As filed with the Securities and Exchange Commission on December 3, 1997
File Nos. __-____
__-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
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MEMORIAL FUNDS
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
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Max Berueffy, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(Name and Address of Agent for Service)
Copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel
1200 G Street, N.W.
Washington, D.C. 20005
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Approximate Date of Proposed Public Offering: As soon as practicable after
the effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Pursuant toe Rule 24f-2 under the Investment Company Act of 1940, as
amended, Registrant hereby elects to register an indefinite number of shares of
Registrant and any series thereof hereinafter created.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(Prospectus offering Trust Shares of Government Bond Fund, Corporate Bond Fund,
Growth Equity Fund and Value Equity Fund)
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FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment Objectives and
Policies; Detailed Description of Funds' Investment
Investments, Strategies and Risks; Other Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objectives and Policies; Detailed
Description of Funds' Investment Investments,
Strategies and Risks; Dividends and Tax Matters;
Other Information - The Trust and its Shares
Item 7. Purchase of Securities
Being Offered: How to Buy Shares; Other Shareholder Services; Other
Information - Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: How to Sell Shares; Other Shareholder Services
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(Prospectus offering Institutional Shares of Government Bond Fund, Corporate
Bond Fund, Growth Equity Fund and Value Equity Fund)
<TABLE>
<S> <C> <C> <C>
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment Objectives and
Policies; Detailed Description of Funds' Investment
Investments, Strategies and Risks; Other Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objectives and Policies; Detailed
Description of Funds' Investment Investments,
Strategies and Risks; Dividends and Tax Matters;
Other Information - The Trust and its Shares
Item 7. Purchase of Securities
Being Offered: How to Buy Shares; Other Shareholder Services; Other
Information - Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: How to Sell Shares; Other Shareholder Services
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
(Statement of Additional Information Trust Shares and Institutional Shares of
Government Bond Fund, Corporate Bond Fund, Growth Equity Fund and
Value Equity Fund)
<TABLE>
<S> <C> <C> <C>
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
Item 10. Cover Page: Cover Page
Item 11. Table of Contents: Cover Page
Item 12. General Information and History: Management; Other Information
Item 13. Investment Objectives and
Policies: Investment Policies; Investment Limitations
Item 14. Management of the Registrant: Management
Item 15. Control Persons and
Principal Holders of
Securities: Other Information
Item 16. Investment Advisory
and Other Services: Management; Other Information - Custodian, Counsel,
Auditors
Item 17. Brokerage Allocation
and Other Practices: Portfolio Transactions
Item 18. Capital Stock and
Other Securities: Other Information -- The Trust and Its Shares
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered: Determination of Net Asset Value; Additional Purchase
and Redemption Information
Item 20. Tax Status: Taxation
Item 21. Underwriters: Management
Item 22. Calculation of
Performance Data: Performance Data
Item 23. Financial Statements: Not Applicable
</TABLE>
<PAGE>
MEMORIAL FUNDS
TRUST SHARES
[date]
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
1. PROSPECTUS SUMMARY.................................................................................
Highlights of the Funds.............................................................................
Expense Information.................................................................................
2. INVESTMENT OBJECTIVES AND POLICIES.................................................................
Government Bond Fund................................................................................
Corporate Bond Fund.................................................................................
Growth Equity Fund..................................................................................
Value Equity Fund...................................................................................
3. MANAGEMENT.........................................................................................
Investment Advisory Services........................................................................
Management, Administration and Distribution Services................................................
Shareholder Servicing and Custody...................................................................
Expenses of the Funds...............................................................................
4. HOW TO BUY SHARES..................................................................................
Minimum Investment..................................................................................
Purchase Procedures.................................................................................
Subsequent Purchases
Account Application.................................................................................
General Information.................................................................................
5. HOW TO SELL SHARES.................................................................................
General Information.................................................................................
Redemption Procedures...............................................................................
Other Redemption Matters............................................................................
6. OTHER SHAREHOLDER SERVICES.........................................................................
Exchanges...........................................................................................
Automatic Investment Plan...........................................................................
Individual Retirement Accounts......................................................................
Automatic Withdrawal Plan...........................................................................
Reopening Accounts..................................................................................
7. DIVIDENDS AND TAX MATTERS..........................................................................
Dividends...........................................................................................
Payment
Options.............................................................................................
Tax Matters.........................................................................................
8. DETAILED DESCRIPTION OF FUNDS' INVESTMENTS, STRATEGIES, AND RISKS
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS
9. OTHER INFORMATION..................................................................................
Determination of Net Asset Value....................................................................
Performance Information.............................................................................
The Trust and Its Shares............................................................................
Core and Gateway Structure..........................................................................
</TABLE>
i
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PROSPECTUS
[DATE]
This Prospectus offers Trust class shares of the Government Bond Fund, Corporate
Bond Fund, Growth Equity Fund and Value Equity Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate, diversified portfolios of the
Memorial Funds (the "Trust"), a registered, open-end, management investment
company.
THIS PROSPECTUS SETS FORTH CONCISELY IMPORTANT INFORMATION
THAT YOU SHOULD KNOW BEFORE INVESTING.
PLEASE READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
The Trust has filed with the Securities and Exchange Commission (the "SEC") a
Statement of Additional Information ("SAI") dated [date], as may be amended from
time to time, which is available for reference on the SEC's Web Site
(http.//www.sec.gov). The SAI contains more detailed information about the Trust
and each of the Funds and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the SAI without charge by contacting the Trust's
distributor, Forum Financial Services, Inc., at Two Portland Square, Portland,
Maine 04101 or by calling (800) xxx-xxxx or (207) xxx-xxxx.
THE MEMORIAL FUNDS ARE A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE
NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
SYSTEM OR ANY OTHER GOVERNMENT AGENCY.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
FIXED INCOME FUNDS
The Memorial Funds includes two "Fixed Income" Funds, the GOVERNMENT BOND FUND
and the CORPORATE BOND FUND. These mutual funds invest primarily in bonds and
other fixed income securities. The Fixed Income Funds are designed principally
for investors that seek current income.
GOVERNMENT BOND FUND seeks to provide a high level of income consistent with
maximum credit protection and moderate fluctuation in principal value. The Fund
will seek to achieve this objective by investing at least 90 percent of its
assets in obligations issued or guaranteed as to principal and interest by the
United States Government, or by its agencies or instrumentalities ("U.S.
Government Securities"). The Fund seeks to moderate fluctuations its volatility
by structuring maturities of its investment portfolio in order to maintain a
duration between 75 percent and 125 percent of the duration of the Lehman
Brothers Government Bond Index .
CORPORATE BOND FUND seeks to provide as high a level of current income as is
consistent with capital preservation and prudent investment risk. Under normal
circumstances, the Fund will seek to attain this objective by investing at least
65% of its assets in corporate debt securities, U.S. Government Securities and
mortgage-backed and asset-backed securities. The Fund intends to maintain a
duration between 75 percent and 125 percent of the Lehman Brothers Aggregate
Bond Index.
EQUITY FUNDS
The Memorial Funds also includes two mutual funds that invest primarily in the
common stock of domestic companies, the GROWTH EQUITY FUND and the VALUE EQUITY
FUND (the "Equity Funds"). The Equity Funds will invest only in companies with a
minimum market capitalization of $250 million at the time of purchase, and will
seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock. Although the investment disciplines of the Equity Funds differ,
they are each designed for investors seeking long term capital appreciation and
able to tolerate possibly significant fluctuation in the value of their
investment.
GROWTH EQUITY FUND seeks long-term capital appreciation. It will seek to achieve
this objective by investing at least 65% of its assets in the common stock of
domestic companies that the
2
<PAGE>
Fund's adviser believes have superior growth potential and fundamental
characteristics that are significantly better than the market average and that
support internal earnings growth capability.
VALUE EQUITY FUND also seeks long-term capital appreciation. It will seek to
attain this objective by investing at least 65% of its total assets in the
common stock of domestic companies. Using a value approach, the Fund will seek
to invest in stocks that are underpriced when measured against comparable
securities, determined by price/earnings ratios, cash flows or other measures.
SOME INVESTMENT CONSIDERATIONS
AND RISK FACTORS
IN GENERAL. There is no assurance that any Fund will achieve its investment
objective, and a Fund's net asset value and total return will fluctuate based
upon changes in the value of its portfolio securities. Upon redemption, an
investment in a Fund may be worth more or less than its original value. No Fund,
by itself, provides a complete investment program.
All investments made by the Funds entail some risk. Among other things, the
market value of any security in which the Funds may invest is based upon the
market's perception of value and not necessarily the book value of an issuer or
other objective measure of a company's worth. Certain investments and investment
techniques, however, entail additional risks, such as the potential use of
leverage by certain Funds through borrowings, securities lending, and other
investment techniques. (See "A Detailed Description of the Funds' Investments,
Investment Strategies and Risks.") Similarly, a Fund's use of mortgage- and
asset-backed securities entails certain risks. (See "A Detailed Description of
the Funds' Investments, Investment Strategies and Risks --Mortgage-Backed
Securities" and "-- Asset-Backed Securities.")
FIXED INCOME FUNDS. The value of your investment in one or both of the Fixed
Income Funds may change in response to changes in interest rates. A rise in
interest rates typically causes a fall in the value of the fixed income
securities in which the Funds invest. Your investment in the Corporate Bond Fund
is also subject to the risk that the financial condition of an issuer of a
security held by the Fund may cause it to default or become unable to pay
interest or principal due on the security. To limit this risk, at least 80
percent of the Corporate Bond Fund's investments in corporate debt securities
will be in securities rated A or better and the Fund will maintain a minimum
average rating of A.
EQUITY FUNDS. The Equity Funds may be appropriate investments for investors who
seek long term growth in their investment, but who are willing to tolerate
significant fluctuations in the value of their investment in response to changes
in the market value of the stocks the Funds hold. This type of market movement
may affect the price of the securities of a single issuer, a segment of the
domestic stock market, or the entire market.
3
<PAGE>
PORTFOLIO MANAGEMENT
INVESTMENT ADVISER. Forum Advisors, LLC (the "Adviser"), serves as the
investment adviser for each Fund. Forum's responsibilities include developing
and reviewing the investment strategies and policies of each Fund, and
overseeing the performance of the investment sub-advisers ("Sub-advisers")
responsible for the day-to-day management of each Fund's investment portfolio.
See "Management - Investment Advisory Services."
INVESTMENT CONSULTANT. To assist it in carrying out its responsibilities, the
Adviser has retained Wellesley Group, Inc. ("Wellesley"). Wellesley consults
with Forum and the Board on the investment programs of each of the Funds and
provides data with which Forum and the Board can monitor and evaluate the
performance of the Funds. If the Board determines in the future to replace one
of the current Sub-advisers, or retain additional Sub-advisers to manage one or
more of the Funds, Wellesley will assist Forum and the Board in the selection of
those Sub-advisers.
INVESTMENT SUB-ADVISERS. The Adviser has retained the following investment
advisers ("Sub-advisers") to render advisory services and make daily investment
decisions for each Fund:
o The portfolio of the Government Bond Fund is managed by GBF Advisers.
o The portfolio of the Corporate Bond Fund is managed by CBF Advisers.
o The portfolio of the Growth Equity Fund is managed by GEF Advisers.
o The portfolio of the Value Equity Fund is managed by VEF Advisers.
The Adviser is also responsible for monitoring the investments and the
performance of the Sub-advisers on behalf of each of the Funds. The Adviser and
the Sub-advisers collectively may be referred to herein as the "Advisers." See
"Management - Investment Advisory Services."
SHARES OF THE FUNDS
Each Fund currently offers two separate classes of shares:
TRUST SHARES are sold through this Prospectus and are offered primarily to
individual investors and smaller fiduciary, agency and custodial clients whose
investments are pooled in common or collective trusts managed by bank trust
department, trust companies or their affiliates. Trust Shares are referred to as
"Shares" in this prospectus.
INSTITUTIONAL SHARES are offered by a separate prospectus. Institutional Shares
are designed for large institutional investors able to make an minimum initial
investment of $10 million, and are expected to incur lower expenses than Trust
Shares.
Shares of each class of a Fund have identical interests in the investment
portfolio of the Fund and, with certain exceptions, the same rights. (See "Other
Information -- The Trust and Its Shares.")
4
<PAGE>
HOW TO BUY AND SELL SHARES
Shares of the Funds may be purchased or sold ("redeemed") on any weekday except
days that the New York Stock Exchange is closed, normally New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas ("Fund Business Day"). The
Trust's transfer agent accepts orders to buy or sell Shares between 9:00 a.m and
6:00 p.m. (Eastern) on all Fund Business Days. Orders are executed at the net
asset value of the Fund's shares next determined after an order in proper form
is received.
You may buy or sell Shares by mail, by bank wire or through various financial
institutions. The minimum initial investment in Shares is $5,000, or $2,000 for
retirement accounts and automatic investment plans. The minimum subsequent
investment is $100. (See "How to Buy Shares" and "How to Sell Shares.")
EXCHANGES
Shareholders may exchange Trust Shares for Trust Shares of the other Funds or
for [NAME OF CLASS] shares of the Forum Daily Assets Treasury Fund, a money
market fund that is a separate series of Forum Funds. (See "Other Shareholder
Services -- Exchanges.")
SHAREHOLDER FEATURES
Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan and
Directed Dividend Option. (See "Other Shareholder Services" and "Choosing a
Share Class.")
DIVIDENDS AND DISTRIBUTIONS
The Fixed Income Funds declare and pay dividends of net investment income
monthly. The Equity Funds declare and pay dividends of net investment income, if
any, quarterly. Each Fund's net capital gain, if any, is distributed annually.
All dividends and distributions are reinvested in additional Fund shares unless
the shareholder elects to have them paid in cash. (See "Dividends and Tax
Matters.")
EXPENSE INFORMATION
The following tables should help you understand the expenses that you will bear
if you invest Shares of a Fund.
5
<PAGE>
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
(APPLICABLE TO EACH FUND)
<S> <C> <C> <C> <C>
GOVERNMENT BOND CORPORATE BOND GROWTH EQUITY FUND VALUE EQUITY FUND
FUND FUND
-------------------- ------------------- -------------------- -------------------
Maximum sales charge on None None None None
purchases and reinvested
dividends
Maximum deferred sales charge None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (1)
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
GOVERNMENT BOND CORPORATE BOND GROWTH EQUITY FUND VALUE EQUITY FUND
FUND FUND
-------------------- ------------------- -------------------- -------------------
Investment Advisory Fees
Rule 12b-1 Fees
Other Expenses
Total Operating Expenses
</TABLE>
(1) Annual Fund Operating Expenses are calculated as a percentage of each Fund's
average net assets assuming average net assets of at least $xxx million. If the
average net assets of a Fund are lower in any given year, the expenses will be a
higher percentage of the Fund's assets. For a further description of the various
expenses associated with investing in the Funds, (see "Management.")
6
<PAGE>
EXAMPLE
The following hypothetical example indicates the dollar amount of expenses that
you would pay if you invested $1,000 in a Fund's Shares, assuming that (a) the
Fund's expenses are as listed above, (b) the Fund has a 5% annual return and (c)
you reinvest all dividends and distributions paid by the Fund. The example does
not represent past or future expenses or return; actual expenses and return may
be more or less than indicated. The 5% annual return does not represent any
Fund's past returns, nor is it meant to predict its projected returns.
1 YEAR 3 YEARS
------ -------
GOVERNMENT BOND FUND xx xx
CORPORATE BOND FUND xx xx
INCOME FUND xx xx
GROWTH VALUE FUND xx xx
7
<PAGE>
2. INVESTMENT OBJECTIVES AND POLICIES
GOVERNMENT BOND FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a high
level of income consistent with maximum credit protection and moderate
fluctuation in principal value. There can be no assurance that the Fund will
achieve this objective.
INVESTMENT POLICIES. The Fund will invest at least 90 percent of its net assets
in a portfolio of fixed and variable rate U.S. Government Securities, including
zero coupon bonds issued or guaranteed by the U.S. Treasury . The Fund may
invest up to 10 percent of its net assets in corporate debt securities.
The Fund may not invest more than 25 percent of its total assets in the
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury, and may not invest more than 10
percent of its total assets in the securities of any other issuer.
The Fund invests in debt obligations with maturities (or average life in the
case of mortgage-backed and similar securities) ranging from overnight to 12
years. The Fund seeks to moderate fluctuations its volatility by structuring
maturities of its investment portfolio in order to maintain a duration between
75 percent and 125 percent of the duration of the Lehman Brothers Government
Bond Index, which is currently X.XX years. Duration measures the sensitivity of
a debt security's price to changes in interest rates -- the longer the
security's duration, the more its price will fluctuate in response to changes in
interest rates. The calculation of duration is based on the present value of
payments over the life of the debt obligation and takes into account call rights
and other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.
The Fund may also use options and futures contracts (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate and foreign currency futures contracts and buy options and write covered
options on those futures contracts. An option is covered if, so long as the Fund
is obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid debt
instruments with a value at all times sufficient to cover the Fund's obligations
under the option. Although the Fund will not engage in these transaction for
speculative purposes, there is a risk that changes in the value of a hedging
instrument will not match those of the investment being hedged.
8
<PAGE>
CORPORATE BOND FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide as high
a level of current income as is consistent with capital preservation and prudent
investment risk. There is no assurance that the Fund will achieve this
objective.
INVESTMENT POLICIES. Under normal circumstances, the Fund will seek to attain
its investment objective by investing at least 65% of its assets in corporate
debt securities. The Fund may also invest in obligations issued or guaranteed as
to principal and interest by the United States Government or by any of its
agencies or instrumentalities, and mortgage-backed and asset-backed securities
("U.S. Government Securities").
At least 80 percent of the Fund's investments in corporate debt will be in
securities that are rated, at the time of purchase, in one of the three highest
rating categories by a nationally recognized statistical rating organization
("NRSRO") such as Standard & Poor's, or which are unrated and determined by the
Sub-adviser to be of comparable quality. (See "Additional Investment Policies
and Risk Considerations -- Rating Matters.") No more than 5 percent of the
Fund's investments will be in securities rated below investment grade, that is
below the fourth highest rating category. The Fund's portfolio of corporate debt
instruments will have a minimum weighted average rating of A.
The Fund will invest primarily in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from
short-term (including overnight) to 15 years. The Fund seeks to structure the
maturities of its investment portfolio in order to maintain a duration between
75 percent and 125 percent of the duration of the Lehman Brothers Aggregate Bond
Index, which is currently X.XX years. Duration measures the sensitivity of a
debt security's price to changes in interest rates -- the longer the security's
duration, the more its price will fluctuate in response to changes in interest
rates. The calculation of duration is based on the present value of payments
over the life of the debt obligation and takes into account call rights and
other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.
The Fund may invest up to 25 percent of its assets in mortgage- and asset-backed
securities. The Fund may enter into "dollar roll" transactions in connection
with its investments in mortgage-backed securities. The Fund may also invest in
zero-coupon securities, but will limit its investment in these securities,
except those issued through the U.S. Treasury's STRIPS program, to not more than
10 percent of the Fund's total assets. The Fund may also invest in securities
that are restricted as to disposition under the federal securities laws
(sometimes referred to as "private placements" or "restricted securities"). In
addition, the Fund may not invest more than 25 percent of its total assets in
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury. For a discussion of these investments
and the risks associated with them see "A Detailed Description of the Funds'
Investments, Investment Strategies and Risks."
9
<PAGE>
The Fund may by use futures contracts and options (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use hedging strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid debt instruments
with a value at all times sufficient to cover the Fund's obligations under the
option.
GROWTH EQUITY FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is long-term capital
appreciation. There is no assurance that the Fund will achieve this objective.
INVESTMENT POLICIES. The Fund will seek to achieve its objective by investing at
least 65% of its assets in the common stock of domestic companies having a
minimum market capitalization of $250 million at the time of purchase. The Fund
will seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock.
The Fund will invest in the securities of issuers that its Sub-adviser believes
have superior growth potential and fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability. The Fund may invest in the securities of companies whose
growth potential is, in the Sub-adviser's opinion, generally unrecognized or
misperceived by the market. The Sub-adviser may also look to changes in a
company that involve a sharp increase in earnings, the hiring of new management
or measures taken to close the gap between the company's share price and
takeover/asset value.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that are rated,
at the time of purchase, within the four highest rating categories assigned by
an NRSRO or which are unrated and determined by the Sub-adviser to be of
comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI.
The Fund may also use futures contracts and options (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use hedging strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid debt instruments
with a value at all times sufficient to cover the Fund's obligations under the
option. For a description of these investment practices and the risks associated
with them see "A Detailed
10
<PAGE>
Description of the Funds' Investments, Investment Strategies and Risks - Futures
Contracts and Options."
VALUE EQUITY FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is long-term capital
appreciation. There is no assurance that the Fund will achieve this objective.
INVESTMENT POLICIES. The Fund will seek to attain this objective by investing at
least 65% of its total assets in common stocks of domestic companies having a
minimum market capitalization of $250 million at the time of purchase. The Fund
will seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock.
Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable companies, determined by price/earnings
ratios, cash flows or other measures. It is expected that the Sub-adviser will
rely on stock selection to achieve its results, rather than trying to time
market fluctuations. In selecting stocks, the Sub-adviser will employ
traditional value disciplines in selecting stocks for investment by the Fund,
evaluating companies on several levels to establish valuation parameters using
relative ratios or target prices.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that are rated,
at the time of purchase, within the four highest rating categories assigned by
an NRSRO or which are unrated and determined by the Sub-adviser to be of
comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI.
The Fund may also use futures contracts and options (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use hedging strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid debt instruments
with a value at all times sufficient to cover the Fund's obligations under the
option. For a description of these investment practices and the risks associated
with them see "A Detailed Description of the Funds' Investments, Investment
Strategies and Risks - Futures Contracts and Options."
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3. MANAGEMENT
The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The Board formulates the general policies of the Funds
and meets periodically to review the performance of the Funds, monitor their
investment activities and practices, and discuss other matters affecting the
Funds and the Trust.
ADVISER
FORUM ADVISERS, LLC (the "Adviser"), Two Portland Square, Portland, Maine 04101,
serves as investment adviser to the Funds pursuant to an investment advisory
agreement with the Trust. Subject to the general control of the Board, the
Adviser is responsible for among other things, developing a continuing
investment program for each Fund in accordance with its investment objective,
reviewing the investment strategies and policies of each Fund, and advising the
Board on the selection of additional Sub-advisers.
The Adviser has entered into investment sub-advisory agreements with the
Sub-advisers to exercise investment discretion over the assets (or a portion of
assets) of each Fund.
For its services under the Investment Advisory Agreement, Forum receives with
respect to the following funds:
Government Bond Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Corporate Bond Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Growth Equity Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Value Equity Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
The Adviser was incorporated under the laws of Delaware in 1987 and is
registered under the Investment Advisers Act of 1940.
INVESTMENT CONSULTANT
To assist it in carrying out its responsibilities under the Investment Advisory
Agreement, the Adviser has retained Wellesley Group, Inc. ("Wellesley"), 800
South Street, Waltham, Massachusetts 02154, to provide investment consulting
services. Among other things, Wellesley has assisted the Board, Management and
the Adviser to formulate investment policies and restrictions best-suited to
achieving each Fund's long-term investment objective.
Wellesley also reviews the investments and analyzes the performance of each
Fund. In doing so, Wellesley compares the risk and return profiles of each Fund
against appropriate groups of investment managers employing a similar investment
strategy, comparable mutual funds, and
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relevant broad based market indices. Wellesley reports its findings to Forum and
to the Board at least quarterly.
If the Board decides to add or change Sub-advisers, Wellesley will assist Forum
and the Board in the selection of these new Sub-advisers with proven long-term
investment performance and philosophy best suited to the goals and objectives of
the Fund for which the adviser is being considered. As a part of this selection
process, Wellesley will analyze statistical information relating to investments
and performance, and evaluate the risk and return profiles of the investment
advisers under consideration. Wellesley will also review such qualitative
factors as the advisory firm's ownership, organizational structure, business
plan, client base, staff resources, investment philosophy, research
capabilities, investment decision-making process, and risk management
disciplines.
SUB-ADVISERS
The Adviser has retained the Sub-advisers to render advisory services and make
daily investment decisions for each Fund. The Adviser makes recommendations to
the Trust's Board of Trustees regarding the selection and retention of these
Sub-advisers. On an ongoing basis, the Adviser evaluates the Sub-advisers and
reports to the Board concerning their investment results. The Adviser also
reviews the investments made for the Funds by the Sub-advisers to see that they
comply with the Funds' investment objectives, policies and restrictions.
The following Sub-advisers and individuals are primarily responsible for the
day-to-day management of the Funds:
GBF ADVISERS ("GBF") [address] manages the portfolio of the GOVERNMENT BOND
FUND. [insert re organization and portfolio managers]
CBF ADVISERS ("CBF") [address] manages the portfolio of the CORPORATE BOND
FUND. [insert re organization and portfolio managers]
GEF ADVISERS ("GEF") [address] manages the portfolio of the GROWTH EQUITY
FUND. [insert re organization and portfolio managers]
VEF ADVISERS ("VEF") [address] manages the portfolio of the VALUE EQUITY
FUND. [insert re organization and portfolio managers]
The Adviser performs internal due diligence on each Sub-adviser and monitors
each Sub-adviser's performance. The Adviser will be responsible for
communicating performance targets and evaluations to the Sub-advisers,
supervising each Sub-adviser's compliance with its Fund's fundamental investment
objectives and policies, authorizing Sub-advisers to engage in certain
investment techniques for the Funds, and recommending to the Board of Trustees
whether sub-advisory agreements should be renewed, modified or terminated. The
Adviser pays a fee to each of the Sub-advisers. These fees are borne solely by
Forum and do not increase the fees paid by
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shareholders of the Funds. As of the date of this Prospectus, Forum will pay
GBF, CBF, GEF, VEF fees of 0.XX%, 0.XX%, 0.XX%, and 0.XX%, respectively, of the
average daily net assets of the corresponding Fund for which the Sub-adviser
provides investment advisory services. The amount of these fees may vary from
time to time as a result of periodic negotiations with the Sub-advisers and
pursuant to certain factors described in the SAI. The amount of Advisory Fees
paid by each Fund will not vary as a result of changes in the Sub-advisory fees,
however.
The Adviser also may from time to time recommend that the Board of Trustees
replace one or more Sub-advisers or appoint additional Sub-advisers, depending
on the Adviser's assessment of what combination of Sub-advisers it believes will
optimize each Fund's chances of achieving its investment objective. In the event
that a Sub-adviser ceased to provide investment advisory services for a Fund,
the Adviser would select a similarly qualified investment adviser to replace the
Sub-adviser but would not manage the Fund's portfolio.
Section 15(a) of the 1940 Act requires that a Fund's shareholders approve its
investment advisory contracts. As interpreted, this requirement applies to the
Sub-advisory contracts of the Funds. The Trust is applying to the SEC for a
conditional exemption from this shareholder approval requirement. The SEC has
granted such applications in the past, and the Trust expects it will receive the
requested exemption. Such relief is not certain, however. If the exemption is
granted, the Board of Trustees would be able to appoint additional or
replacement Sub-advisers without Shareholder approval. The Board would not,
however, be able to replace the Adviser as investment adviser to any Fund
without the approval of that Fund's shareholders.
ADMINISTRATOR
On behalf of the Fund, the Trust has entered into an Administration Agreement
with Forum Administrative Services, Inc. ("Forum"). Under this agreement, Forum
is responsible for the supervision of the overall management of the Trust
(including the Trust's receipt of services for which it must pay), providing the
Trust with general office facilities and providing persons satisfactory to the
Board of Trustees to serve as officers of the Trust. For these services, Forum
receives a fee computed and paid monthly at an annual rate of 0.10% of the
average daily net assets under $150 million, and 0.05% of the average daily
assets over $150 million of each Fund, subject to an annual minimum of $30,000
per Fund.
Forum is located at Two Portland Square, Portland, Maine 04101. As of the date
of this prospectus, Forum administers investment companies and collective
investment funds with assets of approximately $xx billion.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Trust, Forum Financial Services,
Inc. ("FFSI") acts as distributor of the Fund's shares. FFSI acts as the agent
of the Trust in connection with the offering of shares of the Fund. FFSI
receives no compensation for its services under the Distribution Agreement. FFSI
may enter into arrangements with banks, broker-dealers or other financial
institutions ("Selected Dealers") through which investors may purchase or redeem
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shares. FFSI may, at its own expense and from its own resources, compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Fund. Investors purchasing shares of the Fund through
another financial institution should read any materials and information provided
by the financial institution to acquaint themselves with its procedures and any
fees that it may charge. FFSI is a registered broker-dealer and is a member of
the National Association of Securities Dealers, Inc.
DISTRIBUTION PLAN. On behalf of each Fund, the Trust has adopted a Distribution
and Services Plan pursuant to rule 12b-1 under the 1940 Act (the "Plan"). Under
the Plan, each Fund may pay (i) FFSI or another person for distribution services
provided and expenses assumed in connection with distribution services for Trust
shares the Fund ("Shares") and (ii) Service Organizations for shareholder
administrative services provided pursuant to servicing agreements in connection
with Shares. Payments to FFSI are intended to compensate it for distribution
assistance and expenses in connection with activities primarily intended to
result in the sale of Shares, including compensating dealers and other sales
personnel (which may included affiliates of the Adviser or the Sub-advisers,
royalty and licensing fees paid to the International Cemetery and Funeral
Association or other trade associations, direct advertising and marketing
expenses and expenses incurred in connection with preparing, printing, mailing
and distributing or publishing advertisements and sales literature, for printing
and mailing prospectuses and statements of additional information to prospective
investors, and costs associated with implementing and operating the Plan. Under
the Plan, these payments and expenses may not exceed 0.30% of the average annual
net assets of the Fund attributable to Trust Shares.
TRANSFER AGENT
The Trust has entered into a Transfer Agency Agreement with Forum Financial
Corp. ("FFC") pursuant to which FFC acts as the Fund's transfer agent and
dividend disbursing agent. FFC maintains an account for each shareholder of the
Trust (unless such accounts are maintained by sub-transfer agents), performs
other transfer agency functions and acts as dividend disbursing agent for the
Trust.
Pursuant to a separate agreement, Forum Accounting Services, LLC ("FAcS")
provides portfolio accounting services to each Fund. The Adviser, Forum, FFSI,
FFC and FAcS are members of the Forum Financial Group of companies which
together provide a full range of services to the investment company and
financial services industry. As of October 1, 1997, Forum, FAS and Forum
Accounting were controlled by John Y. Keffer.
EXPENSES OF THE TRUST
Each Fund's expenses comprise Trust expenses attributable to the Fund, and a pro
rata share of the Trust's expenses that are not attributable to a particular
Fund. The Adviser, Forum, FFC, or FAcS or any other entity that provides
services for the Funds pursuant to a contract with the Trust, may waive all or a
portion of their fees, which are accrued daily, and paid monthly. Any such
waiver, which could be discontinued at any time, would have the effect of
increasing the
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Fund's performance for the period during which the waiver was in effect and
would not be recouped at a later date.
CUSTODY
__________ Bank serves as each Fund's custodian and may appoint subcustodians
for the foreign securities and other assets held in foreign countries.
4. HOW TO BUY SHARES
MINIMUM INVESTMENT
There is a $5,000 minimum for initial purchases ($2,000 for retirement accounts
and automatic investment plans) and a $100 minimum for subsequent purchases, of
Shares of each Fund. Either management of the Trust or FFC may in its discretion
waive the investment minimums. (See "Other Shareholder Services -- Automatic
Investment Plan" and "Dividends and Tax Matters.")
The Funds reserve the right to reject any subscription for the purchase of their
shares. Share certificates are issued only to shareholders of record upon their
written request and no certificates are issued for fractional shares.
PURCHASE PROCEDURES
INITIAL PURCHASES
THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.
1. BY MAIL. You may send a check or money order (cash cannot be accepted) along
with a completed account application form to the Trust at the address listed
under "Account Application." Checks or money orders are accepted at full value
subject to collection. If a check or money order does not clear, the purchase
order will be canceled and the investor will be liable for any losses or fees
incurred by the Trust, FFC or Forum.
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Memorial Funds" or to
one or more owners of that account and endorsed to "Memorial Funds." For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Memorial Funds." No other method of payment by check will be
accepted. All purchases must be paid in U.S. dollars; checks must be drawn on
U.S. banks. Payment by Traveler's checks is prohibited.
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2. BY BANK WIRE. You make an initial investment in a Fund using the wire system
for transmittal of money among banks. You should first telephone FFC at (800)
338-1348 to obtain an account number. You should then instruct a bank to wire
your money immediately to:
BANKBOSTON
BOSTON, MASSACHUSETTS
ABA # 011000390
FOR CREDIT TO: FORUM FINANCIAL CORP.
RE: [NAME OF FUND]
ACCOUNT NO.:
ACCOUNT NAME:
You should then promptly complete and mail the account application form. Your
bank may charge for transmitting the money by bank wire. The Trust does not
charge you for the receipt of wire transfers. Payment by bank wire is treated as
a federal funds payment when received.
3. THROUGH FINANCIAL INSTITUTIONS. You may also purchase Shares through certain
broker-dealers, banks and other financial institutions ("Processing
Organizations"). FFC and its affiliates may be Processing Organizations.
Processing Organizations may receive payments from Forum with respect to sales
of Trust Shares and may receive payments as a processing agent from FFC.
Financial institutions, including Processing Organizations, may charge their
customers a fee for their services and are responsible for promptly transmitting
purchase, redemption and other requests to the Funds.
If you purchase shares through a Processing Organization, you will be subject to
its procedures which may include charges, limitations, investment minimums,
cutoff times and restrictions in addition to, or different from, those
applicable to shareholders who invest in a Fund directly. You should acquaint
yourselves with your institution's procedures and should read this Prospectus in
conjunction with any materials and information provided by their institution. If
you purchase a Fund's shares through a Processing Organization, you may or may
not be the shareholder of record and, subject to your institution's and the
Funds' procedures, may have Fund shares transferred into your name. There is
typically a three-day settlement period for purchases and redemptions through
broker-dealers. Certain Processing Organizations also may enter purchase orders
with payment to follow.
Certain shareholder services may not be available to you if you purchase shares
through a Processing Organization. You should contact your Processing
Organization for further information. The Trust may confirm purchases and
redemptions of a Processing Organization's customers directly to the Processing
Organization, which in turn will provide its customers with confirmations and
periodic statements. The Trust is not responsible for the failure of any
Processing Organization to carry out its obligations to its customer.
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SUBSEQUENT PURCHASES
You may make subsequent purchases by mailing a check, by sending a bank wire or
through your Processing Organization as indicated above. All payments should
clearly indicate your name and account number.
ACCOUNT APPLICATION
You may obtain the account application form necessary to open an account by
writing the Trust at the following address:
MEMORIAL FUNDS
[NAME OF FUND]
P.O. BOX
PORTLAND, ME 04112
To participate in shareholder services not referenced on the account application
form and to change information on your account (such as addresses), you should
contact the Trust. The Trust reserves the right in the future to modify, limit
or terminate any shareholder privilege upon appropriate notice to shareholders
and to charge a fee for certain shareholder services, although no such fees are
currently contemplated. You may terminate your exercise of any privilege or
participation in any program at any time by writing to the Trust.
GENERAL INFORMATION
Fund Shares are continuously sold on any weekday except days when the New York
Stock Exchange is closed, normally New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas ("Fund Business Day"). The purchase price for a
share of a Fund equals its net asset value next-determined after acceptance of
an order in proper form.
Fund shares become entitled to receive dividends and distributions on the next
Fund Business Day after a purchase order is accepted.
All payments for Shares must be in U.S. dollars. All transactions in Fund shares
are effected through FFC, which accepts orders for redemptions and for
subsequent purchases only from shareholders of record. Shareholders of record
will receive from the Trust periodic statements listing all account activity
during the statement period.
5. HOW TO SELL SHARES
GENERAL INFORMATION
Fund Shares may be sold ("redeemed") at their net asset value on any Fund
Business Day. There is no minimum period of investment and no restriction on the
frequency of redemptions.
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Fund shares are redeemed at the Fund's net asset value next determined after FFC
accepts the redemption order in proper form (and any supporting documentation
that FFC may require). Redeemed shares are not entitled to receive dividends
declared after the day the redemption becomes effective.
Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check used to
purchase the shares being redeemed has been cleared by the shareholder's bank,
which may take up to 15 days. This delay may be avoided by paying for shares
through wire transfers. Unless otherwise indicated, redemption proceeds normally
are paid by check mailed to the shareholder's record address. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the shares to a Fund, except when the New York
Stock Exchange is closed (or when trading on the Exchange is restricted) for any
reason other than its customary weekend or holiday closings, for any period
during which an emergency exists as a result of which disposal by the Fund of
its portfolio securities or determination by the Fund of the value of its net
assets is not reasonably practicable and for such other periods as the SEC may
permit.
REDEMPTION PROCEDURES
If you invested through a Processing Organization you may redeem your shares
through the Processing Organization as described above. If you invested directly
in a Fund, you may redeem your Shares as described below. If you wish to redeem
shares by telephone or receive redemption proceeds by bank wire, you must elect
these options by properly completing the appropriate sections of your account
application form. These privileges may not be available until several weeks
after your application is received. Shares for which certificates have been
issued may not be redeemed by telephone.
1. BY MAIL. You may redeem shares by sending a written request to FFC
accompanied by any share certificate that may have been issued to the
shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. (See "How to Sell Shares -- Other Redemption Matters.")
2. BY TELEPHONE. If you have elected telephone redemption privileges, you may
request a redemption by calling FFC at (800) XXX-XXXX or (207) XXX-XXXX and
providing your account number, the exact name in which your shares are
registered and your social security or taxpayer identification number. In
response to the telephone redemption instruction, the Trust will mail a check to
your record address or, if you have elected wire redemption privileges, wire the
proceeds. (See "How to Sell Shares -- Other Redemption Matters.")
3. BY BANK WIRE. For redemptions of more than $5,000, if you have elected wire
redemption privileges, you may request a Fund to transmit proceeds of any
redemption over $5,000 by federal funds wire to a bank account that you
previously designated in writing. To request bank wire
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redemptions by telephone, you also must have elected the telephone redemption
privilege. Redemption proceeds are transmitted by wire on the day after FFC
receives a redemption request in proper form.
OTHER REDEMPTION MATTERS
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a stock certificate; (2) written instruction to redeem Shares
whose value exceeds $50,000; (3) instructions to change a shareholder's record
name; (4) redemption in an account in which the account address or account
registration has changed within the last 30 days; (5) the proceeds are not being
sent to the address of record, preauthorized bank account, or preauthorized
brokerage firm account; (6) proceeds are to be paid to someone other than the
registered owners or to an account with a different registration; (7) change of
automatic investment or redemption, dividend election, telephone redemption or
exchange option election or any other option election in connection with the
shareholder's account.
Signature guarantees may be provided by any bank, broker-dealer, national
securities exchange, credit union, savings association or other eligible
institution that is authorized to guarantee signatures and is acceptable to FFC.
Whenever a signature guarantee is required, the signature of each person
required to sign for the account must be guaranteed. A notarized signature is
not sufficient.
Shareholders who want to telephone redemption or exchange privileges must elect
those privileges. The Trust and FFC will employ reasonable procedures in order
to verify that telephone requests are genuine, including recording telephone
instructions and causing written confirmations of the resulting transactions to
be sent to shareholders. If the Trust and FFC did not employ such procedures,
they could be liable for losses due to unauthorized or fraudulent telephone
instructions. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements. During times of drastic
economic or market changes, telephone redemption and exchange privileges may be
difficult to implement. In the event that a shareholder is unable to reach the
FFC by telephone, requests may be mailed or hand-delivered to the FFC.
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $2,000 immediately
following any redemption.
The Transfer Agent will deem a shareholder's account "lost" if correspondence to
the shareholder's address of record is returned as undeliverable, unless the
Transfer Agent determines the shareholder's new address. When an account is
deemed lost all distributions on the account will be reinvested in additional
shares of the Fund. In addition, the amount of any outstanding (unpaid for six
months or more) checks for distributions that have been returned to the Transfer
Agent will be reinvested and the checks will be canceled.
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6. OTHER SHAREHOLDER SERVICES
EXCHANGES
Shareholders of one Fund may exchange their shares for Trust shares of any of
the other Memorial Funds, as well as for [NAME OF CLASS] shares of Forum Daily
Assets Treasury Fund. A Prospectus for Daily Assets Treasury Fund can be
obtained by contacting FFC.
The Funds do not charge for exchanges, and there is currently no limit on the
number of exchanges you may make. The Funds reserve the right, however, to limit
excessive exchanges by any shareholder. Exchanges are subject to the fees
charged by, and the limitations (including minimum investment restrictions) of,
the Fund into which a shareholder is exchanging.
Exchanges may only be made between identically registered accounts or by opening
a new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical registration
and the same shareholder privileges as the account from which the exchange is
being made. You may exchange into a Fund only if that Fund's shares may legally
be sold in your state of residence.
Under federal tax law, an exchange is treated as a redemption and a purchase.
Accordingly, you may realize a capital gain or loss depending on whether the
value of the shares redeemed is more or less than your basis in the shares at
the time of the exchange transaction. Exchange procedures may be amended
materially or terminated by the Trust at any time upon 60 days' notice to
shareholders. (See "Additional Purchase and Redemption Information" in the SAI.)
1. EXCHANGES BY MAIL. You may make an exchange by sending a written request to
FFC accompanied by any share certificates for the shares to be exchanged. You
must sign all written requests for exchanges and endorse all certificates
submitted for exchange with your signature guaranteed. (See "How to Sell Shares
- -- Other Redemption Matters.")
2. EXCHANGES BY TELEPHONE. If you have elected telephone exchange privileges,
you may make a telephone exchange request by calling FFC at (800) XXX-XXXX or
(207) XXX-XXXX and providing the account number, the exact name in which the
shareholder's shares are registered and your social security or taxpayer
identification number. (See "How to Sell Shares -- Other Redemption Matters.")
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AUTOMATIC INVESTMENT PLAN
Under the Funds' Automatic Investment Plan, you may authorize monthly amounts of
$100 or more to be withdrawn automatically from a designated bank account (other
than passbook savings) and sent to FFC for investment in Shares of a Fund. If
you wish to use this plan, you must complete an application which may be
obtained by writing or calling FFC. The Trust may modify or terminate the
automatic investment plan with respect to any shareholder if the Trust is unable
to settle any transaction with the shareholder's bank. If the Automatic
Investment Plan is terminated before the shareholder's account totals $2,000,
the Trust reserves the right to close the account in accordance with the
procedures described under "How to Sell Shares -- Other Redemption Matters."
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be a suitable investment vehicle for part or all of the assets
held in individual retirement accounts ("IRAs"). An IRA account application form
may be obtained by contacting the Trust at (800) XXX-XXXX or (207) XXX-XXXX.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. Individuals may make tax-deductible IRA
contributions of up to a maximum of $2,000 annually. However, the deduction will
be reduced if the individual or, in the case of a married individual, either the
individual or the individual's spouse, is an active participant in an
employer-sponsored retirement plan and has adjusted gross income above certain
levels.
An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary. Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.
The foregoing discussion regarding IRAs is based on regulations in effect as of
June 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
AUTOMATIC WITHDRAWAL PLAN
If your Shares in a single account total $1,000 or more, you may establish a
withdrawal plan to provide for the pre-authorized payment from your account of
$250 or more on a monthly, quarterly, semi-annual or annual basis. Under the
withdrawal plan, sufficient shares in your account are redeemed to provide the
amount of the periodic payment and you will recognize any taxable gain or loss
upon redemption of the shares. If you wish to utilize the withdrawal plan, you
may do so by completing an application which may be obtained by writing or
calling FFC. The Trust may suspend a shareholder's withdrawal plan without
notice if the account contains insufficient funds to
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effect a withdrawal or if the account balance is less than $1,000 at any time.
REOPENING ACCOUNTS
You may reopen an account, without filing a new account application form, at any
time within one year after your account is closed, if the information on the
account application form on file with the Trust is still applicable.
7. DIVIDENDS AND TAX MATTERS
DIVIDENDS
The Fixed Income Funds declare and pay dividends of net investment income
monthly. The Equity Funds declare and pay dividends of net investment income, if
any, quarterly. Each Fund's net capital gain, if any, is distributed annually.
All dividends and distributions are reinvested in additional Fund shares unless
the shareholder elects to have them paid in cash. (See "Dividends and Tax
Matters.")
PAYMENT OPTIONS
You may choose to have dividends and distributions of a Fund reinvested in
shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for federal income tax purposes whether received in cash or
reinvested in shares of a fund.
Under the Reinvestment Option, all dividends and distributions of a Fund are
automatically invested in additional shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as of the payment date
of the dividend or distribution. You will be assigned this option unless you
select one of the other two options. Under the Cash Option, all dividends and
distributions are paid to the shareholder in cash. Under the Directed Dividend
Option, shareholders of a Fund whose shares in a single account of that Fund
total $10,000 or more may elect to have all dividends and distributions
reinvested in shares of another fund of the Trust, provided that those shares
are eligible for sale in the shareholder's state of residence. For further
information concerning the Directed Dividend Option, shareholders should contact
FFC.
TAX MATTERS
Each Fund intends to qualify for each fiscal year to be taxed as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). As such, each Fund will not be liable for federal income and excise
taxes on the net investment income and net capital gain distributed to its
shareholders. Because each Fund intends to distribute all of its net investment
income and net capital gain each year, each Fund should thereby avoid all
federal income and excise taxes.
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Dividends paid by a Fund out of its net investment income (including net short-
term capital gain) are taxable to shareholders of the Fund as ordinary income.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. If a shareholder holds Shares for six
months or less and during that period receives a long-term capital gain
distribution, any loss realized on the sale of the Shares during that six-month
period will be a long-term capital loss to the extent of the distribution.
Dividends and distributions reduce the net asset value of the Fund paying the
dividend or distribution by the amount of the dividend or distribution.
Furthermore, a dividend or distribution made shortly after the purchase of
Shares, although in effect a return of capital to you, will be taxable as
described above.
Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to a shareholder who fails to provide the Fund with a correct taxpayer
identification number or to make required certifications, or who is subject to
backup withholding.
Reports containing appropriate information with respect to the federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each calendar year.
8. A DETAILED DESCRIPTION OF THE FUNDS' INVESTMENTS,
INVESTMENT STRATEGIES AND RISKS
IN GENERAL
This section describes in more detail the Funds' investments, the investment
practices and strategies that the Sub-advisers may employ for a Fund, and the
risks associated with these investments and practices.
A FURTHER DESCRIPTION OF THE FUNDS' INVESTMENT POLICIES,
INCLUDING ADDITIONAL FUNDAMENTAL POLICIES, IS CONTAINED IN THE SAI.
A Fund must invest in accordance with its investment objective and stated
investment policies. The holders of a majority of the outstanding voting
securities of the Fund must approve any change to a Fund's investment objective
or to an investment policy designated as fundamental. A majority of outstanding
voting securities means the lesser of 67% of the shares present or represented
at a shareholders' meeting at which the holders of more than 50% of the
outstanding shares are present or represented, or more than 50% of the
outstanding shares. Unless otherwise indicated, the investment policies of the
Funds are not fundamental and may be changed by the Board without shareholder
approval. A Fund will apply the percentage restrictions on its investments set
forth in
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its investment policies when the investment is made. If the percentage of a
Fund's assets committed to a particular investment or practice later increases
because of a change in the market values of a Fund's assets or redemptions of
Fund shares, it will not constitute a violation of the limitation.
CORE AND GATEWAY (R).
Notwithstanding the Funds' other investment policies, each Fund may seek to
achieve its investment objective by converting to a Core and Gateway structure,
upon future action by the Board of Trustees and notice to shareholders. If a
Fund converts to a Core and Gateway structure, it would seek to achieve its
investment objective by investing all or a portion of its assets in shares of
another diversified, open-end management investment company that has an
investment objective and investment policies substantially similar to the Funds.
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS.
INTEREST RATE RISK. All fixed income securities, including U.S. Government
Securities, can change in value when there is a change in interest rates or the
issuer's actual or perceived creditworthiness or ability to meet its
obligations. There is normally an inverse relationship between the market value
of securities sensitive to prevailing interest rates and actual changes in
interest rates. In other words, an increase in interest rates produces a
decrease in market value. Moreover, the longer the remaining maturity (and
duration) of a security, the greater will be the effect of interest rate changes
on the market value of that security. Changes in the ability of an issuer to
make payments of interest and principal and in the market's perception of an
issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists that, the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may become impaired.
CREDIT RISK AND RATINGS. The FIXED INCOME FUNDS' investments are subject to
"credit risk" relating to the financial condition of the issuers of the
securities that each Fund holds. Each Fund attempts to limit its credit risk by
limiting its investment in securities rated in lower categories by a Nationally
Recognized Statistical Rating Organization ("NRSRO").
The GOVERNMENT BOND FUND invests at least 90 percent of its net assets in U.S.
Government Securities. For this reason its exposure to credit risk is limited.
It may, however, invest up to 10 percent of its net assets in "investment grade"
corporate debt instruments. Accordingly, the Government Bond Fund may not
purchase any corporate debt instrument having a long-term rating for corporate
bonds, including convertible bonds, lower than are "Baa" in the case of Moody's
Investors Service ("Moody's") and "BBB" in the case of Standard & Poor's ("S&P")
and Fitch Investors Service, L.P. ("Fitch"); the lowest permissible long-term
investment grades for preferred stock are "Baa" in the case of Moody's and "BBB"
in the case of S&P and Fitch; and the lowest permissible short-term investment
grades for short-term debt, including commercial paper, are Prime-2 (P-2) in the
case of Moody's, A-2 in the case of S&P and F-2 in the case of Fitch.
The CORPORATE BOND FUND also attempts to limit its credit risk by limiting its
investment in securities rated in lower categories by a Nationally Recognized
Statistical Rating Organization
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("NRSRO"). At least 80 percent of the corporate debt instruments that the Fund
purchases must be investment grade. No more than 5 prercent of its corporate
debt securities may be lower than investment grade. The Fund will attempt to
maintain a minimum average portfolio rating, on a dollar weighted basis, of A by
Moody's, S&P or Fitch.
The FIXED INCOME FUNDS also may purchase unrated securities if the portfolio
manager determines the security to be of comparable quality to a rated security
that the Fund may purchase. Unrated securities may not be as actively traded as
rated securities. Each Fund may retain a security whose rating has been lowered
below the Fund's lowest permissible rating category (or that are unrated and
determined by the Sub-adviser to be of comparable quality to securities whose
rating has been lowered below the Fund's lowest permissible rating category) if
the portfolio manager determines that retaining the security is in the best
interests of the Fund. Because a ratings downgrade often results in a reduction
in the market price of the security, sale of a downgraded security may result in
a loss.
U.S. GOVERNMENT SECURITIES. The FIXED INCOME FUNDS may invest in U.S. Government
Securities including U.S. Treasury securities and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities and backed by the
full faith and credit of the U.S. Government, such as those guaranteed by the
Small Business Administration or issued by the Government National Mortgage
Association ("Ginnie Mae").
The CORPORATE BOND FUND also may invest include securities supported primarily
or solely by the creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and the Tennessee Valley Authority. There
is no guarantee that the U.S. Government will support securities not backed by
its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the U.S. Government's full faith
and credit.
VARIABLE AND FLOATING RATE SECURITIES. The FIXED INCOME FUNDS may invest in
securities that pay interest at rates that are adjusted periodically according
to a specified formula, usually with reference to some interest rate index or
market interest rate (the "underlying index"). Such adjustments minimize changes
in the market value of the obligation and, accordingly, enhance the ability of
the Fund to reduce fluctuations in its net asset value. Variable and floating
rate instruments are subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Certain variable
rate securities, sometimes called "inverse floaters," pay interest at a rate
that varies inversely to prevailing short-term interest rates. For instance,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. During times when short-term interest rates are
relatively low as compared to long-term interest rates a Fund may attempt to
enhance its yield by purchasing inverse floaters. Certain inverse floaters may
have an interest rate reset mechanism that multiplies the effects of changes in
the underlying index. Although this may increase the security's, and thus the
Fund's, yield, it can also increase the volatility of the security's market
value.
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There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
could make it difficult for a Fund to dispose of the instrument during periods
that the Fund is not entitled to exercise any demand rights it may have. A Fund
could, for this or other reasons, suffer a loss with respect to an instrument.
The Sub-adviser monitors the liquidity of each Funds' investment in variable and
floating rate instruments, but there can be no guarantee that an active
secondary market will exist.
DEMAND NOTES. The FIXED INCOME FUNDS may purchase variable and floating rate
demand notes of corporations, which are unsecured obligations redeemable upon
not more than 30 days' notice. These obligations include master demand notes
that permit investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangement with the issuer of the instrument. The issuers of
these obligations often have the right, after a given period, to prepay their
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
Although a Fund would generally not be able to resell a master demand note to a
third party, the Fund is entitled to demand payment from the issuer at any time.
Sub-advisers continuously monitors the financial condition of the issuer to
determine the issuer's likely ability to make payment on demand.
GUARANTEED INVESTMENT CONTRACTS. The CORPORATE BOND FUND may invest in
guaranteed investment contracts ("GICs"). A GIC is an arrangement with an
insurance company under which the Fund contributes cash to the insurance
company's general account and the insurance company credits the contribution
with interest on a monthly basis. The interest rate is tied to a specified
market index and is guaranteed by the insurance company not to be less than a
certain minimum rate. The Fund will purchase a GIC only when The Sub-adviser has
determined that the GIC presents minimal credit risks to the Fund and is of
comparable quality to instruments that the Fund may purchase.
ZERO-COUPON SECURITIES. The FIXED INCOME FUNDS may invest in separately traded
principal and interest components of securities issued or guaranteed by the U.S.
Treasury. These components are traded independently under the Treasury's
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program or as Coupons Under Book Entry Safekeeping ("CUBES").
The CORPORATE BOND FUND may also invest in other types of related zero-coupon
securities. For instance, a number of banks and brokerage firms separate the
principal and interest portions of U.S. Treasury securities and sell them
separately in the form of receipts or certificates representing undivided
interests in these instruments. These instruments are generally held by a bank
in a custodial or trust account on behalf of the owners of the securities and
are known by various names, including Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS"). Zero-coupon securities also may be issued by corporations
and municipalities.
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Zero-coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity, but the Fund must include a portion of the
original issue discount of the security as income. Because of this, zero-coupon
securities may be subject to greater fluctuation of market value than the other
securities in which the Fund may invest. The Fund distributes all of its net
investment income, and may have to sell portfolio securities to distribute
imputed income, which may occur at a time when the Sub-adviser would not have
chosen to sell such securities and which may result in a taxable gain or loss.
MORTGAGE-BACKED SECURITIES. The FIXED INCOME FUNDS may invest in mortgage-backed
securities. The GOVERNMENT BOND FUND may only invest in mortgage-backed
securities issued by the government or government-related issuers described
below. The CORPORATE BOND FUND may also invest in mortgage-backed securities of
private issuers.
Mortgage-backed securities represent an interest in a pool of mortgages
originated by lenders such as commercial banks, savings associations and
mortgage bankers and brokers. Mortgage-backed securities may be issued by
governmental or government-related entities or by non-governmental entities such
as special purpose trusts created by banks, savings associations, private
mortgage insurance companies or mortgage bankers.
Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.
GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government guarantor
of mortgage-backed securities is Ginnie Mae, a wholly-owned United States
Government corporation within the Department of Housing and Urban Development.
Mortgage-backed securities are also issued by Fannie Mae, a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development, and Freddie Mac, a
corporate instrumentality of the United States Government. While Fannie Mae and
Freddie Mac each guarantee the payment of principal and interest on the
securities they issue, unlike Ginnie Mae securities, their securities are not
backed by the full faith and credit of the United States Government.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Corporate Bond Fund may also
invest in mortgage-backed securities offered by private issuers. These include
pass-through securities comprised of pools of conventional mortgage loans;
mortgage-backed bonds (which are considered to be debt obligations of the
institution issuing the bonds and which are collateralized by mortgage loans);
and collateralized mortgage obligations ("CMOs"), which are described below.
Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government
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guarantees of payment. Many non-governmental issuers or servicers of
mortgage-backed securities, however, guarantee timely payment of interest and
principal on these securities. Timely payment of interest and principal also may
be supported by various forms of insurance, including individual loan, title,
pool and hazard policies.
UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Funds may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.
LIQUIDITY AND MARKETABILITY. Generally, government and government-related
pass-through pools are highly liquid. While private conventional pools of
mortgages (pooled by non-government-related entities) have also achieved broad
market acceptance and an active secondary market has emerged, the market for
conventional pools is smaller and less liquid than the market for government and
government-related mortgage pools.
AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of a Fund
and may even result in losses to the Fund if the securities were acquired at a
premium. The occurrence of mortgage prepayments is affected by various factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. The assumed average
life of pools of mortgages having terms of 30 years or less is typically between
5 and 12 years.
YIELD CALCULATIONS. Yields on pass-through securities are typically quoted based
on the maturity of the underlying instruments and the associated average life
assumption. In periods of falling interest rates the rate of prepayment tends to
increase, thereby shortening the actual average life of a pool of mortgages.
Conversely, in periods of rising rates the rate of prepayment tends to decrease,
thereby lengthening the actual average life of the pool. Actual prepayment
experience may cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Fund.
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMs") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities
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are still subject to changes in value based on changes in market interest rates
or changes in the issuer's creditworthiness. Because of the resetting of
interest rates, adjustable rate securities are less likely than non-adjustable
rate securities of comparable quality and maturity to increase significantly in
value when market interest rates fall. Also, most adjustable rate securities (or
the underlying mortgages) are subject to caps or floors. "Caps" limit the
maximum amount by which the interest rate paid by the borrower may change at
each reset date or over the life of the loan and, accordingly, fluctuation in
interest rates above these levels could cause such mortgage securities to "cap
out" and to behave more like long-term, fixed-rate debt securities. ARMs may
have less risk of a decline in value during periods of rapidly rising rates, but
they also may have less potential for capital appreciation than other debt
securities of comparable maturities due to the periodic adjustment of the
interest rate on the underlying mortgages and due to the likelihood of increased
prepayments of mortgages as interest rates decline. Furthermore, during periods
of declining interest rates, income to a Fund will decrease as the coupon rate
resets along with the decline in interest rates. During periods of rising
interest rates, changes in the coupon rates of the mortgages underlying the
Fund's ARMs may lag behind changes in market interest rates. This may result in
a lower value until the interest rate resets to market rates.
COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations collateralized by
mortgages or mortgage pass-through securities issued by Ginnie Mae, Freddie Mac
or Fannie Mae or by pools of conventional mortgages ("Mortgage Assets"). CMOs
may be privately issued or U.S. Government Securities. Payments of principal and
interest on the Mortgage Assets are passed through to the holders of the CMOs on
the same schedule as they are received, although, certain classes (often
referred to as tranches) of CMOs have priority over other classes with respect
to the receipt of payments. Multi-class mortgage pass-through securities are
interests in trusts that hold Mortgage Assets and that have multiple classes
similar to those of CMOs. Unless the context indicates otherwise, references to
CMOs include multi-class mortgage pass-through securities. Payments of principal
of and interest on the underlying Mortgage Assets (and in the case of CMOs, any
reinvestment income thereon) provide funds to pay debt service on the CMOs or to
make scheduled distributions on the multi-class mortgage pass-through
securities. Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution date
of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier.
Planned amortization class mortgage-based securities ("PAC Bonds") are a form of
parallel pay CMO. PAC Bonds are designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a contemplated range.
If the actual prepayment experience on the underlying mortgage loans is at a
rate faster or slower than the contemplated range, or if deviations from other
assumptions occur, principal payments on a PAC Bond may be greater or smaller
than predicted. The magnitude of the contemplated range varies from one PAC Bond
to another; a narrower range increases the risk that prepayments will be greater
or smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-related securities.
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ASSET-BACKED SECURITIES. The CORPORATE BOND FUND may invest in asset-backed
securities. These securities represent direct or indirect participations in, or
are secured by and payable from, assets other than mortgage-related assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit (credit card) agreements. The Fund may not invest more than 15% of its
net assets in asset-backed securities that are backed by a particular type of
credit, for instance, credit card receivables. Asset-backed securities,
including adjustable rate asset-backed securities, have yield characteristics
similar to those of mortgage-related securities and, accordingly, are subject to
many of the same risks.
Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
COMMON STOCK. The EQUITY FUNDS invest primarily in common stocks of domestic
issuers. Common stock represents an equity or ownership interest in a company.
Although an equity interest often gives a Fund the right to vote on measures
affecting the company's organization and operations, the Funds do not intend to
exercise control over the management of companies in which they invest. Common
stocks have a history of long-term growth in value, but their prices tend to
fluctuate in the shorter term.
PREFERRED STOCK. The EQUITY FUNDS may invest in preferred stock. Preferred stock
generally does not exhibit as great a potential for appreciation or depreciation
as common stock, although it ranks above common stock in its claim on income
from dividend payments or the recovery of investment or both. The owner of
preferred stock is a shareholder in a business and not, like a bondholder, a
creditor. Dividends paid to preferred stockholders are distributions of earnings
of a business in contrast to interest payments to bondholders which are expenses
of a business.
WARRANTS. The EQUITY FUNDS may invest in warrants. These are options to purchase
an equity security at a specified price at any time during the life of the
warrant. Unlike convertible securities and preferred stocks, warrants do not pay
a dividend. Investments in warrants involve certain risks, including the
possible lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of a Fund's entire investment therein).
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AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The EQUITY FUNDS may invest in sponsored
ADRs, which are receipts issued by an American bank or trust company evidencing
ownership of underlying securities issued by a foreign issuer. ADRs, in
registered form, are designed for use in U.S. securities markets. In a
"sponsored" ADR, the foreign issuer typically bears certain expenses of
maintaining the ADR facility.
CONVERTIBLE SECURITIES. All of the Funds may invest in securities that may be
converted into a pre-determined number of shares of the issuer's common stock at
stated price or formula within a specified time period. The holder of
convertible securities is entitled to receive interest paid or accrued on
convertible debt, or the dividend paid on convertible preferred stock, until the
convertible security matures or is redeemed, converted or exchanged.
Traditionally, convertible securities have paid dividends or interest greater
than common stocks, but less than fixed income or non-convertible debt
securities. Convertible securities typically rank before common stock, but after
non-convertible debt securities, in their claim on dividends paid by the issuer.
In general, the value of a convertible security is the higher of its investment
value (its value as a fixed income security) and its conversion value (the value
of the underlying shares of common stock if the security is converted). As a
fixed income security, the value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The value of a convertible security is, however, also influenced by the value of
the underlying common stock. By investing in a convertible security, a Fund may
participate in any capital appreciation or depreciation of a company's stock,
but to a lesser degree than its common stock.
A Fund may invest in preferred stock and convertible securities rated BBB or
higher by Standard & Poor's Corporation, Baa by Moody's Investors Service, Inc.,
or the equivalent in the case of unrated instruments. SEE "Description of
Securities Ratings" in Appendix A to the SAI.
FUTURES CONTRACTS AND OPTIONS. Each Fund may attempt to hedge against a decline
in the value of securities it owns or an increase in the price of securities it
plans to purchase through the use of options and the purchase and sale of
interest rate futures contracts and options on those futures contracts. These
instruments are often referred to as "derivatives," because their performance is
derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Funds only may write (sell)
"covered" options. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains cash, U.S. Government Securities or other liquid
debt securities in a segregated account with a value at all times sufficient to
cover the Fund's obligation under the option. A Fund may enter into these
futures contracts only if the aggregate of initial deposits for open futures
contract positions does not exceed 5% of the Fund's total assets.
RISK CONSIDERATIONS. A Fund's use of options and futures contracts subjects the
Fund to certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (i) dependence on the Sub-adviser's
ability to predict movements in the prices of individual securities and
fluctuations in the general securities markets; (ii) imperfect correlations
between movements in the prices of options or futures contracts and movements in
the price of the securities hedged or used for cover which may cause a given
hedge not to achieve its objective; (iii) the fact that the skills and
techniques needed to trade these instruments are different from those
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needed to select the other securities in which the Fund invests; (iv) lack of
assurance that a liquid secondary market will exist for any particular
instrument at any particular time, which, among other things, may limit a Fund's
ability to limit exposures by closing its positions; (v) the possible need to
defer closing out of certain options, futures contracts and related options to
avoid adverse tax consequences; and (vi) the potential for unlimited loss when
investing in futures contracts or writing options for which an offsetting
position is not held.
Other risks include the inability of a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an
over-the-counter option transaction will be able to perform its obligations.
There are a limited number of options on interest rate futures contracts and
exchange traded options contracts on fixed income securities. Accordingly,
hedging transactions involving these instruments may entail "cross-hedging." As
an example, a Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
the Fund's Sub-adviser may attempt to hedge the Fund's securities by the use of
options with respect to similar securities. The Fund may use various futures
contracts that are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
in those contracts will develop or continue to exist.
LIMITATIONS. The Funds have no current intention of investing in futures
contracts and options thereon for purposes other than hedging. No Fund may
purchase any call or put option on a futures contract if the premiums associated
with all such options held by the Fund would exceed 5% of the Fund's total
assets as of the date the option is purchased. No Fund may sell a put option if
the exercise value of all put options written by the Fund would exceed 50% of
the Fund's total assets or sell a call option if the exercise value of all call
options written by the Fund would exceed the value of the Fund's assets. In
addition, the current market value of all open futures positions held by a Fund
will not exceed 50% of its total assets.
OPTIONS ON SECURITIES. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
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interest rates.
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of a stock index option, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.
INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the fixed income or equity securities comprising the index is made.
Generally, futures contracts are closed out prior to the expiration date of the
contract.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to stock
options except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.
TECHNIQUES INVOLVING LEVERAGE. Leveraging involves special risks. The Funds may
borrow for other than temporary or emergency purposes, lend their securities,
and purchase securities on a when-issued or forward commitment basis. In
addition, the Funds may engage in dollar roll transactions, and purchase
securities on margin. Each of these transactions involves the use of "leverage"
when cash made available to the Fund through the investment technique is used to
make additional portfolio investments. In addition, the use of swap and related
agreements may involve leverage. A Fund uses these investment techniques only
when the Sub-adviser to the Fund believes that the leveraging and the returns
available from investing the cash will provide the Fund's shareholders with a
potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.
The risks of leverage include a higher volatility of the net asset value of a
Fund's shares and the relatively greater effect on the net asset value of the
shares caused by favorable or adverse market movements or changes in the cost of
cash obtained by leveraging and the yield obtained from investing the cash. So
long as a Fund is able to realize a net return on its investment portfolio that
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is higher than interest expense incurred, if any, leverage will result in higher
current net investment income being realized by the Fund than if the Fund were
not leveraged. On the other hand, interest rates change from time to time
depending upon such factors as supply and demand, monetary and tax policies and
investor expectations. Changes in such factors could cause the relationship
between the cost of leveraging and the yield to change so that rates involved in
the leveraging arrangement may substantially increase relative to the yield on
the obligations in which the proceeds of the leveraging have been invested. To
the extent that the interest expense involved in leveraging approaches the net
return on a Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, the Fund's use of leverage would result in a lower rate
of return than if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if the Fund were not leveraged. In an extreme case, if a Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for the Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.
SEGREGATED ACCOUNT. To limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account for each Fund cash, U.S. Government Securities and other
liquid, debt securities in accordance with SEC guidelines. The accounts value,
which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions. The Fund's commitments may include: (i)
the Fund's obligations to repurchase securities under a reverse repurchase
agreement, or settle when-issued and forward commitment transactions; (ii) the
greater of the market value of securities sold short or the value of the
securities at the time of the short sale (reduced by any margin deposit). The
use of a segregated account in connection with leveraged transactions may result
in a Fund's portfolio being 100% leveraged.
BORROWING. As a fundamental investment policy, a Fund may borrow money for
temporary or emergency purposes, including the meeting of redemption requests,
in amounts up to 33 1/3% of a Fund's total assets. As a nonfundamental
investment policy, a Fund may not purchase portfolio securities if its
outstanding borrowings exceed 5% of its total assets or borrow for purposes
other than meeting redemptions in an amount exceeding 5% of the value of its
total assets at the time the borrowing is made.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might need to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales.
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may seek
additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
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similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.
Repurchase agreements are transactions in which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. When a Fund lends a security
it receives interest from the borrower or from investing cash collateral. The
Trust maintains possession of the purchased securities and any underlying
collateral in these transactions, the total market value of which on a
continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1*3% of the value of its total assets.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The FIXED INCOME FUNDS may
purchase securities on a "when-issued" or "forward commitment" basis. When a
fund purchases a security on a when-issued or forward commitment basis, the
price of the security is fixed when the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
occurs within three months after the transaction, but delayed settlements beyond
three months may be negotiated.
During the period between a commitment and settlement, no interest accrues to
the Fund. When a Fund commits to purchase securities in this manner, however,
the Fund immediately assumes the risk of ownership, including price fluctuation.
If the other party does not deliver or pay for a security purchased or sold by
the Fund, the Fund may incur a loss or miss and opportunity to make an
alternative investment. Any significant commitment of a Fund's assets committed
to the purchase of securities on a when-issued or forward commitment basis may
increase the volatility of its net asset value. Except for dollar roll
transactions, which are described below, each of the Fixed Income Funds limits
its investments in when-issued and forward commitment securities to 15% of the
value of the Fund's total assets.
A Fund may use when-issued transactions and forward commitments to hedge against
anticipated changes in interest rates and prices. If the Fund's Sub-adviser
forecasts incorrectly the direction of interest rate movements, however, the
Fund might be required to complete when-issued or forward transactions at prices
inferior to the current market values. The Funds enter into when-issued and
forward commitments only with the intention of actually receiving the
securities, but a Fund may sell the securities before the settlement date if
deemed advisable. If a Fund disposes of the right to acquire a when-issued
security prior to its acquisition or to dispose of its right to deliver or
receive against a forward commitment, it can incur a gain or loss.
DOLLAR ROLL TRANSACTIONS. Each FIXED INCOME FUND may enter into dollar roll
transactions in which the Fund sells fixed income securities, typically
mortgage-backed securities, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. During the roll
period no payment is made for the securities purchased and no interest or
principal payments on the security accrue to the Fund, but the Fund assumes the
risk of ownership. A Fund
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is compensated for entering into dollar roll transactions by the difference
between the current sales price and the forward price for the future purchase,
as well as by the interest earned on the cash proceeds of the initial sale.
Dollar roll transactions involve the risk that the market value of the
securities sold by a Fund may decline below the price at which the Fund is
committed to purchase similar securities. If the buyer of securities under a
dollar roll transaction becomes insolvent, the Fund's use of the proceeds of the
transaction may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. The Funds will engage in roll transactions for the purpose of
acquiring securities for their portfolios and not for investment leverage. Each
Fixed Income Fund will limit its obligations on dollar roll transactions to 35%
of the Fund's net assets.
CONCENTRATION. As a fundamental investment policy, a Fund may not purchase a
security (other than U.S. Government Securities) if as a result more than 25% of
its net assets would be invested in a particular industry.
DIVERSIFICATION. As a fundamental investment policy, a Fund may not purchase a
security if, as a result (a) more than 5% of a Fund's total assets would be
invested in the securities of a single issuer, or (b) a Fund would own more than
10% of the outstanding voting securities of a single issuer. This limitation
applies only with respect to 75% of a Fund's total assets and does not apply to
U.S. Government Securities.
Each Fund reserves the right to invest up to 100% of its investable assets in
one or more other investment companies and each Fund reserves the right, upon
notification to shareholders to make such investments. If a Fund elected to
pursue its investment objective in this manner, its policies on concentration
and diversification would apply to the assets of the investment companies in
which the Fund invests.
CASH AND TEMPORARY DEFENSIVE POSITIONS. A Fund will hold a certain portion of
its assets in cash or cash equivalents to retain flexibility in meeting
redemptions, paying expenses, and timing of new investments. Cash equivalents
may include (i) short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities ("U.S. Government Securities"),
(ii) certificates of deposit, bankers' acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States that have an A+
rating from Standard & Poor's Corporation or an A-1+ rating from Moody's
Investors Service, Inc., (iii) commercial paper rated P-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation, (iv) repurchase
agreements covering any of the securities in which a Fund may invest directly,
and (v) money market mutual funds.
In addition, when the Sub-adviser believes that business or financial conditions
warrant, a Fund may assume a temporary defensive position. During such periods,
a Fund may invest without limit in cash or cash equivalents. When and to the
extent a Fund assumes a temporary defensive position, it will not pursue its
investment objective.
SHORT SALES. A Fund may not enter into short sales, except short sales "against
the box." In a short sale against the box, a Fund sells securities it owns, or
has the right to acquire at no added
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cost. A Fund does not immediately deliver the securities sold, however, and does
not receive proceeds from the sale until it does deliver the securities. A Fund
may enter into a short sale against the box to lock-in a gain or loss in one
year, while deferring recognition of the gain or loss until the next year. A
Fund may also sell short against the box to hedge against the risk that the
price of a security may decline. In such a case, to the extent a Fund limits its
future losses in the security, it limits its opportunity to achieve future gain
in the security as well. Pursuant to the Taxpayer Relief Act of 1997, if a Fund
has unrealized gain with respect to a security and enters into a short sale with
respect to such security, the Fund generally will be deemed to have sold the
appreciated security and this will recognize gain for tax purposes.
SECURITIES OF OTHER INVESTMENT COMPANIES. A Fund may invest in shares of other
investment companies to the extent permitted by the Investment Company Act of
1940 ("Investment Company Act"). To the extent a Fund invests in shares of an
investment company, it will bear its pro rata share of the other investment
company's expenses, such as investment advisory and distribution fees, and
operating expenses.
ILLIQUID AND RESTRICTED SECURITIES. A Fund may not purchase a security if, as a
result, more than 15 percent of its net assets would be invested in illiquid
securities. A security is considered ILLIQUID if it may not be sold or disposed
of in the ordinary course of business within seven days at approximately the
value at which a Fund has valued the security. Over-the-counter options,
repurchase agreements not entitling the holder to payment of principal in 7
days, and certain "restricted securities" may be illiquid.
A security is RESTRICTED if it is subject to contractual or legal restrictions
on resale to the general public. A liquid institutional market has developed,
however, for certain restricted securities such as repurchase agreements,
commercial paper, foreign securities and corporate bonds and notes. Thus,
restrictions on resale do not necessarily indicate the liquidity of the
security. For example, if a restricted security may be sold to certain
institutional buyers in accordance with Rule 144A under the Securities Act of
1933 or another exemption from registration under the Securities Act, the
Sub-adviser may determine that the security is liquid under guidelines adopted
by the Board. These guidelines take into account trading activity in the
securities and the availability of reliable pricing information, among other
factors. With other restricted securities, however, there can be no assurance
that a liquid market will exist for the security at any particular time. A Fund
might not be able to dispose of such securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemptions. A Fund treats
such holdings as illiquid.
PORTFOLIO TRANSACTIONS. Each Sub-adviser places orders for the purchase and sale
of assets it manages with brokers and dealers selected by, and in the discretion
of, the Sub-adviser. The Sub-advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest available commission
rates when the Fund's Sub-adviser believes it is reasonable to do so in light of
the value of the brokerage and research services provided by the broker
effecting the transaction.
Subject to the policy of obtaining "best execution", each Sub-adviser may employ
broker-dealer affiliates (collectively "Affiliated Brokers") to effect brokerage
transactions. Payment of
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commissions to Affiliated Brokers is subject to procedures adopted by the Board
to provide that the commissions will not exceed the usual and customary broker's
commissions charged by unaffiliated brokers. No specific portion of brokerage
transactions will be directed to Affiliated Brokers and in no event will a
broker affiliated with the Sub-adviser directing the transaction receive
brokerage transactions in recognition of research services provided to the
Sub-adviser.
The frequency of portfolio transactions of a Fund (portfolio turnover rate) will
vary from year to year depending on many factors. From time to time a Fund may
engage in active short-term trading to take advantage of price movements
affecting individual issues, groups of issues or markets. An annual portfolio
turnover rate of 100% would occur if all of the securities in a fund were
replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs and a possible increase in short-term
capital gains or losses. Tax rules applicable to short-term trading may affect
the timing of a portfolio transactions or the ability to realize short-term
trading profits or establish short-term positions. It is estimated that each
Fund's portfolio turnover will be less than 100%.
9. OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of each Fund is determined as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
Time), on each Fund Business Day by dividing the value of the Fund's net assets
(I.E., the value of its securities and other assets less its liabilities) by the
number of shares outstanding at the time the determination is made. Securities
owned by a Fund for which market quotations are readily available are valued at
current market value or, in their absence, at fair value as determined by the
Board or pursuant to procedures approved by the Board.
PERFORMANCE INFORMATION
A Fund's performance may be quoted in terms of yield or total return. All
performance information is based on historical results and is not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. To calculate standardized yield, a Fund takes the income it earned from
its investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. A Fund's total return shows its overall change in value,
including changes in share price and assuming all the Fund's dividends and
distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual returns tend to smooth out
variations in the Funds' returns, shareholders should recognize that they are
not the same as actual year-by-year results.
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The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the performance of
a Fund may be compared to securities indices. Indices are not used in the
management of the Funds but rather are standards by which the Advisers and
shareholders may compare the performance of a Fund to an unmanaged composite of
securities with similar, but not identical, characteristics. This material is
not to be considered representative or indicative of future performance. All
performance information for a Fund is calculated on a class basis.
THE TRUST AND ITS SHARES
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as a Fund) and may
divide portfolios or series into classes of shares (such as Trust Shares); the
costs of doing so will be borne by the Trust. Currently the authorized shares of
the Trust are divided into four separate series.
OTHER CLASSES OF SHARES. The Funds currently issue two classes of shares, Trust
Shares and Institutional Shares. Institutional Shares are offered to large
institutional investors able to make a minimum investment of $10 million. Each
class of a Fund will have a different expense ratio and may have different
distribution fees. Each class' performance is affected by its expenses. For more
information on Institutional shares of the Funds, investors may contact FFC at
(800) XXX-XXXX or (207) XXX-XXXXor the Funds' distributor. Investors may also
contact their sales representative to obtain information about the other
classes.
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series of the Trust and
each class of shares has equal dividend, distribution, liquidation and voting
rights, and fractional shares have those rights proportionately, except that
expenses related to the distribution of the shares of each class (and certain
other expenses such as transfer agency and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
shareholder meetings will be held only when specifically required by federal or
state law. Shareholders (and Trustees) have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a series is entitled to
the shareholder's pro rata share of all dividends and distributions arising from
that series' assets and, upon redeeming shares, will receive the portion of the
series' net assets represented by the redeemed shares.
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{25% SHAREHOLDERS] From time to time, these shareholders or other shareholders
may own a large percentage of the Shares of a Fund and, accordingly, may be able
to greatly affect (if not determine) the outcome of a shareholder vote.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
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MEMORIAL FUNDS
INSTITUTIONAL SHARES
[date]
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
1. PROSPECTUS SUMMARY.................................................................................
Highlights of the Funds.............................................................................
Expense Information.................................................................................
2. INVESTMENT OBJECTIVES AND POLICIES.................................................................
Government Bond Fund................................................................................
Corporate Bond Fund.................................................................................
Growth Equity Fund..................................................................................
Value Equity Fund...................................................................................
3. MANAGEMENT.........................................................................................
Investment Advisory Services........................................................................
Management, Administration and Distribution Services................................................
Shareholder Servicing and Custody...................................................................
Expenses of the Funds...............................................................................
4. HOW TO BUY SHARES..................................................................................
Minimum Investment..................................................................................
Purchase Procedures.................................................................................
Subsequent Purchases
Account Application.................................................................................
General Information.................................................................................
5. HOW TO SELL SHARES.................................................................................
General Information.................................................................................
Redemption Procedures...............................................................................
Other Redemption Matters............................................................................
6. OTHER SHAREHOLDER SERVICES.........................................................................
Exchanges...........................................................................................
Automatic Investment Plan...........................................................................
Individual Retirement Accounts......................................................................
Automatic Withdrawal Plan...........................................................................
Reopening Accounts..................................................................................
7. DIVIDENDS AND TAX MATTERS..........................................................................
Dividends...........................................................................................
Payment
Options.............................................................................................
Tax Matters.........................................................................................
8. DETAILED DESCRIPTION OF FUNDS' INVESTMENTS, STRATEGIES, AND RISKS
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS
9. OTHER INFORMATION..................................................................................
Determination of Net Asset Value....................................................................
Performance Information.............................................................................
The Trust and Its Shares............................................................................
Core and Gateway Structure..........................................................................
</TABLE>
i
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PROSPECTUS
[DATE]
This Prospectus offers Institutional class shares of the Government Bond Fund,
Corporate Bond Fund, Growth Equity Fund and Value Equity Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate, diversified portfolios of the
Memorial Funds (the "Trust"), a registered, open-end, management investment
company.
THIS PROSPECTUS SETS FORTH CONCISELY IMPORTANT INFORMATION
THAT YOU SHOULD KNOW BEFORE INVESTING.
PLEASE READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
The Trust has filed with the Securities and Exchange Commission (the "SEC") a
Statement of Additional Information ("SAI") dated [date], as may be amended from
time to time, which is available for reference on the SEC's Web Site
(http.//www.sec.gov). The SAI contains more detailed information about the Trust
and each of the Funds and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the SAI without charge by contacting the Trust's
distributor, Forum Financial Services, Inc., at Two Portland Square, Portland,
Maine 04101 or by calling (800) xxx-xxxx or (207) xxx-xxxx.
THE MEMORIAL FUNDS ARE A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE
NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
SYSTEM OR ANY OTHER GOVERNMENT AGENCY.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
FIXED INCOME FUNDS
The Memorial Funds includes two "Fixed Income" Funds, the GOVERNMENT BOND FUND
and the CORPORATE BOND FUND. These mutual funds invest primarily in bonds and
other fixed income securities. The Fixed Income Funds are designed principally
for investors that seek current income.
GOVERNMENT BOND FUND seeks to provide a high level of income consistent with
maximum credit protection and moderate fluctuation in principal value. The Fund
will seek to achieve this objective by investing at least 90 percent of its
assets in obligations issued or guaranteed as to principal and interest by the
United States Government, or by its agencies or instrumentalities ("U.S.
Government Securities"). The Fund seeks to moderate fluctuations its volatility
by structuring maturities of its investment portfolio in order to maintain a
duration between 75 percent and 125 percent of the duration of the Lehman
Brothers Government Bond Index .
CORPORATE BOND FUND seeks to provide as high a level of current income as is
consistent with capital preservation and prudent investment risk. Under normal
circumstances, the Fund will seek to attain this objective by investing at least
65% of its assets in corporate debt securities, U.S. Government Securities and
mortgage-backed and asset-backed securities. The Fund intends to maintain a
duration between 75 percent and 125 percent of the Lehman Brothers Aggregate
Bond Index.
EQUITY FUNDS
The Memorial Funds also includes two mutual funds that invest primarily in the
common stock of domestic companies, the GROWTH EQUITY FUND and the VALUE EQUITY
FUND (the "Equity Funds"). The Equity Funds will invest only in companies with a
minimum market capitalization of $250 million at the time of purchase, and will
seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock. Although the investment disciplines of the Equity Funds differ,
they are each designed for investors seeking long term capital appreciation and
able to tolerate possibly significant fluctuation in the value of their
investment.
GROWTH EQUITY FUND seeks long-term capital appreciation. It will seek to achieve
this objective by investing at least 65% of its assets in the common stock of
domestic companies that the
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Fund's adviser believes have superior growth potential and fundamental
characteristics that are significantly better than the market average and that
support internal earnings growth capability.
VALUE EQUITY FUND also seeks long-term capital appreciation. It will seek to
attain this objective by investing at least 65% of its total assets in the
common stock of domestic companies. Using a value approach, the Fund will seek
to invest in stocks that are underpriced when measured against comparable
securities, determined by price/earnings ratios, cash flows or other measures.
SOME INVESTMENT CONSIDERATIONS
AND RISK FACTORS
IN GENERAL. There is no assurance that any Fund will achieve its investment
objective, and a Fund's net asset value and total return will fluctuate based
upon changes in the value of its portfolio securities. Upon redemption, an
investment in a Fund may be worth more or less than its original value. No Fund,
by itself, provides a complete investment program.
All investments made by the Funds entail some risk. Among other things, the
market value of any security in which the Funds may invest is based upon the
market's perception of value and not necessarily the book value of an issuer or
other objective measure of a company's worth. Certain investments and investment
techniques, however, entail additional risks, such as the potential use of
leverage by certain Funds through borrowings, securities lending, and other
investment techniques. (See "A Detailed Description of the Funds' Investments,
Investment Strategies and Risks.") Similarly, a Fund's use of mortgage- and
asset-backed securities entails certain risks. (See "A Detailed Description of
the Funds' Investments, Investment Strategies and Risks --Mortgage-Backed
Securities" and "-- Asset-Backed Securities.")
FIXED INCOME FUNDS. The value of your investment in one or both of the Fixed
Income Funds may change in response to changes in interest rates. A rise in
interest rates typically causes a fall in the value of the fixed income
securities in which the Funds invest. Your investment in the Corporate Bond Fund
is also subject to the risk that the financial condition of an issuer of a
security held by the Fund may cause it to default or become unable to pay
interest or principal due on the security. To limit this risk, at least 80
percent of the Corporate Bond Fund's investments in corporate debt securities
will be in securities rated A or better and the Fund will maintain a minimum
average rating of A.
EQUITY FUNDS. The Equity Funds may be appropriate investments for investors who
seek long term growth in their investment, but who are willing to tolerate
significant fluctuations in the value of their investment in response to changes
in the market value of the stocks the Funds hold. This type of market movement
may affect the price of the securities of a single issuer, a segment of the
domestic stock market, or the entire market.
3
<PAGE>
PORTFOLIO MANAGEMENT
INVESTMENT ADVISER. Forum Advisors, LLC (the "Adviser"), serves as the
investment adviser for each Fund. Forum's responsibilities include developing
and reviewing the investment strategies and policies of each Fund, and
overseeing the performance of the investment sub-advisers ("Sub-advisers")
responsible for the day-to-day management of each Fund's investment portfolio.
See "Management - Investment Advisory Services."
INVESTMENT CONSULTANT. To assist it in carrying out its responsibilities, the
Adviser has retained Wellesley Group, Inc. ("Wellesley"). Wellesley consults
with Forum and the Board on the investment programs of each of the Funds and
provides data with which Forum and the Board can monitor and evaluate the
performance of the Funds. If the Board determines in the future to replace one
of the current Sub-advisers, or retain additional Sub-advisers to manage one or
more of the Funds, Wellesley will assist Forum and the Board in the selection of
those Sub-advisers.
INVESTMENT SUB-ADVISERS. The Adviser has retained the following investment
advisers ("Sub-advisers") to render advisory services and make daily investment
decisions for each Fund:
o The portfolio of the Government Bond Fund is managed by GBF Advisers.
o The portfolio of the Corporate Bond Fund is managed by CBF Advisers.
o The portfolio of the Growth Equity Fund is managed by GEF Advisers.
o The portfolio of the Value Equity Fund is managed by VEF Advisers.
The Adviser is also responsible for monitoring the investments and the
performance of the Sub-advisers on behalf of each of the Funds. The Adviser and
the Sub-advisers collectively may be referred to herein as the "Advisers." See
"Management - Investment Advisory Services."
SHARES OF THE FUNDS
Each Fund currently offers two separate classes of shares:
INSTITUTIONAL SHARES are sold through this prospectus, and are offered to large
institutional investors able to make an minimum aggregate initial investment of
$5 million, in one or more of the Funds. Institutional Shares are referred to as
"Shares" in this prospectus.
TRUST SHARES are offered by separate prospectus. Trust Shares are designed
primarily for individual investors and smaller fiduciary, agency and custodial
clients whose investments are pooled in common or collective trusts managed by
bank trust department, trust companies or their affiliates. Trust Shares are
expected to incur higher expenses than Institutional Shares.
4
<PAGE>
Shares of each class of a Fund have identical interests in the investment
portfolio of the Fund and, with certain exceptions, the same rights. (See "Other
Information -- The Trust and Its Shares.")
HOW TO BUY AND SELL SHARES
Shares of the Funds may be purchased or sold ("redeemed") on any weekday except
days that the New York Stock Exchange is closed, normally New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas ("Fund Business Day"). The
Trust's transfer agent accepts orders to buy or sell Shares between 9:00 a.m and
6:00 p.m. (Eastern) on all Fund Business Days. Orders are executed at the net
asset value of the Fund's shares next determined after an order in proper form
is received.
You may buy or sell Shares by mail, by bank wire or through various financial
institutions. The minimum initial investment in Shares is $10 million.. There is
no minimum for subsequent investments. (See "How to Buy Shares" and "How to Sell
Shares.")
EXCHANGES
Shareholders may exchange Institutional Shares for Trust Shares of the other
Funds or for [NAME OF CLASS] shares of the Forum Daily Assets Treasury Fund, a
money market fund that is a separate series of Forum Funds. (See "Other
Shareholder Services -- Exchanges.")
DIVIDENDS AND DISTRIBUTIONS
The Fixed Income Funds declare and pay dividends of net investment income
monthly. The Equity Funds declare and pay dividends of net investment income, if
any, quarterly. Each Fund's net capital gain, if any, is distributed annually.
All dividends and distributions are reinvested in additional Fund shares unless
the shareholder elects to have them paid in cash. (See "Dividends and Tax
Matters.")
EXPENSE INFORMATION
The following tables should help you understand the expenses that you will bear
if you invest Shares of a Fund.
5
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES
(APPLICABLE TO EACH FUND)
<TABLE>
<S> <C> <C> <C> <C>
GOVERNMENT BOND CORPORATE BOND GROWTH EQUITY FUND VALUE EQUITY FUND
FUND FUND
-------------------- ------------------- -------------------- -------------------
Maximum sales charge on None None None None
purchases and reinvested
dividends
Maximum deferred sales charge None None None None
Exchange Fee None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (1)
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C> <C> <C> <C>
GOVERNMENT BOND CORPORATE BOND GROWTH EQUITY FUND VALUE EQUITY FUND
FUND FUND
-------------------- ------------------- -------------------- -------------------
Investment Advisory Fees
Rule 12b-1 Fees
Other Expenses
Total Operating Expenses
</TABLE>
(1) Annual Fund Operating Expenses are calculated as a percentage of each Fund's
average net assets assuming average net assets of at least $xxx million. If the
average net assets of a Fund are lower in any given year, the expenses will be a
higher percentage of the Fund's assets. For a further description of the various
expenses associated with investing in the Funds, (see "Management.")
6
<PAGE>
EXAMPLE
The following hypothetical example indicates the dollar amount of expenses that
you would pay if you invested $1,000 in a Fund's Shares, assuming that (a) the
Fund's expenses are as listed above, (b) the Fund has a 5% annual return and (c)
you reinvest all dividends and distributions paid by the Fund. The example does
not represent past or future expenses or return; actual expenses and return may
be more or less than indicated. The 5% annual return does not represent any
Fund's past returns, nor is it meant to predict its projected returns.
1 YEAR 3 YEARS
------ -------
GOVERNMENT BOND FUND xx xx
CORPORATE BOND FUND xx xx
INCOME FUND xx xx
GROWTH VALUE FUND xx xx
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<PAGE>
2. INVESTMENT OBJECTIVES AND POLICIES
GOVERNMENT BOND FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a high
level of income consistent with maximum credit protection and moderate
fluctuation in principal value. There can be no assurance that the Fund will
achieve this objective.
INVESTMENT POLICIES. The Fund will invest at least 90 percent of its net assets
in a portfolio of fixed and variable rate U.S. Government Securities, including
zero coupon bonds issued or guaranteed by the U.S. Treasury. The Fund may invest
up to 10 percent of its net assets in corporate debt securities.
The Fund may not invest more than 25 percent of its total assets in the
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury, and may not invest more than 10
percent of its total assets in the securities of any other issuer.
The Fund invests in debt obligations with maturities (or average life in the
case of mortgage-backed and similar securities) ranging from overnight to 12
years. The Fund seeks to moderate fluctuations its volatility by structuring
maturities of its investment portfolio in order to maintain a duration between
75 percent and 125 percent of the duration of the Lehman Brothers Government
Bond Index, which is currently X.XX years. Duration measures the sensitivity of
a debt security's price to changes in interest rates -- the longer the
security's duration, the more its price will fluctuate in response to changes in
interest rates. The calculation of duration is based on the present value of
payments over the life of the debt obligation and takes into account call rights
and other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.
The Fund may also use options and futures contracts (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate and foreign currency futures contracts and buy options and write covered
options on those futures contracts. An option is covered if, so long as the Fund
is obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid debt
instruments with a value at all times sufficient to cover the Fund's obligations
under the option. Although the Fund will not engage in these transaction for
speculative purposes, there is a risk that changes in the value of a hedging
instrument will not match those of the investment being hedged.
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<PAGE>
CORPORATE BOND FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide as high
a level of current income as is consistent with capital preservation and prudent
investment risk. There is no assurance that the Fund will achieve this
objective.
INVESTMENT POLICIES. Under normal circumstances, the Fund will seek to attain
its investment objective by investing at least 65% of its assets in corporate
debt securities. The Fund may also invest in obligations issued or guaranteed as
to principal and interest by the United States Government or by any of its
agencies or instrumentalities, and mortgage-backed and asset-backed securities
("U.S. Government Securities").
At least 80 percent of the Fund's investments in corporate debt will be in
securities that are rated, at the time of purchase, in one of the three highest
rating categories by a nationally recognized statistical rating organization
("NRSRO") such as Standard & Poor's, or which are unrated and determined by the
Sub-adviser to be of comparable quality. (See "Additional Investment Policies
and Risk Considerations -- Rating Matters.") No more than 5 percent of the
Fund's investments will be in securities rated below investment grade, that is
below the fourth highest rating category. The Fund's portfolio of corporate debt
instruments will have a minimum weighted average rating of A.
The Fund will invest primarily in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from
short-term (including overnight) to 15 years. The Fund seeks to structure the
maturities of its investment portfolio in order to maintain a duration between
75 percent and 125 percent of the duration of the Lehman Brothers Aggregate Bond
Index, which is currently X.XX years. Duration measures the sensitivity of a
debt security's price to changes in interest rates -- the longer the security's
duration, the more its price will fluctuate in response to changes in interest
rates. The calculation of duration is based on the present value of payments
over the life of the debt obligation and takes into account call rights and
other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.
The Fund may invest up to 25 percent of its assets in mortgage- and asset-backed
securities. The Fund may enter into "dollar roll" transactions in connection
with its investments in mortgage-backed securities. The Fund may also invest in
zero-coupon securities, but will limit its investment in these securities,
except those issued through the U.S. Treasury's STRIPS program, to not more than
10 percent of the Fund's total assets. The Fund may also invest in securities
that are restricted as to disposition under the federal securities laws
(sometimes referred to as "private placements" or "restricted securities"). In
addition, the Fund may not invest more than 25 percent of its total assets in
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury. For a discussion of these investments
and the risks associated with them see "A Detailed Description of the Funds'
Investments, Investment Strategies and Risks."
The Fund may by use futures contracts and options (both exchange-traded and
over-the-counter) to
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<PAGE>
attempt to reduce the overall risk of its investments ("hedge"). The Fund's
ability to use hedging strategies may be limited by market considerations,
regulatory limits and tax considerations. The Fund may write covered call and
put options, buy put and call options, buy and sell interest rate futures
contracts, and buy options and write covered options on those futures contracts.
An option is covered if, so long as the Fund is obligated under the option, it
owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid debt instruments with a value at all
times sufficient to cover the Fund's obligations under the option.
GROWTH EQUITY FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is long-term capital
appreciation. There is no assurance that the Fund will achieve this objective.
INVESTMENT POLICIES. The Fund will seek to achieve its objective by investing at
least 65% of its assets in the common stock of domestic companies having a
minimum market capitalization of $250 million at the time of purchase. The Fund
will seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock.
The Fund will invest in the securities of issuers that its Sub-adviser believes
have superior growth potential and fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability. The Fund may invest in the securities of companies whose
growth potential is, in the Sub-adviser's opinion, generally unrecognized or
misperceived by the market. The Sub-adviser may also look to changes in a
company that involve a sharp increase in earnings, the hiring of new management
or measures taken to close the gap between the company's share price and
takeover/asset value.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that are rated,
at the time of purchase, within the four highest rating categories assigned by
an NRSRO or which are unrated and determined by the Sub-adviser to be of
comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI.
The Fund may also use futures contracts and options (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use hedging strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid debt instruments
with a value at all times sufficient to cover the Fund's obligations under the
option. For a description of these investment practices and the risks associated
with them see "A Detailed Description of the Funds' Investments, Investment
Strategies and Risks - Futures Contracts and
10
<PAGE>
Options."
VALUE EQUITY FUND
INVESTMENT OBJECTIVE. The investment objective of the Fund is long-term capital
appreciation. There is no assurance that the Fund will achieve this objective.
INVESTMENT POLICIES. The Fund will seek to attain this objective by investing at
least 65% of its total assets in common stocks of domestic companies having a
minimum market capitalization of $250 million at the time of purchase. The Fund
will seek to maintain a minimum average weighted capitalization of $5 billion. A
company's market capitalization is the total market value of its outstanding
common stock.
Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable companies, determined by price/earnings
ratios, cash flows or other measures. It is expected that the Sub-adviser will
rely on stock selection to achieve its results, rather than trying to time
market fluctuations. In selecting stocks, the Sub-adviser will employ
traditional value disciplines in selecting stocks for investment by the Fund,
evaluating companies on several levels to establish valuation parameters using
relative ratios or target prices.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that are rated,
at the time of purchase, within the four highest rating categories assigned by
an NRSRO or which are unrated and determined by the Sub-adviser to be of
comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI.
The Fund may also use futures contracts and options (both exchange-traded and
over-the-counter) to attempt to reduce the overall risk of its investments
("hedge"). The Fund's ability to use hedging strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid debt instruments
with a value at all times sufficient to cover the Fund's obligations under the
option. For a description of these investment practices and the risks associated
with them see "A Detailed Description of the Funds' Investments, Investment
Strategies and Risks - Futures Contracts and Options."
11
<PAGE>
3. MANAGEMENT
The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The Board formulates the general policies of the Funds
and meets periodically to review the performance of the Funds, monitor their
investment activities and practices, and discuss other matters affecting the
Funds and the Trust.
ADVISER
FORUM ADVISERS, LLC (the "Adviser"), Two Portland Square, Portland, Maine 04101,
serves as investment adviser to the Funds pursuant to an investment advisory
agreement with the Trust. Subject to the general control of the Board, the
Adviser is responsible for among other things, developing a continuing
investment program for each Fund in accordance with its investment objective,
reviewing the investment strategies and policies of each Fund, and advising the
Board on the selection of additional Sub-advisers.
The Adviser has entered into investment sub-advisory agreements with the
Sub-advisers to exercise investment discretion over the assets (or a portion of
assets) of each Fund.
For its services under the Investment Advisory Agreement, Forum receives with
respect to the following funds:
Government Bond Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Corporate Bond Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Growth Equity Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
Value Equity Fund A fee at an annual rate of 0.XX percent of that
Fund's average daily net assets
The Adviser was incorporated under the laws of Delaware in 1987 and is
registered under the Investment Advisers Act of 1940.
INVESTMENT CONSULTANT
To assist it in carrying out its responsibilities under the Investment Advisory
Agreement, the Adviser has retained Wellesley Group, Inc. ("Wellesley"), 800
South Street, Waltham, Massachusetts 02154, to provide investment consulting
services. Among other things, Wellesley has assisted the Board, Management and
the Adviser to formulate investment policies and restrictions best-suited to
achieving each Fund's long-term investment objective.
Wellesley also reviews the investments and analyzes the performance of each
Fund. In doing so, Wellesley compares the risk and return profiles of each Fund
against appropriate groups of investment managers employing a similar investment
strategy, comparable mutual funds, and
12
<PAGE>
relevant broad based market indices. Wellesley reports its findings to Forum and
to the Board at least quarterly.
If the Board decides to add or change Sub-advisers, Wellesley will assist Forum
and the Board in the selection of these new Sub-advisers with proven long-term
investment performance and philosophy best suited to the goals and objectives of
the Fund for which the adviser is being considered. As a part of this selection
process, Wellesley will analyze statistical information relating to investments
and performance, and evaluate the risk and return profiles of the investment
advisers under consideration. Wellesley will also review such qualitative
factors as the advisory firm's ownership, organizational structure, business
plan, client base, staff resources, investment philosophy, research
capabilities, investment decision-making process, and risk management
disciplines.
SUB-ADVISERS
The Adviser has retained the Sub-advisers to render advisory services and make
daily investment decisions for each Fund. The Adviser makes recommendations to
the Trust's Board of Trustees regarding the selection and retention of these
Sub-advisers. On an ongoing basis, the Adviser evaluates the Sub-advisers and
reports to the Board concerning their investment results. The Adviser also
reviews the investments made for the Funds by the Sub-advisers to see that they
comply with the Funds' investment objectives, policies and restrictions.
The following Sub-advisers and individuals are primarily responsible for the
day-to-day management of the Funds:
GBF ADVISERS ("GBF") [address] manages the portfolio of the GOVERNMENT BOND
FUND. [insert re organization and portfolio managers]
CBF ADVISERS ("CBF") [address] manages the portfolio of the CORPORATE BOND FUND.
[insert re organization and portfolio managers]
GEF ADVISERS ("GEF") [address] manages the portfolio of the GROWTH EQUITY FUND.
[insert re organization and portfolio managers]
VEF ADVISERS ("VEF") [address] manages the portfolio of the VALUE EQUITY FUND.
[insert re organization and portfolio managers]
The Adviser performs internal due diligence on each Sub-adviser and monitors
each Sub-adviser's performance. The Adviser will be responsible for
communicating performance targets and evaluations to the Sub-advisers,
supervising each Sub-adviser's compliance with its Fund's fundamental investment
objectives and policies, authorizing Sub-advisers to engage in certain
investment techniques for the Funds, and recommending to the Board of Trustees
whether sub-advisory agreements should be renewed, modified or terminated. The
Adviser pays a fee to each of the Sub-advisers. These fees are borne solely by
Forum and do not increase the fees paid by
13
<PAGE>
shareholders of the Funds. As of the date of this Prospectus, Forum will pay
GBF, CBF, GEF, VEF fees of 0.XX%, 0.XX%, 0.XX%, and 0.XX%, respectively, of the
average daily net assets of the corresponding Fund for which the Sub-adviser
provides investment advisory services. The amount of these fees may vary from
time to time as a result of periodic negotiations with the Sub-advisers and
pursuant to certain factors described in the SAI. The amount of Advisory Fees
paid by each Fund will not vary as a result of changes in the Sub-advisory fees,
however.
The Adviser also may from time to time recommend that the Board of Trustees
replace one or more Sub-advisers or appoint additional Sub-advisers, depending
on the Adviser's assessment of what combination of Sub-advisers it believes will
optimize each Fund's chances of achieving its investment objective. In the event
that a Sub-adviser ceased to provide investment advisory services for a Fund,
the Adviser would select a similarly qualified investment adviser to replace the
Sub-adviser but would not manage the Fund's portfolio.
Section 15(a) of the 1940 Act requires that a Fund's shareholders approve its
investment advisory contracts. As interpreted, this requirement applies to the
Sub-advisory contracts of the Funds. The Trust is applying to the SEC for a
conditional exemption from this shareholder approval requirement. The SEC has
granted such applications in the past, and the Trust expects it will receive the
requested exemption. Such relief is not certain, however. If the exemption is
granted, the Board of Trustees would be able to appoint additional or
replacement Sub-advisers without Shareholder approval. The Board would not,
however, be able to replace the Adviser as investment adviser to any Fund
without the approval of that Fund's shareholders.
ADMINISTRATOR
On behalf of the Fund, the Trust has entered into an Administration Agreement
with Forum Administrative Services, Inc. ("Forum"). Under this agreement, Forum
is responsible for the supervision of the overall management of the Trust
(including the Trust's receipt of services for which it must pay), providing the
Trust with general office facilities and providing persons satisfactory to the
Board of Trustees to serve as officers of the Trust. For these services, Forum
receives a fee computed and paid monthly at an annual rate of 0.10% of the
average daily net assets under $150 million, and 0.05% of the average daily
assets over $150 million of each Fund, subject to an annual minimum of $30,000
per Fund.
Forum is located at Two Portland Square, Portland, Maine 04101. As of the date
of this prospectus, Forum administers investment companies and collective
investment funds with assets of approximately $xx billion.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Trust, Forum Financial Services,
Inc. ("FFSI") acts as distributor of the Fund's shares. FFSI acts as the agent
of the Trust in connection with the offering of shares of the Fund. FFSI
receives no compensation for its services under the Distribution Agreement. FFSI
may enter into arrangements with banks, broker-dealers or other financial
institutions ("Selected Dealers") through which investors may purchase or redeem
14
<PAGE>
shares. FFSI may, at its own expense and from its own resources, compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Fund. Investors purchasing shares of the Fund through
another financial institution should read any materials and information provided
by the financial institution to acquaint themselves with its procedures and any
fees that it may charge. FFSI is a registered broker-dealer and is a member of
the National Association of Securities Dealers, Inc.
DISTRIBUTION PLAN. On behalf of each Fund, the Trust has adopted a Distribution
and Services Plan pursuant to rule 12b-1 under the 1940 Act (the "Plan"). Under
the Plan, each Fund may pay (i) FFSI or another person for distribution services
provided and expenses assumed in connection with distribution services for Trust
shares the Fund ("Shares") and (ii) Service Organizations for shareholder
administrative services provided pursuant to servicing agreements in connection
with Shares. Payments to FFSI are intended to compensate it for distribution
assistance and expenses in connection with activities primarily intended to
result in the sale of Shares, including compensating dealers and other sales
personnel (which may included affiliates of the Adviser or the Sub-advisers,
royalty and licensing fees paid to the International Cemetery and Funeral
Association or other trade associations, direct advertising and marketing
expenses and expenses incurred in connection with preparing, printing, mailing
and distributing or publishing advertisements and sales literature, for printing
and mailing prospectuses and statements of additional information to prospective
investors, and costs associated with implementing and operating the Plan. Under
the Plan, these payments and expenses may not exceed 0.05% of the average annual
net assets of the Fund attributable to Trust Shares.
TRANSFER AGENT
The Trust has entered into a Transfer Agency Agreement with Forum Financial
Corp. ("FFC") pursuant to which FFC acts as the Fund's transfer agent and
dividend disbursing agent. FFC maintains an account for each shareholder of the
Trust (unless such accounts are maintained by sub-transfer agents), performs
other transfer agency functions and acts as dividend disbursing agent for the
Trust.
Pursuant to a separate agreement, Forum Accounting Services, LLC ("FAcS")
provides portfolio accounting services to each Fund. The Adviser, Forum, FFSI,
FFC and FAcS are members of the Forum Financial Group of companies which
together provide a full range of services to the investment company and
financial services industry. As of October 1, 1997, Forum, FAS and Forum
Accounting were controlled by John Y. Keffer.
EXPENSES OF THE TRUST
Each Fund's expenses comprise Trust expenses attributable to the Fund, and a pro
rata share of the Trust's expenses that are not attributable to a particular
Fund. The Adviser, Forum, FFC, or FAcS or any other entity that provides
services for the Funds pursuant to a contract with the Trust, may waive all or a
portion of their fees, which are accrued daily, and paid monthly. Any such
waiver, which could be discontinued at any time, would have the effect of
increasing the
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<PAGE>
Fund's performance for the period during which the waiver was in effect and
would not be recouped at a later date.
CUSTODY
__________ Bank serves as each Fund's custodian and may appoint subcustodians
for the foreign securities and other assets held in foreign countries.
4. HOW TO BUY SHARES
MINIMUM INVESTMENT
To open an account, you must make a minimum aggregate investment of $5 million
in one or more of the Funds. To determine whether an investor satisfies this
minimum, accounts sponsored by and institution and its affiliated companies
will be aggregated. Either management of the Trust or FFC may in its discretion
waive the investment minimums. purchases. There is no minimum for subsequent
purchases (See "Other Shareholder Services -- Automatic Investment Plan" and
"Dividends and Tax Matters.")
The Funds reserve the right to reject any subscription for the purchase of their
shares. Share certificates are issued only to shareholders of record upon their
written request and no certificates are issued for fractional shares.
PURCHASE PROCEDURES
INITIAL PURCHASES
THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.
1. BY MAIL. You may send a check or money order (cash cannot be accepted) along
with a completed account application form to the Trust at the address listed
under "Account Application." Checks or money orders are accepted at full value
subject to collection. If a check or money order does not clear, the purchase
order will be canceled and the investor will be liable for any losses or fees
incurred by the Trust, FFC or Forum.
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Memorial Funds" or to
one or more owners of that account and endorsed to "Memorial Funds." For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Memorial Funds." No other method of payment by check will be
accepted. All purchases must be paid in U.S. dollars; checks must be drawn on
U.S. banks. Payment by Traveler's checks is prohibited.
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2. BY BANK WIRE. You make an initial investment in a Fund using the wire system
for transmittal of money among banks. You should first telephone FFC at (800)
338-1348 to obtain an account number. You should then instruct a bank to wire
your money immediately to:
BANKBOSTON
BOSTON, MASSACHUSETTS
ABA # 011000390
FOR CREDIT TO: FORUM FINANCIAL CORP.
RE: [NAME OF FUND]
ACCOUNT NO.:
ACCOUNT NAME:
You should then promptly complete and mail the account application form. Your
bank may charge for transmitting the money by bank wire. The Trust does not
charge you for the receipt of wire transfers. Payment by bank wire is treated as
a federal funds payment when received.
3. THROUGH FINANCIAL INSTITUTIONS. You may also purchase Shares through certain
broker-dealers, banks and other financial institutions ("Processing
Organizations"). FFC and its affiliates may be Processing Organizations.
Processing Organizations may receive payments from Forum with respect to sales
of Trust Shares and may receive payments as a processing agent from FFC.
Financial institutions, including Processing Organizations, may charge their
customers a fee for their services and are responsible for promptly transmitting
purchase, redemption and other requests to the Funds.
If you purchase shares through a Processing Organization, you will be subject to
its procedures which may include charges, limitations, investment minimums,
cutoff times and restrictions in addition to, or different from, those
applicable to shareholders who invest in a Fund directly. You should acquaint
yourselves with your institution's procedures and should read this Prospectus in
conjunction with any materials and information provided by their institution. If
you purchase a Fund's shares through a Processing Organization, you may or may
not be the shareholder of record and, subject to your institution's and the
Funds' procedures, may have Fund shares transferred into your name. There is
typically a three-day settlement period for purchases and redemptions through
broker-dealers. Certain Processing Organizations also may enter purchase orders
with payment to follow.
Certain shareholder services may not be available to you if you purchase shares
through a Processing Organization. You should contact your Processing
Organization for further information. The Trust may confirm purchases and
redemptions of a Processing Organization's customers directly to the Processing
Organization, which in turn will provide its customers with confirmations and
periodic statements. The Trust is not responsible for the failure of any
Processing Organization to carry out its obligations to its customer.
SUBSEQUENT PURCHASES
You may make subsequent purchases by mailing a check, by sending a bank wire or
through your
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Processing Organization as indicated above. All payments should clearly indicate
your name and account number.
ACCOUNT APPLICATION
You may obtain the account application form necessary to open an account by
writing the Trust at the following address:
MEMORIAL FUNDS
[NAME OF FUND]
P.O. BOX
PORTLAND, ME 04112
To participate in shareholder services not referenced on the account application
form and to change information on your account (such as addresses), you should
contact the Trust. The Trust reserves the right in the future to modify, limit
or terminate any shareholder privilege upon appropriate notice to shareholders
and to charge a fee for certain shareholder services, although no such fees are
currently contemplated. You may terminate your exercise of any privilege or
participation in any program at any time by writing to the Trust.
GENERAL INFORMATION
Fund Shares are continuously sold on any weekday except days when the New York
Stock Exchange is closed, normally New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas ("Fund Business Day"). The purchase price for a
share of a Fund equals its net asset value next-determined after acceptance of
an order in proper form.
Fund shares become entitled to receive dividends and distributions on the next
Fund Business Day after a purchase order is accepted.
All payments for Shares must be in U.S. dollars. All transactions in Fund shares
are effected through FFC, which accepts orders for redemptions and for
subsequent purchases only from shareholders of record. Shareholders of record
will receive from the Trust periodic statements listing all account activity
during the statement period.
5. HOW TO SELL SHARES
GENERAL INFORMATION
Fund Shares may be sold ("redeemed") at their net asset value on any Fund
Business Day. There is no minimum period of investment and no restriction on the
frequency of redemptions.
Fund shares are redeemed at the Fund's net asset value next determined after FFC
accepts the redemption order in proper form (and any supporting documentation
that FFC may require).
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Redeemed shares are not entitled to receive dividends declared after the day the
redemption becomes effective.
Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check used to
purchase the shares being redeemed has been cleared by the shareholder's bank,
which may take up to 15 days. This delay may be avoided by paying for shares
through wire transfers. Unless otherwise indicated, redemption proceeds normally
are paid by check mailed to the shareholder's record address. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the shares to a Fund, except when the New York
Stock Exchange is closed (or when trading on the Exchange is restricted) for any
reason other than its customary weekend or holiday closings, for any period
during which an emergency exists as a result of which disposal by the Fund of
its portfolio securities or determination by the Fund of the value of its net
assets is not reasonably practicable and for such other periods as the SEC may
permit.
REDEMPTION PROCEDURES
If you invested through a Processing Organization you may redeem your shares
through the Processing Organization as described above. If you invested directly
in a Fund, you may redeem your Shares as described below. If you wish to redeem
shares by telephone or receive redemption proceeds by bank wire, you must elect
these options by properly completing the appropriate sections of your account
application form. These privileges may not be available until several weeks
after your application is received. Shares for which certificates have been
issued may not be redeemed by telephone.
1. BY MAIL. You may redeem shares by sending a written request to FFC
accompanied by any share certificate that may have been issued to the
shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. (See "How to Sell Shares -- Other Redemption Matters.")
2. BY TELEPHONE. If you have elected telephone redemption privileges, you may
request a redemption by calling FFC at (800) XXX-XXXX or (207) XXX-XXXX and
providing your account number, the exact name in which your shares are
registered and your social security or taxpayer identification number. In
response to the telephone redemption instruction, the Trust will mail a check to
your record address or, if you have elected wire redemption privileges, wire the
proceeds. (See "How to Sell Shares -- Other Redemption Matters.")
3. BY BANK WIRE. For redemptions of more than $5,000, if you have elected wire
redemption privileges, you may request a Fund to transmit proceeds of any
redemption over $5,000 by federal funds wire to a bank account that you
previously designated in writing. To request bank wire redemptions by telephone,
you also must have elected the telephone redemption privilege. Redemption
proceeds are transmitted by wire on the day after FFC receives a redemption
request in proper form.
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OTHER REDEMPTION MATTERS
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a stock certificate; (2) written instruction to redeem Shares
whose value exceeds $50,000; (3) instructions to change a shareholder's record
name; (4) redemption in an account in which the account address or account
registration has changed within the last 30 days; (5) the proceeds are not being
sent to the address of record, preauthorized bank account, or preauthorized
brokerage firm account; (6) proceeds are to be paid to someone other than the
registered owners or to an account with a different registration; (7) change of
automatic investment or redemption, dividend election, telephone redemption or
exchange option election or any other option election in connection with the
shareholder's account.
Signature guarantees may be provided by any bank, broker-dealer, national
securities exchange, credit union, savings association or other eligible
institution that is authorized to guarantee signatures and is acceptable to FFC.
Whenever a signature guarantee is required, the signature of each person
required to sign for the account must be guaranteed. A notarized signature is
not sufficient.
Shareholders who want to telephone redemption or exchange privileges must elect
those privileges. The Trust and FFC will employ reasonable procedures in order
to verify that telephone requests are genuine, including recording telephone
instructions and causing written confirmations of the resulting transactions to
be sent to shareholders. If the Trust and FFC did not employ such procedures,
they could be liable for losses due to unauthorized or fraudulent telephone
instructions. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements. During times of drastic
economic or market changes, telephone redemption and exchange privileges may be
difficult to implement. In the event that a shareholder is unable to reach the
FFC by telephone, requests may be mailed or hand-delivered to the FFC.
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $500,000
immediately following any redemption.
The Transfer Agent will deem a shareholder's account "lost" if correspondence to
the shareholder's address of record is returned as undeliverable, unless the
Transfer Agent determines the shareholder's new address. When an account is
deemed lost all distributions on the account will be reinvested in additional
shares of the Fund. In addition, the amount of any outstanding (unpaid for six
months or more) checks for distributions that have been returned to the Transfer
Agent will be reinvested and the checks will be canceled.
6. OTHER SHAREHOLDER SERVICES
EXCHANGES
Shareholders of one Fund may exchange their shares for Trust shares of any of
the other Memorial Funds, as well as for [NAME OF CLASS] shares of Forum Daily
Assets Treasury Fund. A Prospectus for Daily Assets Treasury Fund can be
obtained by contacting FFC.
The Funds do not charge for exchanges, and there is currently no limit on the
number of exchanges you may make. The Funds reserve the right, however, to limit
excessive exchanges by any shareholder. Exchanges are subject to the fees
charged by, and the limitations (including minimum
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investment restrictions) of, the Fund into which a shareholder is exchanging.
Exchanges may only be made between identically registered accounts or by opening
a new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical registration
and the same shareholder privileges as the account from which the exchange is
being made. A shareholder may exchange into a Fund only if that Fund's shares
may legally be sold in the shareholder's state of residence.
Under federal tax law, an exchange is treated as a redemption and a purchase.
Accordingly, you may realize a capital gain or loss depending on whether the
value of the shares redeemed is more or less than your basis in the shares at
the time of the exchange transaction. Exchange procedures may be amended
materially or terminated by the Trust at any time upon 60 days' notice to
shareholders. (See "Additional Purchase and Redemption Information" in the SAI.)
1. EXCHANGES BY MAIL. You may make an exchange by sending a written request to
FFC accompanied by any share certificates for the shares to be exchanged. You
must sign all written requests for exchanges and endorse all certificates
submitted for exchange with your signature guaranteed. (See "How to Sell Shares
- -- Other Redemption Matters.")
2. EXCHANGES BY TELEPHONE. If you have elected telephone exchange privileges,
you may make a telephone exchange request by calling FFC at (800) XXX-XXXX or
(207) XXX-XXXX and providing the account number, the exact name in which the
shareholder's shares are registered and your social security or taxpayer
identification number. (See "How to Sell Shares -- Other Redemption Matters.")
AUTOMATIC WITHDRAWAL PLAN
If your Shares in a single account total $[MINIMUM ACCOUNT SIZE] or more, you
may establish a withdrawal plan to provide for the pre-authorized payment from
your account of $250 or more on a monthly, quarterly, semi-annual or annual
basis. Under the withdrawal plan, sufficient shares in your account are redeemed
to provide the amount of the periodic payment and you will recognize any taxable
gain or loss upon redemption of the shares. If you wish to utilize the
withdrawal plan, you may do so by completing an application which may be
obtained by writing or calling FFC. The Trust may suspend a shareholder's
withdrawal plan without notice if the account contains insufficient funds to
effect a withdrawal or if the account balance is less than $1,000 at any time.
REOPENING ACCOUNTS
You may reopen an account, without filing a new account application form, at any
time within one year after your account is closed, if the information on the
account application form on file with the Trust is still applicable.
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7. DIVIDENDS AND TAX MATTERS
DIVIDENDS
The Fixed Income Funds declare and pay dividends of net investment income
monthly. The Equity Funds declare and pay dividends of net investment income, if
any, quarterly. Each Fund's net capital gain, if any, is distributed annually.
All dividends and distributions are reinvested in additional Fund shares unless
the shareholder elects to have them paid in cash. (See "Dividends and Tax
Matters.")
PAYMENT OPTIONS
You may choose to have dividends and distributions of a Fund reinvested in
shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for federal income tax purposes whether received in cash or
reinvested in shares of a fund.
Under the Reinvestment Option, all dividends and distributions of a Fund are
automatically invested in additional shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as of the payment date
of the dividend or distribution. You will be assigned this option unless you
select one of the other two options. Under the Cash Option, all dividends and
distributions are paid to the shareholder in cash. Under the Directed Dividend
Option, shareholders of a Fund whose shares in a single account of that Fund
total $[MINIMUM ACCOUNT SIZE] or more may elect to have all dividends and
distributions reinvested in shares of another fund of the Trust, provided that
those shares are eligible for sale in the shareholder's state of residence. For
further information concerning the Directed Dividend Option, shareholders should
contact FFC.
TAX MATTERS
Each Fund intends to qualify for each fiscal year to be taxed as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). As such, each Fund will not be liable for federal income and excise
taxes on the net investment income and net capital gain distributed to its
shareholders. Because each Fund intends to distribute all of its net investment
income and net capital gain each year, each Fund should thereby avoid all
federal income and excise taxes.
Dividends paid by a Fund out of its net investment income (including net short-
term capital gain) are taxable to shareholders of the Fund as ordinary income.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and
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adjusted net capital gains will be taxable to shareholders as such, regardless
of how long a shareholder has held shares in the Fund. If a shareholder holds
Shares for six months or less and during that period receives a long-term
capital gain distribution, any loss realized on the sale of the Shares during
that six-month period will be a long-term capital loss to the extent of the
distribution. Dividends and distributions reduce the net asset value of the Fund
paying the dividend or distribution by the amount of the dividend or
distribution. Furthermore, a dividend or distribution made shortly after the
purchase of Shares, although in effect a return of capital to you, will be
taxable as described above.
Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to a shareholder who fails to provide the Fund with a correct taxpayer
identification number or to make required certifications, or who is subject to
backup withholding.
Reports containing appropriate information with respect to the federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each calendar year.
8. A DETAILED DESCRIPTION OF THE FUNDS' INVESTMENTS,
INVESTMENT STRATEGIES AND RISKS
IN GENERAL
This section describes in more detail the Funds' investments, the investment
practices and strategies that the Sub-advisers may employ for a Fund, and the
risks associated with these investments and practices.
A FURTHER DESCRIPTION OF THE FUNDS' INVESTMENT POLICIES,
INCLUDING ADDITIONAL FUNDAMENTAL POLICIES, IS CONTAINED IN THE SAI.
A Fund must invest in accordance with its investment objective and stated
investment policies. The holders of a majority of the outstanding voting
securities of the Fund must approve any change to a Fund's investment objective
or to an investment policy designated as fundamental. A majority of outstanding
voting securities means the lesser of 67% of the shares present or represented
at a shareholders' meeting at which the holders of more than 50% of the
outstanding shares are present or represented, or more than 50% of the
outstanding shares. Unless otherwise indicated, the investment policies of the
Funds are not fundamental and may be changed by the Board without shareholder
approval. A Fund will apply the percentage restrictions on its investments set
forth in its investment policies when the investment is made. If the percentage
of a Fund's assets committed to a particular investment or practice later
increases because of a change in the market values of a Fund's assets or
redemptions of Fund shares, it will not constitute a violation of the
limitation.
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CORE AND GATEWAY (R).
Notwithstanding the Funds' other investment policies, each Fund may seek to
achieve its investment objective by converting to a Core and Gateway structure,
upon future action by the Board of Trustees and notice to shareholders. If a
Fund converts to a Core and Gateway structure, it would seek to achieve its
investment objective by investing all or a portion of its assets in shares of
another diversified, open-end management investment company that has an
investment objective and investment policies substantially similar to the Funds.
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS.
INTEREST RATE RISK. All fixed income securities, including U.S. Government
Securities, can change in value when there is a change in interest rates or the
issuer's actual or perceived creditworthiness or ability to meet its
obligations. There is normally an inverse relationship between the market value
of securities sensitive to prevailing interest rates and actual changes in
interest rates. In other words, an increase in interest rates produces a
decrease in market value. Moreover, the longer the remaining maturity (and
duration) of a security, the greater will be the effect of interest rate changes
on the market value of that security. Changes in the ability of an issuer to
make payments of interest and principal and in the market's perception of an
issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists that, the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may become impaired.
CREDIT RISK AND RATINGS. The FIXED INCOME FUNDS' investments are subject to
"credit risk" relating to the financial condition of the issuers of the
securities that each Fund holds. Each Fund attempts to limit its credit risk by
limiting its investment in securities rated in lower categories by a Nationally
Recognized Statistical Rating Organization ("NRSRO").
The GOVERNMENT BOND FUND invests at least 90 percent of its net assets in U.S.
Government Securities. For this reason its exposure to credit risk is limited.
It may, however, invest up to 10 percent of its net assets in "investment grade"
corporate debt instruments. Accordingly, the Government Bond Fund may not
purchase any corporate debt instrument having a long-term rating for corporate
bonds, including convertible bonds, lower than are "Baa" in the case of Moody's
Investors Service ("Moody's") and "BBB" in the case of Standard & Poor's ("S&P")
and Fitch Investors Service, L.P. ("Fitch"); the lowest permissible long-term
investment grades for preferred stock are "Baa" in the case of Moody's and "BBB"
in the case of S&P and Fitch; and the lowest permissible short-term investment
grades for short-term debt, including commercial paper, are Prime-2 (P-2) in the
case of Moody's, A-2 in the case of S&P and F-2 in the case of Fitch.
The CORPORATE BOND FUND also attempts to limit its credit risk by limiting its
investment in securities rated in lower categories by a Nationally Recognized
Statistical Rating Organization ("NRSRO"). At least 80 percent of the corporate
debt instruments that the Fund purchases must be investment grade. No more than
5 prercent of its corporate debt securities may be lower than investment grade.
The Fund will attempt to maintain a minimum average portfolio rating, on a
dollar weighted basis, of A by Moody's, S&P or Fitch.
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The FIXED INCOME FUNDS also may purchase unrated securities if the portfolio
manager determines the security to be of comparable quality to a rated security
that the Fund may purchase. Unrated securities may not be as actively traded as
rated securities. Each Fund may retain a security whose rating has been lowered
below the Fund's lowest permissible rating category (or that are unrated and
determined by the Sub-adviser to be of comparable quality to securities whose
rating has been lowered below the Fund's lowest permissible rating category) if
the portfolio manager determines that retaining the security is in the best
interests of the Fund. Because a ratings downgrade often results in a reduction
in the market price of the security, sale of a downgraded security may result in
a loss.
U.S. GOVERNMENT SECURITIES. The FIXED INCOME FUNDS may invest in U.S. Government
Securities including U.S. Treasury securities and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities and backed by the
full faith and credit of the U.S. Government, such as those guaranteed by the
Small Business Administration or issued by the Government National Mortgage
Association ("Ginnie Mae").
The CORPORATE BOND FUND also may invest include securities supported primarily
or solely by the creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and the Tennessee Valley Authority. There
is no guarantee that the U.S. Government will support securities not backed by
its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the U.S. Government's full faith
and credit.
VARIABLE AND FLOATING RATE SECURITIES. The FIXED INCOME FUNDS may invest in
securities that pay interest at rates that are adjusted periodically according
to a specified formula, usually with reference to some interest rate index or
market interest rate (the "underlying index"). Such adjustments minimize changes
in the market value of the obligation and, accordingly, enhance the ability of
the Fund to reduce fluctuations in its net asset value. Variable and floating
rate instruments are subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Certain variable
rate securities, sometimes called "inverse floaters," pay interest at a rate
that varies inversely to prevailing short-term interest rates. For instance,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. During times when short-term interest rates are
relatively low as compared to long-term interest rates a Fund may attempt to
enhance its yield by purchasing inverse floaters. Certain inverse floaters may
have an interest rate reset mechanism that multiplies the effects of changes in
the underlying index. Although this may increase the security's, and thus the
Fund's, yield, it can also increase the volatility of the security's market
value.
There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
could make it difficult for a Fund to dispose of the instrument during periods
that the Fund is not entitled to exercise any demand rights it may have. A Fund
could, for this or other reasons, suffer a loss with respect to an instrument.
The Sub-adviser monitors the liquidity of each Funds' investment in variable and
floating rate
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instruments, but there can be no guarantee that an active secondary market will
exist.
DEMAND NOTES. The FIXED INCOME FUNDS may purchase variable and floating rate
demand notes of corporations, which are unsecured obligations redeemable upon
not more than 30 days' notice. These obligations include master demand notes
that permit investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangement with the issuer of the instrument. The issuers of
these obligations often have the right, after a given period, to prepay their
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
Although a Fund would generally not be able to resell a master demand note to a
third party, the Fund is entitled to demand payment from the issuer at any time.
Sub-advisers continuously monitors the financial condition of the issuer to
determine the issuer's likely ability to make payment on demand.
GUARANTEED INVESTMENT CONTRACTS. The CORPORATE BOND FUND may invest in
guaranteed investment contracts ("GICs"). A GIC is an arrangement with an
insurance company under which the Fund contributes cash to the insurance
company's general account and the insurance company credits the contribution
with interest on a monthly basis. The interest rate is tied to a specified
market index and is guaranteed by the insurance company not to be less than a
certain minimum rate. The Fund will purchase a GIC only when The Sub-adviser has
determined that the GIC presents minimal credit risks to the Fund and is of
comparable quality to instruments that the Fund may purchase.
ZERO-COUPON SECURITIES. The FIXED INCOME FUNDS may invest in separately traded
principal and interest components of securities issued or guaranteed by the U.S.
Treasury. These components are traded independently under the Treasury's
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program or as Coupons Under Book Entry Safekeeping ("CUBES").
The CORPORATE BOND FUND may also invest in other types of related zero-coupon
securities. For instance, a number of banks and brokerage firms separate the
principal and interest portions of U.S. Treasury securities and sell them
separately in the form of receipts or certificates representing undivided
interests in these instruments. These instruments are generally held by a bank
in a custodial or trust account on behalf of the owners of the securities and
are known by various names, including Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS"). Zero-coupon securities also may be issued by corporations
and municipalities.
Zero-coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity, but the Fund must include a portion of the
original issue discount of the security as income. Because of this, zero-coupon
securities may be subject to greater fluctuation of market value than the other
securities in which the Fund may invest. The Fund distributes all of its net
investment income, and may have to sell portfolio securities to distribute
imputed income, which may occur at a time when the Sub-adviser would not have
chosen to sell such securities and which
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may result in a taxable gain or loss.
MORTGAGE-BACKED SECURITIES. The FIXED INCOME FUNDS may invest in mortgage-backed
securities. The GOVERNMENT BOND FUND may only invest in mortgage-backed
securities issued by the government or government-related issuers described
below. The CORPORATE BOND FUND may also invest in mortgage-backed securities of
private issuers.
Mortgage-backed securities represent an interest in a pool of mortgages
originated by lenders such as commercial banks, savings associations and
mortgage bankers and brokers. Mortgage-backed securities may be issued by
governmental or government-related entities or by non-governmental entities such
as special purpose trusts created by banks, savings associations, private
mortgage insurance companies or mortgage bankers.
Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.
GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government guarantor
of mortgage-backed securities is Ginnie Mae, a wholly-owned United States
Government corporation within the Department of Housing and Urban Development.
Mortgage-backed securities are also issued by Fannie Mae, a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development, and Freddie Mac, a
corporate instrumentality of the United States Government. While Fannie Mae and
Freddie Mac each guarantee the payment of principal and interest on the
securities they issue, unlike Ginnie Mae securities, their securities are not
backed by the full faith and credit of the United States Government.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Corporate Bond Fund may also
invest in mortgage-backed securities offered by private issuers. These include
pass-through securities comprised of pools of conventional mortgage loans;
mortgage-backed bonds (which are considered to be debt obligations of the
institution issuing the bonds and which are collateralized by mortgage loans);
and collateralized mortgage obligations ("CMOs"), which are described below.
Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government guarantees of payment. Many
non-governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on these securities. Timely
payment of interest and principal also may be supported by various forms of
insurance, including individual loan, title, pool and hazard policies.
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UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Funds may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.
LIQUIDITY AND MARKETABILITY. Generally, government and government-related
pass-through pools are highly liquid. While private conventional pools of
mortgages (pooled by non-government-related entities) have also achieved broad
market acceptance and an active secondary market has emerged, the market for
conventional pools is smaller and less liquid than the market for government and
government-related mortgage pools.
AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of a Fund
and may even result in losses to the Fund if the securities were acquired at a
premium. The occurrence of mortgage prepayments is affected by various factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. The assumed average
life of pools of mortgages having terms of 30 years or less is typically between
5 and 12 years.
YIELD CALCULATIONS. Yields on pass-through securities are typically quoted based
on the maturity of the underlying instruments and the associated average life
assumption. In periods of falling interest rates the rate of prepayment tends to
increase, thereby shortening the actual average life of a pool of mortgages.
Conversely, in periods of rising rates the rate of prepayment tends to decrease,
thereby lengthening the actual average life of the pool. Actual prepayment
experience may cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Fund.
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMs") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which
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the interest rate paid by the borrower may change at each reset date or over the
life of the loan and, accordingly, fluctuation in interest rates above these
levels could cause such mortgage securities to "cap out" and to behave more like
long-term, fixed-rate debt securities. ARMs may have less risk of a decline in
value during periods of rapidly rising rates, but they also may have less
potential for capital appreciation than other debt securities of comparable
maturities due to the periodic adjustment of the interest rate on the underlying
mortgages and due to the likelihood of increased prepayments of mortgages as
interest rates decline. Furthermore, during periods of declining interest rates,
income to a Fund will decrease as the coupon rate resets along with the decline
in interest rates. During periods of rising interest rates, changes in the
coupon rates of the mortgages underlying the Fund's ARMs may lag behind changes
in market interest rates. This may result in a lower value until the interest
rate resets to market rates.
COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations collateralized by
mortgages or mortgage pass-through securities issued by Ginnie Mae, Freddie Mac
or Fannie Mae or by pools of conventional mortgages ("Mortgage Assets"). CMOs
may be privately issued or U.S. Government Securities. Payments of principal and
interest on the Mortgage Assets are passed through to the holders of the CMOs on
the same schedule as they are received, although, certain classes (often
referred to as tranches) of CMOs have priority over other classes with respect
to the receipt of payments. Multi-class mortgage pass-through securities are
interests in trusts that hold Mortgage Assets and that have multiple classes
similar to those of CMOs. Unless the context indicates otherwise, references to
CMOs include multi-class mortgage pass-through securities. Payments of principal
of and interest on the underlying Mortgage Assets (and in the case of CMOs, any
reinvestment income thereon) provide funds to pay debt service on the CMOs or to
make scheduled distributions on the multi-class mortgage pass-through
securities. Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution date
of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier.
Planned amortization class mortgage-based securities ("PAC Bonds") are a form of
parallel pay CMO. PAC Bonds are designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a contemplated range.
If the actual prepayment experience on the underlying mortgage loans is at a
rate faster or slower than the contemplated range, or if deviations from other
assumptions occur, principal payments on a PAC Bond may be greater or smaller
than predicted. The magnitude of the contemplated range varies from one PAC Bond
to another; a narrower range increases the risk that prepayments will be greater
or smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-related securities.
ASSET-BACKED SECURITIES. The CORPORATE BOND FUND may invest in asset-backed
securities. These securities represent direct or indirect participations in, or
are secured by and payable from, assets other than mortgage-related assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit (credit card) agreements. The Fund may not invest more than 15% of its
net assets in asset-backed securities that are backed by a particular type of
credit, for instance, credit card receivables. Asset-backed securities,
including adjustable rate asset-backed securities, have yield characteristics
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similar to those of mortgage-related securities and, accordingly, are subject to
many of the same risks.
Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
COMMON STOCK. The EQUITY FUNDS invest primarily in common stocks of domestic
issuers. Common stock represents an equity or ownership interest in a company.
Although an equity interest often gives a Fund the right to vote on measures
affecting the company's organization and operations, the Funds do not intend to
exercise control over the management of companies in which they invest. Common
stocks have a history of long-term growth in value, but their prices tend to
fluctuate in the shorter term.
PREFERRED STOCK. The EQUITY FUNDS may invest in preferred stock. Preferred stock
generally does not exhibit as great a potential for appreciation or depreciation
as common stock, although it ranks above common stock in its claim on income
from dividend payments or the recovery of investment or both. The owner of
preferred stock is a shareholder in a business and not, like a bondholder, a
creditor. Dividends paid to preferred stockholders are distributions of earnings
of a business in contrast to interest payments to bondholders which are expenses
of a business.
WARRANTS. The EQUITY FUNDS may invest in warrants. These are options to purchase
an equity security at a specified price at any time during the life of the
warrant. Unlike convertible securities and preferred stocks, warrants do not pay
a dividend. Investments in warrants involve certain risks, including the
possible lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of a Fund's entire investment therein).
AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The EQUITY FUNDS may invest in sponsored
ADRs, which are receipts issued by an American bank or trust company evidencing
ownership of underlying securities issued by a foreign issuer. ADRs, in
registered form, are designed for use in U.S. securities markets. In a
"sponsored" ADR, the foreign issuer typically bears certain expenses of
maintaining the ADR facility.
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CONVERTIBLE SECURITIES. All of the Funds may invest in securities that may be
converted into a pre-determined number of shares of the issuer's common stock at
stated price or formula within a specified time period. The holder of
convertible securities is entitled to receive interest paid or accrued on
convertible debt, or the dividend paid on convertible preferred stock, until the
convertible security matures or is redeemed, converted or exchanged.
Traditionally, convertible securities have paid dividends or interest greater
than common stocks, but less than fixed income or non-convertible debt
securities. Convertible securities typically rank before common stock, but after
non-convertible debt securities, in their claim on dividends paid by the issuer.
In general, the value of a convertible security is the higher of its investment
value (its value as a fixed income security) and its conversion value (the value
of the underlying shares of common stock if the security is converted). As a
fixed income security, the value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The value of a convertible security is, however, also influenced by the value of
the underlying common stock. By investing in a convertible security, a Fund may
participate in any capital appreciation or depreciation of a company's stock,
but to a lesser degree than its common stock.
A Fund may invest in preferred stock and convertible securities rated BBB or
higher by Standard & Poor's Corporation, Baa by Moody's Investors Service, Inc.,
or the equivalent in the case of unrated instruments. SEE "Description of
Securities Ratings" in Appendix A to the SAI.
FUTURES CONTRACTS AND OPTIONS. Each Fund may attempt to hedge against a decline
in the value of securities it owns or an increase in the price of securities it
plans to purchase through the use of options and the purchase and sale of
interest rate futures contracts and options on those futures contracts. These
instruments are often referred to as "derivatives," because their performance is
derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Funds only may write (sell)
"covered" options. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains cash, U.S. Government Securities or other liquid
debt securities in a segregated account with a value at all times sufficient to
cover the Fund's obligation under the option. A Fund may enter into these
futures contracts only if the aggregate of initial deposits for open futures
contract positions does not exceed 5% of the Fund's total assets.
RISK CONSIDERATIONS. A Fund's use of options and futures contracts subjects the
Fund to certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (i) dependence on the Sub-adviser's
ability to predict movements in the prices of individual securities and
fluctuations in the general securities markets; (ii) imperfect correlations
between movements in the prices of options or futures contracts and movements in
the price of the securities hedged or used for cover which may cause a given
hedge not to achieve its objective; (iii) the fact that the skills and
techniques needed to trade these instruments are different from those needed to
select the other securities in which the Fund invests; (iv) lack of assurance
that a liquid secondary market will exist for any particular instrument at any
particular time, which, among other things, may limit a Fund's ability to limit
exposures by closing its positions; (v) the possible need to defer closing out
of certain options, futures contracts and related options to avoid adverse tax
consequences; and (vi) the potential for unlimited loss when investing in
futures contracts or writing options for which an offsetting position is not
held.
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Other risks include the inability of a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an
over-the-counter option transaction will be able to perform its obligations.
There are a limited number of options on interest rate futures contracts and
exchange traded options contracts on fixed income securities. Accordingly,
hedging transactions involving these instruments may entail "cross-hedging." As
an example, a Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
the Fund's Sub-adviser may attempt to hedge the Fund's securities by the use of
options with respect to similar securities. The Fund may use various futures
contracts that are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
in those contracts will develop or continue to exist.
LIMITATIONS. The Funds have no current intention of investing in futures
contracts and options thereon for purposes other than hedging. No Fund may
purchase any call or put option on a futures contract if the premiums associated
with all such options held by the Fund would exceed 5% of the Fund's total
assets as of the date the option is purchased. No Fund may sell a put option if
the exercise value of all put options written by the Fund would exceed 50% of
the Fund's total assets or sell a call option if the exercise value of all call
options written by the Fund would exceed the value of the Fund's assets. In
addition, the current market value of all open futures positions held by a Fund
will not exceed 50% of its total assets.
OPTIONS ON SECURITIES. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
interest rates.
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
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securities. Thus, upon exercise of a stock index option, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.
INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the fixed income or equity securities comprising the index is made.
Generally, futures contracts are closed out prior to the expiration date of the
contract.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to stock
options except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.
TECHNIQUES INVOLVING LEVERAGE. Leveraging involves special risks. The Funds may
borrow for other than temporary or emergency purposes, lend their securities,
and purchase securities on a when-issued or forward commitment basis. In
addition, the Funds may engage in dollar roll transactions, and purchase
securities on margin. Each of these transactions involves the use of "leverage"
when cash made available to the Fund through the investment technique is used to
make additional portfolio investments. In addition, the use of swap and related
agreements may involve leverage. A Fund uses these investment techniques only
when the Sub-adviser to the Fund believes that the leveraging and the returns
available from investing the cash will provide the Fund's shareholders with a
potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.
The risks of leverage include a higher volatility of the net asset value of a
Fund's shares and the relatively greater effect on the net asset value of the
shares caused by favorable or adverse market movements or changes in the cost of
cash obtained by leveraging and the yield obtained from investing the cash. So
long as a Fund is able to realize a net return on its investment portfolio that
is higher than interest expense incurred, if any, leverage will result in higher
current net investment income being realized by the Fund than if the Fund were
not leveraged. On the other hand, interest rates change from time to time
depending upon such factors as supply and demand, monetary and tax policies and
investor expectations. Changes in such factors could cause the relationship
between the cost of leveraging and the yield to change so that rates involved in
the leveraging arrangement may substantially increase relative to the yield on
the obligations in which the
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proceeds of the leveraging have been invested. To the extent that the interest
expense involved in leveraging approaches the net return on a Fund's investment
portfolio, the benefit of leveraging will be reduced, and, if the interest
expense on borrowings were to exceed the net return to shareholders, the Fund's
use of leverage would result in a lower rate of return than if the Fund were not
leveraged. Similarly, the effect of leverage in a declining market could be a
greater decrease in net asset value per share than if the Fund were not
leveraged. In an extreme case, if a Fund's current investment income were not
sufficient to meet the interest expense of leveraging, it could be necessary for
the Fund to liquidate certain of its investments at an inappropriate time. The
use of leverage may be considered speculative.
SEGREGATED ACCOUNT. To limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account for each Fund cash, U.S. Government Securities and other
liquid, debt securities in accordance with SEC guidelines. The accounts value,
which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions. The Fund's commitments may include: (i)
the Fund's obligations to repurchase securities under a reverse repurchase
agreement, or settle when-issued and forward commitment transactions; (ii) the
greater of the market value of securities sold short or the value of the
securities at the time of the short sale (reduced by any margin deposit). The
use of a segregated account in connection with leveraged transactions may result
in a Fund's portfolio being 100% leveraged.
BORROWING. As a fundamental investment policy, a Fund may borrow money for
temporary or emergency purposes, including the meeting of redemption requests,
in amounts up to 33 1/3% of a Fund's total assets. As a nonfundamental
investment policy, a Fund may not purchase portfolio securities if its
outstanding borrowings exceed 5% of its total assets or borrow for purposes
other than meeting redemptions in an amount exceeding 5% of the value of its
total assets at the time the borrowing is made.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might need to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales.
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may seek
additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.
Repurchase agreements are transactions in which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not
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related to the coupon rate or maturity of the purchased security. When a Fund
lends a security it receives interest from the borrower or from investing cash
collateral. The Trust maintains possession of the purchased securities and any
underlying collateral in these transactions, the total market value of which on
a continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1*3% of the value of its total assets.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The FIXED INCOME FUNDS may
purchase securities on a "when-issued" or "forward commitment" basis. When a
fund purchases a security on a when-issued or forward commitment basis, the
price of the security is fixed when the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
occurs within three months after the transaction, but delayed settlements beyond
three months may be negotiated.
During the period between a commitment and settlement, no interest accrues to
the Fund. When a Fund commits to purchase securities in this manner, however,
the Fund immediately assumes the risk of ownership, including price fluctuation.
If the other party does not deliver or pay for a security purchased or sold by
the Fund, the Fund may incur a loss or miss and opportunity to make an
alternative investment. Any significant commitment of a Fund's assets committed
to the purchase of securities on a when-issued or forward commitment basis may
increase the volatility of its net asset value. Except for dollar roll
transactions, which are described below, each of the Fixed Income Funds limits
its investments in when-issued and forward commitment securities to 15% of the
value of the Fund's total assets.
A Fund may use when-issued transactions and forward commitments to hedge against
anticipated changes in interest rates and prices. If the Fund's Sub-adviser
forecasts incorrectly the direction of interest rate movements, however, the
Fund might be required to complete when-issued or forward transactions at prices
inferior to the current market values. The Funds enter into when-issued and
forward commitments only with the intention of actually receiving the
securities, but a Fund may sell the securities before the settlement date if
deemed advisable. If a Fund disposes of the right to acquire a when-issued
security prior to its acquisition or to dispose of its right to deliver or
receive against a forward commitment, it can incur a gain or loss.
DOLLAR ROLL TRANSACTIONS. Each FIXED INCOME FUND may enter into dollar roll
transactions in which the Fund sells fixed income securities, typically
mortgage-backed securities, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. During the roll
period no payment is made for the securities purchased and no interest or
principal payments on the security accrue to the Fund, but the Fund assumes the
risk of ownership. A Fund is compensated for entering into dollar roll
transactions by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Dollar roll transactions involve the risk that the
market value of the securities sold by a Fund may decline below the price at
which the Fund is committed to purchase similar securities. If the buyer of
securities under a dollar roll transaction becomes insolvent, the Fund's use of
the proceeds of the transaction may be restricted pending a determination by the
other
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party, or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities. The Funds will engage in roll transactions for the
purpose of acquiring securities for their portfolios and not for investment
leverage. Each Fixed Income Fund will limit its obligations on dollar roll
transactions to 35% of the Fund's net assets.
CONCENTRATION. As a fundamental investment policy, a Fund may not purchase a
security (other than U.S. Government Securities) if as a result more than 25% of
its net assets would be invested in a particular industry.
DIVERSIFICATION. As a fundamental investment policy, a Fund may not purchase a
security if, as a result (a) more than 5% of a Fund's total assets would be
invested in the securities of a single issuer, or (b) a Fund would own more than
10% of the outstanding voting securities of a single issuer. This limitation
applies only with respect to 75% of a Fund's total assets and does not apply to
U.S. Government Securities.
Each Fund reserves the right to invest up to 100% of its investable assets in
one or more other investment companies and each Fund reserves the right, upon
notification to shareholders to make such investments. If a Fund elected to
pursue its investment objective in this manner, its policies on concentration
and diversification would apply to the assets of the investment companies in
which the Fund invests.
CASH AND TEMPORARY DEFENSIVE POSITIONS. A Fund will hold a certain portion of
its assets in cash or cash equivalents to retain flexibility in meeting
redemptions, paying expenses, and timing of new investments. Cash equivalents
may include (i) short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities ("U.S. Government Securities"),
(ii) certificates of deposit, bankers' acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States that have an A+
rating from Standard & Poor's Corporation or an A-1+ rating from Moody's
Investors Service, Inc., (iii) commercial paper rated P-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation, (iv) repurchase
agreements covering any of the securities in which a Fund may invest directly,
and (v) money market mutual funds.
In addition, when the Sub-adviser believes that business or financial conditions
warrant, a Fund may assume a temporary defensive position. During such periods,
a Fund may invest without limit in cash or cash equivalents. When and to the
extent a Fund assumes a temporary defensive position, it will not pursue its
investment objective.
SHORT SALES. A Fund may not enter into short sales, except short sales "against
the box." In a short sale against the box, a Fund sells securities it owns, or
has the right to acquire at no added cost. A Fund does not immediately deliver
the securities sold, however, and does not receive proceeds from the sale until
it does deliver the securities. A Fund may enter into a short sale against the
box to lock-in a gain or loss in one year, while deferring recognition of the
gain or loss until the next year. A Fund may also sell short against the box to
hedge against the risk that the price of a security may decline. In such a case,
to the extent a Fund limits its future losses in the security, it limits its
opportunity to achieve future gain in the security as well. Pursuant to the
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Taxpayer Relief Act of 1997, if a Fund has unrealized gain with respect to a
security and enters into a short sale with respect to such security, the Fund
generally will be deemed to have sold the appreciated security and this will
recognize gain for tax purposes.
SECURITIES OF OTHER INVESTMENT COMPANIES. A Fund may invest in shares of other
investment companies to the extent permitted by the Investment Company Act of
1940 ("Investment Company Act"). To the extent a Fund invests in shares of an
investment company, it will bear its pro rata share of the other investment
company's expenses, such as investment advisory and distribution fees, and
operating expenses.
ILLIQUID AND RESTRICTED SECURITIES. A Fund may not purchase a security if, as a
result, more than 15 percent of its net assets would be invested in illiquid
securities. A security is considered ILLIQUID if it may not be sold or disposed
of in the ordinary course of business within seven days at approximately the
value at which a Fund has valued the security. Over-the-counter options,
repurchase agreements not entitling the holder to payment of principal in 7
days, and certain "restricted securities" may be illiquid.
A security is RESTRICTED if it is subject to contractual or legal restrictions
on resale to the general public. A liquid institutional market has developed,
however, for certain restricted securities such as repurchase agreements,
commercial paper, foreign securities and corporate bonds and notes. Thus,
restrictions on resale do not necessarily indicate the liquidity of the
security. For example, if a restricted security may be sold to certain
institutional buyers in accordance with Rule 144A under the Securities Act of
1933 or another exemption from registration under the Securities Act, the
Sub-adviser may determine that the security is liquid under guidelines adopted
by the Board. These guidelines take into account trading activity in the
securities and the availability of reliable pricing information, among other
factors. With other restricted securities, however, there can be no assurance
that a liquid market will exist for the security at any particular time. A Fund
might not be able to dispose of such securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemptions. A Fund treats
such holdings as illiquid.
PORTFOLIO TRANSACTIONS. Each Sub-adviser places orders for the purchase and sale
of assets it manages with brokers and dealers selected by, and in the discretion
of, the Sub-adviser. The Sub-advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest available commission
rates when the Fund's Sub-adviser believes it is reasonable to do so in light of
the value of the brokerage and research services provided by the broker
effecting the transaction.
Subject to the policy of obtaining "best execution", each Sub-adviser may employ
broker-dealer affiliates (collectively "Affiliated Brokers") to effect brokerage
transactions. Payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board to provide that the commissions will not exceed
the usual and customary broker's commissions charged by unaffiliated brokers. No
specific portion of brokerage transactions will be directed to Affiliated
Brokers and in no event will a broker affiliated with the Sub-adviser directing
the transaction receive brokerage transactions in recognition of research
services provided to the Sub-adviser.
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The frequency of portfolio transactions of a Fund (portfolio turnover rate) will
vary from year to year depending on many factors. From time to time a Fund may
engage in active short-term trading to take advantage of price movements
affecting individual issues, groups of issues or markets. An annual portfolio
turnover rate of 100% would occur if all of the securities in a fund were
replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs and a possible increase in short-term
capital gains or losses. Tax rules applicable to short-term trading may affect
the timing of a portfolio transactions or the ability to realize short-term
trading profits or establish short-term positions. It is estimated that each
Fund's portfolio turnover will be less than 100%.
9. OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of each Fund is determined as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
Time), on each Fund Business Day by dividing the value of the Fund's net assets
(I.E., the value of its securities and other assets less its liabilities) by the
number of shares outstanding at the time the determination is made. Securities
owned by a Fund for which market quotations are readily available are valued at
current market value or, in their absence, at fair value as determined by the
Board or pursuant to procedures approved by the Board.
PERFORMANCE INFORMATION
A Fund's performance may be quoted in terms of yield or total return. All
performance information is based on historical results and is not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. To calculate standardized yield, a Fund takes the income it earned from
its investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. A Fund's total return shows its overall change in value,
including changes in share price and assuming all the Fund's dividends and
distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual returns tend to smooth out
variations in the Funds' returns, shareholders should recognize that they are
not the same as actual year-by-year results.
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The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the performance of
a Fund may be compared to securities indices. Indices are not used in the
management of the Funds but rather are standards by which the Advisers and
shareholders may compare the performance of a Fund to an unmanaged composite of
securities with similar, but not identical, characteristics. This material is
not to be considered representative or indicative of future performance. All
performance information for a Fund is calculated on a class basis.
THE TRUST AND ITS SHARES
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as a Fund) and may
divide portfolios or series into classes of shares (such as Trust Shares); the
costs of doing so will be borne by the Trust. Currently the authorized shares of
the Trust are divided into four separate series.
OTHER CLASSES OF SHARES. The Funds currently issue two classes of shares, Trust
Shares and Institutional Shares. Institutional Shares are offered to large
institutional investors able to make a minimum investment of $10 million. Each
class of a Fund will have a different expense ratio and may have different
distribution fees. Each class' performance is affected by its expenses. For more
information on Institutional shares of the Funds, investors may contact FFC at
(800) XXX-XXXX or (207) XXX-XXXXor the Funds' distributor. Investors may also
contact their sales representative to obtain information about the other
classes.
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series of the Trust and
each class of shares has equal dividend, distribution, liquidation and voting
rights, and fractional shares have those rights proportionately, except that
expenses related to the distribution of the shares of each class (and certain
other expenses such as transfer agency and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
shareholder meetings will be held only when specifically required by federal or
state law. Shareholders (and Trustees) have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a series is entitled to
the shareholder's pro rata share of all dividends and distributions arising from
that series' assets and, upon redeeming shares, will receive the portion of the
series' net assets represented by the redeemed shares.
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{25% SHAREHOLDERS] From time to time, these shareholders or other shareholders
may own a large percentage of the Shares of a Fund and, accordingly, may be able
to greatly affect (if not determine) the outcome of a shareholder vote.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
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MEMORIAL FUNDS
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
Fund Information: Account Information and
Two Portland Square Shareholder Services:
Portland, Maine 04101
(800) XXX-XXXX Forum Financial Corp.
P.O. Box 446
Investment Adviser: Portland, Maine 04112
Forum Investment Advisors, LLC (207) XXX-XXXX
Two Portland Square (800) XXX-XXXX
Portland, ME 04101
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
[DATE]
This Statement of Additional Information ("SAI") supplements the Prospectus
dated [date], offering shares of the Government Bond Fund, Corporate Bond Fund,
Growth Equity Fund and Value Equity Fund (each a "Fund" and collectively the
"Funds"). The Funds are each diversified portfolios of Memorial Funds (the
"Trust"), a registered open-end, management investment company. This SAI should
be read only in conjunction with the Prospectus, which you may obtain without
charge by contacting the Trust's Distributor, Forum Financial Services, Inc.,
Two Portland Square, Portland, Maine 04101.
TABLE OF CONTENTS
PAGE
1. Investment Policies.................... 3
2. Investment Limitations................ 10
3. Performance Data.......................11
4. Management.............................13
5. Determination of Net Asset Value.......16
6. Portfolio Transactions.................16
7. Additional Purchase and..................
Redemption Information..............17
8. Taxation...............................18
9. Other Information......................19
10. Financial Statements...................20
Appendix A - Description of
Securities Ratings................A-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY AN INVESTOR WITHOUT CHARGE.
<PAGE>
As used in this SAI, the following terms shall have the following meanings:
"Adviser" shall mean Forum Investment Advisors, LLC ("Forum"). "Advisers"
shall mean Forum and each of the investment subadvisers that provide
investment advice and portfolio management for one or more of the Funds
pursuant to an investment subadvisory agreement with Forum.
"Board" shall mean the Board of Trustees of the Trust.
"CFTC" shall mean the U.S. Commodities Futures Trading Commission.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Custodian" shall mean [custodian], or its successor, acting in its
capacity as custodian of a Fund.
"Equity Funds" shall mean the Growth Equity Fund and the Value Equity
Fund.
"FAdS" shall mean Forum Administrative Services, LLC, the Trust's
administrator.
"FFC" shall mean Forum Financial Corp., the Trust's transfer agent.
"Fitch" shall mean Fitch Investors Service, L.P.
"Fixed Income Funds" shall mean the Government Bond Fund and the
Corporate Bond Fund.
"FFSI" shall mean Forum Financial Services, Inc., the distributor of the
Trust's shares.
"Fund" shall mean each of the separate portfolios of the Trust identified
on the cover page of this Statement of Additional Information.
"Moody's" shall mean Moody's Investors Service, Inc.
"NRSRO" shall mean a nationally recognized statistical rating
organization.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's Rating Group.
"Sub-adviser" shall mean each of the investment advisers that provide
investment advice and portfolio management for the Funds pursuant to
investment subadvisory agreements with Adviser.
"Transfer Agent" shall mean Forum Financial Corp. acting in its
capacity as transfer and dividend disbursing agent of a Fund.
"Trust" shall mean Memorial Funds, an open-end management investment
company registered under the 1940 Act.
"U.S. Government Securities" shall mean obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
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1. INVESTMENT POLICIES
The following discussion is intended to supplement the disclosure in the
Prospectus concerning each Fund's investments, investment techniques and
strategies and the risks associated therewith. No Fund may make any investment
or employ any investment technique or strategy unless otherwise permitted in a
Prospectus relating to that Fund or this SAI. For example, while the SAI
describes "when-issued" transactions below, only those Funds whose investment
policies, as described in the Prospectus or this SAI, allow the Fund to invest
in when-issued transactions may do so.
SECURITY RATINGS INFORMATION
Moody's, S&P and other NRSROs are private services that rate the credit quality
of debt obligations. A description of the range of ratings assigned to various
types of bonds and other securities by several NRSROs is included in Appendix A
to this SAI. The Funds may use these ratings to determine whether to purchase,
sell or hold a security. These ratings are general and are not absolute
standards of quality, however. Consequently, securities with the same maturity,
interest rate and rating may have different market prices. To the extent that
the ratings given by a NRSRO may change as a result of changes in such
organizations or their rating systems, the Sub-adviser will attempt to
substitute comparable ratings. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations in
market value. Also, rating agencies may fail to make timely changes in credit
ratings. An issuer's current financial condition may be better or worse than a
rating indicates.
A Fund may purchase unrated securities if its Sub-adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not trade as actively as rated securities. A
Fund may retain securities whose rating has been lowered below the lowest
permissible rating category (or that are unrated and determined by its
Sub-adviser to be of comparable quality to securities whose rating has been
lowered below the lowest permissible rating category) if the Sub-adviser
determines that retaining such security is in the best interests of the Fund.
To limit credit risks, the Funds may only invest in securities that are
investment grade (rated in the top four long-term investment grades by an NRSRO
or in the top two short-term investment grades by an NRSRO.) Accordingly, the
lowest permissible long-term investment grades for corporate bonds, including
convertible bonds, are Baa in the case of Moody's and BBB in the case of S&P and
Fitch; the lowest permissible long-term investment grades for preferred stock
are baa in the case of Moody's and BBB in the case of S&P and Fitch; and the
lowest permissible short-term investment grades for short-term debt, including
commercial paper, are Prime-2 (P-2) in the case of Moody's, A-2 in the case of
S&P and F-2 in the case of Fitch. All these ratings are generally considered to
be investment grade ratings, although Moody's indicates that securities with
long-term ratings of Baa have speculative characteristics.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fixed Income Fund may purchase securities offered on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. At the time a Fund makes
the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
The use of when-issued transactions and forward commitments enables the Fixed
Income Funds to hedge against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling bond
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prices, a Fund might sell securities which it owned on a forward commitment
basis to limit its exposure to falling prices. In periods of falling interest
rates and rising bond prices, a Fund might sell a security and purchase the same
or a similar security on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. However, if the Fund's
Sub-adviser forecasts incorrectly the direction of interest rate movements, the
Fund might be required to complete such when-issued or forward commitment
transactions at prices lower than the current market values.
The Funds enter into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the securities, as the case
may be. If a Fund subsequently chooses to dispose of its right to acquire a
when-issued security or its right to deliver or receive against a forward
commitment before the settlement date, it can incur a gain or loss. When-issued
securities may include bonds purchased on a "when, as and if issued" basis under
which the issuance of the securities depends upon the occurrence of a subsequent
event. Any significant commitment of a Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value.
Each Fund will establish and maintain with its custodian a separate account with
cash, U.S. Government Securities and other liquid high-grade debt securities in
an amount at least equal to its commitments to purchase securities on a
when-issued or delayed delivery basis.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in illiquid securities. The
term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities and
includes, among other things, purchased over-the-counter (OTC) options and
repurchase agreements maturing in more than seven days.
The Board is ultimately responsible for determining whether specific securities
are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Advisers, pursuant to guidelines
approved by the Board. The Advisers take into account a number of factors in
reaching liquidity decisions, including but not limited to: (1) the frequency of
trades and quotations for the security; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the transfer.
The Adviser and the Sub-adviser for each Fund monitor the liquidity of the
securities in that Fund's portfolio and reports periodically on such decisions
to the Board.
CONVERTIBLE SECURITIES
The Funds may invest in convertible securities. A convertible security is a
bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities are similar to nonconvertible debt securities to the
extent that they ordinarily provide a stable stream of income with generally
higher yields than those of common stocks of the same or similar issuers.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to comparable nonconvertible securities.
Although no securities investment is without some risk, investment in
convertible securities generally entails less risk than in the issuer's common
stock. However, the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stocks since they have
fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases.
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The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may affect the convertible
security's investment value. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
TEMPORARY DEFENSIVE POSITION.
When a Fund assumes a temporary defensive position it may invest without limit
in (i) short-term U.S. Government Securities, (ii) certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of commercial banks
doing business in the United States that have, at the time of investment, total
assets in excess of one billion dollars and that are insured by the Federal
Deposit Insurance Corporation, (iii) commercial paper of prime quality rated
Prime-2 or higher by Moody's or A-2 or higher by S&P or, if not rated,
determined by the Fund's Subadviser to be of comparable quality, (iv) repurchase
agreements covering any of the securities in which the Fund may invest directly
and (v) money market mutual funds.
OTHER INVESTMENT COMPANIES
The Funds may invest in the securities of other investment companies within the
limits proscribed by the 1940 Act. In addition to the Fund's expenses (including
the various fees), as a shareholder in another investment company, a Fund would
bear its pro rata portion of the other investment company's expenses (including
fees).
FUTURES CONTRACTS AND OPTIONS
Each Fund may seek to hedge against a decline in the value of securities it owns
or an increase in the price of securities that it plans to purchase through the
writing and purchase of exchange-traded and over-the-counter options and the
purchase and sale of futures contracts and options on those futures contracts.
The Equity Funds may buy or sell stock index futures contracts, such as
contracts on the S&P 500 stock index. The Fixed Income Funds may buy and sell
bond index futures contracts. In addition, all of the Funds may buy or sell
futures contracts on Treasury bills, Treasury bonds and other financial
instruments. The Funds may write covered options and buy options on the futures
contracts in which they may invest.
In addition, the Funds may write (sell) covered put and call options and may buy
put and call options on debt securities and bond indices. An option is covered
if, so long as the Fund is obligated under the option, it owns an offsetting
position in the underlying security, currency or futures contract or maintains
cash, U.S. Government Securities or other liquid, high-grade debt securities in
a segregated account with a value at all times sufficient to cover the Fund's
obligation under the option.
The Funds' use of options and futures contracts would subject the Funds to
certain investment risks and transaction costs to which they might not otherwise
be subject. These risks include: (1) dependence on the Adviser's ability to
predict movements in the prices of individual securities and fluctuations in the
general securities markets;
5
<PAGE>
(2) imperfect correlation between movements in the prices of options, futures
contracts or related options and movements in the price of the securities hedged
or used for cover; (3) the fact that skills and techniques needed to trade these
instruments are different from those needed to select the other securities in
which the Funds invest; (4) lack of assurance that a liquid secondary market
will exist for any particular instrument at any particular time; and (5) the
possible need to defer closing out of certain options, futures contracts and
related options to avoid adverse tax consequences. Other risks include the
inability of the Fund, as the writer of covered call options, to benefit from
the appreciation of the underlying securities above the exercise price and the
possible loss of the entire premium paid for options purchased by the Fund.
The Funds have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. No Fund may purchase any call
or put option on a futures contract if the premiums associated with all such
options held by the Fund would exceed 5 percent of the Fund's total assets as of
the date the option is purchased. No Fund may sell a put option if the exercise
value of all put options written by the Fund would exceed 50 percent of the
Fund's total assets or sell a call option if the exercise value of all call
options written by the Fund would exceed the value of the Fund's assets. In
addition, the current market value of all open futures positions held by a Fund
will not exceed 50 percent of its total assets.
A Fund will only invest in futures and options contracts after providing notice
to its shareholders and filing a notice of eligibility (if required) and
otherwise complying with the requirements of the Commodity Futures Trading
Commission ("CFTC"). The CFTC's rules provide that the Funds are permitted to
purchase such futures or options contracts only (1) for bona fide hedging
purposes within the meaning of the rules of the CFTC; provided, however, that in
the alternative with respect to each long position in a futures or options
contract entered into by a Fund, the underlying commodity value of such contract
at all times does not exceed the sum of cash, short-term United States debt
obligations or other United States dollar denominated short-term money market
instruments set aside for this purpose by the Fund, accrued profit on the
contract held with a futures commission merchant and cash proceeds from existing
Fund investments due in 30 days; and (2) subject to certain limitations.
HEDGING AND OPTIONS STRATEGIES
Each Fund may purchase or sell (write) put and call options on securities to
seek to hedge against a decline in the value of securities owned by it or an
increase in the price of securities which it plans to purchase through the
writing and purchase of exchange-traded and over-the-counter options on
individual securities or securities or financial indices and through the
purchase and sale of financial futures contracts and related options. These
investment techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of a Fund. Use of
these instruments is subject to regulation by the SEC, the several options and
futures exchanges upon which options and futures are traded or the CFTC.
No assurance can be given, however, that any hedging or option income strategy
will succeed in achieving its intended result.
Except as otherwise noted in the Prospectus or herein, the Funds will not use
leverage in their options and hedging strategies. In the case of transactions
entered into as a hedge, a Fund will hold securities, currencies or other
options or futures positions whose values are expected to offset ("cover") its
obligations thereunder. A Fund will not enter into a hedging strategy that
exposes it to an obligation to another party unless it owns either (i) an
offsetting ("covered") position or (ii) cash, U.S. Government Securities or
other liquid securities (or other assets as may be permitted by the SEC) with a
value sufficient at all times to cover its potential obligations. When required
by applicable regulatory guidelines, the Funds will set aside cash, U.S.
Government Securities or other liquid securities (or other assets as may be
permitted by the SEC) in a segregated account with its custodian in the
prescribed amount. Any assets used for cover or held in a segregated account
cannot be sold or closed out while the hedging or option income strategy is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that the use of cover or segregation involving a large percentage
of a Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
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OPTIONS STRATEGIES
A Fund may purchase put and call options written by others and sell put and call
options covering specified individual securities, securities or financial
indices or currencies. A put option (sometimes called a "standby commitment")
gives the buyer of the option, upon payment of a premium, the right to deliver a
specified amount of currency to the writer of the option on or before a fixed
date at a predetermined price. A call option (sometimes called a "reverse
standby commitment") gives the purchaser of the option, upon payment of a
premium, the right to call upon the writer to deliver a specified amount of
currency on or before a fixed date, at a predetermined price. The predetermined
prices may be higher or lower than the market value of the underlying currency.
A Fund may buy or sell both exchange-traded and over-the-counter ("OTC")
options. A Fund will purchase or write an option only if that option is traded
on a recognized U.S. options exchange or if the sub-adviser believes that a
liquid secondary market for the option exists. When a Fund purchases an OTC
option, it relies on the dealer from which it has purchased the OTC option to
make or take delivery of the currency underlying the option. Failure by the
dealer to do so would result in the loss of the premium paid by the Fund as well
as the loss of the expected benefit of the transaction. OTC options and the
securities underlying these options currently are treated as illiquid securities
by the Funds.
When a Fund sells an option, it receives a premium from the purchaser. When a
Fund purchases an option, it pays a premium to the seller. The amount of premium
received or paid by the Fund is based upon certain factors, including the market
price of the underlying securities, index or currency, the relationship of the
exercise price to the market price, the historical price volatility of the
underlying assets, the option period, supply and demand and interest rates.
The Funds may purchase options on securities that the Fund's Sub-adviser intends
to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased as a means of participating in an
anticipated price increase of a security on a more limited risk basis than would
be possible if the security itself were purchased. If the price of the
underlying security declines, use of this strategy limits the potential loss to
the Fund to the premium paid for the options; conversely, if the market price of
the underlying security increases above the exercise price and the Fund either
sells or exercises the option, any profit eventually realized will be reduced by
the premium paid. A Fund may similarly purchase put options in order to hedge
against a decline in market value of securities held in its portfolio. The put
enables the Fund to sell the underlying security at the predetermined exercise
price; thus the potential for loss to the Fund is limited to the option premium
paid. If the market price of the underlying security is lower than the exercise
price of the put, any profit the Fund realizes on the sale of the security would
be reduced by the premium paid for the put option less any amount for which the
put may be sold.
A Sub-adviser may write call options when it believes that the market value of
the underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection against a decrease in the market price of a security, in an amount
equal to the call premium received less any transaction costs.
Certain Funds may purchase and write put and call options on fixed income or
equity security indexes in much the same manner as the options discussed above,
except that index options may serve as a hedge against overall fluctuations in
the fixed income or equity securities markets (or market sectors) or as a means
of participating in an anticipated price increase in those markets. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities which are being hedged. Index options are settled
exclusively in cash.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING
A Fund may effectively terminate its right or obligation under an option
contract by entering into a closing transaction. For instance, if the Fund
wished to terminate its potential obligation to sell securities or currencies
under a call option it had written, it would purchase a call option of the same
type. Closing transactions essentially
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permit the Fund to realize profits or limit losses on its options positions
prior to the exercise or expiration of the option. In addition:
(1) The successful use of options depends upon the Sub-adviser's ability
to forecast the direction of price fluctuations in the underlying
securities or currency markets, or in the case of an index option,
fluctuations in the market sector represented by the index.
(2) Options normally have expiration dates of up to nine months. Options
that expire unexercised have no value. Unless an option purchased by a
Fund is exercised or unless a closing transaction is effected with
respect to that position, a loss will be realized in the amount of the
premium paid.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a market for identical options. Most
exchange-listed options relate to equity securities. Closing transactions
may be effected with respect to options traded in the over-the-counter
markets only by negotiating directly with the other party to the option
contract or in a secondary market for the option if such market exists.
There is no assurance that a liquid secondary market will exist for any
particular option at any specific time. If it is not possible to effect a
closing transaction, a Fund would have to exercise the option which it
purchased in order to realize any profit. The inability to effect a
closing transaction on an option written by a Fund may result in material
losses to the Fund.
(4) A Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs.
(5) When a Fund enters into an over-the-counter contract with a
counterparty, the Fund will assume the risk that the counterparty will
fail to perform its obligations in which case the Fund could be worse off
than if the contract had not been entered into.
FUTURES STRATEGIES
A futures contract is a bilateral agreement wherein one party agrees to accept,
and the other party agrees to make, delivery of cash, an underlying debt
security or the currency as called for in the contract at a specified future
date and at a specified price. For futures contracts with respect to an index,
delivery is of an amount of cash equal to a specified dollar amount times the
difference between the index value at the time of the contract and the close of
trading of the contract.
A Fund may sell interest rate futures contracts in order to continue to receive
the income from a fixed income security, while endeavoring to avoid part of or
all of a decline in the market value of that security which would accompany an
increase in interest rates.
A Fund may purchase index futures contracts for several reasons: to simulate
full investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading, to reduce transactions costs, or to
seek higher investment returns when a futures contract is priced more
attractively than securities in the index.
A Fund may purchase call options on a futures contract as a means of obtaining
temporary exposure to market appreciation at limited risk. This strategy is
analogous to the purchase of a call option on an individual security, in that it
can be used as a temporary substitute for a position in the security itself.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING
A Fund pays no price when it enters into a futures contract; rather, it deposits
(typically with its custodian in a segregated account in the name of the futures
broker) an amount of cash or U.S. Government Securities generally equal to 5% or
less of the contract value. This amount is known as initial margin. Subsequent
payments, called variation margin, to and from the broker, are made on a daily
basis as the value of the futures position varies. When
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writing a call on a futures contract, variation margin must be deposited in
accordance with applicable exchange rules. The initial margin in futures
transactions is in the nature of a performance bond or good-faith deposit on the
contract that is returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied.
Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such futures contracts.
Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for a Fund to close a position,
and in the event of adverse price movements, it would have to make daily cash
payments of variation margin. In addition:
(1) Successful use by a Fund of futures contracts and related options
will depend upon the Sub-adviser's ability to predict movements in the
direction of the overall securities and currency markets, which requires
different skills and techniques than predicting changes in the prices of
individual securities. Moreover, futures contracts relate not to the
current level of the underlying instrument but to the anticipated levels
at some point in the future; thus, for example, trading of stock index
futures may not reflect the trading of the securities which are used to
formulate an index or even actual fluctuations in the relevant index
itself.
(2) The price of futures contracts may not correlate perfectly with
movement in the price of the hedged currencies due to price distortions
in the futures market or otherwise. There may be several reasons
unrelated to the value of the underlying currencies which causes this
situation to occur. As a result, a correct forecast of general market
trends may still not result in successful hedging through the use of
futures contracts over the short term.
(3) There is no assurance that a liquid secondary market will exist for
any particular contract at any particular time. In such event, it may not
be possible to close a position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash
payments of variation margin.
(4) Like other options, options on futures contracts have a limited life.
A Fund will not trade options on futures contracts on any exchange or
board of trade unless and until, in the Adviser's opinion, the market for
such options has developed sufficiently that the risks in connection with
options on futures transactions are not greater than the risks in
connection with futures transactions.
(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs is all that
is at risk. Sellers of options on futures contracts, however, must post
an initial margin and are subject to additional margin calls which could
be substantial in the event of adverse price movements.
(6) A Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of
added brokerage commissions.
COMMODITY FUTURES CONTRACTS AND COMMODITY OPTIONS
A Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in the Prospectus and above. A Fund
will only invest in futures contracts, options on futures contracts and other
options contracts that are subject to the jurisdiction of the CFTC after filing
a notice of eligibility and otherwise complying with the requirements of Section
4.5 of the rules of the CFTC. Under that section, a Fund will
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<PAGE>
not enter into any futures contract or option on a futures contract if, as a
result, the aggregate initial margins and premiums required to establish such
positions would exceed 5% of the Fund's net assets.
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Fund, (i) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely and (ii) the term Code includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Fund may rely.
Except as required by the 1940 Act or the Code, if a Fund satisfies a percentage
restriction on an investment or investment technique when the investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's assets or purchases and redemptions of shares will not be considered
a violation of the limitation.
FUNDAMENTAL INVESTMENT LIMITATIONS
Each Fund has adopted the following fundamental investment limitations
that cannot be changed without the affirmative vote of the lesser of (i) more
than 50% of the outstanding shares of a Fund or (ii) 67% of the shares of a Fund
present or represented at a shareholders meeting at which the holders of more
than 50% of the outstanding shares of a Fund are present or represented. Each
Fund may not:
(1) Purchase the securities of issuers (other than U.S. Government
Securities) conducting their business activity in the same industry if,
immediately after such purchase, the value of a Fund's investments in
such industry would comprise 25% or more of the value of its total
assets.
(2) Purchase a security if, as a result (a) more than 5% of a Fund's
total assets would be invested in the securities of a single issuer, or
(b) a Fund would own more than 10% of the outstanding voting securities
of a single issuer. This limitation applies only with respect to 75% of
a Fund's total assets and does not apply to U.S. Government Securities.
(3) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, a Fund may be deemed to be an underwriter for purpose of
the Securities Act of 1933.
(4) Purchase or sell real estate or any interest therein, except that a
Fund may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such
as mortgage pass-throughs and collateralized mortgage obligations, or
issued by companies that invest in real estate or interests therein.
(5) Purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities.
(6) Make loans to other persons except for the purchase of debt
securities that are otherwise permitted investments or loans of
portfolio securities through the use of repurchase agreements.
(7) Issue senior securities except pursuant to Section 18 of the
Investment Company Act and except that a Fund may borrow money subject
to its investment limitation on borrowing.
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OTHER INVESTMENT LIMITATIONS
Each Fund has adopted the following nonfundamental investment
limitations that may be changed by the Board without shareholder approval. Each
Fund may not:
(a) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted to be incurred by a Fund. The deposit in escrow
of securities in connection with the writing of put and call options,
collateralized loans of securities and collateral arrangements with
respect to margin for futures contracts are not deemed to be pledges or
hypothecations for this purpose.
(b) Make short sales of securities except short sales against the box.
(c) Purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities, but a Fund may make margin deposits in connection with
permitted transactions in options.
(d)Purchase a security if, as a result, more than 15% of its net assets
would be invested in illiquid securities.
(e) Purchase portfolio securities if its outstanding borrowings exceed
5% of the value of its total assets or borrow for purposes other than
meeting redemptions in an amount exceeding 5% of the value of its total
assets at the time the borrowing is made.
(f) Invest more than 5% of its net assets in securities (other than
fully-collateralized debt obligations) issued by companies that have
conducted continuous operations for less than three years, including
the operations of predecessors, unless guaranteed as to principal and
interest by an issuer in whose securities a Fund could invest.
(g) Invest in or hold securities of any issuer if officers and Trustees
of the Trust or the Adviser, individually owning beneficially more than
1/2 of 1% of the securities of the issuer, in the aggregate own more
than 5% of the issuer's securities.
(h) Invest in interests in oil or gas or interests in other mineral
exploration or development programs.
3. PERFORMANCE DATA
The Funds may quote performance in various ways. All performance information
supplied by the Funds in advertising is historical and is not intended to
predict future returns. A Fund's net asset value, yield and total return
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.
In performance advertising the Funds may compare any of their performance
information with data published by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDC/Wiesenberger or other
companies which track the investment performance of investment companies ("Fund
Tracking Companies"). In addition, a Fund may compare any of its performance
information with the performance of recognized stock, bond and other indexes,
including but not limited to the Salomon Brothers Bond Index, the Shearson
Lehman Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the
Dow Jones Industrial Average, and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. A Fund may refer in such materials
to mutual fund performance rankings and other data published by Fund Tracking
Companies. Performance advertising may also refer to discussions of a Fund and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.
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<PAGE>
YIELD CALCULATIONS
Yields for a Fund used in advertising are computed by dividing the Fund's
interest income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. In general, interest income is reduced with
respect to bonds purchased at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds purchased at a discount by adding a portion of the discount to
daily income. Capital gain and loss generally are excluded from these
calculations.
Income calculated for the purpose of determining a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that a Fund's yield for any given
period is not an indication or representation by the Fund of future yields or
rates of return on the Fund's shares. Also, Processing Organizations may charge
their customers direct fees in connection with an investment in a Fund, which
will have the effect of reducing the Fund's net yield to those shareholders. The
yields of each Fund are not fixed or guaranteed, and an investment in a Fund is
not insured or guaranteed. Accordingly, yield information may not necessarily be
used to compare shares of a Fund with investment alternatives which, like money
market instruments or bank accounts, may provide a fixed rate of interest. Also,
it may not be appropriate to compare a Fund's yield information directly to
similar information regarding investment alternatives which are insured or
guaranteed.
TOTAL RETURN CALCULATIONS
Each of the Funds may advertise total return. Total returns quoted in
advertising reflect all aspects of a Fund's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in the
Fund's net asset value per share over the period. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a Fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result if
the rate of growth or decline in value had been constant over the period. While
average annual returns are a convenient means of comparing investment
alternatives, investors should realize that the performance is not constant over
time but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of the Funds.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over a given period
according to the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and
ERV = ending redeemable value.
ERV is the value, at the end of the applicable period, of a hypothetical $1,000
payment made at the beginning of the applicable period.
In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gain and changes in share price) in order
to illustrate the
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relationship of these factors and their contributions to total return. Total
returns, yields and other performance information may be quoted numerically or
in a table, graph or similar illustration.
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return. The other definitions
are the same as in average annual total return
above.
For the period January 28, 1997 through March 31, 1997, the total return of the
Fund since inception was 0.63%.
4. MANAGEMENT
The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
[INSERT TRUSTEES AND OFFICIALS]
The following table provides the aggregate compensation paid to each Trustee.
The Trust has not adopted any form of retirement plan covering Trustees or
officers. Information is presented for the fiscal year ended March 31, 1996.
<TABLE>
<S> <C> <C> <C> <C>
ACCRUED ANNUAL
AGGREGATE PENSION BENEFITS UPON TOTAL
TRUSTEE COMPENSATION BENEFITS RETIREMENT COMPENSATION
[INSERT ESTIMATED FUTURE PAYMENTS]
</TABLE>
ADVISERS
Forum Investment Advisors, LLC ("Forum"), Two Portland Square, Portland, Maine
04101, serves as investment adviser to the Funds pursuant to an investment
advisory agreement with the Trust (the "Advisory Agreement").
[INSERT FIA BUSINESS AND OWNERSHIP INFO]
To assist it in carrying out its responsibility, the Adviser has retained the
following Subadvisers to render advisory services and make daily investment
decisions for each Fund pursuant to an investment subadvisory agreements with
Quadra (the "Subadvisory Agreements").
[INSERT SUB-ADVISER INFO]
The amount of the fees paid by Forum to each Subadviser may vary from time to
time as a result of periodic negotiations with the Subadviser regarding such
matters as the nature and extent of the services (other than investment
selection and order placement activities) provided by the Subadviser to the
Fund, the increased cost and complexity of providing services to the Fund, the
investment record of the Subadviser in managing the Fund and the nature and
magnitude of the expenses incurred by the Subadviser in managing the Fund's
assets and by the Adviser in overseeing and administering management of the
Fund. However, the contractual fee payable to Forum by each Fund for investment
advisory services that is set forth in the Prospectus will not vary as a result
of those negotiations.
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<PAGE>
The Advisers furnish at their own expense all services, facilities and personnel
necessary to perform their duties under the Advisory or Subadvisory Agreements.
The Advisory and Subadvisory Agreements provide, with respect to each Fund, for
an initial term of two years from its effective date and for its continuance in
effect for successive twelve-month periods thereafter, provided the agreement is
specifically approved at least annually by the Board or, with respect to each
Fund, by vote of the shareholders of that Fund, and in either case by a majority
of the directors who are not parties to the Advisory Agreement or interested
persons of any such party.
The Advisory and Subadvisory Agreements are terminable without penalty by the
Trust and by the Adviser, respectively, with respect to a Fund on 30 days'
written notice when authorized either by vote of the Fund's shareholders or by a
vote of a majority of the Board, or by the Adviser and the Subadviser,
respectively, on not less than 90 days' written notice, and will automatically
terminate in the event of its assignment. The Agreements also provide that, with
respect to each Fund, the Adviser shall not be liable for any error of judgment
or mistake of law or for any act or omission in the performance of its duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of the Adviser's duties or by reason of reckless disregard of its
obligations and duties under the Agreements. The Advisory and Subadvisory
Agreements provide that the Advisers may render services to others.
ADMINISTRATOR
Forum Administrative Services, LLC ("FAdS") acts as administrator to the Trust
pursuant to an Administration Agreement with the Trust. As administrator, FAdS
provides management and administrative services necessary to the operation of
the Trust (which include, among other responsibilities, negotiation of contracts
and fees with, and monitoring of performance and billing of, the transfer agent
and custodian and arranging for maintenance of books and records of the Trust),
and provides the Trust with general office facilities. The Administration
Agreement will remain in effect for a period of twelve months with respect to
the Fund and thereafter is automatically renewed each year for an additional
term of one year.
The Administration Agreement terminates automatically if it is assigned and may
be terminated without penalty with respect to the Fund by vote of the Fund's
shareholders or by either party on not more than 60 days' written notice. The
Administration Agreement also provides that FAdS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the Administration
Agreement.
At the request of the Board, FAdS provides persons satisfactory to the Board to
serve as officers of the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
FAdS, the Adviser, the subadviser or their affiliates.
DISTRIBUTOR
Forum Financial Services, Inc. ("FFSI"), an affiliate of FAdS, is the Trust's
distributor and acts as the agent of the Trust in connection with the offering
of shares of the Fund pursuant to a Distribution Agreement. The Distribution
Agreement will continue in effect for twelve months and will continue in effect
thereafter only if its continuance is specifically approved at least annually by
the Board or by vote of the shareholders entitled to vote thereon, and in either
case, by a majority of the Trustees who (i) are not parties to the Distribution
Agreement, (ii) are not interested persons of any such party or of the Trust and
(iii) with respect to any class for which the Trust has adopted a distribution
plan, have no direct or indirect financial interest in the operation of that
distribution plan or in the Distribution Agreement, at a meeting called for the
purpose of voting on the Distribution Agreement. All subscriptions for shares
obtained by FFSI are directed to the Trust for acceptance and are not binding on
the Trust until accepted by it. The Trust has adopted a distribution plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") that authorizes the
payment to FFSI under the Distribution Services Agreement of a distribution
services fee, which may not exceed an annual rate of 0.05% and 0.30% of the
average daily net assets of each Fund attributable to Institutional Shares and
Trust Shares, respectively.
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<PAGE>
The Distribution Agreement provides that FFSI shall not be liable for any error
of judgment or mistake of law or in any event whatsoever, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Distribution Agreement.
The Distribution Agreement is terminable with respect to the Fund without
penalty by the Trust on 60 days' written notice when authorized either by vote
of the Fund's shareholders or by a vote of a majority of the Board, or by FFSI
on 60 days' written notice. The Distribution Agreement will automatically
terminate in the event of its assignment.
FFSI may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Fund in this manner should acquaint themselves with
their institution's procedures and should read this Prospectus in conjunction
with any materials and information provided by their institution. The financial
institution and not its customers will be the shareholder of record, although
customers may have the right to vote shares depending upon their arrangement
with the institution.
TRANSFER AGENT
Forum Financial Corp. ("FFC") acts as transfer agent of the Trust pursuant to a
transfer agency agreement (the "Transfer Agency Agreement"). The Transfer Agency
Agreement provides, with respect to each Fund, for an initial term of one year
from its effective date and for its continuance in effect for successive
twelve-month periods thereafter, provided that the agreement is specifically
approved at least annually by the Board or, with respect to either Fund, by a
vote of the shareholders of that Fund, and in either case by a majority of the
directors who are not parties to the Transfer Agency Agreement or interested
persons of any such party at a meeting called for the purpose of voting on the
Transfer Agency Agreement.
Among the responsibilities of FFC as agent for the Trust are: (1) answering
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Funds; (2) assisting shareholders in initiating
and changing account designations and addresses; (3) providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records, assisting in processing purchase and redemption transactions and
receiving wired funds; (4) transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; (5) verifying shareholder
signatures in connection with changes in the registration of shareholder
accounts; (6) furnishing periodic statements and confirmations of purchases and
redemptions; (7) arranging for the transmission of proxy statements, annual
reports, prospectuses and other communications from the Trust to its
shareholders; (8) arranging for the receipt, tabulation and transmission to the
Trust of proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and (9) providing such other related services as the
Trust or a shareholder may reasonably request.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation as custodian, investment manager, nominee, agent or fiduciary for
its customers or clients who are shareholders of the Funds with respect to
assets invested in the Funds. FFC or any sub-transfer agent or other processing
agent may elect to credit against the fees payable to it by its clients or
customers all or a portion of any fee received from the Trust or from FFC with
respect to assets of those customers or clients invested in the Funds. FFC, FFSI
or sub-transfer agents or processing agents retained by FFC may be Processing
Organizations (as defined in the Prospectus) and, in the case of sub- transfer
agents or processing agents, may also be affiliated persons of FFC or FFSI.
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<PAGE>
For its services under the Transfer Agency Agreement, FFC receives, with respect
to each Series: a fee of $24,000 per year; such amounts to be computed and paid
monthly in arrears by the Fund; and (iii) Annual Shareholder Account Fees of
$25.00 for a retail and $125.00 for an institutional shareholder account; such
fees to be computed as of the last business day of the prior month.
FUND ACCOUNTANT
Pursuant to a Fund Accounting Agreement, Forum Accounting Services, LLC,
("FAcS") prepares and maintains books and records of each Fund on behalf of the
Trust as required under the 1940 Act, calculates the net asset value per share
of each Fund and dividends and capital gain distributions and prepares periodic
reports to shareholders and the Securities and Exchange Commission. For its
services, FAcS receives from the Trust with respect to each Fund a fee of
$36,000 per year plus surcharges of $6,000 to $24,000 for specified asset
levels. FAcS is paid additional surcharges of $12,000 per year for each of the
following: a portfolio with more than a specified number of securities positions
and/or international positions; investments in derivative instruments;
percentages of assets invested in asset backed securities; and, a monthly
portfolio turnover rate of 10% or greater.
5. DETERMINATION OF NET ASSET VALUE
The Trust does not determine the Funds' net asset value on any day that the New
York Stock Exchange ("NYSE") is closed. The NYSE is normally closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Veterans' Day,
Thanksgiving and Christmas. The Trust determines the net asset value per share
of each Fund as of the close of trading on the NYSE (normally 4:00 p.m., Eastern
time) on each Fund Business Day by dividing the value of the Fund's net assets
(in other words, the value of its portfolio securities and other assets less its
liabilities) by the number of that Fund's shares outstanding at the time the
determination is made. Securities owned by a Fund for which market quotations
are readily available are valued at current market value, or, in their absence,
at fair value as determined by the Board. Purchases and redemptions are effected
at the time of the next determination of net asset value following the receipt
in proper form of any purchase or redemption order.
6. PORTFOLIO TRANSACTIONS
Purchases and sales of debt securities for the Fixed Income Funds usually are
principal transactions. Portfolio Securities for these Funds are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for such
purchases. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked prices.
The Equity Funds will, and the Fixed Income Funds may, effect purchases and
sales through brokers who charge commissions. Allocations of transactions to
brokers and dealers and the frequency of transactions are determined by the
Fund's Sub-adviser in its best judgment and in a manner deemed to be in the best
interest of shareholders of the Fund rather than by any formula. The primary
consideration is prompt execution of orders in an effective manner and at the
most favorable price available to the Fund.
A Fund may not always pay the lowest commission or spread available. Rather, in
determining the amount of commission, including certain dealer spreads, paid in
connection with Fund transactions, the Sub-adviser takes into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Advisor may also take into account
payments made by brokers effecting transactions for a Fund (i) to the Fund or
(ii) to other persons on behalf of the Fund for services provided to it for
which it would be obligated to pay.
In addition, a Sub-adviser may give consideration to research and investment
analysis services furnished by brokers or dealers to the Sub-adviser for its use
and may cause the Fund to pay these brokers a higher amount of commission than
may be charged by other brokers. Such research and analysis is of the types
described in Section
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28(e)(3) of the Securities Exchange Act of 1934, as amended, and is designed to
augment the Sub-advisers' own internal research and investment strategy
capabilities. The Sub-adviser may use the research and analysis in connection
with services to clients other than the Fund, and the Sub-advisers' fee is not
reduced by reason of the Sub-advisers' receipt of the research services.
Investment decisions for the Funds will be made independently from those for any
other account or investment company that is or may in the future become managed
by the Sub-advisers or their affiliates. If, however, a Fund and other
investment companies or accounts managed by one of the Sub-advisers are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by a Fund or the size of the position obtainable for the Fund. In
addition, when purchases or sales of the same security for a Fund and for other
investment companies and accounts managed by one of the Sub-advisers occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
In the future the Funds, consistent with the policy of obtaining best net
results, may conduct brokerage transactions through affiliates of those persons
or Forum. If a Fund anticipates conducting brokerage transactions through these
persons, the Board will adopt procedures in conformity with applicable rules
under the 1940 Act to ensure that all brokerage commissions paid to these
persons are reasonable and fair.
7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Fund are sold on a continuous basis by the distributor.
In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily, from time to
time, to reimburse a Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to transactions effected for the benefit of a
shareholder which is applicable to a Fund's shares as provided in the
Prospectus.
The Trust has filed a formal election with the Securities and Exchange
Commission pursuant to which a Fund will only effect a redemption in portfolio
securities if a shareholder is redeeming more than $250,000 or 1% of the Fund's
total net assets, whichever is less, during any 90-day period.
EXCHANGE PRIVILEGE
The exchange privilege permits shareholders of the Funds to exchange their
shares for shares of the same class of any other Fund of the Trust or a
designated class of shares of Daily Assets Cash Fund, a money market fund of
Forum Funds ("Participating Fund"). For Federal income tax purposes, exchange
transactions are treated as sales on which a purchaser will realize a capital
gain or loss depending on whether the value of the shares redeemed is more or
less than his basis in such shares at the time of the transaction.
By use of the exchange privilege, the shareholder authorizes FFC to act upon the
instruction of any person representing himself to either be, or to have the
authority to act on behalf of, the investor and believed by FFC to be genuine.
The records of FFC of such instructions are binding. Proceeds of an exchange
transaction may be invested in another Participating Fund in the name of the
shareholder.
Exchange transactions will be made on the basis of relative net asset values per
share at the time of the exchange transaction. Shares of any Participating Fund
may be redeemed and the proceeds used to purchase, without a sales charge,
shares of any other Participating Fund. The terms of the exchange privilege are
subject to change, and the privilege may be terminated by the Trust. However the
privilege will not be terminated, and no material change that restricts the
availability of the privilege to shareholders will be implemented, without
reasonable advance notice to shareholders.
17
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INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The Trust offers an individual retirement plan ("IRA") for individuals who wish
to use Trust shares of the Funds as a medium for funding individual retirement
savings. Under the IRA, distributions of net investment income and capital gain
will be automatically reinvested in the IRA established for the investor. The
Funds' custodian furnishes custodial services to the IRAs for a service fee.
Shareholders wishing to use a Fund's IRA should contact FFC for further details
and information.
8. TAXATION
Each Fund intends, for each taxable year, to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
Qualification as a regulated investment company under the Internal Revenue Code
of 1986 does not involve governmental supervision of management or investment
practices or policies. Investors should consult their own counsel for a complete
understanding of the requirements the Funds must meet to qualify for such
treatment. The information set forth in the Prospectus and the following
discussion relate solely to Federal income taxes on dividends and distributions
by a Fund and assume that each Fund qualifies as a regulated investment company.
Investors should consult their own counsel for further details and for the
application of state and local tax laws to the investor's particular situation.
The Equity Funds expect to derive a substantial amount of their gross income
(exclusive of capital gain) from dividends. Accordingly, that portion of the
Equity Funds' dividends so derived will qualify for the dividends-received
deduction for corporations to the extent attributable to certain qualifying
dividends received by the Fund from domestic corporations. The Fixed Income
Funds expect to derive substantially all of their gross income (exclusive of
capital gain) from sources other than dividends. Accordingly, it is expected
that only a small portion, if any, of the Fixed Income Funds' dividends or
distributions will qualify for the dividends-received deduction for
corporations. Capital gain distributions are not eligible for the dividends
received deduction for corporations.
Under the Code, gains or losses from the disposition of (i) foreign currencies,
(ii) debt securities denominated in a foreign currency, (iii) certain options on
foreign currencies or (iv) certain forward contracts denominated in a foreign
currency, that are attributed to fluctuations in the value of the foreign
currency between the date of acquisition of the asset and the date of its
disposition are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses, increase or
decrease the amount of a Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than affecting the
amount of the Fund's net capital gain. Because section 988 losses reduce the
amount of ordinary dividends a Fund will be allowed to distribute for a taxable
year, such losses may result in all or a portion of prior dividend distributions
for such year being recharacterized as non-taxable return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his or her shares. To the extent that such distributions exceed such
shareholders' basis, each distribution will be treated as a gain from the sale
of shares. Under certain conditions, a Fund may elect to except from Section 988
any foreign currency gain or loss realized by a Fund on any regulated forward
contract, option or futures contract which would be "marked to market" under
Section 1256 of the Code if held on the last day of taxable year, as described
immediately below.
Certain listed options, regulated futures contracts and foreign exchange
contracts are considered "section 1256 contracts" for Federal income tax
purposes. Section 1256 contracts held by a Fund at the end of each taxable year
will be "marked to market" and treated for Federal income tax purposes as though
sold for fair market value on the last business day of such taxable year. Gain
or loss realized by a Fund on section 1256 contracts generally will be
considered 60% long-term and 40% short-term capital gain or loss. A Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
from the application of section 1256.
With respect to equity or over-the-counter put and call options, gain or loss
realized by a Fund upon the lapse or sale of such options held by the Fund will
be either long-term or short-term capital gain or loss depending upon the
respective Fund's holding period with respect to such option. However, gain or
loss realized upon the lapse or closing out of such options that are written by
a Fund will be treated as short-term capital gain or loss. In general, if a Fund
exercises an option, or if an option that a Fund has written is exercised, gain
or loss on the option will not be
18
<PAGE>
separately recognized but the premium received or paid will be included in the
calculation of gain or loss upon disposition of the property underlying the
option.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in such straddle;
(ii) a Fund's holding period in straddle positions be suspended while the
straddle exists (possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized with respect
to certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as long-
term capital losses; and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to a Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.
A Fund's investment in zero coupon securities will be subject to special
provisions of the Code which may cause the Fund to recognize income without
receiving cash necessary to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding federal income
and excise taxes. In order to satisfy those distribution requirements the Fund
may be forced to sell other portfolio securities.
9. OTHER INFORMATION
CUSTODIAN
Pursuant to a Custodian Agreement, [custodian] acts as the custodian of the
Funds' assets. The custodian's responsibilities include safeguarding and
controlling the Funds' cash and securities, determining income and collecting
interest on Fund investments.
COUNSEL
Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, One Battery
Park Plaza, New York, New York 10004
INDEPENDENT ACCOUNTANTS
[auditors], act as independent accountants for the Quadra Funds.
THE TRUST AND ITS SHARES
The Trust was organized on November 26, 1997, as a Delaware business trust. The
Trust has an unlimited number of authorized shares of beneficial interest. The
Board may, without shareholder approval, divide the authorized shares into an
unlimited number of separate portfolios or series (such as the Funds) and may in
the future divide portfolios or series into two or more classes of shares (such
as Trust and Institutional Shares). Currently the authorized shares of the Trust
are divided into 15 separate series.
Each share of each fund of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertain to the class and other matters for which separate class
voting is appropriate under applicable law. Generally,
19
<PAGE>
shares will be voted in the aggregate without reference to a particular
portfolio or class, except if the matter affects only one portfolio or class or
voting by portfolio or class is required by law, in which case shares will be
voted separately by portfolio or class, as appropriate. Delaware law does not
require the Trust to hold annual meetings of shareholders, and it is anticipated
that shareholder meetings will be held only when specifically required by
Federal or state law. Shareholders have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a portfolio is entitled
to the shareholder's pro rata share of all dividends and distributions arising
from that portfolio's assets and, upon redeeming shares, will receive the
portion of the portfolio's net assets represented by the redeemed shares.
From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.
SHAREHOLDINGS
As of [date], 1998, the officers and Trustees of the Trust as a group owned less
than 1% of the outstanding shares of the Funds. Also as of that date, the
shareholder listed below owned more than 5% of the Fund or Funds identified.
Shareholders owning 25% or more of the shares of a Fund or of the Trust as a
whole may be deemed to be controlling persons. By reason of their substantial
holdings of shares, these persons may be able to require the Trust to hold a
shareholder meeting to vote on certain issues and may be able to determine the
outcome of any shareholder vote. As noted, certain of these shareholders are
known to the Trust to hold their shares of record only and have no beneficial
interest, including the right to vote, in the shares.
FUND SHAREHOLDER INTEREST
10. FINANCIAL STATEMENTS
Because the Funds had not commenced operations as of the date of this SAI,
financial statements for these Funds are not yet available.
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MEMORIAL FUNDS
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
1. CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's rates corporate bond issues, including convertible debt issues, as
follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1, and B1.
STANDARD AND POOR'S CORPORATION ("S&P")
S&P rates corporate bond issues, including convertible debt issues, as follows:
A-1
<PAGE>
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
Bonds rated CCC have currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
Bonds rated CC typically are debt subordinated to senior debt which is assigned
an actual or implied CCC debt rating. This rating may also be used to indicate
imminent default.
The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. The rating Cl is reserved
for income bonds on which no interest is being paid.
Bonds are rated D when the issue is in payment default, or the obligor has filed
for bankruptcy. Bonds rated D are in payment default or the obligor has filed
for bankruptcy. The D rating category is used when interest payments or
principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will made during
such grace period.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the rating category.
FITCH INVESTORS SERVICE, INC. ("FITCH")
Fitch rates corporate bond issues, including convertible debt issues, as
follows:
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
A-2
<PAGE>
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD, or D categories.
2. PREFERRED STOCK
MOODY'S INVESTORS SERVICE, INC.
Moody's rates preferred stock as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
A-3
<PAGE>
An issue rated baa is considered to be a medium-grade, neither highly protected
nor poorly secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.
An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.
An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from aa through b in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issuer ranks in the lower end of its generic rating
category.
STANDARD & POOR'S CORPORATION
S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
A-4
<PAGE>
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
3. SHORT-TERM DEBT (COMMERCIAL PAPER)
MOODY'S INVESTORS SERVICE, INC.
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2, both are judged investment grade, to indicate the relative
repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
--- Leading market positions in well-established industries. --- High
rates of return on funds employed. --- Conservative capitalization
structure with moderate reliance on debt and ample asset protection.
--- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation. --- Well-established access to a range
of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S CORPORATION
S&P's two highest commercial paper ratings are A and B. Issues assigned an A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues with
an A-2 designation is strong. However, the relative degree of safety is not as
high as for issues designated A-1. A-3 issues have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations. Issues rated B are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing conditions
or short-term adversities.
FITCH INVESTORS SERVICE, INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 ratings.
F-3. Issues assigned this rating have characteristics suggesting that the degree
of assurance for timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment grade.
A-5
<PAGE>
F-S. Issues assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.
D.. Issues assigned this rating are in actual or imminent payment default.
A-6
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
Included in the Prospectus:
Not Applicable.*
Included in the Statement of Additional Information:
Not Applicable.*
(b) EXHIBITS.
(1) Copy of the Trust Instrument of the Registrant dated November
25, 1997 (filed herewith).
(2) Not Applicable.
(3) Not Applicable.
(4) (a) Sections 2.02, 2.04 and 2.06 of Registrant's Trust
Instrument provide as follows:
SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law,
the Trustees in their discretion may, from time to time,
without vote of the Shareholders, issue Shares, in addition to
the then issued and Outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and
type of consideration, including cash or securities, at such
time or times and on such terms as the Trustees may deem
appropriate, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in
connection with, the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine
the Shares into a greater or lesser number without thereby
changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares
shall be redeemed as, whole Shares and/or 1/1,000th of a Share
or integral multiples thereof.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided
by the Trustees, Shares shall be transferable on the records
of the Trust only by the record holder thereof or by that
holder's agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly
executed instrument of transfer and such evidence of the
genuineness of such execution and authorization and of such
other matters as may be required by the Trustees or Transfer
Agent. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust
created hereby shall consist of one or more Series and
separate and distinct records shall be maintained by the Trust
for each Series and the assets associated with any such Series
shall be held and accounted for separately from the assets of
the Trust or any other Series. The Trustees may divide the
Shares of any Series into
<PAGE>
Classes. The Trustees shall have full power and authority,
in their sole discretion, and without obtaining any prior
authorization or vote of the Shareholders of any Series, to
establish and designate and to change in any manner any such
Series or Class and to fix such preferences, voting powers,
rights and privileges of such Series or Classes as the
Trustees may from time to time determine, to divide or
combine the Shares or any Series or Classes into a greater
or lesser number, to classify or reclassify any issued
Shares of any Series or Classes into one or more Series or
Classes, and to take such other action with respect to the
Shares as the Trustees may deem desirable. The establishment
and designation of any Series or Class shall be effective
when specified in the resolution of the Trustees setting
forth such establishment and designation and the relative
rights and preferences of the Shares of such Series or
Class.
All references to Shares in this Trust Instrument shall be
deemed to be Shares of any or all Series or Classes, as the
context may require. All provisions herein relating to the
Trust shall apply equally to each Series and each Class,
except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series subject
to Section 2.08 and the preferences, rights and privileges of
each Class of that Series. Each holder of Shares of a Series
or Class thereof shall be entitled to receive the holder's pro
rata share of all distributions made with respect to such
Series or Class thereof. Upon redemption of Shares, such
Shareholder shall be paid solely out of the funds and property
of such Series of the Trust.
Each Series and Class thereof of the Trust and their
attributes will be set forth in Annex A to this Trust
Instrument.
(5) (a) Form of Investment Advisory Agreement between
Registrant and Forum Advisors, Inc. (filed herewith).
(b)* Investment Subadvisory Agreement (Government Bond Fund)
(c)* Investment Subadvisory Agreement (Corporate Bond Fund)
(d)* Investment Subadvisory Agreement (Growth Equity Fund)
(e)* Investment Subadvisory Agreement (Value Equity Fund)
(6) Form of Distribution Agreement between Registrant and Forum
Financial Services, Inc. (filed herewith).
(7) None.
(8) (a) Form of Transfer Agency Agreement between Registrant
and Forum Financial Corp. (filed herewith).
(b)* Custodian Agreement
(9) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC (filed herewith).
(10)* Opinion of counsel to Registrant.
(11)* Opinion of independent auditors.
(12) None.
<PAGE>
(13)* Investment Representation letter of original purchaser of
shares of Registrant.
(14) Not Applicable.
(15) Form of Rule 12b-1 Plan adopted by the Registrant
(filed herewith).
(16)* None.
Other Exhibits*:
Powers of Attorney for the Registrant.
*EXHIBIT IS TO BE FILED BY AMENDMENT..
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF DECEMBER 1, 1997
Number of Record Holders
------------------------
Government Bond Fund 0
Corporate Bond Fund 0
Growth Equity Fund 0
Value Equity Fund 0
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act,
SECTION 10.02 of the Registrant's Trust Instrument provides as follows:
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b): (i) every Person who is, or has been, a
Trustee or officer of the Trust (hereinafter referred to as a
"Covered Person") shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof; (ii) the words
"claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person: (i) who shall have been adjudicated by a court
or body before which the proceeding was brought (A) to be
liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not
to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or (ii) in the
event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, (x) by
the court or other body approving the settlement; (y) by at
least a majority of those Trustees who are neither Interested
Persons of the Trust nor are
<PAGE>
parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry);
or (z) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a
full trial-type inquiry); provided, however, that any
Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees or by independent
counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other
rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a Person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person. Nothing
contained herein shall affect any rights to indemnification to
which Trust personnel, other than Covered Persons, and other
Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or
proceeding of the character described in Subsection 10.02(a)
may be paid by the Trust or Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately
determined that he is not entitled to indemnification under
this Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for
such undertaking, (ii) the Trust is insured against losses
arising out of any such advance payments or (iii) either a
majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is
reason to believe that such Covered Person will be found
entitled to indemnification under Section 10.02.
Section 4 of the Investment Advisory Agreement provides in substance as follows:
SECTION 4. STANDARD OF CARE
The Trust shall expect of the Adviser, and the
Adviser will give the Trust the benefit of, the Adviser's best
judgment and efforts in rendering its services to the Trust,
and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for
lack of good faith, breach of fiduciary duty, willful
misfeasance, bad faith or gross negligence in the performance
of the Adviser's duties hereunder, or by reason of the
Adviser's reckless disregard of its obligations and duties
hereunder and except as otherwise provided by law.
Section 3 Administration Agreement provides as follows:
SECTION 3. STANDARD OF CARE AND RELIANCE
(a) Forum shall be under no duty to take any action except as
specifically set forth herein or as may be specifically agreed
to by Forum in writing. Forum shall use its best judgment and
efforts in rendering the services described in this Agreement.
Forum shall not be liable to the Trust or any of the Trust's
shareholders for any action or inaction of Forum relating to
any event whatsoever in the absence of bad faith, willful
misfeasance or gross negligence in the performance of Forum's
duties or obligations under this Agreement or by reason of
Forum's reckless disregard of its duties and obligations under
this Agreement.
(b) The Trust agrees to indemnify and hold harmless Forum, its
employees, agents, directors, officers and managers and any
person who controls Forum within the meaning of section 15 of
the Securities Act or section 20 of the Securities Exchange
Act of 1934, as amended, ("Forum
<PAGE>
Indemnitees") against and from any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages,
costs, charges, reasonable counsel fees and other expenses
of every nature and character arising out of or in any way
related to Forum's actions taken or failures to act with
respect to a Fund that are consistent with the standard of
care set forth in Section 3(a) or based, if applicable, on
good faith reliance upon an item described in Section 3(d)
(a "Claim"). The Trust shall not be required to indemnify
any Forum Indemnitee if, prior to confessing any Claim
against the Forum Indemnitee, Forum or the Forum Indemnitee
does not give the Trust written notice of and reasonable
opportunity to defend against the claim in its own name or
in the name of the Forum Indemnitee.
(c) Forum agrees to indemnify and hold harmless the Trust, its
employees, agents, trustees and officers against and from any
and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character
arising out of Forum's actions taken or failures to act with
respect to a Fund that are not consistent with the standard of
care set forth in Section 3(a). Forum shall not be required to
indemnify the Trust if, prior to confessing any Claim against
the Trust, the Trust does not give Forum written notice of and
reasonable opportunity to defend against the claim in its own
name or in the name of the Trust.
(d) A Forum Indemnitee shall not be liable for any action
taken or failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel
to the Trust or counsel to Forum, and upon statements of
accountants, brokers and other persons reasonably believed in
good faith by Forum to be experts in the matter upon which
they are consulted;
(ii) any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the
person or persons authorized by the Board to give such oral
instruction. Forum shall have no duty or obligation to make
any inquiry or effort of certification of such oral
instruction;
(iii) any written instruction or certified copy of any
resolution of the Board, and Forum may rely upon the
genuineness of any such document or copy thereof reasonably
believed in good faith by Forum to have been validly executed;
or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other document
reasonably believed in good faith by Forum to be genuine and
to have been signed or presented by the Trust or other proper
party or parties;
and no Forum Indemnitee shall be under any duty or obligation
to inquire into the validity or invalidity or authority or
lack thereof of any statement, oral or written instruction,
resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice,
consent, order, or any other document or instrument which
Forum reasonably believes in good faith to be genuine.
(e) Forum shall not be liable for the errors of other service
providers to the Trust including the errors of printing
services (other than to pursue all reasonable claims against
the pricing service based on the pricing services' standard
contracts entered into by Forum) and errors in information
provided by an investment adviser (including prices and
pricing formulas and the untimely transmission of trade
information), custodian or transfer agent to the Trust.
<PAGE>
Sections 7 and 8 of the Distribution Services Agreement provide:
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and reasonable
efforts in rendering services to the Trust under this
Agreement but shall be under no duty to take any action except
as specifically set forth herein or as may be specifically
agreed to by the Distributor in writing. The Distributor shall
not be liable to the Trust or any of the Trust's shareholders
for any error of judgment or mistake of law, for any loss
arising out of any investment, or for any action or inaction
of the Distributor in the absence of bad faith, willful
misfeasance or gross negligence in the performance of the
Distributor's duties or obligations under this Agreement or by
reason or the Distributor's reckless disregard of its duties
and obligations under this Agreement
(b) The Distributor shall not be liable for any action taken
or failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be
counsel to the Trust or counsel to the Distributor;
(ii) any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the
person or persons authorized by the Board to give such oral
instruction (the Distributor shall have no duty or obligation
to make any inquiry or effort of certification of such oral
instruction);
(iii) any written instruction or certified copy of any
resolution of the Board, and the Distributor may rely upon the
genuineness of any such document or copy thereof reasonably
believed in good faith by the Distributor to have been validly
executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other document
reasonably believed in good faith by the Distributor to be
genuine and to have been signed or presented by the Trust or
other proper party or parties;
and the Distributor shall not be under any duty or obligation
to inquire into the validity or invalidity or authority or
lack thereof of any statement, oral or written instruction,
resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice,
consent, order, or any other document or instrument which the
Distributor reasonably believes in good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any
failure or delay in performance of its obligations under
this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire,
mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails,
transportation, communication or power supply. In addition,
to the extent the Distributor's obligations hereunder are to
oversee or monitor the activities of third parties, the
Distributor shall not be liable for any failure or delay in
the performance of the Distributor's duties caused, directly
or indirectly, by the failure or delay of such third parties
in performing their respective duties or cooperating
reasonably and in a timely manner with the Distributor.
SECTION 8. INDEMNIFICATION
(a) The Trust will indemnify, defend and hold the Distributor,
its employees, agents, directors and officers and any person
who controls the Distributor within the meaning of section
<PAGE>
15 of the Securities Act or section 20 of the 1934 Act
("Distributor Indemnitees") free and harmless from and
against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature
and character (including the cost of investigating or
defending such claims, demands, actions, suits or
liabilities and any reasonable counsel fees incurred in
connection therewith) which any Distributor Indemnitee may
incur, under the Securities Act, or under common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration
Statement or the Prospectuses or arising out of or based
upon any alleged omission to state a material fact required
to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, unless such
statement or omission was made in reliance upon, and in
conformity with, information furnished in writing to the
Trust in connection with the preparation of the Registration
Statement or exhibits to the Registration Statement by or on
behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under
Section 13(e), the Trust shall indemnify and hold each
Distributor Indemnitee free and harmless from and against any
Distributor Claim; provided, that the term Distributor Claim
for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested
amendment to the Registration Statement and for which the
Trust has not filed a Required Amendment, regardless of with
respect to such matters whether any statement in or omission
from the Registration Statement was made in reliance upon, or
in conformity with, information furnished to the Trust by or
on behalf of the Distributor.
(b) The Trust may assume the defense of any suit brought to
enforce any Distributor Claim and may retain counsel of good
standing chosen by the Trust and approved by the Distributor,
which approval shall not be withheld unreasonably. The Trust
shall advise the Distributor that it will assume the defense
of the suit and retain counsel within ten (10) days of receipt
of the notice of the claim. If the Trust assumes the defense
of any such suit and retains counsel, the defendants shall
bear the fees and expenses of any additional counsel that they
retain. If the Trust does not assume the defense of any such
suit, or if Distributor does not approve of counsel chosen by
the Trust or has been advised that it may have available
defenses or claims that are not available to or conflict with
those available to the Trust, the Trust will reimburse any
Distributor Indemnitee named as defendant in such suit for the
reasonable fees and expenses of any counsel that person
retains. A Distributor Indemnitee shall not settle or confess
any claim without the prior written consent of the Trust,
which consent shall not be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold the Trust
and its several officers and trustees (collectively, the
"Trust Indemnitees"), free and harmless from and against any
and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims,
demands, actions, suits or liabilities and any reasonable
counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses result from, arise
out of or are based upon:
(i) any alleged untrue statement of a material fact
contained in the Registration Statement or Prospectus or any
alleged omission of a material fact required to be stated or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in writing
in connection with the preparation of the Registration
Statement or Prospectus by or on behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its
sales representatives that does not conform to the standard of
care set forth in Section 7 of this Agreement ("Trust
Claims").
<PAGE>
(d) The Distributor may assume the defense of any suit brought
to enforce any Trust Claim and may retain counsel of good
standing chosen by the Distributor and approved by the Trust,
which approval shall not be withheld unreasonably. The
Distributor shall advise the Trust that it will assume the
defense of the suit and retain counsel within ten (10) days of
receipt of the notice of the claim. If the Distributor assumes
the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional
counsel that they retain. If the Distributor does not assume
the defense of any such suit, or if Trust does not approve of
counsel chosen by the Distributor or has been advised that it
may have available defenses or claims that are not available
to or conflict with those available to the Distributor, the
Distributor will reimburse any Trust Indemnitee named as
defendant in such suit for the reasonable fees and expenses of
any counsel that person retains. A Trust Indemnitee shall not
settle or confess any claim without the prior written consent
of the Distributor, which consent shall not be unreasonably
withheld or delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the
Trust or the Distributor receiving notice of any action
brought against a Distributor Indemnitee or Trust Indemnitee,
respectively, by the person against whom such action is
brought within twenty (20) days after the summons or other
first legal process is served. Such notice shall refer to the
person or persons against whom the action is brought. The
failure to provide such notice shall not relieve the party
entitled to such notice of any liability that it may have to
any Distributor Indemnitee or Trust Indemnitee except to the
extent that the ability of the party entitled to such notice
to defend such action has been materially adversely affected
by the failure to provide notice.
(f) The provisions of this Section and the parties'
representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of any Distributor
Indemnitee or Trust Indemnitee and shall survive the sale and
redemption of any Shares made pursuant to subscriptions
obtained by the Distributor. The indemnification provisions of
this Section will inure exclusively to the benefit of each
person that may be a Distributor Indemnitee or Trust
Indemnitee at any time and their respective successors and
assigns (it being intended that such persons be deemed to be
third party beneficiaries under this Agreement).
(g) Each party agrees promptly to notify the other party of
the commencement of any litigation or proceeding of which it
becomes aware arising out of or in any way connected with the
issuance or sale of Shares.
(h) Nothing contained herein shall require the Trust to take
any action contrary to any provision of its Organic Documents
or any applicable statute or regulation or shall require the
Distributor to take any action contrary to any provision of
its Articles of Incorporation or Bylaws or any applicable
statute or regulation; provided, however, that neither the
Trust nor the Distributor may amend their Organic Documents or
Articles of Incorporation and Bylaws, respectively, in any
manner that would result in a violation of a representation or
warranty made in this Agreement.
(i) Nothing contained in this section shall be construed to
protect the Distributor against any liability to the Trust or
its security holders to which the Distributor would otherwise
be subject by reason of its failure to satisfy the standard of
care set forth in Section 7 of this Agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
Forum Investment Advisors, LLC
<PAGE>
The descriptions of Forum Investment Advisors, LLC under the caption
"Management-Adviser" in the Prospectus and Statement of Additional
Information relating to the Government Bond Fund, Corporate Bond Fund,
Growth Equity Fund and Value Equity Fund, constituting certain of Parts
A and B, respectively, of the Registration Statement are incorporated
by reference herein.
The following are the directors and officers of Forum Investment
Advisors, LLC, Two Portland Square, Portland, Maine 04101, including
their business connections which are of a substantial nature.
Forum Holdings Corp., Member.
Forum Financial Group, LLC., Member.
Both Forum Holdings Corp. and Forum Financial Group, LLC are
controlled by John Y. Keffer, President and Secretary of Forum
Financial Services, Inc. and of Forum Financial Corp. Mr. Keffer is a
director and/or officer of various registered investment companies for
which Forum Financial Services, Inc. serves as distributor.
William J. Lewis, Director.
Director of Forum Investment Advisors, LLC.
Sara M. Morris, Treasurer.
Chief Financial Officer, Forum Financial Services, Inc. Ms. Morris
serves as an officer of several other Forum affiliated companies. Ms.
Morris also serves as an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor.
David I. Goldstein, Secretary.
General Counsel, Forum Financial Group, LLC. Mr. Goldstein serves as
an officer of several other Forum affiliated companies. Mr. Goldstein
also serves as an officer of various registered investment companies
for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor.
Dana A. Lukens, Assistant Secretary.
Corporate Counsel, Forum Financial Group, LLC. Mr. Lukens also serves
as an officer of several other Forum affiliated companies.
Margaret J. Fenderson, assistant Treasurer.
Corporate Accounting Manager, Forum Financial Group, LLC. Ms.
Fenderson also serves as an officer of several other Forum affiliated
companies.
ITEM 29. PRINCIPAL UNDERWRITER.
(a) Forum Financial Services, Inc., Registrant's underwriter,
serves as underwriter to Core Trust (Delaware), The CRM Funds,
The Cutler Trust, Forum Funds, The Highland Family of Funds,
Monarch Funds, Norwest Funds, Norwest Select Funds and Sound
Shore Fund, Inc.
(b) John Y. Keffer, President of Forum Financial Services, Inc.,
is the Chairman and President of the Registrant. Sara M.
Morris is the Treasurer of Forum Financial Services. David I.
Goldstein, Secretary of Forum Financial Services, Inc., is the
Secretary of the Registrant. Margaret J. Fenderson is the
Assistant Treasurer of Forum Financial Services, Inc. and Dana
Lukens is the Assistant Secretary of Forum Financial Services,
Inc. Their business address is Two Portland Square, Portland,
Maine 04101.
<PAGE>
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Forum Administrative Services, LLC
and Forum Financial Corp., Two Portland Square, Portland, Maine 04101. The
records required to be maintained under Rule 31a-1(b)(1) with respect to
journals of receipts and deliveries of securities and receipts and disbursements
of cash are maintained at the offices of the Registrant's custodian, BankBoston,
100 Federal Street, Boston, Massachusetts 02106. The records required to be
maintained under Rule 31a-1(b)(5), (6) and (9) are maintained at the offices of
the Registrant's adviser or subadviser, as listed in Item 28 hereof.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(i) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the latter of the effective date of Registrant's Securities
Act of 1933 Registration Statement relating to the prospectuses
offering those shares or the commencement of public shares of the
respective shares; and,
(ii) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Portland, and State of Maine on the 3rd day of December, 1997.
MEMORIAL FUNDS
By: /S/ MAX BERUEFFY
Max Berueffy, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the following
persons on the 3rd day of December, 1997.
SIGNATURES TITLE
(a) Principal Executive Officer
/S/ MAX BERUEFFY President
Max Berueffy and Trustee
(b) Principal Financial and
Accounting Officer
/S/ RICHARD C. BUTT Treasurer
Richard C. Butt
(c) All of the Trustees
/S/ MAX BERUEFFY Trustee
Max Berueffy
/S/ REBECCA HACKMANN Trustee
Rebecca Hackmann
/S/ CHERYL O. TUMLIN Trustee
Cheryl O. Tumlin
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
(1) Copy of the Trust Instrument of the Registrant dated November 25, 1997
(5) (a) Form of Investment Advisory Agreement between Registrant and Forum
Advisors, Inc.
(6) Form of Distribution Agreement between Registrant and Forum Financial
Services, Inc.
(8) (a) Form of Transfer Agency Agreement between Registrant and Forum
Financial Corp.
(9) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC
(15) Form of Rule 12b-1 Plan adopted by the Registrant
<PAGE>
EXHIBIT 1
<PAGE>
MEMORIAL FUNDS
TRUST INSTRUMENT
DATED
NOVEMBER 25, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name
Section 1.02 Definitions
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest
Section 2.02 Issuance of Shares
Section 2.03 Register of Shares and Share Certificates
Section 2.04 Transfer of Shares
Section 2.05 Treasury Shares
Section 2.06 Establishment of Series or Class
Section 2.07 Investment in the Trust
Section 2.08 Assets and Liabilities of Series
Section 2.09 No Preemptive Rights
Section 2.10 No Personal Liability of Shareholders
Section 2.11 Assent to Trust Instrument and Disclosure
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust
Section 3.02 Number of Trustees
Section 3.03 Term of Office
Section 3.04 Vacancies and Appointments
Section 3.05 Temporary Absence
Section 3.06 Effect of Ending of a Trustee's Service
Section 3.07 Ownership of Assets of the Trust
Section 3.08 Meetings of Trustees
Section 3.09 Quorum
Section 3.10 Meeting Actions
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers
Section 4.02 Issuance and Repurchase of Shares
Section 4.03 Trustees and Officers as Shareholders
Section 4.04 Principal Transactions
Section 4.05 Delegations and Committees
<PAGE>
ARTICLE V NET ASSET VALUE AND EXPENSES
Section 5.01 Determination of Net Asset Value
Section 5.02 Expenses
ARTICLE VI INVESTMENT ADVISERS AND UNDERWRITERS
Section 6.01 Investment Advisers
Section 6.02 Underwriters
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers
Section 7.02 Meetings
Section 7.03 Notices
Section 7.04 Quorum and Required Vote
Section 7.05 Voting-Proxies
Section 7.06 Action Without a Meeting
Section 7.07 Establishment of Record Dates
ARTICLE VIII CUSTODIANS
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions
Section 9.02 Redemptions
Section 9.03 Suspension of the Right of Redemption
Section 9.04 Redemption of Shares in Order to
Qualify as Regulated Investment Company
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability
Section 10.02 Indemnification
Section 10.03 Shareholders
Section 10.04 Insurance
ARTICLE XI OFFICERS
Section 11.01 Officers and Appointment
Section 11.02 Resignations
Section 11.03 Surety Bonds
Section 11.04 Removal
<PAGE>
ARTICLE XII MISCELLANEOUS
Section 12.01 Trust Not a Partnership
Section 12.02 Trustee's Good Faith Action,
Expert Advice, No Bond or Surety
Section 12.03 Reorganization
Section 12.04 Termination of Trust or Series
Section 12.05 Derivative Actions
Section 12.06 Parties to Contract
Section 12.07 Filing of Copies, References, Headings
Section 12.08 Governing Law
Section 12.09 Amendments
Section 12.10 Fiscal Year
Section 12.11 Provisions in Conflict with Law
Section 12.12 Execution via Facsimile
Section 12.13 Principal Office
Section 12.14 Inspection of Books
Section 12.15 Seal
<PAGE>
MEMORIAL FUNDS
TRUST INSTRUMENT, made by Max Berueffy, Rebecca Hackmann and Cheryl O.
Tumlin as Trustees.
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed
to the trust hereunder shall be held and managed in trust under this Trust
Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Memorial
Funds."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "Affiliated Person" shall have the meaning given it in the 1940
Act, as modified by or interpreted by applicable orders of the Commission or any
rules or regulations adopted by or interpretive releases of the Commission
thereunder.
(b) "Bylaws" means the Bylaws of the Trust as adopted by the Trustees;
(c) "Class" means the class of Shares of a Series established in
accordance with the provisions of Article II, Section 2.06.
(d) "Commission" shall have the meaning given it in the 1940 Act.
(e) "Delaware Act" means to Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(f) "Interested Person" shall have the meaning given it in the 1940
Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive releases of
the Commission thereunder.
<PAGE>
(g) "Majority Shareholder Vote" shall have the same meaning as the term
"vote of a majority of the outstanding voting securities" is given in the 1940
Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive releases of
the Commission thereunder.
(h) "Net Asset Value" means the net asset value of each Series of the
Trust or Class thereof determined in the manner provided in Article V, Section
5.01 hereof;
(i) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or a Transfer Agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(j) "Person" shall have the meaning given it in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(k) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06.
(l) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(m) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or Class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(n) "Transfer Agent" means the transfer agent or such officer or agent
of the Trust as shall maintain the register of a Series.
(o) "Trust" means Memorial Funds and reference to the Trust, when
applicable to one or more Series of the Trust, shall refer to any such Series;
(p) "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as each such person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder;
(q) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or any Series, or the Trustees on behalf of the Trust or any Series.
(r) "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
<PAGE>
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or Classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and Class
thereof, authorized hereunder is unlimited. All Shares issued hereunder shall be
fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law, the
Trustees in their discretion may, from time to time, without vote of the
Shareholders, issue Shares, in addition to the then issued and Outstanding
Shares and Shares held in the treasury, to such party or parties and for such
amount and type of consideration, including cash or securities, at such time or
times and on such terms as the Trustees may deem appropriate, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with, the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000th
of a Share or integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES.
(a) A register shall be kept at the principal office of the Trust or an
office of a Transfer Agent which shall contain the names and addresses of the
Shareholders of each Series and Class thereof, the number of Shares of that
Series and any Classes thereof held by each Shareholder and a record of all
transfers thereof. No Shareholder shall be entitled to receive payment of any
distribution, nor to have notice given to the Shareholder as herein provided,
until the Shareholder has given its address to the Transfer Agent.
(b) All shares shall be uncertificated except as the Trustees may
otherwise authorize. The Trustees may issue certificates to a Shareholder of any
Series or Class thereof for any purpose and the issuance of a certificate to one
or more Shareholders shall not require the issuance of certificates generally.
As to Shares for which no certificate has been issued, each Shareholder shall be
entitled to receive distributions or otherwise to exercise or enjoy the rights
of Shareholders. Share certificates shall be in the form proscribed from time to
time by the Trustees and shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary.
Such signatures may be facsimiles if the certificate is signed by a Transfer
Agent or shareholder services agent or by a registrar, other than a Trustee,
officer or employee of the Trust. In case any officer who has signed or whose
facsimile signature has been placed on a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if the person were such officer at the time of its
issue.]
<PAGE>
(c) In the case of the alleged loss or destruction or the mutilation of
a Share certificate, a duplicate certificate may be issued in place thereof,
upon such terms as the Trustees may prescribe or upon the terms generally
employed by the Transfer Agent. The Trustees may at any time discontinue the
issuance of Share certificates and may, by written notice to each Shareholder,
require the surrender of Share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of Shares in the
Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by that holder's agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees
or Transfer Agent. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any distributions declared with
respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust created hereby
shall consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees may divide the Shares of any Series into
Classes. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series, to establish and designate and to change in any
manner any such Series or Class and to fix such preferences, voting powers,
rights and privileges of such Series or Classes as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares of any
Series or Classes into one or more Series or Classes, and to take such other
action with respect to the Shares as the Trustees may deem desirable. The
establishment and designation of any Series or Class shall be effective when
specified in the resolution of the Trustees setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series or Classes, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series and
each Class, except as the context otherwise requires.
<PAGE>
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series subject to Section 2.08 and the
preferences, rights and privileges of each Class of that Series. Each holder of
Shares of a Series or Class thereof shall be entitled to receive the holder's
pro rata share of all distributions made with respect to such Series or Class
thereof. Upon redemption of Shares, such Shareholder shall be paid solely out of
the funds and property of such Series of the Trust.
Each Series and Class thereof of the Trust and their attributes will be
set forth in Annex A to this Trust Instrument.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series or Class as the Trustees may from time to time
authorize. At the Trustees' discretion, such investments may be in the form of
cash, securities or other assets in which the affected Series is authorized to
invest, valued as provided in Section 5.01. Investments in a Series shall be
credited to each Shareholder's account in the form of full and fractional Shares
at the Net Asset Value per Share next determined after the investment is
received or accepted as may be determined by the Trustees; provided, however,
that the Trustees may, in their sole discretion, (a) fix the Net Asset Value per
Share of the initial capital contribution or (b) impose a sales or other charge
upon investments in the Trust in such manner and at such time determined by the
Trustees.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever from the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to a
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series, except that
liabilities, expenses, costs, charges and reserves allocated to a particular
Class shall be borne by that Class. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series of Classes in such manner as the
Trustees in their sole discretion deem
<PAGE>
fair and equitable. Each such allocation shall be conclusive and binding upon
the Shareholders of all Series for all purposes. Without limitation of the
foregoing provisions of this Section 2.08, but subject to the right of the
Trustees in their discretion to allocate general liabilities, expenses, costs,
changes or reserves as herein provided, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Series shall be enforceable against the assets of such Series only,
and not against the assets of the Trust generally. Notice of this contractual
limitation on inter-Series liabilities may, in the Trustee's sole discretion, be
set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on inter-Series liabilities (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series.
All Persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. No Shareholder of
the Trust or of any Series shall be personally liable for the debts,
liabilities, obligation and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT AND DISCLOSURE. Every
Shareholder, by virtue of having purchased a Share shall become a Shareholder
(i) and shall be held to have expressly assented and agreed to be bound by the
terms hereof (ii) and shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the requirements of any taxing authority.
<PAGE>
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with unlimited powers of delegation except
as may be prohibited by applicable law. The Trustees shall have full power and
authority to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without the
State of Delaware, in any and all states, commonwealths, territories,
dependencies, colonies or possessions of the United States of America and in any
foreign jurisdiction. The Trustees shall have full power and authority to do any
and all acts and to make and execute any and all contracts and instruments that
they may consider necessary, proper, desirable or appropriate in connection with
the management of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Trust Instrument, the presumption shall be in favor of a grant of power to
the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Each Trustee and each committee member may receive such compensation
for his services and reimbursement for his expenses as may be fixed from time to
time by the Trustees.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning a plurality of the Shares voting at a meeting of
Shareholders.
SECTION 3.02 NUMBER OF TRUSTEES. The initial Trustees shall be the
persons named herein. On a date fixed by the Trustees, the Shareholders shall
elect at least one (1) but not more than fifteen Trustees. The number of
Trustees always shall be at least one (1), and otherwise shall be such number as
shall be fixed from time to time by the Trustees, provided, however, that the
number of Trustees shall in no event be more than fifteen (15).
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the lifetime
of this Trust, and until its termination as herein provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein; (b) that any Trustee may be removed at any
time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired,
has become physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; (d) that a Trustee shall be removed upon attaining any retirement
age for Trustees
<PAGE>
specified by resolution of the Trustees and (e) that a Trustee may be removed at
any meeting of the Shareholders of the Trust by a vote of Shareholders owning at
least two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder. In the case of a vacancy, the
remaining Trustees shall fill such vacancy by appointing such other Person as
they in their discretion shall see fit consistent with the limitations of
applicable law. Such appointment shall take effect upon the execution of a
written instrument signed by a majority of the Trustees in office or by
resolution of the Trustees, duly adopted.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that at least one Trustee must personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
SECTION 3.06 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.07 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any Person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
<PAGE>
SECTION 3.08 ACTION AND MEETINGS OF TRUSTEES. The Trustees shall act by
majority vote (unless a greater amount is specified in this Trust Instrument or
applicable law) at a meeting duly called or by unanimous written consent without
a meeting. Notice of the time, date and place of all meetings of the Trustees
shall be given by the party calling the meeting to each Trustee by telephone,
facsimile or other electronic mechanism sent to his home or business address at
least twenty-four hours in advance of the meeting or by written notice mailed to
his home or business address at least seventy-two hours in advance of the
meeting. Notice need not be given to any Trustee who attends the meeting without
objecting to the lack of notice or who executes a written waiver of notice with
respect to the meeting. Written consents or waivers of the Trustees may be
executed in one or more counterparts. Regular special meetings of the Trustees
may be held at such places and at such times as the Trustees may from time to
time determine; each Trustee present at such determination shall be deemed a
party calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees. Any
meeting may adjourn to any place. Meetings of the Trustees may be called orally
or in writing by the Chairman or any two other Trustees. Except as otherwise
provided, notice of any meeting of the Trustees shall be given by the party
calling the meeting to each Trustee.
SECTION 3.09 QUORUM. A majority of the Trustees shall constitute a
quorum for the transaction of business and an action of a majority of the quorum
shall constitute action of the Trustees except to the extent otherwise provided
for in this Trust Instrument.
SECTION 3.10 MEETING ACTIONS. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held. Any action by the Trustees may be taken without
a meeting if a written consent thereto is signed by all the Trustees and filed
with the records of the Trustees' meeting. Such consent shall be treated, for
all purposes, as a vote at a meeting of the Trustees held at the principal place
of business of the Trustees. Trustees may participate in a meeting of Trustees
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. Any meeting
conducted by telephone shall be deemed to take place at and from the principal
office of the Trust.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, free from the control of the Shareholders. The Trustees shall not in
any way be bound or limited by present or future laws or customs in regard to
trust investments, but shall have full power and authority to make any and all
investments which they, in their sole discretion, shall deem proper to
accomplish the purpose of this Trust without recourse to any court or other
authority. Subject to
<PAGE>
any applicable limitation in this Trust Instrument or the Bylaws, the Trustees
shall have the power and authority:
(a) To invest and reinvest cash and other property, to hold cash or
other property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on, lease and otherwise dispose of or act with
respect to any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter, by the Trust itself, or both, or otherwise
pursuant to a plan of distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more custodians of any assets of the Trust and to
retain one or more Transfer Agents and shareholder servicing agents, or both;
(h) To consent to, execute or participate in any agreement or plan of
merger, reorganization or consolidation or certificate of merger or similar
document with respect to the Trust or any Series or Class;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(j) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XII, Subsections 12.04(b) and (c);
(k) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such Person or Persons as the Trustees shall deem proper,
granting to such Person or Persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
<PAGE>
(l) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(m) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II and to establish Classes of such
Series having relative rights, powers and duties as they may provide;
(o) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
Class thereof or to apportion the same between or among two or more Series or
Classes;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any Person or concern or any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern; and to pay calls or
subscriptions with respect to any security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(r) To make distributions of income, capital gain or otherwise to
Shareholders;
(s) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or Class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(t) To interpret the investment objectives, policies, practices or
limitations of any Series;
(u) To establish a registered office and have a registered agent in the
state of Delaware; and
(v) To terminate a Class, or, subject to the provisions of Section
12.04, the Trust or Series.
(w) In general to carry on any other business in connection with or
incidental to any of the foregoing powers or any other power given to the
Trustees in this Trust Instrument, to do everything necessary, suitable or
proper for the accomplishment of any purpose or the attainment of any object or
the furtherance of any power set forth herein, either alone or in association
with
<PAGE>
others, and to do every other act or thing incidental or appurtenant to or
arising out of or connected with the aforesaid business or purposes, objects or
powers.]
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
No Trustee hereunder shall have any power to bind personally the
Trust's officers.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to oversee the
application of any payments made or property transferred to the Trustees or upon
their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if the Trustee, officer or other agent were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued and
sold Shares to and buy such Shares from any such trustee, officer or other agent
or any Person in which the trustee, officer or other agent is interested,
subject only to the general limitations herein contained as to the sale and
purchase of such Shares.
SECTION 4.04 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from, sell any securities to, lend any assets of the Trust to, or contract in
any way, whether orally or written, with any Trustee or officer of the Trust or
any other Person, however related to the Trust; or have any dealings of any kind
with any Person.
SECTION 4.05 DELAGATIONS AND COMMITTEES. the Trustees may delegate to
anyone or more of their number the authority to approve particular actions on
behalf of the Trust. The Trustees may establish one or more committees, delegate
any of the powers of the Trustees to any committee and adopt a committee charter
providing for the responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of a committee
<PAGE>
as the Trustees may deem proper. The Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to any and all matters as the Trustees may deem proper.
The Trustees may elect from their own number an executive committee,
which shall have any or all the powers of the Trustees while the Trustees are
not in session.
All members of each committee shall hold such offices at the pleasure
of the Trustees. The Trustees may abolish any committee at any time. Any
committee to which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its actions to the Trustees. The
Trustees shall have power to rescind any action of any committee, but no such
rescission shall have retroactive effect.
ARTICLE V
NET ASSET VALUE AND EXPENSES
SECTION 5.01 DETERMINATION OF NET ASSET VALUE. The "Net Asset Value" of
any Series shall be the amount by which the assets of that Series exceed its
liabilities, all as determined by or under the direction of the Trustees in any
manner the Trustees deem appropriate, that is in accordance with applicable law.
The Net Asset Value of any Class shall be the amount by which the net assets
attributable to that Class exceed any liabilities attributed to that Class as
determined by or under the direction of the Trustees in any manner the Trustees
deem appropriate is in accordance with applicable law. The valuation of any
securities or other assets for purposes of calculating a Series' (or Class') Net
Asset Value.
SECTION 5.02 EXPENSES. Subject to the provisions of Article II, Section
2.08, the Trustees shall be reimbursed from the estate or the assets belonging
to the appropriate Series for their expenses and disbursements, including,
without limitation, interest charges, taxes, brokerage fees and commissions;
expenses of issue, repurchase and redemption of shares; insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodians,
transfer agents and fund accountants; fees of pricing, interest, dividend,
credit and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to
Shareholders or others; expenses of meetings of Shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust's;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust; costs of Trustee meetings; registration fees
and related expenses; for such non-recurring items as may arise, including
litigation to which the Trust (or a Trustee acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust, and for
the payment of such expenses, disbursements, losses and liabilities the Trustees
shall have a
<PAGE>
lien on the assets belonging to the appropriate Series, or in the case of an
expense allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Shareholders thereto. This section shall
not preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISERS AND UNDERWRITERS
SECTION 6.01 INVESTMENT ADVISERS. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts on
behalf of the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory and other facilities and services upon such terms and
conditions as may be prescribed by the Trustees. Notwithstanding any other
provision of this Trust Instrument, the Trustees may authorize any investment
adviser to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser. Any such purchases, sales and exchanges shall be deemed to have been
authorized by all of the Trustees.
The Trustees may authorize the investment adviser to employ, from time
to time, one or more sub-advisers to perform such of the acts and services of
the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub-adviser. Any reference in this Trust
Instrument to an investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
SECTION 6.02 UNDERWRITERS. The Trustees may in their discretion from
time to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of Shares, whereby the Trust may either agree
to sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract shall be on such
terms and conditions as may be prescribed by the Trustees; and such contracts
may also provide for the repurchase or sale of Shares by such other party as
principal or as agent of the Trust.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 ,or (b) for the removal of Trustees as provided in Article III, Section
3.03(e), (c) to amend this Trust Instrument as provided for in Section 12.08 and
(d) with respect to such additional matters relating to the Trust as may be
required by law, or by this Trust Instrument.
<PAGE>
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by applicable
law, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that the matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon and (iii) when the Trustees have determined that the matter
affects the interests of one of more classes, then the Shareholders of all such
classes shall be entitled to vote. [Each whole Share shall be entitled to one
vote as to any matter on which a Shareholder is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote.] [Each
whole dollar of Net Asset Value of a Share shall be entitled to one vote as to
any matter on which a Shareholder is entitled to vote, and any fraction of a
dollar of Net Asset Value of a Share shall be entitled to a proportionate
fractional vote.] Notwithstanding anything else herein or in the Bylaws, in the
event a proposal by anyone other than the officers or Trustees of the Trust is
submitted to a vote of the Shareholders of one or more Classes, one or more
Series or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Instrument or
the Bylaws to be taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III. Meetings
may be held within or without the State of Delaware as specified by the
Trustees. A meeting of Shareholders shall be called by the Secretary whenever
(i) ordered by the Trustees or (ii) requested in writing by the holder or
holders of at least one third of the Outstanding Shares entitled to vote. If the
Secretary, when so ordered or requested, refuses or neglects for more than 30
days to call such special meeting, the Trustees or the Shareholders so
requesting, may, in the name of the Secretary, call the meeting by giving notice
thereof in the manner required when notice is given by the Secretary. If the
meeting is a meeting of the Shareholders of one or more Series or Classes, but
not a meeting of all Shareholders of the Trust, then only special meetings of
the Shareholders of such one or more Series or Classes shall be called and only
the shareholders of such one or more Series or Classes shall be entitled to
notice of and to vote at such meeting.
SECTION 7.03 NOTICES. Except as provided in Section 7.02, notices of
any meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least ten (10) days before
the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to Persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
<PAGE>
SECTION 7.04 QUORUM AND REQUIRED VOTE. One-third (or such higher
proportion as the Trustees, in their sole discretion, may determine with respect
to a meeting) of Shares entitled to vote in person or by proxy shall be a quorum
for the transaction of business at a Shareholders' meeting, except that where
any provision of law or of this Trust Instrument permits or requires that
holders of any Series shall vote as a Series (or that holders of a Class shall
vote as a Class), then one-third (or such higher proportion as the Trustees, in
their sole discretion, may determine with respect to a meeting) of the aggregate
number of Shares of that Series (or that Class) entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that Series
(or that Class). Any lesser number shall be sufficient only for holding a vote
to adjourn the meeting. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. Except when a larger vote is required by law or by
any provision of this Trust Instrument or the Bylaws, a majority of the Shares
voted in person or by proxy shall decide any questions and a plurality shall
elect a Trustee, provided that where any provision of law or of this Trust
Instrument permits or requires that the holders of any Series shall vote as a
Series (or that the holders of any Class shall vote as a Class), then a majority
of the Shares present in person or by proxy of that Series (or Class), voted on
the matter in person or by proxy shall decide that matter insofar as that Series
(or Class) is concerned.
SECTION 7.05 VOTING-PROXIES. Shares may be voted in person or by proxy
or in any manner provided for in the Bylaws except as otherwise required by
Section 7.01. Shareholders entitled to vote may vote either in person or by
proxy, provided that either (a) an instrument authorizing such proxy to act is
executed by the Shareholder in writing and dated not more than eleven (11)
months before the meeting, unless the instrument specifically provides for a
longer period or (b) the Trustees or President authorize an electronic,
telephonic, computerized or other alternative to execution of a written
instrument authorizing the proxy to act which authorization is received not more
than eleven (11) months before the meeting. Proxies shall be delivered to the
Secretary of the Trust or other person responsible for recording the proceedings
before being voted. A proxy with respect to Shares held in the name of two or
more Persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Trust receives a specific written notice to the
contrary from any one of them. Unless otherwise specifically limited by their
terms, proxies shall entitle the holder thereof to vote at any adjournment of a
meeting. A proxy purporting to be exercised by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden or proving invalidity shall rest on the challenger. At all meetings of
the Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualifications of voters, the validity of proxies, and the
acceptance or rejection of votes shall be decided by the Chairman of the
meeting. Except as otherwise provided herein, all maters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Shareholders
were shareholder of a Delaware corporation.
SECTION 7.06 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing, which may be in one or more
counterparts, and the written consents are filed with the
<PAGE>
records of meetings of Shareholders of the Trust. Such consent shall be treated
for all purposes as a vote at a meeting of the Shareholders held at the
principal place of business of the Trust.
SECTION 7.07 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding one hundred twenty
(120) days preceding the date of any meeting of Shareholders, or the date for
the payment of any distributions, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares shall go into
effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding one hundred, twenty (120) days
preceding the date of any meeting of Shareholders, or the date for payment of
any distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only those Shareholders as shall be Shareholders on the
date so fixed shall be entitled to such notice of, and to vote at, such meeting,
or to receive payment of such distribution, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed as aforesaid.
ARTICLE VIII
CUSTODIANS
The Trustees shall at all times employ one or more persons permitted to
act as custodian for assets of the Trust under applicable law as custodian with
authority as the Trust's agent, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in the Bylaws: (a) to hold
the securities owned by the Trust and deliver the same upon written order or
oral order confirmed in writing; (b) to receive and receipt for any moneys due
to the Trust and deposit the same in its own banking department or elsewhere as
the Trustees may direct; and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a person permitted to act as custodian
for assets of the Trust under applicable law.
<PAGE>
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay distributions
with respect to any Series or Class. The amount of such distributions, the
conditions to and timing of their payment and whether they are in cash or any
other Trust Property shall be wholly in the discretion of the Trustees or their
delegates.
(b) Distributions may be paid or made to Shareholders when declaredor
the Shareholders of record at such other date or time or dates or times and
subject to such conditions as the Trustees shall determine, which distributions,
at the election of the Trustees, may be paid pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such reinvestment
plans, cash payout plans or related plans with respect to distributions as the
Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock distribution pro
rata among the Shareholders of a particular Series, or Class thereof, as of the
record date of that Series or Classified as provided in Subsection 9.01(b).
SECTION 9.02 REDEMPTIONS. In case any Shareholder of a particular
Series desires to dispose of the Shareholder's Shares or any portion thereof,
the Shareholder may deposit at the office of the Transfer Agent or other
authorized agent of that Series a written request or such other form of request
as the Trustees may from time to time authorize, requesting that the Series
purchase the Shares in accordance with this Section 9.02; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the Series
or the principal underwriter of the Series shall purchase the Shares, but only
at the Net Asset Value thereof (as described in Section 5.01 of this Article IX)
reduced by the amount of any sales or other charges applicable to the Shares.
The Series shall make payment for any such Shares to be redeemed, as aforesaid,
in cash or property from the assets of that Series and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder within seven (7) days after the date upon which the request is
effective. Upon redemption, Shares shall become treasury Shares and may be
re-issued from time to time.
SECTION 9.03 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
with respect to the Trust or any Series or Class thereof as permitted under
applicable law. Such suspension shall take effect at such time as the Trustees
shall specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment until the Trustees shall declare the suspension at an
end. In the case of a suspension of the right of redemption, a Shareholder may
either withdraw his request for
<PAGE>
redemption or receive payment based on the Net Asset Value per Share next
determined after the termination of the suspension
SECTION 9.04 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has
disqualified or may disqualify any Series as a regulated investment company
under the Internal Revenue Code of 1986, as amended, then the Trustees shall
have the power (but not the obligation) by lot or other means deemed equitable
by them (a) to call for redemption by any such Person of a number, or principal
amount, of Shares sufficient to maintain or bring the direct or indirect
ownership of Shares into conformity with the requirements for such qualification
and (b) to refuse to transfer or issue Shares to any Person whose acquisition of
Shares in question would result in such disqualification. The redemption shall
be effected at the redemption price and in the manner provided in this Article
IX.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b): (i) every Person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as a "Covered Person") shall be indemnified by
the Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof; (ii) the words "claim,"
"action," "suit," or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual or threatened
while in office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to
<PAGE>
have acted in good faith in the reasonable belief that his action was in the
best interest of the Trust; or (ii) in the event of a settlement, unless there
has been a determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (x) by the court or other body approving
the settlement; (y) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(z) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a Person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) may be paid by the Trust or Series from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust or
Series if it is ultimately determined that he is not entitled to indemnification
under this Section 10.02; provided, however, that either (i) such Covered Person
shall have provided appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Covered Person will be found entitled to indemnification under Section
10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of the Shareholder being or
having been a Shareholder of such Series and not because of the Shareholder's
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or the Shareholder's heirs, executors, administrators or other
legal representatives, or, in the case of Shareholder other than an individual,
its corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Shareholder, assume the
defense of any claim made against the Shareholder for any act or obligation of
the Series and satisfy any judgment thereon from the assets of the Series.
SECTION 10.04 INSURANCE. The Trust may purchase and maintain insurance
on behalf of any Covered Person or employee of the Trust or any Shareholder,
including any Covered Person
<PAGE>
or employee of the Trust who is or was serving at the request of the Trust as a
Trustee, officer or employee of another Person, against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the Trustees would have the power to indemnify
him against such liability.
ARTICLE XI
OFFICERS
SECTION 11.01 OFFICERS AND APPOINTMENT. The officers of the Trust shall
be a Chairman of the Board of Trustees, a President, a Treasurer and a
Secretary, each to be elected by the Trustees, and such other officers as the
Trustees may from time to time elect. The Trustees may delegate to one or more
officers or committees the power to elect any subordinate officers or agents and
to prescribe their respective terms of office, authorities and duties. It shall
not be necessary for any Trustee or officer to be a holder of Shares. Two or
more offices may be held by a single person except the offices of President and
Secretary. Subject to the provisions of Section 11.04 hereof, the Chairman, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees. Each officer may receive such compensation for his
services and reimbursement for his expenses as may be fixed from time to time by
the Trustees.
(a) The Trustees shall appoint from among their number a Chairman of
the Board of Trustees. When present, the Chairman shall preside at all meetings
of the Shareholders and the Trustees, and he may appoint a Trustee to preside at
such meetings in his absence. The Chairman shall be responsible for the
execution of policies established by the Trustees and the administration of the
Trust. The Chairman shall perform such other duties as the Trustees may from
time to time designate.
(b) The President shall be the chief executive officer of the Trust
and, subject to the direction of the Trustees, shall have general administration
of the business and policies of the Trust. Except as the Trustees may otherwise
order, the President shall have the power to grant, issue, execute or sign such
powers of attorney, proxies, agreements or other documents as may be deemed
advisable or necessary in the furtherance of the interests of the Trust or any
Series. The President shall also have the power to employ attorneys, accountants
and other advisors and agents and counsel for the Trust. The President shall
perform such duties additional to all of the foregoing as the Trustees may from
time to time designate.
(c) The Treasurer shall be the principal financial and accounting
officer of the Trust. The Treasurer shall deliver all funds and securities of
the Trust which may come into his hands to such Person as the Trustees shall
employ as Custodian. The Treasurer shall make annual reports regarding the
business and condition of the Trust, which reports shall be preserved in Trust
records, and he shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees may from time to
time designate.
<PAGE>
(d) The Secretary shall record in books kept for the purpose all votes
and proceedings of the Trustees and the Shareholders at their respective
meetings. The Secretary shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
(e) Any Vice President of the Trust shall perform such duties as the
Trustees or the President may from time to time designate. At the request or in
the absence or disability of the President, the Vice President (or, if there are
two or more Vice Presidents, then the senior of the Vice Presidents present and
able to act) may perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
(f) Any Assistant Treasurer of the Trust shall perform such duties as
the Trustees or the Treasurer may from time to time designate, and, in the
absence of the Treasurer, the senior Assistant Treasurer, present and able to
act, may perform all the duties of the Treasurer.
(g) Any Assistant Secretary of the Trust shall perform such duties as
the Trustees or the Secretary may from time to time designate, and, in the
absence of the Secretary, the senior Assistant Secretary, present and able to
act, may perform all the duties of the Secretary.
(h) The Trustees from time to time may appoint such officers or agents
as they may deem advisable, each of whom shall have such title, hold office for
such period, have such authority and perform such duties as the Trustees may
determine.
SECTION 11.02 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 11.01 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
SECTION 11.03 SURETY BONDS. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by applicable law) to the Trust in such sum and with such surety or
sureties as the Trustees may determine, conditioned upon the faithful
performance of his duties to the Trust including responsibility for negligence
and for the accounting of any of the Trust's property, funds or securities that
may come into his hands.
SECTION 11.04 REMOVAL. Any officer may be removed from office by the
Trustees whenever in the judgment of the Trustees the best interest of the Trust
will be served thereby. In addition, any officer or agent appointed in
accordance with the provisions of Subsection 11.01(h) may be removed, either
with or without cause, by any officer upon whom such power of removal shall have
been conferred by the Trustees.
<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a business trust and not a partnership is created hereby.
SECTION 12.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing
shall be binding. Subject to the provisions of Article X hereof, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Trust Instrument or any other matter, and subject to the
provisions of Article X hereof shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 12.03 REORGANIZATION. Notwithstanding anything else herein, the
Trustees may, without Shareholder approval, unless such approval is required by
applicable law, (i) cause the Trust or any Series to merge or consolidate with
or into one or more entities, if the surviving or resulting entity is the Trust
or another company registered as an open-end, management investment company
under the 1940 Act, or a series thereof, (ii) cause any or all Shares to be
exchanged under or pursuant to any state of federal statute to the extent
permitted by law or (iii) cause the Trust to incorporate or organize under the
laws of any state, commonwealth, territory, dependency, colony or possession of
the United States of America or in any foreign jurisdiction.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 12.03 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 12.04 TERMINATION OF TRUST OR SERIES.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsections 12.04(b) and (c).
(b) The Trustees may at any time, in contemplation of the termination
of the Trust or of a Series, subject to a vote of a majority of the Outstanding
Shares of each Series affected by the matter or, if applicable, to a vote of a
majority of the Outstanding Shares of the Trust: (i) sell and convey all or any
portion of the assets of the Trust or the affected Series to another trust,
partnership, association or corporation, or to a separate series of shares
thereof, organized under the laws of any jurisdiction, for adequate
consideration which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust of any affected
Series, and which may include shares of beneficial interest, stock or other
ownership
<PAGE>
interest of such trust, partnership, association or corporation or of a series
thereof; or (ii) sell and convert into money all or any portion of the assets of
the Trust or the affected Series.
Upon paying or making reasonable provision for the payment of all known
liabilities of all Series or any affected Series in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) ratably among the Shareholders of all Series or the
affected Series subject to Section 2.08 and the preferences, rights and
privileges of each Class of the Series.
(c) The Trustees may take any of the actions specified in subsection
(b) above without approval of the Shareholders of the Trust or any affected
Series if the Trustees, in their sole discretion, determine that the
continuation of the Trust or the Series is not in the best interests of the
Trust, the Series, or their respective Shareholders. In reaching such
determination, the Trustees may consider any factors the Trustees, in their sole
discretion, deem to be appropriate.
(d) At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Trustees may abolish
that Series and the establishment and designation thereof.
(e) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsections 12.04(b) or (c), the Trust or
any affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged. Upon termination of the Trust, following
completion of winding up of its business, the Trustees shall cause a certificate
of cancellation of the Trust's certificate of trust to be filed in accordance
with the Delaware Act, which certificate of cancellation may be signed by any
one Trustee.
SECTION 12.05 DERIVATIVE ACTIONS. Except as required under applicable
law, no derivative action may be brought by Shareholders unless Shareholders
owning not less than one third of the outstanding Share of all Series of the
Trust, or of the affected Series or Classes of the Trust, as the case may be,
join in the bringing of the derivative action.
SECTION 12.06 PARTIES TO CONTRACT. Any contract of the character
described in Sections 6.01 or 6.02 or any contract of the character described in
Article VIII and any other contract may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, shareholder, or member of such other Person, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any Person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any Person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Trust document. The same Person may be
the other party to one or more
<PAGE>
contracts entered into by the Trust and any Person may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts entered into by the Trust.
SECTION 12.07 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof' and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his," "he" and "him," shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
SECTION 12.08 GOVERNING LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
<PAGE>
SECTION 12.09 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII, (b) on any amendment to this Section 12.08, (c) on any
amendment as may be required by law and (d) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series or Classes thereof shall be authorized by vote of the
Shareholders of each Series or Class affected and no vote of shareholders of a
Series or Class not affected shall be required. Notwithstanding anything else
herein, any amendment to Article X hereof shall not limit the rights to
indemnification or insurance provided therein with respect to action or omission
of Covered Persons prior to such amendment.
SECTION 12.10 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as determined from time to time by the Trustees.
SECTION 12.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine that any of
such provisions is in conflict with any applicable law or regulation, the
conflicting provision shall be deemed never to have constituted a part of this
Trust Instrument; provided, however, that such determination shall not affect
any of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any matter affect such
provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
SECTION 12.12 EXECUTION VIA FACSIMILE. Execution and delivery of any
consent, waiver, certificate, proxy or other document by Trustees, officers or
Shareholders of the Trust or parties contracting with the Trust may be
accomplished by facsimile or other similar electronic mechanism.
SECTION 12.13 PRINCIPAL OFFICE. The principal office of the Trust shall
be located in Portland, Maine, or such other location as the Trustees may from
time to time determine.
SECTION 12.14 INSPECTION OF BOOKS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of Shareholders; and no Shareholder shall
have any right to inspect any account or book or document of the Trust except as
conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
SECTION 12.15 SEAL. The seal of the Trust shall be circular in form bearing
the inscription: "Memorial Funds" -- 1997 --THE STATE OF DELAWARE.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of date first written above.
/S/ MAX BERUEFFY
Max Berueffy, as Trustee
and not individually
/S/ CHERYL O. TUMLIN
Cheryl O. Tumlin, as Trustee
and not individually
/S/ REBECCA HACKMANN
Rebecca Hackmann, as Trustee
and not individually
<PAGE>
ANNEX A
As of November 25, 1997
<TABLE>
<S> <C> <C>
SERIES CLASS THEREOF DATE CREATED
- ------ ------------ ------------
Government Bond Fund Trust Shares November 25, 1997
Institutional Shares November 25, 1997
Corporate Bond Fund Trust Shares November 25, 1997
Institutional Shares November 25, 1997
Growth Equity Fund Trust Shares November 25, 1997
Institutional Shares November 25, 1997
Value Equity Fund Trust Shares November 25, 1997
Institutional Shares November 25, 1997
</TABLE>
CHARACTERISTICS AND RIGHTS
[DESCRIPTION]
<PAGE>
EXHIBIT (5)(A)
<PAGE>
FORM OF
MEMORIAL FUNDS
INVESTMENT ADVISORY AGREEMENT
WITH
FORUM INVESTMENT ADVISORS, LLC
AGREEMENT made the __ day of ___________ 1998, between Memorial Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Forum Investment Advisors, LLC (the "Adviser "), a limited
liability corporation organized under the laws of the State of Delaware with its
principal place of business at Two Portland Square, Portland, Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end management investment company and
is authorized to issue its shares in separate series and classes;
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for the investment portfolios of the Trust listed on Schedule A hereto
(the "Funds"), each a separate series of the Trust, and the Adviser is willing
to provide those services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. APPOINTMENT AND DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints Adviser as investment adviser for the
Funds for the period and on the terms set forth in this Agreement. Adviser
accepts this appointment and agrees to render its services as investment adviser
for the compensation set forth herein.
(b) The Trust has delivered copies of each of the following documents
and will from time to time furnish Adviser with any supplements or amendments to
such documents:
(i) the Trust Instrument of the Trust, as filed with the
Secretary of State of the State of Delaware, as in effect on the date hereof and
as amended from time to time ("Trust Instrument");
(ii) the Bylaws of the Trust as in effect on the date
hereof and as amended from time to time ("Bylaws");
(iii) the Registration Statement under the Act and, if
applicable, the Securities Act of 1933 (the "Securities Act"), as filed with the
Securities and Exchange Commission (the
<PAGE>
"Commission"), relating to the Fund and its shares and all amendments thereto
("Registration Statement");
(iv) the prospectus and statement of additional information
relating to the Fund ("Prospectus"); and,
(v) all proxy statements, reports to shareholders, advertising
or other materials prepared for distribution to shareholders of the Fund or the
public, that refer to Adviser or its clients.
The Trust shall furnish Adviser with any further documents, materials
or information that Adviser may reasonably request to enable it to perform its
duties pursuant to this Agreement.
SECTION 2. DUTIES OF THE ADVISER
(a) The Adviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Funds. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, and in the name of the Trust, to place orders and
issue instructions with respect to those transactions of the Funds. In all
purchases, sales and other transactions in securities for the Funds, the Adviser
is authorized to exercise full discretion and act for the Trust in the same
manner and with the same force and effect as the Trust might or could do with
respect to such purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(b) The Adviser will report to the Board at each meeting thereof all
changes in the Funds since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Funds and the
Adviser, and on its own initiative, will furnish the Board from time to time
with such information as the Adviser may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in the
Funds' holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Funds maintain
investments. The Adviser will also furnish the Board with such statistical and
analytical information with respect to securities in the Funds as the Adviser
may believe appropriate or as the Board reasonably may request.
(c) In making purchases and sales of securities for the Funds, and
otherwise performing its duties hereunder, the Adviser will comply with the Act
and the rules and regulations thereunder, all other applicable Federal and state
laws and regulations, the policies set from time to time by the Board as well as
the limitations imposed by the Trust's Trust Instrument, Bylaws, Registration
Statement under the Act and the Securities Act, the limitations in the Act and
in the Internal Revenue Code of 1986, as amended, in respect of regulated
investment companies and the investment objectives, policies and restrictions of
the Funds. Without limiting the foregoing, Sub-Adviser agrees that, in placing
orders with broker-dealers for the purchase or sales of portfolio securities, it
shall attempt to obtain quality execution at favorable security prices; provided
that, consistent with section 28(e) of the Securities and
<PAGE>
Exchange Act, the exercise of the Adviser's fiduciary duties under its
Investment Advisory agreement with the Trust, and any other applicable law, the
Adviser may allocate brokerage on behalf of the Trust to broker-dealers who
provide research services and may cause the Fund to pay these broker-dealers a
higher amount of commission than may be charged by other broker-dealers.
(d) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(e) The Adviser shall maintain records relating to Fund transactions
and the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act and the rules and regulations thereunder.
The Adviser shall prepare and maintain, or cause to be prepared and maintained,
in such form, for such periods and in such locations as may be required by
applicable law, all documents and records relating to the services provided by
the Adviser pursuant to this Agreement required to be prepared and maintained by
the Trust pursuant to the Act and the rules and regulations thereunder, the
rules and regulations of any national, state, or local government entity with
jurisdiction over the Trust, including the Commission and the Internal Revenue
Service. The books and records pertaining to the Trust which are in possession
of the Adviser shall be the property of the Trust. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at all
times during the Adviser's normal business hours. Upon the reasonable request of
the Trust, copies of any such books and records shall be provided promptly by
the Adviser to the Trust or the Trust's authorized representatives.
(f) The Adviser shall provide the Funds' custodian and fund accountant
on each business day with information relating to all transactions concerning
the Funds' assets.
(g) The Adviser shall authorize and permit any of its Trustees,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
SECTION 3. EXPENSES
(a) The Adviser shall waive its fee to ensure that the Funds' expense
ratios do not exceed any expense limit described in the prospectus or applicable
to the Funds under the laws or regulations of any state in which shares of the
Funds are qualified for sale (reduced pro rata for any portion of less than a
year).
(b) If the Funds' expense ratio exceeds the expense limits described in
subsection (a) above after the Adviser has waived its fees, the Adviser shall be
responsible for that portion of the net expenses of the Funds that exceed any
expense limit described in the prospectus and the net expenses of the Funds
(except interest, taxes, brokerage, fees and other expenses paid by the Funds in
accordance with an effective plan pursuant to Rule 12b-1 under the Act and
organization expenses, all to the extent such exceptions are permitted by
applicable state law and
<PAGE>
regulation) incurred by the Funds during each of the Funds' fiscal years or
portion thereof that this Agreement is in effect which, as to the Funds, in any
such year exceeds any expense limits applicable to the Funds under the laws or
regulations of any state in which shares of the Funds are qualified for sale
(reduced pro rata for any portion of less than a year).
(c) The Trust hereby confirms that, subject to the foregoing, the Trust
shall be responsible and shall assume the obligation for payment of all the
Trust's other expenses, including: (i) interest charges, taxes, brokerage fees
and commissions; (ii) certain insurance premiums; (iii) fees, interest charges
and expenses of the Trust's custodian, transfer agent and dividend disbursing
agent; (iv) telecommunications expenses; (v) the fees and expenses of the
Trust's independent auditors and of the outside legal counsel appointed by the
Board; (vi) costs of the Trust's formation and maintaining its existence; (vii)
costs of preparing and printing the Trust's prospectuses, statements of
additional information, account application forms and shareholder reports and
delivering them to existing and prospective shareholders; (viii) costs of
maintaining books of original entry for portfolio and fund accounting and other
required books and accounts and of calculating the net asset value of shares of
the Trust; (ix) costs of reproduction, stationery and supplies; (x) compensation
of the Trust's Trustees, officers, employees and other personnel performing
services for the Trust who are not officers of the Adviser, of Forum Financial
Services, Inc. or of affiliated persons of either; (xi) costs of corporate
meetings; (xii) registration fees and related expenses for registration with the
Commission and the securities regulatory authorities of other countries in which
the Trust's shares are sold; (xiii) state securities law registration fees and
related expenses; (xiv) the fee payable hereunder and fees and out-of-pocket
expenses payable to Forum Financial Services, Inc. under any distribution,
management or similar agreement; (xv) and all other fees and expenses paid by
the Trust pursuant to any distribution or shareholder service plan adopted
pursuant to Rule 12b-1 under the Act or otherwise.
SECTION 4. STANDARD OF CARE
The Trust shall expect of the Adviser, and the Adviser will give the
Trust the benefit of, the Adviser's best judgment and efforts in rendering its
services to the Trust, and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, breach of fiduciary
duty, willful misfeasance, bad faith or gross negligence in the performance of
the Adviser's duties hereunder, or by reason of the Adviser's reckless disregard
of its obligations and duties hereunder and except as otherwise provided by law.
SECTION 5. COMPENSATION
In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to each of the Funds, a fee at an annual rate as listed in Appendix
A hereto. These fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. The Adviser's
reimbursement, if any, of the Funds' expenses as provided in Section 4 hereof,
shall be estimated
<PAGE>
and accrued daily and paid to the Trust monthly in arrears, at the same time as
the Trust's payment to the Adviser for such month.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) With respect to the Funds, this Agreement shall become effective
immediately upon approval by a majority of the Trust's Trustees, including a
majority of the Trustees who are not interested persons of the Trust.
(b) This Agreement shall remain in effect for a period of twenty four
months from the date of its effectiveness and shall continue in effect for
successive twelve-month periods (computed from each anniversary date of
approval) or for such shorter period as may be specified by the Board in giving
its approval as provided below; provided that such continuance is specifically
approved at least annually (i) by the Board or by the vote of a majority of the
outstanding voting securities of the Funds, and, in either case, (ii) by a
majority of the Trust's Trustees who are not parties to this Agreement or
interested persons of any such party (other than as Trustees of the Trust);
provided further, however, that if this Agreement or the continuation of this
Agreement is not approved, the Adviser may continue to render the services
described herein in the manner and to the extent permitted by the Act and the
rules and regulations thereunder. The annual approvals provided for herein shall
be effective to continue this Agreement from year to year (or such shorter
period referred to above) if given within a period beginning not more than sixty
(60) days prior to such anniversary, notwithstanding the fact that more than
three hundred sixty-five (365) days may have elapsed since the date on which
such approval was last given.
(c) This Agreement may be terminated at any time, without the payment
of any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Funds on 30 days' written notice to the Adviser or (ii)
by the Adviser on 90 days' written notice to the Trust, with copies to each of
the Trust's Trustees at their respective addresses set forth in the Trust's
Registration Statement or at such other address as such persons may specify to
the Adviser and to legal counsel to the Trust. This agreement shall terminate
automatically and immediately upon assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors, trustees or employees who may
also be a Trustee, officer or employee of the Trust, or persons otherwise
affiliated with the Trust, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, trust, firm, individual or association.
<PAGE>
SECTION 8. SUB-ADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the Adviser's supervision, one or
more persons who are registered as investment advisers pursuant to the
Investment Advisers Act of 1940, as amended, or who are exempt from registration
thereunder ("Sub-advisers"). Each Sub-adviser's employment will be evidenced by
a separate written agreement approved by the Board and, if required, by the
shareholders of the applicable Fund.
SECTION 9. NOTICES
Any notice or other communication required to be given pursuant to this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:
Memorial Funds
Two Portland Square
Portland, ME 04101
Attn: Secretary
and if to the Adviser, at:
Forum Investment Advisors, LLC
Two Portland Square
Portland, ME 04101
Attn: ___________
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interest holders of each Fund shall
not be liable for any obligations of the Trust or of the Funds under this
Agreement, and the Adviser agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Fund to which the Adviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the interest holders
of the Funds.
SECTION 11. MISCELLANEOUS
(a) No provision of this Agreement with respect to any of the Funds may
be amended or modified in any manner except by a written agreement properly
authorized and executed by both parties hereto and, if required by the Act, by a
vote of a majority of the outstanding voting securities of the Funds.
(b) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
<PAGE>
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(d) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MEMORIAL FUNDS
------------------------
[Name]
[Title]
FORUM INVESTMENT ADVISORS, LLC
------------------------
[Name]
Managing Director
<PAGE>
MEMORIAL FUNDS
ADVISORY AGREEMENT WITH FORUM INVESTMENT ADVISORS, LLC
SCHEDULE A
AS OF ____________
Fee as a % of the
Annual Average Daily Net Assets
FUNDS OF THE TRUST of the Fund
Government Bond Fund
Corporate Bond Fund
Growth Equity Fund
Value Equity Fund
<PAGE>
EXHIBIT (6)(A)
<PAGE>
FORM OF
MEMORIAL FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____________ day of ______________, 199__, by
and between Memorial Funds, a Delaware business trust, with its principal office
and place of business at [Address] (the "[Trust]"), and Forum Financial
Services, Inc., a Delaware corporation with its principal office and place of
business at Two Portland Square, Portland, Maine 04101 ("Distributor").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company and
may issue its [shares of beneficial interest, no par value] ("Shares") in
separate series and classes; and
WHEREAS, the Distributor is registered under the Securities Exchange
Act of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly to
purchasers or through other financial intermediaries;
WHEREAS, the Trust [intends to offer][offers] shares in various series
as listed in Appendix A hereto (each such series, together with all other series
subsequently established by the Trust and made subject to this Agreement being
herein referred to as a "Fund," and collectively as the "Funds") [and the Trust
[may in the future offer][intends to offer][offers] shares of various classes of
each Fund as listed in Appendix A hereto (each such class together with all
other classes subsequently established by the Trust in a Fund being herein
referred to as a "Class," and collectively as the "Classes")]; and
WHEREAS, the Trust desires that the Distributor offer, as principal
underwriter, the Shares of each Fund and Class thereof to the public and the
Distributor is willing to provide those services on the terms and conditions set
forth in this Agreement in order to promote the growth of the Funds and
facilitate the distribution of the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Distributor do hereby agree as
follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints the Distributor, and the Distributor
hereby agrees, to act as distributor of the Shares for the period and on the
terms set forth in this Agreement.
(b) In connection therewith, the Trust has delivered to the Distributor
copies of (i) the Trust's [Articles of Incorporation][Trust
Instrument][Declaration of Trust] and Bylaws (collectively, as amended from time
to time, "Organic Documents"), (ii) the Trust's Registration
<PAGE>
Statement and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended
("Securities Act"), or the 1940 Act ("Registration Statement"), (iii) the
current prospectuses and statements of additional information of each Fund and
Class thereof (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), (iv) each current plan of distribution or
similar document adopted by the Trust under Rule 12b-1 under the 1940 Act
("Plan") and each current shareholder service plan or similar document adopted
by the Trust ("Service Plan"); and (iv) all procedures adopted by the Trust with
respect to the Funds (e.g., repurchase agreement procedures), and shall promptly
furnish the Distributor with all amendments of or supplements to the foregoing.
The Trust shall deliver to Forum a certified copy of the resolution of the Board
of [Trustees][Directors] of the Trust (the "Board") appointing Forum and
authorizing the execution and delivery of this Agreement.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Trust to
act distributor of the Funds except that the rights given under this Agreement
to the Distributor shall not apply to: (i) Shares issued in connection with the
merger, consolidation or reorganization of any other investment company or
series or class thereof with a Fund or Class thereof; (ii) a Fund's acquisition
by purchase or otherwise of all or substantially all of the assets or stock of
any other investment company or series or class thereof; (iii) the reinvestment
in Shares by a Fund's shareholders of dividends or other distributions; or (iv)
any other offering by the Trust of securities to its shareholders (collectively
"exempt transactions").
SECTION 3. OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Trust the
Shares needed to fill unconditional orders for unsold Shares of the Funds as
shall then be effectively registered under the Securities Act placed with the
Distributor by investors or selected dealers or selected agents (each as defined
in Section 11 hereof) acting as agent for their customers or on their own
behalf. Alternatively, the Distributor may act as the Trust's agent, to offer,
and to solicit offers to subscribe to, unsold Shares of the Funds as shall then
be effectively registered under the Securities Act. The Distributor will
promptly forward all orders and subscriptions to the Trust. The price that the
Distributor shall pay for Shares purchased from the Trust shall be the net asset
value per Share, determined as set forth in Section 3(c) hereof, used in
determining the public offering price on which the orders are based. Shares
purchased by the Distributor are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(b) hereof, or to selected
dealers or selected agents acting as agent for their customers that have entered
into agreements with the Distributor pursuant to Section 11 hereof or acting on
their own behalf. The Trust reserves the right to sell Shares directly to
investors through subscriptions received by the Trust, but no such direct sales
shall affect the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of a Fund, i.e., the price
per Share at which the Distributor or selected dealers or selected agents may
sell Shares to the public or to those
<PAGE>
persons eligible to invest in Shares as described in the applicable Prospectus,
shall be the public offering price determined in accordance with the then
currently effective Prospectus of the Fund or Class thereof under the Securities
Act relating to such Shares. The public offering price shall not exceed the net
asset value at which the Distributor, when acting as principal, is to purchase
such Shares, plus, in the case of Shares for which an initial sales charge is
assessed, an initial charge equal to a specified percentage or percentages of
the public offering price of the Shares as set forth in the current Prospectus
relating to the Shares. In the case of Shares for which an initial sales charge
may be assessed, Shares may be sold to certain classes of persons at reduced
sales charges or without any sales charge as from time to time set forth in the
current Prospectus relating to the Shares. The Trust will advise the Distributor
of the net asset value per Share at each time as the net asset value per Share
shall have been determined by the Trust and at such other times as the
Distributor may reasonably request.
(c) The net asset value per Share of each Fund or Class thereof shall
be determined by the Trust, or its designated agent, in accordance with and at
the times indicated in the applicable Prospectus on each Fund business day in
accordance with the method set forth in the Prospectus and guidelines
established by the Trust's Board of Trustees (the "Board").
(d) The Trust reserves the right to suspend the offering of Shares of a
Fund or of any Class thereof at any time in the absolute discretion of the
Board, and upon notice of such suspension the Distributor shall cease to offer
Shares of the Funds or Classes thereof specified in the notice.
(e) The Trust, or any agent of the Trust designated in writing to the
Distributor by the Trust, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Trust for
acceptance and shall not be binding until accepted by the Trust. Any order or
subscription may be rejected by the Trust; provided, however, that the Trust
will not arbitrarily or without reasonable cause refuse to accept or confirm
orders or subscriptions for the purchase of Shares. The Trust or its designated
agent will confirm orders and subscriptions upon their receipt, will make
appropriate book entries and, upon receipt by the Trust or its designated agent
of payment thereof, will issue such Shares in certificated or uncertificated
form pursuant to the instructions of the Distributor. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Trust
or its designated agent.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES BY THE TRUST
(a) Any of the outstanding Shares of a Fund or Class thereof may be
tendered for redemption at any time, and the Trust agrees to redeem or
repurchase the Shares so tendered in accordance with its obligations as set
forth in the Organic Documents and the Prospectus relating to the Shares. The
price to be paid to redeem or repurchase the Shares of a Fund of Class thereof
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(b) hereof less, in the case of Shares for which a
deferred sales charge is assessed, a deferred sales charge equal to a specified
percentage or percentages of the net asset value of those Shares as from time to
time set forth in the Prospectus relating to those Shares [or their cost,
whichever is
<PAGE>
less.] Shares of a Fund or Class thereof for which a deferred sales charge may
be assessed and that have been outstanding for a specified period of time may be
redeemed without payment of a deferred sales charge as from time to time set
forth in the Prospectus relating to those Shares.
(b) The Trust or its designated agent shall pay (i) the total amount of
the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii) except
as may be otherwise required by the Rules of Fair Practice (the "Rules") of the
National Association of Securities Dealers Regulation, Inc. (the "NASD") and any
interpretations thereof, any applicable deferred sales charges to the
Distributor in accordance with the Distributor's instructions on or before the
fifth business day (or such other earlier business day as is customary in the
investment company industry) subsequent to the Trust or its agent having
received the notice of redemption in proper form.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings, when trading thereon is restricted, when
an emergency exists as a result of which disposal by the Trust of securities
owned by a Fund is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of a Fund's net assets,
or during any other period when the SEC so requires or permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Funds upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Trust hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.
(b) In selling Shares of the Funds, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Trust to give any information or to make any representations
other than as is contained in a Fund's Prospectus or any advertising materials
or sales literature specifically approved in writing by the Trust or its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents, the
collection of amounts payable by investors and selected dealers or selected
agents on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD.
<PAGE>
(d) The Distributor represents and warrants to the Trust that:
(i) It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its Articles of
Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Distributor, enforceable
against the Distributor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
secured parties;
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify the
Trust if its membership in the NASD is terminated or suspended; and
(vii) The performance by the Distributor of its obligations hereunder
does not and will not contravene any provision of its Articles of
Incorporation.
(e) Notwithstanding anything in this Agreement, including the
Appendices, to the contrary, the Distributor makes no warranty or representation
as to the number of selected dealers or selected agents with which it has
entered into agreements in accordance with Section 11 hereof, as to the
availability of any Shares to be sold through any selected dealer, selected
agent or other intermediary or as to any other matter not specifically set forth
herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE TRUST
(a) The Trust shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other papers
or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Trust shall make available to
the Distributor the number of copies of the Funds' Prospectuses as the
Distributor shall reasonably request.
<PAGE>
(b) The Trust shall take, from time to time, subject to the approval of
the Board and any required approval of the shareholders of the Trust, all action
necessary to fix the number of authorized Shares (if such number is not limited)
and to register the Shares under the Securities Act, to the end that there will
be available for sale the number of Shares as reasonably may be expected to be
sold pursuant to this Agreement.
(c) The Trust shall execute any and all documents, furnish to the
Distributor any and all information, otherwise use its best efforts to take all
actions that may be reasonably necessary and cooperate with the Distributor in
taking any action as may be necessary to register or qualify Shares for sale
under the securities laws of the various states of the United States and other
jurisdictions ("States") as the Distributor shall designate (subject to approval
by the Trust); provided that the Distributor shall not be required to register
as a broker-dealer or file a consent to service of process in any State and
neither the Trust nor any Fund or Class thereof shall be required to qualify as
a foreign corporation, trust or association in any State. Any registration or
qualification may be withheld, terminated or withdrawn by the Trust at any time
in its discretion. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Trust
in connection with such registration or qualification.
(d) The Trust represents and warrants to the Distributor that:
(i) It is a [business trust] duly organized and existing and in
good standing under the laws of the [State of Delaware];
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have been taken
to authorize it to enter into and perform its duties under this
Agreement;
(iv) It is an open-end management investment company registered with
the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Trust, enforceable against
the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties;
(vii) The performance by the Distributor of its obligations hereunder
does not and will not contravene any provision of its Articles of
Incorporation.
(viii) The Registration statement [is currently][will be] effective and
will remain effective with respect to all Shares of the Funds and
Classes thereof being offered for sale;
<PAGE>
(ix) The Registration Statement and Prospectuses have been or will be,
as the case may be, carefully prepared in conformity with the
requirements of the Securities Act and the rules and regulations
thereunder;
(x) The Registration Statement and Prospectuses contain or will contain
all statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder; all statements
of fact contained or to be contained in the Registration Statement or
Prospectuses are or will be true and correct at the time indicated or
on the effective date as the case may be; and neither the Registration
Statement nor any Prospectus, when they shall become effective or be
authorized for use, will include an 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 to a purchaser
of Shares;
(xi) It will from time to time file such amendment or amendments to the
Registration Statement and Prospectuses as, in the light of
then-current and then-prospective developments, shall, in the opinion
of its counsel, be necessary in order to have the Registration
Statement and Prospectuses at all times contain all material facts
required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to the Registration Statement or
Prospectuses without giving the Distributor reasonable advance notice
thereof; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such
amendments to the Registration Statement or Prospectuses, of whatever
character, as the Trust may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) Any amendment to the Registration Statement or Prospectuses
hereafter filed will, when it becomes effective, contain all statements
required to be stated therein in accordance with the 1940 Act and the
rules and regulations thereunder; all statements of fact contained in
the Registration Statement or Prospectuses will, when be true and
correct at the time indicated or on the effective date as the case may
be; and no such amendment, when it becomes effective, will include an
untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and reasonable efforts
in rendering services to the Trust under this Agreement but shall be under no
duty to take any action except as specifically set forth herein or as may be
specifically agreed to by the Distributor in writing. The Distributor shall not
be liable to the Trust or any of the Trust's shareholders for any error of
judgment or mistake of law, for any loss arising out of any investment, or for
any action or
<PAGE>
inaction of the Distributor in the absence of bad faith, willful misfeasance or
[gross] negligence in the performance of the Distributor's duties or obligations
under this Agreement or by reason or the Distributor's reckless disregard of its
duties and obligations under this Agreement
(b) The Distributor shall not be liable for any action taken or failure
to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel
to the Trust or counsel to the Distributor;
(ii) any oral instruction which it receives and which it reasonably
believes in good faith was transmitted by the person or persons
authorized by the Board to give such oral instruction (the Distributor
shall have no duty or obligation to make any inquiry or effort of
certification of such oral instruction);
(iii) any written instruction or certified copy of any resolution of
the Board, and the Distributor may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by the
Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
the Distributor to be genuine and to have been signed or presented by
the Trust or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply. In addition, to the extent the
Distributor's obligations hereunder are to oversee or monitor the activities of
third parties, the Distributor shall not be liable for any failure or delay in
the performance of the Distributor's duties caused, directly or indirectly, by
the failure or delay of such third parties in performing their respective duties
or cooperating reasonably and in a timely manner with the Distributor.
SECTION 8. INDEMNIFICATION
(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section
<PAGE>
15 of the Securities Act or section 20 of the 1934 Act ("Distributor
Indemnitees") free and harmless from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims, demands, actions,
suits or liabilities and any reasonable counsel fees incurred in connection
therewith) which any Distributor Indemnitee may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectuses or arising out of or based upon any alleged omission to state a
material fact required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, unless such statement or omission
was made in reliance upon, and in conformity with, information furnished in
writing to the Trust in connection with the preparation of the Registration
Statement or exhibits to the Registration Statement by or on behalf of the
Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Trust shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested amendment to the
Registration Statement and for which the Trust has not filed a Required
Amendment, regardless of with respect to such matters whether any statement in
or omission from the Registration Statement was made in reliance upon, or in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Trust
and approved by the Distributor, which approval shall not be withheld
unreasonably. The Trust shall advise the Distributor that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Trust assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Trust does not assume the defense of
any such suit, or if Distributor does not approve of counsel chosen by the Trust
or has been advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust will
reimburse any Distributor Indemnitee named as defendant in such suit for the
reasonable fees and expenses of any counsel that person retains. A Distributor
Indemnitee shall not settle or confess any claim without the prior written
consent of the Trust, which consent shall not be unreasonably withheld or
delayed.
(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
<PAGE>
(i) any alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus or any alleged omission of a
material fact required to be stated or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust in writing in connection with the preparation of the Registration
Statement or Prospectus by or on behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement ("Trust Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Trust Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Trust, which approval shall not be withheld
unreasonably. The Distributor shall advise the Trust that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if Trust does not approve of counsel chosen by the
Distributor or has been advised that it may have available defenses or claims
that are not available to or conflict with those available to the Distributor,
the Distributor will reimburse any Trust Indemnitee named as defendant in such
suit for the reasonable fees and expenses of any counsel that person retains. A
Trust Indemnitee shall not settle or confess any claim without the prior written
consent of the Distributor, which consent shall not be unreasonably withheld or
delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Trust Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first legal
process is served. Such notice shall refer to the person or persons against whom
the action is brought. The failure to provide such notice shall not relieve the
party entitled to such notice of any liability that it may have to any
Distributor Indemnitee or Trust Indemnitee except to the extent that the ability
of the party entitled to such notice to defend such action has been materially
adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Trust Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Trust Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).
<PAGE>
(g) Each party agrees promptly to notify the other party of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares.
(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organic Documents or any applicable statute or
regulation or shall require the Distributor to take any action contrary to any
provision of its Articles of Incorporation or Bylaws or any applicable statute
or regulation; provided, however, that neither the Trust nor the Distributor may
amend their Organic Documents or Articles of Incorporation and Bylaws,
respectively, in any manner that would result in a violation of a representation
or warranty made in this Agreement.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or its security holders to which
the Distributor would otherwise be subject by reason of its failure to satisfy
the standard of care set forth in Section 7 of this Agreement.
SECTION 9. NOTIFICATION BY THE TRUST
The Trust shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Trust's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Trust's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Trust's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Trust's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with
the distribution of Shares of each Fund and Class thereof, the Distributor shall
receive: (i) any applicable sales charge assessed upon investors in connection
with the purchase of Shares; (ii) from the Trust, any applicable contingent
deferred sales charge ("CDSC") assessed upon investors in connection with the
redemption of Shares; (iii) from the Trust, the [distribution service fees] with
respect to the Shares of those Classes as designated in Appendix A for which a
Plan is effective (the "Distribution Fee"); and (iv) from the Trust, the
[shareholder service fees] with respect to the Shares of those Classes as
designated in Appendix A for which a Service Plan is effective (the "Shareholder
Service Fee"). The Distribution Fee and Shareholder Service Fee shall be accrued
daily by each applicable Fund or Class thereof and shall be paid monthly as
promptly as possible after the last day of each calendar month but in any event
on or before the fifth (5th) Fund business day after month-end, at the rate or
in the amounts set forth in Appendix A [and, as applicable, the Plan(s)]. The
Trust grants and transfers to the Distributor a general lien and
<PAGE>
security interest in any and all securities and other assets of a Fund now or
hereafter maintained in an account at the Fund's custodian on behalf of the Fund
to secure any Distribution Fees and Shareholder Service Fees owed the
Distributor by the Trust under this Agreement.
(b) The Trust shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Funds and
the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after the settlement date for each redemption of Shares.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall
be entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement. [The Distributor may
receive compensation from [NAME OF INVESTMENT ADVISER]("Adviser") for its
services hereunder or for additional services all as may be agreed to between
the Adviser and the Distributor. Notwithstanding anything in this Agreement to
the contrary, to the extent the Distributor receives compensation from the
Adviser that is disclosed to the Board, the Trust will indemnify, defend and
hold each Distributor Indemnitees free and harmless from and against any and all
claims, demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such claims,
demands, actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) related in any way to such payment.]
(d) The Trust shall be responsible and assumes the obligation for
payment of all the expenses of the Funds, including fees and disbursements of
its counsel and auditors, in connection with the preparation and filing of the
Registration Statement and Prospectuses (including but not limited to the
expense of setting in type the Registration Statement and Prospectuses and
printing sufficient quantities for internal compliance, regulatory purposes and
for distribution to current shareholders).
(e) The Trust shall bear the cost and expenses (i) of the registration
of the Shares for sale under the Securities Act; (ii) of the registration or
qualification of the Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Trust, the Funds or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Trust and the Distributor pursuant to Section 6(c) hereof; and (iv) payable to
each State for continuing registration or qualification therein until the Trust
decides to discontinue registration or qualification pursuant to Section 6(c)
hereof. The Distributor shall pay all expenses relating to the Distributor's
broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") and
selected agent agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the sale of
<PAGE>
Shares and to fix therein the portion of the sales charge, if any, that may be
allocated to the selected dealers or selected agents; provided, that the Trust
shall approve the forms of agreements with selected dealers or selected agents
and shall review the compensation set forth therein. Shares of each Fund or
Class thereof shall be resold by selected dealers or selected agents only at the
public offering price(s) set forth in the Prospectus relating to the Shares.
Within the United States, the Distributor shall offer and sell Shares of the
Funds only to such selected dealers as are members in good standing of the NASD.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information
related to the Trust as proprietary information of the Trust and, on behalf of
itself and its employees, to keep confidential all such information, except that
the Distributor may:
(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(iii) release such other information as approved in writing by the
Trust, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Trust without the consent of the Trust if the Distributor reasonably
believes that it may be exposed to civil or criminal legal proceedings for
failure to comply, when requested to release any information by duly constituted
authorities or when so requested by the Trust.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each Fund on
the later of (i) the date first above written or (ii) the date on which the
Trust's Registration Statement relating to Shares of the Fund becomes effective.
Upon effectiveness of this Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter hereof insofar as such
Agreement may have been deemed to relate to the Funds.
(b) This Agreement shall continue in effect with respect to a Fund for
a period of one year from its effectiveness and thereafter shall continue in
effect with respect to a Fund until terminated; provided, that continuance is
specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and (ii) by a vote of
a majority of Trustees of the Trust (I) who are not parties to this Agreement or
interested persons of any such party (other than as Trustees of the Trust) and
(II) with respect to each class of a Fund for which there is an effective Plan,
who do not have any direct or indirect financial interest
<PAGE>
in any such Plan applicable to the class or in any agreements related to the
Plan, cast in person at a meeting called for the purpose of voting on such
approval.
(c) This Agreement may be terminated at any time with respect to a
Fund, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund or, with respect to
each class of a Fund for which there is an effective Plan, a majority of
Trustees of the Trust who do not have any direct or indirect financial interest
in any such Plan or in any agreements related to the Plan, on 60 days' written
notice to the Distributor or (ii) by the Distributor on 60 days' written notice
to the Trust.
(d) This Agreement shall automatically terminate upon its assignment
and upon the termination of the Distributor's membership in the NASD.
(e) If the Trust shall not file a Required Amendment within fifteen
days following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(d), 6(d), 8, 9 and 10 shall survive
any termination of this Agreement.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by either party
to the other shall be deemed sufficiently given if personally delivered or sent
by telegram, facsimile or registered, certified or overnight mail, postage
prepaid, addressed by the party giving such notice to the other party at the
last address furnished by the other party to the party giving such notice, and
unless and until changed pursuant to the foregoing provisions hereof each such
notice shall be addressed to the Trust or the Distributor, as the case may be,
at their respective principal places of business.
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a [trustee][director], officer or employee of the
Trust, or affiliated persons of the Trust to engage in any other business or to
devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, trust, firm, individual or association.
[SECTION 16. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Distributor agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property
<PAGE>
of the Trust or the Fund to which the Distributor's rights or claims relate in
settlement of such rights or claims, and not to the Trustees of the Trust or the
shareholders of the Funds.]
SECTION 17. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of New York.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(h) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund are separate and distinct
from the assets and liabilities of each other Fund and that no Fund shall be
liable or shall be charged for any debt, obligation or liability of any other
Fund, whether arising under this Agreement or otherwise.
(i) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(j) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.
<PAGE>
(k) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
[INVESTMENT COMPANY NAME]
By:_________________________
[Officer name]
[Title]
FORUM FINANCIAL SERVICES, INC.
By:_________________________
John Y. Keffer
President
NOTE: THIS AGREEMENT NOT TO BE USED
FOR CDSC FUNDING (B SHARE) FINANCING
<PAGE>
MEMORIAL FUNDS
DISTRIBUTION AGREEMENT
APPENDIX A
FUNDS AND CLASSES OF THE TRUST
AS OF [DATE]
[Fund and Class Names]
[Applicability of Plans and Servive Plans]
[Fees under Plans and Service Plans]
<PAGE>
EXHIBIT (8)(A)
<PAGE>
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICES AGREEMENT
AGREEMENT made as of the ___ day of __________, 19__, by and between
Memorial Funds, a Delaware business trust, with its principal office and place
of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and
Forum Financial Corp., a Delaware corporation with its principal office and
place of business at Two Portland Square, Portland, Maine 04101 ("Forum").
WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and is authorized to divide those series into
separate classes; and
WHEREAS, the Trust offers shares in various series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 13, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of various classes of each Fund as listed
in Appendix A hereto (each such class together with all other classes
subsequently established by the Trust in a Fund being herein referred to as a
"Class," and collectively as the "Classes"); and
WHEREAS, the Trust on behalf of the Funds desires to appoint Forum as
its transfer agent and dividend disbursing agent and Forum desires to accept
such appointment;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) APPOINTMENT. The Trust, on behalf of the Funds, hereby appoints
Forum to act as, and Forum agrees to act as, (i) transfer agent for the
authorized and issued shares of beneficial interest of the Trust representing
interests in each of the respective Funds and Classes thereof ("Shares"), (ii)
dividend disbursing agent and (iii) agent in connection with any accumulation,
open-account or similar plans provided to the registered owners of shares of any
of the Funds ("Shareholders") and set out in the currently effective
prospectuses and statements of additional information (collectively
"prospectus") of the applicable Fund, including, without limitation, any
periodic investment plan or periodic withdrawal program.
(b) DOCUMENT DELIVERY. The Trust has delivered to Forum copies of (i)
the Trust's Trust Instrument and Bylaws (collectively, as amended from time to
time, "Organic Documents"), (ii) the Trust's Registration Statement and all
amendments thereto filed with the U.S. Securities and Exchange Commission
("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the Investment Company Act of 1940, as amended ("1940
<PAGE>
Act")(the "Registration Statement"), (iii) the Trust's current Prospectus and
Statement of Additional Information of each Fund (collectively, as currently in
effect and as amended or supplemented, the "Prospectus"), (iv) each current plan
of distribution or similar document adopted by the Trust under Rule 12b-1 under
the 1940 Act ("Plan") and each current shareholder service plan or similar
document adopted by the Trust ("Service Plan"), and (v) all procedures adopted
by the Trust with respect to the Funds (i.e., repurchase agreement procedures),
and shall promptly furnish Forum with all amendments of or supplements to the
foregoing. The Trust shall deliver to Forum a certified copy of the resolution
of the Board of Trustees of the Trust (the "Board") appointing Forum and
authorizing the execution and delivery of this Agreement.
SECTION 2. DUTIES OF FORUM
(a) SERVICES. Forum agrees that in accordance with procedures
established from time to time by agreement between the Trust on behalf of each
of the Funds, as applicable, and Forum, Forum will perform the following
services:
(i) provide the services of a transfer agent, dividend disbursing agent
and, as relevant, agent in connection with accumulation, open-account
or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program) that are customary for open-end
management investment companies including: (A) maintaining all
Shareholder accounts, (B) preparing Shareholder meeting lists, (C)
mailing proxies to Shareholders, (D) mailing Shareholder reports and
prospectuses to current Shareholders, (E) withholding taxes on U.S.
resident and non-resident alien accounts, (F) preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required by
federal authorities with respect to distributions for Shareholders, (G)
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, (H) preparing and
mailing activity statements for Shareholders, and (I) providing
Shareholder account information;
(ii) receive for acceptance orders for the purchase of Shares and
promptly deliver payment and appropriate documentation therefor to the
custodian of the applicable Fund (the "Custodian") or, in the case of
Fund's operating in a master-feeder or fund of funds structure, to the
transfer agent or interestholder recordkeeper for the master portfolios
in which the Fund invests;
(iii) pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iv) receive for acceptance redemption requests and deliver the
appropriate documentation therefor to the Custodian or, in the case of
Fund's operating in a master-feeder or fund of funds structure, to the
transfer agent or interestholder recordkeeper for the master portfolios
in which the Fund invests;
<PAGE>
(v) as and when it receives monies paid to it by the Custodian with
respect to any redemption, pay the redemption proceeds as required by
the prospectus pursuant to which the redeemed Shares were offered and
as instructed by the redeeming Shareholders;
(vi)effect transfers of Shares upon receipt of appropriate instructions
from Shareholders;
(vii) prepare and transmit to Shareholders (or credit the appropriate
Shareholder accounts) payments for all distributions declared by the
Trust with respect to Shares;
(viii) issue share certificates and replacement share certificates for
those share certificates alleged to have been lost, stolen, or
destroyed upon receipt by Forum of indemnification satisfactory to
Forum and protecting Forum and the Trust and, at the option of Forum,
issue replacement certificates in place of mutilated share certificates
upon presentation thereof without requiring indemnification;
(ix) receive from Shareholders or debit Shareholder accounts for sales
commissions, including contingent deferred, deferred and other sales
charges, and service fees (i.e., wire redemption charges) and prepare
and transmit payments to underwriters, selected dealers and others for
commissions and service fees received;
(x) track shareholder accounts by financial intermediary source and
otherwise as requested by the Trust and provide periodic reporting to
the Trust or its administrator or other agent;
(xi) maintain records of account for and provide reports and
statements to the Trust and Shareholders as to the foregoing;
(xii) record the issuance of Shares of the Trust and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934, as
amended ("1934 Act") a record of the total number of Shares of the
Trust, each Fund and each Class thereof, that are authorized, based
upon data provided to it by the Trust, and are issued and outstanding
and provide the Trust on a regular basis a report of the total number
of Shares that are authorized and the total number of Shares that are
issued and outstanding; and
(xiii) provide a system which will enable the Trust to calculate the
total number of Shares of each Fund and Class thereof sold in each
State.
(b) OTHER SERVICES. Forum shall provide the following additional
services on behalf of the Trust and such other services agreed to in writing by
the Trust and Forum:
(i) monitor and make appropriate filings with respect to the
escheatment laws of the various states and territories of the United
States; and
<PAGE>
(ii) receive and tabulate proxy votes/oversee the activities of proxy
solicitation firms and coordinate the tabulation of proxy and
shareholder meeting votes.
(c) BLUE SKY MATTERS. The Trust or its administrator or other agent (i)
shall identify to Forum in writing those transactions and assets to be treated
as exempt from reporting for each state and territory of the United States and
for each foreign jurisdiction (collectively "States") and (ii) shall monitor the
sales activity with respect to Shareholders domiciled or resident in each State.
The responsibility of Forum for the Trust's State registration status is solely
limited to the reporting of transactions to the Trust, and Forum shall have no
obligation, when recording the issuance of Shares, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of the Trust or
its administrator or other agent.
(d) SAFEKEEPING. Forum shall establish and maintain facilities and
procedures reasonably acceptable to the Trust for the safekeeping, control,
preparation and use of share certificates, check forms, and facsimile signature
imprinting devices. Forum shall establish and maintain facilities and procedures
reasonably acceptable to the Trust for safekeeping of all records maintained by
Forum pursuant to this Agreement.
(e) COOPERATION WITH ACCOUNTANTS. Forum shall cooperate with each
Fund's independent public accountants and shall take reasonable action to make
all necessary information available to the accountants for the performance of
the accountants' duties.
(f) RESPONSIBILITY FOR COMPLIANCE WITH LAW. Except with respect to
Forum's duties as set forth in this Section 2 and except as otherwise
specifically provided herein, the Trust assumes all responsibility for ensuring
that the Trust complies with all applicable requirements of the Securities Act,
the 1940 Act and any laws, rules and regulations of governmental authorities
with jurisdiction over the Trust. All references to any law in this Agreement
shall be deemed to include reference to the applicable rules and regulations
promulgated under authority of the law and all official interpretations of such
law or rules or regulations.
SECTION 3. RECORDKEEPING
(a) PREDECESSOR RECORDS. Prior to the commencement of Forum's
responsibilities under this Agreement, if applicable, the Trust shall deliver or
cause to be delivered over to Forum (i) an accurate list of Shareholders of the
Trust, showing each Shareholder's address of record, number of Shares owned and
whether such Shares are represented by outstanding share certificates and (ii)
all Shareholder records, files, and other materials necessary or appropriate for
proper performance of the functions assumed by Forum under this Agreement
(collectively referred to as the "Materials"). The Trust shall on behalf of each
applicable Fund or Class indemnify and hold Forum harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any error, omission, inaccuracy or
other deficiency of the Materials, or out of the failure of the Trust to provide
any portion of the Materials or to provide any information in the Trust's
possession or control reasonably needed by Forum to perform the services
described in this Agreement.
<PAGE>
(b) RECORDKEEPING. Forum shall keep records relating to the services to
be performed under this Agreement, in the form and manner as it may deem
advisable and as required by applicable law. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, Forum agrees that all such records
prepared or maintained by Forum relating to the services to be performed by
Forum under this Agreement are the property of the Trust and will be preserved,
maintained and made available in accordance with Section 31 of the 1940 Act and
the rules thereunder, and will be surrendered promptly to the Trust on and in
accordance with the Trust's request. The Trust and the Trust's authorized
representatives shall have access to Forum's records relating to the services to
be performed under this Agreement at all times during Forum's normal business
hours. Upon the reasonable request of the Trust, copies of any such records
shall be provided promptly by Forum to the Trust or the Trust's authorized
representatives.
(c) CONFIDENTIALITY OF RECORDS. Forum and the Trust agree that all
books, records, information, and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by law.
(d) INSPECTION OF RECORDS BY OTHERS. In case of any requests or demands
for the inspection of the Shareholder records of the Trust, Forum will endeavor
to notify the Trust and to secure instructions from an authorized officer of the
Trust as to such inspection. Forum shall abide by the Trust's instructions for
granting or denying the inspection; provided, however, that Forum may grant the
inspection without instructions if Forum is advised by counsel to Forum that
failure to do so will result in liability to Forum.
SECTION 4. ISSUANCE AND TRANSFER OF SHARES
(a) ISSUANCE OF SHARES. Forum shall make original issues of Shares of
each Fund and Class thereof in accordance with the Trust's then current
prospectus only upon receipt of (i) instructions requesting the issuance, (ii) a
certified copy of a resolution of the Board authorizing the issuance, (iii)
necessary funds for the payment of any original issue tax applicable to such
Shares, and (iv) an opinion of the Trust's counsel as to the legality and
validity of the issuance, which opinion may provide that it is contingent upon
the filing by the Trust of an appropriate notice with the SEC, as required by
Section 24 of the 1940 Act or the rules thereunder. If the opinion described in
(iv) above is contingent upon a filing under Section 24 of the 1940 Act, the
Trust shall indemnify Forum for any liability arising from the failure of the
Trust to comply with that section or the rules thereunder.
(b) TRANSFER OF SHARES. Transfers of Shares of each Fund and Class
thereof shall be registered on the Shareholder records maintained by Forum. In
registering transfers of Shares, Forum may rely upon the Uniform Commercial Code
as in effect in the State of Delaware or any other statutes that, in the opinion
of Forum's counsel, protect Forum and the Trust from liability arising from (i)
not requiring complete documentation, (ii) registering a transfer without an
adverse claim inquiry, (iii) delaying registration for purposes of such inquiry
or (iv) refusing
<PAGE>
registration whenever an adverse claim requires such refusal. As Transfer Agent,
Forum will be responsible for delivery to the transferor and transferee of such
documentation as is required by the Uniform Commercial Code.
SECTION 5. SHARE CERTIFICATES
(a) CERTIFICATES. The Trust shall furnish to Forum a supply of blank
share certificates of each Fund and Class thereof and, from time to time, will
renew such supply upon Forum's request. Blank share certificates shall be signed
manually or by facsimile signatures of officers of the Trust authorized to sign
by the Organic Documents of the Trust and, if required by the Organic Documents,
shall bear the Trust's seal or a facsimile thereof. Unless otherwise directed by
the Trust, Forum may issue or register Share certificates reflecting the manual
or facsimile signature of an officer who has died, resigned or been removed by
the Trust.
(b) ENDORSEMENT; TRANSPORTATION. New Share certificates shall be issued
by Forum upon surrender of outstanding Share certificates in the form deemed by
Forum to be properly endorsed for transfer and satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes. Forum shall forward Share certificates in "non-negotiable" form by
first-class or registered mail, or by whatever means Forum deems equally
reliable and expeditious. Forum shall not mail Share certificates in
"negotiable" form unless requested in writing by the Trust and fully indemnified
by the Trust to Forum's satisfaction.
(c) NON-ISSUANCE OF CERTIFICATES. In the event that the Trust informs
Forum that any Fund or Class thereof does not issue share certificates, Forum
shall not issue any such share certificates and the provisions of this Agreement
relating to share certificates shall not be applicable with respect to those
Funds or Classes thereof.
SECTION 6. SHARE PURCHASES; ELIGIBILITY TO RECEIVE DISTRIBUTIONS
(a) PURCHASE ORDERS. Shares shall be issued in accordance with the
terms of a Fund's or Class' prospectus after Forum or its agent receives either:
(i) (A) an instruction directing investment in a Fund or Class, (B) a
check (other than a third party check) or a wire or other electronic
payment in the amount designated in the instruction and (C), in the
case of an initial purchase, a completed account application; or
(ii) the information required for purchases pursuant to a selected
dealer agreement, processing organization agreement, or a similar
contract with a financial intermediary.
(b) DISTRIBUTION ELIGIBILITY. Shares issued in a Fund after receipt of
a completed purchase order shall be eligible to receive distributions of the
Fund at the time specified in the prospectus pursuant to which the Shares are
offered.
<PAGE>
(c) DETERMINATION OF FEDERAL FUNDS. Shareholder payments shall be
considered Federal Funds no later than on the day indicated below unless other
times are noted in the prospectus of the applicable Class or Fund:
(i) for a wire received, at the time of the receipt of the wire;
(ii) for a check drawn on a member bank of the Federal Reserve System,
on the second Fund Business Day following receipt of the check; and
(iv) for a check drawn on an institution that is not a member of the
Federal Reserve System, at such time as Forum is credited with Federal
Funds with respect to that check.
SECTION 7. FEES AND EXPENSES
(a) FEES. For the services provided by Forum pursuant to this
Agreement, the Trust, on behalf of each Fund, agrees to pay Forum the fees set
forth in Clauses (i) and (ii) of Appendix B hereto. Fees will begin to accrue
for each Fund on the latter of the date of this Agreement or the date of
commencement of operations of the Fund. If fees begin to accrue in the middle of
a month or if this Agreement terminates before the end of any month, all fees
for the period from that date to the end of that month or from the beginning of
that month to the date of termination, as the case may be, shall be prorated
according to the proportion that the period bears to the full month in which the
effectiveness or termination occurs. Upon the termination of this Agreement with
respect to a Fund, the Trust shall pay to Forum such compensation as shall be
payable prior to the effective date of termination.
(b) EXPENSES. In connection with the services provided by Forum
pursuant to this Agreement, the Trust, on behalf of each Fund, agrees to
reimburse Forum for the expenses set forth in Appendix B hereto. In addition,
the Trust, on behalf of the applicable Fund, shall reimburse Forum for all
expenses and employee time (at 150% of salary) attributable to any review of the
Trust's accounts and records by the Trust's independent accountants or any
regulatory body outside of routine and normal periodic reviews. Should the Trust
exercise its right to terminate this Agreement, the Trust, on behalf of the
applicable Fund, shall reimburse Forum for all out-of-pocket expenses and
employee time (at 150% of salary) associated with the copying and movement of
records and material to any successor person and providing assistance to any
successor person in the establishment of the accounts and records necessary to
carry out the successor's responsibilities.
(c) PAYMENT. All fees and reimbursements are payable in arrears on a
monthly basis and the Trust, on behalf of the applicable Fund, agrees to pay all
fees and reimbursable expenses within five (5) business days following receipt`
of the respective billing notice.
SECTION 8. REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES OF FORUM. Forum represents and
warrants to the Trust that:
<PAGE>
(i) It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
(ii) It is duly qualified to carry on its business in the State o
Maine.
(iii) It is empowered under applicable laws and by its Article of
Incorporation and Bylaws to enter into this Agreement and perform its
duties under this Agreement.
(iv) All requisite corporate proceedings have been taken to authorize
it to enter into this Agreement and perform its duties under this
Agreement.
(v) It has access to the necessary facilities, equipment, and personnel
to perform its duties and obligations under this Agreement.
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of Forum, enforceable against Forum
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
(vii) It is registered as a transfer agent under Section 17A of the
1934 Act.
(b) REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust represents
and warrants to Forum that:
(i) It is a business trust duly organized and existing and in good
standing under the laws of Delaware.
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into this Agreement and perform its duties under this
Agreement.
(iii) All requisite corporate proceedings have been taken to authorize
it to enter into this Agreement and perform its duties under this
Agreement.
(iv) It is an open-end management investment company registered under
the 1940 Act.
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Trust, enforceable against
the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties.
(vi) A registration statement under the Securities Act is currently
effective and will remain effective, and appropriate State securities
law filings have been made and will continue to be made, with respect
to all Shares of the Funds and Classes of the Trust being offered for
sale.
<PAGE>
SECTION 9. PROPRIETARY INFORMATION
(a) PROPRIETARY INFORMATION OF FORUM. The Trust acknowledges that the
databases, computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals maintained by Forum on databases under the
control and ownership of Forum or a third party constitute copyrighted, trade
secret, or other proprietary information (collectively, "Proprietary
Information") of substantial value to Forum or the third party. The Trust agrees
to treat all Proprietary Information as proprietary to Forum and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided under this Agreement.
(b) PROPRIETARY INFORMATION OF THE TRUST. Forum acknowledges that the
Shareholder list and all information related to Shareholders furnished to Forum
by the Trust or by a Shareholder in connection with this Agreement
(collectively, "Customer Data") constitute proprietary information of
substantial value to the Trust. In no event shall Proprietary Information be
deemed Customer Data. Forum agrees to treat all Customer Data as proprietary to
the Trust and further agrees that it shall not divulge any Customer Data to any
person or organization except as may be provided under this Agreement or as may
be directed by the Trust.
SECTION 10. INDEMNIFICATION
(a) INDEMNIFICATION OF FORUM. Forum shall not be responsible for, and
the Trust shall on behalf of each applicable Fund or Class thereof indemnify and
hold Forum harmless from and against, any and all losses, damages, costs,
charges, reasonable counsel fees, payments, expenses and liability arising out
of or attributable to:
(i) all actions of Forum or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without gross negligence or willful misconduct;
(ii) the Trust's lack of good faith or the Trust's gross negligence
or willful misconduct;
(iii) the reliance on or use by Forum or its agents or subcontractors
of information, records, documents or services which have been
prepared, maintained or performed by the Trust or any other person or
firm on behalf of the Trust, including but not limited to any previous
transfer agent or registrar;
(iv) the reasonable reliance on, or the carrying out by Forum or its
agents or subcontractors of, any instructions or requests of the Trust
on behalf of the applicable Fund; and
(v) the offer or sale of Shares in violation of any requirement under
the Federal securities laws or regulations or the securities laws or
regulations of any State that such
<PAGE>
Shares be registered in such State or in violation of any stop order
or other determination or ruling by any federal agency or any State
with respect to the offer or sale of such Shares in such State.
(b) INDEMNIFICATION OF TRUST. Forum shall indemnify and hold the Trust
and each Fund or Class thereof harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributed to any action or failure or omission to
act by Forum as a result of Forum's lack of good faith, gross negligence or
willful misconduct with respect to the services performed under or in connection
with this Agreement.
(c) RELIANCE. At any time Forum may apply to any officer of the Trust
for instructions, and may consult with legal counsel to the Trust or to Forum
with respect to any matter arising in connection with the services to be
performed by Forum under this Agreement, and Forum and its agents or
subcontractors shall not be liable and shall be indemnified by the Trust on
behalf of the applicable Fund for any action taken or omitted by it in
reasonable reliance upon such instructions or upon the advice of such counsel.
Forum, its agents and subcontractors shall be protected and indemnified in
acting upon (i) any paper or document furnished by or on behalf of the Trust,
reasonably believed by Forum to be genuine and to have been signed by the proper
person or persons, (ii) any instruction, information, data, records or documents
provided Forum or its agents or subcontractors by machine readable input, telex,
CRT data entry or other similar means authorized by the Trust, and (iii) any
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to Forum in person or by telephone, vocal telegram or other
electronic means, reasonably believed by Forum to be genuine and to have been
given by the proper person or persons. Forum shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Trust. Forum, its agents and subcontractors shall also be protected and
indemnified in recognizing share certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Trust, and
the proper countersignature of any former transfer agent or former registrar or
of a co-transfer agent or co-registrar of the Trust.
(d) RELIANCE ON ELECTRONIC INSTRUCTIONS. If the Trust has the ability
to originate electronic instructions to Forum in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder information
or other information, then in such event Forum shall be entitled to rely on the
validity and authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity with security
procedures established by Forum from time to time.
(e) USE OF FUND/SERV AND NETWORKING. The Trust has authorized or in the
future may authorize Forum to act as a "Mutual Fund Services Member" for the
Trust or various Funds. Fund/SERV and Networking are services sponsored by the
National Securities Clearing Corporation ("NSCC") and as used herein have the
meanings as set forth in the then current edition of NSCC RULES AND PROCEDURES
published by NSCC or such other similar publication as may exist from time to
time. The Trust shall indemnify and hold Forum harmless from and against any and
all losses, damages, costs, charges, reasonable counsel fees, payments, expenses
<PAGE>
and liability arising directly or indirectly out of or attributed to any action
or failure or omission to act by NSCC.
(f) NOTIFICATION OF CLAIMS. In order that the indemnification
provisions contained in this Section shall apply, upon the assertion of a claim
for which either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such claim
or to defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
SECTION 11. EFFECTIVENESS, DURATION AND TERMINATION
(a) EFFECTIVENESS. This Agreement shall become effective with respect
to each Fund or Class on December 1, 1997. Upon effectiveness of this Agreement,
it shall supersede all previous agreements between the parties hereto covering
the subject matter hereof insofar as such Agreement may have been deemed to
relate to the Funds.
(b) DURATION. This Agreement shall continue in effect with respect to a
Fund until terminated; provided, that continuance is specifically approved at
least annually (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Fund and (ii) by a vote of a majority of Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party (other than as Trustees of the Trust).
(c) TERMINATION. This Agreement may be terminated with respect to a
Fund at any time, without the payment of any penalty (i) by the Board on 60
days' written notice to Forum or (ii) by Forum on 60 days' written notice to the
Trust. Any termination shall be effective as of the date specified in the
notice. Upon notice of termination of this Agreement by either party, Forum
shall promptly transfer to the successor transfer agent the original or copies
of all books and records maintained by Forum under this Agreement including, in
the case of records maintained on computer systems, copies of such records in
machine-readable form, and shall cooperate with, and provide reasonable
assistance to, the successor transfer agent in the establishment of the books
and records necessary to carry out the successor transfer agent's
responsibilities.
(d) SURVIVAL. The obligations of Sections 7, 9 and 10 shall survive
any termination of this Agreement.
<PAGE>
SECTION 12. ADDITIONAL FUNDS AND CLASSES. In the event that the Trust
establishes one or more series of Shares or one or more classes of Shares after
the effectiveness of this Agreement, such series of Shares or classes of Shares,
as the case may be, shall become Funds and Classes under this Agreement. Forum
or the Trust may elect not to make and such series or classes subject to this
Agreement.
SECTION 13. ASSIGNMENT. Except as otherwise provided in this Agreement,
neither this Agreement nor any rights or obligations under this Agreement may be
assigned by either party without the written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective permitted successors and assigns. Forum may, without further
consent on the part of the Trust, subcontract for the performance hereof with
any entity, including affiliated persons of Forum; provided however, that Forum
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as Forum is for its own acts and omissions.
SECTION 14. FORCE MAJEURE. Forum shall not be responsible or liable for
any failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical
breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or
failure of the mails or any transportation medium, communication system or power
supply.
SECTION 15. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS,
OFFICERS, EMPLOYEES AND AGENTS. The trustees of the Trust and the shareholders
of each Fund shall not be liable for any obligations of the Trust or of the
Funds under this Agreement, and Forum agrees that, in asserting any rights or
claims under this Agreement, it shall look only to the assets and property of
the Trust or the Fund to which Forum's rights or claims relate in settlement of
such rights or claims, and not to the trustees of the Trust or the shareholders
of the Funds.
SECTION 16. TAXES. Forum shall not be liable for any taxes, assessments
or governmental charges that may be levied or assessed on any basis whatsoever
in connection with the Trust or any Shareholder or any purchase of Shares,
excluding taxes assessed against Forum for compensation received by it under
this Agreement.
SECTION 17. MISCELLANEOUS
(a) NO CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be
liable to the other party for consequential damages under any provision of this
Agreement.
(b) AMENDMENTS. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by both parties hereto.
<PAGE>
(c) CHOICE OF LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of
Delaware.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
(e) COUNTERPARTS. This Agreement may be executed by the parties hereto
on any number of counterparts, and all of the counterparts taken together shall
be deemed to constitute one and the same instrument.
(f) SEVERABILITY. If any part, term or provision of this Agreement is
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(g) HEADINGS. Section and paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
(h) NOTICES. Notices, requests, instructions and communications
received by the parties at their respective principal addresses, or at such
other address as a party may have designated in writing, shall be deemed to have
been properly given.
(i) BUSINESS DAYS. Nothing contained in this Agreement is intended to
or shall require Forum, in any capacity hereunder, to perform any functions or
duties on any day other than a Fund Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Fund Business Day shall be
performed on, and as of, the next Fund Business Day, unless otherwise required
by law.
(j) DISTINCTION OF FUNDS. Notwithstanding any other provision of this
Agreement, the parties agree that the assets and liabilities of each Fund of the
Trust are separate and distinct from the assets and liabilities of each other
Fund and that no Fund shall be liable or shall be charged for any debt,
obligation or liability of any other Fund, whether arising under this Agreement
or otherwise.
(k) NONLIABILITY OF AFFILIATES. No affiliated person (as that term is
defined in the 1940 Act), employee, agent, director, officer or manager of Forum
shall be liable at law or in equity for Forum's obligations under this
Agreement.
(l) REPRESENTATION OF SIGNATORIES. Each of the undersigned expressly
warrants and represents that they have full power and authority to sign this
Agreement on behalf of the party indicated and that their signature will bind
the party indicated to the terms hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
persons, as of the day and year first above written.
[NAME]
By:______________________
Maurice J. DeWald
Trustee
FORUM FINANCIAL CORP.
By:______________________
John Y. Keffer
President
<PAGE>
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICE AGREEMENT
APPENDIX A
FUNDS AND CLASSES
AS OF ___________, 1997
<PAGE>
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICE AGREEMENT
APPENDIX B
FEES AND EXPENSES
(I) BASE FEE:
Fees per Fund with $12,000 plus $6,000 per each class above one
more than one Class plus,
0.05% of the Average Annual Daily Net Assets
attributable to the Universal Class,
0.20% of the Average Annual Daily Net Assets
attributable to the Institutional Class, and
0.20% of the Average Annual Daily Net Assets
attributable to the Investor Class.
The rates set forth above shall remain fixed through December 31, 1998.
On January 1, 1999, and on each successive January 1, the rates may be
adjusted automatically by Forum without action of the Trust to reflect
changes in the Consumer Price Index for the preceding calendar year, as
published by the U.S. Department of Labor, Bureau of Labor Statistics.
Forum shall notify the Trust each year of the new rates, if applicable.
(II) SHAREHOLDER ACCOUNT FEES:
$120 per Shareholder account per year for the Universal Class.
$24 per Shareholder account per year for the Institutional Class.
$24 per Shareholder account per year for the Investor Class.
Shareholder account fees are based upon the number of Shareholder
accounts as of the last Fund Business Day of the prior month.
(III) OUT-OF-POCKET AND RELATED EXPENSES
The Trust, on behalf of the applicable Fund, shall reimburse Forum for
all out-of-pocket and ancillary expenses in providing the services
described in this Agreement, including but not limited to the cost of
(or appropriate share of the cost of): (i) statement, confirmation,
envelope and stationary stock, (ii) share certificates, (iii) printing
of checks and drafts, (iv) postage, (v) telecommunications, (vi)
banking services (DDA account,
<PAGE>
wire and ACH, check and draft clearing and lock box fees and charges),
(vii) NSCC Mutual Fund Service Member fees and expenses, (viii)
outside proxy solicitors and tabulators, (ix) proxy solicitation fees
and (ix) microfilm and microfiche. In addition, any other expenses
incurred by Forum at the request or with the consent of the Trust,
will be reimbursed by the Trust on behalf of the applicable Fund.
<PAGE>
EXHIBIT 9
<PAGE>
FORM OF
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
AGREEMENT made as of the ___ day of _________, 19__, by and between
Memorial Funds, a Delaware business trust, with its principal office and place
of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and
Forum Administrative Services, LLC, a Delaware limited liability company with
its principal office and place of business at Two Portland Square, Portland,
Maine 04101 ("Forum").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and may issue its shares of beneficial interest, no par value (the "Shares"), in
separate series and classes; and
WHEREAS, the Trust offers shares in various series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 6, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of various classes of each Fund as listed
in Appendix A hereto (each such class together with all other classes
subsequently established by the Trust in a Fund being herein referred to as a
"Class," and collectively as the "Classes"); and
WHEREAS, the Trust desires that Forum perform certain administrative
services for each Fund and Class thereof and Forum is willing to provide those
services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints Forum, and Forum hereby agrees, to act as
administrator of the Trust for the period and on the terms set forth in this
Agreement.
(b) In connection therewith, the Trust has delivered to Forum copies of
(i) the Trust's Trust Instrument and Bylaws (collectively, as amended from time
to time, "Organic Documents"), (ii) the Trust's Registration Statement and all
amendments thereto filed with the U.S. Securities and Exchange Commission
("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the 1940 Act (the "Registration Statement"), (iii) the Trust's current
Prospectus and Statement of Additional Information of each Fund (collectively,
as currently in effect and as amended or supplemented, the "Prospectus"), (iv)
each current plan of distribution or similar document adopted by the Trust under
Rule 12b-1 under the 1940 Act ("Plan") and each current shareholder service plan
or similar document adopted by the Trust ("Service Plan"), and (iv) all
procedures adopted by the Trust with respect to the Funds (i.e.,
<PAGE>
repurchase agreement procedures), and shall promptly furnish Forum with all
amendments of or supplements to the foregoing. The Trust shall deliver to Forum
a certified copy of the resolution of the Board of Trustees of the Trust (the
"Board") appointing Forum and authorizing the execution and delivery of this
Agreement.
SECTION 2. DUTIES OF FORUM AND THE TRUST
(a) Subject to the direction and control of the Board, Forum shall
manage all aspects of the Trust's operations with respect to the Funds except
those that are the responsibility of any other service provider hired by the
Trust, all in such manner and to such extent as may be authorized by the Board.
(b) With respect to the Trust or each Fund, as applicable, Forum shall:
(i) at the Trust's expense, provide the Trust with, or arrange for the
provision of, the services of persons competent to perform such legal,
administrative and clerical functions not otherwise described in this
Section 2(b) as are necessary to provide effective operation of the
Trust;
(ii) oversee (A) the preparation and maintenance by the Trust's
custodian, transfer agent, dividend disbursing agent and fund
accountant in such form, for such periods and in such locations as may
be required by applicable United States law, of all documents and
records relating to the operation of the Trust required to be prepared
or maintained by the Trust or its agents pursuant to applicable law;
(B) the reconciliation of account information and balances among the
Trust's custodian, transfer agent, dividend disbursing agent and fund
accountant; (C) the transmission of purchase and redemption orders for
Shares; and (D) the performance of fund accounting, including the
calculation of the net asset value of the Shares;
(iii) oversee the performance of administrative and professional
services rendered to the Trust by others, including its custodian,
transfer agent and dividend disbursing agent as well as legal,
auditing, shareholder servicing and other services performed for the
Funds;
(iv) file or oversee the filing of each document required to be filed
by the Trust in either written or, if required, electronic format
(e.g., electronic data gathering analysis and retrieval system or
"EDGAR") with the SEC;
(v) assist in and oversee the preparation, filing and printing and
the periodic updating of the Registration Statement and Prospectuses;
(vi) oversee the preparation and filing of the Trust's tax returns;
(vii) oversee the preparation of financial statements and related
reports to the Trust's shareholders, the SEC and state and other
securities administrators;
<PAGE>
(viii) assist in and oversee the preparation and printing of proxy and
information statements and any other communications to shareholders;
(ix) provide the Trust with adequate general office space and
facilities and provide persons suitable to the Board to serve as
officers of the Trust;
(x) assist the investment advisers in monitoring Fund holdings for
compliance with Prospectus investment restrictions and assist in
preparation of periodic compliance reports, as applicable;
(xi) prepare, file and maintain the Trust's Organic Documents and
minutes of meetings of Trustees, Board committees and shareholders;
(xii) with the cooperation of the Trust's counsel, investment advisers,
the officers of the Trust and other relevant parties, prepare and
disseminate materials for meetings of the Board, as applicable;
(xiii) maintain the Trust's existence and good standing under
applicable state law;
(xiv) monitor sales of Shares, ensure that the Shares are properly and
duly registered with the SEC and register, or prepare applicable
filings with respect to, the Shares with the various state and other
securities commissions;
(xv) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for
sales literature of the Trust and other appropriate purposes;
(xvi) oversee the determination of the amount of and supervise the
declaration of dividends and other distributions to shareholders as
necessary to, among other things, maintain the qualification of each
Fund as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), and prepare and distribute to
appropriate parties notices announcing the declaration of dividends and
other distributions to shareholders;
(xvii) advise the Trust and the Board on matters concerning the Trust
and its affairs;
(xviii) calculate, review and account for Fund expenses and report on
Fund expenses on a periodic basis;
(xix) authorize the payment of Trust expenses and pay, from Trust
assets, all bills of the Trust;
(xx) prepare Fund budgets, pro-forma financial statements, expense and
profit/loss projections and fee waiver/expense reimbursement
projections on a periodic basis;
<PAGE>
(xxi) prepare financial statement expense information;
(xxii) assist the Trust in the selection of other service providers,
such as independent accountants, law firms and proxy solicitors; and
(xxiii) perform such other recordkeeping, reporting and other tasks as
may be specified from time to time in the procedures adopted by the
Board; provided, that Forum need not begin performing any such task
except upon 65 days' notice and pursuant to mutually acceptable
compensation agreements.
(c) Forum shall provide such other services and assistance relating to
the affairs of the Trust as the Trust may, from time to time, reasonably request
pursuant to mutually acceptable compensation agreements.
(d) Forum shall maintain records relating to its services, such as
journals, ledger accounts and other records, as are required to be maintained
under the 1940 Act and Rule 31a-1 thereunder. The books and records pertaining
to the Trust that are in possession of Forum shall be the property of the Trust.
The Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during Forum's normal business hours. Upon the
reasonable request of the Trust, copies of any such books and records shall be
provided promptly by Forum to the Trust or the Trust's authorized
representatives. In the event the Trust designates a successor that assumes any
of Forum's obligations hereunder, Forum shall, at the expense and direction of
the Trust, transfer to such successor all relevant books, records and other data
established or maintained by Forum under this Agreement.
(e) Nothing contained herein shall be construed to require Forum to
perform any service that could cause Forum to be deemed an investment adviser
for purposes of the 1940 Act or the Investment Advisers Act of 1940, as amended,
or that could cause a Fund to act in contravention of the Fund's Prospectus or
any provision of the 1940 Act. Except with respect to Forum's duties as set
forth in this Section 2 and except as otherwise specifically provided herein,
the Trust assumes all responsibility for ensuring that the Trust complies with
all applicable requirements of the Securities Act, the 1940 Act and any laws,
rules and regulations of governmental authorities with jurisdiction over the
Trust. All references to any law in this Agreement shall be deemed to include
reference to the applicable rules and regulations promulgated under authority of
the law and all official interpretations of such law or rules or regulations.
(f) In order for Forum to perform the services required by this Section
2, the Trust (i) shall cause all service providers to the Trust to furnish any
and all information to Forum, and assist Forum as may be required and (ii) shall
ensure that Forum has access to all records and documents maintained by the
Trust or any service provider to the Trust.
<PAGE>
SECTION 3. STANDARD OF CARE AND RELIANCE
(a) Forum shall be under no duty to take any action except as
specifically set forth herein or as may be specifically agreed to by Forum in
writing. Forum shall use its best judgment and efforts in rendering the services
described in this Agreement. Forum shall not be liable to the Trust or any of
the Trust's shareholders for any action or inaction of Forum relating to any
event whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of Forum's duties or obligations under this
Agreement or by reason of Forum's reckless disregard of its duties and
obligations under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Forum, its
employees, agents, directors, officers and managers and any person who controls
Forum within the meaning of section 15 of the Securities Act or section 20 of
the Securities Exchange Act of 1934, as amended, ("Forum Indemnitees") against
and from any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses of
every nature and character arising out of or in any way related to Forum's
actions taken or failures to act with respect to a Fund that are consistent with
the standard of care set forth in Section 3(a) or based, if applicable, on good
faith reliance upon an item described in Section 3(d) (a "Claim"). The Trust
shall not be required to indemnify any Forum Indemnitee if, prior to confessing
any Claim against the Forum Indemnitee, Forum or the Forum Indemnitee does not
give the Trust written notice of and reasonable opportunity to defend against
the claim in its own name or in the name of the Forum Indemnitee.
(c) Forum agrees to indemnify and hold harmless the Trust, its
employees, agents, trustees and officers against and from any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character arising out of Forum's actions taken or failures to act with respect
to a Fund that are not consistent with the standard of care set forth in Section
3(a). Forum shall not be required to indemnify the Trust if, prior to confessing
any Claim against the Trust, the Trust does not give Forum written notice of and
reasonable opportunity to defend against the claim in its own name or in the
name of the Trust.
(d) A Forum Indemnitee shall not be liable for any action taken or
failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel to the
Trust or counsel to Forum, and upon statements of accountants, brokers
and other persons reasonably believed in good faith by Forum to be
experts in the matter upon which they are consulted;
(ii) any oral instruction which it receives and which it reasonably
believes in good faith was transmitted by the person or persons
authorized by the Board to give such oral instruction. Forum shall have
no duty or obligation to make any inquiry or effort of certification of
such oral instruction;
<PAGE>
(iii) any written instruction or certified copy of any resolution of
the Board, and Forum may rely upon the genuineness of any such document
or copy thereof reasonably believed in good faith by Forum to have been
validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
Forum to be genuine and to have been signed or presented by the Trust
or other proper party or parties;
and no Forum Indemnitee shall be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which Forum reasonably believes in good faith
to be genuine.
(e) Forum shall not be liable for the errors of other service providers
to the Trust including the errors of printing services (other than to pursue all
reasonable claims against the pricing service based on the pricing services'
standard contracts entered into by Forum) and errors in information provided by
an investment adviser (including prices and pricing formulas and the untimely
transmission of trade information), custodian or transfer agent to the Trust.
SECTION 4. COMPENSATION AND EXPENSES
(a) In consideration of the administrative services provided by Forum
pursuant to this Agreement, the Trust shall pay Forum, with respect to each
Class of each of the Funds, the fees set forth in Appendix B hereto. These fees
shall be accrued by the Trust daily and shall be payable monthly in arrears on
the first day of each calendar month for services performed under this Agreement
during the prior calendar month. In the event that any of the legal services
identified in Appendix C hereto are provided to the Trust by personnel of the
legal department of Forum, they will be provided at no additional charge to the
Trust except those matters designated as Special Legal Services, as to which
Forum may charge, and the Trust shall pay an additional amount as reimbursement
of the cost of Forum providing such services. Reimbursement shall be payable
monthly in arrears on the first day of each calendar month for services
performed under this Agreement during the prior calendar month. Nothing in this
Agreement shall require Forum to provide any of the services listed in Appendix
C hereto, as such services may be performed by an outside vendor if appropriate
in the judgment of Forum.
If fees begin to accrue in the middle of a month or if this Agreement
terminates before the end of any month, all fees for the period from that date
to the end of that month or from the beginning of that month to the date of
termination, as the case may be, shall be prorated according to the proportion
that the period bears to the full month in which the effectiveness or
termination occurs. Upon the termination of this Agreement with respect to a
Fund, the Trust shall pay to Forum such compensation as shall be payable prior
to the effective date of termination.
<PAGE>
(b) Notwithstanding anything in this Agreement to the contrary, Forum
and its affiliated persons may receive compensation or reimbursement from the
Trust with respect to (i) the provision of services on behalf of the Funds in
accordance with any Plan or Service Plan, (ii) the provision of shareholder
support or other services, (iii) service as a trustee or officer of the Trust
and (iv) services to the Trust, which may include the types of services
described in this Agreement, with respect to the creation of any Fund and the
start-up of the Fund's operations.
(c) The Trust shall be responsible for and assumes the obligation for
payment of all of its expenses, including: (a) the fee payable under this
Agreement; (b) the fees payable to each investment adviser under an agreement
between the investment adviser and the Trust; (c) expenses of issue, repurchase
and redemption of Shares; (d) interest charges, taxes and brokerage fees and
commissions; (e) premiums of insurance for the Trust, its trustees and officers
and fidelity bond premiums; (f) fees, interest charges and expenses of third
parties, including the Trust's independent accountant, custodian, transfer
agent, dividend disbursing agent and fund accountant; (g) fees of pricing,
interest, dividend, credit and other reporting services; (h) costs of membership
in trade associations; (i) telecommunications expenses; (j) funds transmission
expenses; (k) auditing, legal and compliance expenses; (l) costs of forming the
Trust and maintaining its existence; (m) costs of preparing, filing and printing
the Trust's Prospectuses, subscription application forms and shareholder reports
and other communications and delivering them to existing shareholders, whether
of record or beneficial; (n) expenses of meetings of shareholders and proxy
solicitations therefor; (o) costs of maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, of
calculating the net asset value of Shares and of preparing tax returns; (p)
costs of reproduction, stationery, supplies and postage; (q) fees and expenses
of the Trust's trustees; (r) compensation of the Trust's officers and employees
and costs of other personnel (who may be employees of the investment adviser,
Forum or their respective affiliated persons) performing services for the Trust;
(s) costs of Board, Board committee, shareholder and other corporate meetings;
(t) SEC registration fees and related expenses; (u) state, territory or foreign
securities laws registration fees and related expenses; and (v) all fees and
expenses paid by the Trust in accordance with any Plan or Service Plan or
agreement related to similar manners.
(d) Should the Trust exercise its right to terminate this Agreement,
the Trust, on behalf of the applicable Fund, shall reimburse Forum for all
out-of-pocket expenses and employee time (at 150% of salary) associated with the
copying and movement of records and material to any successor person and
providing assistance to any successor person in the establishment of the
accounts and records necessary to carry out the successor's responsibilities.
SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
(a) This Agreement shall become effective with respect to each Fund on
December 1, 1997. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Funds.
<PAGE>
(b) This Agreement shall continue in effect with respect to a Fund
until terminated; provided, that continuance is specifically approved at least
annually (i) by the Board or by a vote of a majority of the outstanding voting
securities of the Fund and (ii) by a vote of a majority of Trustees of the Trust
who are not parties to this Agreement or interested persons of any such party
(other than as Trustees of the Trust).
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty (i) by the Board on 60 days' written
notice to Forum or (ii) by Forum on 60 days' written notice to the Trust. The
obligations of Sections 3 and 4 shall survive any termination of this Agreement.
(d) This Agreement and the rights and duties under this Agreement
otherwise shall not be assignable by either Forum or the Trust except by the
specific written consent of the other party. All terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
SECTION 6. ADDITIONAL FUNDS AND CLASSES
In the event that the Trust establishes one or more series of Shares or
one or more classes of Shares after the effectiveness of this Agreement, such
series of Shares or classes of Shares, as the case may be, shall become Funds
and Classes under this Agreement. Forum or the Trust may elect not to make any
such series or classes subject to this Agreement.
SECTION 7. CONFIDENTIALITY
Forum agrees to treat all records and other information related to the
Trust as proprietary information of the Trust and, on behalf of itself and its
employees, to keep confidential all such information, except that Forum may
(a) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(b) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(c) release such other information as approved in writing by the Trust,
which approval shall not be unreasonably withheld and may not be withheld where
Forum may be exposed to civil or criminal contempt proceedings for failure to
release the information, when requested to divulge such information by duly
constituted authorities or when so requested by the Trust.
SECTION 8. FORCE MAJEURE
<PAGE>
Forum shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
SECTION 9. ACTIVITIES OF FORUM
(a) Except to the extent necessary to perform Forum's obligations under
this Agreement, nothing herein shall be deemed to limit or restrict Forum's
right, or the right of any of Forum's managers, officers or employees who also
may be a trustee, officer or employee of the Trust, or persons who are otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.
(b) Forum may subcontract any or all of its responsibilities pursuant
to this Agreement to one or more corporations, trusts, firms, individuals or
associations, which may be affiliated persons of Forum, who agree to comply with
the terms of this Agreement; provided, that any such subcontracting shall not
relieve Forum of its responsibilities hereunder. Forum may pay those persons for
their services, but no such payment will increase Forum's compensation from the
Trust.
(c) Without limiting the generality of the Sections 9(a) and (b), the
Trust acknowledges that certain legal services may be rendered to it by lawyers
who are employed by Forum or its affiliates and who render services to Forum and
its affiliates. A lawyer who renders such services to the Trust, and any lawyer
who supervises such lawyer, although employed generally by Forum or its
affiliates, will have a direct professional attorney/client relationship with
the Trust. Those services for which such a direct relationship will exist are
listed in Appendix C hereto. Each of Forum and the Trust hereby consents to the
simultaneous representation by such lawyers of both Forum and the Trust, and
waives any conflict of interest existing in such simultaneous representation.
Furthermore, the Trust agrees that, in the event such lawyer ceases to represent
the Trust, whether at the request of the Trust or otherwise, the lawyer may
continue thereafter to represent Forum, and the Trust expressly consents to such
continued representation.
SECTION 10. COOPERATION WITH INDEPENDENT ACCOUNTANTS
Forum shall cooperate, if applicable, with each Fund's independent
public accountants and shall take reasonable action to make all necessary
information available to the accountants for the performance of the accountants'
duties.
<PAGE>
SECTION 11. SERVICE DAYS
Nothing contained in this Agreement is intended to or shall require
Forum, in any capacity under this Agreement, to perform any functions or duties
on any day other than a business day of the Trust or of a Fund. Functions or
duties normally scheduled to be performed on any day which is not a business day
of the Trust or of a Fund shall be performed on, and as of, the next business
day, unless otherwise required by law.
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the trustees of the Trust or the shareholders of the Funds.
SECTION 13. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(b) Except for Appendix A to add new Funds and Classes in accordance
with Section 6, no provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties hereto.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Delaware.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
<PAGE>
(h) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(i) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund of the Trust are separate and
distinct from the assets and liabilities of each other Fund and that no Fund
shall be liable or shall be charged for any debt, obligation or liability of any
other Fund, whether arising under this Agreement or otherwise.
(j) No affiliated person, employee, agent, director, officer or manager
of Forum shall be liable at law or in equity for Forum's obligations under this
Agreement.
(k) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof and each
party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
(l) The terms "vote of a majority of the outstanding voting
securities," "interested person," and "affiliated person" shall have the
meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
persons, as of the day and year first above written.
[NAME]
By:________________________________
[Name]
[Title]
FORUM ADMINISTRATIVE SERVICES, LLC
By: Forum Advisors, Inc., as Manager
By:________________________________
John Y. Keffer
President
<PAGE>
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
APPENDIX A
FUNDS AND CLASSES OF THE TRUST
AS OF [DATE]
<PAGE>
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
APPENDIX B
FEES AND EXPENSES
Fee as a % of the Annual Average
Portfolio Daily Not Assets of the Portfolio
--------- ---------------------------------
Note 1. Notwithstanding the table above, the minimum fee per Fund shall
be $______ per year ($______ per month).
Note 2. Forum agrees to waive its fees to the following extent and for
the following periods:
For the first year of each Fund's operations, the fee shall be
______ and the minimum fee shall be $______ per year ($______
per month).
<PAGE>
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
APPENDIX C
LEGAL SERVICES
1. Advise the Trust on compliance with applicable U.S. laws and regulations
with respect to matters that are WITHIN the ordinary course of the Trust's
business.
2. Advise the Trust on compliance with applicable U.S. laws and regulations
with respect to matters that are OUTSIDE the ordinary course of the Trust's
business(*).
3. Liaison with the SEC.
4. Draft correspondences to SEC and respond to SEC comments.
5. Liaison with the Trust's outside counsel.
6. Provide attorney letters to the Trust's auditors.
7. Assist Trust outside counsel in the preparation of exemptive applications,
no-action letters, prospectuses, registration statements and proxy
statements and related material.
8. Prepare exemptive applications, no-action letters, prospectuses,
registration statements and proxy statements and related material, and
draft correspondences to SEC and respond to SEC comments with respect
thereto(*).
9. Prepare prospectus supplements.
10. Review and authorize Section 24 filings.
11. Prepare and/or review agendas and minutes for and respond to inquiries at
board and shareholder meetings regarding applicable U.S. laws and
regulations.
12. Prepare and/or review agreements between the Trust and any third parties.
Note: Items designated with an (*) are Special Legal Services.
<PAGE>
EXHIBIT 15
<PAGE>
FORM OF
MEMORIAL FUNDS
DISTRIBUTION PLAN
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
Distribution Plan (the "Plan") of Memorial Funds (the "Trust") with
respect to Trust Shares ("Shares") of each of the Government Bond Fund,
Corporate Bond Fund, Growth Equity Fund and Value Equity Fund (the "Funds") in
accordance with the provisions of Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act").
SECTION 1. DISTRIBUTOR; ADVISER
The Trust has entered into a Distribution Agreement with Forum
Financial Services, Inc. (the "Distributor") whereby the Distributor acts as
principal underwriter of the Funds' shares and has entered into an investment
advisory agreement with Forum Investment Advisors, LLC (the "Adviser") whereby
the Adviser acts as investment adviser to the Fund, each in a form satisfactory
to the Trust's Board of Trustees (the "Board").
SECTION 2. DISTRIBUTION EXPENSES
The Trust may reimburse the Distributor for the distribution expenses
incurred by the Distributor on behalf of each Fund of up to 0.30% per annum of
the Fund's average daily net assets in accordance with the following:
(a) On behalf of a Fund, the Distributor may incur expenses for any
distribution-related purpose it deems necessary or appropriate, including: (i)
the incremental costs of printing (excluding typesetting) prospectuses,
statements of additional information, annual reports and other periodic reports
for use in connection with the offering or sale of Shares, to any prospective
investor, (ii) preparing, printing and distributing any other literature used by
the Distributor in connection with the offering of Shares for sale to the public
and the cost of administering the program, compensation to and expenses
(including overhead and telephone) of employees of the Distributor who engage in
sales support and distribution activities, (iii) compensating other persons for
providing assistance in distributing the Shares and (iv) reimbursement to the
Adviser of the Adviser's distribution-related expenses, including expenses of
employees of the Adviser who train or educate others with respect to the Fund
and the investment techniques employed to achieve the Fund's investment
objective.
(b) The schedule of such reimbursements and the basis upon which they
will be paid shall be determined from time to time by the Board. Unreimbursed
expenses of the Distributor incurred during a fiscal year of the Trust may not
be reimbursed by the Trust in subsequent fiscal years.
SECTION 3. REVIEW AND RECORDS
(a) The Trust and the Distributor shall prepare and furnish to the
Board, and the Board shall review at least quarterly, written reports setting
forth all amounts expended under the
<PAGE>
Plan by the Trust and the Distributor and identifying the activities for which
the expenditures were made.
(b) The Trust shall preserve copies of the Plan, each agreement related
to the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1 under the Act.
SECTION 4. EFFECTIVENESS; DURATION; AND TERMINATION
(a) The Plan shall become effective upon approval by (i) a vote of at
least a majority of the outstanding voting securities of the Fund and (ii) the
Board, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan (the "Qualified Trustees"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on approval of the Plan.
(b) The Plan shall remain in effect for a period of one year from the
date of its effectiveness, unless earlier terminated in accordance with this
Section, and thereafter shall continue in effect for successive twelve-month
periods, provided that such continuance is specifically approved at least
annually by the Board and a majority of the Qualified Trustees pursuant to a
vote cast in person at a meeting called for the purpose of voting on continuance
of the Plan.
(c) The Plan may be terminated without penalty at any time by a vote of
(i) a majority of the Qualified Trustees or (ii) a vote of a majority of the
outstanding voting securities of the Fund.
SECTION 5. AMENDMENT
The Plan may be amended at any time by the Board, provided that (i) any
material amendments to the Plan shall be effective only upon approval of the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on the amendment to the Plan, and
(ii) any amendment which increases materially the amount which may be spent by
the Trust pursuant to the Plan shall be effective only upon the additional
approval a majority of the outstanding voting securities of the Fund.
SECTION 6. NOMINATION OF DISINTERESTED TRUSTEES
While the Plan is in effect, the selection and nomination of the
Trustees of the Trust who are not interested persons of the Trust shall be
committed to the discretion of the Trustees of the Trust who are not interested
persons of the Trust.
SECTION 7. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.