As filed with the Securities and Exchange Commission on April 29, 1999
File Nos. 333-41461 and 811-8529
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 4
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
MEMORIAL FUNDS
Two Portland Square
Portland, Maine 04101
207-879-1900
David Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel, LLC
1200 G Street, NW
Washington, D.C. 20005
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It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[X] on April 30, 1999 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of series being registered: Trust Shares and Institutional Shares of
Government Bond Fund, Corporate Bond Fund, Value Equity Fund and Growth Equity
Fund.
<PAGE>
LOGO
MEMORIAL FUNDS
PROSPECTUS
MAY 1, 1999
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
INSTITUTIONAL SHARES
Shares of the Funds are offered to investors
without any sales charge or Rule 12b-1 (distribution) fees.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
ANY FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY.................................. XX
FEE TABLES........................................... XX
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......... XX
MANAGEMENT........................................... XX
YOUR ACCOUNT......................................... XX
How to Contact the Funds XX
General Information XX
Buying Shares XX
Selling Shares XX
Exchange Privileges XX
OTHER INFORMATION.................................... XX
FINANCIAL HIGHLIGHTS................................. XX
<PAGE>
RISK/RETURN SUMMARY
[Margin callout: CONCEPTS TO UNDERSTAND
A DEBT OR FIXED INCOME SECURITY is a security such as a bond or note
that obligates the issuer to pay the security owner a specified sum of
money at set intervals as well as repay the principal amount of the
security at its maturity
A BOND is a debt security with a long-term maturity, usually 10 years
or longer
MATURITY means the date at which a debt security is due and payable
DURATION is a measure of a security's average life that reflects the
present value of the security's cash flow. Prices of securities with
longer durations will fluctuate more in response to changes in
interest rates
UNITED STATES GOVERNMENT SECURITY is a debt security issued by the
United States or any of its agencies or instrumentalities such as the
Government National Mortgage Association
VALUE INVESTING means to invest in stocks whose prices are low
relative to stocks of comparable companies
GROWTH INVESTING means to invest in stocks of companies that have
exhibited faster than average earnings over the past few years and are
expected to continue to show high levels of profit growth
PRICE/EARNINGS RATIO means the ratio of a company's current market
capitalization divided by the previous 12 months' earnings per share
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market
COMMON STOCK is ownership shares in a corporation that are sold
initially by the corporation and then traded by investors]
GOVERNMENT BOND FUND
INVESTMENT GOAL High level of income consistent with maximum credit protection
and moderate fluctuation in principal value.
PRINCIPAL INVESTMENT STRATEGY The Fund invests under normal circumstances at
least 90 percent of its total 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 and mortgage-backed securities. The Fund invests in securities
with maturities (or average life in the case of mortgage-backed and similar
securities) ranging from overnight to 30 years. The Fund seeks to moderate
fluctuations in the price of its shares 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
INVESTMENT GOAL High level of current income consistent with capital
preservation and prudent investment risk.
PRINCIPAL INVESTMENT STRATEGY The Fund invests under normal circumstances at
least 65 percent of its total assets in corporate bonds. The Fund invests in
securities with maturities (or average life in the case of mortgage-backed and
similar securities) ranging from short-term (including overnight) to 30 years.
The Fund seeks to moderate fluctuation in the price of its shares 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 Corporate Bond
Index. At least 80 percent of the Fund's total assets will be invested in
securities that are rated, at the time of purchase, in one of the three highest
rating categories or are unrated and determined by its sub-adviser to be of
comparable quality.
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GROWTH EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund uses a "growth investing" style by
investing under normal circumstances at least 65 percent of its total assets in
the securities of domestic companies 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 only invests in companies that have a minimum market capitalization of $250
million at the time of purchase, and seeks to maintain a minimum average
weighted market capitalization of $5 billion.
VALUE EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund uses a "value investing" style by
investing under normal circumstances at least 65 percent of its total assets in
the equity securities of domestic companies that its sub-adviser believes are
under-priced relative to comparable securities determined by price/earnings
ratios, cash flows or other measures. The Fund only invests in companies that
have a minimum market capitalization of $250 million at the time of purchase and
seeks to maintain a minimum average weighted market capitalization of $5
billion.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
BOND FUNDS. You could lose money on your investment in Government Bond Fund or
Corporate Bond Fund (collectively the "Bond Funds") and either Bond Fund could
under-perform other investments. The principal risks of investing in a Bond Fund
include:
o Each Bond Fund's share price, yield and total return could fluctuate
in response to bond market movements
o The value of most bonds could fall when interest rates rise; the
longer a bond's maturity and the lower its credit quality, the more
its value typically falls
o The default of an issuer could leave the Bond Fund with unpaid
interest or principal. This risk for Corporate Bond Fund is
potentially greater as it can invest in bonds with a lower credit
rating than Government Bond Fund
o The Bond Funds may invest in mortgage-backed and other similar
securities. A decline in interest rates may result in losses in these
securities' values and a reduction in their yields as the holders of
the assets backing the securities prepay their debts
o The sub-adviser's judgment as to the value of a bond proves to be
wrong
EQUITY FUNDS. You could lose money on your investment in Growth Equity Fund or
Value Equity Fund (collectively the "Equity Funds") and either Equity Fund could
under-perform other investments. The principal risks of investing in an Equity
Fund include:
o The stock market goes down
o The stock market continues to undervalue the stocks in an Equity
Fund's portfolio
o The sub-adviser's judgment as to the value of a stock proves to be
wrong An Equity Fund's particular investment style falls out of favor
with the market
An investment in a Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency
2
<PAGE>
WHO MAY WANT TO INVEST IN THE FUNDS
You may want to purchase shares of the Bond Funds if:
o You seek income and more price stability than stocks offer
o You seek capital preservation o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Bond Funds may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
o You are pursuing a short-term goal or investing emergency reserves
You may want to purchase shares of the Equity Funds if:
o You are willing to tolerate significant changes in the value of their
investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Equity Funds may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency reserves
3
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FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in a Fund.
<TABLE>
<S> <C>
- ---------- ---------------------------------------------------------------------------- -------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Redemption Fee None
Exchange Fee None
- ---------- ---------------------------------------------------------------------------- -------------------
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ANNUAL FUND OPERATING EXPENSES(1)
(expenses that are deducted from Fund assets)
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GOVERNMENT BOND FUND
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Advisory Fees 0.28%
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Distribution (12b-1) Fees None
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Other Expenses 0.57%
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Shareholder Service Fees 0.12%
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Miscellaneous 0.45%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.85%
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Fee Waiver and Expense Reimbursement(2) 0.10%
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Net Expenses 0.75(3)%
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CORPORATE BOND FUND
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Advisory Fees 0.29%
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Distribution (12b-1) Fees None
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Other Expenses 0.47%
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Shareholder Service Fees 0.11%
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Miscellaneous 0.36%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.76%
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Fee Waiver and Expense Reimbursement(2) 0.01%
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Net Expenses 0.75(3)%
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GROWTH EQUITY FUND
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Advisory Fees 0.40%
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Distribution (12b-1) Fees None
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Other Expenses 0.79%
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Shareholder Service Fees 0.10%
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Miscellaneous 0.69%
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TOTAL ANNUAL FUND OPERATING EXPENSES 1.19%
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Fee Waiver and Expense Reimbursement(2) 0.19%
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Net Expenses 1.00%
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4
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VALUE EQUITY FUND
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Advisory Fees 0.40%
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Distribution (12b-1) Fees None
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Other Expenses 0.85%
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Shareholder Service Fees 0.10%
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Miscellaneous 0.75%
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TOTAL ANNUAL FUND OPERATING EXPENSES 1.25%
---------------------------------------------------------------------------- -------------------
Fee Waiver and Expense Reimbursement(2) 0.25%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.00%
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</TABLE>
(1) Based on amounts incurred during the Funds' fiscal year as stated as
percentage of net assets.
(2) Based on certain contractual fee waivers and expense reimbursements
that may increase after April 30, 2000.
(3) Restated to reflect current fees.
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in a Fund, a 5 percent annual return, that
the Fund's operating expenses remain the same as stated in the table above
(before waivers and reimbursements), and reinvestment of all distributions and
redemption at the end of each period. Although your actual costs may be higher
or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
------------------ ----------------- ------------------ -------------------
GOVERNMENT BOND CORPORATE BOND GROWTH EQUITY VALUE
FUND FUND FUND EQUITY FUND
----------------- ------------------ ----------------- ------------------ -------------------
After 1 year $87 $78 $121 $128
----------------- ------------------ ----------------- ------------------ -------------------
After 3 years $273 $243 $378 $398
----------------- ------------------ ----------------- ------------------ -------------------
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
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 is no assurance that the Fund will achieve this objective.
INVESTMENT STRATEGIES
The Fund invests under normal circumstances at least 90 percent of its total
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 and
mortgage-backed securities. The Fund may invest up to 10 percent of its total
assets in "investment grade" corporate debt instruments.
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 securities with maturities (or average life in the case of
mortgage-backed and similar securities) ranging from overnight to 30 years. The
Fund seeks to moderate fluctuations in the price of its shares 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
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 STRATEGIES
The Fund invests under normal circumstances at least 65 percent of its total
assets in corporate bonds. The Fund may also invest in U.S. Government
securities and mortgage-backed and other similar securities of private issuers.
At least 80 percent of the Fund's net assets 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 such as Standard and
Poor's or unrated and determined by its sub-adviser to be of comparable quality.
No more than 5 percent of the Fund's total assets will be in securities rated
below investment grade. The Fund's portfolio of corporate debt instruments will
have a minimum weighted average rating of A.
The Fund invests in securities with maturities (or average life in the case of
mortgage-backed and similar securities) ranging from short-term (including
overnight) to 30 years. The Fund seeks to moderate fluctuation in the price of
its shares 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 Corporate Bond Index.
6
<PAGE>
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.
[Margin callout: CONCEPTS TO UNDERSTAND
PREFERRED STOCK is stock containing certain rights separate from those
conferred by common stock. Preferred shares seldom carry voting rights
but pay dividends and have liquidation preference over common
shareholders
CONVERTIBLE SECURITY is a security such as preferred stock or bonds
that may be converted into a specified number of shares of common
stock]
INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing under normal circumstances
at least 65 percent of its total assets in the common stock of domestic
companies. The Fund only invests in companies having a minimum market
capitalization of $250 million at the time of purchase, and seeks to maintain a
minimum average weighted market capitalization of $5 billion.
The Fund invests 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, at the time of
purchase, are investment grade securities or, if unrated, are determined by the
sub-adviser to be of comparable quality.
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 STRATEGIES
The Fund seeks to attain its objective by investing under normal circumstances
at least 65 percent of its total assets in common stocks of domestic companies.
The Fund only invests in companies having a minimum market capitalization of
$250 million at the time of purchase, and seeks to maintain a minimum average
weighted market capitalization of $5 billion.
Using a value approach, the Fund seeks to invest in stocks that are underpriced
relative to other stocks, determined by price/earnings ratios, cash flows or
other measures. The sub-adviser relies on stock selection to achieve its
results, rather than trying to time market fluctuations. In selecting stocks,
the sub-adviser establishes valuation parameters, by using relative ratios or
target prices to evaluate companies on several levels.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that, at the
time of purchase, are investment grade or, are unrated and determined by the
sub-adviser to be of comparable quality.
7
<PAGE>
INVESTMENT RISKS
GENERALLY
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 have 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 the issuer's worth. Certain investments and investment
techniques, however, have additional risks, such as the potential use of
leverage by certain Funds through borrowings, securities lending, and other
investment techniques.
BOND FUNDS. The value of your investment in a Bond Fund may change in response
to changes in interest rates. An increase in interest rates typically causes a
fall in the value of the fixed income securities in which these Funds invest.
Your investment in 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 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. An additional risk is that issuers
will prepay fixed rate securities when interest rates fall, forcing the Fund to
invest in securities with lower interest rates than the prepaid securities. For
a Bond Fund investing in mortgage-backed and similar securities, there is also
the risk that a decline in interest rates may result in holders of the assets
backing the securities to prepay their debts, resulting in potential losses in
these securities' value and yield. Alternatively, rising interest rates may
reduce the amount of prepayments on the assets backing these securities, causing
the Fund's average maturity to rise and increasing the Fund's potential for
losses in value.
EQUITY FUNDS. The Equity Funds may be appropriate investments if you are seeking
long-term growth in your investment, and are willing to tolerate significant
fluctuations in the value of your 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. The investment style for either or both
Equity Funds could fall out of favor with the market. In other words, if
investors lose interest in "growth" stocks, then the net asset value of the
Growth Equity Fund could also decrease. Likewise, if "value" stocks decrease in
value, there could be a corresponding drop in the net asset value of the Value
Equity Fund.
TEMPORARY DEFENSIVE POSITION The Funds may hold cash or cash equivalents such as
high quality money market instruments, pending investment and to retain
flexibility in meeting redemptions and paying expenses. In addition, in order to
respond to adverse market, economic or other conditions, the Funds may assume a
temporary defensive position and invest without limit in these instruments. As a
result, the Funds may be unable to achieve their investment objectives.
MANAGEMENT
The business of Memorial Funds (the "Trust") and each Fund 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 Funds'
performance, monitor investment activities and practices, and discuss other
matters affecting the Funds. Additional information regarding the Trustees, as
well as executive officers, may be found in the Statement of Additional
Information ("SAI").
ADVISER
Forum Investment Advisors, LLC (the "Adviser"), Two Portland Square, Portland,
Maine 04101, serves as investment adviser to the Funds. 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
8
<PAGE>
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, the Adviser receives an advisory fee at
an annual rate of 0.35 percent of the average daily net assets of the Value
Equity Fund and Growth Equity Fund and 0.23 percent of the average daily net
assets of the Corporate Bond Fund and Government Bond Fund.
INVESTMENT CONSULTANT
To assist it in carrying out its responsibilities, the Adviser has retained
Wellesley Group, Inc., 800 South Street, Waltham, Massachusetts 02154, to
provide data with which the Adviser and the Board can monitor and evaluate the
performance of the Funds and the sub-advisers.
SUB-ADVISERS/PORTFOLIO MANAGERS
The Adviser has retained the following sub-advisers to render advisory services
and make daily investment decisions for each Fund. The day-to-day management of
each Fund is performed by a portfolio manager employed by each sub-adviser to
that Fund. Each sub-adviser is registered or is exempt from registration as an
investment adviser under the Investment Advisers Act of 1940. The sub-adviser
for each Fund and its portfolio manager's business experience and educational
background follow:
The Northern Trust Company ("NTC"), 50 South LaSalle Street, Chicago, Illinois
60675, manages the portfolio of the Government Bond Fund. NTC presently manages
approximately $236 billion in assets for endowments and foundations,
corporations, public funds and insurance companies. Mr. Monty Memler, CFA, is
the Fund's portfolio manager. He is a Vice President and a senior portfolio
manager for NTC and has been a member of the NTC fixed income team since 1990.
Mr. Memler holds a Masters in Business Administration from the University
of Chicago.
Conseco Capital Management, Inc. ("CCM"), 11825 N. Pennsylvania Street, Carmel,
Indiana 46032, manages the portfolio of the Corporate Bond Fund. CCM presently
manages approximately $35 billion for individuals, corporations, insurance
companies, investment companies, pension plans, trusts, estates, as well as
charitable organizations including foundations and endowments. Mr. Gregory Hahn,
CFA, is the Fund's portfolio manager. He has been a Senior Vice President of CCM
since 1989. Mr. Hahn holds a Masters in Business Administration from Indiana
University.
Davis Hamilton Jackson & Associates, L.P. ("DHJA"), Two Houston Center, 909
Fannin Street, Suite 550, Houston, Texas 77010, manages the portfolio of the
Growth Equity Fund. DHJA currently manages approximately $3.5 billion for
institutions and high net worth individuals and invests primarily in domestic
equity securities. Mr. J. Patrick Clegg, CFA, is the Fund's portfolio manager.
Prior to joining DHJA as a portfolio manager, he was a Principal and Director of
Research at Luther King Capital Management in Fort Worth, Texas from 1991 to
1996. Mr. Clegg holds a Masters in Business Administration from the University
of Texas.
Beutel, Goodman Capital Management ("BGCM"), 5847 San Felipe, Suite 4500,
Houston, Texas 77057-3011, manages the portfolio of the Value Equity Fund. BGCM
currently manages approximately $1.5 billion in assets. Mr. John Philip Ferguson
is the Fund's portfolio manager. He has served as Vice President and a member of
the Investment Committee of BGCM since 1988. Mr. Ferguson received his Juris
Doctor from the University of Texas Law School.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
the Funds. As of March 31, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $53 billion.
9
<PAGE>
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Funds' shares. The distributor acts as the agent of Memorial
Funds in connection with the offering of shares of the Funds. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of shares of the Funds.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Funds' transfer
agent.
SHAREHOLDER SERVICES PLAN
The Trust has adopted a shareholder services plan permitting the Trust to
compensate financial institutions for acting as shareholder servicing agents for
their customers. Under this plan, the Trust has entered into an agreement with
Memorial Group, Inc., a corporation of which Christopher W. Hamm, the Chairman
of the Board and President of the Trust, is the sole shareholder. Memorial
Group, Inc. performs certain shareholder services not provided by the Funds'
transfer agent and is paid fees at an annual rate of 0.15 percent of the average
daily net assets of the shares of Growth Equity Fund and Value Equity Fund and
0.17 percent of the average daily net assets of the shares of Government Bond
Fund and Corporate Bond Fund owned by investors for which the Memorial Group,
Inc. maintains a servicing relationship.
FUND EXPENSES
The Funds pay for all of their expenses. Each Fund's expenses are comprised of
expenses attributable to the particular Fund as well as expenses not
attributable to any particular Fund that are allocated among the Funds. The
Adviser or other service providers may waive all or any portion of their fees,
which are accrued daily and paid monthly. Any waiver would have the effect of
increasing a Fund's performance for the period during which the waiver was in
effect.
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Write to us at:
Memorial Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(888) 263-5593
Wire investments (or ACH payments) to us at:
Bank Boston
Boston, Massachusetts
ABA #011000390 For Credit to:
Forum Shareholder Services, LLC
Account # 541-54171
Memorial Funds
(Your Name)
(Your Account Number)
(Your Social Security number or tax identification)
10
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GENERAL INFORMATION
You pay no sales charge to purchase or sell (redeem) shares of the Funds. The
Funds purchase and sell shares at the net asset value per share or NAV next
calculated after the Transfer Agent receives your purchase request in proper
form. For instance, if the Transfer Agent receives your purchase request in
proper form prior to 4 p.m., your transaction will be priced at that day's NAV.
If the Transfer Agent receives your purchase request after 4 p.m., your
transaction will be priced at the next day's NAV. The Funds will not accept
orders that request a particular day or price for the transaction or any other
special conditions.
The Funds do not issue share certificates.
You will receive annual statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
The Funds reserve the right to impose minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED. Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or if the Exchange closes
early. The Funds' NAV is determined by taking the market value of all securities
owned by the fund (plus all other assets such as cash), subtracting all
liabilities and then dividing the result (net assets) by the number of shares
outstanding. The Funds value securities for which market quotations are readily
available at current market value. If market quotations are not readily
available, the Funds value securities at fair value.
TRANSACTIONS THROUGH THIRD PARTIES. If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Funds. Banks, brokers, retirement plans and
financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
BUYING SHARES
All investments must be in U.S. dollars and checks must be drawn on U.S. banks.
CHECKS. For individual or UGMA accounts, the check must be made payable
to "Memorial Funds" or to one or more owners of the account and
endorsed to "Memorial Funds." For all other accounts, the check must be
made payable on its face to "Memorial Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
ACH PAYMENT. Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days. Your financial institution may charge you a fee for this
service.
WIRES. Instruct your financial institution to make a Federal Funds
wire payment to us. Your financial institution may charge you a fee
for this service.
11
<PAGE>
MINIMUM INVESTMENTS. The Funds accept payments in the following minimum amounts:
<TABLE>
<S> <C> <C>
------------------------- --------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
-------------------------------------- ------------------------- --------------------------
Standard Minimums $10,000,000 None
-------------------------------------- ------------------------- --------------------------
</TABLE>
Management of the Funds may choose to waive the investment minimum.
<TABLE>
<CAPTION>
ACCOUNT REQUIREMENTS
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TYPE OF ACCOUNT REQUIREMENT
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Joint accounts can have two or more owners
Individual accounts are owned by one person, as are sole (tenants)
proprietorship accounts. o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as each name appears on the account
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give money custodial account under the Uniform Gift to Minors
to a child and obtain tax benefits. You can give up to Act or the Uniform Transfers to Minors Act
$10,000 a year per child without paying Federal gift tax. o The trustee must sign instructions in a manner
indicating trustee capacity
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
CORPORATIONS AND PARTNERSHIPS o For corporations, provide a corporate
resolution signed by an authorized person with a
signature guarantee
o For partnerships, provide a certification for
a partnership agreement, or the pages from the
partnership agreement that identify the general
partners
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
TRUSTS o The trust must be established before an
account can be opened
o Provide a certification for trust, or the
pages from the trust document that identify the
trustees
- ------------------------------------------------------------ ---------------------------------------------------------
INVESTMENT PROCEDURES
- ------------------------------------------------------------ ---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a confirmation statement Or
o Complete the application o Write a letter to us
o Mail us your application and a check o Write your account number on your check.
o Mail us the slip (or your letter) and a check
BY WIRE
o Call or write us for an account application
o Complete the application BY WIRE
o Call to notify us of your incoming wire
o Call us and you will be assigned an account number o Instruct your bank to wire your money to us
o Mail us your application
o Instruct your bank to wire your money to us
BY ACH PAYMENT
o Call or write us for an account application
o Complete the application
o Call us and you will be assigned an account number
o Mail us your application
o Make an ACH payment
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
12
<PAGE>
LIMITATIONS ON PURCHASES. The Funds reserve the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Funds or their operations. This includes those from any individual or group
who, in the Funds' view, are likely to engage in excessive trading (usually
defined as more than four exchanges out of a Fund within a calendar year).
CANCELED OR FAILED PAYMENTS. The Funds accept checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or you
pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Funds or the Transfer Agent, and the Funds may redeem shares you own in the
account (or another identically registered account in any Fund) as
reimbursement. The Funds and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
The Funds process redemption orders promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the Funds
have not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
- --------------------------------------------------------------------------------
TO SELL SHARES FROM YOUR ACCOUNT
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send your proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire requests are only available if:
o You have elected wire redemption privileges AND
o Your request is for $5,000 or more
o Call us with your request (if you have elected telephone redemption
privileges - See "By Telephone") Or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Telephone requests are only available if you have elected telephone
redemption privileges.
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you Or
o Wired to you (if you have elected wire redemption privileges - See "By
Wire")
- --------------------------------------------------------------------------------
TELEPHONE REDEMPTION PRIVILEGES. You may only request your shares by telephone
if you elect telephone redemption privileges on your account application or a
separate form. You may be responsible for any fraudulent telephone order as long
as the Transfer Agent takes reasonable measures to verify the order.
13
<PAGE>
WIRE REDEMPTION PRIVILEGES. You may only request your shares by wire if you
elect wire redemption privileges on your account application or a separate form.
The minimum amount you may request by wire is $5,000. If you wish to make your
wire request by telephone, you must also elect telephone redemption privileges.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." For requests
made in writing, a signature guarantee is required for any of the following:
o Redemption of over $50,000 worth of shares
o Changes to a shareholder's record name or address
o Redemption from an account for which the address or account
registration has changed within the last 30 days
o Sending proceeds to any person, address, brokerage firm or bank
account not on record
o Sending proceeds to an account with a different registration (name or
ownership) from yours
o Changes to distribution, telephone requests or exchange option or any
other election in connection with your account
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
SMALL ACCOUNTS. If the value of your account falls below $10,000,000, the Funds
may ask you to increase your balance. If the account value is still below
$10,000,000 after 60 days, the Funds may close your account and send you the
proceeds. The Funds will not close your account if it falls below these amounts
solely as a result of a reduction in your account's market value.
REDEMPTION IN KIND. The Funds reserve the right to make redemptions "in kind" --
payment of redemption proceeds in portfolio securities rather than cash --if the
amount requested is large enough to affect Funds operations (for example, if it
represents more than 1 percent of the fund's assets).
LOST ACCOUNTS. The Transfer Agent will consider your account "lost" if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is "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.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy Institutional Shares of any other Fund,
also known as an exchange, by telephone or in writing. You may also exchange
Fund shares for Institutional class shares of Daily Assets Treasury Fund (a
series of the Forum Funds). Because exchanges are treated as a sale and
purchase, they may have tax consequences.
REQUIREMENTS. Exchanges may be made only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Funds reserve the right to limit exchanges. See "Investment
Procedures - Limitations on Purchases."
14
<PAGE>
- --------------------------------------------------------------------------------
HOW TO EXCHANGE
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds from which you are exchanging into and out of
o The dollar amount or number of shares you want to sell (and exchange)
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Telephone exchanges are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
- --------------------------------------------------------------------------------
15
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Distributions of net investment income are declared daily and paid monthly by
the Bond Funds and are declared and paid quarterly by the Equity Funds. Any net
capital gain realized by a Fund will be distributed at least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund intends to operate in a manner so that it will not be liable for
Federal income or excise tax.
Distributions of net investment income or short-term capital gain are taxable to
you as ordinary income. Distributions of long-term capital gain are taxable to
you as long-term capital gain regardless of how long you have held your shares.
Distributions may also be subject to state and local taxes.
Distributions of capital gain and the Equity Funds' distribution of net
investment income reduce the net asset value of the Funds' shares by the amount
of the distribution. If you purchase shares prior to these distributions, you
are taxed on the distribution even though the distribution represents a return
of your investment.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
The Funds will mail reports containing information about the Funds'
distributions during the year to you after December 31 of each year.
Consult your tax adviser about the Federal, state and local tax consequences in
your particular circumstances.
ORGANIZATION
Memorial Funds is a Delaware business trust that is registered with the SEC as
an open-end, management investment company (a "mutual fund"). The Funds are
series of Memorial Funds. It is not intended that meetings of shareholders be
held except when required by Federal or Delaware law. All shareholders of each
Fund are entitled to vote at shareholders' meetings unless a matter is
determined to affect only a specific Fund (such as approval of an advisory
agreement for a Fund.) From time to time, large shareholders may control a Fund
or Memorial Funds.
CORE AND GATEWAY(R)
Each Fund may seek to achieve its investment objective by investing all of its
assets in shares of another diversified, open-end management investment company
that has an investment objective and investment policies substantially similar
to that of the Fund.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1, 2000. The Funds' adviser and administrator are addressing
this matter for their systems. The Funds' other service providers have informed
the Funds that they are taking similar measures. This matter, if not corrected,
could adversely affect the services provided to the Funds or the companies in
which the Funds invest and, therefore, could lower the value of your shares.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the Funds' Institutional
shares financial performance. Total return in the table represents the rate an
investor would have earned (or lost) on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
Peat Marwick LLP. The Funds' financial statements and the auditor's report are
included in the Annual Report, which is available upon request, without charge.
<TABLE>
<S> <C> <C> <C> <C>
GOVERNMENT CORPORATE GROWTH VALUE
BOND FUND BOND FUND EQUITY FUND EQUITY FUND
Year Ended Year Ended Year Ended Year Ended
12/31/98(1) 12/31/98(1) 12/31/98(1) 12/31/98(1)
-------------- -------------- ------------- -------------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $10.00 $10.00 $10.00 $10.00
Income From Investment Operations
Net investment income 0.39 0.43 0.01 0.03
Net gain (loss) on securities (realized and 0.39 0.30 2.09 (0.81)
unrealized)
Total From Investment Operations 0.78 0.73 2.10 (0.78)
Less Distributions
From net investment income (0.39) (0.43) (0.01) (0.03)
From capital gain (0.14) (0.21) (0.60) -
Total Distributions (0.53) (0.64) (0.61) (0.03)
Ending Net Asset Value $10.25 $10.09 $11.49 $9.19
OTHER INFORMATION
Ratios to Average Net Assets(2):
Expenses 0.73% 0.63% 1.00% 1.00%
Expenses (gross) (3) 0.85% 0.76% 1.19% 1.25%
Net Investment Income 5.05% 5.60% 0.16% 0.59%
Total Return 7.96% 7.50% 20.97% (7.76%)
Portfolio Turnover Rate 113.50% 377.36% 135.38% 36.95%
Net Assets at End of Period (in thousands) $65,676 $137,338 $26,426 $30,670
</TABLE>
(1) Institutional Shares of the Funds commenced operations on the following
dates: Government Bond Fund - March 29, 1998; Corporate Bond Fund - March
25, 1998; Growth Equity Fund - March 29, 1998 and Value Equity Fund - March
29, 1998.
(2) Annualized.
(3) Reflects expense ratio in absence of expense reimbursements and fee
waivers.
17
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION LOGO
The following documents are available free upon request:
GOVERNMENT BOND FUND
ANNUAL/SEMI-ANNUAL REPORTS CORPORATE BOND FUND
Additional information about the Funds' investments is available in the GROWTH EQUITY FUND
Funds' annual and semi-annual reports to shareholders. In each Fund's VALUE EQUITY FUND
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performances
during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI") The SAI provides
more detailed information about the Funds and is
incorporated by reference into this Prospectus.
You can get free copies of both reports and the SAI, request other
information and discuss your questions about the Funds by contacting your
broker or the Funds at:
Memorial Funds
Two Portland Square
Portland, Maine 04101
888-263-5593
You can also review the Funds' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get copies, for a
fee, by writing to or calling the following:
Public Reference Room
Securities and Exchange Commission Memorial Funds
Washington, D.C. 20549-6009 P.O. Box 446
Telephone: 800-SEC-0330 Portland, ME 04112
888-263-5593
Free copies are available from the Commission's Internet
website at http://www.sec.gov.
Investment Company Act File No. 811-9034.
</TABLE>
<PAGE>
LOGO
MEMORIAL FUNDS
PROSPECTUS
MAY 1, 1999
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
TRUST SHARES
Shares of the Funds are offered to investors
without any sales charge.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED ANY FUND'S SHARES OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY........................................ XX
PERFORMANCE................................................ XX
FEE TABLES................................................. XX
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS................ XX
MANAGEMENT................................................. XX
YOUR ACCOUNT............................................... XX
How to Contact the Funds XX
General Information XX
Buying Shares XX
Selling Shares XX
Exchange Privileges XX
Retirement Accounts XX
OTHER INFORMATION.......................................... XX
FINANCIAL HIGHLIGHTS....................................... XX
<PAGE>
25
RISK/RETURN SUMMARY
[Margin callout: CONCEPTS TO UNDERSTAND
A DEBT OR FIXED INCOME SECURITY is a security such as a bond or note
that obligates the issuer to pay the security owner a specified sum of
money at set intervals as well as repay the principal amount of the
security at its maturity
A BOND is a debt security with a long-term maturity, usually 10 years
or longer
MATURITY means the date at which a debt security is due and payable
DURATION is a measure of a security's average life that reflects the
present value of the security's cash flow. Prices of securities with
longer durations will fluctuate more in response to changes in interest
rates
UNITED STATES GOVERNMENT SECURITY is a debt security issued by the
United States or any of its agencies or instrumentalities such as the
Government National Mortgage Association
VALUE INVESTING means to invest in stocks whose prices are low relative
to stocks of comparable companies
GROWTH INVESTING means to invest in stocks of companies that have
exhibited faster than average earnings over the past few years and are
expected to continue to show high levels of profit growth
PRICE/EARNINGS RATIO means the ratio of a company's current market
capitalization divided by the previous 12 months' earnings per share
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market
COMMON STOCK is ownership shares in a corporation that are sold
initially by the corporation and then traded by investors]
GOVERNMENT BOND FUND
INVESTMENT GOAL High level of income consistent with maximum credit protection
and moderate fluctuation in principal value.
PRINCIPAL INVESTMENT STRATEGY The Fund invests under normal circumstances at
least 90 percent of its total 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 and mortgage-backed securities. The Fund invests in securities
with maturities (or average life in the case of mortgage-backed and similar
securities) ranging from overnight to 30 years. The Fund seeks to moderate
fluctuations in the price of its shares 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
INVESTMENT GOAL High level of current income consistent with capital
preservation and prudent investment risk.
PRINCIPAL INVESTMENT STRATEGY The Fund invests under normal circumstances at
least 65 percent of its total assets in corporate bonds. The Fund invests in
securities with maturities (or average life in the case of mortgage-backed and
similar securities) ranging from short-term (including overnight) to 30 years.
The Fund seeks to moderate fluctuation in the price of its shares 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 Corporate Bond
Index. At least 80 percent of the Fund's total assets will be invested in
securities that are rated, at the time of purchase, in one of the three highest
rating categories or are unrated and determined by its sub-adviser to be of
comparable quality.
1
<PAGE>
GROWTH EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund uses a "growth investing" style by
investing under normal circumstances at least 65 percent of its total assets in
the securities of domestic companies 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 only invests in companies that have a minimum market capitalization of $250
million at the time of purchase, and seeks to maintain a minimum average
weighted market capitalization of $5 billion.
VALUE EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund uses a "value investing" style by
investing under normal circumstances at least 65 percent of its total assets in
the equity securities of domestic companies that its sub-adviser believes are
under-priced relative to comparable securities determined by price/earnings
ratios, cash flows or other measures. The Fund only invests in companies that
have a minimum market capitalization of $250 million at the time of purchase and
seeks to maintain a minimum average weighted market capitalization of $5
billion.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
BOND FUNDS. You could lose money on your investment in Government Bond Fund or
Corporate Bond Fund (collectively the "Bond Funds") and either Bond Fund could
under-perform other investments. The principal risks of investing in a Bond Fund
include:
o Each Bond Fund's share price, yield and total return could fluctuate
in response to bond market movements
o The value of most bonds could fall when interest rates rise; the
longer a bond's maturity and the lower its credit quality, the more
its value typically falls
o The default of an issuer could leave the Bond Fund with unpaid
interest or principal. This risk for Corporate Bond Fund is
potentially greater as it can invest in bonds with a lower credit
rating than Government Bond Fund
o The Bond Funds may invest in mortgage-backed and similar securities. A
decline in interest rates may result in losses in these securities'
values and a reduction in their yields as the holders of theassets
backing the securities prepay their debts
o The sub-adviser's judgment as to the value of a bond proves to be
wrong
EQUITY FUNDS. You could lose money on your investment in the Growth Equity Fund
or Value Equity Fund (collectively the "Equity Funds"), or either Equity Fund
could under-perform other investments. The principal risks of investing in an
Equity Fund include:
o The stock market goes down
o The stock market continues to undervalue the stocks in an Equity
Fund's portfolio
o The sub-adviser's judgment as to the value of a stock proves to be
wrong
o An Equity Fund's particular investment style falls out of favor with
the market
An investment in a Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
2
<PAGE>
WHO MAY WANT TO INVEST IN THE FUNDS
You may want to purchase shares of the Bond Funds if:
o You seek income and more price stability than stocks offer
o You seek capital preservation
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Bond Funds may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
o You are pursuing a short-term goal or investing emergency reserves
You may want to purchase shares of the Equity Funds if :
o You are willing to tolerate significant changes in the value of their
investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Equity Funds may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency reserves
3
<PAGE>
FEE
TABLES
The following tables describe the fees and expenses that you will pay if you
invest in a Fund.
<TABLE>
<S> <C>
- ---------- ---------------------------------------------------------------------------- -------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Redemption Fee None
Exchange Fee None
- ---------- ---------------------------------------------------------------------------- -------------------
---------------------------------------------------------------------------- -------------------
ANNUAL FUND OPERATING EXPENSES(1)
(expenses that are deducted from Fund assets)
---------------------------------------------------------------------------- -------------------
GOVERNMENT BOND FUND(2)
---------------------------------------------------------------------------- -------------------
Advisory Fees 0.29%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1) Fees 0.25%
---------------------------------------------------------------------------- -------------------
Other expenses 0.47%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.01%
---------------------------------------------------------------------------- -------------------
CORPORATE BOND FUND(2)
---------------------------------------------------------------------------- -------------------
Advisory Fees 0.29%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1) Fees 0.25%
---------------------------------------------------------------------------- -------------------
Other Expenses 0.47%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.01%
---------------------------------------------------------------------------- -------------------
GROWTH EQUITY FUND
---------------------------------------------------------------------------- -------------------
Advisory Fees 0.41%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1) Fees 0.25%
---------------------------------------------------------------------------- -------------------
Other Expenses 1.62%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.29%
---------------------------------------------------------------------------- -------------------
Fee Waiver and Expense Reimbursement (3) 1.04%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.25%
---------------------------------------------------------------------------- -------------------
---------------------------------------------------------------------------- -------------------
VALUE EQUITY FUND
---------------------------------------------------------------------------- -------------------
Advisory Fees 0.41%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1) Fees 0.25%
---------------------------------------------------------------------------- -------------------
Other Expenses 1.74%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.40%
---------------------------------------------------------------------------- -------------------
Fee Waiver and Expense Reimbursement(3) 1.15%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.25%
---------------------------------------------------------------------------- -------------------
</TABLE>
(1) Based on amounts incurred during the Funds' fiscal year as stated as
percentage of net assets.
(2) As of May 1, 1999, Trust Shares of this Fund were not being offered
for sale. Operating expenses shown are estimates.
(3) Based on certain contractual fee waivers and expense reimbursements
that may increase after April 30, 2000.
4
<PAGE>
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in a Fund, a 5 percent annual return, that
the Fund's operating expenses remain the same as stated in the table above
(before waivers and reimbursements), and reinvestment of all distributions and
redemption at the end of each period. Although your actual costs may be higher
or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
---------------- ----------------- ---------------- -----------------
GOVERNMENT CORPORATE BOND GROWTH EQUITY VALUE
BOND FUND FUND FUND EQUITY FUND
------------------- ---------------- ----------------- ---------------- -----------------
After 1 year $103 $103 $233 $243
------------------- ---------------- ----------------- ---------------- -----------------
After 3 years $322 $322 $717 $748
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
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 is no assurance that the Fund will achieve this objective.
INVESTMENT STRATEGIES
The Fund invests under normal circumstances at least 90 percent of its total
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 and
mortgage-backed securities. The Fund may invest up to 10 percent of its total
assets in "investment grade" corporate debt instruments.
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 securities with maturities (or average life in the case of
mortgage-backed and similar securities) ranging from overnight to 30 years. The
Fund seeks to moderate fluctuations in the price of its shares 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
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 STRATEGIES
The Fund invests under normal circumstances at least 65 percent of its total
assets in corporate bonds. The Fund may also invest in U.S. Government
securities and mortgage-backed and other similar securities of private issuers.
At least 80 percent of the Fund's total assets 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 such as Standard and
Poor's or unrated and determined by its sub-adviser to be of comparable quality.
No more than 5 percent of the Fund's total assets will be in securities rated
below investment grade. The Fund's portfolio of corporate debt instruments will
have a minimum weighted average rating of A.
The Fund invests in securities with maturities (or average life in the case of
mortgage-backed and similar securities) ranging from short-term (including
overnight) to 30 years. The Fund seeks to moderate fluctuation in the price of
its shares 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 Corporate Bond Index.
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.
6
<PAGE>
[Margin callout: CONCEPTS TO UNDERSTAND
PREFERRED STOCK is stock containing certain rights separate from those
conferred by common stock. Preferred shares seldom carry voting rights
but pay dividends and have liquidation preference over common
shareholders
CONVERTIBLE SECURITY is a security such as preferred stock or bonds
that may be converted into a specified number of shares of common
stock]
INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing under normal circumstances
at least 65 percent of its total assets in the common stock of domestic
companies. The Fund only invests in companies having a minimum market
capitalization of $250 million at the time of purchase, and seeks to maintain a
minimum average weighted market capitalization of $5 billion.
The Fund invests 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, at the time of
purchase, are investment grade securities or, if unrated, are determined by the
sub-adviser to be of comparable quality.
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 STRATEGIES
The Fund seeks to attain its objective by investing under normal circumstances
at least 65 percent of its total assets in common stocks of domestic companies.
The Fund only invests in companies having a minimum market capitalization of
$250 million at the time of purchase, and seeks to maintain a minimum average
weighted market capitalization of $5 billion.
Using a value approach, the Fund seeks to invest in stocks that are underpriced
relative to other stocks, determined by price/earnings ratios, cash flows or
other measures. The sub-adviser relies on stock selection to achieve its
results, rather than trying to time market fluctuations. In selecting stocks,
the sub-adviser establishes valuation parameters, by using relative ratios or
target prices to evaluate companies on several levels.
The Fund may also invest in preferred stocks and securities convertible into
common stock. The Fund will only purchase convertible securities that, at the
time of purchase, are investment grade or, are unrated and are determined by the
sub-adviser to be of comparable quality.
7
<PAGE>
INVESTMENT RISKS
GENERALLY
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 have 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 the issuer's worth. Certain investments and investment
techniques, however, have additional risks, such as the potential use of
leverage by certain Funds through borrowings, securities lending, and other
investment techniques.
BOND FUNDS. The value of your investment in a Bond Fund may change in response
to changes in interest rates. An increase in interest rates typically causes a
fall in the value of the fixed income securities in which these Funds invest.
Your investment in 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 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. An additional risk is that issuers
will prepay fixed rate securities when interest rates fall, forcing the Fund to
invest in securities with lower interest rates than the prepaid securities. For
a Bond Fund investing in mortgage-backed and similar securities, there is also
the risk that a decline in interest rates may result in holders of the assets
backing the securities to prepay their debts, resulting in potential losses in
these securities' values and yield. Alternatively, rising interest rates may
reduce the amount of prepayments on the assets backing these securities, causing
the Fund's average maturity to rise and increasing the Fund's potential for
losses in value.
EQUITY FUNDS. The Equity Funds may be appropriate investments if you are seeking
long-term growth in your investment, and are willing to tolerate significant
fluctuations in the value of your 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. The investment style for either or both
Equity Funds could fall out of favor with the market. In other words, if
investors lose interest in "growth" stocks, then the net asset value of the
Growth Equity Fund could also decrease. Likewise, if "value" stocks decrease in
value, there could be a corresponding drop in the net asset value of the Value
Equity Fund.
TEMPORARY DEFENSIVE POSITION The Funds may hold cash or cash equivalents such as
high quality money market instruments, pending investment and to retain
flexibility in meeting redemptions and paying expenses. In addition, in order to
respond to adverse market, economic or other conditions, the Funds may assume a
temporary defensive position and invest without limit in these instruments. As a
result, the Funds may be unable to achieve their investment objectives.
MANAGEMENT
The business of Memorial Funds (the "Trust") and each Fund 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 Funds'
performance, monitor investment activities and practices, and discuss other
matters affecting the Funds. Additional information regarding the Trustees, as
well as executive officers, may be found in the Statement of Additional
Information ("SAI").
8
<PAGE>
ADVISER
Forum Investment Advisors, LLC (the "Adviser"), Two Portland Square, Portland,
Maine 04101, serves as investment adviser to the Funds. 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, the Adviser receives an advisory fee at
an annual rate of 0.35 percent of the average daily net assets of the Value
Equity Fund and Growth Equity Fund and 0.23 percent of the average daily net
assets of the Corporate Bond Fund and Government Bond Fund.
INVESTMENT CONSULTANT
To assist it in carrying out its responsibilities, the Adviser has retained
Wellesley Group, Inc., 800 South Street, Waltham, Massachusetts 02154, to
provide data with which the Adviser and the Board can monitor and evaluate the
performance of the Funds and the sub-advisers.
SUB-ADVISERS/PORTFOLIO MANAGERS
The Adviser has retained the following sub-advisers to render advisory services
and make daily investment decisions for each Fund. The day-to-day management of
each Fund is performed by a portfolio manager employed by each sub-adviser to
that Fund. Each sub-adviser is registered or is exempt from registration as an
investment adviser under the Investment Advisers Act of 1940. The sub-adviser
for each Fund and its portfolio manager's business experience and educational
background follow:
The Northern Trust Company ("NTC"), 50 South LaSalle Street, Chicago, Illinois
60675, manages the portfolio of the Government Bond Fund. NTC presently manages
approximately $236 billion in assets for endowments and foundations,
corporations, public funds and insurance companies. Mr. Monty Memler, CFA, is
the Fund's portfolio manager. He is a Vice President and a senior portfolio
manager for NTC and has been a member of the NTC fixed income team since 1990.
Mr. Memler holds a Masters in Business Administration from the University of
Chicago.
Conseco Capital Management, Inc. ("CCM"), 11825 N. Pennsylvania Street, Carmel,
Indiana 46032, manages the portfolio of the Corporate Bond Fund. CCM presently
manages approximately $35 billion for individuals, corporations, insurance
companies, investment companies, pension plans, trusts, estates, as well as
charitable organizations including foundations and endowments. Mr. Gregory Hahn,
CFA, is the Fund's portfolio manager. He has been a Senior Vice President of CCM
since 1989 Mr. Hahn holds a Masters in Business Administration from Indiana
University.
Davis Hamilton Jackson & Associates, L.P. ("DHJA"), Two Houston Center, 909
Fannin Street, Suite 550, Houston, Texas 77010, manages the portfolio of the
Growth Equity Fund. DHJA currently manages approximately $3.5 billion for
institutions and high net worth individuals and invests primarily in domestic
equity securities. Mr. J. Patrick Clegg, CFA, is the Fund's portfolio manager.
Prior to joining DHJA as a portfolio manager, he was a Principal and Director of
Research at Luther King Capital Management in Fort Worth, Texas from 1991 to
1996. Mr. Clegg holds a Masters in Business Administration from the University
of Texas.
Beutel, Goodman Capital Management ("BGCM"), 5847 San Felipe, Suite 4500,
Houston, Texas 77057-3011, manages the portfolio of the Value Equity Fund. BGCM
currently manages approximately $1.5 billion in assets. Mr. John Philip
Ferguson, is the Fund's portfolio manager. He has served as Vice President and a
member of the Investment Committee of BGCM since 1988. Mr. Ferguson received his
Juris Doctor from the University of Texas Law School.
9
<PAGE>
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
the Funds. As of March 31, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $53 billion.
Forum Fund Services, LLC, ("FFS") a registered broker-dealer and member of the
National Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Funds' shares. The distributor acts as the agent of Memorial
Funds in connection with the offering of shares of the Funds. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of shares of the Funds.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Funds' transfer
agent.
DISTRIBUTION EXPENSES
Each Fund has a distribution plan adopted under SEC Rule 12b-1 that allows the
Fund to pay asset-based sales charges or distribution fees for the distribution
and sale of its shares. These fees are charged at an annual rate of 0.25 percent
of the average daily net assets of each Fund. Because these fees are paid out of
a Fund's assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges. These fees are paid to Memorial Group, Inc., a corporation of which
Christopher W. Hamm, the Chairman of the Board and President of the Trust, is
the sole shareholder. Memorial Group, Inc. shall not be paid its fee to the
extent that the Funds' expense ratios exceed the Total Annual Fund Operating
Expenses listed in the Fee Tables on page XX.
FUND EXPENSES
The Funds pay for all of their expenses. Each Fund's expenses are comprised of
expenses attributable to the particular Fund as well as expenses not
attributable to any particular Fund that are allocated among the Funds. The
Adviser or other service providers may waive all or any portion of their fees,
which are accrued daily and paid monthly. Any waiver would have the effect of
increasing a Fund's performance for the period during which the waiver was in
effect.
10
<PAGE>
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Write to us at:
Memorial Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(888) 263-5593
Wire investments (or ACH payments) to us at:
Bank Boston
Boston, Massachusetts
ABA #011000390 For Credit to:
Forum Shareholder Services, LLC
Account # 541-54171
Memorial Funds
(Your Name)
(Your Account Number)
(Your Social Security number or tax identification number)
GENERAL INFORMATION
You pay no sales charge to purchase or sell shares of the Funds. The Funds
purchase and sell (or redeem) shares at the net asset value per share or NAV
next calculated after the Transfer Agent receives your purchase request in
proper form. For instance, if the Transfer Agent receives your purchase request
in proper form prior to 4 p.m., your transaction will be priced at that day's
NAV. If the Transfer Agent receives your purchase request after 4 p.m., your
transaction will be priced at the next day's NAV. The Funds will not accept
orders that request a particular day or price for the transaction or any other
special conditions.
The Funds do not issue share certificates.
You will receive annual statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
The Funds reserve the right to impose minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED. Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or if the Exchange closes
early. The Funds' NAV is determined by taking the market value of all securities
owned by the Fund (plus all other assets such as cash), subtracting all
liabilities and then dividing the result (net assets) by the number of shares
outstanding. The Funds value securities for which market quotations are readily
available at current market value. If market quotations are not readily
available, the Funds value securities at fair value.
TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Funds. Banks, brokers,
11
<PAGE>
retirement plans and financial advisers may charge transaction fees and may set
different minimum investments or limitations on buying or selling shares.
Consult a representative of your financial institution or retirement plan for
further information.
BUYING SHARES
All investments must be in U.S. dollars and checks must be drawn on U.S. banks.
CHECKS. For individual or UGMA accounts, the check must be made payable
to "Memorial Funds" or to one or more owners of the account and
endorsed to "Memorial Funds." For all other accounts, the check must be
made payable on its face to "Memorial Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
ACH PAYMENT. Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days. Your financial institution may charge you a fee for this
service.
WIRES. Instruct your financial institution to make a Federal Funds
wire payment to us. Your financial institution may charge you a fee for
this service.
MINIMUM INVESTMENTS. The Funds accept payments in the following minimum amounts:
<TABLE>
<S> <C> <C>
------------------------- --------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
-------------------------------------- ------------------------- --------------------------
Standard Minimums $5,000 $100
-------------------------------------- ------------------------- --------------------------
Traditional and Roth IRA Accounts $2,000 $100
-------------------------------------- ------------------------- --------------------------
Electronic Fund Transfers $2,000 $100
Automatic Investment Plans $2,000 $100
-------------------------------------- ------------------------- --------------------------
</TABLE>
Management of the Funds may choose to waive the investment minimums.
<TABLE>
<CAPTION>
ACCOUNT REQUIREMENTS
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TYPE OF ACCOUNT REQUIREMENT
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Joint accounts can have two or more owners
Individual accounts are owned by one person, as are sole (tenants)
proprietorship accounts. o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as each name appears on the account
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a custodial
These custodial accounts provide a way to give money account under the Uniform Gift to Minors
to a child and obtain tax benefits. You can give up to Act or the Uniform Transfers to Minors Act
$10,000 a year per child without paying Federal gift tax. o The trustee must sign instructions in a manner
indicating trustee capacity
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
CORPORATIONS AND PARTNERSHIPS o For corporations, provide a corporate
resolution signed by an authorized person with a
signature guarantee
o For partnerships, provide a certification for
a partnership agreement, or the pages from the
partnership agreement that identify the general
partners
- ------------------------------------------------------------ ---------------------------------------------------------
12
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- ------------------------------------------------------------ ---------------------------------------------------------
TRUSTS o The trust must be established before an
account can be opened
o Provide a certification for trust, or the
pages from the trust document that identify the
trustees
- ------------------------------------------------------------ ---------------------------------------------------------
INVESTMENT PROCEDURES
- ------------------------------------------------------------ ---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation statement Or
o Mail us your application and a check o Write a letter to us
o Write your account number on your check.
BY WIRE o Mail us the slip (or your letter) and a check
o Call or write us for an account application
o Complete the application BY WIRE
o Call to notify us of your incoming wire
o Call us and you will be assigned an account number o Instruct your bank to wire your money to us
o Mail us your application
o Instruct your bank to wire your money to us
BY ACH PAYMENT BY AUTOMATIC INVESTMENT
o Call or write us for an account application o Call or write us for an "Automatic Investment"
o Complete the application form
o Call us and you will be assigned an account number o Complete the form
o Mail us your application o Attach a voided check to your form
o Make an ACH payment o Mail us the form and the voided check
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
AUTOMATIC INVESTMENTS. You may invest a specified amount of money in the Funds
once or twice a month on specified dates. These payments are taken from your
bank account by ACH payment. Automatic investments must be for at least $100.
LIMITATIONS ON PURCHASES. The Funds reserve the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Funds or their operations. This includes those from any individual or group
who, in the Funds' view, are likely to engage in excessive trading (usually
defined as more than four exchanges out of a Fund within a calendar year).
CANCELED OR FAILED PAYMENTS. The Funds accept checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or you
pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Funds or the Transfer Agent, and the Funds may redeem shares you own in the
account (or another identically registered account in any Fund) as
reimbursement. The Funds and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
The Funds process redemption orders promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the Funds
have not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
13
<PAGE>
- --------------------------------------------------------------------------------
TO SELL SHARES FROM YOUR ACCOUNT
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send your proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire requests are only available if:
o You have elected wire redemption privileges AND
o Your request is for $5,000 or more
o Call us with your request (if you have elected telephone redemption
privileges - See "By Telephone") Or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Telephone requests are only available if you have elected telephone
redemption privileges.
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you Or
o Wired to you (if you have elected wire redemption privileges - See "By
Wire")
AUTOMATICALLY
o Call or write us for an "Automatic Redemption" form
o Attach a voided check to your form
o Mail us your form with the voided check
- --------------------------------------------------------------------------------
TELEPHONE REDEMPTION PRIVILEGES. You may only request your shares by telephone
if you elect telephone redemption privileges on your account application or a
separate form. You may be responsible for any fraudulent telephone order as long
as the Transfer Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES. You may only request your shares by wire if you
elect wire redemption privileges on your account application or a separate form.
The minimum amount you may request by wire is $5,000. If you wish to make your
wire request by telephone, you must also elect telephone redemption privileges.
AUTOMATIC REDEMPTION. You may request a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic requests must be
for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." For requests
made in writing, a signature guarantee is required for any of the following:
14
<PAGE>
o Redemption of over $50,000 worth of shares
o Changes to a shareholder's record name or address
o Redemption from an account for which the address or account
registration has changed within the last 30 days
o Sending proceeds to any person, address, brokerage firm or bank
account not on record
o Sending proceeds to an account with a different registration (name or
ownership) from yours
o Changes to automatic investment or redemption, distribution, telephone
requests or exchange option or any other election in connection with
your account
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
SMALL ACCOUNTS. If the value of your account falls below $2,000, the Funds may
ask you to increase your balance. If the account value is still below $2,000
after 60 days, the Funds may close your account and send you the proceeds. The
Funds will not close your account if it falls below these amounts solely as a
result of a reduction in your account's market value.
REDEMPTION IN KIND. The Funds reserve the right to make redemptions "in kind" --
payment of redemption proceeds in portfolio securities rather than cash --if the
amount requested is large enough to affect Funds operations (for example, if it
represents more than 1 percent of the fund's assets).
LOST ACCOUNTS. The Transfer Agent will consider your account "lost" if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is "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.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy Trust Shares of any other Fund, also known
as an exchange, by telephone or in writing. You may also exchange Fund shares
for Institutional Service class shares of Daily Assets Government Fund (a series
of the Forum Funds). Because exchanges are treated as a sale and purchase, they
may have tax consequences.
REQUIREMENTS. Exchanges may be made only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Funds reserve the right to limit exchanges. See "Investment
Procedures - Limitations on Purchases."
- --------------------------------------------------------------------------------
HOW TO EXCHANGE
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds from which you are exchanging into and out of
o The dollar amount or number of shares you want to sell (and exchange)
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Telephone exchanges are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
- --------------------------------------------------------------------------------
RETIREMENT ACCOUNTS
The Funds offer IRA accounts, including traditional and Roth IRAs. Before
investing in any IRA or other retirement plan, you should consult your tax
advisors. Whenever making an investment in an IRA, be sure to indicate the year
in which the contribution is made.
15
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Distributions of net investment income are declared daily and paid monthly by
the Bond Funds and are declared and paid quarterly by the Equity Funds. Any net
capital gain realized by a Fund will be distributed at least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund intends to operate in a manner so that it will not be liable for
Federal income or excise tax.
Distributions of net investment income or
short-term capital gain are taxable to you as ordinary income. Distributions of
long-term capital gain are taxable to you as long-term capital gain regardless
of how long you have held your shares. Distributions may also be subject to
state and local taxes.
Distributions of capital gain and the Equity Funds' distribution of net
investment income reduce the net asset value of the Funds' shares by the amount
of the distribution. If you purchase shares prior to these distributions, you
are taxed on the distribution even though the distribution represents a return
of your investment.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
The Funds will mail reports containing information about the Funds'
distributions during the year to you after December 31 of each year.
Consult your tax adviser about the Federal, state and local tax consequences in
your particular circumstances.
ORGANIZATION
Memorial Funds is a Delaware business trust that is registered with the SEC as
an open-end, management investment company (a "mutual fund"). The Funds are
series of Memorial Funds. It is not intended that meetings of shareholders be
held except when required by Federal or Delaware law. All shareholders of each
Fund are entitled to vote at shareholders' meetings unless a matter is
determined to affect only a specific Fund (such as approval of an advisory
agreement for a Fund.) From time to time, large shareholders may control a Fund
or Memorial Funds.
CORE AND GATEWAY(R)
Each Fund may seek to achieve its investment objective by investing all of its
assets in shares of another diversified, open-end management investment company
that has an investment objective and investment policies substantially similar
to that of the Fund.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1, 2000. The Funds' adviser and administrator are addressing
this matter for their systems. The Funds' other service providers have informed
the Funds that they are taking similar measures. This matter, if not corrected,
could adversely affect the services provided to the Funds or the companies in
which the Funds invest and, therefore, could lower the value of your shares.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the Funds' Trust shares
financial performance. This table includes information for Institutional shares
of Corporate Bond Fund and Government Bond Fund because as of December 31, 1998,
Trust shares of the Bond Funds were not offered for sale. Total return in the
table represents the rate an investor would have earned (or lost) on an
investment in a Fund (assuming the reinvestment of all distributions). This
information has been audited by KPMG Peat Marwick LLP. The Funds' financial
statements and the auditor's report are included in the Annual Report, which is
available upon request, without charge.
<TABLE>
<S> <C> <C> <C> <C>
GROWTH VALUE EQUITY GOVERNMENT CORPORATE
EQUITY FUND FUND BOND FUND BOND FUND
Year Ended Year Ended Year Ended Year Ended
12/31/98(1) 12/31/98(1) 12/31/98(1) 12/31/98(1)
------------- --------------- -------------- --------------
Trust Shares Trust Shares Institutional Institutional
Shares Shares
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $10.00 $10.00 $10.00 $10.00
Income From Investment Operations
Net investment income 0.01 0.02 0.39 0.43
Net gain (loss) on securities (realized 2.05 (0.83) 0.39 0.30
and unrealized)
------------- --------------- -------------- --------------
Total From Investment Operations 2.06 (0.81) 0.78 0.73
Less Distributions
From net investment income (0.01) (0.03) (0.39) (0.43)
From capital gain (0.60) - (0.14) (0.21)
------------- --------------- -------------- --------------
Total Distributions (0.61) (0.03) (0.53) (0.64)
Ending Net Asset Value $11.45 $9.16 $10.25 $10.09
OTHER INFORMATION
Ratios to Average Net Assets(2):
Expenses 1.25% 1.25% 0.73% 0.63%
Expenses (gross) (3) 2.29% 2.40% 0.85% 0.76%
Net Investment Income 0.14% 0.34% 5.05% 5.60%
Total Return 20.57% (8.06%) 7.96% 7.50%
Portfolio Turnover Rate 135.38% 36.95% 113.50% 377.36%
Net Assets at End of Period (in thousands) $373 $304 $65,676 $137,338
</TABLE>
(1) Trust Shares of the Equity Funds commenced operations on the following
dates: Growth Equity Fund - March 29, 1998 and Value Equity Fund - March
29, 1998; Institutional Shares of the Bond Funds commenced operations on
the following dates: Government Bond Fund - March 29, 1998; Corporate Bond
Fund March 25, 1998.
(2) Annualized.
(3) Reflects expense ratio in absence of expense reimbursements and fee
waivers.
17
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<TABLE>
<S> <C>
FOR MORE INFORMATION LOGO
The following documents are available free upon request:
GOVERNMENT BOND FUND
ANNUAL/SEMI-ANNUAL REPORTS CORPORATE BOND FUND
Additional information about the Funds' investments is available in the GROWTH EQUITY FUND
Funds' annual and semi-annual reports to shareholders. In each Fund's VALUE EQUITY FUND
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performances
during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI") The SAI provides
more detailed information about the Funds and is
incorporated by reference into this Prospectus.
You can get free copies of both reports and the SAI, request other
information and discuss your questions about the Funds by contacting your
broker or the Funds at:
Memorial Funds
Two Portland Square
Portland, Maine 04101
888-263-5593
You can also review the Funds' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get copies, for
a fee, by writing to or calling the following:
Public Reference Room
Securities and Exchange Commission Memorial Funds
Washington, D.C. 20549-6009 P.O. Box 446
Telephone: 800-SEC-0330 Portland, ME 04112
888-263-5593
Free copies are available from the Commission's Internet
website at http://www.sec.gov.
Investment Company Act File No. 811-9034.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
MEMORIAL FUNDS
GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
FUND INFORMATION:
Memorial Funds
Two Portland Square
Portland, Maine 04101
(888) 263-5593
INVESTMENT ADVISER:
Forum Investment Advisors, LLC
Two Portland Square
Portland, Maine 04101
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) 263-5593
This Statement of Additional Information or SAI supplements the
Prospectuses dated May 1, 1999, as may be amended from time to time, offering
Trust Shares and Institutional Shares of Government Bond Fund, Corporate Bond
Fund, Growth Equity Fund and Value Equity Fund (the "Funds"). This SAI is not a
prospectus and should only be read in conjunction with a prospectus. The
Prospectuses may be obtained, without charge, by contacting shareholder services
at the address or telephone number listed above.
Financial Statements for the Funds for the year ended December 31,
1998, included in the Annual Report to shareholders, are incorporated into this
SAI by reference. Copies of the Annual Report may be obtained, without charge,
upon request by contacting shareholder services at the address or telephone
number listed above.
<PAGE>
TABLE OF CONTENTS
Glossary ........................................... XX
1. Investment Policies and Risks....................... XX
2. Investment Limitations.............................. XX
3. Performance Data and Advertising.................... XX
4. Management.......................................... XX
5. Portfolio Transactions.............................. XX
6. Additional Purchase and Redemption Information...... XX
7. Taxation ........................................... XX
8. Other Matters....................................... XX
Appendix A - Description of Securities Ratings............... A-1
Appendix B - Miscellaneous Tables............................ B-1
Appendix C - Performance Data................................ C-1
<PAGE>
GLOSSARY
"Adviser" means Forum Investment Advisors, LLC
"Board" means the Board of Trustees of the Trust.
"CFTC" means the U.S. Commodities Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means the custodian of each Fund's assets.
"FAdS" means Forum Administrative Services, LLC, administrator of each
Fund.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of
each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's
shares.
"Fitch" means Fitch IBCA, Inc.
"Fund" means each of the separate series of the Trust to which this SAI
relates as identified on the cover page.
"Moody's" means Moody's Investors Service.
"NAV" means net asset value.
"NRSRO" means a nationally recognized statistical rating organization.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"Stock Index Futures" means futures contracts that relate to broadly
based stock indices.
"Subadviser" means The Northern Trust Company, Conseco Capital
Management, Inc., Davis Hamilton Jackson & Associates, L.P. or Beutel,
Goodman Capital Management, as appropriate.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent and distribution disbursing agent of each Fund.
"Trust" means Memorial Funds
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"U.S. Treasury Securities" means obligations issued or guaranteed by
the U.S. Treasury.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
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1. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the prospectuses
about each Fund's investment techniques, strategies and risks.
A. SECURITY RATINGS INFORMATION
The Funds' investments in fixed income securities are subject to credit risk
relating to the financial condition of the issuers of the securities that Funds
hold. To limit credit risk, each Fund generally may only invest its assets in
debt securities that are considered investment grade. Investment grade means
rated in the top four long-term rating categories or top two short-term rating
categories by an NRSRO, or unrated and determined by the Subadviser to be of
comparable quality. Corporate Bond Fund may invest up to 5% of its assets in
securities rated below investment grade. Non-investment grade securities
(commonly known as "junk bonds") have significant speculative characteristics
and generally involve greater volatility of price than investment grade
securities.
The lowest long-term ratings that are investment grade for corporate bonds,
including convertible bonds, are "Baa" in the case of Moody's and "BBB" in the
case of S&P and Fitch; for preferred stock are "Baa" in the case of Moody's and
"BBB" in the case of S&P and Fitch; and 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.
Unrated securities may not be as actively traded 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 the Subadviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Subadviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. 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.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by a Fund, the Subadviser will determine whether the Fund should
continue to hold the obligation. 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 Subadviser 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.
B. TEMPORARY DEFENSIVE POSITION
A Fund may assume a temporary defensive position and may invest without limit in
money market instruments that are of prime quality. Prime quality money market
instruments are those instruments that are rated in one of the two highest
short-term rating categories by an NRSRO or, if not rated, determined by the
Subadviser to be of comparable quality. Certain additional Funds may invest in
commercial paper as an investment and not as a temporary defensive position.
Except as noted below with respect to variable master demand notes, issues of
commercial paper normally have maturities of less than nine months and fixed
rates of return.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which a Fund may invest include
U.S. Government Securities, commercial paper, time deposits, bankers acceptances
and certificates of deposit of 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, corporate
notes and short-term bonds and money market mutual funds. The Funds may only
invest in money market mutual funds to the extent permitted by the 1940 Act.
2
<PAGE>
The money market instruments in which a Fund may invest may have variable or
floating rates of interest. 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 issuer of these
obligations often has the right, after a given period, to prepay the 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 7-day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
Variable amount master demand notes are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between a Fund and the issuer, they are
not normally traded. Although there is no secondary market in the notes, the
Fund may demand payment of principal and accrued interest at any time.
Variable amount master demand notes must satisfy the same criteria as set forth
above for commercial paper.
C. HEDGING AND OPTION INCOME STRATEGIES
A 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. A Fund
accomplishes a hedge by purchasing options or writing (selling) covered options
on securities in which it has invested or on any securities index based in whole
or in part on securities in which the Fund may invest. Options may trade on an
exchange or the over-the-counter market.
A Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in this SAI. 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 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 a
Fund's net assets.
The Funds have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. Growth Equity Fund and Value
Equity Fund (the "Equity Funds") may buy or sell stock index futures contracts,
such as contracts on the S&P 500 stock index. The Bond 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.
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. Likewise, no Fund may 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 may not exceed 50% of its total assets.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose 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 may write any covered options. An option is covered if, as long as a
Fund is obligated under the option, it owns an offsetting position in the
underlying security or maintains cash, U.S. Government Securities or other
liquid, high-grade debt securities with a value at all times sufficient to cover
the Fund's obligation under the option.
No assurance can be given, however, that any hedging or option income strategy
will succeed in achieving its intended result.
3
<PAGE>
1. IN GENERAL
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 (or index)
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 (or a
cash amount equal to the value of the index) 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 (or index) at a specified price during the term of the
option. The writer of the put option, who receives the premium, has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index), upon exercise at the exercise price during the option
period.
The amount of premium received or paid for an option 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 and interest
rates.
There are a limited number of options contracts on securities indices and option
contracts may not be available on all securities that a Fund may own or seek to
own.
Bond and stock index futures contracts are bilateral agreements in 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 securities comprising the index
is made. Generally, these futures contracts are closed out prior to the
expiration date of the contract.
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.
COVERED CALLS AND HEDGING. 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. Hedging or option income strategies include the writing and
purchase of exchange-traded and over-the-counter options on individual
securities or financial indices and the purchase and sale of financial futures
contracts and related options. Whether or not used for hedging purposes, these
investment techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of a Fund. Principal
among such risks are: (1) the possible failure of such instruments as hedging
techniques in cases where the price movements of the securities underlying the
options or futures do not follow the price movements of the portfolio securities
subject to the hedge; (2) potentially unlimited loss associated with futures
transactions and the possible lack of a liquid secondary market for closing out
a futures position; and (3) possible losses resulting from the inability of the
Subadviser to correctly predict the direction of stock prices, interest rates
and other economic factors. To the extent a Fund invests in foreign securities,
it may also invest in options on foreign currencies, foreign currency futures
contracts and options on those futures contracts. 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.
Except as otherwise noted in this SAI, 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 at least one of the following conditions is
met. A Fund owns either an offsetting ("covered") position; or it owns cash,
U.S. Government Securities or other
4
<PAGE>
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.
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
Subadviser believes that a liquid secondary market for the option exists. When a
Fund purchases an OTC option, it relies on the dealer from whom 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.
Upon selling an option, a Fund receives a premium from the purchaser of the
option. Upon purchasing an option the Fund pays a premium to the seller of the
option. 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 call options on debt securities that the Fund's
Subadviser intends to include in the Fund's portfolio in order to fix the cost
of a future purchase. Call options may also be purchased to participate 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, this strategy would serve to limit the potential
loss to the Fund to the option premium paid. 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 Subadviser 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.
The 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.
5
<PAGE>
2. RISKS
The Fund's use of options subjects the Fund to certain investment risks and
transaction costs to which it might not otherwise be subject. These risks
include:
o Dependence on the Subadviser's ability to predict movements in the prices
of individual securities and fluctuations in the general securities
markets.
o Imperfect correlations between movements in the prices of options and
movements in the price of the securities (or indices) hedged or used for
cover, which may cause a given hedge not to achieve its objective.
o The fact that the skills and techniques needed to trade these instruments
are different from those needed to select the securities in which the Funds
invest.
o Lack of assurance that a liquid secondary market will exist for any
particular instrument at any particular time, which, among other things,
may hinder a Fund's ability to limit exposures by closing its positions.
o 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 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.
D. CONVERTIBLE SECURITIES
The Funds may only invest in convertible securities that are investment grade.
1. IN GENERAL
Convertible securities, which include convertible debt, convertible preferred
stock and other securities exchangeable under certain circumstances for shares
of common stock, are fixed income securities or preferred stock which generally
may be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. 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 have
characteristics similar to nonconvertible debt securities or preferred equity in
that they ordinarily provide a stream of income with generally higher yields
than do those of common stocks of the same or similar issuers. These securities
are usually senior to common stock in a company's capital structure, but usually
are subordinated to non-convertible debt securities.
Convertible securities have unique investment characteristics in that they
generally have higher yields than common stocks, but lower yields than
comparable non-convertible securities. Convertible securities are less subject
to fluctuation in value than the underlying stock since they have fixed income
characteristics; and they provide the potential for capital appreciation if the
market price of the underlying common stock increases.
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 the 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.
2. RISKS
Investment in convertible securities generally entails less risk than investment
in the issuer's common stock. The extent to which such risk is reduced, however,
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security. Convertible securities also are
subject to the risks of debt
6
<PAGE>
securities: that changes in interest rates could adversely affect a convertible
security's value and that an issuer may default on payments of interest or
principal.
3. VALUE OF CONVERTIBLE SECURITIES
The value of a convertible security is a function of its "investment value" and
its "conversion value". The investment value of a convertible security is
determined by comparing its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege. The
conversion value is 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.
E. ILLIQUID AND RESTRICTED SECURITIES
No Fund may acquire securities or invest in repurchase agreements if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
1. IN GENERAL
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which a Fund has valued the securities. Illiquid securities include
repurchase agreements not entitling the holder to payment of principal within
seven days, purchased over-the-counter options, securities which are not readily
marketable and restricted securities. Restricted securities, except as otherwise
determined by the Subadviser, are securities subject to contractual or legal
restrictions on resale because they have not been registered under the 1933 Act.
2. RISKS
Certain risks are associated with holding illiquid and restricted securities.
For instance, limitations on resale may have an adverse effect on the
marketability of a security and a Fund might also have to register a restricted
security in order to dispose of it, resulting in expense and delay. A Fund might
not be able to dispose of restricted or illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions. There can be no assurance that a liquid market will exist for any
security at any particular time. Any security, including securities determined
by the Subadviser to be liquid, can become illiquid.
3. DETERMINING LIQUIDITY
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid and has delegated the function of making
determinations of liquidity to the Subadviser, pursuant to guidelines approved
by the Board. The Subadviser determines and monitors the liquidity of the
portfolio securities and reports periodically on its decisions to the Board. The
Subadviser takes 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.
7
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An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Subadviser may determine that the
securities are not illiquid.
F. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Government Bond Fund and Corporate Bond 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.
1. RISKS
The use of when-issued transactions and forward commitments enables Corporate
Bond Fund and Government Bond Fund to hedge against anticipated changes in
interest rates and prices. For instance, in periods of rising interest rates and
falling bond prices, a Fund might sell securities that 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 Subadviser 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 a separate account with cash, U.S.
Government Securities and other liquid securities in an amount at least equal to
its commitments to purchase securities on a when-issued or delayed delivery
basis.
G. MISCELLANEOUS FIXED INCOME SECURITIES
1. U.S. GOVERNMENT SECURITIES
Corporate Bond Fund and Government Bond Fund (the "Bond 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 in 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,
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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.
2. VARIABLE AND FLOATING RATE SECURITIES
The Bond 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.
There may not be an active secondary market for certain floating or
variable rate 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. A Fund's Subadviser monitors the liquidity
of the Fund's investment in variable and floating rate instruments, but there
can be no guarantee that an active secondary market will exist.
3. DEMAND NOTES
The Bond 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.
The Subadvisers continuously monitor the financial condition of the issuer to
determine the issuer's likely ability to make payment on demand.
4. 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 Subadviser has determined that the GIC presents minimal credit
risks to the Fund and is of comparable quality to other instruments that the
Fund may purchase.
5. ZERO-COUPON SECURITIES
The Bond 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.
6. MORTGAGE-BACKED SECURITIES
The Bond Funds may invest up to 25% of their total assets 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.
A. 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.
B. PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. 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.
C. 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
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included in the pools. In addition, many mortgages included in pools are insured
through private mortgage insurance companies.
D. 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.
E. 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.
F. 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.
G. 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 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.
H. COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). 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
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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.
7. 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.
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Funds: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely; and (2) 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 any percentage restriction on
investment or utilization of assets is adhered to at the time an 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.
A fundamental policy of a Fund cannot be changed without the affirmative vote of
the lesser of: (1) 50% of the outstanding shares of the Fund; or (2) 67% of the
shares of the Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the outstanding shares of the Fund are present or
represented. The Board may change a nonfundamental policy of a Fund without
shareholder approval.
A. FUNDAMENTAL LIMITATIONS
Each Fund's investment objective is fundamental. Each Fund has adopted the
following investment limitations, which are fundamental policies of the Fund.
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1. ISSUANCE OF SENIOR SECURITIES
No Fund may issue senior securities except pursuant to Section 18 of the 1940
Act and except that a Fund may borrow money subject to its investment limitation
on borrowing.
2. UNDERWRITING ACTIVITIES
No Fund may 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 1933 Act.
3. CONCENTRATION
No Fund may 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.
4. PURCHASES AND SALES OF REAL ESTATE
No Fund may 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. PURCHASES AND SALES OF COMMODITIES
No Fund may purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities; provided that
currency and currency-related contracts and contracts on indices will not be
deemed to be physical commodities.
6. MAKING LOANS
No Fund may 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. DIVERSIFICATION
Each Fund is "diversified" as that term is defined in the 1940 Act. Accordingly,
no Fund may purchase a security if, as a result; (1) more than 5% of a Fund's
total assets would be invested in the securities of a single issuer; or (2) a
Fund would own more than 10% of the outstanding voting securities of a single
issuer. This limitation applies only to 75% of a Fund's total assets and does
not apply to U.S. Government Securities.
B. NONFUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations, which are not
fundamental policies of the Fund.
1. BORROWING
No Fund's borrowings for other than temporary or emergency purposes or meeting
redemption requests may exceed an amount equal to 5% of the value of the Fund's
net assets.
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2. ILLIQUID SECURITIES
No Fund may acquire securities or invest in repurchase agreements with respect
to any securities if, as result, more than 15% of the Fund's net assets (taken
at current value) would be invested in illiquid securities
3. SHORT SALES
No Fund may make short sales of securities (except short sales against the box).
4. PURCHASES ON MARGIN
No Fund may 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, futures contracts and options on futures contracts.
5. UNSEASONED ISSUERS
No Fund may invest more than 5% of the value of the Fund's total assets in
securities (other than fully collateralized debt obligations) issued by
companies that have conducted continuous operations for less than three years.
6. PLEDGING
No Fund may pledge, mortgage, hypothecate or encumber any of its assets except
to secure permitted borrowings or to secure other permitted transactions. 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.
7. TRUSTEES' AND OFFICERS' HOLDINGS
No Fund may 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.
8. OIL, GAS OR MINERAL
No Fund may invest in interests in oil or gas or interests in other mineral
exploration or development programs.
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
A Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
Performance information is reported on a class basis.
A Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger
or other companies which track the investment performance of
investment companies ("Fund Tracking Companies").
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o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including
but not limited to the Standard & Poor's 500(R) Index, the Russell
2000(R) Index, the Russell MidcapTM Index, the Russell 1000(R) Value
Index, the Russell 2500(R) Index, the Morgan Stanley - Europe,
Australian and Far East Index, the Dow Jones Industrial Average, the
Salomon Brothers Bond Index, the Shearson Lehman Bond Index, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index
as published by the U.S. Department of Commerce.
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of a Fund but rather are standards by
which the Fund's Subadviser and shareholders may compare the performance of the
Fund to an unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
A Fund may refer to: (1) general market performances over past time periods such
as those published by Ibbotson Associates (for instance, its "Stocks, Bonds,
Bills and Inflation Yearbook"); (2) mutual fund performance rankings and other
data published by Fund Tracking Companies; and (3) material and comparative
mutual fund data and ratings reported in independent periodicals, such as
newspapers and financial magazines.
A Fund's performance will fluctuate in response to market conditions and other
factors.
A Fund's performance may be quoted in terms of yield or total return. 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 for
all Funds, each 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 listing of certain performance data as of December 31, 1998 is contained in
Appendix C -- Performance Data.
B. PERFORMANCE CALCULATIONS
1. SEC YIELD
Standardized SEC yields for a Fund used in advertising are computed by dividing
the Fund's interest income (in accordance with specific standardized rules) for
a given 30 day or one month period, net of expenses, by the average number of
shares entitled to receive income 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 accordance with
specific standardized rules) in order to arrive at an annual percentage rate.
Capital gains and losses 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 of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to you in reviewing a Fund's
performance, you should be aware that a Fund's yield fluctuates from day to day
and that the 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. Financial intermediaries may charge their customers that invest in a
Fund fees in connection with that investment. This will have the effect of
reducing the Fund's after-fee yield to those shareholders.
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The yields of a Fund are not fixed or guaranteed, and an investment in a Fund is
not insured or guaranteed. Accordingly, yield information should not 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 that are insured or guaranteed.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
2. TOTAL RETURN CALCULATIONS
A Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns, a Fund: (1) determines the growth or decline in value of a hypothetical
historical investment in a Fund over a stated period; and (2) calculates 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. For
example, a cumulative return of 100% over ten years would produce an average
annual total return of 7.18%. While average annual returns are a convenient
means of comparing investment alternatives, investors should realize that
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 Fund.
Average annual total return is calculated according to the following formula:
P (1+T) n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
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
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results.
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OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
A Fund may quote unaveraged or cumulative total returns, which reflect
a Fund's performance over a stated period of time.
Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period
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
C. MULTICLASS PERFORMANCE
When a Fund has more than one class of shares, performance calculations for the
classes of shares that are created after the initial class may be stated so as
to include the performance of the initial class or classes of the Fund.
Generally, performance of the initial class is not restated to reflect the
expenses or expense ratio of the subsequent class.
Currently, the Funds use the actual date a class of shares commenced operations
as the beginning of that class' performance.
D. OTHER MATTERS
A Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Fund's Subadviser, summaries of the views
of the portfolio managers with respect to the financial markets, or descriptions
of the nature of the Subadviser's and its staff's management techniques; (7) the
results of a hypothetical investment in the Fund over a given number of years,
including the amount that the investment would be at the end of the period; (8)
the effects of investing in a tax-deferred account, such as an individual
retirement account or Section 401(k) pension plan; (9) the net asset value, net
assets or number of shareholders of the Fund as of one or more dates; and (10) a
comparison of
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the Fund's operations to the operations of other funds or similar investment
products, such as a comparison of the nature and scope of regulation of the
products and the products' weighted average maturity, liquidity, investment
policies, and the manner of calculating and reporting performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of a Fund's performance.
A Fund may advertise information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in a Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
SYSTEMATIC SHARE SHARES
PERIOD INVESTMENT PRICE PURCHASED
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
TOTAL AVERAGE TOTAL
INVESTED $600 PRICE $15.17 SHARES 41.81
</TABLE>
In connection with its advertisements, a Fund may provide "shareholder's
letters" which serve to provide shareholders or investors an introduction into
the Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
the Fund's Subadviser that it has for more than twenty-five years been committed
to quality products and outstanding service to assist its customers in meeting
their financial goals and setting forth the reasons that the Subadviser believes
that it has been successful as a portfolio manager.
From time to time marketing materials may include a description of the Trust's
"manager of managers" structure which include the selection of an investment
consultant and sub-advisers and the criteria for their selection in terms of
asset size, investment expertise, reputation and staffing. Marketing materials
may include references to FAdS, a leading third party administrator, including
its expertise, staffing and assets under administration and distribution.
Marketing materials may explain that the Trust may be used as an investment
vehicle in many circumstances, including a cemetery merchandise trust, funeral
industry pre-need trusts, corporate retirement plans, IRAs, and other
association-related trusts.
18
<PAGE>
4. MANAGEMENT
The business of the Trust is conducted under the direction of the Board. The
officers and Trustees of the Trust may be directors, officers or employees of
(and persons providing services to the Trust may include) FFS, its affiliates or
affiliates of the Trust.
A. TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The business and affairs of the Fund are
managed under the direction of the Board in compliance with the laws of the
state of Delaware. The names of the Trustees and officers of the Trust, their
position with the Trust, address, date of birth and 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.
<TABLE>
<S> <C> <C>
NAME, ADDRESS AND AGE POSITION(S) WITH FUND PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
Christopher W. Hamm*, Chairman of the Board of President, Memorial Group, Inc. since 1998
5847 San Felipe, Suite 4545 Trustees, Executive Director, CIBC Oppenheimer 1996-98
Houston, Texas 77002 President Vice President, Paine Webber 1993-96
Born: March 1967 Valuation Committee, Member(1)
John Y. Keffer* Trustee President and Director, Forum Financial
Two Portland Square Valuation Committee, Member(1) Services, Inc. for more than five years
Portland, Maine 04101 Director and sole shareholder (directly and
Born: July 1942 indirectly) Forum Financial Group LLC, which
owns (directly or indirectly) Forum
Administrative Services, LLC. Forum Shareholder
Services, LLC and Forum Investment Advisers, LLC
Officer, Director or Trustee, various funds
managed and distributed by FAdS or FFS
Jay Brammer Trustee Executive Vice President, Gibralter Properties,
9000 Keystone Crossing, Suite Audit Committee, Member(2) Inc., a real estate holding company, since 1995
1000 Executive Vice President, Gibraltar Mausoleum
Indianapolis, Indiana 46240 Corp., 1980-95
Born: August 1957
J.B. Goodwin Trustee President, JBGoodwin Company, a comprehensive
3933 Steck Avenue, B-101 Audit Committee, Member(2) real estate and holding company, for more than
Austin, Texas 78759 five years
Born: December 1949
Robert Stillwell Trustee Attorney, Baker & Botts, a law firm, for more
3000 One Shell Plaza Audit Committee, Chairman(2) than five years
Houston, Texas 77002
Born: January 1937
19
<PAGE>
Sara M. Morris Treasurer Managing Director, Forum Fund Services, LLC
Two Portland Square Treasurer and CFO, Forum Financial Group LLC
Portland, Maine 04101 since 1994
Born: September 1963 Officer, various funds managed and distributed
by FAdS or FFS
Thomas G. Sheehan Vice President Managing Director and Counsel, Forum Financial
Two Portland Square Group, LLC since 1993
Portland, Maine 04101 Special Counsel, Division of Investment
Born: November 1968 Management SEC
Officer, various funds managed and distributed
by FAdS or FFS
D. Blaine Riggle Secretary Assistant Counsel, Forum Financial Group, LLC,
Two Portland Square since 1998
Portland, Maine 04101 Associate Counsel, Wright Express Corporation
Born: November 1966 (a Fleet credit card company), 3/97 - 1/98
Associate at the law firm of Friedman, Babcock
& Gaythwaite, 1994 - 3/97
Officer, various funds managed and distributed
by FAdS or FFS
Stephen J. Barrett Assistant Secretary Manager of Client Services, Forum Financial
Two Portland Square Group, LLC since 1996
Portland, Maine 04101 Senior Product Manager, Fidelity Investments,
Born: November 1968 1994 - 1996
Officer, various funds managed and distributed
by FAdS or FFS
Marcella A. Cote Assistant Secretary Fund Administrator, Forum Financial Group, LLC,
Two Portland Square since 1998
Portland, Maine 04101 Budget Analyst, State of Maine Department of
Born: January 1947 Human Services, 2/97 - 5/98
Project Assistant, Muskie School of Public
Service, 1994 - 2/97
Officer, various funds managed and distributed
by FAdS or FFS
Dawn L. Taylor Assistant Treasurer Tax Manager, Forum Financial Group, LLC, since
Two Portland Square 1997
Portland, Maine 04101 Senior Tax Accountant, Purdy, Bingham &
Born: May, 1964 Burrell, LLC, 1/97 - 10/97
Senior Fund Accountant, Forum Financial Group,
LLC, 9/94 - 1/97
Tax Consultant, New England Financial Services,
6/86 - 9/94
Officer, various funds managed and
distributed by FAdS or FFS
</TABLE>
(1) The Valuation Committee is responsible for determining and monitoring the
value of the Funds' assets.
(2) The Audit Committee is responsible for meeting with the Trust's independent
certified public accountants to (i) review the arrangements and scope of
any audit; (ii) discuss matters of concern relating to the Trust's
20
<PAGE>
financial statements, including any adjustments to such statements
recommended by the accountants, or other results of any audit; (iii)
consider the accountants' comments with respect to the Trust's financial
policies, procedures, and internal accounting controls; and (iv) review
any form of opinion the accountants propose to render to the Trust.
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee receives annual fees of $5,000 and $500 for each Board meeting
attended and is paid $500 for each committee meeting attended on a date when a
Board meeting is not held.
Trustees are also reimbursed for travel and related expenses incurred in
attending meetings of the Board.
Trustees that are affiliated with the Adviser receive no compensation
for their services or reimbursement for their associated expenses. No
officer of the Trust is compensated by the Trust.
The following table sets forth the fees paid to each Trustee by the Trust for
the fiscal year ending December 31, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation from as Part of Fund Benefits upon Compensation from
Name, Position Trust Expenses Retirement Trust
- ------------------------------------- ------------------- ------------------- -------------------- -------------------
Christopher W. Hamm* $0 $0 $0 $0
John Y. Keffer* $0 $0 $0 $0
Jay Brammer $0 $0 $0 $0
J.B. Goodwin $1,500 $0 $0 $1,500
Robert Stillwell $1,500 $0 $0 $1,500
</TABLE>
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to each Fund pursuant to an investment
advisory agreement with the Trust. Under that agreement, the Adviser furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing a Fund's investments and effecting portfolio
transactions for a Fund
21
<PAGE>
2. OWNERSHIP OF ADVISER/AFFILIATIONS
The Adviser is 99% owned by Forum Trust and 1% owned by Forum Holdings Corp. I.
Forum Trust is 99% owned by Forum Financial Group, LLC of which Trustee John Y.
Keffer owns 98%. Forum Investment Advisers, LLC is registered as an investment
adviser with the SEC under the 1940 Act.
Sara M. Morris, Thomas G. Sheehan, Stephen J. Barrett, D. Blaine Riggle,
Marcella A. Cote and Dawn L. Taylor are employed by the Adviser (or affiliates
of the Adviser).
3. FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee is accrued daily by the Funds and is paid monthly based on
average net assets for the previous month. The fee is allocated among the
classes of shares of a Fund based on the average net assets of each class during
the same period.
In addition to receiving its advisory fee from each Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in a Fund. If an investor in a Fund also has a
separately managed account with the Adviser with assets invested in the Fund,
the Adviser will credit an amount equal to all or a portion of the fees received
by the Adviser against any investment management fee received from a client.
Table 1 in Appendix B shows the dollar amount of the fees payable by the Trust
to the Adviser, the amount of the fee waived by the Adviser and the actual fee
received by the Adviser. The Adviser has agreed to waive fees as shown in
Exhibit B.
4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Adviser's agreement must be approved at least annually by the Board or by
vote of the shareholders, and in either case by a majority of the Trustees who
are not parties to the agreement or interested persons of any such party.
The Adviser's agreement is terminable without penalty by the Trust with respect
to a Fund on 60 days' written notice to the Adviser when authorized either by
vote of a majority of the Fund's shareholders or by a vote of a majority of the
Board, or by the Adviser on 60 days' written notice to the Trust. The agreement
will terminate immediately upon its assignment.
5. SUBADVISERS
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 investment subadvisory agreements with the
Adviser (the "Subadvisory Agreements").
The Northern Trust Company ("NTC"), 50 South LaSalle Street, Chicago,
Illinois 60675, manages the portfolio of the GOVERNMENT BOND FUND. NTC
is a wholly-owned subsidiary of Northern Trust Corporation, a Delaware
corporation that was incorporated in 1889. NTC is exempt from
registration as an investment adviser under the Investment Advisers
Act of 1940 ("Advisers Act"). For its services, NTC receives an
advisory fee (excluding waivers) from the Adviser at an annual rate of
0.20% of the Fund's average daily net assets.
Conseco Capital Management, Inc. ("CCM"), 11825 N. Pennsylvania
Street, Carmel, Indiana 46032, manages the portfolio of the CORPORATE
BOND FUND. CCM is a Delaware corporation that was organized in 1981
and is registered as an investment adviser under the Advisers Act. CCM
is a wholly-owned subsidiary of Conseco, Inc., a financial services
holding company that owns or controls several life
22
<PAGE>
insurance companies. For its services, CCM receives an advisory fee
(excluding waivers) from the Adviser at an annual rate of 0.20% of
the Fund's average daily net assets.
Davis Hamilton Jackson & Associates, L.P. ("DHJA"), Two Houston
Center, 909 Fannin Street, Suite 550, Houston, Texas 77010, manages
the portfolio of the GROWTH EQUITY FUND. DHJA is a limited partnership
formed under the laws of Delaware that is registered as an investment
adviser under the Advisers Act. Affiliated Managers Group, Inc.
("AMG"), a holding company that invests in investment management
firms, may be deemed to control DHJA due to an investment it has made
in DHJA. AMG does not participate in the day-to-day management or the
investment process of DHJA. For its services, DHJA receives an
advisory fee (excluding waivers) from the Adviser at an annual rate of
0.30% of the Fund's average daily net assets.
Beutel, Goodman Capital Management ("BGCM"), 5847 San Felipe, Suite
4500, Houston, Texas 77057-3011, manages the portfolio of the VALUE
EQUITY FUND. BGCM is a partnership that was organized in 1988 and is
registered as an investment adviser under the Advisers Act. BGCM has
two general partners, Value Corp. and Beutel, Goodman America Inc.
Beutel, Goodman America Inc. is owned by BG Canada: 51% of BG Canada
is owned by its employees, 49% is owned by First International Asset
Management, Inc., a privately held company in Canada. BG Canada is
registered as an investment adviser with the Ontario and Quebec
Securities Commissions. For its services, BGCM receives an advisory
fee (excluding waivers) from the Adviser at an annual rate of 0.30% of
the Fund's average daily net assets.
The Adviser pays a fee to each of the Subadvisers. These fees do not increase
the fees paid by shareholders of the Funds. The amount of the fees paid by the
Adviser 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 by
each Fund to the Adviser for investment advisory services will not vary as a
result of those negotiations.
The Adviser performs internal due diligence on each Subadviser and monitors each
Subadviser's performance using its proprietary investment adviser selection and
monitoring process. The Adviser will be responsible for communicating
performance targets and evaluations to Subadvisers, supervising each
Subadviser's compliance with the Fund's fundamental investment objectives and
policies, authorizing Subadvisers to engage in certain investment techniques for
the Fund, and recommending to the Board of Trustees whether sub-advisory
agreements should be renewed, modified or terminated. The Adviser also may from
time to time recommend that the Board replace one or more Subadvisers or appoint
additional Subadvisers, depending on the Adviser's assessment of what
combination of Subadvisers it believes will optimize each Fund's chances of
achieving its investment objectives. The sub-advisory agreements with respect to
the Funds are nearly identical to the Adviser's agreement, except for the fees
payable and certain other non-material matters.
D. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of each
Fund, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
FFS, FAdS, FAcS, the Adviser and the Transfer Agent are each controlled
indirectly by Forum Financial Group, LLC. John Y. Keffer controls Forum
Financial Group, LLC.
23
<PAGE>
Under its agreement with the Trust, FFS acts as the agent of the Trust in
connection with the offering of shares of the Funds. FFS continually distributes
shares of the Funds on a best efforts basis. FFS has no obligation to sell any
specific quantity of Fund shares.
The Trust Share Class has a distribution plan adopted under SEC Rule 12b-1 that
allows the Fund to pay asset-based sales charges or distribution fees for the
distribution and sale of its shares. These fees are charged at an annual rate of
0.25 percent of the average daily net assets of each Fund's Trust shares.
Because these fees are paid out of a Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges. These fees are paid to Memorial Group,
Inc. ("MGI"), a corporation of which Christopher W. Hamm, the Chairman of the
Board and President of the Trust, is the sole shareholder. For the fiscal year
ending December 31, 1998, MGI waived all of its 12b-1 fees. Absent such waiver,
MGI is to reimbursed for the expenses it incurs. MGI may incur expenses for any
distribution-related purpose it deems necessary or appropriate, including the
following principal activities: (i) compensation to employees and expenses,
including overhead, travel and telephone and other communication expenses, of
MGI, (ii) the incremental costs of printing and distributing prospectuses,
statements of additional information, annual reports and other periodic reports
for use in connection with the offering for sale of Trust shares to any
prospective investors, (iii) preparing, printing and distributing sales
literature and advertising materials used in connection with the offering of
Trust shares for sale to the public.
2. OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT
FFS's distribution agreement must be approved at least annually by the Board or
by vote of the shareholders, and in either case by a majority of the Trustees
who are not parties to the agreement or interested persons of any such party and
with respect to each class of a Fund for which there is an effective Plan,
Trustees who do not have any direct or indirect financial interest in any such
Plan applicable to the class or in any agreement to the Plan.
FFS's agreement is terminable without penalty by the Trust with respect to a
Fund on 60 days' written notice when authorized either by vote of a majority the
Fund's outstanding shareholders or by a vote of a majority of the Board, or by
FFS on 60 days' written notice to the Trust.
Under its agreement, FFS is not liable for any error of judgment or mistake of
law or for any act or omission in the performance of its duties to a Fund,
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 agreement.
Under its agreement, FFS and certain related parties (such as FFS's officers and
persons that control FFS) are indemnified by the Trust against any and all
claims and expenses in any way related to FFS's actions (or failures to act)
that are consistent with FFS's contractual standard of care. This means that as
long as FFS satisfies its contractual duties, the Trust is responsible for the
costs of: (1) defending FFS against claims that FFS breached a duty it owed to
the Trust; and (2) paying judgments against FFS. The Trust is not required to
indemnify FFS if the Trust does not receive written notice of and reasonable
opportunity to defend against a claim against FFS in the Trust's own name or in
the name of FFS.
FFS 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,
in the case of Institutional shares, 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. When
purchasing shares of the Fund in this manner, you should acquaint yourself with
your institution's procedures and should read the Prospectus and this SAI in
conjunction with any
24
<PAGE>
materials and information provided by your 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.
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust, providing the Trust
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Trust.
For its services, FAdS receives fees from each Fund at an annual rate as
follows: 0.15% of the average daily net assets under $150 million of each Fund
and 0.10% of the average daily net assets over $150 million of each Fund.
Notwithstanding the above, the minimum fee per Fund shall be $30,000 per year
($2,500 per month). The fees are accrued daily by the Funds and are paid monthly
in arrears on the first day of each calendar month for services performed under
the agreement during the prior calendar month.
Table 2 in Appendix B shows the dollar amount of the fees payable by the Trust
to FAdS, the amount of the fee waived by FAdS and the actual fee received by
FAdS.
FAdS's agreement is terminable without penalty by the Trust or by FAdS with
respect to a Fund on 60 days' written notice. Under the agreement, FAdS is not
liable for any error of judgment or mistake of law or for any act or omission in
the performance of its duties to a Fund, 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 agreement.
EXPENSE LIMITATIONS. FAdS and Memorial Group, Inc. have undertaken to assume
certain expenses of the Funds (or waive its fees). This undertaking is designed
to place a maximum limit on expenses (including all fees to be paid to the
Adviser but excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of: (1) 1.00% of the average
daily net assets of the Institutional Class of each Equity Fund; (2) 0.75% of
the average daily net assets of the Institutional Class of Government Bond Fund
and Corporate Bond Fund; and (3) 1.25% of the average daily net assets of the
Trust Class of each Equity Fund.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to each Fund. These services include calculating the NAV per
share of each Fund (and class) and preparing the Funds' financial statements and
tax returns.
For its services, FAcS receives fees from each Fund at an annual rate of $36,000
plus certain share class charges . FAcS is paid additional surcharges of $12,000
per year for each additional share class of the Fund above one. The fees are
accrued daily by the Funds and are paid monthly based on the transactions and
positions for the previous month.
Table 3 in Appendix B shows the dollar amount of the fees payable by the Trust
to FAcS, the amount of the fee waived by FAcS and the actual fee received by
FAcS.
25
<PAGE>
FAcS's agreement is terminable without penalty by the Trust or by FAcS with
respect to a Fund on 60 days' written notice. Under the agreement, FAcS is not
liable any act or omission in the performance of its duties to a Fund, 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 agreement. Under the agreement, in calculating a Fund's NAV per share, FAcS
is deemed not to have committed an error if the NAV per share it calculates is
within 1/10 of 1% of the actual NAV per share (after recalculation) or any loss
to a shareholder if the NAV difference is less than or equal to 1/2 of 1% or if
the loss in the shareholder's account is less than or equal to $10.00. In
addition, in calculating NAV per share FAcS is not liable for the errors of
others, including the companies that supply securities prices to FAcS and the
Funds.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust, the Transfer Agent maintains an account for each shareholder of
record of a Fund and is responsible for processing purchase and redemption
requests and paying distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, the Transfer Agent receives a fee from each Fund at an annual
rate of $24,000 for the first share class, $12,000 per additional share class
and $25.00 per shareholder account. The fees are accrued daily by the Funds and
are paid monthly in arrears. Table 4 in Appendix B shows the dollar amount of
the fees payable by the Trust to the Transfer Agent, the amount of the fee
waived by the Transfer Agent and the actual fee received by the Transfer Agent.
The Transfer Agent's agreement is terminable without penalty by the Trust or by
the Transfer Agent with respect to a Fund on 60 days' written notice. Under the
agreement, the Transfer Agent is not liable for any act or omission in the
performance of its duties to a Fund, except for willful misconduct, bad faith or
gross negligence in the performance of its duties under the agreement.
4. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Investors Bank & Trust
Company safeguards and controls the Funds' cash and securities, determines
income and collects interest on Fund investments. The Custodian may employ
foreign subcustodians to provide custody of a Fund's foreign assets. The
Custodian is located at 200 Clarendon Street, Boston, Massachusetts 02105.
For its services, the Custodian receives a fee from each Fund at an annual rate
as follows: (1) 0.02% of the average daily net assets of the Fund for the first
$100 million in Fund assets; (2) 0.015% of the average daily net assets of the
Fund for the next $100 million in Fund assets; and (3) 0.001% of the average
daily net assets of the Fund for remaining Fund assets. The Custodian is also
paid certain transaction fees. These fees are accrued daily by the Funds and are
paid monthly based on average net assets and transactions for the previous
month.
5. LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Trust are passed
upon by the law firm of Seward & Kissel LLP, 1200 G Street, NW, Washington, DC
20005.
6. INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, 99 High Street, Boston, MA 02110,
have been selected as auditors for each Fund. The auditors audit the annual
financial statements of the Funds and provide the Funds with an audit opinion.
The auditors also review certain regulatory filings of the Funds and the Funds'
tax returns.
26
<PAGE>
5. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the Fund
purchases or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers). These securities normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for these
securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected; (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Subadviser will seek to deal with the primary
market makers; but when necessary in order to obtain best execution, the
Subadviser will utilize the services of others.
Purchases of securities from underwriters include a disclosed fixed 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 price.
In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.
B. COMMISSIONS PAID
Table 5 in Appendix B shows the aggregate brokerage commissions with respect to
each Fund. The data presented are for the past three fiscal years or a shorter
period if the Fund has been in operation for a shorter period, except as
otherwise noted. The table also indicates the reason for any material change in
the last two years in the amount of brokerage commissions paid by a Fund.
C. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
Each Subadviser places orders for the purchase and sale of securities with
brokers and dealers selected by and in the discretion of the Subadviser. No Fund
has any obligation to deal with any specific broker or dealer in the execution
of portfolio transactions. Allocations of transactions to brokers and dealers
and the frequency of transactions are determined by a Subadviser in its best
judgment and in a manner deemed to be in the best interest of the Fund rather
than by any formula.
Each Subadviser seeks "best execution" for all portfolio transactions. This
means that the Subadvisers seek the most favorable price and execution
available. A Subadviser's primary consideration in executing transactions for a
Fund is prompt execution of orders in an effective manner and at the most
favorable price available.
1. CHOOSING BROKER-DEALERS
The Funds may not always pay the lowest commission or spread available. Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection with securities transactions, the Subadviser of each Fund takes
into account factors such as size of the order, difficulty of execution,
efficiency of the executing broker's facilities (including the research services
described below) and any risk assumed by the executing broker.
Consistent with applicable rules and the Subadviser's duties, the Subadviser
may: (1) consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute portfolio transactions for a Fund; and (2) take into
account payments made by brokers effecting transactions for a Fund (these
payments may be made to the Fund or to other persons on behalf of the Fund for
services provided to the Fund for which those other persons would be obligated
to pay.
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2. OBTAINING RESEARCH FROM BROKERS
Each Subadviser may give consideration to research services furnished by brokers
to the Subadviser for its use and may cause a Fund to pay these brokers a higher
amount of commission than may be charged by other brokers. This research is
designed to augment the Subadviser's own internal research and investment
strategy capabilities. This research may be used by the Subadviser in connection
with services to clients other than the Funds, and not all research services may
be used by the Subadviser in connection with the Funds. The Subadviser's fees
are not reduced by reason of the Subadviser's receipt of research services.
Each Subadviser has full brokerage discretion. It evaluates the range of quality
of a broker's services in placing trades including securing best price,
confidentiality, clearance and settlement capabilities, promptness of execution
and the financial stability of the broker-dealer. Under certain circumstances,
the value of research provided by a broker-dealer may be a factor in the
selection of a broker. This research would include reports that are common in
the industry. Typically, the research will be used to service all of the
Subadviser's accounts although a particular client may not benefit from all the
research received on each occasion. The nature of the services purchased for
clients include industry research reports and periodicals, quotation systems,
software for portfolio management and formal databases.
Occasionally, a Subadviser may place an order with a broker and pay a slightly
higher commission than another broker might charge. If this is done it will be
because of the Subadviser's need for specific research, for specific expertise a
firm may have in a particular type of transaction (due to factors such as size
or difficulty), or for speed/efficiency in execution. Since most of the
Subadvisers' brokerage commissions for research are for economic research on
specific companies or industries, and since the Subadvisers are involved with a
limited number of securities, most of the commission dollars spent for industry
and stock research directly benefit the Funds' shareholders.
There are occasions on which portfolio transactions may be executed as part of
concurrent authorizations to purchase or sell the same securities for more than
one account served by a Subadviser, some of which accounts may have similar
investment objectives. Although such concurrent authorizations potentially could
be either advantageous or disadvantageous to any one or more particular
accounts, they will be effected only when the Subadviser believes that to do so
will be in the best interest of the affected accounts. When such concurrent
authorizations occur, the objective will be to allocate the execution in a
manner, which is deemed equitable to the accounts involved. Clients are
typically allocated securities with prices averaged on a per-share or per-bond
basis.
In some cases, a client may direct a Subadviser to use a broker or dealer of the
client's choice. If the client directs the Subadviser to use a particular
broker, the Subadviser may not be authorized to negotiate commissions and may be
unable to obtain volume discounts or best execution. In these cases, there could
be some disparity in commission charges among these clients.
3. COUNTERPARTY RISK
Each Subadviser monitors the creditworthiness of counterparties to its Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
4. TRANSACTIONS THROUGH AFFILIATES
The Subadvisers do not effect brokerage transactions through affiliates of the
Adviser or Subadviser (or affiliates of those persons).
5. OTHER ACCOUNTS OF THE ADVISER OR SUBADVISER
Investment decisions for the Funds are made independently from those for any
other account or investment company that is or may in the future become managed
by a Subadviser. Investment decisions are the
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product of many factors, including basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security. In that
event, each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner which, in
the respective Subadviser's opinion, is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of a portfolio security for one client could have an adverse
effect on another client that has a position in that security. In addition, when
purchases or sales of the same security for a Fund and other client accounts
managed by the Fund's Subadviser occurs contemporaneously, the purchase or sale
orders may be aggregated in order to obtain any price advantages available to
large denomination purchases or sales.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. Portfolio turnover rate
is reported in the Prospectus. 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 to a Fund and a possible increase in short-term capital gains or losses.
D. SECURITIES OF REGULAR BROKER-DEALERS
From time to time a Fund may acquire and hold securities issued by its "regular
brokers and dealers" or the parents of those brokers and dealers. For this
purpose, regular brokers and dealers means the 10 brokers or dealers that: (1)
received the greatest amount of brokerage commissions during the Fund's last
fiscal year; (2) engaged in the largest amount of principal transactions for
portfolio transactions of the Fund during the Fund's last fiscal year; or (3)
sold the largest amount of the Fund's shares during the Fund's last fiscal year.
During the past fiscal year, there were no regular brokers and dealers for any
Fund.
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
Shareholders may effect purchases or redemptions or request any shareholder
privilege in person at the Transfer Agent's offices located at Two Portland
Square, Portland, Maine 04101.
The Funds accept orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
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B. ADDITIONAL PURCHASE INFORMATION
Shares of each Fund are sold on a continuous basis by the distributor at net
asset value ("NAV") per share without any sales charge. Accordingly, the
offering price per share is the same as the NAV per share.
Fund shares are normally issued for cash only. In the Adviser or Subadviser's
discretion, however, a Fund may accept portfolio securities that meet the
investment objective and policies of a Fund as payment for Fund shares. A Fund
will only accept securities that: (1) are not restricted as to transfer by law
and are not illiquid; and (2) have a value that is readily ascertainable (and
not established only by valuation procedures).
1. IRAS
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions 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 financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in a Fund directly. When you purchase a Fund's shares
through a financial institution, you may or may not be the shareholder of record
and, subject to your institution's procedures, you may have Fund shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your institution for further
information. If you hold shares through a financial institution, the Funds may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Funds are not
responsible for the failure of any financial institution to carry out its
obligations.
Investors purchasing shares of the Funds through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
C. ADDITIONAL REDEMPTION INFORMATION
A Fund may redeem shares involuntarily to reimburse the 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.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange, Inc. is closed (other than customary
weekend and holiday closings) or during which the SECdetermines that trading
thereon is restricted; (2) an emergency (as determined by the SEC) exists as a
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result of which disposal by a Fund of its securities is not reasonably
practicable or as a result of which it is not reasonably practicable for a Fund
fairly to determine the value of its net assets; or (3) the SEC may by order
permit for the protection of the shareholders of a Fund.
2. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of a
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
brokerage costs may be incurred by the shareholder in converting the securities
to cash. The Trust has filed an election with the SEC pursuant to which a Fund
may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.
D. NAV DETERMINATION
In determining a Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
sales price. If no sale price is reported, the average of the last bid and ask
price is used. If no average price is available, the last bid price is used. If
market quotations are not readily available, then securities are valued at fair
value as determined by the Board (or its delegate).
E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at a Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of a
Fund on the payment date for the distribution. Cash payments may be made more
than seven days following the date on which distributions would otherwise be
reinvested.
The per share net asset values of each class of shares of a Fund are expected to
be substantially the same. Under certain circumstances, however, the per share
net asset value of each class may vary. Due to the higher expenses of Trust
Shares, the net asset value of Trust Shares will generally be lower than the net
asset value of the Institutional Shares. The per share net asset value of each
class of a Fund eventually will tend to converge immediately after the payment
of dividends, which will differ by approximately the amount of the expense
accrual differential among the classes.
SHAREHOLDER SERVICES
RETIREMENT ACCOUNTS. The Funds may be a suitable investment vehicle for part or
all of the assets held in Traditional or Roth individual retirement accounts
(collectively, "IRAs"). Call the Funds at 1-888-263-5593 to obtain an IRA
account application. Generally, investment earnings in an IRA will be
tax-deferred until withdrawn. If certain requirements are met, investment
earnings held in a Roth IRA will not be taxed even when withdrawn. You may
contribute up to $2,000 annually to an IRA. Only contributions to Traditional
IRAs are tax-deductible. However, that deduction may be reduced if you or your
spouse is an active participant in an employer-sponsored retirement plan and you
(or you and your spouse) have adjusted gross income above certain levels. Your
ability to contribute to a Roth IRA also may be restricted if you or, if you are
married, you and your spouse have adjusted gross income above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
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This information on IRAs is based on regulations in effect as of January 1, 1999
and summarizes only some of the important federal tax considerations affecting
IRA contributions. These comments are not meant to be a substitute for tax
planning. Consult your tax advisors about your specific tax situation.
EXCHANGES
By making an exchange by telephone, you authorize the Transfer Agent to act on
telephonic instructions believed by the Transfer Agent to be genuine
instructions from any person representing himself or herself to be you. The
records of the Transfer Agent of such instructions are binding. The exchange
procedures may be modified or terminated at any time upon appropriate notice to
shareholders. For Federal income tax purposes, exchanges 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 the shareholder's basis in
such shares at the time of such transaction.
You may purchase, with the proceeds from a redemption of all or part of their
shares, shares of the same class of any other Fund of the Trust or a designated
class of Daily Assets Government Fund, a money market fund of Forum Funds.
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal income tax law and assumes that each Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting each Fund and its shareholders that are not described in the
Prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Funds or the implications to shareholders. The
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Funds and
their shareholders. Any of these changes or court decisions may have a
retroactive effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of a Fund.
The tax year-end of each Fund is December 31 (the same as the Fund's fiscal year
end).
1. MEANING OF QUALIFICATION
As a regulated investment company, a Fund will not be subject to federal income
tax on the portion of its investment company taxable income (i.e., taxable
interest, dividends, net short-term capital gains, and other taxable ordinary
income, net of expenses) and net capital gain (i.e., the excess of net long-term
capital gains over net short-term capital losses) that it distributes to
shareholders. In order to qualify to be taxed as a regulated investment company
a Fund must satisfy the following requirements:
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o The Fund must distribute at least 90% of its investment company taxable
income for the tax year. (Certain distributions made by a Fund after
the close of its tax year are considered distributions attributable to
the previous tax year for purposes of satisfying this requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing in
securities.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which
are engaged in the same or similar trades or businesses.
Each Fund generally intends to operate in a manner such that it will not be
liable for federal income tax.
2. FAILURE TO QUALIFY
If for any tax year a Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of a Fund's current and accumulated earnings and profits. A
portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on a Fund's income and performance. It is possible that a Fund will not
qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. These distributions are taxable to
shareholders as ordinary income. In the case of Growth Equity Fund and Value
Equity Fund, a portion of these distributions may qualify for the 70%
dividends-received deduction for corporate shareholders.
Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but the Funds may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held shares. These distributions do not qualify for the dividends-received
deduction.
Each Fund may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
All capital loss carryovers are listed in the Funds' financial statements. Any
such losses may not be carried back.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce the shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's basis would
be reduced below zero.
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All distributions by a Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
A shareholder may purchase shares whose net asset value at the time reflects
undistributed net investment income or recognized capital gain, or unrealized
appreciation in the value of the assets of a Fund. Distributions of these
amounts are taxable to the shareholder in the manner described above, although
the distribution economically constitutes a return of capital to the
shareholder.
Shareholders purchasing shares of a Fund just prior to the ex-dividend date of a
distribution will be taxed on the entire amount of the distribution received,
even though the net asset value per share on the date of the purchase reflected
the amount of the distribution.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which they are made. A distribution declared in October,
November or December of any year and payable to shareholders of record on a
specified date in those months, however, is deemed to be received by the
shareholders (and made by the Fund) on December 31 of that calendar year if the
distribution is actually paid in January of the following year.
Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made (or deemed made) to them during the year.
C. CERTAIN TAX RULES APPLICABLE TO THE FUNDS TRANSACTIONS
For federal income tax purposes, when put and call options purchased by a Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by a Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gains at the time of expiration. When a Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When a Fund exercises a put, the
proceeds from the sale of the underlying security are decreased by the premium
paid. When a put or call written by a Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by a Fund at the end of each tax year are
"marked to market" and treated for federal income tax purposes as though sold
for fair market value on the last business day of the tax year. Gains or losses
realized by a Fund on Section 1256 contracts generally is considered 60%
long-term and 40% short-term capital gains or losses. Each Fund can elect to
exempt its Section 1256 contracts, which are part of a "mixed straddle" (as
described below) from the application of Section 1256.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by the 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: (1) the loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
straddle; (2) the 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); (3) the 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; (4) losses recognized with respect to certain straddle
positions which would otherwise constitute short-term capital losses be treated
as long-term capital losses; and (5) 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
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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.
If a Fund invests in the securities of foreign issuers, the Fund's income may be
subject to foreign withholding taxes.
D. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 (or December 31, if
elected by the Fund) of the calendar year. The balance of the Fund's income must
be distributed during the next calendar year. A Fund will be treated as having
distributed any amount on which it is subject to income tax for any tax year.
For purposes of calculating the excise tax, each Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year and (2) excludes foreign currency gains and
losses incurred after October 31 of any year (or December 31 if it has made the
election described above) in determining the amount of ordinary taxable income
for the current calendar year. The Fund will include foreign currency gains and
losses incurred after October 31 in determining ordinary taxable income for the
succeeding calendar year.
Each Fund intends to make sufficient distributions of its ordinary taxable
income and capital gain net income prior to the end of each calendar year to
avoid liability for the excise tax. Investors should note, however, that a Fund
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
E. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases (for example, by reinvesting dividends) other shares of the Fund
within 30 days before or after the sale or redemption (a so called "wash sale").
If disallowed, the loss will be reflected in an upward adjustment to the basis
of the shares purchased. In general, any gain or loss arising from the sale or
redemption of shares of a Fund will be considered capital gain or loss and will
be long-term capital gain or loss if the shares were held for longer than one
year. Any capital loss arising from the sale or redemption of shares held for
six months or less, however, is treated as a long-term capital loss to the
extent of the amount of capital gain distributions received on such shares. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
non-corporate taxpayer, $3,000 of ordinary income.
F. BACKUP WITHHOLDING
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide its correct taxpayer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to a Fund that it is not subject to backup withholding
or that it is a corporation or other "exempt recipient." Backup withholding is
not an additional tax; any amounts so withheld may be credited against a
shareholder's federal income tax liability or refunded.
G. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from a Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
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If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of ordinary income
(and short-term capital gains) paid to a foreign shareholder will be subject to
U.S. withholding tax at the rate of 30% (or lower applicable treaty rate) upon
the gross amount of the distribution. The foreign shareholder generally would be
exempt from U.S. federal income tax on gain realized on the sale of shares of a
Fund and distributions of net capital gains from a Fund.
If the income from a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income distributions, capital
gain distributions, and any gain realized upon the sale of shares of a Fund will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
or U.S. corporations.
In the case of a noncorporate foreign shareholder, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty might be different from those described herein.
The tax rules of other countries with respect to distributions from a Fund can
differ from the U.S. federal income taxation rules described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in a Fund.
H. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and local jurisdictions with
respect to distributions from a Fund can differ from the U.S. federal income
taxation rules described above. These state and local rules are not discussed
herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in a
Fund.
8. OTHER MATTERS
GENERAL INFORMATION
The Trust was organized as a business trust under the laws of the State of
Delaware on November 26, 1997. The Trust has operated under that name and as an
investment company since that date.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in its series (the
Funds) and in classes of shares of those series. As of the date hereof, the
Trust consisted of the following shares of beneficial interest:
o Institutional Shares of each of Government Bond Fund, Corporate Bond
Fund, Growth Equity Fund and Value Equity Fund.
o Trust Shares of each of Government Bond Fund, Corporate Bond Fund,
Growth Equity Fund and Value Equity Fund.
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 series and may divide series into classes of
shares; the costs of doing so will be borne by the Trust.
The Funds reserve the right to invest in one or more other investment companies
in a Core and Gateway(R) structure.
The Trust and each Fund will continue indefinitely until terminated.
36
<PAGE>
2. CLASSES OF SHARES
Each class of a Fund may have a different expense ratio and its expenses will
affect each class' performance. For more information on any other class of
shares of the Fund, you may contact the Transfer Agent.
3. 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, shareholder service 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 separately by individual series or class 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. 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. 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.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
A shareholder or shareholders representing 33 1/3% or more of the outstanding
shares entitled to vote may, as set forth in the Trust Instrument, call meetings
of the Trust (or Fund) for any purpose related to the Trust (or Fund),
including, in the case of a meeting of the Trust, the purpose of voting on
removal of one or more Trustees.
4. CERTAIN REORGANIZATION TRANSACTIONS
The Trust or any Fund may be terminated upon the sale of its assets to, or
merger with, another open-end, management investment company or series thereof,
or upon liquidation and distribution of its assets. Generally such terminations
must be approved by the vote of the holders of a majority of the outstanding
shares of the Trust or the Fund. The Trustees may, without prior shareholder
approval, (i) cause the Trust or any Fund 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 or 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, dependence, colony or possession of the United
States of America or in any foreign jurisdiction.
B. FUND OWNERSHIP
As of March 31, 1999, the percentage of shares owned by all officers and
trustees of the Trust as a group was as follows. To the extent officers and
trustees own less than 1% of the shares of each class of shares of a Fund (or of
the Trust), the table reflects "N/A" for not applicable.
37
<PAGE>
PERCENTAGE OF SHARES
FUND (OR TRUST) OWNED
The Trust N/A
Government Bond Fund N/A
Corporate Bond Fund N/A
Growth Equity Fund N/A
Value Equity Fund N/A
Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of a Fund. Shareholders known by a Fund to own beneficially 5% or more
of a class of shares of a Fund are listed in Table 6 in Appendix B.
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 of April 1, 1999, the following
persons beneficially owned 25% or more of the shares of a Fund (or of the Trust)
and may be deemed to control the Fund (or the Trust). For each person listed
that is a company, the jurisdiction under the laws of which the company is
organized (if applicable) and the company's parents are listed.
<TABLE>
<CAPTION>
CONTROLLING PERSON INFORMATION
<S> <C> <C>
PERCENTAGE OF
SHARES OWNED
SHAREHOLDER FUND (OR TRUST)
Wells Fargo Bank, Trustee for the benefit of Government Bond Fund 36.36%
Pre-Arranged Trust
</TABLE>
C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the securities regulators of some states,
however, have indicated that they and the courts in their state may decline to
apply Delaware law on this point. The Trust Instrument contains an express
disclaimer of shareholder liability for the debts, liabilities, obligations and
expenses of the Trust and requires that a disclaimer be given in each bond, note
or contract, or other undertaking entered into or executed by the Trust or the
Trustees. The Trust's Trust Instrument (the document that governs the operation
of the Trust) provides that the shareholder, if held to be personally liable
solely by reason of being or having seen a shareholder of such series, shall be
entitled out of the assets the applicable series' property to be held harmless
from and indemnified against all losses and expenses arising from such
liability. The Trust Instrument also provides that each series shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the series and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which Delaware law does not apply, no contractual
limitation of liability was in effect, and the portfolio is unable to meet its
obligations. FAdS believes that, in view of the above, there is no risk of
personal liability to shareholders.
The Trust Instrument provides that the Trustees shall not be liable to any
person other than the Trust or its shareholders for any act, omission or
obligation of the Trust or any Trustee. In addition, the Trust Instrument
provides that the Trustees shall not be liable for any act, omission or any
conduct whatsoever in his capacity as a Trustee, provided that a Trustee is not
protected against any liability 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 his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
38
<PAGE>
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, the copy of such contract or other documents filed as exhibits
to the registration statement.
E. FINANCIAL STATEMENTS
The financial statements of the Funds for the year ended December 31, 1998
included in the Annual Report to shareholders of the Trust are incorporated
herein by reference. These financial statements include the schedule of
investments, statement of assets and liabilities, statement of operations,
statement of changes in net assets, financial highlights, notes and independent
auditors' report.
39
<PAGE>
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
AAA Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds that 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 that make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds that 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.
BAA Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments 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.
BA Bonds that 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.
B Bonds that 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.
CAA Bonds that 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.
CA Bonds that are rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C 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 Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
A-1
<PAGE>
2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
NOTE Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least
degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, large
uncertainties or major exposures to adverse conditions may outweigh
these.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
NOTE Plus (+) or minus (-). 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.
The `r' symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns that are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
A-2
<PAGE>
risk-such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse
floaters.
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic
conditions.
A+,A, Protection factors are average but adequate. However, risk factors
A- are more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions. Overall quality may move up or
down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
A-3
<PAGE>
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, Default. Securities are not meeting current obligations and are
DD, D extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% -
90% of such outstandings, and `D' the lowest recovery potential, i.e.
below 50%.
PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
AAA An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
AA An issue that is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance
the earnings and asset protection will remain relatively well
maintained in the foreseeable future.
A An issue that is 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.
BAA An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
BA An issue which is 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.
B An issue that 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.
CAA An issue that 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.
A-4
<PAGE>
CA An issue that is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of
eventual payments.
C This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: 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
issue ranks in the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA 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.
A 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.
BBB 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.
BB, B, CCC Preferred stock rated BB, B, and CCC is 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. While such issues will likely
have some quality and protective characteristics, large
uncertainties or major risk exposures to adverse conditions outweigh
these.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard
& Poor's does not rate a particular type of obligation as a matter
of policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, 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.
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) 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:
A-5
<PAGE>
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME
Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
A-6
<PAGE>
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse changes in business, economic, or financial
conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
APPENDIX B - MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
The following Table shows the dollar amount of fees payable to the Adviser with
respect to each Fund, the amount of fee that was waived by the Adviser, if any,
and the actual fee received by the Adviser.
<TABLE>
<S> <C> <C> <C>
GOVERNMENT BOND FUND ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
WAIVED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $99,857 $42,530 $57,327
Trust Shares
Period March 30, 1998-December 31, 1998 $75 $40 $35
CORPORATE BOND FUND ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
WAIVED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $266,091 $118,031 $148,060
GROWTH EQUITY FUND ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
WAIVED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $82,725 $31,022 $51,703
Trust Shares
Period March 30, 1998-December 31, 1998 $881 $341 $540
VALUE EQUITY FUND ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
WAIVED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $70,265 $26,411 $43,854
Trust Shares
Period March 30, 1998-December 31, 1998 $793 $309 $484
</TABLE>
B-1
<PAGE>
TABLE 2 - ADMINISTRATION FEES
The following Table shows the dollar amount of fees payable to FAdS with respect
to each Fund, the amount of fee that was waived by FAdS, if any, and the actual
fee received by FAdS.
<TABLE>
<S> <C> <C> <C>
GOVERNMENT BOND FUND ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $52,647 $0 $52,647
Trust Shares
Period March 30, 1998-December 31, 1998 $32 $0 $32
CORPORATE BOND FUND ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $135,972 $0 $135,972
GROWTH EQUITY FUND ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $31,021 $0 $31,021
Trust Shares
Period March 30, 1998-December 31, 1998 $324 $0 $324
VALUE EQUIRY FUND ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $36,313 $0 $36,313
Trust Shares
Period March 30, 1998-December 31, 1998 $290 $0 $290
</TABLE>
B-2
<PAGE>
TABLE 3 - ACCOUNTING FEES
The following table shows the dollar amount of fees payable to FAcS with respect
to each Fund, the amount of fee that was waived by FAcS, if any, and the actual
fee received by FAcS.
<TABLE>
<S> <C> <C> <C>
GOVERNMENT BOND FUND ACCOUNTING FEE PAYABLE ACCOUNTING FEE WAIVED ACCOUNTING FEE
RETAINED
- ---------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $27,637 $2,909 $24,728
Trust Shares
Period March 30, 1998-December 31, 1998 $621 $155 $466
CORPORATE BOND FUND ACCOUNTING FEE PAYABLE ACCOUNTING FEE WAIVED ACCOUNTING FEE
RETAINED
- ----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $31,581 $0 $31,581
GROWTH EQUITY FUND ACCOUNTING FEE PAYABLE ACCOUNTING FEE WAIVED ACCOUNTING FEE
RETAINED
- ----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $35,110 $2,827 $32,283
Trust Shares
Period March 30, 1998-December 31, 1998 $1,148 $237 $911
VALUE EQUITY FUND ACCOUNTING FEE PAYABLE ACCOUNTING FEE WAIVED ACCOUNTING FEE
RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $35,108 $2,829 $32,279
Trust Shares
Period March 30, 1998-December 31, 1998 $1,150 $236 $914
</TABLE>
B-3
<PAGE>
TABLE 4 - TRANSFER AGENCY FEES
The following table shows the dollar amount of shareholder service fees payable
to the Transfer Agent with respect to Shares of each Fund, the amount of fee
that was waived by Transfer Agent, if any, and the actual fee received by
Transfer Agent.
<TABLE>
<S> <C> <C> <C>
GOVERNMENT BOND FUND TRANSFER AGENCY FEE TRANSFER AGENCY FEE TRANSFER AGENCY FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $19,899 $0 $19,899
Trust Shares
Period March 30, 1998-December 31, 1998 $474 $474 $0
CORPORATE BOND FUND TRANSFER AGENCY FEE TRANSFER AGENCY FEE TRANSFER AGENCY FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $19,851 $0 $19,851
GROWTH EQUITY FUND TRANSFER AGENCY FEE TRANSFER AGENCY FEE TRANSFER AGENCY FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $27,453 $0 $27,454
Trust Shares
Period March 30, 1998-December 31, 1998 $1,020 $765 $255
VALUE EQUIRY FUND TRANSFER AGENCY FEE TRANSFER AGENCY FEE TRANSFER AGENCY FEE
PAYABLE WAIVED RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $27,432 $0 $27,432
Trust Shares
Period March 30, 1998-December 31, 1998 $1,011 $760 $251
</TABLE>
B-4
<PAGE>
TABLE 5 - COMMISSIONS
The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.
AGGREGATE COMMISSION
FUND PAID
- --------------------------------------------------------------------
Government Bond Fund
Year Ended December 31, 1998 $0
Corporate Bond Fund
Year Ended December 31, 1998 $0
Growth Equity Fund
Year Ended December 31, 1998 $0
Value Equity Fund
Year Ended December 31, 1998 $0
B-5
<PAGE>
TABLE 6 - 5% SHAREHOLDERS
The following table lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund as of March 31, 1999.
<TABLE>
<S> <C> <C> <C>
% OF
FUND/CLASS OF SHARES NAME AND ADDRESS SHARES CLASS
- ------------------------------------------------------------------------------------------------------------
Government Bond Fund/ Wells Fargo Bank TTEE FBO Pre 2,393,837.319 36.36
Institutional Share Class Arranged Trust (Reg-88) PN Attn:
Mutual Funds Dept.
PO Box 9800
Calabasas, CA 91302
Strafe & Co. 1,096,558.581 16.66%
FBO SCI Related Accounts - FH
PO Box 160
Westerville, OH 43086-0160
Wells Fargo TTEE FBO Cemetery 1,035,577.671 15.73%
Merchandise Trust (Reg-88) CM
Attn: Mutual Funds Dept
PO Box 9800
Calabases, CA 91302
CNOM & Co. 555,706.456 8.44%
C/O Nationsbank Attn: MFO-CNOM
PO Box 831575
Dallas, TX 75283-1575
Miter & Co. 471,402.823 7.16%
FBO Chicago Trust CO/SCI CM
C/O Marshall & Ilsley Trust
PO Box 2977
Milwaukee, WI 53202
First Union National Bank TTEE 411,427.679 6.25%
FBO SCI Endowment Care Trusts
1525 West WT Harris Blvd
CMG NC 1151
Charlotte, NC 28288
Corporate Bond Fund/ Miter & Co. 2,804,408.137 20.22%
Institutional Share Class FBO Chicago Trust Co/SCI EC
C/O Marshall & Ilsley Trust
PO Box 2977
Milwaukee, WI 53202
First Union National Bank TTEE 2,584,816.802 18.64%
FBO SCI Perpetual Care Trusts
1525 West WT Harris Blvd
CMG NC 1151
Charlotte, NC 28288
Strafe & Co. 1,461,342.243 10.54%
FBO SCI Related Account - PE
PO Box 160
Westerville, OH 43086-0160
VAR & CO., c/o US Bank National 1,332,053.161 9.61%
Association FBO E.C.F.
PO Box 64010
St. Paul, MN 55164-0010
Southwest Guaranty Trust Company 1,011,687.857 7.30%
Fiduciary - SCI - Merchandise
10411 Westheimer, Suite 200
Houston, TX 77042
B-6
<PAGE>
First Union National Bank TTEE FBO 934,262.601 6.74%
SCI Preneed Funeral Trusts
1525 Wet WT Harriss Blvd
CMG NC 1151
Charlotte, NC 28288
Growth Equity Fund/ Timothy Brammer TTSS FBO First 10,638.029 27.70%
Trust Share Class Irrevocable QSST of Jay A. Brammer
9000 Keystone Crossing, Suite 1000
Indianapolis, IN 46240
Jay Brammer 8,509.747 22.16%
10948 Lake Front Drive
Indianapolis, IN 46236
Timothy F. Brammer TTEE FBO First 5,319.011 13.85%
Irrevocable QSST of Jay A. Brammer
for Rachel Brammer
9000 Keystone Crossing, Suite 1000
Indianapolis, IN 46240
Jay Brammer Cust FBO Megan Brammer 4,079.099 10.62%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Jay Brammer Cust FBO Michelle Brammer 4,079.099 10.62%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Jay Brammer Cust FBO Abigail Brammer 4,079.099 10.62%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Growth Equity Fund/ First Union National Bank TTEE FBO 573,341.080 18.48%
Institutional Share Class SCI Preneed Funeral Trusts
1525 West WT Harris Blvd CMG NC 1151 Charlotte,
NC 28288
Strafe & Co. FBO SCI Related 564,431.905 18.20%
Accounts - CM
PO Box 160
Westerville, OH 43086-0160
Miter & Co. 538,091.227 17.35%
FBO Chicago Trust CO/SCI CM
C/o Marshall & Ilsley Trust
PO Box 2977
Milwaukee, WI 53202
VAR & CO c/o US Bank National 294,713.291 9.50%
Association FBO Pre-Need
PO Box 64010
St. Paul, MN 55164-0010
VAR & CO c/o US Bank National 273,289.479 8.81%
Association FBO Cemetery Merchandise
PO Box 64010
St. Paul, MN 55164-0010
B-7
<PAGE>
Southwest Guaranty Trust Company 220,916.425 7.12%
Fiduciary - SCI - Merchandise
10411 Westheimer, Suite 200
Houston, TX 77042
Southwest Guaranty Trust Company 199,864.898 6.44%
Fiduciary - SCI - Funeral Service
10411 Westheimer, Suite 200
Houston, TX 77042
Value Equity Fund/ Timothy Brammer TTEE FBO First 11,258.813 29.04%
Trust Share Class Irrevocable QSST of Jay A. Brammer
9000 Keystone Crossing, Suite 1000
Indianapolis, IN 46240
Jay Brammer 9,254.684 23.87%
10948 Lake Front Drive
Indianapolis, IN 46236
Timothy F. Brammer TTEE FBO First 5,629.409 14.52%
Irrevocable QSST of Jay A. Brammer
for Rachel Brammer
9000 Keystone Crossing, Suite 1000
Indianapolis, IN 46240
Jay Brammer Cust FBO Megan Brammer 4,209.294 10.86%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Jay Brammer Cust FBO Michelle Brammer 4,209.294 10.86%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Jay Brammer Cust FBO Abigail Brammer 4,209.294 10.86%
UGMA/IN
10948 Lake Front Drive
Indianapolis, IN 46236
Value Equity Fund/ First Union National Bank TTEE FBO 781,205.221 19.28%
Institutional Share Class SCI Preneed Funeral Trust
1525 West WT Harris Blvd CMG NC 1151 Charlotte,
NC 28288
Strafe & Co. FBO SCI Related 777,684.332 19.19%
Accounts - CM
PO Box 160
Westerville, OH 43086-0160
Miter & Co. 589,671.153 14.55%
FBO Chicago Trust CO/SCI CM
C/o Marshall & Ilsley Trust
PO Box 2977
Milwaukee, WI 53202
VAR & CO c/o US Bank National 400,082.386 9.87%
Association FBO Pre-Need
PO Box 64010
St. Paul, MN 55164-0010
VAR & CO c/o US Bank National 365,870.657 9.03%
Association FBO Cemetery Merchandise
PO Box 64010
St. Paul, MN 55164-0010
B-8
<PAGE>
Southwest Guaranty Trust Company 334,965.345 8.27%
Fiduciary - SCI - Merchandise
10411 Westheimer, Suite 200
Houston, TX 77042
Southwest Guaranty Trust Company 267,246.965 6.60%
Fiduciary - SCI - Funeral Service
10411 Westheimer, Suite 200
Houston, TX 77042
</TABLE>
B-9
<PAGE>
APPENDIX C - PERFORMANCE DATA
TABLE 1 - YIELDS
For the 30-day period ended December 31, 1998, the annualized yield of
Institutional Shares of Government Bond Fund and Corporate Bond Fund was as
follows.
GOVERNMENT BOND FUND YIELD
- --------------------------------------------
Institutional Shares 4.74%
CORPORATE BOND FUND YIELD
- --------------------------------------------
Institutional Shares 5.67%
B-10
<PAGE>
TABLE 2 - TOTAL RETURNS
The average annual total return of each class of each Fund for the period ended
March 31, 1999, was as follows.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NON STANDARDIZED RETURNS (WITHOUT A SALES LOAD)
CALENDAR
GOVERNMENT BOND ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares 0.34% -1.31% -1.31% 6.52% N/A N/A N/A 6.53%
CALENDAR
CORPORATE BOND ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares 0.60% -0.69% -0.69% 6.79% N/A N/A N/A 6.65%
CALENDAR
GROWTH EQUITY ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Trust Shares 4.39% 6.67% 6.67% 28.61 N/A N/A N/A 28.52%
%
Institutional Shares 4.46% 6.73% 6.73% 29.11% N/A N/A N/A 29.02%
CALENDAR
VALUE EQUITY ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Trust Shares 2.27% -4.21% -4.21% -11.93% N/A N/A N/A -11.90%
Institutional Shares 2.38% -4.20% -4.20% -11.63% N/A N/A N/A -11.60%
</TABLE>
B-11
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Copy of the Trust Instrument of the Registrant dated November 25, 1997
(see Note 1).
(b) Not Applicable.
(c) See Sections 2.02, 2.04 and 2.06 of the Trust Instrument filed as
Exhibit (a).
(d)(1) Investment Advisory Agreement between Registrant and Forum Investment
Advisors, LLC dated as of March 13, 1998 (filed herewith).
(2) Investment Subadvisory Agreement between Registrant, Forum Investment
Advisors, LLC and Beutel, Goodman Capital Management dated as of March
13, 1998(filed herewith).
(3) Investment Subadvisory Agreement between Registrant, Forum Investment
Advisors, LLC and Conseco Capital Management, Inc. dated as of March
13, 1998 (filed herewith).
(4) Investment Subadvisory Agreement between Registrant, Forum Investment
Advisors, LLC and Davis Hamilton Jackson & Associates LP dated as of
December 31, 1998 (filed herewith).
(5) Investment Subadvisory Agreement between Registrant, Forum Investment
Advisors, LLC and The Northern Trust Company dated as of March 13, 1998
(filed herewith).
(e) Distribution Agreement between Registrant and Forum Fund Services, LLC
dated as of May 1, 1999 (filed herewith).
(f) None.
(g)(1) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC dated March 13, 1998 (filed herewith).
(2) Custodian Agreement between Registrant and BankBoston dated as of March
9, 1998 (filed herewith).
(h)(1) Administration Agreement between Registrant and Forum Administrative
Services, LLC dated March 13, 1998 (filed herewith).
(2) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC dated as of March 13, 1998 (filed herewith).
(i)(1) Opinion of counsel to Registrant (see Note 3).
(2) Consent of Seward & Kissel, LLP (filed herewith).
(j) Not applicable.
(k) None.
(l) Investment Representation letter of original purchaser of shares of
Registrant (see Note 3).
(m) Rule 12b-1 Plan (see Note 4).
(n) Financial Data Schedules (filed herewith).
(o) 18f-3 Plan adopted by Registrant (filed herewith).
Other Exhibits:
Power of Attorney of Jay Brammer (see Note 3).
<PAGE>
Power of Attorney of J.B. Goodwin (see Note 3).
Power of Attorney of Christopher W. Hamm (see Note 3).
Power of Attorney of Robert Stillwell (see Note 3).
Power of Attorney of John Y. Keffer (see Note 3).
- ---------------
Note:
1 Exhibit incorporated by reference as filed in initial N-1A filing on
December 4, 1997, accession number 0001004402-97-000244.
2 Exhibit incorporated by reference as filed in pre-effective amendment
number 1 on February 19, 1998, accession number 0001004402-98-000122.
3 Exhibit incorporated by reference as filed in post-effective amendment
number 1 on March 13, 1998, accession number 0001004402-98- 000197.
4 Exhibit incorporated by reference as filed in pre-effective amendment
number 2 on March 4, 1998, accession number 0001004402-98-000161.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
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 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.
<PAGE>
(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 of the 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 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,
<PAGE>
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 the person or persons transmitted
faith 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.
Sections 7 and 8 of the Distribution 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
<PAGE>
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 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
<PAGE>
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").
(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
<PAGE>
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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Forum Investment Advisors, LLC
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 members of Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101, including their business
connections, which are of a substantial nature.
Forum Holdings Corp. I., Member.
Forum Trust, LLC, Member.
<PAGE>
Both Forum Holdings Corp. I. and Forum Trust are controlled indirectly
by John Y. Keffer, President of Forum Trust and Forum Financial Group,
LLC. Mr. Keffer is also a director and/or officer of various registered
investment companies for which the various Forum Financial Group's
operating subsidiaries provide services.
<TABLE>
<S> <C> <C>
------------------------------------ ----------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------ ----------------------------------- -----------------------------------
Sara M. Morris Treasurer Forum Investment Advisors, LLC.
------------------------------------ -----------------------------------
Chief Financial Officer Forum Financial Group, LLC.
------------------------------------ -----------------------------------
Officer Other Forum affiliated companies
----------------------------------- ------------------------------------ -----------------------------------
----------------------------------- ------------------------------------ -----------------------------------
David I. Goldstein Secretary Forum Investment Advisors, LLC.
------------------------------------ -----------------------------------
General Counsel Forum Financial Group, LLC.
------------------------------------ -----------------------------------
Officer Other Forum affiliated companies
----------------------------------- ------------------------------------ -----------------------------------
----------------------------------- ------------------------------------ -----------------------------------
Mark D. Kaplan Director Forum Investment Advisors, LLC.
----------------------------------- ------------------------------------ -----------------------------------
</TABLE>
(b) The Northern Trust Company
The following are the directors and officers of The Northern Trust
Company, 50 South LaSalle Street, Chicago, Illinois, 60675, including
any business connections of a substantial nature, which they have had
in the past two (2) fiscal years.
<TABLE>
<S> <C> <C>
------------------------------------ ----------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Duane L. Burnham Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
Chairman and Chief Executive Abbott Laboratories, 100 Abbott
Officer Park Road, Abbott Park, IL
60064-3500
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Dr. Dolores E. Cross Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
President GE Fund, General Electric
Company, 3135 Easton Turnpike,
Fairfield, CT 06432
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Susan Crown Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President Henry Crown and Company, 222 N.
LaSalle Street, Suite 2000,
Chicago, IL 60601
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
John R. Goodwin Senior Vice President The Northern Trust Company
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Robert S. Hamada Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Dean, Edward Eagle Brown University of Chicago Graduate
Distinguished Service Professor School of Business, 1101 East
of Finance 58th Street, Chicago, IL 60637
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director A.M. Castle & Co., 3400 North
Wolf Road, Franklin Park, IL 60131
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Chicago Board of Trade, 141 West
Jackson Boulevard, Chicago, IL
60604
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Barry G. Hastings President, Chief Operating The Northern Trust Company
Officer & Director
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
President, Chief Operating Northern Trust Corporation
Officer & Director
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Securities, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust of California
Corporation, 355 S. Grand Avenue,
Los Angeles, CA 90017
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice Chairman of the Board & Northern Trust of Florida
Director Corporation, 700 Brickell Avenue,
Miami, FL 33131
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Nortrust Realty Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Robert A. Helman Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Partner Mayer, Brown & Platt, 190 S.
LaSalle Street, 38th Fl.,
Chicago, IL 60603
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Governor Chicago Stock Exchange, One
Financial Plaza, 440 S. LaSalle
St., Chicago, IL 60605
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Horsham Corporation, 24
Hazelton Avenue, Toronto,
Ontario, Canada M5R 2E2
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Alberta Natural Gas Company,
Ltd., 2900, 240 Fourth Ave.,
N.W., Calgary, Alberta, Canada
T2P 4L7
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Brambles USA, Inc., 400 N.
Michigan Avenue, Chicago, IL 60611
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Arthur L. Kelly Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Managing Partner KEL Enterprises Ltd., Two First
National Plaza, 20 S. Clark
Street, Suite 2222, Chicago, IL
60603
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Bayerische Motoren Werke(BMW)
A.G. BMW Haus Petuelring 130
Postfach 40 02 40, D-8000 Munich
40 Germany
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Deere & Company, John Deere Rd.,
Moline, IL 61265
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Nalco Chemical Company, One Nalco
Center, Naperville, IL 60563-1198
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Snap-on Incorporated, 2801 80th
Street, Kenosha, WI 53140
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Tejas Gas Corporation, 1301
McKinney St., Houston, TX 77010
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Frederick A. Krehbiel Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Chairman and Chief Executive Molex Incorporated, 2222
Officer Wellington Court, Lisle, IL
60532-1682
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Nalco Chemical Company, One Nalco
Center, Naperville, IL 60563-1198
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Tellabs, Inc. , 4951 Indiana
Avenue, Lisle, IL 60532
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Roger W. Kushla Senior Vice President The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Northern Trust Company of New
York, 40 Broad Street, 8th Fl.,
New York, NY 10004
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Robert A. LaFleur Senior Vice President The Northern Trust Company
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Thomas L. Mallman Senior Vice President The Northern Trust Company
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
James J. Mitchell, III Executive Vice President The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Northern Trust Company of New
York, 40 Broad Street, 8th Fl.,
New York, NY 10004
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
William G. Mitchell Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Interlake Corporation, 7701
Harger Road, Oak Brook, IL
60521-1488
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Peoples Energy Corporation, 122
South Michigan Avenue, Chicago,
IL 60603
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Sherwin-Williams Company, 101
Prospect Avenue, N.W., Cleveland,
OH 44115-1075
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Edward J. Mooney Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Chairman, Chief Executive Nalco Chemical Company, One Nalco
Officer, President & Director Center, Naperville, IL 60563-1198
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Morton International, Inc., 100
North Riverside Plaza, Chicago,
IL 60605
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
William A. Osborn Chairman and Chief Executive The Northern Trust Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust of California
Corporation, 355 S. Grand Avenue,
Los Angeles, CA 90017
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Nortrust Realty Management Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Futures Corporation
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Sheila A. Penrose Executive Vice President The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Global Advisors,
Inc., 29 Federal Street,
Stamford, CT 06901
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Perry R. Pero Senior Executive Vice President, The Northern Trust Company
Chief Financial Officer and
Cashier
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Futures Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Global Advisors,
Inc., 29 Federal Street Stamford,
CT 06901
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Securities, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Nortrust Realty Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Peter L. Rossiter Executive Vice President and The Northern Trust Company
General Counsel
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Consolidated Communications Inc.,
Illinois Consolidated Telephone
Company, 121 S. 17th Street,
Mattoon, IL 61938
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Executive Vice President and Northern Trust Corporation
General Counsel
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
Chairman of the Executive Illinois Tool Works Inc. , 3600
Committee West Lake Avenue, Glenview, IL
60025-5811
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director W. W. Grainger, Inc., 5500 West
Howard Street, Skokie, IL 60077
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Trustee Northwestern Mutual Life, 720
East Wisconsin Avenue, Milwaukee,
WI 53202Insurance Co.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
William D. Smithbur Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Abbott Laboratories, One Abbott
Park Road, Abbott Park, IL 60675
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Corning Incorporated, Corning, NY
14831
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Trustee Prime Capital Corporation, P.O.
Box 8460, Rolling Meadows, IL
60008
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
James M. Snyder Executive Vice President The Northern Trust Company
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Bide L. Thomas Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Northern Trust Corporation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director MYR Group Inc. (formerly L.E.
Myers Company), 2550 W. Golf Rd.,
Rolling Meadows, IL 60008
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director R. R. Donnelley & Sons Company,
77 West Wacker Drive, Chicago, IL
60601
------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
(c) Conseco Capital Management, Inc
The following are the directors and officers of Conseco Capital
Management, Inc., 11825 N. Pennsylvania Street, Carmel, Indiana 46032,
including any business connections of a substantial nature, which they
have had in the past two (2) fiscal years. Unless otherwise indicated,
the address of each company listed is 11825 N. Pennsylvania Street,
Carmel, Indiana 46032.
<TABLE>
<S> <C> <C>
------------------------------------ ----------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Nora Ann Bammann Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Maxwell Bublitz President, Chief Executive Conseco Capital Management, Inc.
Officer and Director
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Andrew S. Chow Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Joseph F. DeMichele Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick Director Conseco Capital Management, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice American Life Holding Company,
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice American Life & Casualty
President Insurance Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Executive Vice President American Life & Casualty
Marketing Division Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Vulcan Life Insurance Company
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice CCP II Holdings Corp.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice CNC Real Estate Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Marketing Distribution Systems
Consulting Group, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director MDS of New Jersey, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Conseco Private Capital Group,
President Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Beneficial Standard Life
President and Chief Financial Insurance Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Conseco Mortgage Capital, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Jefferson National Life Insurance
President and Chief Financial Company of Texas
Officer
----------------------------------- -----------------------------------
Director, Executive Vice Great American Reserve Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Conseco Partnership Management,
President and Chief Financial Inc.
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Vice Chairman Conseco Risk Management, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Treasurer and Executive Conseco Securities, Inc.
Vice President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice National Fidelity Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Bankers National Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Conseco, Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Lincoln American Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Brightpoint, Inc., 6402 Corporate
Drive, Indianapolis, IN 46278
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director General Acceptance Corporation,
1025 Acuff Road, Suite 400,
Bloomington, IN 47404
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Administrators Service Corporation
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice American Life Holdings, Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice American Travelers Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Anchor Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Association Management Corporation
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Automobile Underwriters
President and Chief Financial Corporation
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Automobile Underwriters,
President and Chief Financial Incorporated
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Avantec, Inc.
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Bankers Life and Casualty Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Bankers Life Insurance Company of
President and Chief Financial Illinois
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Business Information Group, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, President and Treasurer CNC Entertainment Nevada, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice C.P. Real Estate Services Corp.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director CRM Acquisition Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Capitol American Financial
President and Chief Financial Corporation
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Capitol American Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Capitol Insurance Company of Ohio
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Capitol National Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Certified Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Colonial Penn Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Connecticut National Life
President and Chief Financial Insurance Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Conseco Capital Management, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Conseco Entertainment, Inc.
----------------------------------- -----------------------------------
Director, Executive Vice Conseco Global Investments, Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Conseco Group Risk Management
President and Chief Financial Company
Officer
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Conseco Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
Director, Executive Vice Conseco Life Insurance Company of
President, Chief Financial New York
Officer and Treasurer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Executive Vice President and Conseco Marketing, L.L.C.
Chief Financial Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Conseco Private Capital Group,
Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Treasurer, Executive Vice Conseco Services, L.L.C.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Conseco Teleservices, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Conseco Travel Services, Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Continental Life & Accident
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Continental Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Continental Marketing Corporation
President of Illinois, Inc., 11825 N.
Pennsylvania Street, Carmel,
Indiana 46032
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice DBP of Nevada, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Design Benefit Plans, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Design Benefit Plans of Oregon,
President Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Direct Financial Services, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Diversified National Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Eagle Mortgage Company, Inc.
President and Chief Financial
Officer
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Eagles' National Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Executive Vice President and Frontier National Life Insurance
Chief Financial Officer Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director General Acceptance Corporation,
1025 Acuff Road, Suite 400,
Bloomington, Indiana 47404
----------------------------------- -----------------------------------
Director, Executive Vice Hawthorne Advertising Agency
President and Chief Financial Incorporated
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Health and Life Insurance Company
President and Chief Financial of America
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Healthscope, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Independent Processing Services,
President and Chief Financial Inc.
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Independent Savers Plan, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Integral Technologies, Inc., 9855
Crosspointe Blvd., Suite 401,
Indianapolis, Indiana 46256
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Integrated Networks, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Interart, Inc., 1145 Sunrise
Greetings Court, Bloomington,
Indiana 47402
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director InveStar Insurance Agency, Inc.
(OH)
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice KP Acquisition Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Key-Art Publishing Corp., 8383
Craig Street, Suite 290,
Indianapolis, Indiana 46250
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Lamar Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice MNL Marketing Corporation
President
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Manhattan National Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Monroe Guaranty Corporation,
11590 North Meridian St., Suite
300, Carmel, Indiana 46032
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Executive Vice President, Chief NACT, Inc.
Financial Officer and Treasurer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice National Benefit Plans, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice National Group Life Insurance
President and Chief Financial Group
Officer
----------------------------------- -----------------------------------
Director and Executive Vice Network Air Medical Systems, Inc
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director NewVoice Communications, Inc.,
3900 South Old State Road 37,
Bloomington, Indiana 47401
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice PL Holdings, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Partners Health Group, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Personal Healthcare, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Philadelphia Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Pioneer Financial Services, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Pioneer Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Pioneer Savers Plan, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Powerway, Inc., 6919 Hillsdale
Court, Indianapolis, Indiana
46250
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Preferred Health Choice, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Providential Life Insurance
President and Chief Financial Company
Officer
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director and Executive Vice Response Air Ambulance Network,
President Inc.
----------------------------------- -----------------------------------
Director and Executive Vice Target Ad Group, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Techno, Company d/b/a/ Statesman
President and Chief Financial Data Services, Inc.
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Tier 4 Partners, L.L.C., 320 West
8th Street, Suite 100,
Bloomington, Indiana 47404
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice The Nations Health Plan, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice U.S. Insurance Marketing, Inc.
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice United General Life Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
Director and Executive Vice United Group Holdings, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice United Life Holdings, Inc.
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice United Presidential Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice United Presidential Life
President and Chief Financial Insurance Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director United-States Power Engineering
Power Company, LLC, 3520 N.
Washington Boulevard,
Indianapolis, Indiana 46205
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Wabash Life Insurance Company
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Washington National Corporation
President and Chief Financial
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Washington National Development
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Washington National Financial
President and Chief Financial Services, Inc.
Officer
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Washington National Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
Director Weiss Communications, 6081 East
82nd Street, Suite 401,
Indianapolis, Indiana 46250
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Wells & Company, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Wellsco, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Steven English Chief Financial Officer, Conseco Capital Management, Inc.
Treasurer and Second Vice
President
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
William Ficca Vice President, Director of Conseco Capital Management, Inc.
Research
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Albert Gutierrez Senior Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
William Latimer Vice President, Secretary and Conseco Capital Management, Inc.
Director
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President, Secretary and GARCO Equity Sales, Inc.
Director
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President, Secretary and MDS Securities, Morris Plains, NJ
Director
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Thomas Meyers Senior Vice President, Director Conseco Capital Management, Inc.
of Marketing
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Senior Vice President Conseco Mortgage Capital, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Thomas J. Pence Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
See Yeng Quek Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Gregory Hahn, Senior Vice President, Portfolio Conseco Capital Management, Inc.
Manager
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Gordon N. Smith Vice President, Portfolio Manager Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Andrew Sommers Vice President Conseco Capital Management, Inc.
------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
(d) Davis Hamilton Jackson & Associates, L.P.
The following are the directors and officers of Davis Hamilton Jackson
& Associates, L.P. ("DHJA") Two Houston Center, 909 Fannin, Suite 550,
Houston, Texas 77010, including any business connections of a
substantial nature which they have had in the past two (2) fiscal
years.
<TABLE>
<S> <C> <C>
------------------------------------ ----------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Jack R. Hamilton President and Shareholder DHJA
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Robert C. Davis Secretary, Treasurer and DHJA
Shareholder
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Alfred Jackson Principal and Shareholder DHJA
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Carla J. Evans Vice President - Administration DHJA
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Jeffrey L. Sarff Chief Operating Officer DHJA
------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
(e) Beutel, Goodman Capital Management
The following are the directors and officers of Beutel, Goodman Capital
Management, 5847 San Felipe, Suite 4550, Houston, Texas 77057-3011,
including any business connections of a substantial nature, which they
have had in the past two (2) fiscal years. Unless otherwise indicated,
the address of each company listed is 5847 San Felipe, Suite 4550,
Houston, Texas 77057-3011.
<TABLE>
<S> <C> <C>
------------------------------------ ----------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Robert F. McFarland Chairman, Member of the Beutel, Goodman Capital Management
Management Committee
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Chairman Value Corp
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Member, Board of Directors Beutel, Goodman & Company, Ltd,
20 Eglinton Avenue West, Suite
2000, Toronto, Ontario MAR-1K8
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Richard J. Andrews President, Treasurer and Member Beutel, Goodman Capital Management
of the Management Committee
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Edna Gladney Fund, 2300 Hemphill,
Ft. Worth, TX 76110
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director U.S. Coast Guard Academy Alumni
Association, 15 Monhegan Avenue,
New London, CT 06230-4195
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President Beutel Goodman America, Inc.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
President, Treasurer and Director Value Corp.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Carl Dinger, III Vice President Beutel, Goodman Capital Management
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
John P. Ferguson Vice President and Member of the Beutel, Goodman Capital Management
Management Committee
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President and Director Value Corp.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Trustee Memorial Hermann Foundation, 7737
Southwest Freeway, Houston, TX
77074
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Advisory Trustee Houston Ballet, 1921 West Bell,
Houston, TX 77219
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Frank McReynolds Wozencraft, Jr. Vice President Beutel, Goodman Capital Management
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Member, Board of Directors DePelchin Children's Center, 100
Sandman, Houston, TX 77007
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Keith McRedmond Vice President Beutel, Goodman Capital Management
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Stephen H. Pouns Vice President and Member of the Beutel, Goodman Capital Management
Management Committee
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Vice President and Director Value Corp.
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Trustee Memorial Hospital System, 7737
Southwest Freeway, Suite 250,
Houston, TX 77074
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Memorial Foundation, 7737
Southwest Freeway, Suite 250,
Houston, TX 77074
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director The Methodist Home, 1111 Herring
Avenue, Waco, TX
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
Suzanne L. Babin Vice President Beutel, Goodman Capital Management
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Forrest B. Bruch, II Vice President Beutel, Goodman Capital Management
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Harper B. Trammell Vice President Beutel, Goodman Capital Management
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Trustee The Trammell Foundation
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Member, Board of Governors The Fondren Foundation, P.O. Box
2558, Houston, TX 77252-8037
------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter, or its affiliate,
Forum Financial Services, Inc., serve as underwriter for the following
investment companies registered under the Investment Company Act of
1940. As amended:
The CRM Funds Monarch Funds
The Cutler Trust Norwest Advantage Funds
Forum Funds Norwest Select Funds
Sound Shore Fund, Inc.
(b) The following officer of Forum Fund Services, LLC, Registrant's
underwriter, holds the following position with registrant. Her business
address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
---- ------------------------- ------------------------
Sara M. Morris Treasurer Treasurer
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS 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 Shareholder Services, LLC, 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, Investors
Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts 02116. 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 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. 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,
<PAGE>
(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, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this registration statement
under rule 485(b) under the Securities Act of 1933, as amended, and has duly
caused this post-effective amendment number 4 to Registrant's registration
statement to be signed on its behalf by the undersigned, duly authorized in the
City of Portland, State of Maine on April 29, 1999.
MEMORIAL FUNDS
Christopher W. Hamm, President
By: /s/ David I. Goldstein
----------------------------------
David I. Goldstein, Attorney-in-Fact*
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on April
29, 1999.
(a) Principal Executive Officer
Chris W. Hamm
By: /s/ David I. Goldstein
------------------------------
David I. Goldstein, Attorney-in-Fact*
(b) Principal Financial Officer
/s/ Sara M. Morris
---------------------------------
Sara M. Morris, Treasurer
(c) A majority of the Trustees
Jay Brammer, Trustee
J.B. Goodwin, Trustee
Christopher W. Hamm, Trustee
John Y. Keffer, Trustee
Robert Stillwell, Trustee
By: /s/ David I. Goldstein
--------------------------------
David I. Goldstein, Attorney-in-Fact*
* Pursuant to powers of attorney filed as Other Exhibits to this
Registration Statement.
<PAGE>
INDEX TO EXHIBITS
(d)(1) Investment Advisory Agreement between Registrant and Forum Advisors,
Inc. dated as of March 13, 1998 (filed herewith).
(d)(2) Investment Subadvisory Agreement between Registrant, Forum Advisors,
Inc. and Beutel, Goodman Capital Management dated as of March 13, 1998.
(d)(3) Investment Subadvisory Agreement between Registrant, Forum Advisors,
Inc. and Conseco Capital Management, Inc. dated as of March 13, 1998.
(d)(4) Investment Subadvisory Agreement between Registrant, Forum Advisors,
Inc. and Davis Hamilton, Inc., d/b/a Davis Hamilton Jackson &
Associates dated as of March 13, 1998.
(d)(5) Investment Subadvisory Agreement between Registrant, Forum Advisors,
Inc. and The Northern Trust Company dated as of March 13, 1998.
(e) Distribution Agreement between Registrant and Forum Fund Services,
LLC dated as of May 1, 1999.
(g)(1) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC dated March 13, 1998.
(g)(2) Custodian Agreement between Registrant and BankBoston dated as of March
9, 1998.
(h)(1) Administration Agreement between Registrant and Forum Administrative
Services, LLC dated March 13, 1998.
(h)(2) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC dated as of March 13, 1998.
(i)(2) Consent of Seward & Kissel.
(n) Financial Data Schedules.
(o) 18f-3 Plan adopted by Registrant.
Exhibit (d)(1)
MEMORIAL FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, and amended as of the
11th day of September, 1998, by and between Memorial Funds, a Delaware business
trust, its principal office and place of business at Two Portland Square,
Portland, Maine 04101 (the "Trust"), and Forum Investment Advisors, LLC, a
Delaware limited liability company, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101 ("Adviser").
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
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series of the Trust listed in Appendix A hereto (each, a
"Fund" and collectively, the "Funds"), and the Adviser 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 the Adviser hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs Adviser, subject to the direction and
control of the Board, to manage the investment and reinvestment of the assets in
each Fund and, without limiting the generality of the foregoing, to provide
other services as specified herein. The Adviser accepts this employment and
agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Trust has delivered to the Adviser
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 Prospectuses and Statements of Additional Information of each
Fund (collectively, as currently in effect and as amended or supplemented, the
"Prospectus"), and (iv) all procedures adopted by the Trust with respect to any
Fund (i.e., repurchase agreement procedures), and shall promptly furnish the
Adviser with all amendments of or supplements to the foregoing. The Trust shall
deliver to the Adviser (x) a certified copy of the resolution of the Board of
Trustees of the Trust (the "Board") appointing the Adviser and authorizing the
<PAGE>
execution and delivery of this Agreement, (y) a copy of all proxy statements and
related materials relating to any Fund, and (z) any other documents, materials
or information that the Adviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Adviser has delivered to the Trust (i) a copy of its Form ADV
as most recently filed with the SEC and (ii) a copy of its code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act (the "Code").
The Adviser shall promptly furnish the Trust with all amendments of or
supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST
In order for the Adviser to perform the services required by this
Agreement, the Trust (i) shall cause all service providers to the Trust to
furnish information to the Adviser, and assist the Adviser as may be required
and (ii) shall ensure that the Adviser has reasonable access to all records and
documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser will make decisions with respect to all purchases and
sales of securities and other investment assets in each Fund. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, at the risk 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 and other
investments 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.
Consistent with Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Adviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Adviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Adviser or its affiliates.
Whenever the Adviser simultaneously places orders to purchase or sell the same
asset on behalf of a Fund and one or more other accounts advised by the Adviser,
the orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account.
(b) The Adviser will report to the Board at each meeting thereof as
requested by the Board all material changes in each Fund 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
<PAGE>
securities are included in the Funds' holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which the Funds maintain investments, or otherwise. The Adviser will also
furnish the Board with such statistical and analytical information with respect
to investments of the Funds as the Adviser may believe appropriate or as the
Board reasonably may request. In making purchases and sales of securities and
other investment assets for the Funds, the Adviser will bear in mind the
policies set from time to time by the Board as well as the limitations imposed
by the Organic Documents and Registration Statement, the limitations in the 1940
Act, the Securities Act, the Internal Revenue Code of 1986, as amended, and
other applicable laws and the investment objectives, policies and restrictions
of the Funds.
(c) The Adviser will from time to time employ or contract 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. If Adviser delegates all or a portion of its
duties under this Agreement with respect to a Fund to one or more sub-advisers,
Adviser shall report to the Board at each regularly scheduled meeting thereof,
or as otherwise requested by the Board, information regarding the investments
made on behalf of the Fund by the sub-adviser or sub-advisers, the performance
of the Fund, and the fees paid to the sub-adviser or sub-advisers or such other
information as the Adviser may believe appropriate or as the Board reasonably
may request.
(d) The Adviser will report to the Board all material matters related
to the Adviser. On an annual basis, the Adviser shall report on its compliance
with its Code to the Board and upon the written request of the Trust, the
Adviser shall permit the Trust, or its representatives to examine the reports
required to be made to the Adviser under the Code. The Adviser will notify the
Trust of any change of control of the Adviser and any changes in the key
personnel who are either the portfolio manager(s) of the Fund or senior
management of the Adviser, in each case prior to or promptly after such change.
(e) The Adviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. 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 Adviser or the Trust
pursuant to applicable law. To the extent required by law, 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 its 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 its representatives.
<PAGE>
(f) The Adviser will 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.
(g) The Adviser will provide the Funds' custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Funds' assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, the Adviser is
responsible for assisting in the fair valuation of all Fund assets and will use
its reasonable efforts to arrange for the provision of prices from parties who
are not affiliated persons of the Adviser for each asset for which the Funds'
fund accountant does not obtain prices in the ordinary course of business.
(h) The Adviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
(i) Unless otherwise agreed to by the Adviser and the Trust, the
Adviser shall have no duties or obligations pursuant to this Agreement with
respect to a Fund during any period in which the Fund invests all or
substantially all of its investment assets in a registered, open-end management
investment company, or separate series thereof, in accordance with Section
12(d)(1)(E) under the 1940 Act.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to each Fund, a fee at an annual rate as listed in Appendix A
hereto. Such 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. 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 the Adviser such
compensation as shall be payable prior to the effective date of termination.
(b) The Adviser may agree to waive all or part of its fees by separate
agreement.
<PAGE>
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
(d) 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 administrator under an agreement between
the administrator 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 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
and officers; (r) the costs of personnel (who may be employees of the Adviser,
an administrator 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 distribution or
service plan or agreement related to similar manners.
SECTION 5. STANDARD OF CARE
(a) 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. The Adviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Adviser against any liability to the Trust or to the Trust's security
holders to which the Adviser would otherwise be subject by reason of 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.
(b) The Adviser shall not be liable to the Trust for any action taken
or failure to act in good faith reliance upon: (i) information, instructions or
requests, whether oral or written, with respect to a Fund that the Adviser
reasonably believes were made by a duly authorized officer of the Trust, (ii)
<PAGE>
the advice of counsel to the Trust, and (iii) any written instruction or
certified copy of any resolution of the Board.
(c) The Adviser 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 (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon approval by a majority of the outstanding voting securities
of that Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; 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 Fund, 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 the continuation of
this Agreement is not approved as to a Fund, the Adviser may continue to render
to that Fund the services described herein in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund 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 Fund on 60 days' written
notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the
Trust. This Agreement shall terminate immediately upon its 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 directors, officers or employees 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. REPRESENTATIONS OF ADVISER.
The Adviser represents and warrants that (i) it is either registered as
an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Trust of the
occurrence of any event that would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the direction and control of the
Board, one or more persons who are registered as investment advisers pursuant to
the Advisers Act or who are exempt from registration thereunder ("Subadvisers").
Each Subadviser's employment will be evidenced by a separate written agreement
approved by the Board and, if required, by the shareholders of the applicable
Fund. The Adviser shall not be liable hereunder for any act or omission of any
Subadviser, except to exercise good faith in the employment of the Subadviser
and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. 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 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 shareholders of the
Funds.
SECTION 11. MISCELLANEOUS
(a) 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 and, if required by the 1940 Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
<PAGE>
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) 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.
(j) 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 any other series of the Trust and that no
Fund shall be liable or shall be charged for any debt, obligation or liability
of any other Fund or series, whether arising under this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Adviser shall be liable at law or in equity for the Adviser's obligations
under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) 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
<PAGE>
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.
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
By:/s/ Christopher W. Hamm
-----------------------------
Christopher W. Hamm
President
FORUM INVESTMENT ADVISORS, LLC
By:/s/ Mark Kaplan
-----------------------------
Mark Kaplan
Managing Director
<PAGE>
MEMORIAL FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Government Bond Fund 0.23
Corporate Bond Fund 0.23
Value Equity Fund 0.35
Growth Equity Fund 0.35
Exhibit (d)(2)
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, by and among Memorial
Funds, a Delaware business trust, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101, (the "Trust"); Forum
Investment Advisors, LLC, a Delaware limited liability company, with its
principal office and place of business at Two Portland Square, Portland, Maine
04101, (the "Adviser") and Beutel, Goodman Capital Management, a partnership
with its principal office and place of business at 5847 San Felipe, Suite 4500,
Houston, Texas 77057-3011 (the "Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement
dated the 13th day of March, 1998, ("Advisory Agreement") with the Trust;
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;
WHEREAS, pursuant to the Advisory Agreement, and subject to the
direction and control of the Board of Trustees of the Trust (the "Board"), the
Adviser acts as investment adviser for each series of the Trust listed on
Appendix hereto (each, a "Fund" and, collectively, the "Funds");
WHEREAS, the Trust and Adviser desire to retain the Subadviser to
perform investment advisory services for the Fund and Subadviser 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, the Adviser and the Subadviser hereby
agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust and the Adviser hereby employ Subadviser, subject to the
direction and control of the Board, to manage the investment and reinvestment of
the assets in each Fund and, without limiting the generality of the foregoing,
to provide other services as specified herein. The Subadviser accepts this
employment and agrees to render its services for the compensation set forth
herein.
(b) In connection therewith, the Trust has delivered to the Subadviser
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, all exhibits thereto, 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 Prospectuses and Statements of Additional
Information of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), and (iv) all procedures adopted by the Trust
with respect to any Fund (I.E., repurchase agreement procedures), and shall
promptly furnish the Adviser with all amendments of or supplements to the
foregoing. The Trust shall deliver to the Subadviser (x) a certified copy of the
resolution of the Board appointing the Subadviser and authorizing the execution
and delivery of this Agreement, (y) a copy of all proxy statements and related
materials relating to any Fund, and (z) any other documents, materials or
information that the Subadviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Subadviser has delivered to the Adviser and the Trust (i) a
copy of its Form ADV as most recently filed with the SEC and (ii) a copy of its
code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act
<PAGE>
(the "Code"). The Subadviser shall promptly furnish the Adviser and Trust with
all amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST AND ADVISER
(a) In order for the Subadviser to perform the services required by
this Agreement, the Trust and the Adviser (i) shall, cause all service providers
to the Trust to furnish information relating to any Fund to the Subadviser and
assist the Subadviser as may be required and (ii) shall ensure that the
Subadviser has reasonable access to all records and documents maintained by the
Trust, or any service provider to the Trust.
(b) In order for the Subadviser to perform the services required by
this Agreement, the Adviser shall deliver to the Subadviser all material it
provides to the Board in accordance with the Advisory Agreement.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser will make decisions with respect to all purchases
and sales of securities and other investment assets in each Fund to the extent
such authority is delegated by the Adviser. To carry out such decisions, the
Subadviser is hereby authorized, as agent and attorney-in-fact for the Trust,
for the account of, at the risk 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 and other investments for
the Funds, the Subadviser 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.
Consistent with Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Subadviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Subadviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Subadviser or its affiliates.
Whenever the Subadviser simultaneously places orders to purchase or sell the
same asset on behalf of a Fund and one or more other accounts advised by the
Subadviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(b) The Subadviser will report to the Board at each meeting thereof as
requested by the Adviser or the Board all material changes in each Fund since
the prior report, and will also keep the Board informed of important
developments affecting the Trust, the Funds and the Subadviser, and on its own
initiative, will furnish the Board from time to time with such information as
the Subadviser 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, the economic, social or political conditions
prevailing in each country in which the Funds maintain investments, or
otherwise. The Subadviser will also furnish the Board with such statistical and
analytical information with respect to investments of the Funds as the
Subadviser may believe appropriate or as the Board reasonably may request. In
making purchases and sales of securities and other investment assets for the
Funds, the Subadviser will bear in mind the policies set from time to time by
the Board as well as the limitations imposed by the Organic Documents and
Registration Statement, the limitations in the 1940 Act, the Securities Act, the
Internal Revenue Code of 1986, as amended, and other applicable laws and the
investment objectives, policies and restrictions of the Funds.
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's or Adviser's behalf in any such respect.
<PAGE>
(d) The Subadviser will report to the Board all material matters
related to the Subadviser. On an annual basis, the Subadviser shall report on
its compliance with its Code to the Adviser and to the Board and upon the
written request of the Adviser or the Trust, the Subadviser shall permit the
Adviser and the Trust, or their respective representatives to examine the
reports required to be made to the Subadviser under the Code. The Subadviser
will notify the Adviser and the Trust of any change of control of the Subadviser
and any changes in the key personnel who are either the portfolio manager(s) of
the Fund or senior management of the Subadviser, in each case prior to or
promptly after such change.
(e) The Subadviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Subadviser 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 Subadviser pursuant to this
Agreement required to be prepared and maintained by the Subadviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Adviser and the Trust, or their respective
representatives, shall have access to such books and records at all times during
the Subadviser's normal business hours. Upon the reasonable request of the
Adviser or the Trust, copies of any such books and records shall be provided
promptly by the Subadviser to the Adviser and the Trust, or their respective
representatives.
(f) The Subadviser will 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.
(g) The Subadviser will provide the Funds' custodian and fund
accountant on each business day with such information relating to all
transactions concerning the Funds' assets under the Subadviser's control as the
custodian and fund accountant may reasonably require. In accordance with
procedures adopted by the Board, the Subadviser is responsible for assisting in
the fair valuation of all Fund assets and will use its reasonable efforts to
arrange for the provision of prices from parties who are not affiliated persons
of the Subadviser for each asset for which the Funds' fund accountant does not
obtain prices in the ordinary course of business.
(h) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
(i) Except as otherwise agreed to by the Trust, the Adviser and the
Subadviser, during any period in which a Fund invests all (or substantially all)
of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act, the Subadviser shall have no duties or obligations pursuant
to this Agreement with respect to the Fund.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to each Fund, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser 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. 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 Adviser shall pay to the Subadviser
such compensation as shall be payable prior to the effective date of
termination.
<PAGE>
(b) The Subadviser may agree to waive all or part of its fees by
separate agreement.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
SECTION 5. STANDARD OF CARE
(a) The Trust and Adviser shall expect of the Subadviser, and the
Subadviser will give the Trust and Adviser the benefit of, the Subadviser's best
judgment and efforts in rendering its services hereunder. The Subadviser shall
not be liable to the Adviser or the Trust hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Subadviser against
any liability to the Adviser or the Trust to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Subadviser's duties hereunder, or by reason
of the Subadviser's reckless disregard of its obligations and duties hereunder.
(b) The Subadviser shall not be liable to the Adviser or the Trust for
any action taken or failure to act in good faith reliance upon: (i) information,
instructions or requests, whether oral or written, with respect to a Fund that
the Subadviser reasonably believes were made by a duly authorized officer of the
Adviser or the Trust, (ii) the advice of counsel to the Trust, and (iii) any
written instruction or certified copy of any resolution of the Board.
(c) The Subadviser 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 (other than those related to the
Subadviser's employees), fire, mechanical breakdowns, flood or catastrophe, acts
of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon the later of approval 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) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; 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 Fund, 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 the continuation of
this Agreement is not approved as to a Fund, the Subadviser may continue to
render to that Fund the services described herein in the manner and to the
extent permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board, by a vote of a
majority of the outstanding voting securities of the Fund or by the Adviser on
60 days' written notice to the Subadviser or (ii) by the Subadviser on 60 days'
written notice to the Trust. This Agreement shall terminate immediately (x) upon
its assignment or (y) upon termination of the Advisory Agreement.
<PAGE>
SECTION 7. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's directors, officers or employees 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 8. REPRESENTATIONS OF SUBADVISER
The Subadviser represents and warrants that (i) it is either registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Adviser and
the Trust of the occurrence of any event that would disqualify the Subadviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
SECTION 10. 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 Subadviser 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 Subadviser'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 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties hereto and approved by the Trust in the manner set forth in Section 6(b)
hereof.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to any other party
for consequential damages under any provision of this Agreement.
(d) 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.
(e) 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.
(f) 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.
(g) 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
<PAGE>
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.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) 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.
(j) 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 any other series of the Trust and that no
Fund or other series of the Trust shall be liable or shall be charged for any
debt, obligation or liability of any other Fund or series, whether arising under
this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Subadviser shall be liable at law or in equity for the Subadviser's
obligations under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) 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.
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
By:/s/ Christopher W. Hamm
------------------------------
Name:Christopher W. Hamm
Title:President
FORUM INVESTMENT ADVISORS, LLC
By:/s/ Mark D. Kaplan
------------------------------
Name:Mark D. Kaplan
Title:Managing Director
BEUTEL, GOODMAN CAPITAL MANAGEMENT
By:/s/ J. Philip Ferguson
------------------------------
Name: J. Philip Ferguson
Title:Vice President
<PAGE>
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Value Equity Fund 0.30
Exhibit (d)(3)
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, by and among Memorial
Funds, a Delaware business trust, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101, (the "Trust"); Forum
Investment Advisors, LLC, a Delaware limited liability company, with its
principal office and place of business at Two Portland Square, Portland, Maine
04101, (the "Adviser") and Conseco Capital Management, Inc., a Delaware
corporation, with its principal office and place of business at 11825 North
Pennsylvania Street, Carmel, Indiana 46032 (the "Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement
dated the 13th day of March, 1998, ("Advisory Agreement") with the Trust;
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;
WHEREAS, pursuant to the Advisory Agreement, and subject to the
direction and control of the Board of Trustees of the Trust (the "Board"), the
Adviser acts as investment adviser for each series of the Trust listed on
Appendix hereto (each, a "Fund" and, collectively, the "Funds");
WHEREAS, the Trust and Adviser desire to retain the Subadviser to
perform investment advisory services for the Fund and Subadviser 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, the Adviser and the Subadviser hereby
agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust and the Adviser hereby employ Subadviser, subject to the
direction and control of the Board, to manage the investment and reinvestment of
the assets in each Fund and, without limiting the generality of the foregoing,
to provide other services as specified herein. The Subadviser accepts this
employment and agrees to render its services for the compensation set forth
herein.
(b) In connection therewith, the Trust has delivered to the Subadviser
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, all exhibits thereto, 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 Prospectuses and Statements of Additional
Information of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), and (iv) all procedures adopted by the Trust
with respect to any Fund (I.E., repurchase agreement procedures), and shall
promptly furnish the Adviser with all amendments of or supplements to the
foregoing. The Trust shall deliver to the Subadviser (x) a certified copy of the
resolution of the Board appointing the Subadviser and authorizing the execution
and delivery of this Agreement, (y) a copy of all proxy statements and related
materials relating to any Fund, and (z) any other documents, materials or
information that the Subadviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Subadviser has delivered to the Adviser and the Trust (i) a
copy of its Form ADV as most recently filed with the SEC and (ii) a copy of its
code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act
<PAGE>
(the "Code"). The Subadviser shall promptly furnish the Adviser and Trust with
all amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST AND ADVISER
(a) In order for the Subadviser to perform the services required by
this Agreement, the Trust and the Adviser (i) shall, cause all service providers
to the Trust to furnish information relating to any Fund to the Subadviser and
assist the Subadviser as may be required and (ii) shall ensure that the
Subadviser has reasonable access to all records and documents maintained by the
Trust, or any service provider to the Trust.
(b) In order for the Subadviser to perform the services required by
this Agreement, the Adviser shall deliver to the Subadviser all material it
provides to the Board in accordance with the Advisory Agreement.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser will make decisions with respect to all purchases
and sales of securities and other investment assets in each Fund to the extent
such authority is delegated by the Adviser. To carry out such decisions, the
Subadviser is hereby authorized, as agent and attorney-in-fact for the Trust,
for the account of, at the risk 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 and other investments for
the Funds, the Subadviser 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.
Consistent with Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Subadviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Subadviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Subadviser or its affiliates.
Whenever the Subadviser simultaneously places orders to purchase or sell the
same asset on behalf of a Fund and one or more other accounts advised by the
Subadviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(b) The Subadviser will report to the Board at each meeting thereof as
requested by the Adviser or the Board all material changes in each Fund since
the prior report, and will also keep the Board informed of important
developments affecting the Trust, the Funds and the Subadviser, and on its own
initiative, will furnish the Board from time to time with such information as
the Subadviser 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, the economic, social or political conditions
prevailing in each country in which the Funds maintain investments, or
otherwise. The Subadviser will also furnish the Board with such statistical and
analytical information with respect to investments of the Funds as the
Subadviser may believe appropriate or as the Board reasonably may request. In
making purchases and sales of securities and other investment assets for the
Funds, the Subadviser will bear in mind the policies set from time to time by
the Board as well as the limitations imposed by the Organic Documents and
Registration Statement, the limitations in the 1940 Act, the Securities Act, the
Internal Revenue Code of 1986, as amended, and other applicable laws and the
investment objectives, policies and restrictions of the Funds.
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's or Adviser's behalf in any such respect.
<PAGE>
(d) The Subadviser will report to the Board all material matters
related to the Subadviser. On an annual basis, the Subadviser shall report on
its compliance with its Code to the Adviser and to the Board and upon the
written request of the Adviser or the Trust, the Subadviser shall permit the
Adviser and the Trust, or their respective representatives to examine the
reports required to be made to the Subadviser under the Code. The Subadviser
will notify the Adviser and the Trust of any change of control of the Subadviser
and any changes in the key personnel who are either the portfolio manager(s) of
the Fund or senior management of the Subadviser, in each case prior to or
promptly after such change.
(e) The Subadviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Subadviser 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 Subadviser pursuant to this
Agreement required to be prepared and maintained by the Subadviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Adviser and the Trust, or their respective
representatives, shall have access to such books and records at all times during
the Subadviser's normal business hours. Upon the reasonable request of the
Adviser or the Trust, copies of any such books and records shall be provided
promptly by the Subadviser to the Adviser and the Trust, or their respective
representatives.
(f) The Subadviser will 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.
(g) The Subadviser will provide the Funds' custodian and fund
accountant on each business day with such information relating to all
transactions concerning the Funds' assets under the Subadviser's control as the
custodian and fund accountant may reasonably require. In accordance with
procedures adopted by the Board, the Subadviser is responsible for assisting in
the fair valuation of all Fund assets and will use its reasonable efforts to
arrange for the provision of prices or values from parties who are not
affiliated persons of the Subadviser for each asset for which the Funds' fund
accountant does not obtain prices in the ordinary course of business.
(h) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
(i) Except as otherwise agreed to by the Trust, the Adviser and the
Subadviser, during any period in which a Fund invests all (or substantially all)
of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act, the Subadviser shall have no duties or obligations pursuant
to this Agreement with respect to the Fund.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to each Fund, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser 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. 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 Adviser shall pay to the Subadviser
such compensation as shall be payable prior to the effective date of
termination.
<PAGE>
(b) The Subadviser may agree to waive all or part of its fees by
separate agreement.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
SECTION 5. STANDARD OF CARE
(a) The Trust and Adviser shall expect of the Subadviser, and the
Subadviser will give the Trust and Adviser the benefit of, the Subadviser's best
judgment and efforts in rendering its services hereunder. The Subadviser shall
not be liable to the Adviser or the Trust hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Subadviser against
any liability to the Adviser or the Trust to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Subadviser's duties hereunder, or by reason
of the Subadviser's reckless disregard of its obligations and duties hereunder.
(b) The Subadviser shall not be liable to the Adviser or the Trust for
any action taken or failure to act in good faith reliance upon: (i) information,
instructions or requests, whether oral or written, with respect to a Fund that
the Subadviser reasonably believes were made by a duly authorized officer of the
Adviser or the Trust, (ii) the advice of counsel to the Trust, and (iii) any
written instruction or certified copy of any resolution of the Board.
(c) The Subadviser 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 (other than those related to the
Subadviser's employees), fire, mechanical breakdowns, flood or catastrophe, acts
of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon the later of approval 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) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; 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 Fund, 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 the continuation of
this Agreement is not approved as to a Fund, the Subadviser may continue to
render to that Fund the services described herein in the manner and to the
extent permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board, by a vote of a
majority of the outstanding voting securities of the Fund or by the Adviser on
60 days' written notice to the Subadviser or (ii) by the Subadviser on 60 days'
written notice to the Trust. This Agreement shall terminate immediately (x) upon
its assignment or (y) upon termination of the Advisory Agreement.
<PAGE>
SECTION 7. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's directors, officers or employees 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 8. REPRESENTATIONS OF SUBADVISER
The Subadviser represents and warrants that (i) it is either registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Adviser and
the Trust of the occurrence of any event that would disqualify the Subadviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
SECTION 10. 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 Subadviser 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 Subadviser'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 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties hereto and approved by the Trust in the manner set forth in Section 6(b)
hereof.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to any other party
for consequential damages under any provision of this Agreement.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
<PAGE>
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) 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.
(j) 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 any other series of the Trust and that no
Fund or other series of the Trust shall be liable or shall be charged for any
debt, obligation or liability of any other Fund or series, whether arising under
this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Subadviser shall be liable at law or in equity for the Subadviser's
obligations under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) 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.
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
By:/s/ Christopher W. Hamm
----------------------------------
Christopher W. Hamm
President
FORUM INVESTMENT ADVISORS, LLC
By:/s/ Mark Kaplan
-----------------------------------
Mark Kaplan
Managing Director
CONSECO CAPITAL MANAGEMENT, INC.
By:/s/ Maxwell E Boblitz
-----------------------------------
Name: Maxwell E Boblitz
Title:President and CEO
<PAGE>
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Corporate Bond Fund 0.20
Exhibit (d)(4)
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made as of the 31st day of December, 1998, by and among
Memorial Funds, a Delaware business trust, with its principal office and place
of business at Two Portland Square, Portland, Maine 04101, (the "Trust"); Forum
Investment Advisors, LLC, a Delaware limited liability company, with its
principal office and place of business at Two Portland Square, Portland, Maine
04101, (the "Adviser") and Davis Hamilton Jackson & Associates, L.P., a Delaware
limited partnership, with its principal office and place of business at Two
Houston Center, 909 Fannin Street, Suite 550, Houston, Texas 77010 (the
"Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement
dated the 13th day of March, 1998 and amended the 11th day of September, 1998
("Advisory Agreement") with the Trust;
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;
WHEREAS, pursuant to the Advisory Agreement, and subject to the
direction and control of the Board of Trustees of the Trust (the "Board"), the
Adviser acts as investment adviser for each series of the Trust listed on
Appendix A hereto (each, a "Fund" and, collectively, the "Funds");
WHEREAS, the Trust and Adviser desire to retain the Subadviser to
perform investment advisory services for the Fund and Subadviser 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, the Adviser and the Subadviser hereby
agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust and the Adviser hereby employ Subadviser, subject to the
direction and control of the Board, to manage the investment and reinvestment of
the assets in each Fund and, without limiting the generality of the foregoing,
to provide other services as specified herein. The Subadviser accepts this
employment and agrees to render its services for the compensation set forth
herein.
(b) In connection therewith, the Trust has delivered to the Subadviser
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, all exhibits thereto, 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 Prospectuses and Statements of Additional
Information of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), and (iv) all procedures adopted by the Trust
with respect to any Fund (I.E., repurchase agreement procedures), and shall
promptly furnish the Adviser with all amendments of or supplements to the
foregoing. The Trust shall deliver to the Subadviser (x) a certified copy of the
resolution of the Board appointing the Subadviser and authorizing the execution
and delivery of this Agreement, (y) a copy of all proxy statements and related
materials relating to any Fund, and (z) any other documents, materials or
information that the Subadviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement. The Trust shall furnish to the Subadviser
a copy of each amendment of or supplement to the foregoing promptly after the
adoption of each amendment or supplement.
(c) The Subadviser has delivered to the Adviser and the Trust (i) a
copy of its Form ADV as most recently filed with the SEC and (ii) a copy of its
code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act
(the "Code"). The Subadviser shall promptly furnish the Adviser and Trust with
all amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST AND ADVISER
(a) In order for the Subadviser to perform the services required by
this Agreement, the Trust and the Adviser (i) shall, cause all service providers
to the Trust to furnish information relating to any Fund to the Subadviser and
assist the Subadviser as may be required and (ii) shall ensure that the
Subadviser has reasonable access to all records and documents maintained by the
Trust, or any service provider to the Trust.
(b) In order for the Subadviser to perform the services required by
this Agreement, the Adviser shall deliver to the Subadviser all material it
provides to the Board in accordance with the Advisory Agreement.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser will make decisions with respect to all purchases
and sales of securities and other investment assets in each Fund to the extent
such authority is delegated by the Adviser. To carry out such decisions, the
Subadviser is hereby authorized, as agent and attorney-in-fact for the Trust,
for the account of, at the risk 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 and other investments for
the Funds, the Subadviser 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.
Consistent with Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Subadviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Subadviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Subadviser or its affiliates.
Whenever the Subadviser simultaneously places orders to purchase or sell the
same asset on behalf of a Fund and one or more other accounts advised by the
Subadviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(b) The Subadviser will report to the Board at each meeting thereof as
requested by the Adviser or the Board all material changes in each Fund since
the prior report, and will also keep the Board informed of important
developments affecting the Trust, the Funds and the Subadviser, and on its own
initiative, will furnish the Board from time to time with such information as
the Subadviser 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, the economic, social or political conditions
prevailing in each country in which the Funds maintain investments, or
otherwise. The Subadviser will also furnish the Board with such statistical and
analytical information with respect to investments of the Funds as the
Subadviser may believe appropriate or as the Board reasonably may request. In
making purchases and sales of securities and other investment assets for the
Funds, the Subadviser will bear in mind the policies set from time to time by
the Board as well as the limitations imposed by the Organic Documents and
Registration Statement, the limitations in the 1940 Act, the Securities Act, the
Internal Revenue Code of 1986, as amended, and other applicable laws and the
investment objectives, policies and restrictions of the Funds.
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's or Adviser's behalf in any such respect.
(d) The Subadviser will report to the Board all material matters
related to the Subadviser. On an annual basis, the Subadviser shall report on
its compliance with its Code to the Adviser and to the Board and upon the
written request of the Adviser or the Trust, the Subadviser shall permit the
Adviser and the Trust, or their respective representatives to examine the
reports required to be made to the Subadviser under the Code. The Subadviser
will notify the Adviser and the Trust of any change of control of the Subadviser
and any changes in the key personnel who are either the portfolio manager(s) of
the Fund or senior management of the Subadviser, in each case prior to or
promptly after such change.
(e) The Subadviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Subadviser 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 Subadviser pursuant to this
Agreement required to be prepared and maintained by the Subadviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Subadviser may make and retain for its own use a copy
of such books and records. The Adviser and the Trust, or their respective
representatives, shall have access to such books and records at all times during
the Subadviser's normal business hours. Upon the reasonable request of the
Adviser or the Trust, copies of any such books and records shall be provided
promptly by the Subadviser to the Adviser and the Trust, or their respective
representatives.
(f) The Subadviser will 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.
(g) The Subadviser will provide the Funds' custodian and fund
accountant on each business day with such information relating to all
transactions concerning the Funds' assets under the Subadviser's control as the
custodian and fund accountant may reasonably require. In accordance with
procedures adopted by the Board, the Subadviser is responsible for assisting in
the fair valuation of all Fund assets and will use its reasonable efforts to
arrange for the provision of prices from parties who are not affiliated persons
of the Subadviser for each asset for which the Funds' fund accountant does not
obtain prices in the ordinary course of business.
(h) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
(i) Except as otherwise agreed to by the Trust, the Adviser and the
Subadviser, during any period in which a Fund invests all (or substantially all)
of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act, the Subadviser shall have no duties or obligations pursuant
to this Agreement with respect to the Fund.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to each Fund, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser 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. 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 Adviser shall pay to the Subadviser
such compensation as shall be payable prior to the effective date of
termination.
(b) The Subadviser may agree to waive all or part of its fees by
separate agreement.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
SECTION 5. STANDARD OF CARE
(a) The Trust and Adviser shall expect of the Subadviser, and the
Subadviser will give the Trust and Adviser the benefit of, the Subadviser's best
judgment and efforts in rendering its services hereunder. The Subadviser shall
not be liable to the Adviser or the Trust hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Subadviser against
any liability to the Adviser or the Trust to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Subadviser's duties hereunder, or by reason
of the Subadviser's reckless disregard of its obligations and duties hereunder.
(b) The Subadviser shall not be liable to the Adviser or the Trust for
any action taken or failure to act in good faith reliance upon: (i) information,
instructions or requests, whether oral or written, with respect to a Fund that
the Subadviser reasonably believes were made by a duly authorized officer of the
Adviser or the Trust, (ii) the advice of counsel to the Trust, and (iii) any
written instruction or certified copy of any resolution of the Board.
(c) The Subadviser 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 (other than those related to the
Subadviser's employees), fire, mechanical breakdowns, flood or catastrophe, acts
of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon the later of approval 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) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; 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 Fund, 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 the continuation of
this Agreement is not approved as to a Fund, the Subadviser may continue to
render to that Fund the services described herein in the manner and to the
extent permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board, by a vote of a
majority of the outstanding voting securities of the Fund or by the Adviser on
60 days' written notice to the Subadviser or (ii) by the Subadviser on 60 days'
written notice to the Trust. This Agreement shall terminate immediately (x) upon
its assignment or (y) upon termination of the Advisory Agreement.
SECTION 7. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's directors, officers or employees 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 8. REPRESENTATIONS OF SUBADVISER.
The Subadviser represents and warrants that (i) it is either registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Adviser and
the Trust of the occurrence of any event that would disqualify the Subadviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
SECTION 10. 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 Subadviser 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 Subadviser'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 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties hereto and approved by the Trust in the manner set forth in Section 6(b)
hereof.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) No party to this Agreement shall be liable to the any other party
for consequential damages under any provision of this Agreement.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) 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.
(j) 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 any other series of the Trust and that no
Fund or other series of the Trust shall be liable or shall be charged for any
debt, obligation or liability of any other Fund or series, whether arising under
this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Subadviser shall be liable at law or in equity for the Subadviser's
obligations under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person", "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) 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.
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
By:/s/Christopher W. Hamm____
Christopher W. Hamm
President
FORUM INVESTMENT ADVISORS, LLC
By:/s/Mark Kaplan___________
Mark Kaplan
Managing Director
DAVIS HAMILTON JACKSON & ASSOCIATES, L.P.
By:/s/Jeffrey Sarff________
Name:Jeffrey Sarff
Title:Managing Director and CEO
<PAGE>
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Growth Equity Fund 0.30%
Exhibit (d)(5)
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, by and among Memorial
Funds, a Delaware business trust, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101, (the "Trust"); Forum
Investment Advisors, LLC, a Delaware limited liability company, with its
principal office and place of business at Two Portland Square, Portland, Maine
04101, (the "Adviser") and The Northern Trust Company, a wholly-owned subsidiary
of Northern Trust Corporation, a Delaware corporation, with its principal office
and place of business at 50 South LaSalle Street, Chicago, Illinois 60675 (the
"Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement
dated the 13th day of March, 1998, ("Advisory Agreement") with the Trust;
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;
WHEREAS, pursuant to the Advisory Agreement, and subject to the
direction and control of the Board of Trustees of the Trust (the "Board"), the
Adviser acts as investment adviser for each series of the Trust listed on
Appendix A hereto (each, a "Fund" and, collectively, the "Funds");
WHEREAS, the Trust and Adviser desire to retain the Subadviser to
perform investment advisory services for the Fund and Subadviser 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 Adviser and the Subadviser hereby agree as
follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust and the Adviser hereby employ Subadviser, subject to the
direction and control of the Board, to manage the investment and reinvestment of
the assets in each Fund and, without limiting the generality of the foregoing,
to provide other services as specified herein. The Subadviser accepts this
employment and agrees to render its services for the compensation set forth
herein.
(b) In connection therewith, the Trust has delivered or will promptly
deliver to the Subadviser 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 Prospectuses and Statements of Additional
Information of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), and (iv) all procedures adopted by the Trust
with respect to any Fund (I.E., repurchase agreement procedures) and all written
instructions adopted by the Board with respect to any Fund, and shall promptly
furnish the Subadviser with all amendments of or supplements to the foregoing.
The Trust shall deliver to the Subadviser (x) a certified copy of the resolution
of the Board appointing the Subadviser and authorizing the execution and
delivery of this Agreement, (y) a copy of all proxy statements and related
materials relating to any Fund, and (z) any other documents, materials or
information that the Subadviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
<PAGE>
(c) The Subadviser has delivered to the Adviser and the Trust a copy of
its code of ethics complying with the requirements of Rule 17j-1 under the 1940
Act (the "Code"). If in the opinion of counsel to the Trust, the code of ethics
does not satisfy the requirements of Rule 17j-1, the Subadviser will adopt a
code of ethics that does. The Subadviser shall promptly furnish the Adviser and
Trust with all amendments of or supplements to the code of ethics at least
annually.
SECTION 2. DUTIES OF THE TRUST AND ADVISER
(a) In order for the Subadviser to perform the services required by
this Agreement, the Trust and the Adviser (i) shall, cause all service providers
to the Trust to furnish information within a reasonable time relating to any
Fund to the Subadviser and assist the Subadviser as may be required and (ii)
shall ensure that the Subadviser has reasonable access to all records and
documents maintained by the Trust, or any service provider to the Trust.
(b) In order for the Subadviser to perform the services required by
this Agreement, the Adviser shall deliver within a reasonable time to the
Subadviser all material it provides to the Board in accordance with the Advisory
Agreement.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser will make decisions with respect to all purchases
and sales of securities and other investment assets in each Fund to the extent
such authority is delegated by the Adviser. To carry out such decisions, the
Subadviser is hereby authorized, as agent and attorney-in-fact for the Trust,
for the account of, at the risk 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 and other investments for
the Funds, the Subadviser 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.
Consistent with Section 28(e) of the Securities Exchange Act of 1934,
as amended, the Subadviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Subadviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Subadviser or its affiliates.
Whenever the Subadviser simultaneously places orders to purchase or sell the
same asset on behalf of a Fund and one or more other accounts advised by the
Subadviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(b) The Subadviser will report to the Board at each meeting thereof as
requested by the Adviser or the Board all material changes in each Fund since
the prior report, and will also keep the Board informed of important
developments affecting the Trust, the Funds and the Subadviser, and on its own
initiative, will furnish the Board from time to time with such information as
the Subadviser 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, the economic, social or political conditions
prevailing in each country in which the Funds maintain investments, or
otherwise. The Subadviser will also furnish the Board with such statistical and
analytical information with respect to investments of the Funds as the
Subadviser may believe appropriate or as the Board reasonably may request. In
making purchases and sales of securities and other investment assets for the
Funds, the Subadviser will bear in mind the policies set from time to time by
the Board (to the extent such policies and limitations have been communicated to
the Subadviser), as well as the limitations imposed by the Organic Documents and
Registration Statement, the limitations in the 1940 Act, the Securities Act, the
Internal Revenue Code of 1986, as amended, and other applicable laws.
Notwithstanding the foregoing, Subadviser shall not be responsible for the
Fund's compliance with limitations upon investments by cemetery or funeral
<PAGE>
trusts unless such limitations are set forth in the Fund's investment policies
or guidelines provided by Adviser from time to time.
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's or Adviser's behalf in any such respect.
(d) The Subadviser will report to the Board all material matters
related to the Subadviser's duties hereunder. On an annual basis, the Subadviser
shall report on compliance by the access persons of the Fund with its Code to
the Adviser and to the Board and upon the written request of the Adviser or the
Trust, the Subadviser shall permit the Adviser and the Trust, or their
respective representatives to examine the reports required to be made to the
Subadviser by the access persons of the Fund under the Code. The Subadviser will
notify the Adviser and the Trust of any change of control of the Subadviser and
any changes in the key personnel who are either the portfolio manager(s) of the
Fund or senior management of the investment services group of the Subadviser, in
each case prior to or promptly after such change.
(e) The Subadviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Subadviser 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 Subadviser pursuant to this
Agreement required to be prepared and maintained by the Subadviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Adviser and the Trust, or their respective
representatives, shall have reasonable access to such books and records at all
times during the Subadviser's normal business hours. Upon the reasonable request
of the Adviser or the Trust, copies of any such books and records shall be
provided promptly by the Subadviser to the Adviser and the Trust, or their
respective representatives.
(f) The Subadviser will 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.
(g) The Subadviser will provide the Funds' custodian and fund
accountant on each business day with such information relating to all
transactions concerning the Funds' assets under the Subadviser's control as the
custodian and fund accountant may reasonably require. In accordance with
procedures adopted by the Board, the Subadviser is responsible for assisting in
the fair valuation of all Fund assets and will use its reasonable efforts to
arrange for the provision of prices from parties who are not affiliated persons
of the Subadviser for each asset for which the Funds' fund accountant does not
obtain prices in the ordinary course of business.
(h) Except as otherwise agreed to by the Trust, the Adviser and the
Subadviser, during any period in which a Fund invests all (or substantially all)
of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act, the Subadviser shall have no duties or obligations pursuant
to this Agreement with respect to the Fund.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to each Fund, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser 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. 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
<PAGE>
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 Adviser shall pay to the Subadviser
such compensation as shall be payable prior to the effective date of
termination.
(b) The Subadviser may agree to waive all or part of its fees by
separate agreement.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
SECTION 5. STANDARD OF CARE
(a) The Trust and Adviser shall expect of the Subadviser, and the
Subadviser will give the Trust and Adviser the benefit of, the Subadviser's best
judgment and efforts in rendering its services hereunder. The Subadviser shall
not be liable to the Adviser or the Trust hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Subadviser against
any liability to the Adviser or the Trust to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Subadviser's duties hereunder, or by reason
of the Subadviser's reckless disregard of its obligations and duties hereunder.
(b) The Subadviser shall not be liable to the Adviser or the Trust for
any action taken or failure to act in good faith reliance upon: (i) information,
instructions or requests, whether oral or written, with respect to a Fund that
the Subadviser reasonably believes were made by a duly authorized officer of the
Adviser or the Trust, (ii) the advice of counsel to the Trust, and (iii) any
written instruction or certified copy of any resolution of the Board.
(C) THE SUBADVISER 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 (OTHER THAN THOSE RELATED TO THE
SUBADVISER'S EMPLOYEES), FIRE, MECHANICAL BREAKDOWNS, FLOOD OR CATASTROPHE, ACTS
OF GOD, INSURRECTION, WAR, RIOTS OR FAILURE OF THE MAILS, TRANSPORTATION,
COMMUNICATION OR POWER SUPPLY.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon the later of approval 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) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; 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 Fund, 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 the continuation of
this Agreement is not approved as to a Fund, the Subadviser may continue to
render to that Fund the services described herein in the manner and to the
extent permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board, by a vote of a
majority of the outstanding voting securities of the Fund or by the Adviser on
<PAGE>
60 days' written notice to the Subadviser or (ii) by the Subadviser on 60 days'
written notice to the Trust. This Agreement shall terminate immediately (x) upon
its assignment or (y) upon termination of the Advisory Agreement.
SECTION 7. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's directors, officers or employees 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 8. REPRESENTATIONS OF SUBADVISER.
The Subadviser represents and warrants that (i) it is either registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Adviser and
the Trust of the occurrence of any event that would disqualify the Subadviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
SECTION 10. 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 Subadviser 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 Subadviser'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 11. MISCELLANEOUS
(a) 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 and approved by the Trust in the manner set forth in Section 6(b)
hereof.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(d) 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.
(e) 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.
(f) 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.
<PAGE>
(g) 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.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) 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.
(j) 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 any other series of the Trust and that no
Fund or other series of the Trust shall be liable or shall be charged for any
debt, obligation or liability of any other Fund or series, whether arising under
this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Subadviser shall be liable at law or in equity for the Subadviser's
obligations under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) 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.
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
By:/s/ Christopher W. Hamm
--------------------------------
Christopher W. Hamm
President
FORUM INVESTMENT ADVISORS, LLC
By:/s/Mark D. Kaplan
---------------------------------
Mark D. Kaplan
Managing Director
The Northern Trust Company
By: /s/ Anthony Wilkins
----------------------------------
Name:Anthony Wilkins
Title:Officer - Vice president
<PAGE>
MEMORIAL FUNDS
SUBADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Government Bond Fund .20
Exhibit (e)
MEMORIAL FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 1st day of May, 1999, 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
Fund Services, LLC, a Delaware limited liability company 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 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 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.
<PAGE>
(b) In connection therewith, the Trust has delivered to the Distributor
copies of (i) the Trust's Trust Instrument (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 ("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 the Distributor a certified copy of the resolution of the
Board of Trustees of the Trust (the "Board") appointing the Distributor 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 as 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
<PAGE>
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 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.
<PAGE>
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 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.
<PAGE>
(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.
(d) The Distributor represents and warrants to the Trust that:
(i) It is a limited liability company 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 Operating
Agreement 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 Operating
Agreement.
<PAGE>
(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.
(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;
<PAGE>
(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 Organic Document.
(viii) The Registration statement is currently effective and will
remain effective with respect to all Shares of the Funds and Classes
thereof being offered for sale;
(ix) The Registration Statement and Prospectuses have been or will be,
as the case may be, 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
<PAGE>
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 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,
<PAGE>
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 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
<PAGE>
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 the 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").
(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
<PAGE>
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 the 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 Operating Agreement or any applicable statute or regulation;
provided, however, that neither the Trust nor the Distributor may amend their
Organic Documents or Operating Agreement, respectively, in any manner that would
result in a violation of a representation or warranty made in this Agreement.
<PAGE>
(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 SEC 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 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.
<PAGE>
(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 Forum Investment Advisors, LLC ("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 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
<PAGE>
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 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.
<PAGE>
(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, 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 of the Trust or the
Fund to which the Distributor's rights or claims relate in settlement of such
<PAGE>
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.
MEMORIAL FUNDS
By:/s/ Christopher W. Hamm
--------------------------------
Christopher W. Hamm
President
FORUM FUND SERVICES, LLC
By:/s/ David I. Goldstein
---------------------------------
David I. Goldstein
Secretary
<PAGE>
MEMORIAL FUNDS
DISTRIBUTION AGREEMENT
APPENDIX A
FUNDS AND CLASSES OF THE TRUST
AS OF MAY 1, 1999
FUNDS
Government Bond Fund
Corporate Bond Fund
Value Equity Fund
Growth Equity Fund
CLASSES
Institutional Share Class
Trust Share Class
Exhibit (g)(1)
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICES AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, 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
Shareholder 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 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.
<PAGE>
(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 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;
<PAGE>
(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;
(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
<PAGE>
(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
(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.
<PAGE>
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.
(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
<PAGE>
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 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.
<PAGE>
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.
(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
<PAGE>
respect to a Fund, the Trust shall pay to Forum such compensation as shall be
payable prior to the effective date of termination.
(b) Start-up Fees. In consideration of the services provided by Forum
to begin the operations of a new Fund, the Trust shall pay Forum, with respect
to each Fund, the fees set forth in clause (iii) of Appendix B hereto. The fees
payable for these services shall be payable monthly in arrears on the first day
of the calendar month after the Fund commences operations.
(c) 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.
(d) 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:
(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 of
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.
<PAGE>
(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.
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
<PAGE>
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 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
<PAGE>
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
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
<PAGE>
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 the later of the date on which the Trust's Registration
Statement relating to the Shares of the Fund or Class becomes effective or the
date of the commencement of operations of the Fund or Class. 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.
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.
<PAGE>
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.
(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.
<PAGE>
(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.
MEMORIAL FUNDS
By:/s/ Christopher W. Hamm
------------------------------
Christopher W. Hamm
President
FORUM SHAREHOLDER SERVICES, LLC
By:/s/ Lisa Weymouth
-------------------------------
Lisa Weymouth
Managing Director
<PAGE>
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICE AGREEMENT
APPENDIX A
FUNDS AND CLASSES
AS OF MARCH 13, 1998
FUNDS
Government Bond Fund
Corporate Bond Fund
Value Equity Fund
Growth Equity Fund
CLASSES
Institutional Share Class
Trust Share Class
<PAGE>
MEMORIAL FUNDS
TRANSFER AGENCY AND SERVICE AGREEMENT
APPENDIX B
FEES AND EXPENSES
(I) BASE FEE:
Fees per Fund with $24,000 plus $12,000 per each class above one.
more than one 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:
$25 per Shareholder account per year.
Shareholder account fees are based upon the number of Shareholder
accounts as of the last Fund Business Day of the prior month.
(III) START-UP FEE
Fund Start-Up Fee...........................................$10,000.00
<PAGE>
(IV) 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, 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.
Exhibit (g)(2)
CUSTODIAN AGREEMENT
MEMORIAL FUNDS
THIS AGREEMENT made as of this 9th day of March, 1998, between,
Memorial Funds, a Delaware Massachusetts business trust, with its principal
place of business at Two Portland Square, Portland, Maine 04101 (hereinafter
called the "TrustFund"), and BankBoston, N.A., a national banking association
with its principal place of business in Boston, Massachusetts (hereinafter
called the "Custodian").
WHEREAS, the Trust Fund desires that its the Ssecurities and cash of
certain of its separate series shall be hereafter held and administered by
Custodian as the Trust's Fund's agent pursuant to the terms of this Agreement;
and
WHEREAS, the Custodian provides services in the ordinary course of its
business which will meet the Trust's Fund's needs as provided for hereinafter;
NOW, THEREFORE, in consideration of the mutual promises herein made,
the Trust Fund and the Custodian agree as follows:
SECTION 1. DEFINITIONS.
(a) "Account" shall mean the applicable custodial account maintained by
the Custodian on behalf of the Trust for each Fund. The Account of each Fund
shall be separate from the Account of each other Fund and the assets of a Fund's
Account shall not in any way be charged with the liabilities of any other Fund's
Account.
(b) "Bank" shall mean a bank as defined in Sec.tion 2(a)(5) of the
Investment Company Act of 1940 Act.
(c) "Fund" shall mean each of the separate series of the Trust as
listed in Appendix A hereto and each other series of the Trust as may be made
subject to this Agreement by a writing between the Trust and the Custodian.
(d) "Securities" shall mean and include stocks, shares, bonds,
debentures, notes, money market instruments, "foreign securities," as that term
is defined in Rule 17f-5 under the 1940 Act, and or other obligations and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, or subscribe for the same, or evidencing or representing any
other rights or interests therein, or in any property or assets. Unless
otherwise indicated herein, "Securities" shall mean both U. S. and "foreign
securities", as that term is defined in Sec. 17(f) of the Investment Company Act
of 1940.
(e) "Officers' Certificate" shall mean a request or directions in
writing or a written confirmation of an oral requests or directions in writing
signed in the name of the Trust Fund by any two of the Officers Chairman of the
Executive Committee, the President, a Vice President, the Secretary, the Clerk
or the Treasurer of the Trust, the Chariman of the Corporation or any other
persons duly authorized to sign by the Board of Trustees or the Executive
Committee of the TrustFund.
(f) "1940 Act" shall mean the United States Investment Company Act of
1940, as amended.
(g) "Officer of the Trust" shall mean any President, Vice-President,
Treasurer, Assistant Treasurer, Secretary of Assistant Secretary of the Trust.
<PAGE>
(h) "Securities Depository" means a clearing corporation registered
under Section 17A of the Securities Exchange Act of 1934 which maintains a
system for the central handling of securities in which all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the securities.
(i) "Book-Entry securities" means securities issued by the Treasury of
the United States of America and Federal agencies and instrumentalities of the
United States of America that are maintained in the book-entry system provided
by the Federal Reserve Banks.
(j) "Book-Entry Account" means an account maintained by a Federal
Reserve Bank.
SECTION 2. CUSTODIAN AS AGENT.
The Custodian is authorized to act under the terms of this Agreement as
the Trust's Fund's agent and to shall be representing the Trust and a particular
Fund of the Trust Fund whenever acting within the scope of the Agreement.
SECTION 3. NAMES, TITLES AND SIGNATURE OF FUND'S OFFICERS.
(a) An Officer of the Trust Fund will certify to the Custodian the
names, titles, and signatures of those persons authorized to sign the Officers'
Certificates, as well as names of the Board of Trustees and the Executive
Committee. Said Officer, or his or her successor, will provide the Custodian
with any changes which may occur from time to time.
(b) The Custodian is authorized to rely and act upon written and
manually signed instructions of any person or persons (if Custodain has been
directed to act on the instructions of more than one person) more than one, so
indicated) named in a identified on a separate list ("Authorized Persons") of
listing separately those persons who may authorize the withdrawal of any portion
of the cash or Securities contained in an Account which will be furnished to the
Custodian from time to time and signed by an Officers of the Trust The Fund and
certified by its Secretary or an Assistant Secretary, ("Authorized Persons").
The Trust Fund will provide the Custodian with authenticated specimen signatures
of all Authorized Persons.
(c) 40 Act Custody
Revised 5/97
The Custodian is further authorized to rely upon any instructions received by
any other means and identified as having been given or authorized by any
Authorized Person; regardless of whether such instructions shall in fact have
been authorized or given by any such persons; provided, that,
(ai) the Custodian and the Trust Fund shall have previously agreed
in writing upon the means of transmission and the method of identification for
such instructions;
(bii) the Custodian has not been notified by the Trust Fund to cease
to recognize such means and methods,; and
(ciii) such means and methods have in fact been used.
(d) If the Trust Fund should so choose to have dial-up or other means
of direct access to the Custodian's accounting system for Securities in
custodial accounts, the Custodian is also authorized to rely and act upon any
instructions received by the Custodian through the terminal device, regardless
of whether such instructions shall in fact have been given or authorized by the
Trust, Fund provided that such instructions are accompanied by passwords which
have been mutually agreed to in writing by the Custodian and the Trust Fund and
<PAGE>
the Custodian has not been notified by the Trust Corporation to cease
recognizing such passwords.
Wheren dial-up or other direct means of access to the Custodian's
accounting system for cash or Securities is utilized, the Trust Fund agrees to
indemnify the Custodian and hold it harmless from and against any and all
liabilities, losses, damages, costs, reasonable counsel fees, and other
reasonable expenses of every nature suffered or incurred by the Custodian by
reason of or in connection with the improper use, unauthorized use and misuse by
the Trust Fund or its employees of any terminal device with access to the
Custodian's accounting system for cash or Securities in Ccustodial Aaccounts,
unless such losses, damages, etc., result from grossly negligent or wrongful
acts of the Custodian, its employees or agents.
SECTION 4. RECEIPT AND DISBURSEMENT OF MONEY.
(a) A. The Custodian shall open and maintain a separate Account with
respect to each Fundthe Account, subject to debit only by a draft or order by
the Custodian acting pursuant to the terms of this Agreement. The Custodian
shall hold in each Accountthe Account, subject to the provisions hereof, all
cash received by it from or for the aAccount of the applicable Fund.
1. (b) With respect to the Account of each Fund, the The Custodian
shall make payment of cash to the AAccount or shall debit the Account only :
(i)
(a) for the purchase of Securities for the portfolio of the Fund upon the
delivery of such Securities to the Custodian, registered in the name of
the Fund or of the nominee of the Custodian referred to in Section 9
below;
(ii) (b) for payments in connection with the conversion, exchange or
surrender of Securities owned or subscribed to by the Fund held by or
to be delivered to the Custodian;
(ciii) for payments in connection with the return of the cash
collateral received in connection with Securities loaned by the Fund;
(div) for payments in connection with futures contracts positions
held by the Fund;
(ev) for payments of interest, dividends, taxes and in connection
with rights offerings; or
(fvi) for other proper Fund purposes.
All Securities accepted in connection with the purchase of such
Securities, if (a) usual in the course of local market practice or (b)
specifically required in instructions from the Fund, shall be accompanied by
payment of, or a "due bill" for, any dividends, interest or other distributions
of the issue due the purchaser.
(c)
<PAGE>
2. Except as hereinafter provided, the Custodian shall make any payment for
which it receives direction from an Authorized Person so long as such direction
(i) is (aA) in writing (or is a facsimile transmission of a written direction),
(bB) electronically transmitted to the Custodian as provided in Section 3 or
(cC) orally when written or electronic directions cannot reasonably be given
within the relevant time period, orally when the person giving the direction is
known to the Custodian's employee and when the person giving such direction (i)
such direction assures the Custodian that the directions will be confirmed in
writing by an Authorized Persons within twenty-four (24) hours and (ii) states
that such payment is for a purpose permitted under the terms of this subsection.
3 (d) . All funds received by the Custodian in connection with the sale,
transfer, exchange or loan of Securities will be credited to the applicable
Account in immediately available funds as soon as reasonably possible on the
date such received funds are immediately available. Payments for purchase of
Securities for an the Account made in immediately available funds will be
charged against the Account on the day of delivery of such Securities and all
other payments will be charged on the business day after the day of delivery.
(i) A. The Custodian is hereby authorized and required to (aA) collect
on a timely basis all income and other payments with respect to
Securities held hereunder to which a the Fund shall be entitled either
by law or pursuant to custom in the securities business, and to credit
such income to the Account, (bB) detach and present for payment all
coupons and other income items requiring presentation as and when they
become due, (cC) collect interest when due on Securities held
hereunder, and (dD) endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Fund.
(ii) B. If the Custodian agrees to advance cash or Securities of the
Custodian for delivery on behalf of a the Fund to a third party, any
property received by the Custodian on behalf of the Fund in respect of
such delivery shall serve as security for the Fund's obligation to
repay such advance until such time as such advance is repaid, and, in
the case where such advance is extended for the purchase of Securities
which constitute "margin stock" under Regulation U of the Board of
Governors of the Federal Reserve System, such additional Securities of
the Fund, as shall be necessary for the Custodian, in the Custodian's
reasonable determination, to be in compliance with such Regulation U
also shall constitute security for the Fund's obligation to repay such
advance. Each The Fund hereby grants the Custodian a security interest
in such property of the Fund to secure such advance and agrees to repay
such advance promptly without demand from the Custodian (and in any
event, as soon as reasonably practicable following any demand by the
Custodian), unless otherwise agreed by both parties. Should a the Fund
fail to repay such advance as required, the Custodian shall be entitled
immediately to apply such security to the extent necessary to obtain
repayment of the advance, subject, in the case of a Fund's failure to
make prompt repayment without demand, to prior notice to the Fund.
SECTION 5. RECEIPT OF SECURITIES.
(a) The Custodian shall hold in each Fund's the Account, segregated at
all times from those of any other persons, firms or corporations (including the
Accounts of other Funds), pursuant to the provisions hereof, all Securities
received by it from or for the account of the applicable the Fund. All such
Securities are to be held or disposed of by the Custodian for, and subject at
all times to the instructions of, the applicable Fund pursuant to the terms of
this Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any of the Securities and cash,
except pursuant to the directive of the applicable Fund and only for the account
of the Fund as set forth in Section 7 of this Agreement.
<PAGE>
(b) The Custodian and its agents (including foreign subcustodians) may
make arrangements with Depository Trust Fund ("DTC") and other foreign or
domestic depositories or clearing agencies, including the Federal Reserve Bank
and any foreign depository or clearing agency, whereby certain Securities may be
deposited for the purpose of allowing transactions to be made by bookkeeping
entry without physical delivery of such Securities, subject to such restrictions
as may be agreed upon by the Custodian and the Fund. The Custodian shall
immediately commence procedures to replace Securities lost due to robbery,
burglary or theft while such Securities are within its control or that of its
agents or employees upon discovery of such loss.The Trust hereby authorizes the
Custodian to deposit assets of the Funds of the Trust as follows:
(i) deposit with the Custodian or any opther bank licensed and examined
by the United States or any state thereof;
(ii) deposit in the Custodian's account(s) with any Securities
Depository all or any part of the Securities as may from time to time
be held for the Trust; and
(iii) deposit Book-Entry Securities belonging to the Funds in a
Book-Entry Account maintained for the Custodian by a Federal Reserve
Bank.
So long as any deposit referred to in (ii) or (iii) above is maintained for the
Trust, the Custodian shall:
(A) deposit the Securities in an account that includes only assets
held by it for customers;
(B) with respect to Securities of the Trust transferred to the account,
identify as belonging to the Trust a quantity of securities in a
fungible bulk of securities that are registered in the name of the
Custodian or its nominee, or shown on the Custodian's account on the
books of the Securities Depository, the Book-Entry System, or the
Custodian's agent;
(C) promptly send to the Trust all reports the Custodian receives from
the appropriate Federal Reserve Bank or Securities Depository on its
respective system of internal accounting control; and
(D) send to the Trust such reports of the systems of internal
accounting control of the Custodian and its agents through which such
Securities are deposited as are available and as the Trust may
reasonably request from time to time.
The Custodian shall not waive any rights it may have against a Securities
Depository or Federal Reserve Bank. The Trust may elect to be subrogated to the
rights of the Custodian against the Securities Depository or Federal Reserve
Bank or any other person with respect to any claim that the Custodian may have
as a consequence of any loss or damage suffered by the Trust as a result of the
Custodian's use of the Securities Depository or Book-Entry account if and to the
extent that the Trust has not been made whole for any such loss or damage.
SECTION 6. FOREIGN SUBCUSTODIANS AND OTHER AGENTS.
(a) In the event the Custodian places Securities, pursuant to this
Agreement, with any foreign subcustodian, the Custodian agrees that it shall
place such Securities only with those foreign subcustodians which either are
satisfy the requirements of "eligible foreign custodians" as defined in under
Rule 17f-5 under the 1940 ActSection 17(f) of the U. S. Investment Company Act
of 1940, or with respect to which exemptive relief has been granted by the U.
S. Securities and Exchange Commission from the requirements of Section 17(f).
<PAGE>
The Custodian agrees further that in placing Securities with any such
foreign subcustodian, it will enter into a written subcustodian agreement which
shall provide that: (i) the Custodian will be adequately indemnified and the
Securities so placed adequately insured in the event of loss, as provided in
subsection 6(b)part (b) of this section; (ii) the Securities will not be subject
to any right, charge, security interest, lien or claim of any kind in favor of
the foreign subcustodian or its creditors (except any claim for payment for the
services provided by such subcustodian and any related expenses; provided,
however that the Custodian shall use its best efforts promptly to release any
such right, charge, security interest, lien or claim on the assets, except to
the extent such right, charge, security interest, lien or claim arises with
respect to a special request or requirement by the Fund for services the cost of
which and the expenses incurred in connection with which the Fund has not paid
or has declined to pay, it being agreed and understood that, in the ordinary
course, all payments for usual and routine services rendered and expenses
incurred by a subcustodian shall be the obligation of the Custodian); (iii)
beneficial ownership of the Securities will be freely transferable without
payment of money or value other than for safe custody or administration; (iv)
adequate records will be maintained identifying the Securities as belonging to
the Funds of the Trust; (v) the Custodian's independent public accountants will
be given access to those records or the confirmation of the contents of those
records; and (vi) the Custodian will receive periodic reports with respect to
the safekeeping of the Securities, including, but not necessarily limited to,
notification of any transfer to or from the Accounts.
(b) In addition to the indemnities included in Section 13 hereof, the
Custodian agrees that the Custodian shall be liable to the Trust for any loss
which shall occur as a result of the failure of a subcustodian as listed in
exhibit B hereto to exercise reasonable care with respect to the safekeeping of
the Securities and cash of the Trust to the same extent that the Custodian would
be liable to the Trust if the Custodian were holding such Securities or cash in
NewYorkto indemnify and hold harmless the Fund from any and all loss or damage
incurred or suffered by the Fund as a result of placement by the Custodian of
Securities with a foreign subcustodian hereunder, to the extent the Custodian
receives indemnification from such foreign subcustodian pursuant to part (a)(i)
of this section.
(c) With respect to any Securities to be placed with foreign
subcustodians pursuant to this section, the Custodian represents and warrants
that during the term of this Agreement it will carry a Bankers Blanket Bond or
similar insurance for losses incurred as a result of such sub-custodial
arrangements.
(d) The Trust Fund authorizes the Custodian to release any and all
information regarding Securities placed with foreign subcustodians hereunder as
may be required by court order of a court of competent jurisdiction.
(e) So long as Rule 17f-5 under the 1940 Act so requires the Trust's
Board of Trustees or Funds's investment adviser to review or monitor the
Custodian's global custody network, the Custodian shall (a) furnish annually to
the Trust information concerning the foreign sub-custodians employed by the
Custodian similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Agreement; (b) promptly inform the Trust in
the event that the custodian learns of (i) a material adverse change in the
financial condition of a foreign sub-custodian, (ii) any material loss of the
assets of a Fund or (iii) a foreign sub-custodian not the subject of an
exemptive order from the U.S. Securities and Exchange Commission ceasing, or
becoming likely to cease, to meet applicable minimum shareholders' equity
requirements.
<PAGE>
SECTION 7. TRANSFER, EXCHANGE AND REDELIVERY OF SECURITIES.
The Custodian (or a subcustodian or any other agent of the Custodian)
shall have sole power to release or deliver any Securities of a the Fund held by
the Custodian (or such subcustodian or agent) pursuant to this Agreement. The
Custodian agrees (and will obtain an undertaking from each subcustodian or other
agent) that Securities held by the Custodian (or by a subcustodian or other
agent of the Custodian) will be transferred, exchanged or delivered only :
(i) for sales of Securities for the account of the Fund in accordance
with (iA) "New York Street Practice", (B(ii) predominant established
practice in the relevant local market, or (iiiC) specific instructions
from the Fund; or
(ii) when Securities are called, redeemed or retired or otherwise
become payable;
(iii) for examination by any broker selling any such Securities in
accordance with "street delivery" custom or other relevant local market
practice;
(iv) in exchange for or upon conversion into other Securities whether
pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(v) upon conversion of such Securities pursuant to their terms into
other Securities;
(vi) upon exercise of subscription, purchase or other similar rights
represented by such Securities pursuant to their terms;
(vii) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(viii) for the purpose of tendering Securities;
(ix) for the purpose of delivering Securities lent by the Fund;
(x) for purposes of delivering collateral upon redelivery of Securities
lent or for purposes of delivering excess collateral; or
(xi) for other proper Fund purposes.
As to any deliveries made by the Custodian pursuant to items (bii), (div), (ev),
(fvi), (gvii), (iix), (jx) and (kxi), Securities in exchange therefor shall be
deliverable to the Custodian (or a subcustodian or other agent of the
Custodian). The Custodian may rely upon any written, electronic or oral
instructions or an Officers' Certificate relating thereto as provided for in
Sections 3 and 4 hereofabove.
SECTION 8. THE CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS.
Unless and until the Custodian receives instructions to the contrary,
the Custodian (or a subcustodian or other agent of the Custodian) shall:
(i) present for payment all coupons and other income items held by it
for the account of each the Fund which call for payment upon
presentation and hold the cash received by it upon such payment in the
applicable Account;
(ii) collect interest and cash dividends and other distributions,
provide notice to the Fund of receipts, and deposit to the Account;
<PAGE>
(iii) hold for the account of the Fund all stock dividends, rights and
similar Securities issued with respect to any Securities held by the
Custodian under the terms of this Agreement;
(iv) execute as agent on behalf of the Fund all necessary ownership
certificates required by the United States Internal Revenue Code of
1986, as amended, or the Income Tax Regulations of the United States
Treasury Department, the laws of any State or territory of the United
States, or, in the case of Securities held through foreign
subcustodians, the laws of the jurisdiction in which such Securities
are held, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the Securities covered thereby, to the
extent it may lawfully do so;
(v) use its best efforts, in cooperation with the Fund, to file such
forms, certificates and other documents as may be required to comply
with all applicable laws and regulations relating to withholding
taxation applicable to the Securities; and
(vi) use its best efforts to assist the Fund in obtaining any refund
of local taxes to which the Fund may have a reasonable claim.
The Trust The Fund agrees to furnish to the Custodian such information and to
execute such forms and other documents as the Custodian may reasonably request
or as otherwise may be reasonably necessary in connection with the Custodian's
performance of its obligations under clauses (ev) and (fvi).
SECTION 9. REGISTRATION OF SECURITIES.
(a) Except as otherwise directed by an Officers' Certificate, the
Custodian shall register all Securities, except such as are in bearer form, in
the name of the Trust or the applicable Fund or a registered nominee of the
Trust or the Fund Fund or a registered nominee of the Custodian or a
subcustodian. Securities deposited with a Securities Depository or with a DTC or
a foreign subcustodian securities depository permitted under Section 56 may be
registered in the nominee name of the Securities Depository DTC or such foreign
subcustodian securities depository. The Custodian shall execute and deliver all
such certificates in connection therewith as may be required by the applicable
provisions of the United States Internal Revenue Code offo 1986, as amended, the
Income Tax Regulations of the United States Treasury Department, the laws of any
State or territory of the United States, or, in the case of Securities placed
with foreign subcustodians, the laws of the jurisdiction in which such
Securities are held. The Custodian shall maintain such books and records as may
be necessary to identify the specific Securities held by it hereunder at all
times.
(b) The Trust Fund shall from time to time furnish the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee, any
Securities which it may hold for the account of a the Fund and which may from
time to time be registered in the name of athe Fund.
SECTION 10. VOTING AND OTHER ACTION.
Neither the Custodian nor any nominee of the Custodian or of DTC shall
vote any of the Securities held hereunder by or for the account of a the Fund
except in accordance with the instructions contained in an Officers'
Certificate.
The Custodian shall deliver or have delivered to the Trust Fund all
notices, proxies and proxy soliciting materials with relation to such
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of a the Fund), but without
indicating the manner in which such proxies are to be voted.
<PAGE>
With respect to Securities deposited with a Securities Depository or a DTC or
any other depository, including a foreign subcustodian, as provided for in
Section 6 hereof, that where such Securities may be registered in the nominee
name of the Securities Depository or the foreign subcustodianDTC, or other such
depository the Custodian shall request that the nominee shall not vote any of
such deposited Securities or execute any proxy to vote thereon or give any
consent or take any other action with respect thereto unless instructed to do so
by the Custodian following receipt by the Custodian of an Officers' Certificate.
SECTION 11. TRANSFER TAX AND OTHER DISBURSEMENTS.
The Trust, on behalf of each Fund, Fund shall pay or reimburse the
Custodian from time to time for any transfer taxes payable upon transfers of
Securities made hereunder and for all other necessary and proper disbursements
and expenses made or incurred by the Custodian in the performance of this
Agreement, as required by U.S. law or the laws of the jurisdiction in which the
Securities are held, as the case may be.
The Custodian shall execute and deliver such certificates in connection
with Securities delivered to it or by it under this Agreement as may be required
under the laws of any jurisdiction to exempt from taxation any exemptible
transfers and/or deliveries of any such Securities.
SECTION 12. COMPENSATION AND THE CUSTODIAN'S EXPENSES.
The Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties.
SECTION 13. INDEMNIFICATION.
The Trust, on behalf of each Fund, Fund agrees to indemnify and hold
harmless the Custodian and its employees, agents and nominee from all taxes,
charges, expenses, assessments, claims and liabilities (including attorneys'
fees) incurred or assessed against them in connection with the performance of
the Agreement, except such as may arise from their own grossly negligent action,
negligent failure to act or willful misconduct. The Custodian agrees to
indemnify and hold harmless the Trust Fund and its trustees, officers,
employees, and agents from all taxes, charges, expenses, assessments, claims and
liabilities (including attorneys fees) incurred or assessed against the Trust
Fund in connection with the performance of the Agreement, which may arise from
grossly negligent action, grossly negligent failure to act or willful misconduct
on the part of the Custodian. In the event of any advance of cash for any
purpose made by the Custodian resulting from orders or instructions of a the
Fund, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own grossly negligent action, grossly negligent failure to
act or willful misconduct, any property at any time held for the account of the
Fund shall be security therefor.
Within a reasonable time after receipt by an indemnified party of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, notify in
writing the indemnifying party of the commencement thereof; and the omission so
to notify the indemnifying party will not relieve it from any liability
hereunder as to the particular item for which indemnification is then being
sought, unless such omission is a result of the failure to exercise reasonable
care on the part of the indemnified party. In case any such action is brought
against an indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation. Any such indemnifying party shall not be liable to any such
<PAGE>
indemnified party on account of any settlement of any claim or action effected
without the consent of such indemnifying party.
SECTION 14. MAINTENANCE OF RECORDS.
The Custodian will maintain records with respect to each the Funds,
including general ledgers, portfolio ledgers, subsidiary ledgers, if any,
appropriate journals or other records reflecting (i) Securities maintained in
the portfolio of a Fund, (ii) Securities borrowed, loaned or collateralizing
obligations of a Fund, (iii) monies borrowed and monies loaned (together with a
record of the collateral thereto and substitutions of such collateral), (iv)
dividends and interest received, and (v) dividends receivable and interest
insert accrued, in compliance with the rules and regulations of the Investment
Company Act of 1940 Act, as amended, where applicable.
SECTION 15. REPORTS BY THE CUSTODIAN.
The Custodian will furnish to the Trust Fund at the end of every month,
and at the close of each quarter of a Fund's fiscal year, a list of the
portfolio Securities and the aggregate amount of cash in each Account Fund and
will assist in the preparation of the financial data for the N-SAR annual report
to be filed on behalf of a Fund.
The Custodian shall furnish the Trust Fund with such other reports
concerning transactions in the Accounts and/or the Securities as may be agreed
upon from time to time. The books and records of the Custodian pertaining to its
actions under this Agreement shall be kept and preserved by the Custodian in the
manner and, in accordance with applicable rules and regulations under the 1940
ActInvestment Company Act of 1940, and shall be open to inspection and audit at
reasonable times and upon reasonable notice to the Custodian, by officers of any
auditors employed by the Trust Fund (and such other persons as the Trust Fund
may designate from time to time). All such books and records shall be the
property of the Trust Fund and the Custodian shall forthwith upon the
TrustFund's request, turn over to the Trust Fund and cease to retain in its
files, records and documents created and maintained by the Custodian pursuant to
this Agreement, which are no longer needed by the Custodian in performance of
its services or for its protection except that the Custodian may maintain copies
of any such files, records and documents to the extent needed for its
protection.
SECTION 16. FUND VALUATION -- INTENTIONALLY LEFT BLANK.
<PAGE>
SECTION 17. TERMINATION AND ASSIGNMENT.
(a) This agreement may be terminated by the with respect to one or more
Funds Fund or by the Trust or by the Custodian, immediately upon written notice
from the Trust Fund or the Custodian, as applicable, to the other party, if the
other party fails materially to perform its obligations hereunder, and may
otherwise be terminated by the Trust Fund or by the Custodian on sixty ninety
(960) days' notice, given in writing and sent by registered mail to the
Custodian or the Trust Fund as the case may be. Upon termination of this
Agreement, the Custodian shall deliver the Securities and cash in the aAccount
of the Funds for which this Agreement has been terminated to the Trust such
entity as is designated in writing by the Trust Fund and, in the absence of such
a designation may, but shall not be obligated to, deliver them to a bank or
trust company of the Custodian's own selection having an aggregate capital,
surplus and undivided profits as shown by its last published report of not less
than 50 million dollars ($50,000,000), the Securities and cash to be held by
such bank or trust company for the benefit of the Trust Fund under terms similar
to those of this Agreement, and the Trust Fund shall to be obligated to pay to
such transferee the then current rates of such transferee for services rendered
by it; provided, however, that t. The Custodian may decline, however, to
transfer such amount of such Securities equivalent to all fees and other sums
owing by the applicable Fund to the Custodian, and the Custodian shall have a
charge against and security interest in such amount until all monies owing to it
have been paid, or escrowed to its satisfaction.
(b) This Agreement may not be assigned by the Custodian without the
consent of the TrustFund, authorized or approved by a resolution of the Trust's
Fund's Board of Trustees.
SECTION 18. FORCE MAJEURE.
The Custodian shall not be liable or accountable for any loss or damage
resulting from any condition or event beyond its reasonable control; provided,
however, that the Custodian shall promptly use its best efforts to mitigate any
such loss or damage to the Trust or a Fund Fund as a result of any such
condition or event. For the purposes of the foregoing, the actions or inactions
of the Custodian's subcustodians and other agents shall not be deemed to be
beyond the reasonable control of the Custodian. In connection with the
foregoing, the Custodian agrees (and agrees that it will use its best efforts to
obtain the undertaking of its subcustodians and other agents to the effect) that
the Custodian (and/or such subcustodian or agent) shall maintain such alternate
power sources for computer and related systems and alternate channels for
electronic communication with such computers and related systems that the
failure of the primary power source and/or communications channel of the
Custodian (and/or its subcustodians or other agents) will not foreseeabley
result in any loss or damage to the Trust or any FundFund.
SECTION 19. THIRD PARTIES.
This Agreement shall be binding upon and the benefits hereof shall
inure to the parties hereto and their respective successors and assigns.
However, nothing in this Agreement shall give or be construed to give or confer
upon any third party any rights hereunder.
SECTION 20. AMENDMENTS.
The terms of this Agreement shall not be waived, altered, modified,
amended, supplemented or terminated in any manner whatsoever, except by written
instrument signed by both of the parties hereto.
SECTION 21. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the
laws of Tthe Commonwealth of Massachusetts.
<PAGE>
SECTION 22. COUNTERPARTS.
This agreement may be executed in several counterparts, each of which
is an original.
SECTION 23. 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.
SECTION 234. NOTICES.
All notices provided for herein shall be in writing and shall become
effective when deposited in the United States mail, postage prepaid and
certified, addressed
<TABLE>
<S> <C>
(ai) iif to the Custodian, at: 150 Royall Street
Canton, MA 02021
Attention: Worldwide Custody - MS: 45-02-90
(bii) if to the TrustFund, at: Two Portland Square
Portland, Maine 04101
Attention: _____________________________ Secretary
</TABLE>
or to such other address as either party may notify the other in writing.
A copy of the Declaration of Trust Instrument of the Trust has been
delivered to the Custodian Fund is on file with the Secretary of the Trust (Name
of State), and notice is hereby given that this instrument is executed on behalf
of the Trustees of the Trust Fund as Trustees, and the obligations of this
instrument are not binding upon any of the Trustees, officers, or shareholders
of the Trust Fund individually but binding only upon assets and property of the
applicable Fund of the TrustFund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
MEMORIAL FUNDS
By: /s/ Max Berueffy
------------------------------
Name: Max Berueffy, Vice President
and Secretary
Title:
BANKBOSTON, N.A.
By: /s/ Herbert Alleyne, Jr.
----------------------------------
Name: Herbert Alleyne, Jr
Title: Director and Senior Manager
<PAGE>
CUSTODIAN AGREEMENT
MEMORIAL FUNDS
APPENDIX A
FUNDS OF THE TRUST
MAY 1, 1998
Government Bond Fund
Corporate Bond Fund
Value Equity Fund
Growth Equity Fund
<PAGE>
CUSTODIAN AGREEMENT
MEMORIAL FUNDS
APPENDIX B
SUBCUSTODIANS FOR WHICH THE CUSTODIAN IS LIABLE
<TABLE>
<S> <C>
COUNTRY SUBCUSTODIAN
Australia Australia & New Zealand Banking Group, Ltd.
Austria Creditanstalt-Bankverein
Belgium Banque Bruxelles Lambert, S.A.
Canada Canadian Imperial Bank of Commerce
Denmark Den Danske Bank
Finland Merita Bank
France Credit Agricole Indosuez
Germany Dresdner Bank AG
Greece Citibank, N.A.
Hong Kong Standard Chartered Bank
Hungary Creditanstalt-Bankverein
Indonesia Standard Chartered Bank
Ireland The Bank of Ireland
Italy Banque Paribas
Japan Bank of Tokyo-Mitsubishi, Ltd.
Korea Standard Chartered Bank
Malaysia Standard Chartered Bank
Mexico Citibank, N.A.
Netherlands Kas-Associatie N.V.
New Zealand Australia & New Zealand Banking Group, Ltd.
Norway Den norske Bank
Portugal Banco Espirito Santo Commercial de Lisboa
Singapore Standard Chartered Bank
South Africa Standard Bank of South Africa Ltd.
Spain Banco Bilboa Vizcaya
Sweden Skandinaviska Enskilda Banken
Switzerland Bank Leu Ltd.
Transnationalitional Cedel, S.A.
United Kingdom Midland Bank plc
First Chicago Clearing Centre
Venezuela Citibank, N.A.
Argentina, Brazil, Chile , Columbia, Panama, Peru, United Bank Boston, N.A.
States and Uruguay
</TABLE>
Exhibit (h)(1)
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, 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
<PAGE>
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., 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;
<PAGE>
(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;
(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 outside counsel to the Trust,
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;
<PAGE>
(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;
(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. In addition, the
lawyers who are employed by Forum or its affiliates shall provide any of the
legal services identified in Appendix C hereto to the Trust, subject to
satisfaction of the conditions contained in Section 9(c) and to the consents and
waivers by the Trust and Forum of any general conflict of interest existing as a
result of the provision of those services. Forum shall not charge the Trust for
providing the legal services identified in Appendix C, except for those matters
designated as Special Legal Services, as to which Forum may charge, and, subject
to review and approval by the Chairman of the Audit Committee or outside counsel
to the Trust, the Trust shall pay, an additional amount as reimbursement of the
cost to Forum of providing the Special Legal Services. Nothing in this Agreement
shall require Forum to provide any of the services listed in Appendix C, and
each of those services may be performed by an outside vendor if appropriate in
the judgment of Forum or the Trust.
(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.
<PAGE>
(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.
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,
40
<PAGE>
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.
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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.
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) 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
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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 or
Class on the later of the date on which the Trust's Registration Statement
relating to the Shares of the Fund or Class becomes effective or the date of the
commencement of operations of the Fund or Class. 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
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.
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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
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.
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(c) Without limiting the generality of the Sections 9(a) and (b), the
Trust acknowledges that certain legal services may be provided to it by lawyers
who are employed by Forum or its affiliates and who render services to Forum and
its affiliates. A lawyer who provides 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. Provided (i) Forum agrees with any attorney
performing legal services for the Trust to not direct the professional judgment
of the attorney in performing those legal services and (ii) the attorney agrees
to disclose to the Chairman of the Audit Committee or to outside counsel to the
Trust any circumstance in which a legal service the attorney proposes to provide
relates to a matter in which the Trust and Forum or the Trust and any other
investment company to which the attorney is providing legal services have or may
have divergent legal or economic interests, each of Forum and the Trust hereby
consents to the simultaneous representation by the attorney of both Forum and
the Trust and waives any general conflict of interest existing in such
simultaneous representation, and the Trust agrees that, in the event the
attorney ceases to represent the Trust, whether at the request of the Trust or
otherwise, the attorney 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.
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.
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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.
(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,
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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.
MEMORIAL FUNDS
By:/s/ Christopher W. Hamm
----------------------------------
Christopher W. Hamm
President
FORUM ADMINISTRATIVE SERVICES, LLC
By:/s/ David I. Goldstein
----------------------------------
David I. Goldstein
Managing Director
<PAGE>
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
APPENDIX A
FUNDS AND CLASSES OF THE TRUST
AS OF MARCH 13, 1998
Funds
Government Bond Fund
Corporate Bond Fund
Value Equity Fund
Growth Equity Fund
Classes
Institutional Shares
Trust Shares
<PAGE>
MEMORIAL FUNDS
ADMINISTRATION AGREEMENT
APPENDIX B
FEES AND EXPENSES
For its services under the agreement, the Trust shall pay Forum 0.15% of the
average daily net assets under $150 million of each Fund and 0.10% of the
average daily net assets over $150 million of each Fund.
Notwithstanding the above, the minimum fee per Fund shall be $30,000 per year
($2500 per month).
Exhibit (h)(2)
MEMORIAL FUNDS
FUND ACCOUNTING AGREEMENT
AGREEMENT made as of the 13th day of March, 1998, by and between
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 Accounting Services, Limited Liability Company, 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");
WHEREAS, the Trust intends initially to offer shares in [Number of
Initial Series] 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 intends initially to
offer 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");
WHEREAS, the Trust desires that Forum perform certain fund accounting
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 fund accountant 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 its Trust Instrument (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
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("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the 1940 Act (the "Registration Statement"), (iii) the Trust's and the
current Prospectus and Statement of Additional Information of each Fund
(collectively, as currently in effect and as amended or supplemented, the
"Prospectus") and (iv) 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. shall promptly furnish Forum with all amendments of or
supplements to the foregoing.
SECTION 2. DUTIES OF FORUM
(a) Forum and the Trust's administrator, Forum Administrative Services,
LLC (the "Administrator"), may from time to time adopt such procedures as they
agree upon to implement the terms of this Section. With respect to each Fund,
Forum shall perform the following services:
:
(i) calculate the net asset value per share with the frequency
prescribed in each Fund's then-current Prospectus;
(ii) calculate each item of income, expense, deduction, credit, gain
and loss, if any, as required by the Trust and in conformance with
generally accepted accounting practice ("GAAP"), the SEC's Regulation
S-X (or any successor regulation) and the Internal Revenue Code of
1986, as amended (or any successor laws)(the "Code");
(iii) Mmaintain each Fund's general ledger and record all income,
expenses, capital share activity and security transactions of each
Fund;
(iv) calculate the yield, effective yield, tax equivalent yield and
total return for each Fund, and each Class thereof, as applicable, and
such other measure of performance as may be agreed upon between the
parties hereto;
(v) provide the Trust and such other persons as the Administrator may
direct with the following reports (A) a current security position
report, (B) a summary report of transactions and pending maturities
(including the principal, cost, and accrued interest on each portfolio
security in maturity date order), and (C) a current cash position and
projection report;
(vi) prepare and record, as of each time when the net asset value of a
Fund is calculated or as otherwise directed by the Trust, either (A) a
valuation of the assets of the Fund (unless otherwise specified in or
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in accordance with this Agreement, based upon (based upon the use of
outside services normally used and contracted for this purpose by Forum
in the case of securities for which information and market price or
yield quotations are readily available and based upon evaluations
conducted in accordance with the Trust's instructions in the case of
all other assets) or (B) a calculation confirming that the market value
of the Fund's assets does not deviate from the amortized cost value of
those assets by more than a specified percentage;
(vii) make such adjustments over such periods as Forum deems necessary
to reflect over-accruals or under-accruals of estimated expenses or
income;
(viii) request any necessary information from the Administrator and the
Trust's transfer agent and distributor in order to prepare, and
prepare, the Trust's Form N-SAR;
(ix) provide appropriate records to assist the Trust's independent
accountants and, upon approval of the Trust or the Administrator, any
regulatory body in any requested review of the Trust's books and
records maintained by Forum;
(x) prepare semi-annual financial statements and oversee the production
of the semi-annual financial statements and any related report to the
Trust's shareholders prepared by the Trust or its investment advisers,
as applicable;
(xi) file the Funds' semi-annual financial statements with the SEC or
ensure that the Funds' semi-annual financial statements are filed with
the SEC;
(xii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information with respect to investment companies;
(xiii) provide the Trust or Administrator with the data requested by
the Administrator that is required to update the Trust's registration
statement;
(xiv) provide the Trust or independent accountants with all information
requested with respect to the preparation of the Trust's income, excise
and other tax returns;
(xv) prepare or prepare, execute and file all Federal income and excise
tax returns and state income and other tax returns, including any
extensions or amendments, each as agreed between the Trust and Forum;
(xvi) produce quarterly compliance reports for investment advisers, as
applicable, to the Trust and the Trust's Board of Trustees (the Board")
and provide information to the Administrator, investment advisers to
the Trust and other appropriate persons with respect to questions of
Fund compliance;
(xvii) determine the amount of distributions to shareholders as
necessary to, among other things, maintain the qualification of each
Fund as a regulated investment company under the Code, and prepare and
distribute to appropriate parties notices announcing the declaration of
dividends and other distributions to shareholders;
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(xviii) transmit to and receive from each Fund's transfer agent
appropriate data to on a daily basis and daily reconcile Shares
outstanding and other data with the transfer agent;
(xix) periodically reconcile all appropriate data with each Fund's
custodian; and
(xx) verify investment trade tickets when received from an investment
adviser, as applicable, and maintain individual ledgers and historical
tax lots for each security ; and
(xxi) 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.
(b) Forum shall prepare and maintain on behalf of the Trust the
following books and records of each Fund, and each Class thereof, pursuant to
Rule 31a-1 under the 1940 Act (the "Rule"):
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of
cash and all other debits and credits, as required by subsection (b)(1)
of the Rule;
(ii) Journals and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, as required by
subsection (b)(2) of the Rule (but not including the ledgers required
by subsection (b)(2)(iv);
(iii) A record of each brokerage order given by or on behalf of the
Trust for, or in connection with, the purchase or sale of securities,
and all other portfolio purchases or sales, as required by subsections
(b)(5) and (b)(6) of the Rule;
(iv) A record of all options, if any, in which the Trust has any direct
or indirect interest or which the Trust has granted or guaranteed and a
record of any contractual commitments to purchase, sell, receive or
deliver any property as required by subsection (b)(7) of the Rule;
(v) A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by subsection (b)(8) of the Rule; and
(VI) ADD RULE 2A-7 RECORDS HERE
(vii) Other records required by the Rule or any successor rule or
pursuant to interpretations thereof to be kept by open-end management
investment companies, but limited to those provisions of the Rule
applicable to portfolio transactions and as agreed upon between the
parties hereto.
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(c) The books and records maintained pursuant to Section 2(b) shall be
prepared and maintained in such form, for such periods and in such locations as
may be required by the 1940 Act. 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 or the Administrator, copies of any such books and records
shall be provided promptly by Forum to the Trust or the Trust's authorized
representatives at the Trust's expense. In the event the Trust designates a
successor that shall assume 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.
(d) In case of any requests or demands for the inspection of the
records of the Trust maintained by Forum, 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.
(d) 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 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. STANDARD OF CARE; 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
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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(c)(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) 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
expert in the matters 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.
(d) Notwithstanding anything to the contrary in this Agreement, Forum
shall not be liable for the errors of other service providers to the Trust,
including the errors of pricing 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.
(e) With respect to Funds which do not value their assets in accordance
with Rule 2a-7 under the 1940 Act, notwithstanding anything to the contrary in
this Agreement, Forum shall not be liable to the Trust or any shareholder of the
Trust for (i) any loss to the Trust if an NAV Difference for which Forum would
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otherwise be liable under this Agreement is less than or equal to 0.001 (1/10 of
1%) or (ii) any loss to a shareholder of the Trust if the NAV Difference for
which Forum would otherwise be liable under this Agreement is less than or equal
to 0.005 (1/2 of 1%) or if the loss in the shareholder's account with the Trust
is less than or equal to $10. Any loss for which Forum is determined to be
liable hereunder shall be reduced by the amount of gain which inures to
shareholders, whether to be collected by the Trust or not.
(f) For purposes of this Agreement, (i) the NAV Difference shall mean
the difference between the NAV at which a shareholder purchase or redemption
should have been effected ("Recalculated NAV") and the NAV at which the purchase
or redemption is effected, divided by the Recalculated NAV, (ii) NAV Differences
and any Forum liability therefrom are to be calculated each time a Fund's (or
class's) NAV is calculated, (iii) in calculating any NAV Difference for which
Forum would otherwise be liable under this Agreement for a particular NAV error,
Fund losses and gains shall be netted and (iv) in calculating any NAV Difference
for which Forum would otherwise be liable under this Agreement for a particular
NAV error that continues for a period covering more than one NAV determination,
Fund losses and gains for the period shall be netted.
(g) 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 Portfolio to act in contravention of a Portfolio's
Offering Document or any provision of the 1940 Act. 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 4. COMPENSATION AND EXPENSES
(a) In consideration of the services provided by Forum pursuant to this
Agreement, the Trust shall pay Forum, with respect to each Fund, the fees set
forth in Clause (i) of Appendix B hereto. In consideration of the services
provided by Forum to begin the operations of a new Fund, the Trust shall pay
Forum, with respect to each Fund, the fees set forth in clause (ii) of Appendix
B hereto. In consideration of additional services provided by Forum to perform
certain functions, the Trust shall pay Forum, with respect to each Fund the fees
set forth in clause (iii) of Appendix B hereto. Nothing in this Agreement shall
require Forum to perform any of the services listed in Section 2(a)(xiv) and
clause (iii) of Appendix B hereto, as such services may be performed by the
Fund's independent accountant if appropriate in the judgment of Forum.
All fees payable hereunder shall be accrued daily by the Trust. The
fees payable for the services listed in clauses (i) and (iii) of Appendix B
hereto shall be payable monthly in advance on the first day of each calendar
month for services to be performed during the following calendar month. The fees
payable for the services listed in clause (ii) and for all reimbursements as
53
<PAGE>
described in Section 4(b) shall be payable monthly in arrears on the first day
of each calendar month (the first day of the calendar month after the Fund
commences operations in the case of the fees listed in clause (ii) of Appendix B
hereto) for services performed during the prior calendar month. If fees payable
for the services listed in clause (i) 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) 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 Clause (iv) of 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.
(d) Forum may, with respect to questions of law relating to its
services hereunder, apply to and obtain the advice and opinion of counsel to the
Trust or counsel to Forum. The costs of any such advice or opinion shall be
borne by the Trust.
SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
(a) This Agreement shall become effective with respect to each Fund or
Class on the later of the date on which the Trust's Registration Statement
relating to the Shares of the Fund or Class becomes effective or the date of the
commencement of operations of the Fund or Class. 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
until terminatedfor a period of one year from its effectiveness and shall
continue in effect for successive one year periods; 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).
54
<PAGE>
(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 anyd
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.
55
<PAGE>
SECTION 8. 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,
transportation, communication or power supply. In addition, to the extent
Forum's obligations hereunder are to oversee or monitor the activities of third
parties, Forum shall not be liable for any failure or delay in the performance
of Forum'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 Forum.
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.
(b) Forum may subcontract any or all of its functions or
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. Forum may pay those
persons for their services, but no such payment will increase Forum's
compensation from the Trust.
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.
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
56
<PAGE>
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.
(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
57
<PAGE>
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
officers, as of the day and year first above written.
MEMORIAL FUNDS
By:/s/ Christopher W. Hamm
-------------------------------
Christopher W. Hamm
President
FORUM ACCOUNTING SERVICES, LIMITED
LIABILITY COMPANY
By:/s/ Stacey E. Hong
-------------------------------
Stacey E. Hong
Managing Director
<PAGE>
MEMORIAL FUNDS
FUND ACCOUNTING AGREEMENT
APPENDIX A
FUNDS AND CLASSES OF THE TRUST
AS OF MARCH 13, 1998
FUNDS
Government Bond Fund
Corporate Bond Fund
Value Equity Fund
Growth Equity Fund
CLASSES
Institutional Share Class
Trust Share Class
<PAGE>
MEMORIAL FUNDS
FUND ACCOUNTING AGREEMENT
APPENDIX B
FEES AND EXPENSES
<TABLE>
<S> <C>
(I) BASE FEE
A. Standard Fee
Fee per Fund................................................................... $3,000/month
Fee for each additional Class of the Fund above one............................ $1,000/month
B. Plus additional surcharges for each of:
(i) Portfolios with asset levels exceeding $100 million................... $500/month
Portfolios with asset levels exceeding $250 million................... $1000/month
Portfolios with asset levels exceeding $500 million................... $1,500/month
Portfolios with asset levels exceeding $1,000 million................. $2,000/month
(ii) Portfolios requiring international custody............................ $1,000/month
(iii) Portfolios with more than 30 international positions ................. $1,000/month
(iv) Tax free money market Funds........................................... $1,000/month
(v) Portfolios with more than 25% of net assets invested in
asset backed securities............................................... $1,000/month
Portfolios with more than 50% of net assets invested in
asset backed securities............................................... $2,000/month
(vii) Portfolios with more than 100 security positions...................... $1,000/month
</TABLE>
Note 1: Surcharges are determined based upon the total assets, security
positions or other factors as of the end of the prior month and on the
portfolio turnover rate for the prior month. Portfolio turnover rate
shall have the meaning ascribed thereto in SEC Form N-1A.
Note 2: 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) START-UP FEE
Fund Start-Up Fee............................. $10,000.00
58
<PAGE>
(III) OTHER SERVICES (payable in equal installments monthly) (if requested by
the Trust)
TAX SERVICES. Preparation of Federal income and excise tax
returns and preparation, execution and filing of state income
tax returns, including any extensions or amendments
Standard Fee................... $3,000/fiscal period
(IV) 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) pricing, paydown, corporate
action, credit and other reporting services, (ii) taxes, (iii) postage
and delivery services, (iv) telephone services, (v) electronic or
facsimile transmission services, (vi) reproduction, (vii) printing and
distributing financial statements, (xiii) microfilm and microfiche and
(ix) Trust record storage and retention fees. 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>
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.
Exhibit (i)(2)
SEWARD & KISSEL LLP
1200 G Street, NW
Suite 350
WASHINGTON, DC 20005
April 20, 1999
Memorial Funds
Two Portland Square
Portland, ME 04101
Ladies and Gentlemen:
We consent to the continued inclusion as an exhibit to the Registration
Statement of Memorial Funds of our opinion dated March 12, 1998 as to the
legality of the securities registered by Memorial Funds as of that date.
Very truly yours,
/s/ Seward & Kissel LLP
47180.000 #83426 v.1
Exhibit (o)
MEMORIAL FUNDS
MULTICLASS PLAN
MARCH 9, 1998
AS AMENDED SEPTEMBER 11, 1998
This Plan is adopted by Memorial Funds (the "Trust") pursuant to Rule
18f-3 under the Investment Company Act of 1940 (the "Act") to document the
separate distribution arrangements, expenses and allocations of each class of
shares of beneficial interest (a "Class") of each series of the Trust (a
"Fund"). Except for any differences set forth in this Plan, each shareholder of
a Fund shall have the same rights and obligations as any other shareholder of
that Fund.
SECTION 1. CLASSES
Each Fund may issue the following Classes: "Institutional Shares," and
"Trust Shares." If a Fund offers more than one Class, each Class shall have a
different arrangement for shareholder services or distribution or both
("Distribution Arrangement"), as follows:
(a) Institutional Shares:
(i) Institutional Shares are offered with no sales charges or
distribution expenses.
(ii) Institutional Shares are offered subject to a maximum
annual shareholder servicing fee equal to 0.17% of the average
daily net assets of the Institutional Class of the Fund.
(iii) The minimum dollar amount for investment (the
"investment minimum") in the Institutional Class shall be
$10,000,000. There shall be no minimum for subsequent
investments in the Institutional Class.
(b) Trust Shares.
(i) Trust Shares are offered subject to a maximum annual
distribution fee equal to 0.25% of the average daily net
assets of the Trust Class of the Fund.
(ii) The investment minimum for Trust Shares shall be $5,000.
The minimum for subsequent investments in the Trust Class
shall be $100.
59
<PAGE>
SECTION 2. VOTING RIGHTS
The holders of a class of shares shall have:
(a) exclusive voting rights with respect to any matter submitted
to a vote of shareholders that relates solely to the Distribution
Arrangement for that Class
(b) separate voting rights on any matter submitted to shareholders
in which the interests of one Class differ from the interest of any
other Class; and,
(c) in all other respects, the same rights and obligations as each
other Class.
SECTION 3. CLASS EXPENSE ALLOCATIONS
(a) Shareholder Servicing Fees. All expenses incurred under a Class's
shareholder servicing plan shall be allocated to that Class. Any agreement
relating to a shareholder servicing plan shall require the parties thereto to
provide the Trustees of the Trust with such information as may be reasonably
necessary to evaluate this Plan.
(b) Distribution Expenses. All expenses incurred under a Class's
distribution plan adopted in accordance with Rule 12b-1 under the Act shall be
allocated to that Class.
(c) Other Class Expenses. The following expenses, which are incurred by
Classes in different amounts or reflect differences in the amount or kind of
services that different Classes receive (collectively with shareholder servicing
fees under Section 2(a) "Class Expenses"), shall be allocated to the Class that
incurred the expenses:
(i) Transfer agent fees and expenses;
(ii) Administrative fees and expenses;
(iii) Litigation, legal and audit fees;
(iv) State and foreign securities registration fees;
(v) Shareholder report expenses;
(vi) Trustee fees and expenses;
(vii) Preparation, printing and related fees and expenses for
proxy statements and, with respect to current shareholders,
shareholder reports, prospectuses and statements of additional
information; and
60
<PAGE>
(viii) Such other fees and expenses as Forum Administrative
Services, LLC ("Forum"), administrator of the Trust, deems to
be allocable to different Classes.
Items (i) and (ii) entirely are incurred by the Funds on a Class by
Class basis and, accordingly, are wholly allocated to specific Classes. All
other items are allocated to a specific Class only to the extent incurred by
Classes in different amounts and not by the Fund (or the Trust) as a whole.
SECTION 4. OTHER ALLOCATIONS AND WAIVERS/REIMBURSEMENTS
(a) Expenses Applicable to More than One Fund. Expenses other than
Class Expenses incurred by the Trust on behalf of a Fund shall be allocated to
that Fund and expenses other than Class Expenses incurred by the Trust on behalf
of more than one Fund shall be allocated to the Funds that incurred the expense
in accordance with the "Settled Share Method" set forth in Section 3(b).
(b) "Settled Share Method". Income, realized and unrealized capital
gains and losses and expenses other than Class Expenses related to a Fund shall
be allocated to each class of the Fund based on the net asset value of the Class
(excluding the value of subscriptions receivable) in relation to the net asset
value of the Fund.
(d) Waivers and Reimbursements. Nothing in this Plan shall limit the
ability of any person to waive any fee paid by a Fund or Class to that person or
to reimburse any or all expenses of a Fund or Class.
SECTION 5. EXCHANGE PRIVILEGES
(a) Institutional Shares. Institutional Shares of a Fund may be
exchanged for Institutional Shares of any other Fund.
(b) Trust Shares. Trust Shares of a Fund may be exchanged for Trust
Shares of any other Fund.
SECTION 6. AMENDMENTS
(a) Non-Material Amendments. Other than for material amendments,
this Plan may be amended at any time by the officers of the Trust.
(b) Material Amendments. Material amendments to this Plan, including
but not limited to any amendments adding a Class, may only be made by a majority
of the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust as defined by the Act, upon a finding that the
amendment is in the best interests of the Classes affected by the amendment and
of the Trust. Prior to any material amendment to this Plan, the Board of
Trustees shall request such information as may be reasonably necessary to
61
<PAGE>
evaluate the Plan as proposed to be amended. The Board of Trustees may review,
among other things, (i) the relationship among the Classes, (ii) the potential
conflicts of interest among the Classes regarding the allocation of fees, the
services provided to the Classes, waivers of fees and reimbursements of
expenses, (iii) voting rights, (iv) the level, cost and appropriateness of the
services provided to each Class and (v) the reasonableness of the allocation of
expenses among the Classes of a Fund.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MEMORIAL
FUNDS ANNUAL REPORT DATED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001045701
<NAME> MEMORIAL FUNDS
<SERIES>
<NUMBER> 032
<NAME> GROWTH EQUITY FUND - INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 23,580,637
<INVESTMENTS-AT-VALUE> 26,584,415
<RECEIVABLES> 9,794,394
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 25,468
<TOTAL-ASSETS> 36,404,277
<PAYABLE-FOR-SECURITIES> 112,090
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,492,968
<TOTAL-LIABILITIES> 9,605,058
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,187,895
<SHARES-COMMON-STOCK> 2,300,377
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,715
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,605,831
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,003,778
<NET-ASSETS> 26,425,878
<DIVIDEND-INCOME> 172,100
<INTEREST-INCOME> 71,659
<OTHER-INCOME> 0
<EXPENSES-NET> 210,522
<NET-INVESTMENT-INCOME> 33,237
<REALIZED-GAINS-CURRENT> 3,424,032
<APPREC-INCREASE-CURRENT> 3,003,778
<NET-CHANGE-FROM-OPS> 6,461,047
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,648
<DISTRIBUTIONS-OF-GAINS> 1,799,949
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,716,662
<NUMBER-OF-SHARES-REDEEMED> 2,528,273
<SHARES-REINVESTED> 111,988
<NET-CHANGE-IN-ASSETS> 26,799,219
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,606
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 251,140
<AVERAGE-NET-ASSETS> 27,251,101
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 2.09
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.49
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MEMORIAL
FUNDS ANNUAL REPORT DATED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001045701
<NAME> MEMORIAL FUNDS
<SERIES>
<NUMBER> 031
<NAME> GROWTH EQUITY FUND - TRUST SHARES
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 23,580,637
<INVESTMENTS-AT-VALUE> 26,584,415
<RECEIVABLES> 9,794,394
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 25,468
<TOTAL-ASSETS> 36,404,277
<PAYABLE-FOR-SECURITIES> 112,090
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,492,968
<TOTAL-LIABILITIES> 9,605,058
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,187,895
<SHARES-COMMON-STOCK> 32,603
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,715
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,605,831
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,003,778
<NET-ASSETS> 373,341
<DIVIDEND-INCOME> 172,100
<INTEREST-INCOME> 71,659
<OTHER-INCOME> 0
<EXPENSES-NET> 210,522
<NET-INVESTMENT-INCOME> 33,237
<REALIZED-GAINS-CURRENT> 3,424,032
<APPREC-INCREASE-CURRENT> 3,003,778
<NET-CHANGE-FROM-OPS> 6,461,047
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 297
<DISTRIBUTIONS-OF-GAINS> 18,252
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161,489
<NUMBER-OF-SHARES-REDEEMED> 130,508
<SHARES-REINVESTED> 1,622
<NET-CHANGE-IN-ASSETS> 26,799,219
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,606
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 251,140
<AVERAGE-NET-ASSETS> 284,794
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 2.05
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MEMORIAL
FUNDS ANNUAL REPORT DATED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001045701
<NAME> MEMORIAL FUNDS
<SERIES>
<NUMBER> 042
<NAME> VALUE EQUITY FUND - INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 30,438,302
<INVESTMENTS-AT-VALUE> 30,934,288
<RECEIVABLES> 39,982
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 25,468
<TOTAL-ASSETS> 30,999,738
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,241
<TOTAL-LIABILITIES> 25,241
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,407,576
<SHARES-COMMON-STOCK> 3,338,042
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 649
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,929,714)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 495,986
<NET-ASSETS> 30,670,226
<DIVIDEND-INCOME> 196,783
<INTEREST-INCOME> 86,369
<OTHER-INCOME> 0
<EXPENSES-NET> 178,680
<NET-INVESTMENT-INCOME> 104,472
<REALIZED-GAINS-CURRENT> (1,929,714)
<APPREC-INCREASE-CURRENT> 495,986
<NET-CHANGE-FROM-OPS> (1,329,256)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 103,341
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,655,098
<NUMBER-OF-SHARES-REDEEMED> 322,329
<SHARES-REINVESTED> 5,273
<NET-CHANGE-IN-ASSETS> 30,974,497
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71,058
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,486
<AVERAGE-NET-ASSETS> 23,114,569
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> (.81)
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.19
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MEMORIAL
FUNDS ANNUAL REPORT DATED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001045701
<NAME> MEMORIAL FUNDS
<SERIES>
<NUMBER> 041
<NAME> VALUE EQUITY FUND - TRUST SHARES
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 30,438,302
<INVESTMENTS-AT-VALUE> 30,934,288
<RECEIVABLES> 39,982
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 25,468
<TOTAL-ASSETS> 30,999,738
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,241
<TOTAL-LIABILITIES> 25,241
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,407,576
<SHARES-COMMON-STOCK> 33,204
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 649
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,929,714)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 495,986
<NET-ASSETS> 304,271
<DIVIDEND-INCOME> 196,783
<INTEREST-INCOME> 86,369
<OTHER-INCOME> 0
<EXPENSES-NET> 178,680
<NET-INVESTMENT-INCOME> 104,472
<REALIZED-GAINS-CURRENT> (1,929,714)
<APPREC-INCREASE-CURRENT> 495,986
<NET-CHANGE-FROM-OPS> (1,329,256)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 905
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 153,755
<NUMBER-OF-SHARES-REDEEMED> 120,656
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> 30,974,497
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71,058
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,486
<AVERAGE-NET-ASSETS> 255,029
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.83)
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.16
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
