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As filed with the Securities and Exchange Commission on March 1, 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. 2
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 5
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
1200 G Street, NW
Washington, D.C. 20005
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on ____________ pursuant to Rule 485, paragraph (b)
[X] 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, Growth Equity Fund and Value Equity
Fund.
<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 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
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>
RISK/RETURN SUMMARY
[Margin callout: CONCEPT TO UNDERSTAND
A BOND is an interest bearing or discounted security that obligates the
issuer to pay the bondholder a specified sum at money at set intervals as well
as repay the principal amount of the loan at its maturity]
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 will invest at least 90 percent of its
net assets in a portfolio of fixed and variable rate U.S. Government Securities,
including zero coupon bonds issued or guaranteed by the U.S. Treasury and
mortgage-backed securities.
CORPORATE BOND FUND
INVESTMENT GOAL High level of current income consistent with capital
preservation and prudent investment risk.
PRINCIPAL INVESTMENT STRATEGY The Fund will under normal conditions invest at
least 65% of the value of the total assets in corporate bonds.
GROWTH EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund will invest in the securities of issuers
that its investment adviser believes have superior growth potential and
fundamental characteristics that are significantly better than the market
average and support internal earnings growth capability.
VALUE EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Using a value approach, the Fund will seek to
invest in stocks that are underpriced relative to comparable stocks, determined
by price/earnings ratios, cash flows or other measures.
[Margin callout: CONCEPTS TO UNDERSTAND
VALUE INVESTING means to invest in stocks whose prices are low
relative to comparable companies.
GROWTH INVESTING means to invest in stocks that have exhibited faster
than average gains over the past few years and is expected to continue
to show high levels of profit growth
PRICE/EARNINGS RATIO means the price of a stock divided by the
company's earnings per share]
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in the Government Bond Fund or Corporate
Bond Fund (the "Bond Funds"), or either Bond Fund could underperform other
investments. The principal risks include the following:
o Each Fund's share price, yield and total return will fluctuate in
response to bond market movements
o The value of most bonds will 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 would leave a fund with unpaid interest or
principal
You could lose money on your investment in the Growth Equity Fund or Value
Equity Fund (the "Equity Funds"), or either Equity Fund could underperform other
investments, if any of the following occurs:
o The stock market goes down
o The stock market continues to undervalue the stocks in the Funds'
portfolios
<PAGE>
o The investment adviser's judgment as to the value of a stock proves to
be wrong
WHO MAY WANT TO INVEST IN THE FUNDS
The Bond Funds may be appropriate for investors who:
o Are seeking income and more price stability than stocks
o Are seeking capital preservation
o Are pursuing a long-term goal
o Are willing to accept higher short-term risk for higher potential
long-term returns
The Bond Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries
o Are pursuing a short-term goal or investing emergency reserves
The Equity Funds may be appropriate for investors who:
o Are willing to tolerate significant changes in the value of their
investment
o Are pursuing a long-term goal
o Are willing to accept higher short-term risk for higher potential
long-term returns
The Equity Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries
o Need regular income or stability of principal
o Are pursuing a short-term goal or investing emergency reserves
2
<PAGE>
PERFORMANCE
The following charts illustrate the variability of the Funds' returns. These
charts and the following tables provide some indication of the risks of
investing in the Funds by showing how the Funds' returns compare to a broad
measure of market performance. PERFORMANCE INFORMATION REPRESENTS ONLY PAST
PERFORMANCE AND DOES NOT NECESSARILY INDICATE FUTURE RESULTS.
Growth Equity Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
Value Equity Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
GROWTH EQUITY FUND
The following table compares the Fund's Trust Shares' total return since
inception as of December 31, 1998 to the Russell 1000 Growth Index.
<TABLE>
<S> <C> <C>
YEAR GROWTH EQUITY FUND RUSSELL 1000 GROWTH INDEX
Since Inception (3/30/98-12/31/98) XXXX% XXXX%
</TABLE>
The Russell 1000 Growth Index measures the performance of the 1,000 largest U.S.
companies based on total market capitalization with higher price-to-book ratios
and higher forecasted growth values.
VALUE EQUITY FUND
The following table compares the Fund's Trust Shares' total return since
inception as of December 31, 1998 to the Russell 1000 Value Index.
<TABLE>
<S> <C> <C>
YEAR VALUE EQUITY FUND RUSSELL 1000 VALUE INDEX
Since Inception (3/30/98-12/31/98) XXXX% XXXX%
</TABLE>
The Russell 1000 Value Index measures the performance of the 1,000 largest U.S.
companies based on total market capitalization with lower price-to-book ratios
nd lower forecasted growth values.
3
<PAGE>
FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in a Fund.
Shareholder transaction expenses are charges you pay when buying, selling or
exchanging shares of a Fund. Operating expenses, which include fees and expenses
for the Adviser and shareholder services, are paid out of a Fund's assets and
are factored into a Fund's share price rather than charged directly to
shareholder accounts.
<TABLE>
<S> <C>
- ---------- ---------------------------------------------------------------------------- -------------------
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Maximum Deferred Sales Charge (Load) None
Redemption Fee None
Exchange Fee None
Maximum Account Fee $0(1)
- ---------- ---------------------------------------------------------------------------- -------------------
---------------------------------------------------------------------------- -------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
---------------------------------------------------------------------------- -------------------
GOVERNMENT BOND FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.28%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) 0.25%
---------------------------------------------------------------------------- -------------------
Other expenses 0.57%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.85%(2)
---------------------------------------------------------------------------- -------------------
CORPORATE BOND FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.29%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) 0.25%
---------------------------------------------------------------------------- -------------------
Other expenses 0.47%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.76%(2)
---------------------------------------------------------------------------- -------------------
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/or Expense Reimbursement) 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/or Expense Reimbursement) 1.15%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.25%
---------------------------------------------------------------------------- -------------------
</TABLE>
(1) IRA accounts are subject to an annual $10 maintenance fee.
(2) As of May 1, 1999, Trust Shares of this Fund were not being offered
for sale. Operating expenses shown are those expenses from the Fund's
Institutional Share class.
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% annual return, that the
Fund's operating expenses remain the same as stated in the table above, 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:
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
---------------- ----------------- ---------------- -----------------
GOVERNMENT CORPORATE BOND GROWTH EQUITY VALUE
BOND FUND FUND FUND EQUITY FUND
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 1 year $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 3 years $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 5 years N/A N/A $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 10 years N/A N/A $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
</TABLE>
<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 will invest at least 90 percent of its net assets in a
portfolio of fixed and variable rate U.S. Government Securities, including zero
coupon bonds issued or guaranteed by the U.S. Treasury and mortgage-backed
securities. The Fund may invest up to 10% of its net assets in corporate debt
securities.
The Fund may not invest more than 25% 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% of
its total assets in the securities of any other issuer.
The Fund invests in debt obligations with maturities (or average life
in the case of mortgage-backed and similar securities) ranging from overnight to
30 years. The Fund seeks to moderate fluctuations in the price of its shares by
maintain a duration of all the shares in the Fund's portfolio between 75% and
125% of the duration of the Lehman Brothers Government Bond Index.
[Margin callout: CONCEPTS TO UNDERSTAND
DURATION measures bond price volatility by measuring the length of a bond
INVESTMENT GRADE means a bond with a Standard & Poors' rating of AAA to
BBB or Moody's rating of Aaa to Baa
MATURITY means the date at which a bond is due and payable]
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
Under normal circumstances, the Fund will seek to attain its investment
objective by investing at least 65% of the value of the total assets in
corporate bonds. The Fund may also invest in U.S. Government securities and
mortgage-backed and asset-backed securities of private issuers. At least 80% of
the Fund's investments will be in securities that are rated, at the time of
purchase, in one of the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") or which are unrated and
determined by its sub-adviser to be of comparable quality. No more than 5% of
the Fund's investments 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 debt obligations 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 of all the shares in the Fund's portfolio by maintaining a
duration between 75% and 125% 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.
[Margin callout: CONCEPTS TO UNDERSTAND
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market
COMMON STOCK represents an equity or ownership interest in a company
5
<PAGE>
PREFERRED STOCK is stock that has a preference over common stock to the
company's dividends (and thus greater potential for income) and whose
value generally fluctuates less than common stock
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 will seek to achieve its objective by investing at least 65%
of its assets in the common stock of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion.
The Fund will invest in the securities of issuers that its sub-adviser
believes have superior growth potential and fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability. The Fund may invest in the securities of companies whose
growth potential is, in the sub-adviser's opinion, generally unrecognized or
misperceived by the market. The sub-adviser may also look to changes in a
company that involve a sharp increase in earnings, the hiring of new management
or measures taken to close the gap between the company's share price and
takeover/asset value. The Fund may also invest in preferred stocks and
securities convertible into common stock. The Fund will only purchase
convertible securities that, at the time of purchase, are investment grade
securities or which are unrated and 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 will seek to attain this objective by investing at least 65%
of its total assets in common stocks of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion. A company's market capitalization is the total
market value of its outstanding common stock.
Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable stocks, determined by price/earnings ratios,
cash flows or other measures. It is expected that the Sub-adviser will rely on
stock selection to achieve its results, rather than trying to time market
fluctuations. In selecting stocks, the sub-adviser will establish 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 are
rated, at the time of purchase, are investment grade or which are unrated and
determined by the sub-adviser to be of comparable quality.
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 entail some risk. Among other things,
the market value of any security in which the Funds may invest is based upon the
market's perception of value and not necessarily the book value of an issuer or
other objective measure of the issuer's worth. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending, and
other investment techniques.
BOND FUNDS. The value of your investment in one or both of the Bond
Funds 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 the Corporate Bond
Fund is also subject to the risk that the financial condition of an issuer of a
security held by the Fund may cause it to default or become unable to pay
6
<PAGE>
interest or principal due on the security. To limit this risk, at least 80
percent of the Corporate Bond Fund's investments in corporate debt securities
will be in securities rated A or better and the Fund will maintain a minimum
average rating of A.
EQUITY FUNDS. The Equity Funds may be appropriate investments for
investors who seek long-term growth in their investment, but who are willing to
tolerate significant fluctuations in the value of their investment in response
to changes in the market value of the stocks the Funds hold. This type of market
movement may affect the price of the securities of a single issuer, a segment of
the domestic stock market, or the entire market.
YEAR 2000 Like other organizations around the world, the Funds could be
adversely affected if the computer systems used by its various service providers
(or the market in general) do not properly operate after January 1, 2000. The
Funds are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance, however, that
these steps will be sufficient to avoid a temporary service disruption or any
adverse impact on the Funds.
TEMPORARY DEFENSIVE POSITION In order to respond to adverse market, economic,
political or other conditions, a Fund may assume a temporary defensive position
and invest without limit in commercial paper and other money market instruments.
The result of this action may be that the Fund will be unable to achieve its
investment objectives.
MANAGEMENT
The business of the 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 pursuant to an investment
advisory agreement with the Memorial 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% of the average daily net assets of the Value Equity Fund and Growth
Equity Fund and 0.23% 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. ("Wellesley"), 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. 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 is a wholly-owned
subsidiary of Northern Trust Corporation, a Delaware corporation that was
incorporated in 1889. NTC presently manages approximately $XXX billion in assets
for endowments and foundations, corporations, public funds and insurance
companies. For its services, NTC receives an advisory fee from the Adviser at an
annual rate of 0.20% of the average daily net assets of the Government Bond
Fund. MR. MONTY MEMLER, CFA, is a Vice President and Senior Portfolio Manager
for NTC. Mr. Memler has been
7
<PAGE>
a member of the fixed income team at NTC for seven years and holds a Masters in
Business Administration from the University of Chicago in Chicago, Illinois and
has been in the industry since 1986.
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 insurance companies. CCM presently manages approximately $XX
billion for individuals, corporations, insurance companies, investment
companies, pension plans, trusts, estates, as well as charitable organizations
including foundations and endowments. For its services, CCM receives an advisory
fee from the Adviser at an annual rate of 0.20% of the average daily net assets
of the Corporate Bond Fund. MR. GREGORY HAHN, CFA, is a Senior Vice President
and Portfolio Manager for the Fund and holds a Masters in Business
Administration from Indiana University in Indianapolis, Indiana. Prior to
joining CCM in 1989, Mr. Hahn was a Fixed Income Portfolio Manager for Unified
Management in Indianapolis, Indiana.
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. DHJA currently manages approximately $XX billion
for institutions and high net worth individuals and invests primarily in
domestic equity securities. For its services, DHJA receives an advisory fee from
the Adviser at an annual rate of 0.30% of the average daily net assets of the
Growth Equity Fund. MR. J. PATRICK CLEGG, CFA, is the Fund's Portfolio Manager
and received his M.B.A. from the University of Texas in Austin, Texas. Prior to
joining DHJA in 1996, Mr. Clegg was a Principal and Director of Research at
Luther King Capital Management in Fort Worth, Texas from 19XX to 19XX.
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 Duff & Phelps, a
U.S. public company listed on the New York Stock Exchange. BG Canada is
registered as an investment adviser with the Ontario and Quebec Securities
Commissions. BGCM currently manages approximately $XX billion in assets. For its
services, BGCM receives an advisory fee from the Adviser at an annual rate of
0.30% of the average daily net assets of the Value Equity Fund. MR. JOHN PHILIP
FERGUSON, is the Fund's Portfolio Manager and 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, in Austin, Texas.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide various services to the
Funds. As of December 31, 1998, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $66.2 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 the
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.
8
<PAGE>
DISTRIBUTION EXPENSES
Under a distribution plan (the "Plan") adopted by the Board, the Funds may
reimburse FFS for the distribution expenses incurred by the sale and
distribution of a Fund's 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
expenses may include the cost of advertising and promotional materials,
providing prospective shareholders with a Fund's prospectus, statement of
additional information and shareholder reports, reimbursing FFS for its
distribution expenses and compensating others who may provide assistance in
distributing Shares of a Fund. These expenses may include costs of FFS's offices
such as rent, communications equipment, employee salaries and overhead costs.
The Trust will not reimburse FFS for any distribution expenses in any fiscal
year of a Fund in excess of 0.25% of the Fund's average daily net assets. During
the period in which the Plan and the related distribution agreement are in
effect, the Board will from time to time determine the amount of distribution
expense reimbursement to be paid. Unreimbursed expenses of FFS incurred during a
fiscal year of the Trust may not be reimbursed by the Trust in future years or
after the termination of the Plan or the Distribution Agreement. To the extent
that the Funds engage in joint distribution activities, distribution costs will
be allocated among the participating Funds pro rata according to their net
assets. FFS has entered into an agreement under the Plan whereby Memorial Group,
Inc., a corporation of which Christopher W. Hamm, the Chairman of the Board and
President of the Trust, is the sole shareholder, receives 0.25% for performing
certain distribution-related activities.
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 voluntarily 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 and may not be recouped at a later date.
The Adviser has voluntarily undertaken to waive its fees or assume certain
expenses of each Fund in order to limit the Funds' expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses). This
undertaking may be terminated at any time.
9
<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 goes on this line) (Your Account Number goes
on this line)
(Your Social Security number or tax identification number goes
on this line)
GENERAL INFORMATION
You pay no sales charge to purchase or sell shares of the Funds. Shares are
purchased and sold by the Funds at the next share price, which is known as net
asset value per share or NAV. Your shares' NAV is calculated after the Transfer
Agent receives your purchase request in good order. For instance, if your
purchase request is received in proper form after 4 p.m., your transaction will
be priced at the next day's NAV. The Funds cannot accept orders that request a
particular day or price for the transaction or any other special conditions.
The Funds does 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 immediately upon
receipt of confirmations.
The Funds reserves the right to minimum investment amounts and may temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED. The net asset value per share of the Funds is
calculated 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, normally, New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The time at which NAV is calculated may be changed in case of an
emergency or if the New York Stock Exchange closes early. The Fund's NAV is
determined by dividing the value of the Fund's assets by the number of shares
outstanding. Securities for which market quotations are readily available are
valued at current market value. If market quotations are not readily available,
then securities are valued 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.
10
<PAGE>
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, payment by travelers checks is
prohibited).
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. Following are the minimum investments accepted by the
Funds:
<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
-------------------------------------- ------------------------- --------------------------
</TABLE>
ACCOUNT REQUIREMENTS
<TABLE>
<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 Act or
to a child and obtain tax benefits. You can give up to 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
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
11
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
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 us o Call to notify us of your incoming wire
o 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 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
- ------------------------------------------------------------ ---------------------------------------------------------
</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 its operations. This includes those from any individual or group
who, in the Fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the Fund within a calendar year).
CANCELED OR FAILED PAYMENTS. Checks and ACH transfers are accepted 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
Redemption orders are processed 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 Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
12
<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
- --------------------------------------------------------------------------------
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:
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
13
<PAGE>
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 "redemption 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% 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 Service class shares of Forum Daily Assets
Government Fund (a money market fund). 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 reserves the right to limit exchanges. See "Account and
Transaction Policies - 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 name of the Fund from which you are exchanging and into which you
are exchanging
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.
14
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
The Bond Funds declare distributions daily and pay distributions of net
investment income monthly. The Equity Funds declare and pay distributions of net
income, if any, quarterly. 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 generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Funds' distributions of net investment income (which include net short-term
capital gains) are taxable to shareholders as ordinary income. The Funds'
distributions of net capital gains are taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held shares.
Distributions will reduce the net asset value of the Funds' shares by the amount
of the distribution. A distribution made shortly after the purchase of shares,
although in effect a return of capital, may still be taxable to the shareholder.
Shareholders will incur a capital gain or loss when they sell their shares. The
amount of this gain or loss is calculated based on the amount paid for the
shares and the value of the shares upon redemption.
Reports containing appropriate information with respect to the Federal income
tax status of distributions paid during the year by a Fund will be mailed to
shareholders after the close of each year.
For further information about the tax effects of investing in a Fund, please see
the SAI.
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 the
only four series of the Memorial Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law and 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 the Memorial Funds.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table reflects the Funds' financial performance. Information is
not included for the Corporate Bond Fund and Government Bond Fund as no Trust
Shares of the Funds were outstanding as of December 31, 1998. 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 LLP. The Funds' financial statements and
the auditor's report are included in the Annual Report, and may be obtained
without charge.
GROWTH VALUE
EQUITY FUND EQUITY FUND
Year Ended Year Ended
12/31/98(1) 12/31/98(1)
------------ ------------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $XX.XX $XX.XX
Income From Investment Operations
Net Investment Income
Net gains (losses) on securities (realized
and unrealized)
Total From Investment Operations
Less Distributions From
Net investment income
Capital gains
Total Distributions
Ending Net Asset Value
OTHER INFORMATION
Ratios to Average Net Assets:
Expenses (2) (2)
Expenses (excluding reimbursements and (2) (2)
waivers)
Net Investment Income (2) (2)
Total Return
Portfolio Turnover Rate
Net Assets at End of Period (in thousands)
(1) Trust Shares of the Funds commenced operations on the following dates:
Growth Equity Fund - March 30, 1998 and Value Equity Fund - March 30, 1998.
(2) Annualized.
16
<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 text-only
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.
Web Site:
www.XXXXX.com
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
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
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>
RISK/RETURN SUMMARY
[Margin callout: CONCEPT TO UNDERSTAND
A BOND is an interest bearing or discounted security that obligates the
issuer to pay the bondholder a specified sum at money at set intervals as well
as repay the principal amount of the loan at its maturity]
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 will invest at least 90 percent of its
net assets in a portfolio of fixed and variable rate U.S. Government Securities,
including zero coupon bonds issued or guaranteed by the U.S. Treasury and
mortgage-backed securities.
CORPORATE BOND FUND
INVESTMENT GOAL High level of current income consistent with capital
preservation and prudent investment risk.
PRINCIPAL INVESTMENT STRATEGY The Fund will under normal conditions invest at
least 65% of the value of the total assets in corporate bonds.
GROWTH EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund will invest in the securities of issuers
that its investment adviser believes have superior growth potential and
fundamental characteristics that are significantly better than the market
average and support internal earnings growth capability.
VALUE EQUITY FUND
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Using a value approach, the Fund will seek to
invest in stocks that are underpriced relative to comparable stocks, determined
by price/earnings ratios, cash flows or other measures.
[Margin callout: CONCEPTS TO UNDERSTAND
VALUE INVESTING means to invest in stocks whose prices are low relative
to comparable companies
GROWTH INVESTING means to invest in stocks that have exhibited faster
than average gains over the past few years and is expected to continue
to show high levels of profit growth PRICE/EARNINGS RATIO means the
price of a stock divided by the company's earnings per share]
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in the Government Bond Fund or Corporate
Bond Fund (the "Bond Funds"), or either Bond Fund could underperform other
investments. The principal risks include the following:
o Each Fund's share price, yield and total return will fluctuate in
response to bond market movements
o The value of most bonds will 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 would leave a fund with unpaid interest or
principal
You could lose money on your investment in the Growth Equity Fund or Value
Equity Fund (the "Equity Funds"), or either Equity Fund could underperform other
investments, if any of the following occurs:
o The stock market goes down
o The stock market continues to undervalue the stocks in the Funds'
portfolios
<PAGE>
o The investment adviser's judgment as to the value of a stock proves to
be wrong
WHO MAY WANT TO INVEST IN THE FUNDS
The Bond Funds may be appropriate for investors who:
o Are seeking income and more price stability than stocks
o Are seeking capital preservation
o Are pursuing a long-term goal
o Are willing to accept higher short-term risk for higher potential
long-term returns
The Bond Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries
o Are pursuing a short-term goal or investing emergency reserves
The Equity Funds may be appropriate for investors who:
o Are willing to tolerate significant changes in the value of their
investment
o Are pursuing a long-term goal
o Are willing to accept higher short-term risk for higher potential
long-term returns
The Equity Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries
o Need regular income or stability of principal
o Are pursuing a short-term goal or investing emergency reserves
2
<PAGE>
PERFORMANCE
The following charts illustrate the variability of the Funds' returns. The
following tables provide some indication of the risks of investing in the Funds
by showing how the Funds' returns compare to a broad measure of market
performance. PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND DOES
NOT NECESSARILY INDICATE FUTURE RESULTS.
Government Bond Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
Corporate Bond Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
Growth Equity Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
Value Equity Fund
The following chart shows the average annual total return for the Fund.
[EDGAR REPRESENTATION OF GRAPH CHART]
Year Average Annual Total Return
- ---- ---------------------------
3/30/98 - 12/31/98 XX.XX%
During the period shown in the chart, the highest quarterly return was XX.XX%
(for the quarter ended ______) and the lowest quarterly return was XX.XX% (for
the quarter ended ______________).
GOVERNMENT BOND FUND
The following table compares the Fund's Institutional Shares' total return since
inception as of December 31, 1998 to the Lehman Brothers Government Bond Index.
<TABLE>
<S> <C> <C>
YEAR GOVERNMENT BOND FUND LEHMAN BROTHERS GOVERNMENT
BOND INDEX
Since Inception (3/30/98-12/31/98) XXXX% XXXX%
</TABLE>
The Lehman Brothers Government Bond Index is an index that tracks the returns of
U.S. Treasuries, agency bonds, and one- to three-year U.S. government
obligations.
CORPORATE BOND FUND
The following table compares the Fund's Institutional Shares' total return since
inception as of December 31, 1998 to the Lehman Brothers Corporate Bond Index.
<TABLE>
<S> <C> <C>
YEAR CORPORATE BOND FUND LEHMAN BROTHERS CORPORATE
BOND INDEX
Since Inception (3/25/98-12/31/98) XXXX% XXXX%
</TABLE>
The Lehman Brothers Corporate Bond Index is a market value-weighted index of
investment-grade corporate fixed-rate debt issues with maturities of one year or
more.
GROWTH EQUITY FUND
The following table compares the Fund's Institutional Shares' total return since
inception as of December 31, 1998 to the Russell 1000 Growth Index.
<TABLE>
<S> <C> <C>
YEAR GROWTH EQUITY FUND RUSSELL 1000 GROWTH INDEX
Since Inception (3/30/98-12/31/98) XXXX% XXXX%
</TABLE>
The Russell 1000 Growth Index measures the performance of the 1,000 largest U.S.
companies based on total market capitalization with higher price-to-book ratios
and higher forecasted growth values.
VALUE EQUITY FUND
The following table compares the Fund's Institutional Shares' total return since
inception as of December 31, 1998 to the Russell 1000 Value Index.
<TABLE>
<S> <C> <C>
YEAR VALUE EQUITY FUND RUSSELL 1000 VALUE INDEX
Since Inception (3/30/98-12/31/98) XXXX% XXXX%
</TABLE>
The Russell 1000 Value Index measures the performance of the 1,000 largest U.S.
companies based on total market capitalization with lower price-to-book ratios
nd lower forecasted growth values.
3
<PAGE>
FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in a Fund.
Shareholder transaction expenses are charges you pay when buying, selling or
exchanging shares of a Fund. Operating expenses, which include fees and expenses
for the Adviser and shareholder services, are paid out of a Fund's assets and
are factored into a Fund's share price rather than charged directly to
shareholder accounts.
<TABLE>
<S> <C>
- ---------- ---------------------------------------------------------------------------- -------------------
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Maximum Deferred Sales Charge (Load) None
Redemption Fee None
Exchange Fee None
Maximum Account Fee $0(1)
- ---------- ---------------------------------------------------------------------------- -------------------
---------------------------------------------------------------------------- -------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
---------------------------------------------------------------------------- -------------------
GOVERNMENT BOND FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.28%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) None
---------------------------------------------------------------------------- -------------------
Other expenses 0.57%
---------------------------------------------------------------------------- -------------------
Shareholder Service fees 0.12%
---------------------------------------------------------------------------- -------------------
Miscellaneous 0.45%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.85%
---------------------------------------------------------------------------- -------------------
Fee Waiver (and/or Expense Reimbursement) 0.13%
---------------------------------------------------------------------------- -------------------
Net Expenses 0.72%
---------------------------------------------------------------------------- -------------------
CORPORATE BOND FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.29%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) None
---------------------------------------------------------------------------- -------------------
Other expenses 0.47%
---------------------------------------------------------------------------- -------------------
Shareholder Service fees 0.11%
---------------------------------------------------------------------------- -------------------
Miscellaneous 0.36%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.76%
---------------------------------------------------------------------------- -------------------
Fee Waiver (and/or Expense Reimbursement) 0.13%
---------------------------------------------------------------------------- -------------------
Net Expenses 0.63%
---------------------------------------------------------------------------- -------------------
GROWTH EQUITY FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.40%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) None
---------------------------------------------------------------------------- -------------------
Other expenses 0.79%
---------------------------------------------------------------------------- -------------------
Shareholder Service fees 0.10%
---------------------------------------------------------------------------- -------------------
Miscellaneous 0.69%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.19%
---------------------------------------------------------------------------- -------------------
Fee Waiver (and/or Expense Reimbursement) 0.19%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.00%
---------------------------------------------------------------------------- -------------------
VALUE EQUITY FUND
---------------------------------------------------------------------------- -------------------
Advisory fees 0.40%
---------------------------------------------------------------------------- -------------------
Distribution (12b-1 fees) None
---------------------------------------------------------------------------- -------------------
Other expenses 0.85%
---------------------------------------------------------------------------- -------------------
Shareholder Service fees 0.10%
---------------------------------------------------------------------------- -------------------
Miscellaneous 0.75%
---------------------------------------------------------------------------- -------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.25%
---------------------------------------------------------------------------- -------------------
Fee Waiver (and/or Expense Reimbursement) 0.25%
---------------------------------------------------------------------------- -------------------
Net Expenses 1.00%
---------------------------------------------------------------------------- -------------------
</TABLE>
(1) IRA accounts are subject to an annual $10 maintenance fee.
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% annual return, that the
4
<PAGE>
Fund's operating expenses remain the same as stated in the table above, 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 $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 3 years $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 5 years $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
------------------- ---------------- ----------------- ---------------- -----------------
After 10 years $XXX $XXX $XXX $XXX
------------------- ---------------- ----------------- ---------------- -----------------
</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 will invest at least 90 percent of its net assets in a
portfolio of fixed and variable rate U.S. Government Securities, including zero
coupon bonds issued or guaranteed by the U.S. Treasury and mortgage-backed
securities. The Fund may invest up to 10% of its net assets in corporate debt
securities.
The Fund may not invest more than 25% 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% of
its total assets in the securities of any other issuer.
The Fund invests in debt obligations with maturities (or average life
in the case of mortgage-backed and similar securities) ranging from overnight to
30 years. The Fund seeks to moderate fluctuations in the price of its shares by
maintain a duration of all the shares in the Fund's portfolio between 75% and
125% of the duration of the Lehman Brothers Government Bond Index.
[Margin callout: CONCEPTS TO UNDERSTAND
DURATION measures bond price volatility by measuring the length of a bond
INVESTMENT GRADE means a bond with a Standard & Poors' rating of AAA to
BBB or Moody's rating of Aaa to Baa
MATURITY means the date at which a bond is due and payable]
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
Under normal circumstances, the Fund will seek to attain its investment
objective by investing at least 65% of the value of the total assets in
corporate bonds. The Fund may also invest in U.S. Government securities and
mortgage-backed and asset-backed securities of private issuers. At least 80% of
the Fund's investments will be in securities that are rated, at the time of
purchase, in one of the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") or which are unrated and
determined by its sub-adviser to be of comparable quality. No more than 5% of
the Fund's investments 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 debt obligations 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 of all the shares in the Fund's portfolio by maintaining a
duration between 75% and 125% 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.
[Margin callout: CONCEPTS TO UNDERSTAND
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market
COMMON STOCK represents an equity or ownership interest in a company
6
<PAGE>
PREFERRED STOCK is stock that has a preference over common stock to
the company's dividends (and thus greater potential for income) and
whose value generally fluctuates less than common stock
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 will seek to achieve its objective by investing at least 65%
of its assets in the common stock of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion.
The Fund will invest in the securities of issuers that its sub-adviser
believes have superior growth potential and fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability. The Fund may invest in the securities of companies whose
growth potential is, in the sub-adviser's opinion, generally unrecognized or
misperceived by the market. The sub-adviser may also look to changes in a
company that involve a sharp increase in earnings, the hiring of new management
or measures taken to close the gap between the company's share price and
takeover/asset value. The Fund may also invest in preferred stocks and
securities convertible into common stock. The Fund will only purchase
convertible securities that, at the time of purchase, are investment grade
securities or which are unrated and 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 will seek to attain this objective by investing at least 65%
of its total assets in common stocks of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion. A company's market capitalization is the total
market value of its outstanding common stock.
Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable stocks, determined by price/earnings ratios,
cash flows or other measures. It is expected that the Sub-adviser will rely on
stock selection to achieve its results, rather than trying to time market
fluctuations. In selecting stocks, the sub-adviser will establish 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 are
rated, at the time of purchase, are investment grade or which are unrated and
determined by the sub-adviser to be of comparable quality.
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 entail some risk. Among other things,
the market value of any security in which the Funds may invest is based upon the
market's perception of value and not necessarily the book value of an issuer or
other objective measure of the issuer's worth. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending, and
other investment techniques.
BOND FUNDS. The value of your investment in one or both of the Bond
Funds 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 the Corporate Bond
Fund is also subject to the risk that the financial condition of an issuer of a
security held by the Fund may cause it to default or become unable to pay
7
<PAGE>
interest or principal due on the security. To limit this risk, at least 80
percent of the Corporate Bond Fund's investments in corporate debt securities
will be in securities rated A or better and the Fund will maintain a minimum
average rating of A.
EQUITY FUNDS. The Equity Funds may be appropriate investments for
investors who seek long-term growth in their investment, but who are willing to
tolerate significant fluctuations in the value of their investment in response
to changes in the market value of the stocks the Funds hold. This type of market
movement may affect the price of the securities of a single issuer, a segment of
the domestic stock market, or the entire market.
YEAR 2000 Like other organizations around the world, the Funds could be
adversely affected if the computer systems used by its various service providers
(or the market in general) do not properly operate after January 1, 2000. The
Funds are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance, however, that
these steps will be sufficient to avoid a temporary service disruption or any
adverse impact on the Funds.
TEMPORARY DEFENSIVE POSITION In order to respond to adverse market, economic,
political or other conditions, a Fund may assume a temporary defensive position
and invest without limit in commercial paper and other money market instruments.
The result of this action may be that the Fund will be unable to achieve its
investment objectives.
MANAGEMENT
The business of the 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 pursuant to an investment
advisory agreement with the Memorial 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% of the average daily net assets of the Value Equity Fund and Growth
Equity Fund and 0.23% 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. ("Wellesley"), 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. 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 is a wholly-owned
subsidiary of Northern Trust Corporation, a Delaware corporation that was
incorporated in 1889. NTC presently manages approximately $XXX billion in assets
for endowments and foundations, corporations, public funds and insurance
companies. For its services, NTC receives an advisory fee from the Adviser at an
annual rate of 0.20% of the average daily net assets of the Government Bond
Fund. MR. MONTY MEMLER, CFA, is a Vice President and Senior Portfolio Manager
for NTC. Mr. Memler has been
8
<PAGE>
a member of the fixed income team at NTC for seven years and holds a Masters in
Business Administration from the University of Chicago in Chicago, Illinois and
has been in the industry since 1986.
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 insurance companies. CCM presently manages approximately $XX
billion for individuals, corporations, insurance companies, investment
companies, pension plans, trusts, estates, as well as charitable organizations
including foundations and endowments. For its services, CCM receives an advisory
fee from the Adviser at an annual rate of 0.20% of the average daily net assets
of the Corporate Bond Fund. MR. GREGORY HAHN, CFA, is a Senior Vice President
and Portfolio Manager for the Fund and holds a Masters in Business
Administration from Indiana University in Indianapolis, Indiana. Prior to
joining CCM in 1989, Mr. Hahn was a Fixed Income Portfolio Manager for Unified
Management in Indianapolis, Indiana.
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. DHJA currently manages approximately $XX billion
for institutions and high net worth individuals and invests primarily in
domestic equity securities. For its services, DHJA receives an advisory fee from
the Adviser at an annual rate of 0.30% of the average daily net assets of the
Growth Equity Fund. MR. J. PATRICK CLEGG, CFA, is the Fund's Portfolio Manager
and received his M.B.A. from the University of Texas in Austin, Texas. Prior to
joining DHJA in 1996, Mr. Clegg was a Principal and Director of Research at
Luther King Capital Management in Fort Worth, Texas from 19XX to 19XX.
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 Duff & Phelps, a
U.S. public company listed on the New York Stock Exchange. BG Canada is
registered as an investment adviser with the Ontario and Quebec Securities
Commissions. BGCM currently manages approximately $XX billion in assets. For its
services, BGCM receives an advisory fee from the Adviser at an annual rate of
0.30% of the average daily net assets of the Value Equity Fund. MR. JOHN PHILIP
FERGUSON, is the Fund's Portfolio Manager and 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, in Austin, Texas.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide various services to the
Funds. As of December 31, 1998, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $66.2 billion.
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 the
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.
9
<PAGE>
SHAREHOLDER SERVICES PLAN
The Trust has adopted a shareholder services plan providing that the Trust may
obtain the services of qualified financial institutions to act as shareholder
servicing agents for their customers. Under this plan, the Trust has entered
into an agreement whereby Memorial Group, Inc., a corporation of which
Christopher W. Hamm, the Chairman of the Board and President of the Trust, is
the sole shareholder, performs certain shareholder services not otherwise
provided by the Funds' transfer agent. For these services, the Trust pays
Memorial Group, Inc. fees of 0.15% annually of the average daily net assets of
the Institutional Shares of Growth Equity Fund and Value Equity Fund and 0.17%
annually of the average daily net assets of the Institutional 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 voluntarily 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 and may not be recouped at a later date.
The Adviser has voluntarily undertaken to waive its fees or assume certain
expenses of each Fund in order to limit the Funds' expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses). This
undertaking may be terminated at any time.
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 goes on this line) (Your Account Number goes
on this line)
(Your Social Security number or tax identification number goes
on this line)
GENERAL INFORMATION
You pay no sales charge to purchase or sell shares of the Funds. Shares are
purchased and sold by the Funds at the next share price, which is known as net
asset value per share or NAV. Your shares' NAV is calculated after the Transfer
Agent receives your purchase request in good order. For instance, if your
purchase request is received in proper form after 4 p.m., your transaction will
be priced at the next day's NAV. The Funds cannot accept orders that request a
particular day or price for the transaction or any other special conditions.
The Funds does not issue share certificates.
10
<PAGE>
You will receive annual statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account immediately upon
receipt of confirmations.
The Funds reserves the right to minimum investment amounts and may temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED. The net asset value per share of the Funds is
calculated 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, normally, New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The time at which NAV is calculated may be changed in case of an
emergency or if the New York Stock Exchange closes early. The Fund's NAV is
determined by dividing the value of the Fund's assets by the number of shares
outstanding. Securities for which market quotations are readily available are
valued at current market value. If market quotations are not readily available,
then securities are valued 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, payment by travelers checks is
prohibited).
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. Following are the minimum investments accepted by the
Funds:
<TABLE>
<S> <C> <C>
------------------------- --------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
-------------------------------------- ------------------------- --------------------------
-------------------------------------- ------------------------- --------------------------
Standard Minimums $10,000,000 None
-------------------------------------- ------------------------- --------------------------
</TABLE>
ACCOUNT REQUIREMENTS
<TABLE>
<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 or
to a child and obtain tax benefits. You can give up to 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
- ------------------------------------------------------------ ---------------------------------------------------------
11
<PAGE>
- ------------------------------------------------------------ ---------------------------------------------------------
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
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
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 us o Call to notify us of your incoming wire
o 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 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
- ------------------------------------------------------------ ---------------------------------------------------------
</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 its operations. This includes those from any individual or group
who, in the Fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the Fund within a calendar year).
CANCELED OR FAILED PAYMENTS. Checks and ACH transfers are accepted 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
Redemption orders are processed 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 Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
12
<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
- --------------------------------------------------------------------------------
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:
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
13
<PAGE>
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 "redemption 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% 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 Forum Daily Assets Treasury Fund
(a money market fund). 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 reserves the right to limit exchanges. See "Account and
Transaction Policies - 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 name of the Fund from which you are exchanging and into which you are
exchanging
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.
14
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
The Bond Funds declare distributions daily and pay distributions of net
investment income monthly. The Equity Funds declare and pay distributions of net
income, if any, quarterly. 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 generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Funds' distributions of net investment income (which include net short-term
capital gains) are taxable to shareholders as ordinary income. The Funds'
distributions of net capital gains are taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held shares.
Distributions will reduce the net asset value of the Funds' shares by the amount
of the distribution. A distribution made shortly after the purchase of shares,
although in effect a return of capital, may still be taxable to the shareholder.
Shareholders will incur a capital gain or loss when they sell their shares. The
amount of this gain or loss is calculated based on the amount paid for the
shares and the value of the shares upon redemption.
Reports containing appropriate information with respect to the Federal income
tax status of distributions paid during the year by a Fund will be mailed to
shareholders after the close of each year.
For further information about the tax effects of investing in a Fund, please see
the SAI.
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 the
only four series of the Memorial Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law and 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 the Memorial Funds.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table reflects the Funds' 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 LLP. The Funds' financial statements and
the auditor's report are included in the Annual Report, and may be obtained
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 $XX.XX $XX.XX $XX.XX $XX.XX
Income From Investment Operations
Net Investment Income
Net gains (losses) on securities (realized
and unrealized)
Total From Investment Operations
Less Distributions From
Net investment income
Capital gains
Total Distributions
Ending Net Asset Value
OTHER INFORMATION
Ratios to Average Net Assets:
Expenses (2) (2) (2) (2)
Expenses (excluding reimbursements and (2) (2) (2) (2)
waivers)
Net Investment Income (2) (2) (2) (2)
Total Return
Portfolio Turnover Rate
Net Assets at End of Period (in thousands)
</TABLE>
(1) Institutional Shares of the Funds commenced operations on the following
dates: Government Bond Fund - March 30, 1998; Corporate Bond Fund - March
25, 1998; Growth Equity Fund - March 30, 1998 and Value Equity Fund - March
30, 1998.
(2) Annualized.
16
<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 text-only
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.
Web Site:
www.XXXXX.com
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.
<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.
"Core Trust" means Core Trust (Delaware), an open-end, management
investment company registered under the 1940 Act.
"Core Trust Board" means the Board of Trustees of Core Trust.
"Custodian" means the custodian of each Fund's assets.
"FAdS" means Forum Administrative Services, LLC, the administrator of
each Fund.
"Fitch" means Fitch IBCA, Inc.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of
each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's
shares.
"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 Subadviser of each Fund.
"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.
<PAGE>
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 Fund's investments in fixed income securities are subject to credit risk
relating to the financial condition of the issuers of the securities that each
Fund holds. 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 Investment 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
commercial paper and other money market instruments that are of prime quality.
Prime quality instruments are those instruments that are rated in one of the two
highest 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, 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.
<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 hedge is
accomplished by purchasing and writing (selling) covered options on securities
in which it has invested and on any securities index based in whole or in part
on securities in which that fund may invest. The Funds' options may be traded on
an exchange or in an over-the-counter market.
A Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in the Prospectus and 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 the Fund's net assets.
The Funds have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. The Equity Funds may buy or
sell stock index futures contracts, such as contracts on the S&P 500 stock
index. The Fixed Income Funds may buy and sell bond index futures contracts. In
addition, all of the Funds may buy or sell futures contracts on Treasury bills,
Treasury bonds and other financial instruments. The Funds may write covered
options and buy options on the futures contracts in which they may invest.
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 will 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).
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.
2
<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 the Prospectus or 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 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
3
<PAGE>
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.
An 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.
Certain Funds may purchase and write put and call options on fixed income or
equity security indexes in much the same manner as the options discussed above,
except that index options may serve as a hedge against overall fluctuations in
the fixed income or equity securities markets (or market sectors) or as a means
of participating in an anticipated price increase in those markets. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities, which are being hedged. Index options are settled
exclusively in cash.
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.
4
<PAGE>
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.
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
5
<PAGE>
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.
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.
E. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fixed Income Fund may purchase securities offered on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. At the time a Fund makes
the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
6
<PAGE>
1. RISKS
The use of when-issued transactions and forward commitments enables the Fixed
Income Funds to hedge against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling bond 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 with its custodian a separate account with
cash, U.S. Government Securities and other liquid high-grade debt securities in
an amount at least equal to its commitments to purchase securities on a
when-issued or delayed delivery basis.
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 be without
shareholder approval.
A. FUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations, which are
fundamental policies of the Fund.
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.
7
<PAGE>
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.
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.
8
<PAGE>
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").
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.
9
<PAGE>
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 tax equivalent yield is calculated by dividing the Fund's tax-free yield by
one minus a stated federal, state or combined federal and state tax rate.
A listing of certain performance data as of December 31, 1998 is contained in
Appendix C -- Performance Data.
B. PERFORMANCE CALCULATIONS
A Fund's performance may be quoted in terms of yield or total return.
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 investors in reviewing a
Fund's performance, investors 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.
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 quotations are based on amounts invested in a Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
The Funds charge no sales charges.
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<PAGE>
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. FIXED INCOME AND EQUITY FUNDS
Standardized yields for the Funds used in advertising are computed by dividing a
Fund's interest income (in accordance with specific standardized rules) for a
given 30 days or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income in accordance with specific
standardized rules) in order to arrive at an annual percentage rate. In general,
interest income is reduced with respect to municipal securities purchased at a
premium over their par value by subtracting a portion of the premium from income
on a daily basis. In general, interest income is increased with respect to
municipal securities purchased at original issue at a discount by adding a
portion of the discount to daily income. Capital gains and losses generally are
excluded from these calculations.
The standardized tax equivalent yield is the rate an investor would have to earn
from a fully taxable investment in order to equal a Fund's yield after taxes.
Tax equivalent yields are calculated by dividing the Fund's yield by one minus
the stated Federal or combined Federal and state tax rate. If a portion of a
Fund's yield is tax-exempt, only that portion is adjusted in the calculation.
Income calculated for the purpose of determining each Fund's standardized yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
3. 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.
Total return figures may be based on amounts invested in a Fund net of sales
charges that may be paid by an investor. A computation of total return that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
The Funds charge no sales charges.
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.
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<PAGE>
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.
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. Total returns may be quoted with or without
taking into consideration a Fund's front-end sales charge or contingent deferred
sales charge (if applicable).
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. For instance, if A Shares of
a Fund are created after Institutional Shares have been in existence, the
inception of performance for the A Shares will be deemed to be the inception
date of the Institutional Shares and the performance of the Institutional Shares
(based on the Institutional Shares actual expenses) from the inception of
Institutional Shares to the inception of A Shares will be deemed to be the
performance of A Shares for that period. For standardized total return
calculations, the current maximum initial sales load and applicable 12b-1 fees
on A Shares would be used in determining the total return of A Shares as if
assessed at the inception of Institutional Shares.
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
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<PAGE>
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 earning Federally and, if applicable, state tax-exempt income
from the Fund or 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 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 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.
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<PAGE>
With respect to the Funds that invest in municipal securities and distribute
Federally tax-exempt (and in certain cases state tax-exempt) dividends, the
Funds may advertise the benefits of and other effects of investing in municipal
securities. For instance, the Funds' advertisements may note that municipal
bonds have historically offered higher after tax yields than comparable taxable
alternatives for those persons in the higher tax brackets, that municipal bond
yields may tend to outpace inflation and that changes in tax law have eliminated
many of the tax advantages of other investments. The combined Federal and state
income tax rates for a particular state may also be described and advertisements
may indicate equivalent taxable and tax-free yields at various approximate
combined marginal Federal and state tax bracket rates. All yields so advertised
are for illustration only and not necessarily representative of a Fund's yield.
In connection with its advertisements each Fund may provide "shareholders
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
Norwest or its parent corporation that Norwest has for more than 60 years been
committed to quality products and outstanding service to assist its customers in
meeting their financial goals and setting forth the reasons that Norwest
believes that it has been successful as a national financial service firm.
4. MANAGEMENT
Those officers, as well as certain other officers and Trustees of the Trust, may
be directors, officers or employees of (and persons providing services to the
Trust may include) Forum, its affiliates or affiliates of the Trust.
A. TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. 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>
NAME, POSITION WITH TRUST, DATE OF BIRTH, ADDRESS PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
John Y. Keffer*, Trustee President and Director, Forum Financial Services, Inc. for
Born: Month 19XX more than five years
Two Portland Square Director and sole shareholder (directly and indirectly) Forum
Portland, Maine 04101 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 Officer,
various registered investment companies for
which Forum Administrative Services,
LLC or Forum Fund Services, LLC serves as
manager, administrator and/or distributor
Christopher W. Hamm*, Chairman of the Board of President, Memorial Group, Inc. since 1998
Trustees and President Executive Director, CIBC Oppenheimer 1996-98
Vice President, Paine Webber 1993-96
Born:
5847 San Felipe, Suite 4545
Houston, Texas 77002
Jay Brammer, Trustee Executive Vice President, Gibralter Poroperties, Inc., a real
Born: estate holding company, since 1995
9000 Keystone Crossing, Suite 1000 Executive Vice President, Gibraltar Masoleum Corp., 1980-95
Indianapolis, Indiana 46240
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<PAGE>
J.B. Goodwin, Trustee President, JBGoodwin Company, a comprehensive real estate and
Born: holding company, for more than five years
3933 Steck Avenue, B-101
Austin, Texas 78759
Robert Stillwell, Trustee Attorney, Baker & Botts, a law firm, for more than five years
Born:
3000 One Shell Plaza
Houston, Texas 77002
Sara M. Morris, Treasurer Managing Director, Forum Fund Services, LLC
Born: September 1963 Treasurer and CFO, Forum Financial Group LLC since 1994
Two Portland Square Officer, various registered investment companies for which
Portland, Maine 04101 Forum Administrative Services, LLC or Forum
Fund Services, LLC serves as manager, administrator
and/or distributor
Thomas G. Sheehan, Vice President Managing Director and Counsel, Forum Financial Group, LLC
Born: November 1968 since 1993
Two Portland Square Special Counsel, Division of Investment Management SEC
Portland, Maine 04101 Officer, various registered investment companies for which
Forum Administrative Services, LLC or Forum
Fund Services, LLC serves as manager, administrator
and/or distributor
Stephen J. Barrett, Assistant Secretary Manager of Client Services, Forum Financial Group, LLC since
Born: November 1968 1996
Two Portland Square Senior Product Manager, Fidelity Investments, 1994 - 1996
Portland, Maine 04101 Officer, various registered investment companies for which
Forum Administrative Services, LLC or Forum
Fund Services, LLC serves as manager, administrator
and/or distributor
D. Blaine Riggle, Secretary Assistant Counsel, Forum Financial Group, LLC, since 1998
Born: November 1966 Associate Counsel, Wright Express Corporation (a fleet credit
Two Portland Square card company), 3/97 - 1/98
Portland, Maine 04101 Associate at the law firm of Friedman, Babcock & Gaythwaite,
1994 - 3/97
Officer, various registered investment companies for which
Forum Administrative Services, LLC or Forum Fund Services,
LLC serves as manager, administrator and/or distributor
Marcella Cote, Assistant Secretary Fund Administrator, Forum Financial Group, LLC, since 1998
Born: January 1947 Budget Analyst, State of Maine Department of Human Services,
Two Portland Square 2/97 - 5/98
Portland, Maine 04101 Project Assistant, Muskie School of Public Service, 1994 -
2/97
Officer, various registered investment companies for which
Forum Administrative Services, LLC or Forum Fund Services,
LLC serves as manager, administrator and/or distributor
Dawn L. Taylor, Assistant Treasurer Tax Manager, Forum Financial Group, LLC, since 1997
Born: May, 1964 Senior Tax Accountant, Purdy, Bingham & Burrell, LLC, 1/97 -
Two Portland Square 10/97
Portland, Maine 04101 Senior Fund Accountant, Forum Financial Group, LLC, 9/94 -
10/97
Tax Consultant, New England Financial Services, 6/86 - 9/94
Officer, various registered investment companies for which
Forum Administrative Services, LLC or Forum Fund Services,
LLC serves as manager, administrator and/or distributor
</TABLE>
15
<PAGE>
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
- ------------------------------------- ------------------- ------------------- -------------------- -------------------
John Y. Keffer* $0 $0 $0 $0
Trustee
Christopher W. Hamm* $0 $0 $0 $0
Chairman of the Board of Trustees
and President
Jay Brammer $0 $0 $0 $0
Trustee
J.B. Goodwin $1,500 $0 $0 $1,500
Trustee
Robert Stillwell $1,500 $0 $0 $1,500
Trustee
</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
2. OWNERSHIP OF ADVISER/AFFILIATIONS
The Adviser is 99% owned by Forum Trust and 1% owned by Forum Holdings Corp. I.
Forum Investment Advisers, LLC is registered as an investment adviser with the
SEC under the 1940 Act, as amended.
Sara M. Morris is the only officers of the Trust that is employed by the Adviser
(or affiliates of the Adviser).
16
<PAGE>
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.
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 30 days' written notice when authorized either by vote of the
Fund's shareholders or by a vote of a majority of the Board, or by the Adviser
on 90 days' written notice to the Trust.
Under its agreement, the Adviser is not liable for any error of judgment,
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.
5. EXPENSE LIMITATIONS
The Adviser has voluntarily 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) X.XX% of the average daily net assets of the
Institutional Class of each Fund; and (2) X.XX% of the average daily net assets
of the Trust Class of each Fund.]
6. 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 an investment subadvisory agreements with
the Adviser (the "Subadvisory Agreements").
Government Bond Fund -- The Northern Trust Company
Corporate Bond Fund -- Conseco Capital Management, Inc.
Growth Equity Fund -- Davis Hamilton Jackson & Associates, L.P.
Value Equity Fund -- Beutel, Goodman Capital Management
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 to
each Fund by the Adviser for investment advisory services will not vary as a
result of those negotiations.
17
<PAGE>
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 of Trustees 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 identical, 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 and the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC. John Y. Keffer controls Forum Financial Group, LLC.
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 has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act (the "Plan") that authorizes the payment to FFSI under the Distribution
Services Agreement of a distribution services fee, which may not exceed an
annual rate of 0.25% of the average daily net assets of each Fund attributable
to Trust shares. FFSI has entered into an agreement under the Plan with Memorial
Group, Inc., a corporation controlled by Christopher W. Hamm, the Chairman of
the Board of Trustees and President of the Trust, pursuant to which Memorial
Group, Inc. shall receive 0.25% for performing certain distribution activities.
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.
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 the Fund's
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.
18
<PAGE>
FFSI may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Fund in this manner should acquaint themselves with
their institution's procedures and should read the Prospectus and this SAI in
conjunction with any materials and information provided by their institution.
The financial institution and not its customers will be the shareholder of
record, although customers may have the right to vote shares depending upon
their arrangement with the institution.
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 a fee 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
($2500 per month). The fee is accrued daily by the Funds and is paid monthly
based on average net assets for the previous 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.
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 a fee from each Fund at an annual rate of
$36,000 plus surcharges of $6,000 to $24,000 for specified asset levels. FAcS is
paid additional surcharges of $12,000 per year for each of the following: a
portfolio with more than a specified number of securities positions and/or
international positions; investments in derivative instruments; percentages of
assets invested in asset backed securities; and, a monthly portfolio turnover
rate of 10% or greater. The fee is accrued daily by the Funds and is 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.
19
<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 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 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). 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 and $25.00 per Trust Class shareholder account and $120.00 per
Institutional Class shareholder account. The fee is accrued daily by the Funds
and is paid monthly. 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 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.
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, One Battery park Plaza, New York, New
York 10004.
6. INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, 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.
20
<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 Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases of securities from underwriters of the securities 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
The Adviser or Subadviser of each fund places orders for the purchase and sale
of securities with brokers and dealers selected by and in the discretion of the
Adviser or 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 the Adviser or Subadviser in its best judgment and in a manner
deemed to be in the best interest of each Fund rather than by any formula.
The Adviser or Subadviser of each fund seeks "best execution" for all portfolio
transactions. This means that the Adviser or Subadviser seeks the most favorable
price and execution available. The Adviser or 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 Adviser or Subadviser of each
find 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 Adviser or Subadviser's duties, the
Adviser or 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
21
<PAGE>
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.
2. OBTAINING RESEARCH FROM BROKERS
The Adviser or Subadviser of each fund may give consideration to research
services furnished by brokers to the Adviser or 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 Adviser or
Subadviser's own internal research and investment strategy capabilities. This
research may be used by the Adviser or Subadviser in connection with services to
clients other than the Funds, and not all research services may be used by the
Adviser or Subadviser in connection with the Funds. The Adviser or Subadviser's
fees are not reduced by reason of the Adviser or Subadviser's receipt of
research services.
The Adviser or Subadviser of each fund 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 Adviser or 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, the Adviser or 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 Adviser or 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 Adviser or Subadviser's brokerage commissions for research are
for economic research on specific companies or industries, and since the Adviser
or Subadviser is involved with a limited number of securities, most of the
commission dollars spent for industry and stock research directly benefit the
clients.
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 the Adviser or 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 Adviser or 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, the client may direct the Adviser or Subadviser to use a broker
or dealer of the client's choice. If the client directs the Adviser or
Subadviser to use a particular broker, the Adviser or 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
The Adviser or Subadviser of each fund monitors the creditworthiness of
counterparties to each 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 Adviser or Subadviser of each fund may not effect brokerage transactions
through affiliates of the Adviser or Subadviser (or affiliates of those
persons). The Board has not adopted respective procedures.
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<PAGE>
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 the Adviser or Subadviser of each fund or its affiliates. Investment
decisions are the 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 Adviser or 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 Adviser or
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.
Following is a list of the regular brokers and dealers of each Fund whose
securities (or the securities of the parent company) were acquired during the
past fiscal year and the aggregate value of the Funds' holdings of those
securities as of the Funds' most recent fiscal year.
<TABLE>
<S> <C>
Regular Broker or Dealer Value of Securities Held ($)(000's omitted)
FUND
Broker Dealer & Co., Inc. $0,000
FUND
Broker Dealer & Co., Inc. $0,000
</TABLE>
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.
23
<PAGE>
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. That information is
contained in the Funds' financial statements (specifically in the statements of
assets and liabilities).
The Funds reserve the right to refuse any purchase request in excess of 1% of a
Fund's total assets.
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 Securities and Exchange
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Commission determines that trading thereon is restricted; (2) an emergency (as
determined by the SEC) exists as a 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.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. The Funds' transfer agent and distributor or their
affiliates may be Processing Organizations. Financial institutions, including
Processing Organizations, may charge their customers a fee for their services
and are responsible for promptly transmitting purchase, redemption and other
requests to the Funds.
If you purchase shares through a Processing Organization, you will be subject to
the Processing Organization'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 Processing Organization, 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
Processing Organizations may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a Processing Organization. Contact your Processing Organization
for further information. If you hold shares through a Processing Organization,
the Funds may confirm purchases and redemptions to the Processing Organization,
which will provide you with confirmations and periodic statements. The Funds are
not responsible for the failure of any Processing Organization to carry out its
obligations.
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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, all contributions and 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 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.
This information on IRAs is based on regulations in effect as of January 1, 1998
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, the investor authorizes the Trust's transfer
agent to act on telephonic instructions believed by the Trust's transfer agent
to be genuine instructions from any person representing himself or herself to be
the investor. The records of the Trust's 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.
Shareholders of the Funds Shares 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.
REDEMPTIONS
In addition to the situations described in the Prospectus with respect to the
redemptions of shares, the Trust may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to a Fund's shares as provided in the Prospectus from time to time.
Proceeds of redemptions normally are paid in cash. However, payments may be made
wholly or partially in portfolio securities if the Board determines that payment
in cash would be detrimental to the best interests of the Fund. If payment for
shares redeemed is made wholly or partially in portfolio securities, brokerage
costs may be incurred by the shareholder in converting the securities to cash.
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
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<PAGE>
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 net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of long-term capital gains over long-term capital
losses) that it distributes to shareholders. In order to qualify as a regulated
investment company a Fund must satisfy the following requirements:
o The Fund must distribute at least 90% of its investment company taxable
income (i.e., net investment income and capital gain net 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.
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.
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.
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<PAGE>
B. FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its net investment
income for each tax year. These distributions are taxable to shareholders as
ordinary income. 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.
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.
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.
If a shareholder holds shares for six months or less and redeems shares at a
loss after receiving a capital gain distribution, the loss will be treated as a
long-term capital loss to the extent 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 a 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 a 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.
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<PAGE>
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 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.
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
ordinary its taxable income for the calendar year; and (2) 98% of its capital
gain net income for the one-year period ended on October 31 of the calendar
year. If the Fund changes its tax year-end to November 30 or December 31, it may
elect to use that date instead of the October 31 date in making this
calculation. 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 ending in a calendar 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 November 30 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 other shares of the Fund within 30 days before or after the sale or
redemption (a so called "wash sale"). 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. For this purpose, the special holding period rules of Code Section
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246(c) (3) and (4) generally will apply in determining the holding period of
shares. Capital losses in any year are deductible only to the extent of capital
gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
F. WITHHOLDING TAX
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 correct tax payer
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."
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.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income distributions 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, capital gain distributions
from a Fund and amounts retained by a Fund that are designated as undistributed
capital gain.
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 rules for U.S. federal income taxation 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, distributions from a Fund, the applicability
of foreign taxes and related matters.
H. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from a Fund can differ from the rules for U.S.
federal income taxation 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, distributions from a Fund, the applicability of state and local taxes and
related matters.
8. OTHER MATTERS
1. 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.
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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 Trust and each Fund will continue indefinitely until terminated.
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, investors 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 in the aggregate without reference to a particular series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
shareholder meetings will be held only when specifically required by federal or
state law.
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.
Shareholders representing 10% or more of the Trust's (or a Fund's) outstanding
shares 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, change the form of organization of the Trust by merger, consolidation
or incorporation. Under the Trust Instrument, the Trustees may, without
shareholder vote, cause the Trust to merge or consolidate into one or more
trusts, partnerships or corporations or cause the Trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end, management
investment company that will succeed to or assume the Trust's registration
statement.
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B. FUND OWNERSHIP
As of April 1, 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.
PERCENTAGE OF SHARES
FUND (OR TRUST) OWNED
The Trust XXX
Government Bond Fund XXX
Corporate Bond Fund XXX
Growth Equity Fund XXX
Value Equity Fund XXX
Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of a Fund. These shareholders and any shareholder 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)
XXXXX XXXXXX XXXX
</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 Trust believes that 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 contract 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 for indemnification out of each series'
property of any shareholder or former shareholder held personally liable for the
obligations of the series. 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. In addition, the Trust
Instrument provides that the Trustees shall not be liable for any conduct
whatsoever, 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.
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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.
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, reference is made to the copy of such contract or other
documents filed as exhibits to the registration statement.
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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 only include the schedules of
investments, statements of assets and liabilities, statements of operations,
statements of changes in net assets, financial highlights, notes and independent
auditors' report.
<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
risk-such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse
floaters.
A-2
<PAGE>
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 but
AA may vary slightly from time to time because of economic conditions.
A+,A, Protection factors are average but adequate. However, risk factors are
A- 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 due.
BB 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 not
B be met when due. Financial protection factors will fluctuate widely
B- 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.
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.
A-3
<PAGE>
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, High default risk. Default is a real possibility. Capacity for
CC, C 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 then 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.
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.
cs 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.
A-4
<PAGE>
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, Preferred stock rated BB, B, and CCC is regarded, on balance,
B, CCC 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:
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.
A-5
<PAGE>
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.
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 change sin business, economic, or financial
conditions.
A-6
<PAGE>
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 EQUIRY 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 Waived ADMINISTRATION FEE
PAYABLE 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 $32 $0
CORPORATE BOND FUND ADMINISTRATION FEE Administration Fee Waived ADMINISTRATION FEE
PAYABLE RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $135,972 $0 $135,972
GROWTH EQUITY FUND ADMINISTRATION FEE Administration Fee Waived ADMINISTRATION FEE
PAYABLE RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $31,021 $4,511 $26,510
Trust Shares
Period March 30, 1998-December 31, 1998 $324 $324 $0
VALUE EQUITY FUND ADMINISTRATION FEE Administration Fee Waived ADMINISTRATION FEE
PAYABLE RETAINED
- -----------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $36,313 $14,341 $21,972
Trust Shares
Period March 30, 1998-December 31, 1998 $290 $290 $0
</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 $72 $549
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 Waived TRANSFER AGENCY FEE
PAYABLE 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 Waived TRANSFER AGENCY FEE
PAYABLE RETAINED
- -------------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 26, 1998-December 31, 1998 $19,851 $0 $19,851
GROWTH EQUITY FUND TRANSFER AGENCY FEE Transfer Agency Fee Waived TRANSFER AGENCY FEE
PAYABLE RETAINED
- -------------------------------------------------------------------------------------------------------------------------
Institutional Shares
Period March 30, 1998-December 31, 1998 $27,454 $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 Waived TRANSFER AGENCY FEE
PAYABLE 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
X Shares
Year Ended Month dd, yyyy $0
Year Ended Month dd, yyyy-1 $0
Year Ended Month dd, yyyy-2 $0
Y Shares
Year Ended Month dd, yyyy $0
Year Ended Month dd, yyyy-1 $0
Year Ended Month dd, yyyy-2 $0
Z Shares
Year Ended Month dd, yyyy $0
Year Ended Month dd, yyyy-1 $0
Year Ended Month dd, yyyy-2 $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 Month dd, yyyy, as well
as their percentage holding of all shares of the Fund.
<TABLE>
<S> <C> <C> <C> <C>
% OF % OF FUND
FUND/CLASS OF SHARES NAME AND ADDRESS SHARES CLASS
- --------------------------------------------------------------------------------------------------------
X Class
Y Class
Z Class
</TABLE>
B-6
<PAGE>
APPENDIX C - PERFORMANCE DATA
<PAGE>
TABLE 1 - YIELDS
For the 30-day period ended January 31, 1999, the annualized yield of
Institutional Shares of Government Bond Fund and Corportate Bond Fund was as
follows.
GOVERNMENT BOND FUND YIELD
Institutional Shares 4.74%
CORPORTATE BOND FUND YIELD
Institutional Shares 5.67%
C-1
<PAGE>
TABLE 2 - TOTAL RETURNS
The average annual total return of each class of each Fund for the period ended
January 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 0.71% 1.37% 0.71% N/A N/A N/A N/A 8.73%
CALENDAR
CORPORATE BOND ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------------------------------------------------------------
Institutional Shares 0.87% 2-39% 0.87% N/A N/A N/A N/A 8.44%
CALENDAR
GROWTH EQUITY ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------------------------------------------------------------
Institutional Shares 7.25% 24.06% 7.25% N/A N/A N/A N/A 29.31%
Trust Shares 7.22% 23.97% 7.22% N/A N/A N/A N/A 29.70%
CALENDAR
VALUE EQUITY ONE THREE YEAR TO ONE THREE FIVE TEN YEARS SINCE
FUND MONTH MONTHS DATE YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------------------------------------------------------------
Institutional Shares -3.38% 1.29% -3.38% N/A N/A N/A N/A -11.17%
Trust Shares -3.37% 1.40% -3.37% N/A N/A N/A N/A -10.87%
</TABLE>
C-2
<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) Form of Investment Advisory Agreement between Registrant and Forum
Advisors, Inc. (see Note 1).
(2) Form of Investment Subadvisory Agreement (see Note 2).
(e) Form of Distribution Agreement between Registrant and Forum Financial
Services, Inc. (see Note 1).
(f) None.
(g)(1) Form of Transfer Agency Agreement between Registrant and Forum Financial
Corp. (see Note 1).
(2) Form of Custodian Agreement between Registrant and BankBoston (see Note
3).
(h) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC (see Note 1).
(i) Opinion of counsel to Registrant (see Note 3).
(j) Not applicable.
(k) None.
(l) Investment Representation letter of original purchaser of shares of
Registrant (see Note 3).
(m) Form of Proposed Rule 12b-1 Plan (see Note 4).
(n) Not applicable.
(o) None.
Other Exhibits:
Power of Attorney of Jay Brammer (see Note 3).
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.
<PAGE>
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.
(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:
<PAGE>
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,
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,
<PAGE>
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 Services Agreement provide:
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and reasonable efforts
in rendering services to the Trust under this Agreement but shall be
under no duty to take any action except as specifically set forth
herein or as may be specifically agreed to by the Distributor in
writing. The Distributor shall not be liable to the Trust or any of the
Trust's shareholders for any error of judgment or mistake of law, for
any loss arising out of any investment, or for any action or inaction
of the Distributor in the absence of bad faith, willful misfeasance or
gross negligence in the performance of the Distributor's duties or
obligations under this Agreement or by reason or the Distributor's
reckless disregard of its duties and obligations under this Agreement
(b) The Distributor shall not be liable for any action taken or failure
to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel to
the Trust or counsel to the Distributor;
(ii) any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the person
or persons authorized by the Board to give such oral instruction
(the Distributor shall have no duty or obligation to make any
inquiry or effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any resolution
of the Board, and the Distributor may rely upon the genuineness
of any such document or copy thereof reasonably believed in good
faith by the Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report,
notice, consent, order, or other document reasonably believed in
good faith by the Distributor to be genuine and to have been
signed or presented by the Trust or other proper party or
parties; and the Distributor shall not be under any duty or
obligation to inquire into the validity or invalidity or
authority or lack thereof of any statement, oral or written
instruction, resolution, signature, request, letter of
transmittal, certificate, opinion of counsel, instrument, report,
notice, consent, order, or any other document or instrument which
the Distributor reasonably believes in good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its
reasonable control including, without limitation, acts of civil or
military authority, national emergencies, labor difficulties, fire,
mechanical breakdowns, flood or catastrophe, acts of God, insurrection,
war, riots or failure of the mails, transportation, communication or
power supply. In addition, to the extent the Distributor's obligations
hereunder are to oversee or monitor the activities of third parties,
the Distributor shall not be liable for any failure or delay in the
performance of the Distributor's duties caused, directly or indirectly,
by the failure or delay of such third parties in performing their
respective duties or cooperating reasonably and in a timely manner with
the Distributor.
SECTION 8. INDEMNIFICATION
(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls
the Distributor within the meaning of section 15 of the Securities Act
<PAGE>
or section 20 of the 1934 Act ("Distributor Indemnitees") free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims, demands,
actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectuses or arising
out of or based upon any alleged omission to state a material fact
required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection with the preparation of
the Registration Statement or exhibits to the Registration Statement by
or on behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Trust shall indemnify and hold each Distributor Indemnitee
free and harmless from and against any Distributor Claim; provided,
that the term Distributor Claim for purposes of this sentence shall
mean any Distributor Claim related to the matters for which the
Distributor has requested amendment to the Registration Statement and
for which the Trust has not filed a Required Amendment, regardless of
with respect to such matters whether any statement in or omission from
the Registration Statement was made in reliance upon, or in conformity
with, information furnished to the Trust by or on behalf of the
Distributor.
(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the
Trust and approved by the Distributor, which approval shall not be
withheld unreasonably. The Trust shall advise the Distributor that it
will assume the defense of the suit and retain counsel within ten (10)
days of receipt of the notice of the claim. If the Trust assumes the
defense of any such suit and retains counsel, the defendants shall bear
the fees and expenses of any additional counsel that they retain. If
the Trust does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Trust or has been
advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust
will reimburse any Distributor Indemnitee named as defendant in such
suit for the reasonable fees and expenses of any counsel that person
retains. A Distributor Indemnitee shall not settle or confess any claim
without the prior written consent of the Trust, which consent shall not
be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"),
free and harmless from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable
counsel fees incurred in connection therewith), but only to the extent
that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other
expenses result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in
the Registration Statement or Prospectus or any alleged omission
of a material fact required to be stated or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon, and in conformity with, information
furnished to the Trust in writing in connection with the
preparation of the Registration Statement or Prospectus by or on
behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set
forth in Section 7 of this Agreement ("Trust Claims").
(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
<PAGE>
the Distributor, the Distributor will reimburse any Trust Indemnitee
named as defendant in such suit for the reasonable fees and expenses of
any counsel that person retains. A Trust Indemnitee shall not settle or
confess any claim without the prior written consent of the Distributor,
which consent shall not be unreasonably withheld or delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a
Distributor Indemnitee or Trust Indemnitee, respectively, by the person
against whom such action is brought within twenty (20) days after the
summons or other first legal process is served. Such notice shall refer
to the person or persons against whom the action is brought. The
failure to provide such notice shall not relieve the party entitled to
such notice of any liability that it may have to any Distributor
Indemnitee or Trust Indemnitee except to the extent that the ability of
the party entitled to such notice to defend such action has been
materially adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Distributor Indemnitee or Trust Indemnitee and shall survive the sale
and redemption of any Shares made pursuant to subscriptions obtained by
the Distributor. The indemnification provisions of this Section will
inure exclusively to the benefit of each person that may be a
Distributor Indemnitee or Trust Indemnitee at any time and their
respective successors and assigns (it being intended that such persons
be deemed to be third party beneficiaries under this Agreement).
(g) Each party agrees promptly to notify the other party of the
commencement of any litigation or proceeding of which it becomes aware
arising out of or in any way connected with the issuance or sale of
Shares.
(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organic Documents or any applicable
statute or regulation or shall require the Distributor to take any
action contrary to any provision of its Articles of Incorporation or
Bylaws or any applicable statute or regulation; provided, however, that
neither the Trust nor the Distributor may amend their Organic Documents
or Articles of Incorporation and Bylaws, respectively, in any manner
that would result in a violation of a representation or warranty made
in this Agreement.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or its security holders
to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
ITEM 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.
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.
<PAGE>
<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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
John R. Goodwin Senior Vice President The Northern Trust Company
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
Harold B. Smith Director The Northern Trust Company
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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.
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) Director, Executive Vice Great American Reserve Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
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
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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.
------------------------------------ ----------------------------------- -----------------------------------
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
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Conseco Life Insurance Company
President and Chief Financial
Officer
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) 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.
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) 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
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
Director and Executive Vice MNL Marketing Corporation
President
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) 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
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director and Executive Vice Response Air Ambulance Network,
President Inc.
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
Rollin M. Dick (continued) 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
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director, Executive Vice Washington National Insurance
President and Chief Financial Company
Officer
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Director Weiss Communications, 6081 East
82nd Street, Suite 401,
Indianapolis, Indiana 46250
----------------------------------- -----------------------------------
<PAGE>
----------------------------------- -----------------------------------
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, Inc.
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.
<PAGE>
<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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
<PAGE>
------------------------------------ ----------------------------------- -----------------------------------
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
------------------------------------ ----------------------------------- -----------------------------------
------------------------------------ ----------------------------------- -----------------------------------
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 Financial Services, Inc., Registrant's underwriter, or its
affiliate, Forum Fund Services, LLC, serve as underwriter for the
following investment companies registered under the Investment Company
Act of 1940. As amended:
<PAGE>
The CRM Funds Monarch Funds
The Cutler Trust Norwest Advantage Funds
Forum Funds Norwest Select Funds
Memorial Funds Sound Shore Fund, Inc.
(b) The following directors and officers of Forum Financial Services, Inc.,
Registrant's underwriter, hold the following positions with registrant.
Their business address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
John Y. Keffer President Trustee
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,
(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 has duly caused this
post-effective amendment number 2 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 March 1, 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 March
1, 1999.
(a) Principal Executive Officer
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.
