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OMB APPROVAL
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As filed with the Securities and Exchange Commission on November 3, 1999
File Nos. 333-84031 and 811-09509
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
The NP Comanche Funds
(formerly The NewBridge Funds)
Two Portland Square
Portland, Maine 04101
(207) 879-1900
D. Blaine Riggle, Esq.
Forum Fund Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Harold B. Finn III, Esq.
Finn Dixon & Herling LLP
One Landmark Square
Stamford, Connecticut 06901
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Title of Securities Being Registered: NP Comanche Growth Fund.
<PAGE>
THE NP COMANCHE FUNDS
PROSPECTUS
DECEMBER XX, 1999
NP COMANCHE GROWTH FUND
Shares of the Fund are offered to investors
without any Rule 12b-1
(distribution) fees.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE 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..........................................................2
Fee Tables...................................................................3
Investment Objectives, Principal Investment Strategies and Principal Risks...4
Management...................................................................5
Your Account.................................................................7
How to Contact the Fund 7
General Information 7
Buying Shares 8
Selling Shares 9
Exchange Privileges 11
Other Information...........................................................13
<PAGE>
RISK/RETURN SUMMARY
NP COMANCHE GROWTH FUND (THE "FUND")
INVESTMENT GOAL Long-term capital appreciation.
Principal Investment Strategy The Fund's investment adviser, NewBridge Partners,
LLC (the "Adviser"), intends to follow a long-term investment philosophy by
investing primarily in the equity securities of "Mid Cap" and "Large Cap"
companies which appear to have growth prospects that exceed those of the overall
stock market.
CONCEPTS TO UNDERSTAND
GROWTH INVESTING means to invest in stocks of companies that have
exhibited faster than average earnings growth over the past few years
and are expected to continue to show high levels of profit growth
MID CAP STOCKS mean securities of companies the market value of which
is between $1 billion and $10 billion
LARGE CAP STOCKS mean securities of companies the market value of
which is in excess of $10 billion
PRINCIPAL RISKS OF INVESTING IN THE FUND
You could lose money on your investment in the Fund and the Fund could
under-perform other investments. The principal risks of investing in the Fund
include:
o The stock market goes down
o The stock market undervalues the stocks in the Fund's portfolio
o The Adviser's judgment as to the fundamentals of an issuer proves
to be wrong o The Fund's particular investment style falls out of
favor with the market
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
WHO MAY WANT TO INVEST IN THE FUND
You may want to purchase shares of the Fund if:
o You are willing to tolerate significant changes in the value of
your investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Fund may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only
on particular sectors or industries
o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency
reserves
PERFORMANCE INFORMATION
Performance information is not provided as the Fund does not have a full
calendar year of operations as of the date of this prospectus.
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FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in the Fund.
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SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases 4.00%
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and Other
Distributions None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Advisory Fees 0.70%
Other Expenses(1) 0.80%
TOTAL ANNUAL FUND OPERATING EXPENSES(2) 1.50%
</TABLE>
(1) Based on estimated expenses for the Fund's first fiscal year ended June 30,
2000.
(2) The Adviser has voluntarily undertaken to waive a portion of its fees and
assume certain expenses of the Fund to the extent that total annual fund
operating expenses exceed 1.50% of net assets. This undertaking may be
terminated by the Adviser at any time.
The following is a hypothetical example intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual funds. This
example assumes that you invest $10,000 in the Fund, you pay the maximum sales
charge, your investment has a 5% annual return, that the Fund's operating
expenses remain the same as stated in the table above, that you reinvest all
distributions and redeem at the end of each period. Although your actual costs
may be higher or lower, under these assumptions your costs would be:
After 1 year After 3 years
$547 $855
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek long-term capital appreciation
by investing in companies whose growth prospects appear to exceed those of the
overall market. There is no assurance that the Fund will achieve this objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing primarily in the equity
securities of "Mid Cap" and "Large Cap" companies. The Adviser analyzes the
price, earnings, price histories, balance sheet characteristics, perceived
management skills and perceived prospects for earnings growth when deciding
which stocks to buy and sell for the Fund. The Adviser believes that earnings
growth is the primary determinant of stock prices and that efficient financial
markets will reward consistently above-average earnings growth with greater than
average capital appreciation over the long term.
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PRINCIPAL INVESTMENT RISKS
There is no assurance that the Fund will achieve its investment objective, and
the 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 the
Fund may be worth more or less than its original value. The Fund does not, by
itself, provide a complete investment program.
All investments made by the Fund have some risk. Among other things, the market
value of any security in which the Fund 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. Moreover, the stock markets tend to be
cyclical, with periods of generally rising prices and generally declining
prices. These cycles will affect the value of the Fund.
The Fund may be an appropriate investment if you are seeking long-term growth in
your investment, and are willing to tolerate significant fluctuations in the
value of your investment in response to changes in the market value of the
stocks the Fund holds. This type of market movement may affect the price of the
securities of a single issuer, a segment of the domestic stock market, or the
entire market. The investment style for the Fund could fall out of favor with
the market. In other words, if investors lose interest in "growth" stocks, then
the net asset value of the Fund could also decrease. For the most part, the
Fund's portfolio is comprised of Mid Cap and Large Cap companies. Therefore, if
larger companies fall out of favor among investors, the value of the Fund's
shares may decline. Likewise, if smaller companies outperform these larger
companies, the Fund could under-perform broader equity indices. While the
investment professionals employed by the Adviser have a number of years of prior
experience in managing investment portfolios, including a mutual fund, this is
the first time that the Adviser has managed a mutual fund.
TEMPORARY DEFENSIVE POSITION
The Fund may hold cash or cash equivalents such as high quality money market
instruments pending investment and to retain flexibility to pay redemptions and
expenses. In addition, in order to respond to adverse market, economic or other
conditions, the Fund may assume a temporary defensive position and invest
without limit in these instruments. As a result, the Fund may be unable to
achieve its investment objectives.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1, 2000. The Adviser and administrator are addressing this
Year 2000 issue and its possible impact on their systems. The Fund's other
service providers have informed the Fund that they are taking similar measures.
This matter, if not corrected, could adversely affect the services provided to
the Fund or the companies in which the Fund invests and, therefore, could lower
the value of your shares.
MANAGEMENT
The business of the Fund is managed under the direction of the Board of Trustees
of The NP Comanche Funds (the "Board"). The Board formulates the general
policies of the Fund and meets periodically to review the Fund's performance,
monitor investment activities and practices, and discuss other matters affecting
the Fund. Additional information regarding the Board, as well as executive
officers, may be found in the Statement of Additional Information ("SAI").
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THE ADVISER
NewBridge Partners, LLC, 535 Madison Avenue, 14th Floor, New York, New York
10022, serves as investment adviser to the Fund. Subject to the general control
of the Board, the Adviser makes investment decisions for the Fund. For its
services, the Adviser receives an advisory fee at an annual rate of 0.70% of the
average daily net assets of the Fund.
The Adviser commenced business on March 15, 1999. As of September XX, 1999, the
Adviser had over $XX of assets under management.
All investment decisions for the Fund are made by a committee of investment
professionals and, no persons are primarily responsible for making
recommendations to that committee.
OTHER SERVICE PROVIDERS
Forum Financial Group, LLC and its affiliates (collectively "Forum"), provide
various services to the Fund. As of September 30, 1999, Forum provided
administration and distribution services to investment companies and collective
investment funds with assets of approximately $73 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 Fund's shares. The distributor acts as the agent of the Fund
in connection with the offering of shares of the Fund. 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 Fund.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Fund's transfer
agent.
FUND EXPENSES
The Fund pays for all of its expenses. The Adviser or other service providers
may waive all or any portion of their fees, which are accrued daily and paid
monthly. Any waiver would have the effect of increasing a Fund's performance for
the period during which the waiver was in effect.
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YOUR ACCOUNT
HOW TO CONTACT THE FUND
Write to us at:
The NP Comanche Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(888) XXX-XXXX
Wire investments (or ACH payments) to us at:
Bankers Trust Company
New York, New York
ABA #XXXXXXXXX
For Credit to:
Forum Shareholder Services, LLC
Account #XX-XXX-XXX
The NP Comanche Funds
(Your Name)
(Your Account Number)
(Your Social Security number or tax identification number)
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share, or
NAV, plus any applicable sales charge (or minus any applicable sales charge in
the case of redemptions) next calculated after the Transfer Agent receives your
request in proper form. For instance, if the Transfer Agent receives your
request in proper form prior to 4 p.m. (Eastern time), your transaction will be
priced at that day's NAV plus the applicable sales charge. If the Transfer Agent
receives your transaction request after 4 p.m., your transaction will be priced
at the next business day's NAV plus the applicable sales charge. The Fund will
not accept orders that request a particular day or price for the transaction or
any other special conditions.
The Fund does not issue share certificates.
You will receive periodic statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
The Fund reserves the right to impose minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED. The Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or, if the New York Stock
Exchange closes early. The Fund's NAV is determined by taking the market value
of all securities owned by the Fund (plus all other assets such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. The Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily available, the Fund values securities at fair value as
determined by the Board (or its delegate).
TRANSACTIONS THROUGH THIRD PARTIES. If you invest through a broker or other
financial institution, the policies and fees (other than sales charges)charged
by that institution may be different than those of the Fund. Banks, brokers,
retirement plans and financial
5
<PAGE>
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, Uniform Gifts to Minors Act ("UMGA") or
Uniform Transfer to Minors Act ("UTMA") accounts, the check must be
made payable to "The NP Comanche Funds" or to one or more owners of
the account and endorsed to "The NP Comanche Funds." For all other
accounts, the check must be made payable on its face to "The NP
Comanche Funds." No other method of check payment is acceptable (for
instance, you may not pay by travelers check).
PURCHASES BY AUTOMATED CLEARING HOUSE ("ACH") This service allows the
purchase of additional shares through an electronic transfer of money
from a checking or savings account. When an additional purchase is
made by telephone, the Transfer Agent will automatically debit your
pre-designated bank account for the desired amount. You may call (888)
XXX-XXXX to request an ACH transaction.
WIRES. Instruct your financial institution to make a Federal Funds
wire payment to us. Your financial institution may charge you a fee
for this service.
Minimum Investments. The Fund accepts payments in the following minimum amounts:
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
Standard Account $10,000 None
Traditional and Roth IRA Accounts $1,000 $100
Electronic Fund Transfers $10,000 $50
Systematic Investment Plans $10,000 $50
Exchange Privileges $2,500 None
The Adviser or the Fund's administrator may, at its discretion, waive the above
investment minimums.
ACCOUNT REQUIREMENTS
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TYPE OF ACCOUNT REQUIREMENTS
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INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons required
Individual accounts are owned by one person, as are to sign (you choose who must sign) exactly as their
sole proprietorship accounts. names appear on the account
Joint accounts can have two or more owners (tenants)
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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 UGMA or the UTMA
to a child and obtain tax benefits. You can give up o The trustee must sign instructions in a manner
to $10,000 a year per child without paying Federal gift indicating trustee capacity
tax.
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BUSINESS ENTITIES o For entities with officers, provide an original
or certified copy of a resolution that identifies
the authorized signers for the account
o For entities with partners or other interested
parties, provide a certified partnership agreement
or organizational document, or certified pages from
the partnership agreement or organizational
document, that identify the partners or interested
parties
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TRUSTS o The trust must be established before an account can
be opened
o Provide a certification for trust, or the pages
from the trust document that identify the trustees
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</TABLE>
INVESTMENT PROCEDURES
<TABLE>
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TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
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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 Mail us the slip (or your letter) and a check
o Write your account number on your check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and you will be assigned an account number
o Mail us your application
o Instruct your bank to wire your money to us
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete Systematic Investment section of the
o Complete the application application
o Call us and you will be assigned an account number o Attach a voided check to your application
o Mail us your application o Mail us the completed application and the
o Make an ACH payment voided check
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</TABLE>
SYSTEMATIC INVESTMENTS. You may invest a specified amount of money in the Fund
once or twice a month on specified dates. These payments are taken from your
bank account by ACH payment. Systematic investments must be for at least $50.
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LIMITATIONS ON PURCHASES. The Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Fund 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 or more substantial redemptions or exchanges within a
calendar year).
CANCELED OR FAILED PAYMENTS. The Fund accepts checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or you
pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Fund or the Transfer Agent, and the Fund may redeem other shares you own in the
account (or another identically registered account in any other series of The NP
Comanche Funds) as reimbursement. The Fund and its agents have the right to
reject or cancel any purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
The Fund processes redemption orders promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the 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.
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TO SELL SHARES FROM YOUR ACCOUNT
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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 not declined redemption privileges on your account
application AND
o Your request is for $10,000 or more
o Call us with your request (if you have not declined 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 not declined
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 forms of identification
o Your proceeds will be:
o Mailed to you OR
o Wired to you(if you have not declined wire redemption privileges)
(See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
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TELEPHONE REDEMPTION PRIVILEGES. You may redeem your shares by telephone unless
you declinedtelephone redemption privileges on your account application. 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 redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount you may redeem by wire is $10,000. If you wish to make your wire request
by telephone, you must also have telephone redemption privileges.
SYSTEMATIC REDEMPTION. If you own shares of the Fund with an aggregate value of
at least $10,000, you may request a specified amount of money from your account
once a month or once a quarter on a specified date. These payments are sent from
your account to a designated bank account by ACH payment. Systematic requests
must be for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Fund against fraud,
signatures on certain requests must have a "signature guarantee." 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.
For requests made in writing, a signature guarantee is required for any of the
following:
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<PAGE>
o Sales 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 redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, distribution,
telephone redemptionor exchange option or any other election in
connection with your account
SMALL ACCOUNTS. If the value of your account falls below $10,000 (not including
IRAs), the Fund may ask you to increase your balance. If the account value is
still below $10,000 after 60 days, the Fund may close your account and send you
the proceeds. The Fund 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 Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions "in kind" usually occur
if the amount to be redeemed is large enough to affect the Fund's 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.
SALES CHARGES
PURCHASES A sales charge is assessed on purchases of Fund shares as follows:
SALES CHARGE (LOAD) AS %
OF:
PUBLIC
AMOUNT OF PURCHASE OFFERING PRICE NET ASSET VALUE* REALLOWANCE %
$0-$49,999 4.00 4.17 3.50
$50,000 to $99,999 3.50 3.63 3.00
$100,000 to $249,999 3.00 3.09 2.50
$250,000 to $499,999 2.50 2.56 2.10
$500,000 to $999,999 2.00 2.04 1.70
$1,000,000 and up 0.00 0.00 1.00
* Rounded to the nearest one-hundredth percent.
The offering price for the Fund's shares includes the relevant sales charge. The
commission paid to the distributor is the sales charge less the reallowance paid
to certain financial institutions purchasing shares. Normally, reallowances are
paid as indicated in the above table. From time to time, however, the
distributor may elect to reallow the entire sales charge for all sales during a
particular period.
From time to time and at its own expense, the distributor may provide
compensation, including financial assistance, to certain dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising campaigns or other dealer-sponsored special events.
Compensation may include the provision of travel arrangements and lodging,
tickets for entertainment events and merchandise.
REDUCED SALES CHARGES You may qualify for a reduced sales charge on Fund
purchases under rights of accumulation or a letter of intent. Certain persons
may also be eligible to purchase or redeem Fund shares without a sales charge.
Please see the SAI for further information.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy, also known as an exchange, Investor class
shares of Daily Assets Cash Fund, Daily Assets Government Fund, Daily Assets
Government Obligations Fund, and Investors Bond Fund (series of the Forum
Funds). The minimum amount that is required to open an account in the Fund
through an exchange with another fund is $2,500. If you exchange into a fund
that has a higher sales charge than the Fund, you will have to pay the
difference between that fund's sales charge and the Fund's sales charge. If you
exchange into a fund that has no sales charge or a lower sales charge than the
Fund, you will not have to pay a sales charge at the time of exchange. Because
exchanges are treated as a sale and purchase, they may have tax consequences.
REQUIREMENTS. You may make exchanges only between identically registered
accounts (name(s), address and taxpayer ID number). There is currently no limit
on exchanges, but the Fund reserves the right to limit exchanges. You may
exchange your shares by mail or telephone, unless you declined telephone
redemption privileges on your account application. You may be responsible for
any fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
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HOW TO EXCHANGE
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BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds out of and into which you are exchanging
o The dollar amount or number of shares you want to 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
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BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
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RETIREMENT ACCOUNTS
The Fund offers IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing in any IRA or other retirement plan, you should consult your tax
adviser. Whenever making an investment in an IRA, be sure to indicate the year
in which the contribution is made.
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OTHER INFORMATION
DISTRIBUTIONS
Distributions of net investment income are declared and paid quarterly by the
Fund. Any net capital gain realized by the 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
The Fund intends to operate in a manner so that it will not be liable for
Federal income or excise tax.
Distributions of net investment income or short-term capital gain are taxable to
you as ordinary income. A portion of the dividends paid by the Fund may be
eligible for the dividends-received deduction for corporate shareholders.
Distributions of long-term capital gain are taxable to you as long-term capital
gain regardless of how long you have held your shares. Distributions may also be
subject to state and local taxes.
Distributions of capital gain and the Fund's distribution of net investment
income reduce the net asset value of the Fund's shares by the amount of the
distribution. If you purchase shares prior to these distributions, you are taxed
on the distribution even though the distribution represents a return of your
investment. The sale or exchange of Fund shares is a taxable transaction for
Federal income tax purposes.
The Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to you if you fail to provide the Fund with
your correct taxpayer identification number or to make required certifications,
or if you have been notified by the IRS that you are subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against your U.S. federal income tax liability.
The Fund will mail reports containing information about the Fund's distributions
during the year to you after December 31 of each year. Consult your tax adviser
about the Federal, state and local tax consequences in your particular
circumstances.
ORGANIZATION
The NP Comanche Funds is a Delaware business trust that is registered with the
SEC as an open-end, management investment company (a "mutual fund"). The Fund is
a series of The NP Comanche Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law. All
shareholders of The NP Comanche Funds are entitled to vote at shareholders'
meetings unless a matter is determined to affect a series of The NP Comanche
Funds (such as approval of an advisory agreement for the Fund). From time to
time, large shareholders may control the Fund or The NP Comanche Funds.
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FOR MORE INFORMATION
The following documents will be available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
NP Comanche Growth Fund
The Fund will provide annual and semi-annual reports to shareholders that will
provide additional information about the Fund's investments. In the Fund's
annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's
performance during its preceding fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the Fund and is
incorporated by reference into this Prospectus.
You can get free copies of both reports (when available) and the SAI, request
other information and discuss your questions about the Fund by
contacting your broker or the Fund at:
The NP Comanche Funds
Two Portland Square
Portland, Maine 04101
888-XXX-XXXX
http://www.xxxxxxxxxxx.com
You can also review the Fund's reports (when available) and SAIs at the
Public Reference Room of the Securities and Exchange Commission. You can
get copies, for a fee, by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
E-mail address: [email protected]
The NP Comanche Funds
P.O. Box 446
Portland, ME 04112
888-XXX-XXXX
Information on the hours of operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. Free copies of the
reports and SAIs are available from the Commission's Internet website at
http://www.sec.gov.
Investment Company Act File No. 811-09509
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER XX, 1999
THE NP COMANCHE FUNDS
NP COMANCHE GROWTH FUND
FUND INFORMATION:
The NP Comanche Funds
Two Portland Square
Portland, Maine 04101
(888) XXX-XXXX
INVESTMENT ADVISER:
NewBridge Partners, LLC
535 Madison Avenue, 14th Floor
New York, New York 10022
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) XXX-XXXX
This Statement of Additional Information, or SAI, supplements the Prospectus
dated December XX, 1999, as may be amended from time to time, offering shares
the NP Comanche Growth Fund (the "Fund"). This SAI is not a prospectus and
should only be read in conjunction with the Prospectus. The Prospectus may be
obtained without charge by contacting shareholder services at the address or
telephone number listed above.
<PAGE>
TABLE OF CONTENTS
Glossary .................................................... XX
1. Investment Policies and Risks................................ XX
2. Investment Limitations....................................... XX
3. Performance Data and Advertising............................. XX
4. Management................................................... XX
5. Portfolio Transactions....................................... XX
6. Additional Purchase and Redemption Information............... XX
7. Taxation .................................................... XX
8. Other Matters................................................ XX
Appendix A - Description of Securities Ratings........................ A-1
<PAGE>
GLOSSARY
"Adviser" means NewBridge Partners, LLC.
"Board" means the Board of Trustees of the Trust.
"CFTC" means the U.S. Commodities Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means the custodian of the Fund's assets.
"FAdS" means Forum Administrative Services, LLC, administrator of the Fund.
"FAcS" means Forum Accounting Services, LLC, the accountant of the Fund.
"FFS" means Forum Fund Services, LLC, distributor of the Fund's shares.
"Fund" means the NP Comanche Growth Fund.
"Fitch" means Fitch IBCA, Inc.
"IRS" mean Internal Revenue Service.
"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.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer agent
and distribution disbursing agent of the Fund.
"Trust" means The NP Comanche Funds.
"U.S. Government Securities" means obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
"U.S. Treasury Securities" means obligations issued or guaranteed by the
U.S. Treasury.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
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1. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the Prospectus about the
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 the
Fund holds. To limit credit risk, the Fund generally may only invest its assets
in debt securities that, with the exception of convertible securities, 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 Adviser to be of comparable quality. 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. The Fund
may retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser 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 Fund 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 the Fund, the Adviser 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 Adviser will attempt to substitute comparable ratings. Credit ratings
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings. An issuer's current financial
condition may be better or worse than a rating indicates.
B. TEMPORARY DEFENSIVE POSITION
The Fund may assume a temporary defensive position and may invest without limit
in money market instruments that are of prime quality. Prime quality instruments
are those instruments that are rated in one of the two highest short-term rating
categories by an NRSRO or, if not rated, determined by the Adviser to be of
comparable quality. 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 the Fund may invest
include U.S. Government Securities, commercial paper, time deposits, bankers
acceptances and certificates of deposit of banks doing business in the United
States that have, at the time of investment, total assets in excess of one
billion dollars and that are insured by the Federal Deposit Insurance
Corporation, corporate notes and short-term bonds and money market mutual funds.
Some money market instruments in which the Fund may invest 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.
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These obligations generally are not traded, and there is generally no
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.
C. HEDGING AND OPTION INCOME STRATEGIES
The 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. The Fund
accomplishes a hedge by purchasing options to acquire securities or writing
(selling) covered options on securities in which it has invested, other than for
bona fide hedging purposes, by buying or selling stock index futures based in
whole or in part on securities in which the Fund may invest, as well as by
buying or selling options on such futures contracts.
The 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, the Fund may 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 other
positions would exceed 5% of the Fund's net assets.
The Fund has no current intention of investing in futures contracts and options
thereon for purposes other than hedging.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
The Fund may write any covered options. An option is covered if, as long as the
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, 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.
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 the Fund may own or seek
to own.
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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. The 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 the 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 Adviser to correctly predict the direction of stock
prices, interest rates and other economic factors. To the extent the 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
options and futures exchanges upon which options and futures are traded or the
CFTC.
Except as otherwise noted in this SAI, the Fund will not use leverage in its
options and hedging strategies. In the case of transactions entered into as a
hedge, the Fund will hold securities, currencies or other options or futures
positions whose values are expected to offset ("cover") its obligations
thereunder. The 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. The 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
Fund 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 in the
prescribed amount. Any assets used for cover or held in a segregated account
cannot be sold or closed out while the hedging or option income strategy is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that the use of cover or segregation involving a large percentage
of the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
OPTIONS STRATEGIES. The 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. The Fund may buy or sell both exchange-traded and
over-the-counter ("OTC") options. The Fund will purchase or write an option only
if that option is traded on a recognized U.S. options exchange or if the Adviser
believes that a liquid secondary market for the option exists. When the 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
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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 Fund.
Upon selling an option, the 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 Fund may purchase call options on debt securities that the Fund's Adviser
intends to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased 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. The 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.
The Adviser may write call options when it believes that the market value of the
underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection, to the extent of the call premium received less any transaction
costs, against a decrease in the market price of a security.
The Fund may purchase and write put and call options on fixed income or equity
security indices 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 Adviser's ability to predict movements in the prices of
individual securities and fluctuations in the general securities markets.
o Imperfect correlations between movements in the prices of options and
movements in the price of the securities (or indices) hedged or used for
cover, which may cause a given hedge not to achieve its objective.
o The fact that the skills and techniques needed to trade these instruments
are different from those needed to select the securities in which the Fund
invests.
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 the 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.
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D. FOREIGN INVESTMENT
1. FOREIGN CURRENCY TRANSACTIONS
The Fund may conduct foreign currency exchange transactions, for hedging
purposes, either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market or by entering into a forward foreign currency contract.
A forward foreign currency contract ("forward contract") involves an obligation
to purchase or sell a specific amount of a specific currency at a future date,
which may be any fixed number of days (usually less than one year) from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. Forward contracts are considered to be derivatives. The Fund enters
into forward contracts in order to "lock in" the exchange rate between the
currency it will deliver and the currency it will receive for the duration of
the contract. In addition, the Fund may enter into forward contracts to hedge
against risks arising from securities the Fund owns or anticipates purchasing,
or the U.S. dollar value of interest and dividends paid on those securities. The
Fund will not enter into forward contracts for speculative purposes.
If the Fund makes delivery of the foreign currency at or before the settlement
of a forward contract, it may be required to obtain the currency through the
conversion of assets of the Fund into the currency. The Fund may close out a
forward contract obligating it to purchase a foreign currency by selling an
offsetting contract, in which case it will realize a gain or a loss.
Foreign currency transactions involve certain costs and risks. The Fund incurs
foreign exchange expenses in converting assets from one currency to another.
Forward contracts involve a risk of loss if the Adviser is inaccurate in its
prediction of currency movements. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The precise matching of forward contract
amounts and the value of the securities involved is generally not possible.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency if the market value of the security is less than the amount of the
foreign currency the Fund is obligated to deliver under the forward contract and
the decision is made to sell the security and make delivery of the foreign
currency. The use of forward contracts as a hedging technique does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. Although forward
contracts can reduce the risk of loss due to a decline in the value of the
hedged currencies, they also limit any potential gain that might result from an
increase in the value of the currencies.
In addition, there is no systematic reporting of last sale information for
foreign currencies, and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a timely
basis. Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign currencies
is a global around-the-clock market. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, the Fund may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
The Fund has no present intention to enter into currency futures contracts or
options thereon, but may do so in the future, particularly in order to hedge
against the risk of foreign exchange fluctuation on foreign securities the Fund
holds in its portfolio or which it intends to purchase.
2. FOREIGN SECURITIES
All investments, domestic and foreign, involve certain risks. Investments in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S. issuers. All foreign
investments are subject to risks of foreign political and economic instability,
adverse movements in foreign exchange rates, the imposition or tightening of
exchange controls or other limitations on repatriation of foreign capital, and
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changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of foreign
investors' assets.
Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Fund's shareholders; commission rates payable on foreign transactions are
generally higher than in the United States; foreign accounting, auditing and
financial reporting standards differ from those in the United States and,
accordingly, less information may be available about foreign companies than is
available about issuers of comparable securities in the United States; and
foreign securities may trade less frequently and with lower volume and may
exhibit greater price volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by the Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult, if not impossible, to
predict. Income from foreign securities will be received and realized in foreign
currencies, and the Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar occurring after the Fund's income has been earned and
computed in U.S. dollars may require the Fund to liquidate portfolio securities
to acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time the Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the Fund may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet such
expenses.
The Fund may purchase foreign bank obligations. In addition to the risks
described above that are generally applicable to foreign investments, the
investments that the Fund makes in obligations of foreign banks, branches or
subsidiaries may involve further risks, including differences between foreign
banks and U.S. banks in applicable accounting, auditing and financial reporting
standards, and the possible establishment of exchange controls or other foreign
government laws or restrictions applicable to the payment of certificates of
deposit or time deposits that may affect adversely the payment of principal and
interest on the securities held by the Fund.
3. DEPOSITORY RECEIPTS
The Fund may invest in the securities of foreign issuers directly or indirectly
through sponsored or unsponsored depositary receipts. A depositary receipt is a
receipt for shares of a foreign-based company that entitles the holder to
distributions on the underlying security. Depositary receipts include sponsored
or unsponsored American Depositary Receipts ("ADRs") or European Depositary
Receipts ("EDRs"), and other similar securities global instruments. ADRs are
typically issued by a U.S. bank or trust company, evidence ownership of
underlying securities issued by a foreign company, and are designed for use in
U.S. securities markets. EDRs are receipts issued by a European financial
institution evidencing an arrangement similar to that of ADRs, and are designed
for use in European securities markets. A fund invests in depository receipts in
order to obtain exposure to foreign securities markets.
Unsponsored depositary receipts may be created without the participation of the
foreign issuer. Holders of these receipts generally bear all the costs of the
depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depositary receipt. The bank or trust company depository of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
E. REPURCHASE AGREEMENTS
1. IN GENERAL
Repurchase agreements are transactions in which the Fund purchases securities
from a bank or securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date and at a price
reflecting a market rate of interest unrelated to the purchased security. During
the term of a repurchase agreement, the Fund's custodian maintains possession of
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the purchased securities and any underlying collateral, which is maintained at
not less than 100% of the repurchase price. Repurchase agreements allow the Fund
to earn income on its uninvested cash for periods as short as overnight, while
retaining the flexibility to pursue longer-term investments.
2. REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which the Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate.
F. CONVERTIBLE SECURITIES
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 the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
8
<PAGE>
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.
G. ILLIQUID AND RESTRICTED SECURITIES
The Fund may not 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 the Fund has valued the securities. Illiquid securities include
repurchase agreements not entitling the holder to payment of principal within
seven days, over-the-counter options, securities which are not readily
marketable and, with certain exceptions, restricted securities. Restricted
securities are securities subject to contractual or legal restrictions on resale
because they have not been registered under the 1933 Act. The Fund may treat
certain restricted securities as liquid pursuant to guidelines adopted by the
Board of Trustees.
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 the Fund might also have to register a
restricted security in order to dispose of it, resulting in expense and delay.
The 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 Adviser 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 Adviser, pursuant to guidelines approved by
the Board. The Adviser determines and monitors the liquidity of the portfolio
securities and reports periodically on its decisions to the Board. The Adviser
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 Adviser may determine that the securities
are not illiquid.
H. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The 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 the Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
9
<PAGE>
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
1. RISKS
The use of when-issued transactions and forward commitments enables the Fund to
hedge against anticipated changes in interest rates and prices. For instance, in
periods of rising interest rates and falling bond prices, the 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, the
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 Adviser forecasts incorrectly the
direction of interest rate movements, the Fund might be required to complete
such when-issued or forward commitment transactions at prices lower than the
then current market values.
The Fund enters into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the securities, as the case
may be. If the 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 the Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's NAV.
The Fund will establish and maintain a separate account with cash, U.S.
Government Securities and other liquid securities in an amount at least equal to
its commitments to purchase securities on a when-issued or delayed delivery
basis.
2. INVESTMENT LIMITATIONS
For purposes of all fundamental and nonfundamental investment policies of the
Fund, (i) the term 1940 Act includes the rules thereunder, SEC interpretations
and any exemptive order upon which the Fund may rely and (ii) the term Code
includes the rules thereunder, IRS interpretations and any private letter ruling
or similar authority upon which the Fund may rely.
The Fund has adopted the investment policies listed in this section which are
nonfundamental policies unless otherwise noted. Except for its investment
objective (see "Investment Objective, Strategies and Risks" in the Prospectus),
which is fundamental, the Fund has not adopted any fundamental policies except
as required by the 1940 Act.
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 cannot be changed without the affirmative vote of the
lesser of (i) more than 50% of the outstanding shares of the Fund or (ii) 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.
1. DIVERSIFICATION
The Fund may not, with respect to 75% of its assets, purchase a security (other
than a U.S. Government Security or a security of an investment company) if, as a
result: (i) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer, or (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer.
2. INDUSTRY CONCENTRATION
a. The Fund may not purchase a security if, as a result, more than 25% of
the Fund's total assets would be invested in securities of issuers
conducting their principal business activities in the same industry.
For purposes of this limitation, there is no limit on: (i) investments
in U.S. Government securities, in repurchase agreements covering U.S.
Government Securities, in tax-exempt securities issued by the states,
territories or possessions of the United States ("municipal
securities").
b. For purposes of this policy (i) "mortgage related securities," as that
term is defined in the 1934 Act, are treated as securities of an
issuer in the industry of the primary type of asset backing the
security, (ii) financial service companies are classified according to
the end users of their services (for example, automobile finance, bank
finance and diversified finance) and (iii) utility companies are
classified according to their services (for example, gas, gas
transmission, electric and gas, and electric and telephone).
3. BORROWING
The Fund may not borrow money if, as a result, outstanding borrowings would
exceed an amount equal to 10% of the Fund's total assets. For purposes of this
limitation, there is no limit on the following to the extent they are fully
collateralized: (i) the delayed delivery of purchased securities (such as the
purchase of when-issued securities), and (ii) reverse repurchase agreements. The
Fund will not purchase portfolio securities while outstanding borrowings of
money exceed 5% of its total assets.
4. REAL ESTATE
The Fund may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate,
securities of companies engaged in the real estate business, or in real estate
investment trusts).
5. LENDING
a. The Fund may not make loans to other parties. For purposes of this
limitation, entering into repurchase agreements, lending securities
and acquiring any debt security are not deemed to be the making of
loans.
b. The Fund may not lend a security if, as a result, the amount of loaned
securities would exceed an amount equal to 30% of the Fund's total
assets, as determined by SEC guidelines.
6. COMMODITIES
The Fund may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities).
7. UNDERWRITING
The Fund may not underwrite (as that term is defined in the 1933 Act) securities
issued by other persons except, to the extent that in connection with the
disposition of the Fund's assets, the Fund may be deemed to be an underwriter.
8. SENIOR SECURITIES
The Fund may not issue senior securities except to the extent permitted by the
1940 Act.
10
<PAGE>
9. LIQUIDITY
The Fund may not invest more than 15% of its net assets in illiquid securities
(taken at their current value).
10. EXERCISING CONTROL OF ISSUERS
The Fund may not make investments for the purpose of exercising control of an
issuer. Investments by the Fund in entities created under the laws of foreign
countries solely to facilitate investment in securities in that country will not
be deemed the making of investments for the purpose of exercising control.
11. SHORT SALES AND PURCHASING ON MARGIN
a. The Fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short (short sales "against the box"), and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
b. The Fund may not purchase securities on margin, except that the Fund
may use short-term credit for the clearance of the Fund's
transactions, and provided that initial and variation margin payments
in connection with futures contracts and options on futures contracts
shall not constitute purchasing securities on margin.
12. SECURITIES OF INVESTMENT COMPANIES
The Fund may not invest in the securities of any investment company, other than
a money market mutual fund, except in connection with a merger, consolidation,
reorganization, or acquisition of assets or where otherwise permitted by the
1940 Act.
13. OPTIONS, WARRANTS AND FUTURES CONTRACTS
The Fund may invest in futures or options contracts regulated by the CFTC for
(i) bona fide hedging purposes within the meaning of the rules of the CFTC and
(ii) for other purposes if, as a result, no more than 5% of the Fund's net
assets would be invested in initial margin and premiums (excluding amounts
"in-the-money") required to establish the contracts.
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
The 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.
The 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.
11
<PAGE>
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 the Fund but rather are standards by
which the Adviser and shareholders may compare the performance of the Fund to an
unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
The 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.
The Fund's performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
The Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for the 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 the 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 the 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 the
Fund's performance, investors should be aware that the 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 the 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 the Fund are not fixed or guaranteed, and an investment in the
Fund is not insured or guaranteed. Accordingly, yield information should not be
used to compare shares of the 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 the Fund's yield information directly
to similar information regarding investment alternatives that are insured or
guaranteed.
Yield quotations are based on amounts invested in the 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.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
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<PAGE>
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
2. TOTAL RETURN CALCULATIONS
The 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 the 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.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns, the Fund: (1) determines the growth or decline in value of a
hypothetical historical investment in the Fund over a stated period; and (2)
calculates the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would produce an
average annual total return of 7.18%. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that performance is not constant over time but changes from year to year, and
that average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
Average annual total return is calculated according to the following formula:
P (1+T) n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value 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.
o The Fund may quote unaveraged or cumulative total returns, which
reflect the Fund's performance over a stated period of time.
o 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 the Fund's front-end sales charge.
Period total return is calculated according to the following formula:
13
<PAGE>
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total return above
C. OTHER MATTERS
The Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Adviser, summaries of the views of the
portfolio managers with respect to the financial markets, or descriptions of the
nature of the Adviser'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 Federal 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 $1,188 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
7.00% and 12.00% annually, $1,000 will grow to $1,967 and $3,106, respectively,
at the end of 10 years and $3,870 and $9,646, respectively, at the end of 20
years. These examples are for illustrative purposes only and are not indicative
of the Fund's performance.
The 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 the 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 the Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
14
<PAGE>
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
In connection with its advertisements, the 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 Adviser that it has for more than 25 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 Adviser believes that it
has been successful as a portfolio manager.
With respect to the Fund that invests in municipal securities and distributes
Federally tax-exempt (and in certain cases state tax-exempt) dividends, the Fund
may advertise the benefits of and other effects of investing in municipal
securities. For instance, the Fund's 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 the Fund's
yield.
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The business and affairs of the Fund are
managed under the direction of the Board in compliance with the laws of the
state of Delaware. Among its duties, the Board generally meets and reviews on a
quarterly basis the actions of all of the Fund's service providers. This
management also includes a periodic review of the service providers' agreements
and fees charged to the Fund. The names of the Trustees and officers of the
Fund, their position with the Fund, 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 Fund is indicated by
an asterisk.
<TABLE>
<S> <C> <C>
NAME, ADDRESS AND AGE POSITION(S) WITH FUND PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE
YEARS
..............................................................................................................................
Eric J. Gleacher Trustee Chairman and Chief Executive Officer, Gleacher
Gleacher & Co. LLC & Co., LLC
660 Madison Avenue
New York, NY 10021-8405
Born: April, 1940
..............................................................................................................................
W. Wallace McDowell Trustee Private Investor, Prospect Capital Corp.
43 Arch Street
Greenwich, CT 06830
Born: November, 1936
15
<PAGE>
..............................................................................................................................
James B. Cowperthwait* Trustee Chairman and Chief Investment Officer, NewBridge
NewBridge Partners, LLC Partners, LLC, 3/99 - Present
535 Madison Ave., 14th Floor Managing Director, Campbell, Cowperthwait, a
New York, NY 10022 division of U. S. Trust Company 12/92 - 3/99
Born: September, 1937
..............................................................................................................................
Erick F. Maronak* Trustee Managing Director And Director of Research,
NewBridge Partners, LLC NewBridge Partners, LLC, 3/99 - Present
535 Madison Ave., 14th Floor Vice President and Portfolio Manager, Campbell
New York, NY 10022 Cowperthwait, a division of U.S. Trust Company
Born: January, 1966 3/96 - 3/99
Vice President and Portfolio Manager, U.S.
Trust Company 2/90 - 3/96
</TABLE>
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee receives an annual fee of $XXXX and is paid $XXX for each Board
meeting attended and $XXX 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 and any committee thereof.
Trustees that are affiliated with the Adviser or other service provider to the
Fund 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 that have been, or will be, paid to each
Trustee by the Trust during the current fiscal year ending June 30, 2000.
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation as Part of Fund Benefits upon Compensation from
Name, Position from Trust Expenses Retirement Trust(1)
- - - ------------------------------------- ------------------- ------------------- -------------------- -------------------
</TABLE>
(1) The total compensation reflects payments made since the Trust's inception on
XXXXX XX, 1999 through the end of the current fiscal year ending June 30, 2000.
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to the 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 the Fund's investments and effecting portfolio
transactions for the Fund, other than brokerage expenses.
2. OWNERSHIP OF ADVISER/AFFILIATIONS
The Adviser is 100% owned by James B. Cowperthwait.
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 Fund and is paid monthly, equal to
0.70% per annum based on average net assets for the previous month.
In addition to receiving its advisory fee from the Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in the Fund. If an investor in the 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 from the Fund against any investment management fee received from
a client.
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 the 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
the 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.
17
<PAGE>
5. EXPENSE LIMITATIONS
FAdS and the Adviser have undertaken to assume certain expenses of the Fund (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: XXXXXX
D. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of the
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 Fund. FFS continuously distributes
shares of the Fund on a best efforts basis. FFS has no obligation to sell any
specific quantity of Fund shares.
The Fund has a distribution plan adopted under SEC Rule 12b-1 that allows the
Fund to pay asset-based sales charges or distribution fees for the distribution
and sale of its shares. These fees are charged at an annual rate of [XXXX] of
the average daily net assets of the Fund's shares. Because these fees are paid
out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges. These fees are paid to [insert]. For the fiscal year
ending June 30, 2000, [insert] waived all of its 12b-1 fees. Absent such waiver,
[insert] is to be reimbursed for the expenses it incurs. [Insert] may incur
expenses for any distribution-related purpose it deems necessary or appropriate,
including the following principal activities: (i) compensation to employees and
expenses, including overhead, travel and telephone and other communication
expenses, of [insert], (ii) the incremental costs of printing and distributing
prospectuses, statements of additional information, annual reports and other
periodic reports for use in connection with the offering for sale of Fund shares
to any prospective investors, (iii) preparing, printing and distributing sales
literature and advertising materials used in connection with the offering of
Fund shares for sale to the public.
Pursuant to its agreement, FFS receives, and may reallow to certain financial
institiutions, the sales charge paid by the purchasers of the Fund's shares. In
addition, FFS may waive the sales charge for certain purchasers or sellers of
the Fund's shares, such as registered investment advisers.
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 the
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 the 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.
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FFS may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold with a sales charge. 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 which 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 the Fund at an annual rate as
follows: 0.15% of the average daily net assets under $50 million of the Fund,
0.10% of the average daily net assets over $50 million and under $100 million
and 0.05% of the average daily net assets over $100 million of the Fund.
Notwithstanding the above, the minimum fee for the Fund shall be $25,000 per
year. The fee is accrued daily by the Fund 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 the 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 the 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 the Fund. These services include calculating the NAV per
share of the Fund and preparing the Fund's financial statements and tax returns.
For its services, FAcS receives a fee from the 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 Fund and is paid monthly based on the
transactions and positions for the previous month.
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FAcS's agreement is terminable without penalty by the Trust or by FAcS with
respect to the 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 the 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 the 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 Fund.
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 the 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 the Fund at an annual
rate of $24,000 (waived to $18,000 for the first year) and $15.00 per open
shareholder account, $12.00 per open networked shareholder account, $5.00 per
closed shareholder account and $12,000 per additional share class. The fee is
accrued daily by the Fund 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 the 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
the 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, Forum Trust, LLC (the
"Custodian") safeguards and controls the Fund's cash and securities, determines
income and collects interest on Fund investments. The Custodian may employ
subcustodians. The Custodian is located at Two Portland Square, Portland, Maine
04101. The Custodian has hired Bankers Trust Company, 130 Liberty Street, New
York, New York, 10006, to serve as subcustodian for the Fund.
For its services, the Custodian receives a fee from the Fund at an annual rate
as follows: (1) 0.01% for the first $1 billion in Fund assets; (2) 0.0075% for
Fund assets between $1-$2 billion; and (3) 0.005% for Fund assets greater than
$2 billion. The Custodian is also paid certain transaction fees. These fees are
accrued daily by the Fund 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 Finn Dixon & Herling LLP, One Landmark Square, Stamford,
CT 06901.
6. INDEPENDENT AUDITORS
Ernst & Young, LLP One North Broadway, White Plains, New York 10601, independent
auditors, have been selected as auditors for the Fund. The auditors audit the
annual financial statements of the Fund and provide the Fund with an audit
opinion. The auditors also review certain regulatory filings of the Fund and the
Fund's tax returns.
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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. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser places orders for the purchase and sale of securities with brokers
and dealers selected by and in the discretion of the Adviser. The Fund has no
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 in its best judgment
and in a manner deemed to be in the best interest of the Fund rather than by any
formula.
The Adviser seeks "best execution" for all portfolio transactions. This means
that the Adviser seeks the most favorable price and execution available. The
Adviser's primary consideration in executing transactions for the Fund is prompt
execution of orders in an effective manner and at the most favorable price
available.
1. CHOOSING BROKER-DEALERS
The Fund 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 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.
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause the Fund to pay these brokers a higher
amount of commission than might be charged by other brokers. These services,
which augment the Adviser's own internal research capabilities, include industry
research reports and periodicals, quotation systems, software for portfolio
management and formal databases. They may be used by the Adviser in connection
with services to clients other than the Fund, and not all research services may
be used by the Adviser in connection with the Fund. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
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<PAGE>
3. COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to the 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 may not effect brokerage transactions through affiliates of the
Adviser (or affiliates of those persons). The Board has not adopted respective
procedures.
5. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Fund are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser of the Fund. 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. 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, some
of which accounts may have similar investment objectives. Such concurrent
authorizations will be effected only when the Adviser believes that to do so
will be in the best interest of all 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.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. From time to time
the 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 the Fund
were replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs to the Fund and a possible increase in
short-term capital gains or losses.
C. SECURITIES OF REGULAR BROKER-DEALERS
From time to time the 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 as principal in the largest dollar amount of portfolio
transactions of the Fund during the Fund's last fiscal year; or (3) sold the
largest dollar amount of the Fund's shares during the Fund's last fiscal year.
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 Fund accepts orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
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B. ADDITIONAL PURCHASE INFORMATION
Shares of the Fund are sold on a continuous basis. Set forth below is an example
of the method of computing the offering price of the Fund's shares. The example
assumes a purchase of shares of beneficial interest aggregating less than
$100,000 subject to the schedule of sales charges set forth in the Prospectus
based on the net asset value per share of the Fund of $10.00.
Net Asset Value Per Share $10.00
................................................................................
Sales Charge, 4.00% of offering price
(4.17% of net asset value per share) $0.__
Offering to Public $__.__
................................................................................
The Fund reserves the right to refuse any purchase request.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The 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).
Shareholders of the Fund's 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.
1. IRAs
The Fund 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 Fund at 1-888-XXXXXXX to obtain an IRA account application. Generally,
investment earnings in an IRA will be tax-deferred until withdrawn. If certain
requirements are met, investment earnings held in a Roth IRA will not be taxed
even when withdrawn. You may contribute up to $2,000 annually to an IRA. Only
contributions to traditional IRAs are tax-deductible. However, that deduction
may be reduced if you or your spouse is an active participant in an
employer-sponsored retirement plan and you or your spouse have adjusted gross
income above certain levels. Your ability to contribute to a Roth IRA also may
be restricted if you or, if you are married, you and your spouse have adjusted
gross income above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
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This information on IRAs is based on regulations in effect as of January 1, 1999
and summarizes only some of the important federal tax considerations affecting
IRA contributions. These comments are not meant to be a substitute for tax
planning. Consult your tax advisors about your specific tax situation.
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. The Fund's transfer agent and distributor or
financial institutions. These financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Fund.
If you purchase shares through a financial institution, you will be subject to
the financial 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 the Fund directly. When you purchase
the 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 financial institution for
further information. If you hold shares through a financial institution, the
Fund may confirm purchases and redemptions to the financial institution, which
will provide you with confirmations and periodic statements. The Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
C. ADDITIONAL REDEMPTION INFORMATION
The 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
the 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 is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted; (2) an emergency (as determined by the SEC) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not reasonably practicable for the 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 the 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 the
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 the 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.
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<PAGE>
3. INVOLUNTARY 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
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 the Fund's shares as provided in the Prospectus from time to
time.
D. NAV DETERMINATION
In determining the Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
sale 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 the 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
the 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 NAV of any other class of shares of the Fund are expected to be
substantially the same. Under certain circumstances, however, the per share NAV
of each class may vary. The per share NAV of each class of the 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.
F. EXCHANGES
Shareholders may sell their Fund shares, and buy shares in one of the series of
the Forum Funds (see "Exchange Privileges" in the Prospectus). The exchange
procedures (as described in the Prospectus) 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.
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 the Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Fund 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 Fund and its
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.
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A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The 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 the Fund.
The tax year-end of the Fund is June 30, 2000 (the same as the Fund's fiscal
year end).
1. MEANING OF QUALIFICATION
As a regulated investment company, the Fund will not be subject to federal
income tax on the portion of its investment company taxable income (i.e.,
taxable interest, dividends, net short-term capital gains and other taxable
ordinary income, net of expenses) and net capital gain (i.e., the excess of net
long-term capital gains over net short-term capital losses) that it distributes
to shareholders. In order to qualify as a regulated investment company the Fund
must satisfy the following requirements:
o The Fund must distribute at least 90% of its investment company
taxable income for the tax year. (Certain distributions made by the
Fund after the close of its tax year are considered distributions
attributable to the previous tax year for purposes of satisfying this
requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing in
securities.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
o The Fund generally intends to operate in a manner such that it will
not be liable for federal income tax.
2. FAILURE TO QUALIFY
If for any tax year the 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 the 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 the Fund's income and performance. It is possible that the Fund will
not qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. These distributions are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the 70% dividends-received deduction for corporate shareholders.
The 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 Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to
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<PAGE>
shareholders as long-term capital gain, regardless of how long a shareholder has
held shares and do not qualify for the dividends-received deduction.
The 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 Fund's financial statements. Any
such losses may not be carried back.
Distributions by the 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 the 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 NAV at the time reflects undistributed
net investment income or recognized capital gain, or unrealized appreciation in
the value of the assets of the 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 the 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 NAV per share on the date of the purchase reflected the amount
of the distribution.
Ordinarily, shareholders are required to take distributions by the 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 FUND'S TRANSACTIONS
For federal income tax purposes, when put and call options purchased by the Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by the Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gains at the time of expiration. When the Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When the 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 the Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by the 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 the Fund on Section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses. The 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.
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<PAGE>
Any option, futures contract, or other position entered into or held by the 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 the 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 the 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 the 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 its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 (or December 31, if
elected by the Fund) of the calendar year. The balance of the Fund's income must
be distributed during the next calendar year. The Fund will be treated as having
distributed any amount on which it is subject to income tax.
For purposes of calculating the excise tax, the Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year and (2) excludes foreign currency gains and
losses incurred after October 31 of any year (or December 31 if it has made the
election described above) in determining the amount of ordinary taxable income
for the current calendar year. The Fund will include foreign currency gains and
losses incurred after October 31 in determining ordinary taxable income for the
succeeding calendar year.
The 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 the 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 the Fund in an amount equal to the difference between the proceeds
of the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases (for example, by reinvesting dividends) other shares of
the Fund within 30 days before or after the sale or redemption (a so called
"wash sale"). If disallowed, the loss will be reflected in an upward adjustment
to the basis of the shares purchased. In general, any gain or loss arising from
the sale or redemption of shares of the 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 received on such shares. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
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<PAGE>
F. BACKUP WITHHOLDING
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares paid to
any shareholder: (1) who has failed to provide its correct taxpayer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient." Backup
withholding is not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax or refunded.
G. FOREIGN TAXES
Income received by the Fund may also be subject to foreign income taxes,
including withholding taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested
within various countries is not known. In the case of the Fund, if more than 50%
of the value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal Revenue Service to
pass through to its shareholders the amount of foreign taxes paid by the Fund.
However, there can be no assurance that the Fund will be able to do so. Pursuant
to this election a shareholder will be required to (i) include in gross income
(in addition to taxable dividends actually received) his pro rata share of
foreign taxes paid by the Fund, (ii) treat his pro rata share of such foreign
taxes as having been paid by him, and (iii) either deduct such pro rata share of
foreign taxes in computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders who are not
liable for federal income taxes, such as retirement plans qualified under
section 401 of the Code, will not be affected by any such pass-through of taxes
by the Fund. No deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition, certain shareholders
may be subject to rules which limit or reduce their ability to fully deduct, or
claim a credit for, their pro rata share of the foreign taxes paid by the Fund.
A shareholder's foreign tax credit with respect to a dividend received from the
Fund will be disallowed unless the shareholder holds shares in the Fund on the
ex-dividend date and for at least 15 other days during the 30-day period
beginning 15 days prior to the ex-dividend date. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year and, if so, such
notification will designate (i) the shareholder's portion of the foreign taxes
paid to each such country and (ii) the portion of dividends that represents
income derived from sources within each such country.
The federal income tax status of each year's distributions by the Fund will be
reported to shareholders and to the Internal Revenue Service. The foregoing is
only a general description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a foreign tax credit
or deduction will depend on the particular circumstances of each shareholder,
potential investors are advised to consult their own tax advisers.
H. 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 the Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of ordinary income
(and short-term capital gains) paid to a foreign shareholder will be subject to
U.S. withholding tax at the rate of 30% (or lower applicable treaty rate) upon
the gross amount of the distribution. The foreign shareholder generally would be
exempt from U.S. federal income tax on gain realized on the sale of shares of
the Fund and distributions of net capital gain from the Fund.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income
distributions, capital gain distributions, and any gain realized upon the sale
of shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or U.S. corporations.
29
<PAGE>
In the case of a noncorporate foreign shareholder, the 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 the Fund can
differ from the U.S. federal income taxation rules described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in the Fund.
I. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from the Fund can differ from the U.S. federal
income taxation rules described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in the
Fund.
8. OTHER MATTERS
1. GENERAL INFORMATION
The Trust was organized as a business trust under the laws of the State of
Delaware on July 29, 1999 pursuant to a trust instrument dated July 29, 1999
(the "Trust Instrument"). The Trust has operated under that name and as an
investment company since that date.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in the Fund, which is
the first in what may be a series of funds. 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 the Fund will continue indefinitely until terminated.
2. 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.
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Shareholders representing 10% or more of the Trust's (or the 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.
3. 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.
B. FUND OWNERSHIP
As of October XX, 1999, and prior to the public offering of the Fund, NewBridge
Partners, LLC ("NewBridge"), beneficially owned 100% of and may be deemed to
control the Fund. James B. Cowperthwait, Trustee, owns 100% of the shares of
NewBridge. As of the same date, no other officers or Trustees of the Trust owned
any of the outstanding shares of the Fund. From time to time, certain
shareholders may own a large percentage of the shares of the Fund. Accordingly,
those shareholders may be able to greatly affect (if not determine) the outcome
of a shareholder vote. It is unlikely, however, that NewBridge will continue to
control the Fund. "Control" for these purposes is the ownership of 25% or more
the Fund's voting securities.
C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the securities regulators of some states,
however, have indicated that they and the courts in their state may decline to
apply Delaware law on this point. The Trust Instrument contains an express
disclaimer of shareholder liability for the debts, liabilities, obligations and
expenses of the Trust and requires that a disclaimer be given in each contract
entered into or executed by the Trust or the Trustees. The Trust Instrument
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.
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
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which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
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.
E. FINANCIAL STATEMENTS
Because the Fund has not commenced operations as of the date of this SAI,
financial statements for the Fund are not yet available.
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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 may
AA 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 for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according
BB- 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 be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
A-3
<PAGE>
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
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.
A-4
<PAGE>
ca An issue that is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
c This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for
issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
BB, B, CCC Preferred stock rated BB, B, and CCC is regarded, on balance,
as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. BB indicates the lowest degree
of speculation and CCC the highest. While such issues will likely
have some quality and protective characteristics, large
uncertainties or major risk exposures to adverse conditions outweigh
these.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard
& Poor's does not rate a particular type of obligation as a matter
of policy.
Note Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
A-5
<PAGE>
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.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime
Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
A-6
<PAGE>
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse change sin business, economic, or financial
conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant (see Note).
(b) None.
(c) See Sections 2.02, 2.04, and 2.06 of the Trust Instrument filed as Exhibit
(a).
(d) Investment Advisory Agreement between Registrant and NewBridge Partners,
LLC (see Note).
(e) Distribution Agreement with FFS*
(f) None.
(g) Custodian Agreement; Transfer Agency and Services Agreement; Administration
Agreement*
(h) None.
(i) Legal Opinion*
(j) None.
(k) None.
(l) None
(m) 12b-1 Plan*
(n) Not Applicable.
(o) None.
*To be filed by amendment.
- - - ----------------
Note: Exhibit incorporated by reference as filed in Initial Registration
Statement on Form N-1A via EDGAR on July 29, 1999, accession number
0001004402-99-000338.
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
In accordance with Section 3803 of the Delaware Business Trust Act, Section
9.02 of the Registrant's Trust instrument provides as follows:
Section 9.02 Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
9.02(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, proceeding or investigation 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," "proceeding" or "investigation" shall apply to
all claims, actions, suits, proceedings or investigations (civil, criminal or
other, including appeals), formal or informal, 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).
(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, proceeding or investigation of the character
described in Subsection 9.02(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 9.02; 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 this Section 9.02.
Section 5 of the Investment Advisory Agreement provides as follows:
Section 5. Standard of Care
(a) The Trust shall expect of the Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust. The Adviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Adviser against any liability to the Trust or to the Trust's security
holders to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Adviser's
duties hereunder, or by reason of the Adviser's reckless disregard of its
obligations and duties hereunder.
(b) The Adviser shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The description of NewBridge Partners, LLC contained in Parts A and B
of this registration statement is incorporated by reference herein.
The following are the directors and principal executive officers of
NewBridge Partners, LLC, including their business connections, which
are of a substantial nature. The address of NewBridge Partners, LLC is
535 Madison Avenue, 14th Floor, New York, NY 10022.
Name Title Business Connection
...................... ................... ............................
...................... ................... ............................
James B. Cowperthwait Sole Owner NewBridge Partners, LLC
................... ............................
................... ............................
Managing Director United States Trust Company
of New York (until 3/99)
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter serves as
underwriter for the following investment companies registered under the
Investment Company Act of 1940, as amended:
The Cutler Trust Monarch Funds
Forum Funds Norwest Advantage Funds
Memorial Funds Sound Shore Fund, Inc.
(b) The following officers of Forum Fund Services, LLC, the Registrant's
underwriter, hold the following position with the Registrant. Each
officer's business address is Two Portland Square, Portland, Maine
04101.
Name Title Business Connection
.................. ................... ................................
David I. Goldstein Secretary Forum Investment Advisors, LLC
................... ................................
................... ................................
General Counsel Forum Financial Group, LLC
................... ................................
................... ................................
Officer other Forum affiliated companies
.................. ................... ................................
.................. ................... ................................
John Burns Director Forum Investment Advisors, LLC
................... ................................
................... ................................
Director Forum Financial Group, LLC
................... ................................
................... ................................
Officer other Forum affiliated companies
.................. ................... ................................
.................. ................... ................................
Marc Keffer Assistant Secretary Forum Investment Advisors, LLC
................... ................................
................... ................................
Corporate Counsel Forum Financial Group, LLC
................... ................................
................... ................................
Officer other Forum affiliated companies
(c) Not Applicable.
<PAGE>
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 Registrant's custodian's master
subcustodian, Bankers Trust Company, 16 Wall Street, New York, New York
10005. 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,
NewBridge Partners, LLC.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
pre-effective amendment number 1 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 November 3, 1999.
The NP Comanche Funds
By: /s/ Stephen J. Barrett
Stephen J. Barrett, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on
November 3, 1999.
(a) Principal Executive Officer
/s/ Stephen J. Barrett
Stephen J. Barrett, President
(b) Principal Financial Officer
/s/Ronald Hirsch
Ronald Hirsch, Treasurer
(c) All of the Trustees
/s/ D. Blaine Riggle
D. Blaine Riggle, Trustee
/s/ Stephen J. Barrett
Stephen J. Barrett, Trustee
/s/ David I. Goldstein
David I. Goldstein, Trustee
<PAGE>
