As filed with the Securities and Exchange Commission on April 28, 2000
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
Post-Effective Amendment No. 2
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 4
TRUECROSSING 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
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[x] on May 1, 2000 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: TrueCrossing Growth Fund, TrueCrossing
Technology Fund.
<PAGE>
TRUECROSSING FUNDS
PROSPECTUS
MAY 1, 2000
TrueCrossing Growth Fund
TrueCrossing Technology Fund
NewBridge Partners, LLC
535 Madison Avenue, 14th Floor
New York, New York 10022
THE FUNDS
SEEKS LONG-TERM CAPITAL APPRECIATION
SHARES OF THE FUNDS ARE OFFERED TO INVESTORS
WITHOUT ANY SALES CHARGE.
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
Performance Information 3
Fee Tables 4
Investment Objectives, Principal Investment Strategies and Principal Risks 5
Management 8
Your Account 10
How to Contact the Funds 10
General Information 10
Buying Shares 11
Selling Shares 15
Exchange Privileges 17
Other Information 19
Financial Highlights 20
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RISK/RETURN SUMMARY
INVESTMENT GOAL The investment goal of both TrueCrossing Growth Fund and
TrueCrossing Technology Fund (each a "Fund" and collectively the "Funds"), as
managed by their investment adviser, NewBridge Partners, LLC (the "Adviser"), is
long-term capital appreciation.
TRUECROSSING GROWTH FUND
PRINCIPAL INVESTMENT STRATEGY The Fund intends to follow a long-term investment
philosophy by investing primarily in the common stock of Mid-Cap and Large-Cap
companies which appear to have growth prospects that exceed those of the overall
stock market.
[Margin Callout
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]
TRUECROSSING TECHNOLOGY FUND
PRINCIPAL INVESTMENT STRATEGY The Fund intends to follow a long-term investment
philosophy by investing primarily in the common stock of Mid-Cap and Large-Cap
companies which are expected to derive at least 50% of their revenues from the
technology and technology-related sectors and which appear to have growth
prospects that exceed those of the overall stock market.
[Margin Callout
CONCEPTS TO UNDERSTAND
COMPANIES WHICH DERIVE REVENUES FROM TECHNOLOGY AND TECHNOLOGY RELATED
SECTORSS include, but are not limited to, those that develop, produce
and distribute products in industries such as computers, software,
semiconductors, electronics, data storage, data processing, satellites,
optics, telecommunications, wireless, broadband, cable, internet
content, e-commerce, media and entertainment, interactive marketing and
information technology services]
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
TRUECROSSING GROWTH 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
o The Fund's investments in Mid-Cap companies, rather than Large-Cap
companies, may involve greater risks, such as limited product lines,
markets and financial or managerial resources
TRUECROSSING TECHNOLOGY 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
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o The Fund's investments in Mid-Cap companies, rather than Large-Cap
companies, may involve greater risks, such as limited product lines,
markets and financial or managerial resources
o Technology and technology-related companies are subject to greater
competitive pressures, rapid obsolescence and greater government
regulation than other companies
o The Fund is non-diversified and therefore may focus its investments in
a comparatively small number of issuers. Concentration of the Fund in
securities of a limited number of issuers exposes it to greater market
risk and potential monetary losses than if its assets were diversified
among the securities of a greater number of issuers
An investment in any Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST IN THE FUNDS
You may want to purchase shares of TrueCrossing Growth 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
TrueCrossing Growth 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 You
may want to purchase shares of TrueCrossing Technology 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
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
TrueCrossing Technology Fund may NOT be appropriate for you if:
o You want a diversified portfolio of securities
o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency reserves
o You do not want an investment that pursues market trends or focuses
only on particular sectors or industries
PERFORMANCE INFORMATION
Performance information is not provided because neither Fund will have had a
full calendar year of operations prior to the date of this prospectus.
3
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FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in a Fund.
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES TRUECROSSING TRUECROSSING
(fees paid directly from your investment) GROWTH TECHNOLOGY FUND
FUND
Maximum Sales Charge (Load) Imposed on Purchases None None
Maximum Deferred Sales Charge (Load) None None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None None
Redemption Fee None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES(1) TRUECROSSING TRUECROSSING
(expenses that are deducted from Fund assets) GROWTH TECHNOLOGY FUND
FUND
Advisory Fees 0.70% 0.70%
Other Expenses 0.80% 0.80%
TOTAL ANNUAL FUND OPERATING EXPENSES(2) 1.50% 1.50%
</TABLE>
(1) Based on estimated expenses for each Fund's fiscal year ending November 30,
2000.
(2) Each Fund has adopted a distribution plan under SEC Rule 12b-1 ("12b-1
Plan") which requires further Board action and shareholder notification before
the 12b-1 Plan can become effective and implemented. See "Distribution Plan"
below for more information. To the extent the total expenses exceed the amounts
shown in the fee table, the Adviser has undertaken to assume such excess
expenses of each Fund (or waive the fees) through November 30, 2000.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes that you invest $10,000 in a Fund, that your investment has a 5%
annual return, that a Fund's operating expenses remain the same as stated in the
table above, that you reinvest all distributions and redeem your shares at the
end of each period. Although your actual costs may be higher or lower, under
these assumptions your costs would be:
1 YEAR 3 YEARS
TRUECROSSING GROWTH FUND $153 $474
TRUECROSSING TECHNOLOGY FUND $153 $474
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS
TRUECROSSING GROWTH FUND
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.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing primarily in the common
stock 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.
TRUECROSSING TECHNOLOGY FUND
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.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing primarily in the common
stock of Mid-Cap and Large-Cap companies which are expected to derive at least
50% of their revenues from the technology and technology-related sectors.
Utilizing a bottom-up approach, the Adviser analyzes and seeks companies with
above-average earnings growth, high return invested capital and strong
financials and management. The Adviser considers selling a security when these
underlying fundamentals deteriorate or a better investment opportunity is
identified.
PRINCIPAL INVESTMENT RISKS
GENERAL RISKS FOR BOTH FUNDS
There is no assurance a Fund will achieve its investment objective, and its net
asset value and total return will fluctuate based upon changes in the value of
its portfolio securities. Upon redemption, an investment in a Fund may e worth
more or less than its original value. A Fund does not, by itself, provide a
complete investment program.
All investments made by each Fund have some risk. Among other things, the market
value of any security in which a 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, stock markets tend to be
cyclical, with periods of generally rising prices and generally declining
prices. These cycles will affect the value of each Fund.
A 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 a 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 a 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 a Fund could also decrease. 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.
5
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SPECIFIC RISKS
TRUECROSSING GROWTH FUND
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. In addition, the common stock of Mid-Cap companies tend to be less
liquid than those of Large-Cap companies, with the result that the Fund's
portfolio may become more volatile if and to the extent that it increases its
investments in Mid-Cap companies.
TRUECROSSING TECHNOLOGY FUND
Technology and Technology-Related Industries - The Fund will be subject to
greater risk because of its concentration of investments in the technology
sector and technology-related industries. Although the Adviser believes that
investments by the Fund in the technology sector offer greater opportunity for
growth of capital than investments in other industries, the value of such
investments can and often does fluctuate dramatically and may expose you to
greater than average financial and market risk.
Non-Diversified Status - The Fund is "non-diversified" and has the ability to
take larger positions in a smaller number of issuers. Since the appreciation or
depreciation of a single stock may have a greater impact on the net asset value
of a non-diversified fund, its share price may fluctuate more than a comparable
diversified fund. This fluctuation, if significant, may affect the performance
of the Fund.
TEMPORARY DEFENSIVE POSITION
In order to respond to adverse market, economic or other conditions, each Fund
may assume a temporary defensive position and invest without limit in these
instruments. As a result, a Fund may be unable to achieve its investment
objectives.
MANAGEMENT
The business of each Fund is managed under the direction of the Board of
Trustees of TrueCrossing Funds (the "Board"). The Board formulates the general
policies of each Fund and meets periodically to review each Fund's performance,
monitor investment activities and practices and discuss other matters affecting
each Fund. Additional information regarding the Board, as well as executive
officers, may be found in the Statement of Additional Information ("SAI").
ADVISER
NewBridge Partners, LLC, 535 Madison Avenue, 14th Floor, New York, New York
10022 (the "Adviser"), serves as investment adviser to each Fund. Subject to the
general control of the Board, the Adviser makes investment decisions for each
Fund. For its services, the Adviser receives an advisory fee at an annual rate
of 0.70% of the average daily net assets of each Fund.
The Adviser commenced business on March 15, 1999. As of May 1, 2000, the Adviser
had over $6.2 billion of assets under management.
All investment decisions for each Fund are made by a committee of investment
professionals and no other person is primarily responsible for making
recommendations to that committee.
6
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OTHER SERVICE PROVIDERS
Forum Financial Group, LLC and its affiliates (collectively "Forum"), provide
various services to each Fund. As of April 1, 2000, Forum provided
administration and distribution services to investment companies and collective
investment funds with assets of approximately $67 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 each Fund's shares. The distributor acts as the agent of each
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 each Fund.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan under SEC Rule 12b-1 ("12b-1 Plan").
Although the 12b-1 Plan has been adopted, further Board action and shareholder
notification is required before the 12b-1 Plan can become effective.
Implementing such a 12b-1 Plan would allow each Fund to pay asset-based sales
charges or distribution fees for the distribution and sale of its shares. If the
12b-1 Plan became effective, fees could be charged at an annual rate of up to
0.25% of the average daily net assets of each Fund. Because these fees are paid
out of each Fund's assets on an on-going basis, over time these fees could
increase the cost of your investment and may cost you more than paying other
types of sales charges. Because the Board has not yet implemented the 12b-1
Plan, no 12b-1 Distribution Fees currently will be charged.
FUND EXPENSES
Each 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 each Fund's performance
for the period during which the waiver was in effect.
7
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YOUR ACCOUNT
HOW TO CONTACT THE FUNDS WRITE TO US AT:
TrueCrossing Funds
P.O. Box 446
Portland, ME 04112
OVERNIGHT ADDRESS:
TrueCrossing Funds
Two Portland Square
Portland, Maine 04101
TELEPHONE US TOLL-FREE AT:
(800) 679-5707
WIRE INVESTMENTS (OR ACH PAYMENTS) TO US AT:
Bankers Trust Company
New York, New York
ABA #021001033 FOR CREDIT TO:
Forum Shareholder Services, LLC
Account #014-65-547
TrueCrossing Funds
(Your Name)
(Your Account Number)
GENERAL INFORMATION
You may purchase, without any sales charge, and sell (redeem) shares at the net
asset value of a share, or NAV, next calculated after the Transfer Agent
receives your request in proper form. For instance, if the Transfer Agent
receives your transaction request in proper form prior to 4 p.m. (Eastern time)
on a business day, your transaction will be priced at that day's NAV. If the
Transfer Agent receives your transaction request after 4 p.m., your transaction
will be priced at the next business day's NAV. A Fund will not accept orders
that request a particular day or price for the transaction or any other special
conditions.
The Funds do not issue share certificates.
You will receive 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.
Each 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 Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which the
NAV is calculated may change in case of an emergency or, if the New York Stock
Exchange closes early. A 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. Each Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily available, a 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 charged by that institution may be
8
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different than those of a Fund. Banks, brokers, retirement plans and financial
advisers may charge transaction fees and may set different minimum investments
or limitations on buying or selling shares. Consult a representative of your
financial institution or retirement plan for further information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, sole proprietorship, joint and Uniform Gifts to
Minors Act ("UMGA") or Uniform Transfer to Minors Act ("UTMA")
accounts, the check must be made payable to "TrueCrossing Funds" or to
one or more owners of the account and endorsed to "TrueCrossing Funds."
For all other accounts, the check must be made payable on its face to
"TrueCrossing 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 you
to purchase additional shares through an electronic transfer of money
from a checking or savings account. When you make an additional
purchase by telephone, the Transfer Agent will automatically debit your
pre-designated bank account for the desired amount. You may call (800)
679-5707 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.
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MINIMUM INVESTMENTS Each Fund accepts payments in the following minimum amounts:
<TABLE>
<S> <C> <C>
MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
Standard Account $2,500 $500
Traditional and Roth IRA Accounts $1,000 $100
Electronic Fund Transfers $2,500 $500
Systematic Investment Plans $2,500 $500
Exchange Privileges $2,500 None
</TABLE>
The Adviser or the Fund's administrator may, at its discretion, waive the above
investment minimums.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENT
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names
proprietorship accounts. Joint accounts can have two or appear on the account
more owners (tenants)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to custodial account under the UGMA or the UTMA
a child and obtain tax benefits. o The custodian must sign instructions in a
manner indicating custodial capacity
BUSINESS ENTITIES o Submit a Corporate/Organization Resolution
Form or similar document (see below)
TRUSTS o The trust must be established before an
account can be opened
o Provide a certified trust document, or the
pages from the trust document that identify
the trustees
INVESTMENT PROCEDURES
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
and/or a Corporate/Organization Resolution Form confirmation statement or write us a letter
o Complete the application o Write your account number on your check
o Mail us your application and a check o Mail us the slip (or your letter) and a check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
and/or a Corporate/Organization Resolution Form o Instruct your bank to wire your money to us
o Complete the application
o Call us to fax the completed application and we
will assign you an account number
o Mail us your original 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 the Systematic Investment section of
o Complete the application the application
o Call us to fax the completed application and we o Attach a voided check to your application
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will assign you an account number o Mail us the completed application and the
o Mail us your original application voided check
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a 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 $500. The
minimum initial investment must be at least $2,500.
LIMITATIONS ON PURCHASES Each 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 a 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 Each 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 a 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
TrueCrossing Funds or Forum Funds) as reimbursement. Each Fund and its agents
have the right to reject or cancel any purchase, exchange or redemption due to
nonpayment.
SELLING SHARES
Each 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 a 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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HOW TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send your proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire requests are only available if your request is for $10,000 or more
and you provided bank account information on your account application
o Call us with your request (unless you declined telephone redemption
privileges on your account application) (See "By Telephone") OR
o Mail us your request (See "By Mail")
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 the account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you OR
o Wired to you (unless you did not provide bank account information on your
account application) (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
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by 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.
WIRE REDEMPTIONS You may have your redemption proceeds wired to you if you
provided bank account information 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 WITHDRAWAL If you own shares of a 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 can be sent
to your address of record by check or to a designated bank account by ACH
payment. Systematic requests must be for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." 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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o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
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 redemption or exchange option or any other election in
connection with your account
SMALL ACCOUNTS If the value of your account falls below $2,500 (not including
IRAs), a Fund may ask you to increase your balance. If the account value is
still below $2,500 after 60 days, the Fund may close your account and send you
the proceeds. A 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.
REDEMPTIONS IN KIND Each 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 a Fund's operations (for
example, if it represents more than 1% of a Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address.
When an account is lost, all distributions on the account will be reinvested in
additional shares of the Fund. In addition, the amount of any outstanding
(unpaid for six months or more) checks for distributions that have been returned
to the Transfer Agent will be reinvested and the checks will be canceled.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy shares of the other Fund, also known as an
exchange, by telephone or in writing. You may also exchange Fund Shares for
Investor Shares of Daily Assets Cash Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund or Investors Bond Fund (series of the Forum
Funds). The minimum amount that is required to open an account in a Fund through
an exchange with another fund is $2,500. Because exchanges are treated as a sale
and purchase, they may have tax consequences.
REQUIREMENTS You may exchange only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but each Fund reserves the right to limit exchanges. You may exchange
your shares by mail or telephone, unless you declined telephone exchange
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
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of each fund 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
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
RETIREMENT ACCOUNTS
Each 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.
OTHER INFORMATION
DISTRIBUTIONS
Each Fund declares distributions from its net investment income and pays those
distributions quarterly. Any net capital gain realized by a Fund will be
distributed at least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund intends to operate in a manner such that it will not be subject to
Federal income or excise tax.
A Fund's distribution of net investment income (including short-term capital
gain) are taxable to you as ordinary income. A portion of the dividends paid by
a Fund may be eligible for the dividends-received deduction for corporate
shareholders. A Fund's distribution of long-term capital gain, if any, is
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 a 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.
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Each 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 a 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.
Each Fund will mail you reports containing information about the income tax
status of distributions paid during the year after December 31 of each year. For
further information about the tax effects of investing in a Fund, including
state and local tax matters, please see the SAI and consult your tax adviser.
FINANCIAL HIGHLIGHTS
Financial highlights are not provided because the TrueCrossing Growth Fund
commenced operations on December 20, 1999 and does not yet have audited
financial statements. TrueCrossing Technology Fund had not commenced operations
prior to the date of this prospectus.
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<TABLE>
<S> <C>
FOR MORE INFORMATION
The following documents will be available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Each Fund will provide annual and semi-annual reports to shareholders that TRUECROSSING GROWTH FUND
will provide additional information about the Fund's TRUECROSSING TECHNOLOGY
investments. In each Fund's annual report, you FUND
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 each Fund and is
incorporated by reference into this Prospectus.
CONTACTING THE FUNDS
You can get free copies of both reports (when available) and the SAI, request
other information and discuss your questions about each Fund by
contacting your broker or the Funds at:
Forum Shareholder Services, LLC
P. O. Box 446
Portland, Maine 04112
(800)-679-5707
SECURITIES AND EXCHANGE COMMISSION INFORMATION
You can also review the Funds' reports (when available) and SAI at the
Public Reference Room of the Securities and Exchange Commission ("SEC").
The scheduled hours of operation of the Public Reference Room may be
obtained by calling the SEC at (202) 942-8090. You can get copies of this
information, for a fee, by e-mail or by writing to:
TRUECROSSING FUNDS
Public Reference Room Two Portland Square
Securities and Exchange Commission Portland, ME 04101
Washington, D.C. 20549-0102 (800) 679-5707
E-mail address: [email protected]
INVESTMENT ADVISER
Free copies of the Funds' reports and SAI are available from the SEC's NewBridge Partners, LLC
Internet Web Site at http://www.sec.gov. 535 Madison Avenue, 14th Floor
New York, New York 10022
www.truecrossingfunds.com
Investment Company Act File No. 811-09509
</TABLE>
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TRUECROSSING
FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FUND INFORMATION: MAY 1, 2000
TrueCrossing Funds
Two Portland Square
Portland, Maine 04101
(800) 679-5707
INVESTMENT ADVISER: TRUECROSSING
GROWTH FUND
NewBridge Partners, LLC
535 Madison Avenue, 14th TRUECROSSING
New York, New York 10022 TECHNOLOGY FUND
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 679-5707
This Statement of Additional Information, or SAI, supplements the Prospectus
dated May 1, 2000, as may be amended from time to time, offering shares of
TrueCrossing Growth Fund and TrueCrossing Technology 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...........................................................3
1. Investment Policies and Risks......................................4
2. Investment Limitations.............................................12
3. Performance Data and Advertising...................................14
4. Management.........................................................19
5. Portfolio Transactions.............................................26
6. Additional Purchase and Redemption Information.....................27
7. Taxation...........................................................30
8. Other Matters......................................................35
Appendix A - Description of Securities Ratings..............................A-1
Appendix B - Financial Statement............................................B-1
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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 each Fund's assets.
"FAdS" means Forum Administrative Services, LLC, administrator of each
Fund.
"FAcS" means Forum Accounting Services, LLC, the accountant of each
Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's shares.
"Fund" means either TrueCrossing Growth Fund or TrueCrossing Technology
Fund.
"Funds" means the TrueCrossing Growth Fund and TrueCrossing Technology 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 each Fund.
"Trust" means TrueCrossing 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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INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the Prospectus about each
Fund's investment techniques, strategies and risks.
SECURITY RATINGS INFORMATION
Each Fund may invest in fixed income securities. Each Fund's investments in
fixed income securities are subject to credit risk relating to the financial
condition of the issuers of the securities that each Fund holds. To limit credit
risk, each Fund generally may only invest its assets in debt securities that,
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. Each 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. Each 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 a 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.
TEMPORARY DEFENSIVE POSITION
Each 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 each 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 a 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
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to direct arrangement with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days' notice.
These obligations generally are not traded, 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.
HEDGING AND OPTION INCOME STRATEGIES
Each Fund may seek to hedge against a decline in the value of securities it owns
or an increase in the price of securities that it plans to purchase. Each 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 a Fund may invest, as well as by buying
or selling options on such futures contracts.
A Fund will only invest in futures contracts, options on futures contracts and
other options contracts that are subject to the jurisdiction of the CFTC after
filing a notice of eligibility and otherwise complying with the requirements of
Section 4.5 of the rules of the CFTC. Under that section, 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 each Fund's net assets.
Neither Fund has any 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).
Each 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.
IN GENERAL
A call option is a contract pursuant to which the purchaser of the call option,
in return for a premium paid, has the right to buy the security (or index)
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security (or a
cash amount equal to the value of the index) against payment of the exercise
price during the option period.
A put option gives its purchaser, in return for a premium, the right to sell the
underlying security (or index) at a specified price during the term of the
option. The writer of the put option, who receives the premium, has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index), upon exercise at the exercise price during the option
period.
The amount of premium received or paid for an option is based upon certain
factors, including the market price of the underlying security or index, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security or index, the option period and interest
rates.
There are a limited number of options contracts on securities indices and option
contracts may not be available on all securities that a Fund may own or seek to
own.
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<PAGE>
Bond and stock index futures contracts are bilateral agreements in which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the bond or stock index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the securities comprising the index
is made. Generally, these futures contracts are closed out prior to the
expiration date of the contract.
Options on futures contracts are similar to stock options except that an option
on a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract rather than to purchase or sell
stock, at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position to the
holder of the option will be accompanied by transfer to the holder of an
accumulated balance representing the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case of
a put, the exercise price of the option on the future.
COVERED CALLS AND HEDGING. Each Fund may purchase or sell (write) put and call
options on securities to seek to hedge against a decline in the value of
securities owned by it or an increase in the price of securities which it plans
to purchase. Hedging or option income strategies include the writing and
purchase of exchange-traded and over-the-counter options on individual
securities or financial indices and the purchase and sale of financial futures
contracts and related options. Whether or not used for hedging purposes, these
investment techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of a Fund. Principal
among such risks are: (1) the possible failure of such instruments as hedging
techniques in cases where the price movements of the securities underlying the
options or futures do not follow the price movements of the portfolio securities
subject to the hedge; (2) potentially unlimited loss associated with futures
transactions and the possible lack of a liquid secondary market for closing out
a futures position; and (3) possible losses resulting from the inability of the
Adviser to correctly predict the direction of stock prices, interest rates and
other economic factors. To the extent a Fund invests in foreign securities, it
may also invest in options on foreign currencies, foreign currency futures
contracts and options on those futures contracts. Use of these instruments is
subject to regulation by the SEC, the options and futures exchanges upon which
options and futures are traded or the CFTC.
Except as otherwise noted in this SAI, a 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. A Fund will not enter into a hedging strategy that exposes it to an
obligation to another party unless at least one of the following conditions is
met. A Fund owns either an offsetting ("covered") position; or it owns cash,
U.S. Government Securities or other liquid securities (or other assets as may be
permitted by the SEC) with a value sufficient at all times to cover its
potential obligations. When required by applicable regulatory guidelines, a 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 a Fund's assets could impede portfolio management or a Fund's ability to meet
redemption requests or other current obligations.
OPTIONS STRATEGIES. Each 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. Each Fund may buy or sell both exchange-traded and
over-the-counter ("OTC") options. A Fund will purchase or write an option only
if that option is traded on a recognized U.S. options exchange or if the Adviser
believes that a liquid secondary market for the option exists. When a Fund
purchases an OTC option, it relies on the dealer from whom it has purchased the
OTC option to make or take delivery of the currency underlying the option.
Failure by the dealer to do so would result in the loss of the premium paid by a
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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 a Fund.
Upon selling an option, a Fund receives a premium from the purchaser of the
option. Upon purchasing an option a Fund pays a premium to the seller of the
option. The amount of premium received or paid by a 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.
Each 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. Each 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.
Each 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.
RISKS
A 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 a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price, and the possible loss of the entire premium paid for options
purchased by the Fund.
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FOREIGN INVESTMENT
FOREIGN CURRENCY TRANSACTIONS
Each 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. A 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 each Fund owns or anticipates purchasing,
or the U.S. dollar value of interest and dividends paid on those securities.
Neither Fund will enter into forward contracts for speculative purposes.
If a 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. A 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. A 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.
Neither Fund has any 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 each Fund
holds in its portfolio or which it intends to purchase.
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
changes in foreign governmental attitudes towards private investment, possibly
8
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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
each 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 a 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 a 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 a 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 a 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.
Each Fund may purchase foreign bank obligations. In addition to the risks
described above that are generally applicable to foreign investments, the
investments that a 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.
DEPOSITORY RECEIPTS
Each 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.
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REPURCHASE AGREEMENTS
IN GENERAL
Each Fund may enter into repurchase agreements. Repurchase agreements are
transactions in which a 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,
a Fund's custodian maintains possession of the purchased securities and any
underlying collateral, which is maintained at not less than 100% of the
repurchase price. Repurchase agreements allow a Fund to earn income on its
uninvested cash for periods as short as overnight, while retaining the
flexibility to pursue longer-term investments.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements are transactions in which a 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.
CONVERTIBLE SECURITIES
IN GENERAL
Each Fund may invest in convertible securities. 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 a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
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.
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VALUE OF CONVERTIBLE SECURITIES
The value of a convertible security is a function of its "investment value" and
its "conversion value". The investment value of a convertible security is
determined by comparing its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege. The
conversion value is the security's worth, at market value, if converted into the
underlying common stock. The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may affect the convertible
security's investment value. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
ILLIQUID AND RESTRICTED SECURITIES
Neither Fund may acquire securities or invest in repurchase agreements if, as a
result, more than 15% of a Fund's net assets (taken at current value) would be
invested in illiquid securities.
IN GENERAL
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which a Fund has valued the securities. Illiquid securities include
repurchase agreements not entitling the holder to payment of principal within
seven days, 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. A Fund may treat
certain restricted securities as liquid pursuant to guidelines adopted by the
Board of Trustees.
RISKS
Certain risks are associated with holding illiquid and restricted securities.
For instance, limitations on resale may have an adverse effect on the
marketability of a security and a Fund might also have to register a restricted
security in order to dispose of it, resulting in expense and delay. 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.
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.
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<PAGE>
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.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase securities offered on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. At the time a Fund makes
the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
RISKS
The use of when-issued transactions and forward commitments enables a 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.
A 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 a Fund subsequently chooses to dispose of its right to acquire a
when-issued security or its right to deliver or receive against a forward
commitment before the settlement date, it can incur a gain or loss. When-issued
securities may include bonds purchased on a "when, as and if issued" basis under
which the issuance of the securities depends upon the occurrence of a subsequent
event. Any significant commitment of 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.
Each Fund will establish and maintain a separate account with cash, U.S.
Government Securities and other liquid securities in an amount at least equal to
its commitments to purchase securities on a when-issued or delayed delivery
basis.
MISCELLANEOUS
Each 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.
INVESTMENT LIMITATIONS
For purposes of all fundamental and nonfundamental investment policies of each
Fund, (i) the term 1940 Act includes the rules thereunder, SEC interpretations
and any exemptive order upon which each Fund may rely and (ii) the term Code
includes the rules thereunder, IRS interpretations and any private letter ruling
or similar authority upon which each Fund may rely.
Each 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, neither Fund has adopted any fundamental policies except
as required by the 1940 Act.
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<PAGE>
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 a Fund or (ii) 67% of
the shares of a Fund's present or represented at a shareholder's meeting at
which the holders of more than 50% of the outstanding shares of a Fund are
present or represented.
DIVERSIFICATION
True Crossing Growth Fund, as a diversified fund under the 1940 Act, 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 TrueCrossing Growth Fund's total assets would be invested in the
securities of a single issuer, or (ii) TrueCrossing Growth Fund would own more
than 10% of the outstanding voting securities of any single issuer. TrueCrossing
Technology Fund is a non-diversified fund pursuant to the 1940 Act, but is
considered diversified pursuant to the Code.
INDUSTRY CONCENTRATION
a. Each 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).
BORROWING
A 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. A
Fund will not purchase portfolio securities while outstanding borrowings of
money exceed 5% of its total assets.
REAL ESTATE
Neither Fund may 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).
LENDING
a. Neither Fund may 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. A 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.
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<PAGE>
COMMODITIES
Neither Fund may purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent a Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities).
UNDERWRITING
Neither Fund may underwrite securities issued by other persons except, to the
extent that, in connection with the disposition of a Fund's assets, the Fund may
be deemed to be an underwriter for purposes of the 1933 Act.
SENIOR SECURITIES
Neither Fund may issue senior securities except to the extent permitted by the
1940 Act.
LIQUIDITY
A Fund may not invest more than 15% of its net assets in illiquid securities
(taken at their current value).
EXERCISING CONTROL OF ISSUERS
Neither Fund may make investments for the purpose of exercising control of an
issuer. Investments by a 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.
SHORT SALES AND PURCHASING ON MARGIN
a. Neither Fund may sell securities short, unless a Fund 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. Neither Fund may purchase securities on margin, except that a 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.
SECURITIES OF INVESTMENT COMPANIES
Neither Fund may 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.
OPTIONS AND FUTURES CONTRACTS
Each 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 a Fund's net assets
would be invested in initial margin and premiums (excluding amounts
"in-the-money") required to establish the contracts.
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<PAGE>
PERFORMANCE DATA AND ADVERTISING
PERFORMANCE DATA
Each 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.
Each Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment companies
("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including but
not limited to the Standard & Poor's 500(R) Index, the Russell 2000(R)
Index, the Russell MidcapTM Index, the Russell 1000(R) Value Index, the
Russell 2500(R) Index, the Morgan Stanley - Europe, Australian and Far East
Index, the Dow Jones Industrial Average, the Salomon Brothers Bond Index,
the Shearson Lehman Bond Index, U.S. Treasury bonds, bills or notes and
changes in the Consumer Price Index as published by the U.S. Department of
Commerce.
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of a Fund but rather are standards by
which the 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.
Each 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.
Each Fund's performance will fluctuate in response to market conditions and
other factors.
Each Fund may reference the "New Economy" in its advertising, sales literature,
shareholder reports or other materials. The Adviser considers the "New Economy"
as a new "vital" era that has come into being over the last decade as a result
of many forces, primarily the globalization of the world economy, the dominance
of new technology and the information revolution. The Adviser believes that the
vitality of the "New Economy" can be attributed to the following characteristics
that it believes currently exist: the private sector has become the primary
engine of economic growth; inflation is at a low rate and prices are stable; the
budget is balanced or close to being balanced; tariffs on imported goods are
being reduced or eliminated; restrictions on foreign investments are being
removed; state-owned industries and utilities are becoming privatized; banking
and telecommunication systems are more open to private ownership; and an array
of competing pension options and mutual funds are now available.
PERFORMANCE CALCULATIONS
Each Fund's performance may be quoted in terms of yield or total return.
SEC YIELD
Standardized SEC yields for each Fund used in advertising are computed by
dividing each 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
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<PAGE>
number of shares entitled to receive income distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income in accordance
with specific standardized rules) in order to arrive at an annual percentage
rate.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Funds' yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Funds' 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 each Fund are not fixed or guaranteed, and an investment in either
Fund is not insured or guaranteed. Accordingly, yield information should not be
used to compare shares of each 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 each Fund's yield information
directly to similar information regarding investment alternatives that are
insured or guaranteed.
Yield quotations are based on amounts invested in a Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges. Neither
Fund charges any sales charges.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
TOTAL RETURN CALCULATIONS
Each Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns, each 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.
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<PAGE>
Average annual total return is calculated according to the following formula:
P (1+T) n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value 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 Each 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.
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total
return above
OTHER MATTERS
Each 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
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<PAGE>
number of shareholders of a Fund as of one or more dates; and (10) a comparison
of a 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 a Fund's performance.
Each Fund may advertise information regarding the effects of automatic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in a Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
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 INVESTED $600 AVERAGE PRICE $15.17 TOTAL SHARES 41.81
In connection with its advertisements, each 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.
If a Fund 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.
MANAGEMENT
TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The business and affairs of each 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
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quarterly basis the actions of all of the Funds' service providers. This
management also includes a periodic review of the service providers' agreements
and fees charged to each Fund. The names of the Trustees and officers of the
Funds, their position with the Funds, 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 Funds 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
Gleacher & Co. LLC Nominating Committee, Chairperson Officer, Gleacher & Co., LLC
660 Madison Avenue (3) for more than five years
New York, NY 10021-8405 Audit Committee, Member (2)
Born: April 1940
W. Wallace McDowell Trustee 1994-present. Private Investor.
43 Arch Street Audit Committee, Chairperson 1991-1994. Managing Director, MLGAL
Greenwich, CT 06830 Nominating Committee, Member Partners.
Born: November 1936 1983-1991. Prospect Capital Corp.
Daniel B. Goldman, Esquire* Trustee 1994 - Present. Partner, Kasowitz,
Kasowitz, Benson, Torres & Audit Committee, Member Benson, Torres & Friedman LLP
Friedman LLP Nominating Committee, Member
1301 Avenue of the Americas
New York, NY 10019
Born: April 1960
James B. Cowperthwait* Chairman, Board of Trustees 1/00 - Present. Manager, Chairman,
NewBridge Partners, LLC Valuation Committee, Chairperson(1) Chief Executive Officer and Chief
535 Madison Ave., 14th Floor Investment Officer, NewBridge
New York, NY 10022 Partners, LLC
Born: September 1937 3/99 - 1/00. Chairman and Chief
Investment Officer, NewBridge
Partners, LLC
12/92 - 3/99. Managing Director,
Campbell, Cowperthwait, a division
of U.S. Trust Company
Erick F. Maronak* Trustee 1/00 - Present. Manager, Managing
NewBridge Partners, LLC President Director and Director of Research,
535 Madison Ave., 14th Floor Valuation Committee, Member NewBridge Partners, LLC
New York, NY 10022 3/99 - 1/00. Managing Director and
Born: January 1966 Director of Research, NewBridge
Partners, LLC
3/96 - 3/99. Managing Director,
Campbell, Cowperthwait, a division
of U.S. Trust Company
2/90 - 3/96. Managing Director,
Campbell, Cowperthwait, a division
of U.S. Trust Company
Jason E. Dahl 3/99 - Present. NewBridge Partners,
NewBridge Partners, LLC Vice President LLC
535 Madison Ave., 14th Floor Assistant Treasurer 3/94 - 3/99. Asst. Vice President,
New York, NY 10022 Valuation Committee, Member Portfolio Manager, Campbell,
Born: December 1967 Cowperthwait, a division of U.S.
Trust Company
19
<PAGE>
John Y. Keffer Vice President President and Director, Forum
Two Portland Square Assistant Secretary Financial Services, Inc. for more
Portland, Maine 04101 than five years
Born: July 1942 Director and sole shareholder
(directly and indirectly) of Forum
Financial Group LLC, which owns
(directly or indirectly) Forum
Administrative Services, LLC,
Forum Shareholder Services, LLC
and Forum Fund Services, LLC
Officer, Director or Trustee,
various funds managed and
distributed by Forum Administrative
Services, LLC and Forum Fund Services,
LLC
Stephen J. Barrett Vice President 6/96 -Present. Manager of Client
Two Portland Square Assistant Secretary Services, Forum Financial Group, LLC
Portland, ME 04101 1994-1996. Senior Product Manager,
Born: November 1968 Fidelity Investments
Officer, various funds managed and
distributed by Forum Administrative
Services, LLC and Forum Fund Services, LLC
D. Blaine Riggle Secretary 1/98 - Present. Counsel, Forum
Two Portland Square Financial Group, LLC
Portland, ME 04101 3/97 - 1/98. Associate Counsel,
Born: November 1966 Wright Express Corporation
1994 - 3/97. Associate at the law
firm of Friedman, Babcock &
Gaythwaite
Officer, various funds managed and
distributed by Forum Fund Services,
LLC and Forum Administrative
Services, LLC
Ronald H. Hirsch Treasurer 9/99 - Present. Managing Director
Two Portland Square of Operations and Finance, Forum
Portland, ME 04101 Financial Group
Born: October 1943 1991-1998. Member of the Board,
Citibank Germany
Marcella A. Cote Assistant Secretary 6/98 - Present. Senior Fund
Two Portland Square Specialist, Forum Administrative
Portland, ME 04101 Services, LLC
Born: January 1947 1/97 - 12/97. Budget Analyst, Maine
Department of Human Services
1991 - 1997. Project Assistant,
Maine Inter-departmental Committee
on Transition
Officer, various funds managed and
distributed by Forum Fund Services,
LLC and Forum Administrative
Services, LLC
20
<PAGE>
Dawn L. Taylor Assistant Treasurer 10/97 - Present. Tax Manager, Forum
Two Portland Square Financial Group, LLC
Portland, ME 04101 1/97 - 10/97. Senior Tax
Born: May 1964 Accountant, Purdy, Bingham &
Burrell, LLC
9/94 - 10/97. Senior Fund
Accountant, Forum Financial Group,
LLC
Officer, various funds managed and
distributed by Forum Fund Services,
LLC and Forum Administrative
Services, LLC
</TABLE>
(1) The Valuation Committee is responsible for determining and monitoring the
value of each Fund's assets.
(2) The Audit Committee is responsible for meeting
with the Trust's independent certified public accountants to (i) review the
arrangements and scope of any audit; (ii) discuss matters of concern relating to
the Trust's financial statements, including any adjustments to such statements
recommended by the accountants, or other results of any audit; (iii) consider
the accountants' comments with respect to the Trust's financial policies,
procedures, and internal accounting controls; and (iv) review any form of
opinion the accountants propose to render to the Trust.
(3) The Nominating Committee is responsible for overseeing the composition of
both the Board as well as the various committees of the Trust to ensure that
these positions are filled by competent and capable candidates.
COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee, other than those affiliated with the Adviser, is paid $1,500 for
each Board meeting attended and $1,000 for each Audit Committee and Nominating
Committee meeting attended on a date when a Board meeting is not held. The
Chairman of the Audit Committee is paid $500 for each meeting attended in
addition to the Chairman's compensation as a Trustee.
Trustees and officers are also reimbursed for travel and related expenses
incurred in attending meetings of the Board and any committee thereof.
Trustees participating in professional development activities relating to the
Trustee's duties and responsibilities as a Trustee is paid $500 per day for each
day or partial day of attendance.
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 November 30, 2000.
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation from as Part of Fund Benefits upon Compensation from
Name Trust Expenses Retirement Trust(1)
- ------------------------------------- ------------------- ------------------- -------------------- -------------------
Eric J. Gleacher $8,000 $0 $0 $8,000
W. Wallace McDowell $8,500 $0 $0 $8,500
Daniel B. Goldman $8,000 $0 $0 $8,000
Erick F. Maronak $0 $0 $0 $0
James B. Cowperthwait $0 $0 $0 $0
</TABLE>
(1) The total compensation reflects expected payments made or to be made since
the Trust's inception on November 23, 1999 through the end of the current fiscal
year ending November 30, 2000. The Trust is not a member of a fund complex.
INVESTMENT ADVISER
SERVICES OF ADVISER
The Adviser serves as investment adviser to each Fund pursuant to an investment
advisory agreement with the Trust. Under that agreement, the Adviser furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing each Fund's investments and effecting portfolio
transactions for each Fund, other than brokerage expenses.
OWNERSHIP OF ADVISER/AFFILIATIONS
Mr. Cowperthwait is the controlling interest holder in the Adviser. In addition,
Mr. Cowperthwait and Mr. Maronak are two out of the three Managers of the
Adviser.
FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee is accrued daily by each 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 each Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in either Fund. If an investor in a Fund also has a
separately managed account with the Adviser with assets invested in the Fund,
the Adviser will credit an amount equal to all or a portion of the fees received
by the Adviser from the Fund against any investment management fee received from
a client.
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 a
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
each 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.
22
<PAGE>
EXPENSE LIMITATIONS
To the extent the expenses exceed the amounts shown in the fee table in the
Prospectus. The Adviser has undertaken to assume such excess expenses of each
Fund (or waive its fees) through November 30, 2000. 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) for the period of 1.50%.
DISTRIBUTOR
DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of each
Fund, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
FFS, FAdS, FAcS and the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC. John Y. Keffer controls Forum Financial Group, LLC.
Under its agreement with the Trust, FFS acts as the agent of the Trust in
connection with the offering of shares of each Fund. FFS continuously
distributes shares of the Fund on a best efforts basis. FFS has no obligation to
sell any specific quantity of either Fund's shares.
Each Fund has adopted a distribution plan under SEC Rule 12b-1 ("12b-1 Plan")
that allows each Fund to pay asset-based sales charges or distribution fees for
the distribution and sale of its shares. Although the Board has adopted the
12b-1 Plan, further Fund action and shareholder notification are required
before the 12b-1 Plan can become effective and be implemented. Because the Board
has not yet implemented the 12b-1 Plan, no 12b-1 Distribution Fees currently are
being charged. Because these fees are paid out of each 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. If charged,
these fees would be paid to FFS. If the Board decides to implement the 12b-1
Plan, FFS would be reimbursed for the expenses it incurs at an annual rate of up
to 0.25% of the average daily net assets of the Fund's shares. FFS 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 FFS, (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.
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 each
Fund on 60 days' written notice when authorized either by vote of a 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 each 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.
23
<PAGE>
Under its agreement, FFS and certain related parties (such as FFS's officers and
persons that control FFS) are indemnified by the Trust against any and all
claims and expenses in any way related to FFS's actions (or failures to act)
that are consistent with FFS's contractual standard of care. This means that as
long as FFS satisfies its contractual duties, the Trust is responsible for the
costs of: (1) defending FFS against claims that FFS breached a duty it owed to
the Trust; and (2) paying judgments against FFS. The Trust is not required to
indemnify FFS if the Trust does not receive written notice of and reasonable
opportunity to defend against a claim against FFS in the Trust's own name or in
the name of FFS.
FFS may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of each Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of each Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to each 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 a 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.
OTHER FUND SERVICE PROVIDERS
ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust, providing the Trust
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Trust.
For its services, FAdS receives a fee from each Fund at an annual rate as
follows: 0.15% of the average daily net assets under $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 each Fund shall be $25,000 per
year. The fee is accrued daily by each Fund and is paid monthly based on average
net assets for the previous month.
FAdS's agreement is terminable without penalty by the Trust or by FAdS with
respect to each 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 each 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.
FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to each Fund. These services include calculating the NAV per
share of the Fund and preparing the Fund's financial statements and tax returns.
For its services, FAcS receives a fee from each Fund at an annual rate of
$36,000 plus surcharges of $6,000 to $24,000 for specified asset levels. FAcS is
paid additional surcharges of $12,000 per year for each of the following: a
portfolio with more than a specified number of securities positions and/or
international positions; investments in derivative instruments; percentages of
assets invested in asset backed securities; and, a monthly portfolio turnover
rate of 10% or greater. The fee is accrued daily by each Fund and is paid
monthly based on the transactions and positions for the previous month.
24
<PAGE>
FAcS's agreement is terminable without penalty by the Trust or by FAcS with
respect to each 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 each Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
agreement. Under the agreement, in calculating a Fund's NAV per share, FAcS is
deemed not to have committed an error if the NAV per share it calculates is
within 1/10 of 1% of the actual NAV per share (after recalculation). In
addition, in calculating NAV per share FAcS is not liable for the errors of
others, including the companies that supply securities prices to FAcS and the
Fund.
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 each Fund and is responsible for processing purchase and redemption
requests and paying distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, the Transfer Agent receives a fee from each Fund at an annual
rate of $24,000 (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 each Fund and is paid monthly.
The Transfer Agent's agreement is terminable without penalty by the Trust or by
the Transfer Agent with respect to each 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
each 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.
CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Forum Trust, LLC (the
"Custodian") safeguards and controls each 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 Deutsche Bank, 130 Liberty Street, New York, New
York, 10006, to serve as subcustodian for each Fund.
For its services, the Custodian receives a fee from each 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 each Fund and are paid monthly based on average net assets and
transactions for the previous month.
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.
INDEPENDENT AUDITORS
Ernst & Young, LLP, 787 Seventh Avenue, New York, NY 10019, independent
auditors, have been selected as auditors for each Fund. The auditors will
perform an audit of the annual financial statements of each Fund.
25
<PAGE>
PORTFOLIO TRANSACTIONS
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 each
Fund purchases or to whom each 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.
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. Neither Fund has
any obligation to deal with any specific broker or dealer in the execution of
portfolio transactions. Allocations of transactions to brokers and dealers and
the frequency of transactions are determined by the Adviser in its best judgment
and in a manner deemed to be in the best interest of each Fund rather than by
any formula.
The Adviser 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 each Fund is
prompt execution of orders in an effective manner and at the most favorable
price available.
CHOOSING BROKER-DEALERS
A 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.
OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause a 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 a Fund, and not all research services may be
used by the Adviser in connection with a Fund. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
26
<PAGE>
COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to each Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
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.
OTHER ACCOUNTS OF THE ADVISER
Investment decisions for each 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 each 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.
PORTFOLIO TURNOVER
The frequency of portfolio transactions of each Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. Although portfolio
transactions are not a principal strategy to achieving each Fund's investment
objectives, from time to time a Fund may engage in short-term trading to take
advantage of price movements affecting individual issues, groups of issues or
markets. An annual portfolio turnover rate of 100% would occur if all of the
securities in a Fund were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased brokerage costs to a Fund and a
possible increase in short-term capital gains or losses.
SECURITIES OF REGULAR BROKER-DEALERS
From time to time either 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 a Fund's last
fiscal year; (2) engaged as principal in the largest dollar amount of portfolio
transactions of a Fund during the Fund's last fiscal year; or (3) sold the
largest dollar amount of a Fund's shares during its last fiscal year.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
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.
Each Fund accepts orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
27
<PAGE>
ADDITIONAL PURCHASE INFORMATION
Shares of each Fund are sold on a continuous basis at NAV per share without any
sales charge. Accordingly, the offering price per share is the same as the NAV
per share, which will be contained in each Fund's financial statements
(specifically, the statements of assets and liabilities). Each Fund reserves the
right to refuse any purchase request in excess of 1%.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, each Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. A Fund will only
accept securities that: (1) are not restricted as to transfer by law and are not
illiquid; and (2) have a value that is readily ascertainable (and not
established only by valuation procedures).
Shareholders of each 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.
IRAS
A 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 1-800-679-5707 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 has adjusted gross
income above certain levels. Your ability to contribute to a Roth IRA also may
be restricted if you or, if you are married, you and your spouse have adjusted
gross income above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
This information on IRAs is based on regulations in effect as of January 1, 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.
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.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to each 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 a Fund directly. When you purchase a
Fund's shares through a financial institution, you may or may not be the
shareholder of record and, subject to your institution's procedures, you may
have Fund shares transferred into your name. There is typically a three-day
28
<PAGE>
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. A Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
ADDITIONAL REDEMPTION INFORMATION
Each 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.
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 a 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 a Fund.
REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Trust determines conditions
exist which would make payment in cash detrimental to the best interests of a
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
brokerage costs may be incurred by the shareholder in converting the securities
to cash. The Trust has filed an election with the SEC pursuant to which each
Fund may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of a Fund's total net assets,
whichever is less, during any 90-day period.
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 a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to the Fund's shares as provided in the Prospectus from time to time.
NAV DETERMINATION
In determining a Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
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).
DISTRIBUTIONS
Distributions of net investment income will be reinvested at a Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of a
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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 a Fund is 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 a Fund eventually
will tend to converge immediately after the payment of dividends, which will
differ by approximately the amount of the expense accrual differential among the
classes.
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.
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 a Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting a 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 any 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 a 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.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of either Fund.
The tax year-end of each Fund is November 30 (the same as each Fund's fiscal
year end).
MEANING OF QUALIFICATION
As a regulated investment company, neither Fund will 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 a Fund
must satisfy the following requirements:
o Each Fund must distribute at least 90% of its investment company taxable
income for the tax year. (Certain distributions made by a Fund after the
close of its tax year are considered distributions attributable to the
previous tax year for purposes of satisfying this requirement.)
o Each 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.
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o Each 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 Each Fund generally intends to operate in a manner such that it will not be
subject to federal income tax.
FAILURE TO QUALIFY
If for any tax year a Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends paid to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of that Fund's current and accumulated earnings and
profits. A portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on a Fund's income and performance. It is our intention that each Fund
will always qualify as a registered investment company. However, there is no
assurance that a Fund will always qualify as a regulated investment company in
every tax year.
FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. These distributions are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the 70% dividends-received deduction for corporate shareholders.
Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but a Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held shares and do not qualify for the dividends-received deduction.
A 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 a Fund's financial statements. Any
such losses may not be carried back.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce the shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's basis would
be reduced below zero.
All distributions by a Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
taxable 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.
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Shareholders purchasing shares of a Fund just prior to the ex-dividend date of a
distribution may 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 a Fund into
account in the year in which they are made. A distribution declared in October,
November or December of any year and payable to shareholders of record on a
specified date in those months, however, is deemed to be received by the
shareholders (and made by a 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.
CERTAIN TAX RULES APPLICABLE TO THE FUND'S TRANSACTIONS
For federal income tax purposes, when put and call options purchased by a Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by a Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gains at the time of expiration. When a Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When a Fund exercises a put, the
proceeds from the sale of the underlying security are decreased by the premium
paid. When a put or call written by a Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by a Fund at the end of each tax year are
"marked to market" and treated for federal income tax purposes as though sold
for fair market value on the last business day of the tax year. Gains or losses
realized by a Fund on Section 1256 contracts generally 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.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by a Fund may constitute a
"straddle" for federal income tax purposes. A straddle of which at least one,
but not all, the positions are Section 1256 contracts, may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (1) the loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
straddle; (2) the Fund's holding period in straddle positions be suspended while
the straddle exists (possibly resulting in gain being treated as short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain straddle positions which are part of a mixed straddle and
which are non-Section 1256 positions be treated as 60% long-term and 40%
short-term capital loss; (4) losses recognized with respect to certain straddle
positions which would otherwise constitute short-term capital losses be treated
as long-term capital losses; and (5) the deduction of interest and carrying
charges attributable to certain straddle positions may be deferred. Various
elections are available to a Fund, which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In general, the
straddle rules described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of Section 1256 contracts.
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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 a Fund) of the calendar year. The balance of each Fund's income must
be distributed during the next calendar year. A Fund will be treated as having
distributed any amount on which it is subject to income tax.
For purposes of calculating the excise tax, each Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year and (2) excludes foreign currency gains and
losses incurred after October 31 of any year (or December 31 if it has made the
election described above) in determining the amount of ordinary taxable income
for the current calendar year. A Fund will include foreign currency gains and
losses incurred after October 31 in determining ordinary taxable income for the
succeeding calendar year.
Each Fund intends to make sufficient distributions of its ordinary taxable
income and capital gain net income prior to the end of each calendar year to
avoid liability for the excise tax. Investors should note, however, that the
Fund might in certain circumstances be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases (for example, by reinvesting dividends) other shares of the Fund
within 30 days before or after the sale or redemption (a so called "wash sale").
If disallowed, the loss will be reflected in an upward adjustment to the basis
of the shares purchased. In general, any gain or loss arising from the sale or
redemption of shares of 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 distributions received on such shares. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer (married, filing jointly), $3,000 of ordinary income.
BACKUP WITHHOLDING
Each 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.
FOREIGN TAXES
Income received by a 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 a Fund, if more than 50% of the
value of its 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
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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 Funds. 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 Funds. A
shareholder's foreign tax credit with respect to a dividend received from the
Funds will be disallowed unless the shareholder holds shares in the Funds 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 each 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.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from a Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, 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 a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income distributions, capital
gain distributions, and any gain realized upon the sale of shares of the Fund
will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or U.S. corporations.
In the case of a noncorporate foreign shareholder, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty might be different from those described herein.
The tax rules of other countries with respect to distributions from a Fund can
differ from the U.S. federal income taxation rules described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in a Fund.
FOREIGN CURRENCY TRANSACTIONS. Under Section 988 of the Code, special rules are
provided for certain foreign currency contracts (whether or not traded in the
interbank market), from futures contracts that are not "regulated futures
contracts", and from unlisted options are treated as ordinary income or loss
under Section 988. The Funds may elect to have foreign currency-related
regulated futures contracts and listed options subject to ordinary income or
loss treatment under Section 988. In addition, in certain circumstances, the
Funds may elect capital gain or loss for foreign currency transactions. The
rules under Section 988 may also affect the timing of income recognized by the
Funds.
If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from each Fund can differ from the U.S. federal
income taxation rules described above. These state and local rules are not
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discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in a
Fund.
OTHER MATTERS
GENERAL INFORMATION
ORGANIZATION
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") and was amended and restated on November 15, 1999. The
Trust has operated as an investment company since the date of its organization.
The Trust is registered with the SEC as an open-end, management investment
company under the 1940 Act. The Trust offers shares of beneficial interest in
the Funds. The Trust has an unlimited number of authorized shares of beneficial
interest. The Funds are the only two series of TrueCrossing Funds. It is not
intended that meetings of shareholders be held except when required by Federal
or Delaware law. All shareholders of each Fund are entitled to vote at
shareholders' meetings unless a matter is determined to affect only a specific
Fund (such as approval of an advisory agreement for a Fund). From time to time,
large shareholders may control a Fund or TrueCrossing Funds. 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. Under the 1940 Act, TrueCrossing
Growth Fund is diversified and TrueCrossing Technology Fund is non-diversified.
The TrueCrossing Technology Fund reserves the right to invest in one or more
other investment companies in a Core and Gateway(R) structure (also known as a
master/feeder). Implementation of such a structure by TrueCrossing Technology
Fund is subject to approval by the Fund's Board and notification to shareholders
outlining information and fees related to such a structure.
The Trust and both Funds will continue indefinitely until terminated.
Not all Funds of the Trust may be available for sale in the state in which you
reside. Please check with your investment professional to determine a Fund's
availability.
Code of Ethics. The Trust, the Adviser, and FFS have each adopted a code of
ethics under Rule 17j-1 of the 1940 Act which are designed to eliminate
conflicts of interest between the Funds and personnel of the Trust, the Adviser
and FFS. The codes permit such personnel to invest in securities, including
securities that may be purchased or held by the Funds, subject to certain
limitations.
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.
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A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
Shareholders representing 10% or more of the Trust's (or a Fund's) outstanding
shares may, as set forth in the Trust Instrument, call meetings of the Trust (or
a Fund) for any purpose related to the Trust (or a Fund), including, in the case
of a meeting of the Trust, the purpose of voting on removal of one or more
Trustees.
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 a 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.
FUND OWNERSHIP
As of March 31, 2000, and prior to the public offering of the TrueCrossing
Technology Fund, the Adviser beneficially owned 100% of and may be deemed to
control the TrueCrossing Technology Fund. James B. Cowperthwait, Trustee, owns
84.5% and Erick F. Maronak, Trustee, owns 2.5% of the shares of the Adviser. As
of the same date, no other officers or Trustees of the Trust owned any of the
outstanding shares of the TrueCrossing Technology Fund. From time to time,
certain shareholders may own a large percentage of the shares of either Fund.
Accordingly, those shareholders may be able to greatly affect (if not determine)
the outcome of a shareholder vote. It is unlikely, however, that Adviser will
continue to control the TrueCrossing Technology Fund. "Control" for these
purposes is the ownership of 25% or more the Fund's voting securities.
As of March 31, 2000, the percentage of shares owned by all officers and
trustees of the Trust as a group was 1.98% of the shares of TrueCrossing Growth
Fund.
Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of TrueCrossing Growth Fund. These shareholders and any shareholder
known by TrueCrossing Growth Fund to own beneficially 5% or more of a class of
shares of each Fund are listed in Table 1 in Appendix B.
As of March 31, 2000, no person beneficially owned 25% or more of the shares
of TrueCrossing Growth Fund.
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
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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
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.
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.
FINANCIAL STATEMENT
A financial statement as of December 16, 1999, for the TrueCrossing Growth Fund
is included in this Statement of Additional Information.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
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.
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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>
DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic
conditions.
A+,A, Protection factors are average but adequate. However, risk factors
A- are more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions. Overall quality may move up or
down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
A-3
<PAGE>
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, High default risk. Default is a real possibility. Capacity for
CC, C meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, Default. Securities are not meeting current obligations and are
DD, D extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% - 90%
of such outstandings, and `D' the lowest recovery potential, i.e.
below 50%.
PREFERRED STOCK
MOODY'S INVESTORS SERVICE
AAA An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
AA An issue that is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance
the earnings and asset protection will remain relatively well
maintained in the foreseeable future.
A An issue that is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat
greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
BA An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings
and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
B An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of
time may be small.
CAA An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
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.
A-4
<PAGE>
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for
issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
BB, Preferred stock rated BB, B, and CCC is regarded, on balance,
B, as predominantly speculative with respect to the issuer's capacity
CCC 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.
SHORT TERM RATINGS
MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
A-5
<PAGE>
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse changes in business, economic, or financial
conditions.
A-6
<PAGE>
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
APPENDIX B - FINANCIAL STATEMENT
TRUECROSSING FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 16, 1999
TRUECROSSING
GROWTH FUND
ASSETS
Cash $100,000
Total assets $100,000
========
LIABILITIES $0
--
NET ASSETS $100,000
========
Shares Outstanding (no par value, shares
authorized is unlimited) 10,000
Net Asset Value, offering and redemption price
per share (10,000 shares outstanding) $10.00
======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
B-1
<PAGE>
TRUECROSSING FUNDS
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 16, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
(A) General: TrueCrossing Funds (the "Trust") is an open end management
investment company registered under the Investment Company Act of 1940, as
amended. The Trust was organized as a Delaware business trust on July 29, 1999.
TrueCrossing Growth Fund ("Fund") is a separate, diversified series of the
Trust. As of December 16, 1999, the Fund has had no operations other than
organizational matters and the issuance and sale of initial shares to NewBridge
Partners, LLC on December 15, 1999. Organizational expenses will be borne by
NewBridge Partners, LLC.
(B) Federal Taxes: The Fund intends to qualify for treatment as a regulated
investment company under the Internal Revenue Code and distribute all its
taxable income. In addition, by distributing in each calendar year substantially
all its net investment income, capital gain and certain other amounts, if any,
the Fund will not be subject to Federal excise tax. Therefore, no Federal income
or excise tax provision will be required.
NOTE 2 - INVESTMENT ADVISORY AND OTHER SERVICES
(A) Investment Adviser. The investment adviser for the Fund is NewBridge
Partners, LLC (the "Adviser"). For its services, the Adviser receives a fee at
an annual rate of 0.70% of the Fund's average daily net assets.
(B) Administrator. The administrator for the Fund is Forum Administrative
Services, LLC ("FAdS"). For its services, FAdS receives a fee at an annual rate
of 0.15% of the Fund's average daily net assets under $50 million, 0.10% of the
Fund's average daily net assets between $50 million and $100 million and 0.05%
of the Fund's average daily net assets in excess of $100 million. This fee is
subject to an annual minimum of $25,000.
(C) Distributor. Forum Fund Services, LLC ("FFS"), a registered broker-dealer
and a member of the National Association of Securities Dealers, Inc., acts as
the Fund's distributor. FFS receives no compensation for its services.
(D) Other Service Providers. Forum Accounting Services, LLC is the fund
accountant for the Fund and receives a fee of $36,000 per year, subject to
adjustments for the number and type of portfolio transactions. Forum Shareholder
Services, LLC is the Fund's transfer agent and dividend disbursing agent and
receives a fee of $18,000 per year plus certain other fees and expenses.
(E) Shareholder Servicing Agent. The Trust has adopted a shareholder servicing
plan under which the Trust pays FAdS a shareholder servicing fee at an annual
rate of 0.25% of the average daily net assets of the Fund. FAdS may pay out any
and all amounts of these fees to various institutions that provide shareholder
servicing to their customers who hold shares of the Fund.
B-2
<PAGE>
TABLE 1 - 5% SHAREHOLDERS
The following table lists the persons who owned of record 5% or more of the
outstanding shares of the TrueCrossing Growth Fund as of March 31, 2000.
<TABLE>
<S> <C> <C>
NAME AND ADDRESS SHARES % OF FUND
Thomas L. Piper III & 47,155.953 10.62
Ann R. Piper
Windrow Lane
New Canaan, CT 06840
Joan E. Hoffman 34,875.197 7.85
2496 San Antonio Ave.
Carmel, CA 93923
New Bridge Partners LLC 30,531.119 6.87
535 Madison Ave.
14th Floor
New York, NY 10022
Martha B. Walker 25,460.941 5.73
P.O. Box 472422
San Francisco, CA 94147-2422
Jacqueline Meyer 22,713.955 5.11
902 Kensington Way
Mt. Kisco, NY 10549
</TABLE>
B-3
<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 between Registrant and Forum Fund Services, LLC,
dated as of December 8, 1999 (see Note).
(f) None.
(g) Custodian Agreement between Registrant and Forum Trust, LLC, dated as
of December 8, 1999 (see Note).
(h) (1) Transfer Agency and Services Agreement between Registrant and Forum
Financial Services, LLC, dated as of December 8, 1999 (see Note).
(2) Administration Agreement between Registrant and Forum Administrative
Services, LLC, dated as of December 8, 1999 (see Note).
(3) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC dated as of December 8, 1999 (see Note).
(i) Opinion of Finn Dixon & Herling LLP dated December 17, 1999 (see Note).
(j) Consent of independent auditors (filed herewith).
(k) None.
(l) Investment Representation Letter of original purchaser of shares of
Registrant (see Note).
(m) Distribution (12b-1) Plan adopted by Registrant (see Note).
(n) None.
(p) (1) Code of Ethics adopted by Registrant (see Note).
(2) Code of Ethics adopted by NewBridge Partners, LLC (filed herewith).
(3) Joint Code of Ethics adopted by Forum Investment Advisors, LLC and
Forum Fund Services, LLC (filed herewith).
OTHER EXHIBITS:
(1) Power of attorney of James B. Cowperthwait (see Note).
(2) Power of attorney of Erick F. Maronak (see Note).
(3) Power of attorney of Eric J. Gleacher (see Note).
(4) Power of attorney of W. Wallace McDowell (see Note).
(5) Power of attorney of Daniel B. Goldman (see Note).
- ----------------
Note: Exhibit incorporated by reference as filed in pre-effective amendment
No. 2 via EDGAR on December 17, 1999, accession number 0001004402-99-
000465.
<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, (A) by the court or other body approving
the settlement; (B) 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
(C) 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
<PAGE>
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.
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.
<TABLE>
<S> <C> <C>
Name Title Business Connection
.................................... ................................... ..................................
James B. Cowperthwait Manager, Chairman, CEO, and CIO NewBridge Partners, LLC
................................... ..................................
Managing Director Campbell, Cowperthwait, a
division of United States Trust
Company of New York (until 3/99)
.................................... ................................... ..................................
Erick F. Maronak Manager, Managing Director, and NewBridge Partners, LLC
Director of Research
................................... ..................................
Portfolio Manager Campbell, Cowperthwait, a
division of United States Trust
Company of New York (until 3/99)
.................................... ................................... ..................................
Scott R. Kefer Manager and Managing Director NewBridge Partners, LLC
................................... ..................................
Portfolio Manager Campbell, Cowperthwait, a
division of United States Trust
Company of New York (until 3/99)
</TABLE>
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
Forum Funds
Memorial Funds
Monarch Funds
Sound Shore Fund, Inc.
(b) The following officers of Forum Fund Services, LLC, the Registrant's
underwriter, hold the following positions with the Registrant. Their
business address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
................................... ................................ ......................................
John Y. Keffer Director Vice President/Assistant Secretary
................................... ................................ ......................................
Ronald H. Hirsch Treasurer Treasurer
</TABLE>
<PAGE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained at the offices of Forum
Administrative Services, LLC and Forum Shareholder Services, LLC, Two
Portland Square, Portland, Maine 04101. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts
and deliveries of securities and receipts and disbursements of cash are
maintained at the offices of 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, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this registration statement
under rule 485(b) under the Securities Act and has duly caused this amendment to
its registration statement to be signed on its behalf by the undersigned, duly
authorized in the City of Portland, State of Maine on April 28, 2000.
TRUECROSSING FUNDS
Erick F. Maronak, President
/s/ Erick F. Maronak
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on April
28, 2000.
(a) Principal Executive Officer
/s/ Erick F. Maronak
Erick F. Maronak, President
(b) Principal Financial Officer
/s/ Ronald H. Hirsch
Ronald H. Hirsch, Treasurer
(c) All of the Trustees
/s/ Erick F. Maronak
Erick F. Maronak, Trustee
/s/ James Cowperthwait
James Cowperthwait, Trustee
Daniel B. Goldman, Trustee
Eric J. Gleacher, Trustee
W. Wallace McDowell, Trustee
By: /s/ D. Blaine Riggle
D. Blaine Riggle, Attorney in fact*
* Pursuant to powers of attorney filed as Other Exhibits 1 2, 3, 4 and 5 to this
registration statement.
<PAGE>
INDEX TO EXHIBITS
(j) Consent of independent auditors.
(p)(2) Code of Ethics adopted by NewBridge Partners, LLC.
(p)(3) Joint Code of Ethics adopted by Forum Investment Advisors, LLC and
Forum Fund Services, LLC.
<PAGE>
Exhibit (j)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
in this Registration Statement (Form N-1A No. 333-84031)of TrueCrossing Funds.
ERNST & YOUNG LLP
New York, New York
April 28, 2000
<PAGE>
NEWBRIDGE PARTNERS, LLC
CODE OF PROFESSIONAL RESPONSIBILITY
(Revised December 1999)
NewBridge Partners is an investment management firm. Our clients have
entrusted us with the extraordinary responsibility of managing their assets to
the best of our ability. As a consequence, we owe our clients, both as a matter
of principle and as a matter of law, a fiduciary duty, that is, a duty of
loyalty and a duty of care. In addition, as employees of the Firm, each of us
owes a duty of loyalty to the Firm. Moreover, each of us is required to comply
with certain express requirements of the Investment Advisers Act of 1940 (the
"Advisers Act"). This Code of Professional Responsibility describes our duties
to our clients and the Firm, as well as our additional obligations under the
Advisers Act, and sets forth certain rules that have been adopted by the Firm
with a view toward ensuring that the Firm and its employees will fulfill such
duties and obligations.
FIDUCIARY DUTY TO OUR CLIENTS.
The Advisers Act imposes a fiduciary duty upon each of us at NewBridge
Partners, which means that we owe our clients a duty of loyalty and a duty of
care.
Under the duty of care, we are obligated:
o to exercise a high degree of care in evaluating investment
alternatives, in making investment recommendations to our clients
and, when applicable, in exercising our discretionary power to
make investments on behalf of our clients;
o to ensure that all information provided to our clients is
accurate in all material respects;
o to ensure that all of our recommendations to our clients, and, if
applicable, the investments made by us on their behalf, are
suitable in light of each client's needs, financial circumstances
and investment objectives; and
o to obtain best execution for our clients' securities transactions
where the Firm is in a position to direct brokerage transactions.
Under the duty of loyalty, we are obligated:
o always to act in the best interests of our clients;
o to render disinterested and impartial advice to our clients;
o to avoid engaging in any activity that conflicts with the
interests of our clients; and
o to disclose to our clients any potential conflict of interest.
<PAGE>
In conformity with the requirements of the duty of loyalty, we have
advised our clients in Part II of our Form ADV, which is provided to each
client, that any of us may, from time to time, engage in securities transactions
that are the same as or similar to those that the Firm has recommended to its
clients or has effected for their account. However, while such disclosure makes
it permissible for each of us to engage in securities transactions that are the
same as or similar to those that we are recommending to our clients or are
effecting for their accounts, we can never:
o engage in "front running," which means that we cannot purchase
(or sell) securities for our own account prior to recommending
the purchase or sale of such securities to, or purchasing (or
selling) such securities for, our clients if our purchases (or
sales) might disadvantage our clients by causing them to purchase
(or sell) such securities at a possible higher (or lower) price
than we might pay (or receive) as a result of our own purchases
(or sales) of such securities; or
o misappropriate an investment opportunity, which means, by way of
illustration, that we cannot purchase securities for our own
account if our purchase would preclude or hinder our clients from
purchasing securities that we would have otherwise recommended to
them.
Similarly, under the duty of loyalty, we cannot favor one client over
another. Thus we must endeavor to spread unique investment opportunities amongst
our clients in a fair manner; and, while the bunching of trades is permissible,
we must take care to ensure that the savings that are realized from such
bunching are fairly allocated amongst our clients.
The duty of loyalty also imposes a duty upon the Firm itself not to
accept any compensation for directing trades to a particular broker except in
the very narrow circumstances under which the payment of so-called "soft
dollars" is permitted under Section 28(e) of the Securities Exchange Act of
1934. In order to ensure fulfill of this duty, the Firm has determined that it
will not accept any compensation from any broker in connection with brokerage
transactions, including any "soft dollar" compensation.
SPECIFICALLY PROHIBITED CONDUCT.
In addition to imposing a fiduciary duty upon the Firm and its
employees, the Advisers Act expressly prohibits the Firm and its employees from:
o purchasing any security from, or selling a security to, a client
for the account of the Firm or for the account of an employee of
the Firm, without the express consent of the client
o engaging in false or misleading advertising, including the use of
testimonials and certain references to past recommendations;
o receiving performance fees (except in certain specified
circumstances);
<PAGE>
o making payments to outside solicitors, except in compliance with
certain specific requirements; and
o engaging in any insider trading.
To ensure that the Firm and its employees will not inadvertently engage
in any of these specifically prohibited transactions, the Firm has adopted the
following rules:
1. The Firm and its employees may not purchase (or sell) a
security from (or to) a client for the account of the Firm or
for any account in which an employee of the Firm has a
Beneficial Interest without the prior approval of the Firm's
Compliance Officer. For purposes of the Code of Professional
Responsibility, an employee will be deemed to have a
"Beneficial Interest" in an account, in a security or in a
transaction, if any of the following persons or entities has
the opportunity to profit or share directly or indirectly in
any profit derived from such security or transaction:
o the employee himself or herself;
o any member of the employee's immediate family sharing
the same household;
o any partnership as to which the employee is a general
partner;
o any corporation or similar entity in which the employee
owns securities if the employee is a controlling
shareholder of the entity and has or shares investment
control over the entity's portfolio; or
o any trust as to which (a) the employee is the trustee
and such employee or any member of his immediate family
is a beneficiary, (b) the employee is a beneficiary and
controls or shares control of the trust's investments,
or (c) the employee is a settlor, has the power to
revoke the trust without the consent of another person
and shares investment control over the trust's
investments.1
2. Pursuant to the Firm's Policies and Procedures relating to
Advertising, a copy of which is attached as Exhibit A to this
Code of Professional Responsibility, all advertising by the
Firm (which includes any written communication to more than
one person) will be reviewed by the Firm's Compliance Officer
(or his or her designee) prior to the dissemination thereof.
3. The Firm will not accept any performance fees except pursuant
to arrangements that have been approved by the Firm's
Compliance Officer (or his or her designee).
- ------------------
1The applicable rules that have been promulgated under both the
Advisers Act and the Investment Company Act define the term "Beneficial
Interest" by reference to Rule 16a-1(a)(2) of the rules and regulations
promulgated under the Exchange Act of 1934, to which reference should be made if
there is any question as to whether an employee has a Beneficial Interest in any
transaction or security. The term "immediate family" includes children,
grandchildren, parents, grandparents, parents-in-law, siblings-in-law and
children-in-law.
<PAGE>
4. The Firm will not engage any outside solicitors except
pursuant to arrangements that have been approved by the Firm's
Compliance Officer (or his or her designee).
5. Each employee of the Firm will be required to read and agree
to abide by the Firm's Written Policy on Insider Trading, a
copy of which is attached as Exhibit B to this Code of
Professional Responsibility.
PERSONAL SECURITIES TRANSACTIONS.
The rules promulgated under both the Advisers Act and the Investment
Company Act of 1940 (the "Investment Company Act") expressly require that the
Firm maintain records with respect to each security transaction that is entered
into by the Firm or any employee of the Firm who possesses knowledge about the
Firm's investment recommendations. In order to ensure compliance with these
rules, each employee of the Firm must provide a securities transaction report to
the Firm's Compliance Officer (or his or her designee) within 10 days of the end
of each calendar quarter which sets forth, as to each transaction in which the
employee has a Beneficial Interest (as defined above):
o the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each security involved in a transaction that
was effected during such quarter;
o the nature of the transaction (I.E., purchase, sale or other
acquisition or disposition);
o the price of the security at which the transaction was effected;
o the name of the broker, dealer or bank with or through whom the
transaction was effected; and
o the date that the report is submitted by such employee;
provided, however, that an employee need not report (a) any transactions
effected in any account over which neither the Firm nor such employee has any
direct or indirect influence or control or (b) any transaction in any of the
following securities: direct obligations of the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial paper, and high
quality short-term debt instruments, including repurchase agreements, and shares
issued by open-end investment companies that are registered under the Investment
Company Act.
If no securities transaction in which such employee has a direct or
indirect beneficial interest occurred during the prior quarter, that fact must
be stated in the quarterly securities transaction report.
An employee of the Firm may satisfy the foregoing reporting requirement
by supplying or directing his or her broker to supply to the Firm's Compliance
Officer (or his or her designee) copies of confirmations of all personal
securities transactions or copies of all periodic statements for all securities
<PAGE>
accounts as to which the employee has a direct or indirect beneficial interest,
provided that such confirmations or statements are delivered to the Firm's
Compliance Officer within 10 days of the end of the applicable quarter.
In addition, if, during any quarter, an employee of the Firm
establishes an account that holds securities as to which the employee has a
Beneficial Interest, the employee must report the following information to the
Firm's Compliance Officer (or his or her designee) within 10 days after the end
of such calendar quarter:
o the name of the broker, dealer or bank with whom the employee
established the account;
o the date the account was established; and
o the date that the report is submitted by such employee.
In order to ensure that the personal securities transactions of
employees of the Firm will not even have the appearance of a
conflict of interest, the Firm has adopted the following
restrictions on, and requirements relating to, personal investing
activities:
1. No employee of the Firm may execute a transaction relating to
an Investment Security, as to which the employee has or would
have a Beneficial Interest, on a day when the Firm has a block
trade pending for the accounts of its clients in that same
security until such trade is executed or withdrawn without the
prior approval of the Firm's Compliance Officer (or his or her
designee); and
2. Each employee of the Firm must preclear with the Firm's
Compliance Officer (or his or her designee) any transaction
involving an Investment Security as to which the employee
has or would have a Beneficial Interest;
provided, however, that such preclearance shall not be required with
respect to transactions involving 1000 shares or less or, in the case
of Investment Securities of companies with a market capitalization in
excess of $10 Billion, with respect to transactions involving 10,000
shares or less. For purposes of this Code of Professional
Responsibility, an "Investment Security" shall mean an equity security
of a company whose securities are listed for trading in the United
States and which has a market capitalization in excess of $1 Billion.
ADDITIONAL RESTRICTIONS AND LIMITATIONS APPLICABLE TO INVESTMENT COMPANY
ADVISERS
In accordance with certain of the Recommendations contained in the May
9, 1994, Report of the Advisory Group on Personal Investing of the Investment
Company Institute and Rule 17j-1 of the rules and regulations promulgated under
the Investment Company Act of 1940, the Firm has adopted the following
additional restrictions on, and requirements relating to, personal investing
activities, which restrictions and limitations will become effective at such
time as the Firm commences to provide investment advice to a registered
investment company:
<PAGE>
1. Initial Public Offerings
No employee of the Firm may purchase any "Covered Security"
that is being offered in an initial public offering without
the prior approval of the Firm's Compliance Officer (or his or
her designee). For purposes of this Code of Conduct, a
"Covered Security" is any security other than direct
obligations of the Government of the United States, bankers'
acceptances, bank certificates of deposit, commercial paper,
and high quality short-term debt instruments, including
repurchase agreements, and shares issued by open-end
investment companies that are registered under the Investment
Company Act.
2. Limited Offerings (Private Placements)
No employee of the Firm may purchase a Covered Security in a
private placement without the prior approval of the Firm's
Compliance Officer (or his or her designee).
3. Additional Blackout Periods
No employee of the Firm may, without the prior approval of the
Firm's Compliance Officer (or his or her designee) execute a
transaction relating to an Covered Security on a day when any
registered investment company as to which the Firm is an
investment adviser has pending a buy or sell order in that
same security until such order is executed or withdrawn; in
addition, no member of the Investment Policy Committee of the
Firm may, without the prior approval of the Firm's Compliance
Officer (or his or her designee) purchase or sell any Covered
Security within five calendar days before and two calendar
days after any investment company as to which the Firm acts as
an investment adviser purchases or sells that same security;
provided, however, that such preclearance shall not be
required with respect to transactions in Investment Securities
involving 1000 shares or less or, in the case of Investment
Securities of companies with a market capitalization in excess
of $10 Billion, with respect to transactions involving 10,000
shares or less. The Firm reserves the right to require any
employee who had engaged in transactions that are prohibited
during such blackout periods to disgorge any profits realized
in connection with such transaction.
4. Gifts
No employee of the Firm may accept any gift or other thing of
more than DE MINIMIS value from any person or entity that does
business with or on behalf of any investment company as to
which the Firm serves as an investment adviser.
<PAGE>
5. Service as a Director
No employee of the Firm may serve on the board of directors of
any publicly traded company absent prior approval of the
Firm's Compliance Officer (or his or her designee) based upon
a determination that such board service would be consistent
with the interests of any investment company as to which the
Firm serves as an investment adviser and its shareholders.
6. Disclosure of Personal Holdings.
Each employee of the Firm, upon commencement of employment and
annually thereafter, shall be required to report the following
information to the Firm's Compliance Officer, as of a date not
more than 30 days prior to the date on which the report in
submitted, (a) the title, number of shares and principal
amount of all Covered Securities in which the employee has a
direct or indirect Beneficial Interest (as defined above), (b)
the name of any broker, dealer or bank with whom the employee
maintains an account in which any securities are held, either
directly or indirectly, for the benefit of such employee, and
(c) the date that the report is submitted by such employee;
provided, however, that such employee need not make a report
with respect to any account over which the employee has no
direct or indirect influence or control.
7. Certification of Compliance with Code of Professional Responsibility
Each employee shall be required to certify annually that he or
she (i) has read and understood the Code of Professional
Responsibility, (ii) recognizes that he or she is subject
thereto, (iii) has complied with the requirements of the Code
of Professional Responsibility and (iv) has disclosed or
reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Code
of Professional Responsibility.
8. Review Procedures
The Compliance Officer (or his or her designee) shall, among
other things review all securities transaction and holdings
reports and compare, on a quarterly basis, all employee
securities transactions with each Fund's completed portfolio
transactions to determine whether a Code violation may have
occurred. When there appears to be a transaction that
conflicts with the Code, the Compliance Officer shall request
a written explanation of the employee's transaction. If after
post-trade review, it is determined that there has been a
violation of the Code, a report will be made by the designated
Compliance Officer with a recommendation of appropriate action
to the Board.
PRESERVATION OF CONFIDENTIAL INFORMATION.
Many of our clients have provided personal and financial information to
us on the understanding that such information will be held in the strictest
confidence. At the same time, each of us has learned, during the course of our
employment, confidential information about the firm, including its investment
<PAGE>
management strategies and practices, its marketing plans and strategies, and its
financial circumstances, as well as confidential information relating to our
clients. All such confidential information must be held by each of us in strict
confidence and not discussed or otherwise disclosed to anyone outside the Firm
except as required by law. Any order, subpoena or other demand for any such
confidential information should be immediately referred to the Firm's General
Counsel.
DUTY OF LOYALTY TO THE FIRM.
The success of the Firm is dependent upon the dedication of its
employees to the achievement of that success. Accordingly, it is the policy of
the Firm that no employee of the Firm may accept any position with any
organization, whether for profit or otherwise, including governmental positions,
without the prior approval of the Firm's Compliance Officer (or his or her
designee). Such approval will not be given by the Firm's Compliance Officer (or
his or her designee) if such organization competes with the business of the Firm
or if the acceptance of the position with such organization would inhibit the
employee from devoting substantially all of his or her business effort to the
business of the Firm or might otherwise adversely affect the Firm.
<PAGE>
NEWBRIDGE PARTNERS, LLC
POLICIES AND PROCEDURES RELATING TO ADVERTISING
The maintenance of the Firm's reputation for honesty in its
relationships with its clients and prospective clients is essential to the
Firm's future success. For this reason, the Firm must exercise extraordinary
care to ensure that its communications to its clients and the public are
accurate and complete, do not contain any potentially misleading information,
are based upon solid factual data and do not contain promises or predictions as
to future results. In addition, the Securities and Exchange Commission (the
"SEC") has expressly prohibited certain types of advertising, including
testimonials and, except in certain specified circumstances, references to past
specific recommendations. TO ENSURE PRESERVATION OF ITS REPUTATION AND
COMPLIANCE WITH THE REQUIREMENTS OF THE SEC, THE FIRM HAS DETERMINED THAT ALL
ADVERTISING AND SOLICITATION MATERIALS (INCLUDING ANY WRITTEN COMMUNICATION
ADDRESSED TO MORE THAN ONE PERSON) MUST BE SUBMITTED TO THE FIRM'S COMPLIANCE
OFFICER (OR HIS OR HER DESIGNEE) FOR REVIEW AND APPROVAL PRIOR TO THE
DISSEMINATION THEREOF.
In addition, in accordance with the requirements of the SEC, the Firm's
Compliance Officer (or his or her designee) will keep and maintain the following
records that relate to advertising:
o A copy of each notice, circular, advertisement, newspaper article,
investment letter, bulletin or other communication that the Firm circulates
or distributes, directly or indirectly, to more than ten persons (other
than persons connected with the Firm).
o A copy of each written communication that the firm sends to any client or
prospective client relating to any recommendation made or proposed to be
made or any advice given or proposed to be given, together with the names
and addresses of each person, if any, to whom such communication was
specifically addressed; provided, however, that if the Firm sends or
otherwise delivers any such communication to
o more than 10 persons, the Firm is not required to keep a record of the
names and addresses of the persons to whom it was sent; except that if such
communication is distributed to persons named on any list, the Firm is
required to retain with the copy of such communication a memorandum
describing the list and the source thereof.
o Copies of any records or documents, including internal working papers, that
are necessary to form the basis for or demonstrate the calculation of the
performance or rate of return of any or all managed accounts or securities
recommendations in any notice, circular, advertisement, newspaper article,
investment letter, bulletin or other communication that the Firm circulates
or distributes, directly or indirectly, to 10 or more persons (other than
persons connected with the Firm). The Compliance Officer need not keep a
copy of any account records that are used to calculate the performance of
managed accounts so long as the Firm keeps copies of all account statements
for its clients and such account statements reflect all debits, credits and
other transactions for each account period.
o A copy of each Part II of the Firm's Form ADV, and any amendment thereof,
that is delivered to any prospective client, together with a record of the
date of delivery.
<PAGE>
EXHIBIT A
NEWBRIDGE PARTNERS, LLC
WRITTEN POLICY ON INSIDER TRADING
NewBridge Partners, LLC (the "Firm") prohibits anyone who is associated
with the Firm, including any officer or employee of the Firm (an "Associated
Person") from trading, either personally or on behalf of others, on material
non-public information or communicating material non-public information to
others in violation of the Insider Trading and Securities Fraud Enforcement Act
of 1988. This conduct is frequently referred to as "insider trading." Any
questions regarding this policy should be referred to the Firm's Compliance
Officer.
The term "insider trading" is not clearly defined in federal or state
securities laws, but generally is used to refer to the use of material
non-public information to trade in securities (whether or not one is an
"insider") or to communications of material non-public information to others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
o trading by an insider on the basis of material non-public
information;
o trading by a non-insider on the basis of material non-public
information, where the information either was disclosed to the
non-insider in violation of an insider's duty to keep it
confidential or was misappropriated; or,
o communicating material non-public information to others.
I. WHO IS AN INSIDER?
The term "insider" is broadly defined. It includes officers, directors
and employees of a company. In addition, a person can be a "temporary insider"
if he or she enters into a special confidential relationship with the company
and, as a result, is given access to information that is intended to be used
solely for the company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. In addition, the Firm may become a
temporary insider of a client company it advises or for which it performs other
services. If a client company expects the Firm to keep the disclosed non-public
information confidential and the relationship implies such a duty, then the Firm
and its Associated Persons who have knowledge of such information will be
considered insiders.
II. WHAT IS MATERIAL INFORMATION?
Trading on insider information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information that a reasonable investor would consider important in making their
investment decisions, or information that is likely to have a substantial effect
<PAGE>
on the price of a company's securities, regardless of whether the information is
related directly to the company's business. Information that Associated Persons
of the Firm should consider material includes, but is not limited to: dividend
changes; earnings estimates; changes in previously released earnings estimates;
significant merger or acquisition proposals or agreements; major litigation;
liquidation problems; and, extraordinary management developments.
III WHAT IS NON-PUBLIC INFORMATION?
Information is non-public until it has been effectively communicated to
the marketplace. For example, information found in a report filed with the SEC,
or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or
other publications of general circulation would be considered public
information.
IV. PENALTIES FOR INSIDER TRADING
Penalties for trading on or communicating material non-public
information are severe, both for individuals involved in such unlawful conduct
and their employers. A person can be subject to some or all of the penalties
described below even if they do not personally benefit from the activities
surrounding the violation. Penalties include: civil injunctions; treble damages;
disgorgement of profits; jail sentences; fines for the person who committed the
violation of up to three times the profit gained or loss avoided, whether or not
the person actually benefitted; and, fines for the employer or other controlling
person of up to the greater of $1,000,000 or three times the amount of the
profit gained or loss avoided. In addition, any violation of this policy
statement can be expected to result in serious sanctions by the Firm, including
dismissal of the persons involved.
V. PROCEDURES TO IMPLEMENT INSIDER TRADING POLICY
The following procedures have been established to aid the Associated
Persons of the Firm in avoiding insider trading. Failure to follow these
procedures may result in dismissal, regulatory sanctions and criminal penalties.
A. IDENTIFY INSIDER INFORMATION
Before trading or making investment recommendations for any
account on the basis of information about a company that is not
generally available to the public, each Associated Person of the Firm
should ask himself or herself the following questions:
1. Is the information material? Is this information that
an investor would consider important in making an
investment decision? Is this information that would
substantially effect the market price of the securities
if generally disclosed?
<PAGE>
2. Is the information non-public? To whom has this
information been provided? Has the information been
effectively communicated to the market place, such as
by being published in publications of general
circulation?
B. REPORT TO COMPLIANCE OFFICER.
If, after consideration of the above, the Associated Person
concludes that the information is material and non-public, or if he or
she has further questions as to whether the information is material and
non-public, the following procedures shall be followed:
1. The Associated Person should report the matter
immediately to the Firm's Compliance Officer, who
should advise the Associated Person as to the proper
course of action to take after review of the matter.
2. Pending receipt of the advice of the Firm's
Compliance Officer, the Associated Person should not
purchase, sell or recommend securities on behalf of
himself or herself or others, including accounts
managed by the Firm.
3. The Associated Person should not communicate the
information inside or outside the Firm other than to
the Firm's Compliance Officer.
C. PERSONAL SECURITIES TRADING
As described in the Firm's Code of Professional
Responsibility, all employees of the Firm are required to submit a
report to the Firm of every securities transaction in which they have a
direct or indirect beneficial interest within ten (10) days after the
end of the calendar quarter in which the transactions were effected.
This report shall include, among other things, the names of the
securities, dates of the transactions, quantities, prices and
broker/dealer or other entity through which the transactions were
effected.
D. RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION
Information in an Associated Person's possession that he or
she has identified as material and non-public may not be communicated
to anyone, including persons within the Firm except as provided in
paragraph B above. In addition, care should be taken so that such
information is secure. For example, files containing material
non-public information should be sealed and kept in a secure storage
space.
<PAGE>
ACKNOWLEDGMENT
By affixing my signature below, I acknowledge that I have read and understood
the foregoing Code of Professional Responsibility (Revised December 1999) and
the Exhibits thereto, including the Written Policy on Insider Trading, and agree
that I will comply in all respects with such Code of Professional
Responsibility, including such policy.
- --------------------------------- ----------------
Name Date
<PAGE>
Exhibit (p)(3)
FORUM INVESTMENT ADVISORS, LLC
FORUM FUND SERVICES, LLC
CODE OF ETHICS
AS AMENDED JANUARY 17, 2000
INTRODUCTION
This Code of Ethics (the "Code") has been adopted by Forum Fund
Services, LLC ("FFS") and Forum Investment Advisors, LLC ("FIA" and collectively
with FFS, "Forum"). This Code pertains to Forum's investment advisory and
distribution services to registered management investment companies or series
thereof (each a "Fund"). In addition, this Code applies to employees of Forum's
commonly controlled companies who serve as officers of a Fund. This Code
establishes standards and procedures for the detection and prevention of
activities by which persons having knowledge of the investments and investment
intentions of a Fund may abuse their fiduciary duties to the Fund and addresses
other types of conflict of interest situations. Definitions of underlined terms
are included in Appendix A.
1. POLICY STATEMENT
Forum forbids any Access Person, Investment Personnel or Fund Officer
from engaging in any conduct which is contrary to this Code. In addition, due to
their positions, Forum also forbids any Access Person or Investment Personnel
from engaging in any conduct which is contrary to Forum's Insider Trading Policy
and Related Procedures. In addition, many persons subject to the Code are also
subject to the other restrictions or requirements which affect their ability to
open securities accounts, effect securities transactions, report securities
transactions, maintain information and documents in a confidential manner and
other matters relating to the proper discharge of your obligations to Forum.
These include contractual arrangements with Forum, policies adopted by Forum
concerning confidential information and documents and FFS' Compliance and
Supervisory Procedures Manual.
Forum has always held itself and its employees to the highest ethical
standards. While this Code is only one manifestation of those standards,
compliance with its provisions is essential. Failure to comply with this Code is
a very serious matter and may result in disciplinary action being taken. Such
action can include among other things, monetary fines, disgorgement of profits,
suspension or even termination of employment.
2. WHO IS COVERED BY THIS CODE
(a) All Access Persons and Investment Personnel, in each case only
with respect to those Funds as listed on Appendix B.
(b) Fund Officers, but only with respect to those Funds for which
they serve as Fund Officers as listed in Appendix B.
<PAGE>
3. PROHIBITED TRANSACTIONS
(A) PROHIBITION AGAINST FRAUDULENT CONDUCT. It is unlawful for Access
Persons, Investment Personnel and Fund Officers to use any information
concerning a security held or to be acquired by a Fund, or their ability to
influence any investment decisions, for personal gain or in a manner detrimental
to the interests of a Fund. In addition, they shall not, directly or indirectly:
(i) employ any device, scheme or artifice to defraud a Fund or
engage in any manipulative practice with respect to a Fund;
(ii) make to a Fund, any untrue statement of a material fact or
omit to state to a Fund a material fact necessary in order to
make the statements made, in light of the circumstances under
which they are made, not misleading; or
(iii) engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon a Fund.
(B) BLACKOUT PERIOD. Access Persons and Investment Personnel shall not
purchase or sell a Covered Security in an account over which they have direct or
indirect influence or control on a day during which they know or should have
known a Fund has a pending "buy" or "sell" order in that same security until
that order is executed or withdrawn.
(C) ADDITIONAL INVESTMENT PERSONNEL BLACKOUT PERIOD. No Investment
Personnel shall purchase or sell a Covered Security within five calendar days
before or two calendar days after a Fund for which the Investment Personnel
makes or participates in making a recommendation trades in that security. Any
profits realized on trades within this proscribed period shall be disgorged.
This blackout period does not apply to money market mutual funds which are
advised by FIA.
(D) FUND OFFICER PROHIBITION. No Fund Officer shall directly or
indirectly seek to obtain information (other than that necessary to accomplish
the functions of the office) from any Fund portfolio manager regarding (i) the
status of any pending securities transaction for a Fund or (ii) the merits of
any securities transaction contemplated by the Fund Officer.
(E) BLACKOUT PERIOD EXCLUSIONS AND DEFINITIONS. The following
transactions shall not be prohibited by this Code and are not subject to the
limitations of Sections 3(b) and (c):
(i) purchases or sales over which you have no direct or indirect
influence or control (for this purpose, you are deemed to have
direct or indirect influence or control over the accounts of a
spouse, minor children and relatives residing in your home);
(ii) purchases which are part of an automatic dividend reinvestment
plan;
(iii) purchases or sales which are non-volitional on your part; and
<PAGE>
(iv) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer.
Your trading shall be exempt from the limitations of Sections 3(b) and
(c) provided that (i) the market capitalization of a particular security exceeds
$1 billion and (ii) pending orders of FIA do not exceed two percent of the daily
average trading volume of the security for the prior 15 days.
For purposes of Sections 3(b) and (c), and subject to Section 3(g)
below, the (i) common stock and any fixed income security of an issuer shall not
be deemed to be the same security and (ii) non-convertible preferred stock of an
issuer shall be deemed to be the same security as the fixed income securities of
that issuer; and (iii) convertible preferred stock shall be deemed to be the
same security as both the common stock and fixed income securities of that
issuer.
(F) REQUIREMENT FOR PRECLEARANCE. Investment Personnel must obtain
prior written approval from the designated Review Officer before:
(i) directly or indirectly acquiring securities in an initial
public offering for which no public market in the same or
similar securities of the issue has previously existed; and
(ii) directly or indirectly acquiring securities in a private
placement. In determining whether to preclear the transaction,
the Review Officer designated under Section 5 shall consider,
among other factors, whether the investment opportunity should
be reserved for a Fund, and whether such opportunity is being
offered to the Investment Personnel by virtue of their
position with the Fund.
Any Investment Personnel of a Fund who has taken a personal position
through a private placement will be under an affirmative obligation to disclose
that position in writing to the Review Officer if they play a material role in
the Fund's subsequent investment decision regarding the same issuer; this
separate disclosure must be made even though the Investment Personnel has
previously disclosed the ownership of the privately placed security in
compliance with the preclearance requirements of this section. Once disclosure
is given, an independent review of the Fund's investment decision will be made.
(G) OTHER PROHIBITED TRANSACTIONS. Access Persons, Investment
Personnel and Fund Officers shall not:
(i) induce or cause a Fund to take action or to fail to take
action, for personal benefit rather than for the benefit of
the Fund;
(ii) accept anything other than of DE MINIMIS value or any other
preferential treatment from any broker-dealer or other entity
with which a Fund does business;
(iii) establish or maintain an account at a broker-dealer, bank or
other entity through which securities transactions may be
effected without written notice to the designated Review
Officer prior to establishing such an account;
<PAGE>
(iv) use knowledge of portfolio transactions of a Fund for your
personal benefit or the personal benefit of others;
(v) violate the anti-fraud provisions of the federal or state
securities laws;
(vi) serve on the boards of directors of publicly traded companies,
absent prior authorization based upon a determination by the
Review Officer that the board service would be consistent with
the interests of the Fund and its shareholders.
(H) UNDUE INFLUENCE. Access Persons, Investment Personnel and Fund
Officers shall not cause or attempt to cause any Fund to purchase, sell or hold
any security in a manner calculated to create any personal benefit to you. You
shall not recommend any securities transactions for a Fund without having
disclosed (through reports in accordance with Section 4, preclearance in
accordance with Section 3(f), or otherwise) your interest, if any, in such
securities or the issuer thereof, including, without limitation, (i) your
beneficial ownership of any securities of such issuer, (ii) any position with
such issuer or its affiliates and (iii) any present or proposed business
relationship between you (or any party in which you have a significant interest)
and such issuer or its affiliates.
(I) CORPORATE OPPORTUNITIES. Access Persons, Investment Personnel and
Fund Officers shall not take personal advantage of any opportunity properly
belonging to a Fund.
(J) CONFIDENTIALITY. Except as required in the normal course of
carrying out their business responsibilities, Access Persons, Investment
Personnel and Fund Officers shall not reveal information relating to the
investment intentions or activities of any Fund, or securities that are being
considered for purchase or sale on behalf of any Fund.
4. REPORTING REQUIREMENTS
(A) REPORTING. Access Persons, Investment Personnel and Fund Officers
must report the information described in this Section with respect to
transactions in any Covered Security in which they have, or by reason of such
transaction acquire, any direct or indirect beneficial ownership. They must
report to the designated Review Officer unless they are otherwise required by a
Fund, pursuant to a Code of Ethics adopted by the Fund, to report to the Fund or
another person.
(B) EXCLUSIONS FROM REPORTING. Purchases or sales in Covered Securities
in an account in which you have no direct or indirect influence or control are
not subject to the reporting requirements of this Section.
(C) INITIAL HOLDING REPORTS. No later than ten (10) days after you
become subject to this Code as set forth in Section 2, you must report the
following information:
(i) the title, number of shares and principal amount of each
Covered Security (whether or not publicly traded) in which you
have any direct or indirect beneficial ownership as of the
date you became subject to this Code;
<PAGE>
(ii) the name of any broker, dealer or bank with whom you
maintained an account in which any securities were held for
your direct or indirect benefit as of the date you became
subject to this Code; and
(iii) the date that the report is submitted.
(D) QUARTERLY TRANSACTION REPORTS. No later than ten (10) days after
the end of a calendar quarter, you must report the following information:
(i) with respect to any transaction during the quarter in a Covered
Security (whether or not publicly traded) in which you have, or
by reason of such transaction acquired, any direct or indirect
beneficial ownership:
(1) the date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Covered Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) the price of the Covered Security at which the transaction
was effected;
(4) the name of the broker, dealer or bank with or through which
the transaction was effected; and
(5) the date that the report is submitted.
(ii) with respect to any account established by you in which any
Covered Securities (whether or not publicly traded) were held
during the quarter for your direct or indirect benefit:
(1) the name of the broker, dealer or bank with whom you
established the account;
(2) the date the account was established; and
(3) the date that the report is submitted.
(E) ANNUAL HOLDINGS REPORTS. Annually, you must report the following
information (which information must be current as of a date no more than thirty
(30) days before the report is submitted):
(i) the title, number of shares and principal amount of each
Covered Security (whether or not publicly traded) in which you
had any direct or indirect beneficial ownership;
(ii) the name of any broker, dealer or bank with whom you maintain
an account in which any securities are held for your direct or
indirect benefit; and
(iii) the date that the report is submitted.
(F) CERTIFICATION OF COMPLIANCE. You are required to certify annually
(in the form of Attachment A) that you have read and understood the Code and
recognize that you are subject to the Code. Further, you are required to certify
annually that you have complied with all the requirements of the Code and you
<PAGE>
have disclosed or reported all personal securities transactions pursuant to the
requirements of the Code.
(G) ALTERNATIVE REPORTING. The submission to the Review Officer of
duplicate broker trade confirmations and statements on all securities
transactions shall satisfy the reporting requirements of Section 4. The annual
holdings report may be satisfied by confirming annually, in writing, the
accuracy of the records maintained by the Review Officer and recording the date
of the confirmation.
(H) REPORT QUALIFICATION. Any report may contain a statement that the
report shall not be construed as an admission by the person making the report
that he or she has any direct or indirect beneficial ownership in the Covered
Securities to which the report relates.
(I) ACCOUNT OPENING PROCEDURES. You shall provide written notice to
the Review Officer prior to opening any account with any entity through which a
Covered Securities transaction may be effected. In addition, you will promptly:
(i) provide full access to a Fund, its agents and attorneys to any
and all records and documents which a Fund considers relevant
to any securities transactions or other matters subject to the
Code;
(ii) cooperate with a Fund, or its agents and attorneys, in
investigating any securities transactions or other matter
subject to the Code;
(iii) provide a Fund, its agents and attorneys with an explanation
(in writing if requested) of the facts and circumstances
surrounding any securities transaction or other matter subject
to the Code; and
(iv) promptly notify the Review Officer or such other individual as
a Fund may direct, in writing, from time to time, of any
incident of noncompliance with the Code by anyone subject to
this Code.
5. REVIEW OFFICER
(A) DUTIES OF REVIEW OFFICER. The Chief Compliance Officer of Forum has
been appointed by the Director of FIA and FFS as the Review Officer to:
(i) review all securities transaction and holdings reports and
shall maintain the names of persons responsible for reviewing
these reports;
(ii) identify all persons subject to this Code who are required to
make these reports and promptly inform each person of the
requirements of this Code;
(iii) compare, on a quarterly basis, all Covered Securities
transactions with each Fund's completed portfolio transactions
to determine whether a Code violation may have occurred;
(iv) maintain a signed acknowledgment by each person who is then
subject to this Code, in the form of Attachment A; and
(v) identify persons who are Investment Personnel of the Fund
and inform those persons of their requirements to obtain
prior written approval from the Review Officer prior to
directly or indirectly acquiring ownership of a security in
any private placement or initial public offering.
<PAGE>
(vi) exempt any Fund Officer from provisions of this Code if the
person is subject to similar requirements of a Fund's Code of
Ethics.
(B) POTENTIAL TRADE CONFLICT. When there appears to be a transaction
that conflicts with the Code, the Review Officer shall request a written
explanation of the person's transaction. If after post-trade review, it is
determined that there has been a violation of the Code, a report will be made by
the designated Review Officer with a recommendation of appropriate action to the
Director of FIA and FFS and a Fund's Board of Trustees (or Directors).
(C) REQUIRED RECORDS. The Review Officer shall maintain and cause to be
maintained:
(i) a copy of any code of ethics adopted by Forum which has been
in effect during the previous five (5) years in an easily
accessible place;
(ii) a record of any violation of any code of ethics, and of any
action taken as a result of such violation, in an easily
accessible place for at least five (5) years after the end of
the fiscal year in which the violation occurs;
(iii) a copy of each report made by anyone subject to this Code as
required by Section 4 for at least five (5) years after the
end of the fiscal year in which the report is made, the first
two (2) years in an easily accessible place;
(iv) a list of all persons who are, or within the past five years
have been, required to make reports or who were responsible
for reviewing these reports pursuant to any code of ethics
adopted by Forum, in an easily accessible place;
(v) a copy of each written report and certification required
pursuant to Section 5(e) of this Code for at least five (5)
years after the end of the fiscal year in which it is made,
the first two (2) years in an easily accessible place; and
(vi) a record of any decision, and the reasons supporting the
decision, approving the acquisition by Investment Personnel of
securities under Section 3(f) of this Code, for at least five
(5) years after the end of the fiscal year in which the
approval is granted.
(D) POST-TRADE REVIEW PROCESS. Following receipt of trade confirms and
statements, transactions will be screened for the following:
(i) SAME DAY TRADES: transactions by Access Persons and
Investment Personnel occurring on the same day as the
purchase or sale of the same security by a Fund for which
they are an Access Person or Investment Personnel.
(ii) PORTFOLIO MANAGER TRADES: transactions by Investment Personnel
within five calendar days before and two calendar days after a
Fund, for which the Investment Personnel makes or participates
in making a recommendation, trades in that security.
<PAGE>
(iii) FRAUDULENT CONDUCT: transaction by Access Persons, Investment
Personnel and Fund Officers which, within the most recent 15
days, is or has been held by a Fund or is being or has been
considered by a Fund or FIA for purchase by a Fund.
(iv) OTHER ACTIVITIES: transactions which may give the appearance
that an Access Person, Investment Personnel or Fund Officer
has executed transactions not in accordance with this Code.
(E) SUBMISSION TO FUND BOARD. The Review Officer shall annually
prepare a written report to the Board of Trustees (or Directors) of a Fund
listed in Appendix B that
(i) describes any issues under this Code or its procedures since the
last report to the Trustees, including, but not limited to,
information about material violations of the code or procedures
and sanctions imposed in response to the material violations; and
(ii) certifies that the Fund has adopted procedures reasonably
necessary to prevent Access Persons, Investment Personnel and
Fund Officers from violating this code.
<PAGE>
FORUM CODE OF ETHICS
APPENDIX A
DEFINITIONS
(a) Access Person:
(i)(1) of FIA means each director or officer of FIA, any employee or
agent of FIA, or any company in a control relationship to FIA
who, in connection with the person's regular functions or
duties, makes, participates in or obtains information
regarding the purchase or sale of Covered Securities by a Fund
advised by FIA, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(i)(2) any natural person in a control relationship to FIA who
obtains information concerning recommendations made to a Fund
by FIA with regard to the purchase or sale of Covered
Securities by the Fund;
(ii) of FFS means each director or officer of FFS who in the
ordinary course of business makes, participates in or obtains
information regarding the purchase or sale of Covered
Securities for a Fund or whose functions or duties as part of
the ordinary course of business relate to the making of any
recommendation to a Fund regarding the purchase or sale of
Covered Securities.
(b) Act means the Investment Company Act of 1940, as amended.
(c) Beneficial Owner shall have the meaning as that set forth in Rule
16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, except that
the determination of direct or indirect beneficial ownership shall apply to all
Covered Securities which an Access Person owns or acquires. A beneficial owner
of a security is any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest (the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the subject securities) in
a security.
Indirect pecuniary interest in a security includes securities held by a
person's immediate family sharing the same household. Immediate family means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law (including adoptive relationships).
(d) Control means the power to exercise a controlling influence over the
management or policies of a company, unless this power is solely the result of
an official position with the company. Ownership of 25% or more of a company's
outstanding voting securities is presumed to give the holder thereof control
over the company. This presumption may be rebutted by the Review Officer based
upon the facts and circumstances of a given situation.
<PAGE>
(e) Covered Security means any security except:
(i) direct obligations of the Government of the United States;
(ii) bankers' acceptances and bank certificates of deposits;
(iii) commercial paper and debt instruments with a maturity at
issuance of less than 366 days and that are rated in one of
the two highest rating categories by a nationally recognized
statistical rating organization;
(iv) repurchase agreements covering any of the foregoing; and
(v) shares of registered open-end investment companies.
(f) Fund Officer means any employee of Forum or of a company commonly
controlled with Forum who is an officer or director/trustee of a Fund.
(h) Investment Personnel means
(i) any employee of FIA who, in connection with his or her regular
functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities
by a Fund managed by FIA; and
(ii) any individual who controls FIA or a Fund for which FIA is an
investment adviser and who obtains information concerning
recommendations made to the Fund regarding the purchase or
sale of securities by the Fund.
(i) Purchase or sale includes, among other things, the writing of an option
to purchase or sell.
(j) Security held or to be acquired by the Fund means
(i) any Covered Security which, within the most recent 15 days (x)
is or has been held by the applicable Fund or (y) is being or
has been considered by the applicable Fund or its investment
adviser for purchase by the applicable Fund; and
(ii) and any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security.
<PAGE>
FORUM CODE OF ETHICS
APPENDIX B
LIST OF ACCESS PERSONS
(as amended March 20, 2000)
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FIA AP IP AS OF DATE FUND END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Berthy, Les C. X X September 1, 1989 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Burns, John X X July 1, 1999 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Fischer, Anthony R. X X January 1, 1998 CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. X June 1, 1997 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Kaplan, Mark D. X X March 20, 1996 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. X September 1, 1989 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Stillings, Dawn Marie X X January 1, 1998 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron X November 1, 1999 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FFS AP IP AS OF DATE FUND END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. X September 1, 1991 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. X June 9, 1986 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron X November 1, 1999 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FUND OFFICERS AP IP AS OF DATE OFFICER OR TRUSTEE OF END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Barrett, Stephen J. September 28, 1998 CT, TC, ML, SS
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. October 16, 1992 CT, FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron October 28, 1999 SS, TC, CT, ML
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hong, Stacey E. May 19, 1998 CT, FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Kaplan, Mark D. June 14, 1996 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. October 16, 1992 CT, FF, SS, TC
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Klenk, Leslie K. May 19, 1998 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Riggle, D. Blaine March 9, 1998 CT, ML, SS, TC
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Sheehan, Thomas G. July 26, 1994 CT, ML
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Taylor, Dawn January 28, 1999 SS
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
</TABLE>
AP = Access Person; IP = Investment Personnel
FF = Forum Funds; CTD = Core Trust (Delaware); CT = Cutler Trust; TC = True
Crossing; Memorial = ML; SS = Sound Shore
<PAGE>
FORUM
CODE OF ETHICS
ATTACHMENT A
ACKNOWLEDGMENT
I understand that I am subject to Forum's Code of Ethics. I have read and I
understand the Forum Code of Ethics, as adopted by Forum Investment Advisors,
LLC and Forum Fund Services, LLC as amended January 17, 2000 and will comply
with it in all respects. In addition, I certify that I have complied with the
requirements of the Code of Ethics and I have disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of the Code.
Signature Date
Printed Name
THIS FORM MUST BE COMPLETED AND RETURNED TO FORUM'S COMPLIANCE DEPARTMENT:
COMPLIANCE MANAGER
FORUM FINANCIAL GROUP
TWO PORTLAND SQUARE
PORTLAND, ME 04101
<PAGE>
