As filed with the Securities and Exchange Commission on January 27, 1998
File No. 2-67052
File No. 811-3023
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 58
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 60
FORUM FUNDS
(Formerly Forum Funds, Inc.)
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Anthony C.J. Nuland, Esq.
Seward & Kissel
1200 G Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485, paragraph (b)
_____ on ________________ pursuant to Rule 485, paragraph (b)
__X__ 60 days after filing pursuant to Rule 485, paragraph (a)(i)
_____ 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
_____ on [ ] pursuant to Rule 485, paragraph (a)(ii)
_____ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed a
Rule 24f-2 notice for its most recent fiscal year ended March 31, 1997, on May
29, 1997.
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CROSS REFERENCE SHEET
PART A
(Prospectus offering shares of Equity Index Fund, Investors Equity Fund,
Small Company Opportunities Fund International Equity Fund and
Emerging Markets Fund)
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FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment Objective and
Policies; Other Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objective and Policies; Dividends and Tax
Matters; Other Information - The Trust and its Shares
Item 7. Purchase of Securities
Being Offered: Purchases and Redemptions of Shares; Other
Information - Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
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CROSS REFERENCE SHEET
PART A
(All other Prospectuses)
Not Applicable in this Filing
3
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CROSS REFERENCE SHEET
PART B
(SAI offering shares of Equity Index Fund, Investors Equity Fund,
Small Company Opportunities Fund International Equity Fund and
Emerging Markets Fund)
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LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
Item 10. Cover Page: Cover Page
Item 11. Table of Contents: Cover Page
Item 12. General Information and History: Management; Other Information
Item 13. Investment Objectives and
Policies: Investment Policies; Investment Limitations
Item 14. Management of the Registrant: Management
Item 15. Control Persons and
Principal Holders of
Securities: Other Information
Item 16. Investment Advisory
and Other Services: Management; Other Information - Custodian, Counsel,
Auditors
Item 17. Brokerage Allocation
and Other Practices: Portfolio Transactions
Item 18. Capital Stock and
Other Securities: Determination of Net Asset Value
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered: Determination of Net Asset Value; Additional Purchase
and Redemption Information
Item 20. Tax Status: Taxation
Item 21. Underwriters: Management
Item 22. Calculation of
Performance Data: Performance Data
Item 23. Financial Statements: Not Applicable
</TABLE>
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CROSS REFERENCE SHEET
PART B
(All other SAIs)
Not Applicable in this Filing
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FORUM FUNDS
EQUITY INDEX FUND
INVESTORS EQUITY FUND
SMALL COMPANY OPPORTUNITIES FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS FUND
PROSPECTUS
March __, 1998
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION AND SHAREHOLDER SERVICING:
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94FORUM
- --------------------------------------------------------------------------------
This Prospectus offers shares of the Equity Index Fund, Investors Equity Fund,
Small Company Opportunities Fund, International Equity Fund and Emerging Markets
Fund (each, a "Fund" and collectively, the "Funds"), separately-managed
portfolios of Forum Funds (the "Trust"), a registered open-end management
investment company. Each of Equity Index Fund, International Equity Fund and
Emerging Markets Fund seeks to achieve its investment objective by investing all
of its investable assets in a separate portfolio of another registered,
open-end, management investment company with the same investment objective.
Accordingly, each of these Fund's investment experience will correspond directly
with the portfolio's investment experience. See "Other Information - Core &
Gateway Structure." Small Company Opportunities Fund seeks to achieve its
investment objective by investing in various portfolios of other registered
open-end management investment companies, each of which invests using a
different investment style. See "Other Information -- Core & Gateway Structure."
Investors Equity Fund seeks to achieve its investment objective by investing
directly in portfolio securities.
EQUITY INDEX FUND seeks to duplicate the return of the Standard & Poor's 500
Composite Stock Index with minimum tracking error, while also minimizing
transaction costs. Under normal circumstances, the portfolio will hold stocks
representing 100% or more of the capitalization-weighted market values of the
Index.
INVESTORS EQUITY FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stock of companies domiciled in the United
States. The Fund intends to maintain a portfolio that is broadly diversified
across investment sectors.
SMALL COMPANY OPPORTUNITIES FUNDS seeks to provide long-term capital
appreciation while moderating annual return volatility by diversifying its
investments across different small capitalization equity investment styles.
INTERNATIONAL EQUITY FUND seeks to provide shareholders with long-term capital
appreciation by investing directly or indirectly in high quality companies based
outside the United States. Investments in foreign securities involve special
risks in addition to the risks associated with investments in general.
EMERGING MARKETS FUND seeks to achieve long-term capital appreciation through
investment in equity securities of issuers domiciled or doing business in
emerging market countries in regions such as Southeast Asia, Latin America, and
Eastern and Southern Europe. It is designed for investors who seek the
aggressive growth potential of emerging world markets and are willing to bear
the special risks of investing in those markets.
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There can be no assurance that any Fund's objective will be achieved. Shares of
the Funds are offered to investors at a price equal to the next determined net
asset value plus a maximum sales charge of 4.0% of the total public offering
price (4.17% of the amount invested).
This prospectus sets forth concisely the information a prospective investor
should know before investing in a Fund. The Trust has filed with the Securities
and Exchange Commission ("SEC") a Statement of Additional Information dated
March __, 1998, as may be amended from time to time (the "SAI"), which contains
more detailed information about the Trust and the Fund and is available together
with other related materials for reference on the SEC's Internet Web Site
(http://www.sec.gov). The SAI, which is incorporated into this Prospectus by
reference, also is available without charge and may be obtained by writing or
calling the Funds' transfer agent at the address and telephone numbers printed
above.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
TABLE OF CONTENTS
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<S> <C> <C>
1. Prospectus Summary 2. Investment Objectives and Policies
3. Additional Investment Policies 4. Risk Considerations
5. Management 6. Purchases and Redemptions of Shares
7. Distributions and Tax Matters 8. Other Information
Account Application
</TABLE>
FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUND
THE FUNDS
Each Fund's objective is described on the cover page. Investors Equity Fund
invests directly in portfolio securities. Each of Equity Index Fund,
International Equity Fund and Emerging Markets Fund seeks to achieve its
investment objective by investing all of its investable assets in a separate
series of another registered open-end, management investment company (each a
"Portfolio"). Accordingly, the investment experience of each of these Funds will
correspond directly with the investment experience of its corresponding
Portfolio. See "Other Information - Core & Gateway Structure." The Portfolios in
which the Funds invest are:
FUND PORTFOLIO
- ---- ---------
Equity Index Fund Index Portfolio
International Equity Fund International Portfolio
Emerging Markets Fund Schroder EM Core Portfolio
Index Portfolio and International Portfolio are separate series of Core Trust
(Delaware) ("Core Trust") and Schroder EM Core Portfolio is a series of Schroder
Capital Funds ("Schroder Core").
Small Company Opportunities Fund seeks to achieve its investment objective by
investing some or all of its investable assets in various Portfolios of other
open-end, management investment companies. Each Portfolio invests using a
different investment style. See "Other Information -- Core & Gateway Structure."
The Portfolios in which Small Company Opportunities Fund currently invest are:
Small Cap Index Portfolio, Small Company Stock Portfolio, Small Company Value
Portfolio and Small Cap Value Portfolio, each a separate series of Core Trust,
and Schroder U.S. Smaller Companies Portfolio, a separate series of Schroder
Core. The percentage of the Fund's assets invested in each Portfolio may be
changed at any time in response to market or other conditions. Allocations are
made within specified ranges as described under "Investment Objectives and
Policies -- Small Companies Opportunities Fund."
INVESTMENT ADVISERS
INVESTORS EQUITY FUND. H.M. Payson & Co. ("Payson") serves as the Fund's
investment adviser and Peoples Heritage Bank ("Peoples") serves as the
investment subadviser. Peoples and Bank of New Hampshire are subsidiaries of
Peoples Heritage Financial Group, a multi-bank and financial services holding
company.
EQUITY INDEX FUND. Norwest Investment Management, Inc. ("Norwest") serves
as Index Portfolio's investment adviser. Norwest is an indirect subsidiary of
Norwest Corporation, a multi-bank holding company that was incorporated under
the laws of Delaware in 1929.
SMALL COMPANY OPPORTUNITIES FUND. Forum Investment Advisors, LLC ("Forum
Advisors") serves as the investment adviser to the Fund. Following are the
investment advisers and investment subadvisers of the Portfolios of which Small
Company Opportunities Fund currently invests:
NORWEST serves as investment adviser to Small Cap Index Portfolio, Small
Company Stock Portfolio, Small Company Value Portfolio and Small Cap Value
Portfolio.
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("SMCI") serves as Schroder
U.S. Smaller Company Portfolio's investment adviser. SCMI is a wholly owned U.S.
subsidiary of Schroders Incorporated, the wholly owned U.S. subsidiary of
Schroders plc, a publicly owned company organized under the laws of England.
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CRESTONE CAPITAL MANAGEMENT, INC. ("Crestone"), an indirect investment
advisory subsidiary of Norwest Corporation, is the investment subadviser of
Small Company Stock Portfolio.
PEREGRINE CAPITAL MANAGEMENT, INC. ("Peregrine"), an indirect investment
advisory subsidiary of Norwest Corporation, is the investment subadviser of
Small Company Value Portfolio.
SMITH ASSET MANAGEMENT GROUP, L.P. ("Smith") is the investment subadviser
of Small Cap Value Portfolio.
INTERNATIONAL EQUITY FUND AND EMERGING MARKETS FUND. SCMI serves as
International Portfolio's and Schroder EM Core Portfolio's investment adviser.
Each investment adviser to a Fund or Portfolio may be referred to as an
"Adviser." For a description of each Adviser and its fees, see "Management -
Investment Advisers and Portfolio Managers." The investment advisory fees paid
by a Portfolio are borne indirectly by the Fund investing in that Portfolio.
MANAGEMENT
The administrator of the Funds is Forum Administrative Services, LLC
("FAS") and the distributor of their shares is Forum Financial Services, Inc.
("FFSI"). Forum Financial Corp. (the "Transfer Agent" or "FFC"), Two Portland
Square, Portland, Maine 04101, serves as the Funds' transfer agent, dividend
disbursing agent and shareholder servicing agent. See "Management."
PURCHASES AND REDEMPTIONS
Shares of each Fund are offered at the next-determined net asset value
per share plus any applicable sales charge. Shares may be purchased or redeemed
by mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $5,000, ($2,000 for an Individual
Retirement Account) and the minimum subsequent investment is $500. Shares may be
redeemed without charge. See "Purchases and Redemption of Shares."
EXCHANGE PROGRAM
Shareholders may exchange their shares without charge for the shares of
certain other funds of the Trust. See "Purchases and Redemptions of Shares --
Exchanges."
DISTRIBUTIONS
Distributions of net investment income are declared and paid annually
and the Funds distribute any net realized long-term capital gain at least
annually. With respect to each Fund, distributions are reinvested automatically
in additional shares of the Fund at net asset value unless the shareholder has
notified the Fund in his or her Account Application or otherwise in writing of
the shareholder's election to receive distributions in cash. See "Distributions
and Tax Matters."
CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS
There can be no assurance that a Fund will achieve its investment
objective and a Fund's net asset value and total return will fluctuate based
upon changes in the value of the securities in which it or its corresponding
Portfolio invests. No single Fund is a complete investment program. See,
"Investment Objectives and Policies" and "Risk Considerations."
The policies of International Portfolio and Schroder EM Core Portfolio
of investing in the securities of foreign issuers may involve risks in addition
to those normally associated with investments in the securities of U.S. issuers,
including risks of foreign political and economic instability, adverse movements
in exchange rates, and the
9
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imposition or tightening of limitations on the repatriation of capital. These
risks are more pronounced for Schroder EM Core Portfolio. See "Risk
Considerations."
The policy of investing in securities of smaller companies employed by
Small Company Opportunities Fund entails certain risks in addition to those
normally associated with investments in equity securities. These risks include
lower trading volumes and, therefore, the potential for greater stock price
volatility. For a description of investment considerations and risks involved in
investing in small company securities, see "Risk Considerations." Small Company
Opportunities Fund is designed for the investment of that portion of an
investor's funds that can appropriately bear the special risks associated with
an investment in smaller market capitalization companies.
By pooling their assets in one or more Portfolios with other
institutional investors, Equity Index Fund, Small Company Opportunities Fund,
International Equity Fund and Emerging Markets Fund may achieve certain
efficiencies and economies of scale. Nonetheless, this investment also could
have potential adverse effects on these Funds. These risks are described under
"Other Information - Core & Gateway Structure."
EXPENSES OF INVESTING IN THE FUNDS
The purpose of the following table is to assist investors in
understanding the expenses that an investor in shares of the Funds will bear
directly or indirectly.
<TABLE>
<S> <C> <C> <C> <C> <C>
Equity Investors Small Company International Emerging
Index Equity Opportunities Equity Markets
Fund Fund Fund Fund Fund
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge imposed
on purchases(1) (as a percentage
of public offering price) 4.0% 4.0% 4.0% 4.0% 4.0%
Exchange Fee None None None None None
ANNUAL FUND OPERATING
EXPENSES(2)
(as a percentage of average
net assets after applicable
expense reimbursements and
fee waivers)
Management Fees
(after fee waivers)(3) 0.15% 0.65% 0.59% 0.43% 0.92%
12b-1 Fees.................. None None None None None
Other Expenses
(after expense
reimbursements)(4)......... 0.10% 0.45% 0.91% 0.97% 0.68%
----- ----- ----- ----- -----
Total Fund Operating
Expenses................... 0.25% 1.10% 1.50% 1.40% 1.60%
</TABLE>
(1) Certain shareholders may be eligible for reduced sales charges. See
"Purchases and Redemptions of Shares - Reduced Sales Charges."
(2) For a further description of the various expenses incurred in the
operation of the Funds, see "Management." Expense reimbursements and fee waivers
are voluntary and may be reduced or eliminated at any time.
(3) Absent fee waivers, Management Fees would have been: International
Equity Fund, 0.45% and Emerging Markets Fund, 1.00%. Management Fees are the
investment advisory fees of a Fund and/or of the Portfolio or
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Portfolios in which the Fund invests. As long as a Fund's assets are invested in
a Portfolio, the Fund pays no investment advisory fees directly.
(4) The amount of Other Expenses is an estimate for the Funds' first fiscal
year of operations ending May 31, 1998. Absent expense reimbursements, Other
Expenses and Total Operating Expenses would have been: Equity Index Fund, 1.48%
and 1.63%; Investors Equity Fund, 1.49% and 2.14%; Small Company Opportunities
Fund, 0.14% and 2.70%; International Equity Fund, 3.22% and 3.67%; and Emerging
Markets Fund, 2.92% and 3.92%; respectively.
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in shares would pay assuming (i) a $1,000 investment
in the Fund, (ii) a 5% annual return, (iii) the reinvestment of all dividends
and distributions and (iv) payment of the maximum initial sales charge and
redemption at the end of each period:
1 YEAR 3 YEARS
Equity Index Fund $2 $8
Investors Equity Fund $11 $34
Small Company Opportunities
Fund $55 $86
International Equity
Fund $14 $43
Emerging Markets Fund $16 $48
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The example is based on the expenses listed in the table. The 5% annual return
is not a prediction of the Funds' return; rather it is required by government
regulation.
2. INVESTMENT OBJECTIVES AND POLICIES
To achieve their investment objectives, the Funds invest primarily in
common stocks and other equity securities. The domestic securities in which a
Fund invests are generally listed on a securities exchange or included in the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System but may be traded in the over-the-counter securities
market. Each Fund, other than Equity Index Fund, may invest in foreign issuers.
These investments may involve certain risks. See "Risk Considerations - Foreign
Investments."
Although the descriptions of the investment policies of Equity Index Fund, Small
Company Opportunities Fund, International Equity Fund and Emerging Markets Fund
discuss the investment policies of the Portfolios in which they invest and the
responsibilities of Core Trust's Board of Trustees (the "Core Trust Board") or
Schroder Core's Board of Trustees (the "Schroder Core Board"), as applicable,
they apply equally to the Funds and the Trust's Board of Trustees (the "Board").
Additional information concerning the investment policies of the Funds and the
Portfolios, including additional fundamental policies, is contained in the SAI.
EQUITY INDEX FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of Equity Index Fund is to duplicate the
return of the Standard & Poor's 500 Composite Stock Price Index.
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The Fund currently seeks to achieve its investment objective by
investing all of its investable assets in the Index Portfolio, which has
substantially the same investment objective and substantially similar policies
as the Fund. There can be no assurance that either the Fund or the Portfolio
will achieve its investment objective.
INVESTMENT POLICIES
The Portfolio is designed to duplicate the return of the Standard &
Poor's 500 Composite Stock Index (the "Index") with minimum tracking error,
while also minimizing transaction costs. Under normal circumstances, the
Portfolio will hold stocks representing 100% or more of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of facilitating payment of the
Portfolio's expenses or redemptions. For these and other reasons, the
Portfolio's performance can be expected to approximate but not be equal to that
of the Index.
The Portfolio may utilize index futures contracts to a limited extent.
Index futures contracts are bilateral agreements pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value at the close of trading of
the contract and the price at which the futures contract is originally struck.
As no physical delivery of securities comprising the Index is made, a purchaser
of index futures contracts may participate in the performance of the securities
contained in the index without the required capital commitment. Index futures
contracts may be used for several reasons: to simulate full investment in the
underlying index while retaining a cash balance for fund management purposes, to
facilitate trading or to reduce transaction costs. The Portfolio does not invest
in futures contracts for speculative reasons or to leverage the Fund. The Fund
is, however, subject to certain investment risks. These risks include: (i)
imperfect correlations between movements in the prices of futures contracts and
movements in the price of the securities hedged which may cause a given hedge
not to achieve its objective; (ii) the fact that the skills and techniques
needed to trade futures are different from those needed to select the other
securities in which the Fund invests; (iii) lack of assurance that a liquid
secondary market will exist for any particular instrument at any particular
time, which, among other things, may hinder a Fund's ability to limit exposures
by closing its positions; and (iv) the possible need to defer closing out of
certain futures contracts to avoid adverse tax consequences.
The Index tracks the total return performance of 500 common stocks
which are chosen for inclusion in the Index by Standard & Poor's ("S&P") on a
statistical basis. The inclusion of a stock in the Index in no way implies that
S&P believes the stock to be an attractive investment. The 500 securities, most
of which trade on the New York Stock Exchange, represent approximately 70% of
the total market value of all U.S. common stocks. Each stock in the Index is
weighted by its market value. Because of the market-value weighting, the 50
largest companies in the Index currently account for approximately 47% of its
value. The Index emphasizes large capitalizations and, typically, companies
included in the Index are the largest and most dominant firms in their
respective industries.
Neither the Fund nor the Portfolio is sponsored, endorsed, sold or
promoted by S&P, nor does S&P make any representation or warranty, implied or
express, to the purchasers of the Portfolio or the Fund or any member of the
public regarding the advisability of investing in index funds or the ability of
the Index to track general stock market performance. S&P does not guarantee the
accuracy and/or the completeness of the Index or any data included therein. S&P
makes no warranty, express or implied, as to the results to be obtained by the
Portfolio or the Fund, by the owners of the Portfolio or the Fund, or by any
other person or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and hereby expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the Index or any data included therein.
INVESTORS EQUITY FUND
INVESTMENT OBJECTIVE
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The investment objective of Investors Equity Fund is to seek capital
appreciation by investing primarily in common stock of companies domiciled in
the United States. There is no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES
To pursue its goal, the Fund intends to invest in securities of
established, growing companies that have demonstrated a high degree of financial
strength and fiduciary quality, and provide good liquidity in the market. Under
normal circumstances, the Fund will invest at least 65% of its assets in these
companies, without concentration in any one industry. In seeking these
investments, the Advisers rely in part upon fundamental and technical analysis
of individual companies. Among the characteristics that the Fund seeks in
companies are: a strong record of earnings growth, industry leadership, a unique
product or niche and good management. The Advisers also apply a broader analysis
of industry conditions and economic trends. While the Fund will be broadly
diversified across investment sectors, the Advisers' top down industry and
economic analysis will influence the actual sector weightings.
The fundamental risk of investing in common stock is the risk that the
value of the stock might decrease. Stock values fluctuate in response to the
activities of an individual company or in response to general market and/or
economic conditions. Historically, common stocks have provided greater long-term
returns and have entailed greater short-term risks than preferred stocks,
fixed-income securities and money market investments. The market value of all
securities, including equity securities, is based upon the market's perception
of value and not necessarily the book value of an issuer or other objective
measure of a company's worth.
In addition to common stock, the Fund also may invest in preferred
stocks and investment-grade convertible debt securities. The Fund also may
invest in American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers. The Fund expects any foreign investments
to remain below 10% of its assets.
SMALL COMPANY OPPORTUNITIES FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIOS
The investment objective of the Fund is to provide long term capital
appreciation while moderating annual return volatility by diversifying its
investments across different small capitalization equity investment styles. The
Fund currently seeks to achieve its investment objective by investing all of its
investable assets in the Portfolios described below. There can be no assurance
that either the Fund or the Portfolios will achieve their investment objectives.
INVESTMENT POLICIES
The Fund follows a "multi-style" approach designed to minimize the volatility
and risk of investing in small capitalization equity securities. The Fund
invests in various different small capitalization equity styles. The Fund uses
different equity investment styles in order to reduce the risk of price and
return volatility associated with reliance on a single investment style.
SMALL COMPANY OPPORTUNITIES FUND ALLOCATION
Set forth below are the ranges of investments by the Fund in each
Portfolio and projected allocation among the Portfolios when the Small
Cap Index Portfolio achieves total assets of $15 million. Until that
time, the Fund's assets will be allocated among the four Core
Portfolios listed under "Small Company style" below.
<TABLE>
<S> <C> <C>
CURRENT ALLOCATION RANGE OF INVESTMENT
Small Cap Index Portfolio 40% 38% - 42%
Small Company style 60% 58% - 62%
Small Company Stock Portfolio 15% 13% - 17%
Small Company Value Portfolio 18% 16% - 20%
Small Cap Value Portfolio 18% 16% - 20%
Schroder U.S. Smaller Companies Portfolio 9% 7% - 11%
Total Fund Assets 100%
</TABLE>
As market values of the Fund's assets change, the percentage of Fund
assets invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Forum Advisors daily effects transactions for
the Fund to reestablish its allocations.
Consistent with the Fund's investment objective and policies and under
the general supervision of the Board, Forum Advisors may make changes in the
foregoing percentage allocations at any time Forum Advisors deems appropriate,
including in response to market and other conditions. In addition, upon approval
of the Board and notification of shareholders, the Fund may invest in additional
or fewer Core Portfolios or invest directly in portfolio securities. When Forum
Advisors believes that a change in the allocation percentages is desirable, it
will sell and purchase securities to effect the change.
Following is a discussion of the investment objectives, policies and
risks of the Portfolios in which the Fund currently invests.
SMALL CAP INDEX PORTFOLIO. Small Cap Index Portfolio seeks to replicate
the return of the Standard & Poor's Small Cap 600 Composite Stock Price Index
(the "Index"). The Portfolio is designed to replicate the return of the Index
with minimum tracking error, while also minimizing transaction costs. Under
normal circumstances, the Portfolio will hold stocks representing 100% of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of facilitating payment of the
Portfolio's expenses or redemptions. Cash positions may be invested in
short-term money market instruments, hedged with S&P 500 Index futures. For
these and other reasons, the Portfolio's performance can be expected to
approximate but not be equal to that of the Index.
Small Cap Index Portfolio may utilize index futures contracts to a
limited extent. Index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. As no physical delivery of securities comprising the Index is
made, a purchaser of index futures contracts may participate in the performance
of the securities contained in the index without the required capital
commitment. Index futures contracts may be used for several reasons: to simulate
full investment in the underlying index while retaining a cash balance for
portfolio management purposes; to facilitate trading; or to reduce transaction
costs. The Portfolio does not invest in futures contracts for speculative
reasons or to leverage the Portfolio. (See "Investment Objectives and Policies
- -- Equity Index Fund".)
The Index tracks the total return performance of 600 common stocks
which are chosen for inclusion in the Index by Standard & Poor's Corporation
("S&P") on a statistical basis. The inclusion of a stock in the Index in no way
implies that S&P believes the stock to be an attractive investment. The 600
securities, most of which trade on the New York Stock Exchange, represent 4% of
the total market value of all U.S. common stocks. The Index is comprised of
industrial, utility, financial and transportation companies and is a
market-value weighted index, with each stock's weight in the Index proportionate
to its market value.
Small Cap Index Portfolio is not sponsored, endorsed, sold or promoted
by S&P, nor does S&P make any representation or warranty, implied or express, to
the investors in the Portfolio or any member of the public regarding the
advisability of investing in index funds or the ability of the Index to track
general stock market performance. S&P does not guarantee the accuracy and/or the
completeness of the Index or any data included therein.
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S&P makes no warranty, express or implied, as to the results to be
obtained by Small Cap Index Portfolio, by the investors in the Portfolio, or by
any other person or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and hereby expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the Index or any data included therein.
SMALL COMPANY STOCK PORTFOLIO seeks capital appreciation by investing
primarily in the common stock of small- and medium-size domestic companies that
have a market capitalization well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index. Small companies are those
companies whose market capitalization is less than the largest stock in the
Russell 2000 Index. Medium companies are those companies whose market
capitalization is in the range of $500 million to $8 billion.
In selecting securities for the Portfolio, Crestone seeks securities
with significant price appreciation potential, and attempts to identify
companies that show above-average growth, as compared to long-term overall
market growth. The companies in which the Portfolio invests may be in a
relatively early stage of development or may produce goods and services that
have favorable prospects for growth due to increasing demand or developing
markets. Frequently, such companies have a small management group and single
product or product line expertise, which, in the view of Crestone, may result in
an enhanced entrepreneurial spirit and greater focus, thereby allowing such
companies to be successful. Norwest and Crestone believe that such companies may
develop into significant business enterprises and that an investment in such
companies offers a greater opportunity for capital appreciation than an
investment in larger, more established entities.
Securities owned by the Portfolio that are traded in the
over-the-counter market or on a regional securities exchange may not be traded
every day or in the volume typical of securities trading on a national
securities exchange. As a result, disposition by the Portfolio of a portfolio
security, to meet redemption requests by shareholders or otherwise, may require
the Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time.
Small Company Stock Portfolio also may invest up to 20% of its assets
in American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers.
SMALL COMPANY VALUE PORTFOLIO. Small Company Value Portfolio seeks to
provide long-term capital appreciation by investing primarily in smaller
companies. The Portfolio invests primarily in the common stock of companies that
have a market capitalization well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index. Smaller companies are those
companies whose market capitalization is less than the largest stock in the
Russell 2000 Index.
The Advisers focus on securities that are conservatively valued in the
marketplace relative to their underlying fundamentals. Value investing provides
investors with a less aggressive way to take advantage of growth opportunities
of small companies. The Advisers seek to invest in stocks priced low relative to
the stock of comparable companies, determined by price/earnings ratios, cash
flows or other measures. Value investing therefore may reduce downside risk
while offering potential for capital appreciation as a stock gains favor among
other investors and its stock price rises.
SMALL CAP VALUE PORTFOLIO. Small Cap Value Portfolio seeks capital
appreciation by investing in common stocks of smaller companies. The Portfolio
seeks higher growth rates and greater long-term returns by investing primarily
in the common stock of smaller companies that, in the view of the investment
adviser, are undervalued. Under normal circumstances, the Portfolio will invest
substantially all of its assets, but not less than 65% of its net assets, in
securities of companies with a market capitalization which reflects the market
capitalization of companies included in the Russell 2000 Index.
The Portfolio invests in those smaller companies that the investment
adviser believes to be undervalued and which will report a level of corporate
earnings exceeding the level expected by investors. The determination of value
is based upon both the price to earnings ratio of the company and a comparison
of the public market value of the company to a proprietary model that values the
company in the private market. In seeking companies that will report a level of
earnings exceeding that expected by investors, the investment adviser uses both
quantitative and fundamental
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analysis. Among the factors that the investment adviser considers are changes of
earnings estimates by investment analysts, the recent trend of company earnings
reports, and the fundamental business outlook for the company.
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO seeks capital appreciation by
investing primarily in equity securities of companies domiciled in the United
States that, at the time of purchase, have market capitalizations of $1.5
billion or less.
In its investment approach, Schroder attempts to identify securities of
companies which it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. As part of the
investment decision, Schroder's assessment of the competency of an issuer's
management will be an important consideration. These criteria are not rigid, and
other investments may be included in the Portfolio if they may help the
Portfolio to attain its objective.
The Portfolio will invest principally in equity securities (common
stocks, securities convertible into common stocks or, subject to special
limitations, rights or warrants to subscribe for or purchase common stocks). The
Portfolio may also invest to a limited degree in non-convertible debt securities
and preferred stocks when, in the opinion of Schroder, such investments are
warranted to achieve the Portfolio's investment objective.
The Portfolio may invest in securities of small, unseasoned companies
(which, together with any predecessors, have been in operation for less than
three years), as well as in securities of more established companies. In view of
the volatility of price movements of the former, the Portfolio currently intends
to invest no more than 5% of its total assets in securities of small, unseasoned
issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, it is the present intention
of the Portfolio to invest no more than 5% of its net assets in debt securities
rated below the fourth highest rating category. These securities are commonly
known as "high yield/high risk" securities or "junk bonds." The Portfolio will
not invest in debt securities that are in default. High yield/high risk
securities are predominantly speculative with respect to the capacity to pay
interest and repay principal and generally involve a greater volatility of price
than securities in higher rated categories. The Portfolio is not obligated to
dispose of securities due to changes by the rating agencies. (See "Additional
Investment Policies and Risk Considerations -- Debt Securities.") (See the SAI
for information about the risks associated with investing in junk bonds.)
For a description of the investment considerations and risks involved
in investing in small company securities, see "Risk Considerations."
INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of International Equity Fund is long-term
capital appreciation by investing directly or indirectly in high quality
companies based outside the United States. There is no assurance that either the
Fund or the Portfolio will achieve its investment objective.
The Fund is designed for U.S. investors who seek international
diversification of their investments by participating in foreign securities
markets. The Fund is not a complete investment program and investments in the
securities of foreign issuers generally involve risks in addition to the risks
associated with investments in the securities of U.S. issuers. See "Risk
Considerations - Foreign Investments."
The Fund currently seeks to achieve its investment objective by
investing all of its investment assets in International Portfolio, which has
substantially the same investment objective and policies as the Fund. There is
no assurance that the Fund or the Portfolio will achieve its investment
objective.
INVESTMENT POLICIES
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The Portfolio normally invests at least 65% of its total assets in
equity securities of companies domiciled outside the United States. Investments
by the Portfolio are selected on the basis of their potential for capital
appreciation without regard for current income. The Portfolio also may invest in
the securities of domestic closed-end investment companies investing primarily
in foreign securities and may invest in debt obligations of foreign governments
or their political subdivisions, agencies or instrumentalities, of supranational
organizations and of foreign corporations. The Portfolio's investments will be
diversified among securities of issuers in foreign countries including, but not
limited to, Japan, Germany, the United Kingdom, France, The Netherlands, Hong
Kong, Singapore and Australia. In general, the Portfolio will invest only in
securities of companies and governments in countries that SCMI, in its judgment,
considers both politically and economically stable. International Portfolio has
no limit on the amount of its assets that may be invested in any one type of
foreign instrument or in any foreign country; however, to the extent
International Portfolio concentrates its assets in a foreign country, it will
incur greater risks. See "Risk Considerations - Foreign Investments."
The Portfolio may purchase preferred stock and convertible debt
securities, including convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio also may enter into foreign exchange contracts,
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to the Portfolio from adverse movements in currency values, the
contracts also limit possible gains from favorable movements. See "Additional
Investment Policies - Foreign Exchange Contracts."
FOREIGN INVESTMENT RISKS. For a detailed description of the risks of foreign
investment, see "Risk Considerations - Foreign Investments."
EMERGING MARKETS FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of Emerging Markets Fund is to seek long-term
capital appreciation. It seeks to achieve this objective through investment in
equity securities of issuers domiciled or doing business in emerging market
countries in regions such as Southeast Asia, Latin America, and Eastern and
Southern Europe. There is no assurance that either the Fund or Portfolio will
achieve its investment objective.
The Fund is designed for investors who seek the aggressive growth
potential of emerging world markets and are willing to bear the special risks of
investing in those markets. The Fund is not a complete investment program and
investments in the securities of foreign issuers generally involve risks in
addition to the risks associated with investments in the securities of U.S.
issuers. See "Risk Considerations." The Fund is not intended for investors whose
objective is assured income or preservation of capital.
The Fund seeks to achieve its investment objective by investing
substantially all of its assets in Schroder EM Core Portfolio, which has an
identical investment objective and substantially similar investment policies and
strategies as the Fund. There can be no assurance that either the Fund or the
Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Under normal market conditions, the Portfolio will invest at least 65%
of its total assets in emerging market equity securities, which include common
stocks; preferred stocks; convertible preferred stocks; stock rights and
warrants and convertible debt securities. Investments in stock rights and
warrants will not be considered for purposes of determining compliance with this
policy. The Portfolio may invest up to 35% of its total assets in high-risk debt
securities that are unrated or rated below investment grade. See "Risk
Considerations - Debt Securities." The Portfolio may acquire emerging market
securities that are not denominated in emerging market currencies. Under certain
circumstances, the Portfolio may invest indirectly in emerging market securities
by
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investing in other investment companies or vehicles. See "Investment in Other
Investment Companies or Vehicles" below.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state-owned industries, permitting
the value of their currencies to float against the dollar and other major
currencies, and generally reducing the level of state intervention in industry
and commerce. Important intra-regional economic integration also holds the
promise of greater trade and growth. At the same time, significant progress has
been made in restructuring the heavy external debt burden that certain emerging
market countries accumulated during the 1970s and 1980s. While there is no
assurance that these trends will continue, the Portfolio's investment adviser
will seek out attractive investment opportunities in these countries.
"Emerging market" countries are all those not included in the Morgan
Stanley Capital International World Index ("MSCI World") of major world
economies. If, however, the investment adviser determines that the economy of a
MSCI World-listed country is an emerging market economy, the adviser may include
such country in the emerging market category. The following countries are
currently excluded from the Portfolio's emerging market category: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Malaysia, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States of
America. The Portfolio will not necessarily seek to diversify investments on a
geographic basis and may invest more than 25% of its total assets in issuers
located in any one country. See "Risk Considerations - Foreign Investments -
Geographic Concentration."
An issuer of a security will be considered to be domiciled or doing
business in an emerging market when: (i) it is organized under the laws of an
emerging market country; (ii) its primary securities trading market is in an
emerging market country; (iii) in the judgment of the investment adviser, at
least 50% of the issuer's revenues or profits are derived from goods produced or
sold, investments made, or services performed in emerging market countries; or
(iv) it has at least 50% of its assets situated in emerging market countries.
The Portfolio may consider investment companies to be located in the country or
countries in which they primarily invest.
BRADY BONDS. The Portfolio may invest a portion of its assets in Brady
Bonds, which are securities created through the exchange of existing commercial
bank loans to sovereign entities for new obligations in connection with debt
restructuring (under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady). Brady Bonds have been issued only
recently and, therefore, do not have a long payment history. Brady Bonds may
have collateralized and uncollateralized components, are issued in various
currencies and are actively traded in the over-the-counter secondary market.
Brady Bonds are not considered U.S. government securities. In light of the
residual risk associated with the uncollateralized portions of Brady Bonds and,
among other factors, the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are considered speculative. Brady Bonds could be
subject to restructuring arrangements or to requests for new credit, which could
cause the Portfolio to suffer a loss of interest or principal on its holdings.
For further information, see "Brady Bonds" in the SAI.
INVESTMENTS IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio is
permitted to invest in certain emerging markets through governmentally
authorized investment vehicles or companies. Pursuant to the 1940 Act, the
Portfolio may invest in the shares of other investment companies which invest in
securities that the Portfolio is permitted to purchase subject to the limits
permitted under the 1940 Act or any orders, rules or regulations thereunder.
When investing through investment companies, the Portfolio may pay substantial
premiums above such investment companies' net asset value per share. As a
shareholder in an investment company, the Portfolio would bear its ratable share
of the investment company's expenses, including its advisory and administrative
fees. At the same time, the Portfolio would continue to pay its own fees and
expenses.
FOREIGN INVESTMENT RISKS. For a detailed description of the risks of
foreign investment, including the risks of investing in emerging market
countries, see "Risk Considerations - Foreign Investments" and "- Emerging
Markets."
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NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, Emerging Markets Fund, like the Schroder EM
Core Portfolio, has classified itself as a "non-diversified investment company"
under the 1940 Act so that it may invest more than 5% of its total assets in the
securities of a single issuer. This classification may not be changed without a
shareholder vote. However, so that the Fund may continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended at the close of each quarter of the taxable year: (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of a single issuer; and (ii) with respect to`50% of the market
value of its total assets, not more than 5% will be invested in the securities
of a single issuer; and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer.
To the extent the Fund makes investments in excess of 5% of its assets
in a particular issuer, its exposure to credit and market risks associated with
that issuer is increased. Also, since a relatively high percentage of the Fund's
assets may be invested in the securities of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
3. ADDITIONAL INVESTMENT POLICIES
The investment objective and all investment policies of each of the
Funds and the Portfolios that are designated as fundamental may not be changed
without approval of the holders of a majority of the outstanding voting
securities of a Fund or a Portfolio, as applicable. A majority of outstanding
voting securities means the lesser of (i) 67% of the shares present or
represented at a shareholder meeting at which the holders of more than 50% of
the outstanding shares are present or represented, or (ii) more than 50% of
outstanding shares. Unless otherwise indicated, all investment policies of the
Fund are not fundamental and may be changed by the Board without approval by
shareholders of the Fund. Likewise, nonfundamental investment policies of a
Portfolio may be changed by the Schroder Core Board or the Core Trust Board, as
applicable, without shareholder approval. For more information concerning
shareholder voting, see "Other Information - "The Trust and Its Shares" and "-
Core & Gateway Structure."
Unless otherwise indicated below, the discussion below of the
investment policies of a Fund investing in a single Portfolio also refers to the
investment policies of the Portfolio.
BORROWING
Equity Index Fund, Investors Equity Fund and International Equity Fund
may borrow money for temporary or emergency purposes, including the meeting of
redemption requests, but not in excess of 33 1/3% of the value of the Fund's
total assets (computed immediately after the borrowing). Small Company Fund may
borrow money for temporary or emergency purposes, including the meeting of
redemption requests, but not in excess of 331/3% of the value of the Fund's net
assets. Small Company Opportunities Fund may not borrow more than 5% of the
value of its assets for other than temporary or emergency purposes. Emerging
Markets Fund will not borrow money if, as a result, outstanding borrowings would
exceed an amount equal to one third of the Fund's or Portfolio's total assets.
DIVERSIFICATION AND CONCENTRATION
Each Fund except Emerging Markets Fund is diversified as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). As a fundamental
policy, with respect to 75% of its assets, a diversified fund may not purchase a
security (other than a U.S. Government Security or shares of investment
companies) if, as a result: (i) more than 5% of the Fund's total assets would be
invested in the securities of a single issuer; or (ii) the Fund would own more
than 10% of the outstanding voting securities of any single issuer. Each Fund is
prohibited from concentrating its assets in the securities of issuers in any
industry. As a fundamental policy, no Fund may purchase securities if,
immediately after the purchase, more than 25% of the value of the Fund's total
assets would be invested in the securities of issuers conducting their principal
business activities in the same industry. This limit does not apply to
investments in U.S. Government Securities or repurchase agreements covering U.S.
Government
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Securities. Each Fund reserves the right to invest up to 100% of its investable
assets in one or more investment companies such as the Portfolios.
ILLIQUID SECURITIES
Each of the Funds limits its purchase of illiquid securities. As a
fundamental policy, no Fund may knowingly acquire securities or invest in
repurchase agreements with respect to any securities if, as a result, more than
15% of the Fund's net assets taken at current value would be invested in
securities which are not readily marketable. Illiquid securities are securities
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the securities and
include, among other things, repurchase agreements not entitling the holder to
payment within seven days and restricted securities (other than those determined
to be liquid pursuant to guidelines established by the Board, the Schroder Core
Board or the Core Trust Board). Under the supervision of the Board, the Schroder
Core Board or the Core Trust Board, the Advisers determine and monitor the
liquidity of the portfolio securities.
REPURCHASE AGREEMENTS AND
LENDING OF PORTFOLIO SECURITIES
Each Fund may enter into repurchase agreements and may lend securities
from its portfolio to brokers, dealers and other financial institutions. These
investments may entail certain risks not associated with direct investments in
securities. For instance, in the event that bankruptcy or similar proceedings
were commenced against a counterparty in these transactions or a counterparty
defaulted on its obligations, a Fund may have difficulties in exercising its
rights to the underlying securities, may incur costs and experience time delays
in disposing of them and may suffer a loss.
Repurchase agreements are transactions in which a Fund purchases a
security and simultaneously commits to resell that security to the seller at an
agreed-upon price on an agreed-upon future date, normally one to seven days
later. The resale price reflects a market rate of interest that is not related
to the coupon rate or maturity of the purchased security. When a Fund lends a
security it receives interest from the borrower or from investing cash
collateral. The Trust maintains possession of the purchased securities and any
underlying collateral in these transactions, the total market value of which on
a continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will limit securities lending to not more than 33
1/3% of the value of its total assets.
COMMON AND PREFERRED STOCK
AND WARRANTS
Each Fund may invest in common and preferred stock. Common stockholders
are the owners of the company issuing the stock and, accordingly, vote on
various corporate governance matters such as mergers. They are not creditors of
the company, but rather, upon liquidation of the company, are entitled to their
pro rata share of the company's assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders are paid. Preferred
stock is a class of stock having a preference over common stock as to dividends
and, in general, as to the recovery of investment. A preferred stockholder is a
shareholder in the company and not a creditor of the company, as is a holder of
the company's fixed income securities. Dividends paid to common and preferred
stockholders are distributions of the earnings of the company and not interest
payments, which are expenses of the company. Equity securities owned by a Fund
may be traded in the over-the counter market or on a securities exchange, but
may not be traded every day or in the volume typical of securities traded on a
major U.S. national securities exchange. As a result, disposition by a Fund of a
security to meet redemptions by interest holders or otherwise may require the
Fund to sell these securities at a discount from market prices, to sell during
periods when disposition is not desirable, or to make many small sales over a
lengthy period of time. The market value of all securities, including equity
securities, is based upon the market's perception of value and not necessarily
the book value of an issuer or other objective measure of a company's worth. A
Fund may also invest in warrants, which are options to purchase an equity
security at a specified price (usually representing a premium over the
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applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time.
MARGIN AND SHORT SALES
No Fund may purchase securities on margin or make short sales of
securities, except short sales against the box. A short sale is
"against-the-box" to the extent that the Fund contemporaneously owns or has the
right to obtain at no added cost securities identical to those sold short. These
prohibitions do not restrict the Fund's ability to use short-term credits
necessary for the clearance of portfolio transactions and to make margin
deposits in connection with permitted transactions in options and futures
contracts.
FOREIGN EXCHANGE CONTRACTS
Changes in foreign currency exchange rates will affect the U.S. dollar
values of securities denominated in currencies other than the U.S. dollar. The
rate of exchange between the U.S. dollar and other currencies fluctuates in
response to forces of supply and demand in the foreign exchange markets. These
forces are affected by the international balance of payments and other economic
and financial conditions, government intervention, speculation and other
factors, many of which may be difficult if not impossible to predict. No Fund or
Portfolio will seek to benefit from anticipated short-term fluctuations in
currency exchange rates. When investing in foreign securities, the International
Portfolio and Schroder EM Core Portfolio usually effect currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market. The Portfolios incur foreign exchange expenses in
converting assets from one currency to another.
International Portfolio and Schroder EM Core Portfolio may enter into
foreign currency forward contracts for the purchase or sale of foreign currency
to "lock in" the U.S. dollar price of the securities denominated in a foreign
currency or the U.S. dollar value of interest and dividends to be paid on such
securities, or to hedge against the possibility that the currency of a foreign
country in which the Portfolio has investments may suffer a decline against the
U.S. dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. Although the strategy
of engaging in foreign currency transactions could reduce the risk of loss due
to a decline in the value of the hedged currency, it could also limit the
potential gain from an increase in the value of the currency. Neither Portfolio
intends to maintain a net exposure to such contracts where the fulfillment of
the Portfolio's obligations under such contracts would obligate the Portfolio to
deliver an amount of foreign currency in excess of the value of the Portfolio's
portfolio securities or other assets denominated in the currency. A Portfolio
will not enter into these contracts for speculative purposes and will not enter
into non-hedging currency contracts. These contracts involve a risk of loss if
SCMI fails to predict currency values correctly. International Portfolio has no
present intention to enter into currency futures or options contracts but may do
so in the future.
OPTIONS AND FUTURES TRANSACTIONS
While the Funds (except Equity Index Fund and Small Company
Opportunities Fund as described above) do not presently intend to do so, they
may write covered call options and purchase certain put and call options, stock
index futures, and options on stock index futures and broadly-based stock
indices, all of which are referred to as "Hedging Instruments." In general, a
Fund may use Hedging Instruments: (i) to protect against declines in the market
value of the portfolio's securities or (ii) to establish a position in the
equities markets as a temporary substitute for purchasing particular equity
securities. No Fund will use Hedging Instruments for speculation. The Hedging
Instruments a Fund is authorized to use have certain risks associated with them,
including: (i) 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; (ii) potentially unlimited loss associated with futures transactions
and the possible lack of a liquid secondary market for closing out a futures
position; and (iii) possible losses resulting from the inability of the
investment adviser to predict the direction of stock prices, interest rates and
other economic factors. The Hedging Instruments each Fund
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may use and the risks associated with them are described in greater detail under
"Options and Futures Transactions" in the SAI.
DEBT SECURITIES
Each Fund except Equity Index Fund may seek capital appreciation
through investment in convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities is
incidental to a Fund's or Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the operating expenses
of the Funds or Portfolios. The debt securities in which the Funds invest may be
unrated. Schroder EM Core Portfolio may invest up to 35% of its total assets in
debt securities that are unrated or rated below investment grade (below "Baa" by
Moody's or "BBB" by S&P). See "Risk Considerations - Debt Securities." For a
further description of S&P's and Moody's securities ratings see the Appendix to
the SAI.
Schroder EM Core Portfolio may invest in debt securities issued or
guaranteed by emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"); debt securities issued or guaranteed by international organizations
designated or supported by multiple foreign governmental entities (which are not
obligations of foreign governments) to promote economic reconstruction or
development; and debt securities issued by corporations or financial
institutions.
TEMPORARY DEFENSIVE POSITION
When business or financial conditions warrant, each Fund (and the
Portfolios in which Small Company Opportunities Fund invests) may assume a
temporary defensive position and invest without limit in cash or prime quality
cash equivalents, including: (i) short-term U.S. Government Securities; (ii)
certificates of deposit, bankers acceptances and interest-bearing savings
deposits of commercial banks; (iii) commercial paper; (iv) repurchase
agreements; and (v) shares of money market funds registered under the 1940 Act
within the limits specified therein. During periods when and to the extent that
a Fund or Portfolio has assumed a temporary defensive position, it may not be
pursuing its investment objective. Prime quality instruments are those that are
rated in one of the two highest short-term rating categories by an NRSRO or, if
not rated, determined by the investment adviser to be of comparable quality.
Apart from temporary defensive purposes, a Fund or Portfolio may at any time
invest a portion of its assets in cash and cash equivalents as described above.
International Portfolio and Schroder EM Core Portfolio also may hold cash and
bank instruments denominated in any major foreign currency.
PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Funds (the portfolio
turnover rate) will vary from year to year depending on market conditions. The
Funds (or Portfolios) may engage in short-term trading but their portfolio
turnover rate is not expected to exceed 100%. An annual portfolio turnover rate
of 100% would occur if all the securities in a Fund or Portfolio were replaced
in a one year period. Higher portfolio turnover and short-term trading involve
correspondingly greater commission expenses and transaction costs. The Advisers
weigh the anticipated benefits of short-term investments against these
consequences. Also, higher portfolio turnover rates may cause shareholders of a
Fund to recognize gains for federal income tax purposes. See "Taxation" in the
SAI.
4. RISK CONSIDERATIONS
FOREIGN INVESTMENTS
GENERAL
All investments, domestic and foreign, involve certain risks.
Investment in the securities of foreign issuers may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers. In
general, International Portfolio and Schroder EM Core Portfolio will invest only
in securities of companies and
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governments in countries which SCMI, in its judgment, considers both politically
and economically stable. Nevertheless, 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 leading to
nationalization, increased taxation or confiscation of Portfolio assets. To the
extent the Portfolios invest substantially in issuers located in one country or
area, such investments may be subject to greater risk in the event of political
or social instability or adverse economic developments affecting that country or
area.
Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income available for
distribution to a Portfolio's, and thus the Fund's, shareholders; (ii)
commission rates payable on foreign portfolio transactions are generally higher
than in the U.S.; (iii) accounting, auditing and financial reporting standards
differ from those in the U.S., and this may mean that less information about
foreign companies may be available than is generally available about issuers of
comparable securities in the U.S.; (iv) foreign securities often trade less
frequently and with less volume than U.S. securities and consequently may
exhibit greater price volatility; and (v) foreign securities trading practices,
including those involving securities settlement, may expose the Portfolio to
increased risk in the event of a failed trade or the insolvency of a foreign
broker-dealer or registrar.
CURRENCY FLUCTUATIONS AND DEVALUATIONS
Because International Portfolio and Schroder EM Core Portfolio will
invest heavily in non-U.S. currency denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
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. A decline in the value of currencies in which a Portfolio's
investments are denominated against the dollar will result in a corresponding
decline in the dollar value of the Portfolio's assets. This risk tends to be
heightened in the case of investments in certain emerging market countries as
further discussed below. A decline in the value of a particular foreign currency
against the U.S. dollar occurring after the Portfolio's income has been earned
and computed in U.S. dollars may require the Portfolio to liquidate portfolio
securities to acquire sufficient U.S. dollars to fund redemptions. Similarly, if
the exchange rate declines between the time the Portfolio incurs expenses in
U.S. dollars and the time such expenses are paid, the Portfolio may be required
to liquidate additional foreign securities to purchase the U.S. dollars required
to meet such expenses.
GEOGRAPHIC CONCENTRATION
Schroder EM Core Portfolio may invest more than 25% of its total assets
in issuers located in any one country. To the extent it invests in issuers
located in one country, a Portfolio is susceptible to factors adversely
affecting that country. In particular, these factors may include the political
and economic developments and foreign exchange rate fluctuations discussed
above. As a result of investing substantially in one country, the value of a
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable fund with a lesser degree of geographic concentration.
EMERGING MARKETS
POLITICAL AND ECONOMIC RISKS
Schroder EM Core Portfolio may invest in securities of issuers located
in countries considered by some to be emerging market countries. The risks of
investing in foreign securities may be greater with respect to securities of
issuers in, or denominated in the currencies of, emerging market countries. In
any emerging market country, there is the possibility of expropriation of
assets, confiscatory taxation, nationalization, foreign exchange controls,
foreign investment controls on daily stock market movements, default in foreign
government securities, political or social
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instability or diplomatic developments which could affect investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as economic growth rates,
rates of inflation, capital reinvestment, resources, self-sufficiency and
balance of payments positions. Certain foreign investments may also be subject
to foreign withholding taxes, thereby reducing the income available for
distribution to a Fund's shareholders. The economies of developing countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade.
Certain emerging market countries may restrict investment by foreign
entities. For example, some of these countries may limit the size of foreign
investment in certain issuers, require prior approval of foreign investment by
the government, impose additional tax on foreign investors or limit foreign
investors to specific classes of securities of an issuer that have less
advantageous rights (with regard to price or convertibility, for example) than
classes available to domiciliaries of the country. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the costs and expenses of the Fund.
Substantial limitations may also exist in certain countries with
respect to a foreign investor's ability to repatriate investment income, capital
or the proceeds of sales of securities. The Portfolio could be adversely
affected by delays in, or refusals to grant, any required governmental approvals
for repatriation of capital. If a deterioration occurs in a country's balance of
payments, the country could impose temporary restrictions on foreign capital
remittances. In the event of expropriation, nationalization or other
confiscation, the Portfolio could lose its entire investment in the country
involved.
REGULATION AND LIQUIDITY OF MARKETS
Government supervision and regulation of exchanges and brokers in
emerging market countries is frequently less extensive than in the United
States. Therefore, there is an increased risk of uninsured loss due to lost,
stolen or counterfeit stock certificates. These markets may have different
clearance and settlement procedures. Securities settlements may, in some
instances, be subject to delays and related administrative uncertainties. In
certain cases, settlements have not kept pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could adversely affect or interrupt the Fund's intended investment
program or result in investment losses due to intervening declines in security
values.
The securities markets of many foreign countries, including emerging
market countries, are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. Consequently, a Portfolio whose
investment portfolio includes securities traded in such markets may experience
greater price volatility and significantly lower liquidity than a portfolio
invested solely in equity securities of United States companies. These foreign
markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. Furthermore, reduced secondary
market liquidity may make it more difficult for the Portfolio to determine the
value of its portfolio securities or dispose of particular instruments when
necessary.
Investing in local markets, particularly emerging markets, may require
the Portfolio to adopt special procedures, seek local government approvals or
take other actions each of which may involve additional costs to the Portfolio.
Brokerage commissions and other transaction costs on and off of foreign
securities exchanges are generally higher as well.
FINANCIAL INFORMATION AND STANDARDS AND REGULATION OF ISSUERS
Issuers of securities in foreign jurisdictions are generally not
subject to the same degree of regulation as are U.S. issuers with respect to
such matters as insider trading rules, restrictions on market manipulation,
shareholder proxy requirements and timely disclosure of information. Foreign
companies may not be subject to uniform
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accounting, auditing and financial reporting standards. Often, available
information about issuers and their securities is less extensive, and, in
certain circumstances, substantially less extensive in foreign markets, and
particularly emerging market countries, than in the United States. In addition,
laws in foreign countries governing business organizations, bankruptcy and
insolvency may provide less protection to security holders such as the Portfolio
than that provided by U.S. laws.
CURRENCY FLUCTUATIONS AND DEVALUATIONS
The risks associated with currency fluctuations and devaluations often
are heightened with respect to investments in emerging market countries. For
example, some currencies of emerging market countries have experienced steady
devaluations relative to the U.S. dollar, and major adjustments have been made
in certain of such currencies periodically. Some emerging market countries also
may have managed currencies which do not freely float against the U.S. dollar.
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.
INFLATION
Several emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation in recent years. Inflation and
rapid fluctuations in inflation rates may have very negative effects on the
economies and securities markets of certain emerging market countries. Further,
inflation accounting rules in some emerging market countries require, for
companies that keep accounting records in the local currency, that certain
assets and liabilities be restated on the company's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits for certain emerging market
companies.
DEBT SECURITIES
Schroder EM Core Portfolio may invest without limitation in investment
grade emerging market debt securities; it may invest up to 35% of its total
assets in debt securities that are unrated or are rated below investment grade
(below "Baa" by Moody's or "BBB" by S&P; (for a further description of Moody's
and S&P's securities ratings please see the Appendix to the SAI.) Note that even
debt securities rated "Baa" by Moody's are considered to have speculative
characteristics. Below investment grade securities (and unrated securities of
comparable quality) ("high yield/high risk securities") are predominantly
speculative with respect to the capacity to pay interest and repay principal,
and generally involve a greater volatility of price than securities in higher
rating categories. These securities are commonly referred to as "junk" bonds.
The risks associated with junk bonds are generally greater than those associated
with higher-rated securities. The Portfolio is not obligated to dispose of
securities due to rating changes by Moody's, S&P or other rating agencies. The
Portfolio is not authorized to purchase debt securities that are in default,
except for sovereign debt (discussed below) in which the Portfolio may invest no
more than 5% of its total assets while such sovereign debt securities are in
default.
In purchasing high yield/high risk securities, the Portfolio will rely
on the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors should
review the investment objective and policies of the Fund and consider their
willingness to assume risk before making an investment.
High yield/high risk securities' market values are affected more by
individual issuer developments and are more sensitive to adverse economic
changes than are higher-rated securities. Issuers of high yield/high risk
securities may be highly leveraged and may not have more traditional methods of
financing available to them. During economic downturns or substantial periods of
rising interest rates, issuers of high yield/high risk securities, especially
highly leveraged ones, may be less able to service their principal and interest
payment obligations, meet their projected business goals, or obtain additional
financing. The risk of loss due to default by the issuer is significantly
greater for holders of high yield/high risk securities because such securities
may be unsecured and may be subordinated to other creditors of the issuer. In
addition, the Portfolio may incur additional expenses if it i
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required to seek recovery upon a default by the issuer of such an obligation or
participate in the restructuring of such obligation.
Periods of economic uncertainty and change will likely cause increased
volatility in the market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value if it invests in such
securities; market prices of such securities structured as zero coupon or
pay-in-kind securities are more affected by interest rate changes and thus tend
to be more volatile than securities that pay interest periodically and in cash.
High yield/high risk securities may have call or redemption features
which would permit an issuer to repurchase the securities from the Portfolio. If
a call were exercised by the issuer during a period of declining interest rates,
the Portfolio would likely have to replace called securities with lower yielding
securities, thus decreasing the Portfolio's net investment income and dividends
to shareholders.
While a secondary trading market for high yield/high risk securities
does exist, it is generally not as liquid as the secondary market for higher
rated securities. In periods of reduced secondary market liquidity, prices of
high yield/high risk securities may become volatile and experience sudden and
substantial price declines. The Portfolio may, therefore, have difficulty
disposing of particular issues to meet its liquidity needs or in response to a
specific economic event (such as a deterioration in the creditworthiness of the
issuer). Reduced secondary market liquidity for certain high yield/high risk
securities also may make it more difficult for the Portfolio to obtain accurate
market quotations (for purposes of valuing the Portfolio's investment
portfolio): market quotations are generally available on many high yield/high
risk securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, high yield/high risk securities may have to be valued at fair value
as determined by the Schroder Core Board or SCMI under Board-approved
guidelines.
Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/ high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Portfolio's, and thus the Fund's, net asset value.
SMALL COMPANY INVESTMENTS
While all investments have risks, investments in smaller capitalization
companies carry greater risk than investments in larger capitalization
companies. Smaller capitalization companies generally experience higher growth
rates and higher failure rates than do larger capitalization companies; and the
trading volume of smaller capitalization companies' securities is normally lower
than that of larger capitalization companies and, consequently, generally has a
disproportionate effect on market price (tending to make prices rise more in
response to buying demand and fall more in response to selling pressure).
Investments in small, unseasoned issuers generally carry greater risk
than is customarily associated with larger, more seasoned companies. Such
issuers often have products and management personnel that have not been tested
by time or the marketplace and their financial resources may not be as
substantial as those of more established companies. Their securities (which a
Portfolio may purchase when they are offered to the public for the first time)
may have a limited trading market which can adversely affect their sale by the
Portfolio and can result in such securities being priced lower than otherwise
might be the case. If other institutional investors engage in trading this type
of security, the Portfolio may be forced to dispose of its holdings at prices
lower than might otherwise be obtained.
5. MANAGEMENT
The business and affairs of the Funds are managed under the direction of
the Board. The Trustees of the Trust are John Y. Keffer, Costas Azariadis, James
C. Cheng and J. Michael Parish. The business and affairs of the Index Portfolio
and International Portfolio are managed under the direction of the Core Trust
Board. The Trustees of the Trust also serve as the Trustees of Core Trust. The
business and affairs of Schroder EM Core Portfolio are managed under the
direction of the Schroder Core Board. The Trustees of Schroder Core are Peter E.
Guernsey, Ralph E. Hansmann, John I. Howell, Laura E. Luckyn-Malone, Clarence F.
Michalis, Hermann C. Schwab
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and Mark J. Smith. Additional information regarding the Trustees and the
respective executive officers of the Trust and Schroder Core may be found in the
SAI under "Management - Trustees and Officers."
INVESTMENT ADVISERS AND PORTFOLIO MANAGERS
INVESTORS EQUITY FUND
H.M. Payson & Co., located at One Portland Square, Portland, Maine
04101, serves as investment adviser to Investors Equity Fund pursuant to an
investment advisory agreement with the Trust. Subject to the general control of
the Board, Payson is responsible for among other things, developing a continuing
investment program for the Fund in accordance with its investment objective and
reviewing the investment strategies and policies of the Fund. Payson was founded
in Portland, Maine in 1854 and was incorporated in Maine in 1987, making it one
of the oldest investment firms in the United States operating under its original
name. Payson is a registered broker-dealer and investment adviser and is a
member of the National Association of Securities Dealers, Inc. Payson provides
investment management services through an investment advisory division and a
trust division. As of December 1, 1997, Payson had in excess of $975 million in
assets under management. Payson's clients include pension plans, endowment funds
and institutional and individual accounts. For its services, Payson receives an
advisory fee at an annual rate of 0.65% of the Fund's average daily net assets.
Payson has entered into an investment sub-advisory agreement with
Peoples Heritage Bank to exercise certain investment discretion over the assets
(or a portion of assets) of the Fund. Subject to the general supervision of the
Board, Peoples is responsible for among other things, developing a continuing
investment program for the Fund in accordance with its investment objective and
reviewing the investment strategies and policies of the Fund. Peoples, located
at One Portland Square, Portland, Maine 04101, and Bank of New Hampshire are
subsidiaries of Peoples Heritage Financial Group, a multi-bank holding company.
As of December 1, 1997, Peoples Heritage Financial Group had assets of $6.5
billion and Peoples and its affiliates managed assets in their trust departments
with a value of approximately $932 million. Payson pays a fee to Peoples for its
sub-advisory services. This fee is borne solely by Payson and does not increase
the fee paid by shareholders of the Fund. For its services, Peoples receives a
sub-advisory fee at an annual rate of 0.25% of the Fund's average daily net
assets.
William N. Weickert, Jr., CFA, Dana R. Mitiguy, CFA and Jonathan W.
White, CFA serve as the portfolio managers of Investors Equity Fund. William N.
Weickert, Jr. has sixteen years of experience in the investment industry and is
a Director, equity and fixed income Research Analyst and Portfolio Manager of
Payson, with which he has been associated since 1989. Prior to joining Payson,
Mr. Weickert served as an Account Executive for Kidder Peabody & Co., and from
1981 through 1987 served as an equity trader and mutual fund manager for
Scudder, Stevens & Clark. Mr. Weickert received a Bachelor of Arts degree from
Hobart College. Dana R. Mitiguy has fourteen years of experience in the
investment industry and is the Chief Investment Officer for Peoples' Heritage
Bank. Prior to joining Peoples in September 1995, Mr. Mitiguy served as a Vice
President at Key Trust of Maine. From 1992 through 1993, Mr. Mitiguy was a
Managing Director with Boston American Asset Management and prior to that served
as Assistant Vice President at The Boston Company. Mr. Mitiguy received a
Bachelor of Arts degree from Middlebury College. Jonathan W. White, Chief
Investment Officer for the Bank of New Hampshire, has over 25 years of
experience in the investment industry. From 1989 through 1994, Mr. White was an
investment associate with Connecticut Seed Ventures. Prior to that he served as
Vice President - Research at the Bank of New England. Mr. White received a
Bachelor of Arts degree from Dartmouth College and a Masters in Business
Administration from the University of New Hampshire.
EQUITY INDEX FUND
Subject to the general supervision of the Core Trust Board, Norwest
provides investment advisory services to Index Portfolio. Norwest manages the
investment and reinvestment of the assets of Index Portfolio and continuously
reviews, supervises and administers the Portfolio's investments. In this regard,
it is the responsibility of Norwest to make decisions relating to Index
Portfolio's investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For its
services with respect to the Portfolio, Norwest receives an advisory fee at an
annual rate of 0.15% of the Portfolio's average daily net assets.
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The investment advisory fees paid to Norwest by Index Portfolio are borne
indirectly by Equity Index Fund. Norwest, which is located at Norwest Center,
Sixth Street and Marquette, Minneapolis, Minnesota 55479, is an indirect
subsidiary of Norwest Corporation, a multi-bank holding company that was
incorporated under the laws of Delaware in 1929. As of September 30, 1997,
Norwest Corporation had assets of $85.3 billion, which made it the 11th largest
bank holding company in the United States, and Norwest and its affiliates
managed assets with a value in excess of $53 billion.
David D. Sylvester and Laurie R. White are primarily responsible for the
day-to-day management of Index Portfolio. Mr. Sylvester has been associated with
Norwest for 16 years, the last 8 years as a Vice President and Senior Portfolio
Manager. He has over 20 years' experience in managing securities portfolios. Ms.
White has been a Vice President and Senior Portfolio Manager of Norwest since
1991; from 1989 to 1991, she was a Portfolio Manager at Richfield Bank and
Trust. Mr. Sylvester and Ms. White began serving as portfolio managers of Index
Portfolio on January 1, 1996.
SMALL COMPANY OPPORTUNITIES FUND
Forum Investment Advisors, LLC serves as investment adviser to the Fund
pursuant to an investment advisory agreement with the Trust. Subject to the
general control of the Board, Forum Advisors is responsible for, among other
things, developing a continuing investment program for the Fund in accordance
with its investment objective and reviewing the investment strategies and
policies of the Fund. Forum Advisors was organized under the laws of Delaware in
1997 and is registered under the Investment Advisers Act of 1940. For its
services, Forum Advisors receives an advisory fee at an annual rate of 0.__% of
the Fund's average daily net assets. The Fund also bears an investment advisory
fee at a blended rate based on the investment advisory fees of the Portfolios in
which the Fund invests. The total fee payable by the Fund through its
investments in the Portfolios will vary based on the percentage of its assets
invested in each Portfolio.
Mark Kaplan, CFA, serves as the portfolio manager of the Fund. Mr. Kaplan
has over thirteen years of experience in the investment industry and has been a
Managing Director at Forum Financial Services, Inc., where he is responsible for
investment advisory services, since September 1995. Before that Mr. Kaplan was
Managing Director and Director of Research at H.M. Payson & Co., an investment
advisory and trust services company. Prior thereto, Mr. Kaplan was a securities
analyst in the investment division of UNUM Life Insurance Company. Mr. Kaplan
has a Masters in Business Administration from Boston University.
Norwest serves as investment adviser to Small Cap Index Portfolio,
Small Company Stock Portfolio, Small Company Value Portfolio and Small Cap Value
Portfolio. It is the responsibility of Norwest to make investment decisions and
to continuously review, supervise and administer a Portfolio's investment
program or to oversee the investment decisions of the Portfolio's investment
subadviser, as applicable. For its services as investment subadvisers, Norwest
receives fees of 0.25%, 0.90%, 0.90% and 0.95% of the net assets of Small Cap
Index Portfolio, Small Company Stock Portfolio, Small Company Value Portfolio
and Small Cap Value Portfolio, respectively. For a description of Norwest, see
"Management -- Investment Advisers and Portfolio Managers --Equity Index Fund."
To assist Norwest in carrying out its obligations, Core Trust and
Norwest have retained the services of the investment subadvisers described
below. Each investment subadviser makes investment decisions for the Portfolio
to which it serves as investment subadviser and continuously reviews, supervises
and administers the Portfolio's investment program with respect to that portion,
if any, of the Portfolio's assets that Norwest believes should be managed by the
investment subadviser. Currently, each investment subadviser manages all of the
assets of the Portfolio that it subadvises. Norwest (and not the Portfolios)
pays each investment subadviser a fee for its investment subadvisory services.
This compensation does not increase the amount paid by the Portfolios to Norwest
for investment advisory services.
Crestone, which is located at 7720 East Belleview Avenue, Suite 220,
Englewood, Colorado 80111, serves as investment subadviser to Small Company
Stock Portfolio. Crestone, an indirect investment advisory subsidiary of Norwest
Corporation, provides investment advice regarding companies with small market
capitalization to
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various clients, including institutional investors. As of June 30, 1997,
Crestone managed assets with value of approximately $534 million.
Peregrine, which is located at LaSalle Plaza, 800 LaSalle Avenue, Suite
1850, Minneapolis, Minnesota 55402, serves as investment subadviser to Small
Company Value Portfolio. Peregrine, an indirect investment advisory subsidiary
of Norwest Corporation, provides investment advisory services to corporate and
public pension plans, profit-sharing plans, savings-investment plans and 401(k)
plans. As of June 30, 1997, Peregrine managed approximately $5.0 billion in
assets.
Smith, which is located at 500 Crescent Court, Suite 250, Dallas, Texas
75201, is a registered investment adviser. Smith provides investment management
services to company retirement plans, foundations, endowments, trust companies
and high net worth individuals using a disciplined equity style. As of June 30,
1997, Smith managed over $200 million in assets.
SCMI serves as investment adviser to Schroder U.S. Small Companies
Portfolio. It is the responsibility of SCMI to make investment decisions and to
continuously review, supervise and administer the Portfolio's investment
program. For its services as investment adviser, SCMI receives a fee of 0.60% of
the Portfolio's net assets. For a description of SCMI, see "Management --
Investment Advisors and Portfolio Managers -- International Equity Fund and
Emerging Markets Fund."
INTERNATIONAL EQUITY FUND AND EMERGING
MARKETS FUND
SCMI manages the investment and reinvestment of the assets of
International Portfolio and Schroder EM Core Portfolio, and continuously
reviews, supervises and administers each Portfolio's investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Portfolios' investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For its
services under the Investment Advisory Agreements between SCMI and Core Trust
and between SCMI and Schroder Core, SCMI is entitled to receive an advisory fee
at the annual rate of 0.45% in the case of International Portfolio, and 1.00% in
the case of Schroder EM Core Portfolio, of the Portfolio's average daily net
assets.
The investment advisory fees paid to SCMI by International Portfolio
and Schroder EM Core Portfolio are born indirectly by International Equity Fund
and Emerging Markets Fund, respectively.
SCMI, located at 787 Seventh Avenue, New York, New York 10019, is a
wholly owned U.S. subsidiary of Schroders Incorporated, the wholly owned U.S.
subsidiary of Schroders plc, a publicly owned company organized under the laws
of England. Schroders plc is the holding company parent of a large world-wide
group of banks and financial services companies (referred to as the "Schroder
Group"), with associated companies and branch and representative offices located
in eighteen countries world-wide. The investment management subsidiaries of the
Schroder Group had, as of September 30, 1997, assets under management in excess
of $175 billion.
Michael Perelstein, a Senior Vice President of SCMI, with the assistance of
an SCMI investment committee, is primarily responsible for the day-to-day
management of International Portfolio's investment portfolio. Mr. Perelstein has
been a Senior Vice President of SCMI since January 2, 1997. Prior thereto, Mr.
Perelstein was a Managing Director at MacKay Shields. Mr. Perelstein has more
than twelve years of international and global investment experience. Mr.
Perelstein has served as portfolio manager of International Portfolio since
January 1997.
Schroder EM Core Portfolio's current investment managers are John A.
Troiano, a Vice President of Schroder Core, who has managed the Portfolio's
assets since its inception, assisted by the management team of Heather Crighton
and Mark Bridgeman, who are responsible for the day-to-day management of the
investment portfolio. Mr. Troiano, Chief Executive Officer of SCMI since July 1,
1997, has been a Managing Director of SCMI since October 1995 and has been
employed by various Schroder Group companies in the investment research and
portfolio management areas since 1981. Ms. Crighton is a Vice President of SCMI
and has been employed by SCMI in the investment research and portfolio
management areas since 1992. Mr. Bridgeman, also a Vice President of
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SCMI, has been employed by various Schroder Group companies in the investment
research and portfolio management areas since 1990.
ADMINISTRATIVE AND DISTRIBUTION SERVICES
On behalf of the Funds, the Trust has entered into an administrative
services agreement contract with Forum Administrative Services, LLC. As provided
in this agreement, FAS is responsible for the supervision of the overall
management of the Trust (including the Trust's receipt of services for which it
must pay), providing the Trust with general office facilities and providing
persons satisfactory to the Board to serve as officers of the Trust. For these
services, FAS receives from each Fund a fee computed and paid monthly at an
annual rate of 0.20% of the Fund's average daily net assets.
Pursuant to a distribution agreement with the Trust, Forum Financial
Services, Inc. acts as distributor of the Funds' shares. FFSI acts as the agent
of the Trust in connection with the offering of shares of the Funds. Pursuant to
a distribution agreement FFSI receives, and may reallow to certain financial
institutions, the sales charge paid by the purchasers of the Funds' shares. FFSI
may enter into arrangements with banks, broker-dealers or other financial
institutions ("Selected Dealers") through which investors may purchase or redeem
shares. FFSI may, at its own expense and from its own resources, compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Fund. Investors purchasing shares of the Fund through
another financial institution should read any materials and information provided
by the financial institution to acquaint themselves with its procedures and any
fees that it may charge.
FFSI and FAS are located at Two Portland Square, Portland, Maine 04101.
FFSI was incorporated under the laws of the State of Delaware on February 7,
1986. FFSI is a registered broker-dealer and investment adviser and is a member
of the National Association of Securities Dealers, Inc. FAS was organized on
December 29, 1995 under the laws of the State of Delaware. As of December 1,
1997, FAS and FFSI provide management, administration and distribution services
to registered investment companies and collective investment funds with assets
of approximately $30 billion.
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
services for the Funds and the Portfolios, including determination of each
Fund's and Portfolio's net asset value, pursuant to separate agreements between
FAcS and each of the Trust, Core Trust and Schroder Core.
As of the date of this prospectus FAS, FFSI, FAcS and the Transfer
Agent of the Trust were controlled by John Y. Keffer, president and Chairman of
the Trust.
FAS serves as administrator of each Portfolio of Core Trust. For these
services, FAS receives a fee at an annual rate of 0.05% and 0.075%,
respectively, of each Portfolio's average daily net assets.
Schroder Advisors, Inc., 787 Seventh Avenue, New York, New York 10019
serves as administrator for each Portfolio of Schroder Core. Schroder Advisors
is a wholly owned subsidiary of SCMI. For these services, Schroder Advisors
receives an administrative services fee at an annual rate of 0.075% of the
Portfolio's average daily net assets. In addition, Schroder Core and Schroder
Advisors have entered into a sub-administration agreement with FAS. Payment for
FAS's services with respect to the Schroder EM Core Portfolio is made by
Schroder Advisors and is not a separate expense of the Portfolio.
SHAREHOLDER SERVICING
Shareholder inquiries and communications concerning the Fund may be
directed to Forum Financial Corp., the Fund's transfer agent and dividend
disbursing agent. FFC maintains for each shareholder of record, an account
(unless such accounts are maintained by sub-transfer agents) to which all shares
purchased are credited, together with any distributions that are reinvested in
additional shares. FFC also performs other transfer agency functions and acts as
dividend disbursing agent for the Trust. For its services, FFC receives a fee at
an annual rate of 0.25% of each Fund's average daily net assets plus $12,000.
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FFC is authorized to subcontract any or all of its functions to one or
more qualified sub-transfer agents or processing agents, which may be processing
organizations (as described under "Purchases and Redemptions of Shares -
Purchases and Redemptions Through Financial Institutions"), who agree to comply
with the terms of the Transfer Agency Agreement. FFC may pay those agents for
their services, but no such payment will increase FFC's compensation from the
Trust.
EXPENSES OF THE TRUST
Each Fund is obligated to pay for all of its expenses. The Funds'
expenses comprise Trust expenses attributable to the Funds and expenses not
attributable to any particular portfolio of the Trust, which are allocated among
the Funds and the portfolios in proportion to their average net assets. Each
Fund's expenses include the Fund's pro rata share of the operating expenses of
the Portfolio or Portfolios, if any, in which it invests, which are borne
indirectly by the Fund's shareholders. A Fund's expenses include: interest
charges; taxes; brokerage fees and commissions; certain insurance premiums;
applicable fees and expenses under the Trust's, Core Trust's or Schroder Core's
service contracts, custodian fees, fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
auditing, legal and compliance expenses; costs of preparing and printing the
Trust's prospectuses, statements of additional information and shareholder
reports and delivering them to existing shareholders; compensation of certain of
the Trust's, Core Trust's or Schroder Core's trustees, officers and employees
and other personnel performing services for the Trust, Core Trust or Schroder
Core; and registration fees and related expenses.
Each Adviser and each other service provider in its sole discretion,
may waive all or any portion of its respective fees, which are accrued daily and
paid monthly. Any such waiver, which could be discontinued at any time, would
have the effect of increasing a Fund's performance for the period during which
the waiver was in effect and would not be recouped at a later date.
PORTFOLIO TRANSACTIONS
Each Adviser monitors the creditworthiness of counterparties to the
Funds' transactions and intends to enter into a transaction only when it
believes that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks.
The Advisers place orders for the purchase and sale of assets they
manage with brokers and dealers selected by and in the discretion of the
respective Adviser. The Advisers seek "best execution" for all portfolio
transactions, but a Fund or Portfolio may pay higher than the lowest available
commission rates when its investment adviser believes it is reasonable to do so
in light of the value of the brokerage and research services provided by the
broker effecting the transaction.
Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and this may cause higher brokerage expenses to accrue to
a Fund that invests in foreign securities than would be the case for comparable
transactions effected on U.S. securities exchanges.
Subject to the Funds' or Portfolios' policy of obtaining the best price
consistent with quality of execution of transactions, each Adviser may employ
broker-dealer affiliates of the Adviser (collectively "Affiliated Brokers") to
effect brokerage transactions for the Fund managed by the Adviser. A Fund's
payment of commissions to Affiliated Brokers is subject to procedures adopted by
the Board, the Core Trust Board or the Schroder Core Board, to provide that the
commissions will not exceed the usual and customary broker's commissions charged
by unaffiliated brokers. No specific portion of a Fund's brokerage will be
directed to Affiliated Brokers and in no event will a broker affiliated with the
investment adviser directing the transaction receive brokerage transactions in
recognition of research services provided to the adviser. The Advisers may
effect transactions for the Funds (or the Portfolios) through brokers who sell
Fund shares. The Funds have no obligation to deal with any specific broker or
dealer in the execution of portfolio transactions.
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Although Investors Equity Fund and the Portfolios do not currently
engage in directed brokerage arrangements to pay expenses, they may do so in the
future. These arrangements, whereby brokers executing a Fund's or Portfolio's
portfolio transactions would agree to pay designated expenses of the Fund or
Portfolio if brokerage commissions generated by the Fund or Portfolio reached
certain levels, might reduce the Fund's expenses or the Portfolio's expenses
(and, indirectly, the Fund's expenses). As anticipated, these arrangements would
not materially increase the brokerage commissions paid by the Fund or a
Portfolio.
6. PURCHASES AND REDEMPTIONS OF SHARES
GENERAL INFORMATION
Investments in a Fund may be made either by an investor directly or
through certain brokers and financial institutions of which the investor is a
customer. All transactions in Fund shares are effected through the Transfer
Agent, which accepts orders for purchases and redemptions from shareholders of
record and new investors. Shareholders of record will receive from the Trust
periodic statements listing all account activity during the statement period.
The Trust reserves the right in the future to modify, limit or terminate any
shareholder privilege upon appropriate notice to shareholders and charge a fee
for certain shareholder services, although no such fees are currently
contemplated.
PURCHASES
Fund shares are sold at a price equal to their net asset value
next-determined after receipt of an order in proper form plus any applicable
sales charge on all weekdays except days when the New York Stock Exchange is
closed, normally, New Year's Day, Dr. Martin Luther King Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas ("Fund Business Day") (see "Sales Charges" below). Fund shares are
issued immediately after an order for the shares in proper form is accepted by
the Transfer Agent. Each Fund's net asset value is calculated at 4:00 p.m.,
Eastern Time on each Fund Business Day. Fund shares become entitled to receive
dividends on the next Fund Business Day after the order is accepted.
The Funds reserve the right to reject any subscription for the purchase
of their shares. Stock certificates are issued only to shareholders of record
upon their written request and no certificates are issued for fractional shares.
REDEMPTIONS
Fund shares may be redeemed without charge at their net asset value on
any Fund Business Day. There is no minimum period of investment and no
restriction on the frequency of redemptions. Fund shares are redeemed as of the
next determination of a Fund's net asset value following receipt by the Transfer
Agent of the redemption order in proper form (and any supporting documentation
which the Transfer Agent may require). Shares redeemed are not entitled to
receive dividends declared after the day on which the redemption becomes
effective.
Normally, redemption proceeds are paid immediately following, but in no
event later than seven days following, receipt of a redemption order in proper
form by the Transfer Agent. Proceeds of redemption requests (and exchanges),
however, will not be paid unless any check used for investment has been cleared
by the shareholder's bank, which may take up to 15 calendar days. This delay may
be avoided by investing through wire transfers. Unless otherwise indicated,
redemption proceeds normally are paid by check mailed to the shareholder's
record address. The right of redemption may not be suspended nor the payment
dates postponed except when the New York Stock Exchange is closed (or when
trading thereon is restricted) for any reason other than its customary weekend
or holiday closings or under any emergency or other circumstance as determined
by the Securities and Exchange Commission.
Proceeds of redemptions normally are paid in cash. However, payments
may be made wholly or partially in portfolio securities if the Board determines
that payment in cash would be detrimental to the best interests of the Fund. The
Trust will only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's net assets,
whichever is less, during any 90-day period.
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The Trust employs reasonable procedures to insure that telephone orders
are genuine (which include recording certain transactions and the use of
shareholder security codes). If the Trust did not employ such procedures it
could be liable for any losses due to unauthorized or fraudulent telephone
instructions. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements. During times of drastic
economic or market changes, the telephone redemption and exchange privileges may
be difficult to implement. In the event that a shareholder is unable to reach
the Transfer Agent by telephone, requests may be mailed or hand-delivered to the
Transfer Agent.
Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon not less than 60 days' written notice, all
shares in any Fund account with an aggregate net asset value of less than
$1,000. The Trust will not redeem accounts that fall below that amount solely as
a result of a reduction in net asset value.
PURCHASE AND REDEMPTION PROCEDURES
The following purchase and redemption procedures and shareholder
services apply to investors who invest in a Fund directly. These investors may
open an account by completing the application at the back of this Prospectus or
by contacting the Transfer Agent at the address on the first page of this
prospectus. For those shareholder services not referenced on the account
application and to change information regarding a shareholder's account (such as
addresses), investors should request an Optional Services Form from the Transfer
Agent.
INITIAL PURCHASE OF SHARES
There is a $5,000 minimum for initial investments in any Fund ($2,000
for individual retirement accounts).
BY MAIL. Investors may send a check made payable to the Trust along
with a completed account application to the Fund at the address listed above.
Checks are accepted at full value subject to collection. If a check does not
clear, the purchase order will be canceled and the investor will be liable for
any losses or fees incurred by the Trust, the Transfer Agent or FFSI.
BY BANK WIRE. To make an initial investment in any Fund using the wire
system for transmittal of money among banks, an investor should first telephone
the Trust at (207) 879-0001 or 800-94FORUM (800-943-6786) to obtain an account
number. The investor should then instruct a bank to wire the investor's money
immediately to:
BankBoston
Boston, MA
ABA# 011000390
Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund]
Account #:______________
Account Name: __________
The investor should then promptly complete and mail the account
application. Any investor planning to wire funds should instruct a bank early in
the day so the wire transfer can be accomplished the same day. There may be a
charge imposed by the bank for transmitting payment by wire, and there also may
be a charge for the use of Federal funds.
SUBSEQUENT PURCHASES OF SHARES
There is a $500 minimum for subsequent purchases. Subsequent purchases
may be made by mailing a check or by sending a bank wire as indicated above.
Shareholders using the wire system for purchase should first
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telephone the Trust at (207) 879-0001 or 800-94FORUM (800-943-6786) to notify it
of the wire transfer. All payments should clearly indicate the shareholder's
name and account number.
AUTOMATIC INVESTMENT. Shareholders may purchase Fund shares at regular,
preselected intervals by authorizing the automatic transfer of funds from a
designated bank account maintained with a United States banking institution
which is an Automated Clearing House member. Under the program, existing
shareholders may authorize amounts of $250 or more to be debited from their bank
account and invested in a Fund monthly or quarterly. Shareholders wishing to
participate in this program may obtain the applicable forms from the Transfer
Agent. Shareholders may terminate their automatic investments or change the
amount to be invested at any time by written notification to the Transfer Agent.
REDEMPTION OF SHARES
Shareholders that wish to redeem shares by telephone or by check or
receive redemption proceeds by bank wire must elect these options by properly
completing the appropriate sections of their account application. These
privileges may not be available until several weeks after a shareholder's
application is received. Shares for which certificates have been issued may not
be redeemed by telephone.
BY MAIL. Shareholders may make a redemption in any amount by sending a
written request to the Transfer Agent accompanied by any stock certificate that
may have been issued to the shareholder. All written requests for redemption
must be signed by the shareholder with signature guaranteed and all certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed.
BY TELEPHONE. A shareholder that has elected telephone redemption
privileges may make a telephone redemption request by calling the Transfer Agent
at (207) 879-0001 or 800-94FORUM (800-943-6786) and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number. In
response to the telephone redemption instruction, the Fund will mail a check to
the shareholder's record address or, if the shareholder has elected wire
redemption privileges, wire the proceeds.
BY BANK WIRE. For redemptions of more than $5,000, a shareholder that
has elected wire redemption privileges may request the Fund to transmit the
redemption proceeds by Federal Funds wire to a bank account designated on the
shareholder's account application. To request bank wire redemptions by
telephone, the shareholder also must have elected the telephone redemption
privilege. Redemption proceeds are transmitted by wire on the day the redemption
request in proper form is received by the Transfer Agent.
AUTOMATIC REDEMPTIONS. Shareholders may redeem Fund shares at regular,
preselected intervals by authorizing the automatic redemption of shares from
their Fund account. Redemption proceeds will be sent either by check or by
automatic transfer to a designated bank account maintained with a United States
banking institution which is an Automated Clearing House member. Under this
program, shareholders may authorize the redemption of shares in amounts of $250
or more from their account monthly or quarterly. Shareholders may terminate
their automatic redemptions or change the amount to be redeemed at any time by
written notification to the Transfer Agent.
OTHER REDEMPTION MATTERS. To protect shareholders and the Funds against
fraud, signatures on certain requests must have a signature guarantee. Requests
must be made in writing and include a signature guarantee for any of the
following transactions: (1) any endorsement on a stock certificate; (2) written
instruction to redeem Shares whose value exceeds $50,000; (3) instructions to
change a shareholder's record name; (4) redemption in an account in which the
account address or account registration has changed within the last 30 days; (5)
the proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account; (6) proceeds are to be paid to
someone other than the registered owners or to an account with a different
registration; (7) change of automatic investment or redemption, dividend
election, telephone redemption or exchange option election or any other option
election in connection with the shareholder's account.
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Signature guarantees may be provided by any eligible institution
acceptable to the Transfer Agent, including a bank, a broker, a dealer, a
national securities exchange, a credit union, or a savings association that is
authorized to guarantee signatures. Whenever a signature guarantee is required,
the signature of each person required to sign for the account must be
guaranteed. A notarized signature is not sufficient.
The Transfer Agent will deem a shareholder's account "lost" if
correspondence to the shareholder's address of record is returned for six
months, unless the Transfer Agent determines the shareholder's new address. When
an account is deemed lost all distributions on the account will be reinvested in
additional shares of the Fund. In addition, the amount of any outstanding
(unpaid for six months or more) checks for distributions that have been returned
to the Transfer Agent will be reinvested and the checks will be canceled.
SALES CHARGES
The public offering price for shares of a Fund is the sum of the net
asset value of the shares being purchased plus any applicable sales charge. No
sales charge is assessed on the reinvestment of dividends or other
distributions. The sales charge is assessed for each Fund as follows:
<TABLE>
<S> <C> <C> <C>
PUBLIC OFFERING NET ASSET DEALERS'
AMOUNT OF PURCHASE PRICE VALUE* REALLOWANCE
- --------------------------------- ------------------------- ----------------- -------------------
less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $200,000 3.50% 3.63% 3.10%
$200,000 but less than $400,000 3.00% 3.09% 2.70%
$400,000 but less than $600,000 2.50% 2.56% 2.25%
$600,000 but less than $800,000 2.00% 2.04% 1.75%
$800,000 but less than $1,000,000 1.50% 1.52% 1.30%
$1,000,000 and up 0.50% 0.50% 0.40%
* Rounded to the nearest one-hundredth percent.
</TABLE>
FFSI's commission is the sales charge shown above less any applicable
discount reallowed to selected brokers and dealers (including banks and bank
affiliates purchasing shares as principal or agent). Normally, FFSI will reallow
discounts to selected brokers and dealers in the amounts indicated in the table
above. From time to time, however, FFSI may elect to reallow the entire sales
charge to selected brokers or dealers for all sales with respect to which orders
are placed with FFSI during a particular period. The dealers' reallowance may be
changed from time to time.
In addition, from time to time and at its own expense, FFSI may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (i) the provision of travel arrangements and lodging,
(ii) tickets for entertainment events and (iii) merchandise.
No sales charge will be assessed on purchases made for investment
purposes by: (a) any bank, trust company, savings association or similar
institution with whom FFSI has entered into a share purchase agreement acting on
behalf of the institution's fiduciary customer accounts or any account
maintained by its trust department (including a pension, profit sharing or other
employee benefit trust created pursuant to a qualified retirement plan); (b) any
registered investment adviser with whom FFSI has entered into a share purchase
agreement and which is acting on behalf of its fiduciary customer accounts; (c)
any registered investment adviser which is acting on behalf of its fiduciary
customer accounts and for which it provides additional investment advisory
services; (d) any
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<PAGE>
broker-dealer with whom FFSI has entered into a Selected Dealer Agreement and a
Fee-Based or Wrap Account Agreement and which is acting on behalf of its
fee-based program clients; (e) directors and officers of the Trust; directors,
officers and full-time employees of the Advisers, FFSI, any of their affiliates
or any organization with which FFSI has entered into a selected dealer or
processing agent agreement; the spouse, sibling, direct ancestor or direct
descendent (collectively, "relatives") of any such person; any trust or
individual retirement account or self-employed retirement plan for the benefit
of any such person or relative; or the estate of any such person or relative;
(f) any person who has, within the preceding 90 days, redeemed Fund shares (but
only on purchases in amounts not exceeding the redeemed amounts) and completes a
reinstatement form upon investment; (g) persons who exchange into a Fund from a
mutual fund other than a fund of the Trust that participates in the Trust's
exchange program, See "Purchases and Redemptions of Shares Exchanges"; and (h)
employee benefit plans qualified under Section 401 of the Internal Revenue Code
of 1986. The Trust may require appropriate documentation from an investor
concerning that investor's eligibility to purchase Fund shares without a sales
charge. Any shares so purchased may not be resold except to the Fund.
REDUCED SALES CHARGES
For an investor to qualify for a reduced sales charge as described
below, the investor must notify the Transfer Agent at the time of purchase.
Programs for reduced sales charges may be modified or terminated at any time and
are subject to confirmation of an investor's holdings.
RIGHTS OF ACCUMULATION. An investor's purchase of additional shares of
a Fund may qualify for rights of accumulation ("ROA") wherein the applicable
sales charge will be based on the total of the investor's current purchase and
the net asset value (at the end of the previous Fund Business Day) of shares of
a Fund held by the investor. For example, if an investor owned shares of a Fund
worth $400,000 at the then current net asset value and purchased shares of the
Fund worth an additional $50,000, the sales charge for the $50,000 purchase
would be at the 2.50% rate applicable to a single $450,000 purchase, rather than
at the 4.0% rate. To qualify for ROA on a purchase, the investor must inform the
Transfer Agent and supply sufficient information to verify that each purchase
qualifies for the privilege or discount.
LETTER OF INTENT. Investors may also obtain reduced sales charges based
on cumulative purchases by means of a written Letter of Intent ("LOI"), which
expresses the investor's intention to invest $100,000 or more within a period of
13 months in shares of a Fund. Each purchase of shares under a LOI will be made
at the public offering price applicable at the time of the purchase to a single
transaction of the dollar amount indicated in the LOI.
An LOI is not a binding obligation upon the investor to purchase the
full amount indicated. Shares purchased with the first 5% of the amount
indicated in the LOI will be held subject to a registered pledge (while
remaining registered in the name of the investor) to secure payment of the
higher sales charge applicable to the shares actually purchased if the full
amount indicated is not purchased within 13 months. Pledged shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. When
the full amount indicated has been purchased, the shares will be released from
pledge. Share certificates are not issued for shares purchased under an LOI.
Investors wishing to enter into an LOI can obtain a form of LOI from their
broker or financial institution or by contacting the Transfer Agent.
EXCHANGES
Fund shareholders are entitled to exchange their shares for shares of
any other fund of the Trust or any other fund that participates in the exchange
program and whose shares are eligible for sale in the shareholder's state of
residence. Exchanges may only be made between accounts registered in the same
name. A completed account application must be submitted to open a new account in
a Fund through an exchange if the shareholder requests any shareholder privilege
not associated with the existing account. Exchanges are subject to the fees
charged by, and the restrictions listed in the prospectus for, the fund into
which a shareholder is exchanging, including minimum investment requirements.
The Fund does not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make.
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<PAGE>
The Trust (and Federal tax law) treats an exchange as a redemption of
the shares owned and the purchase of the shares of the fund being acquired.
Redemptions and purchases are effected at the respective net asset values of the
two funds as next determined following receipt of proper instructions and all
necessary supporting documents by the fund whose shares are being exchanged.
If a shareholder exchanges into a fund that imposes a sales charge,
that shareholder is required to pay the difference between that fund's sales
charge and any sales charge the shareholder has previously paid in connection
with the shares being exchanged. For example, if a shareholder paid a 2% sales
charge in connection with the purchase of the shares of a fund and then
exchanged those shares into another fund with a 3% sales charge, that
shareholder would pay an additional 1% sales charge on the exchange. Shares
acquired through the reinvestment of dividends and distributions are deemed to
have been acquired with a sales charge rate equal to that paid on the shares on
which the dividend or distribution was paid. The exchange privilege may be
modified materially or terminated by the Trust at any time upon 60 days' notice
to shareholders.
BY MAIL. Exchanges may be accomplished by written instructions to the
Transfer Agent accompanied by any stock certificate that may have been issued to
the shareholder. All written requests for exchanges must be signed by the
shareholder (a signature guaranteed is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.
EXCHANGE BY TELEPHONE. Exchanges may be accomplished by telephone by
any shareholder that has elected telephone exchange privileges by calling the
Transfer Agent at (207) 879-0001 or 800-94FORUM (800-943-6786) and providing the
shareholder's account number, the exact name in which the shareholder's shares
are registered and the shareholder's social security or taxpayer identification
number.
RETIREMENT PROGRAMS
INDIVIDUAL RETIREMENT ACCOUNTS. A single Fund should not be considered
as a complete investment vehicle for the assets held in individual retirement
accounts ("IRAs"). The minimum initial investment for an IRA is $2,000, and the
minimum subsequent investment is $500. There are limits on the amount of
tax-deductible contributions individuals may make into the various types of
IRAs. Individuals should consult their tax advisers with respect to their
specific tax situations as well as with respect to state and local taxes and
read any materials supplied by the Funds concerning Fund sponsored IRAs.
EMPLOYEE BENEFIT PLANS. A Fund may be a suitable investment vehicle for
part of the assets held in various employee benefit plans, including 401(k)
plans, 403(b) plans and SARSEPs.
PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased and redeemed through certain broker-dealer
banks, trust companies and their affiliates, and other financial institutions,
including affiliates of the Transfer Agent ("Processing Organizations").
Processing Organizations may receive as a dealer's reallowance a portion of the
sales charge paid by their customers who purchase Fund shares. In addition,
Processing Organizations may charge their customers a fee for their services and
are responsible for promptly transmitting purchase, redemption and other
requests to the Fund. The Trust is not responsible for the failure of any
institution to promptly forward these requests.
Investors who purchase shares through a Processing Organization may be
charged a fee if they effect transactions in Fund Shares through a broker or
agent and will be subject to the procedures of their Processing Organization,
which may include limitations, investment minimums, cutoff times and
restrictions in addition to, or different from, those applicable to shareholders
who invest in a Fund directly. These investors should acquaint themselves with
their Processing Organization's procedures and should read this Prospectus in
conjunction with any materials and information provided by their Processing
Organization. Customers who purchase Fund shares through a Processing
Organization may or may not be the shareholder of record and, subject to their
Processing Organization's and the Fund's procedures, may have Fund shares
transferred into their name. Under their arrangements with the Trust,
broker-dealer Processing Organizations are not generally required to deliver
payment
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<PAGE>
for purchase orders until several business days after a purchase order has been
received by a Fund. Certain other Processing Organizations may also enter
purchase orders with payment to follow.
Certain shareholder services may not be available to shareholders who
have purchased shares through a Processing Organization. These shareholders
should contact their Processing Organization for further information. The Trust
may confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with such confirmations and periodic statements as may be required by
law or agreed to between the Processing Organization and its customers. The
Trust is not responsible for the failure of any Processing Organization to carry
out its obligations to its customer. Certain states permit shares of a Fund to
be purchased and redeemed only through registered broker-dealers, including the
Fund's distributor.
7. DISTRIBUTIONS AND TAX MATTERS
THE FUNDS
DISTRIBUTIONS
Distributions of each Fund's net investment income are declared and
paid annually. Distributions of net capital gain, if any, realized by each Fund
are distributed annually.
Shareholders may have all distributions reinvested in additional shares
of the Fund in which they invest or received in cash. In addition, shareholders
may have distributions of net capital gain reinvested in additional shares of
the Fund in which they invest and distributions of net investment income paid in
cash. All distributions are treated in the same manner for Federal income tax
purposes whether received in cash or reinvested in shares of a Fund.
All distributions will be reinvested at a Fund's net asset value as of
the payment date of the dividend. All distributions are reinvested unless
another option is selected. All distributions not reinvested will be paid to the
shareholder in cash and may be paid more than seven days following the date on
which dividends would otherwise be reinvested.
TAXES
Each Fund intends to qualify for each fiscal year to be taxed as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. As such, the Funds will not be liable for Federal income taxes on the
net investment income and net capital gain distributed to their shareholders.
Because each Fund intends to distribute all of their net investment income and
net capital gain each year, each Fund should avoid all Federal income and excise
taxes.
Distributions paid by each Fund out of its net investment income
(including realized net short-term capital gain) are taxable to the shareholders
of the Fund as ordinary income. Two different tax rates apply to net capital
gain - that is, the excess of net gain from capital assets held for more than
one year over net losses from capital assets held for not more than one year.
One rate (generally 28%) applies to net gain on capital assets held for more
than one year but not more than 18 months and a second rate (generally 20%)
applies to the balance of such net capital gains. Distributions of net capital
gain will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. If Fund shares are sold at a loss after
being held for six months or less, the loss will be treated as long-term capital
loss to the extent of any distribution of net capital gain is received on those
shares.
Any distribution received by a shareholder reduces the net asset value
of the shareholder's shares by the amount of the dividend or distribution. To
the extent that the income or gain comprising a dividend or distribution were
accrued by the Fund before the shareholder purchased the shares, the dividend or
distribution would be in effect a return of capital to the shareholder. All
dividends and distributions, including those that operate as a return
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of capital, however, are taxable as described above to the shareholder receiving
them regardless of the length of time he may have held shares prior to the
dividend or distribution.
It is expected that a portion of each Fund's dividends to shareholders
will qualify for the dividends received deduction for corporations.
The Funds may be required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and redemption
proceeds) paid to individuals and certain other non-corporate shareholders.
Withholding is not required if a shareholder certifies that the shareholder's
social security or tax identification number provided to the Fund is correct and
that the shareholder is not subject to backup withholding.
Reports containing appropriate information with respect to the Federal
income tax status of dividends and distributions paid during the year by a Fund
will be mailed to shareholders shortly after the close of each year.
EFFECT OF FOREIGN TAXES. With respect to each Fund that invests in
foreign securities, foreign governments may impose taxes on the Fund or
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If International Equity Fund and Emerging Markets Fund are eligible to
do so, each intends to elect to permit its shareholders to take a credit (or a
deduction) for the Fund's share of foreign income taxes paid by the Portfolio in
which the Fund invests. If a Fund does make such an election, its shareholders
would include as gross income in their federal income tax returns both: (i)
distributions received from the Fund; and (ii) the amount that the Fund advises
is their pro rata portion of foreign income taxes paid with respect to or
withheld from, dividends and interest paid to the Fund or Portfolio from its
foreign investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Funds and their shareholders. There may
be other Federal, state or local tax considerations applicable to a particular
investor. Prospective investors are urged to consult their tax advisors.
THE PORTFOLIOS
The Portfolios are not required to pay Federal income taxes on their
net investment income and capital gain, as they are treated as partnerships for
Federal income tax purposes. All interest, dividends and gain and losses of a
Portfolio are deemed to have been "passed through" to the Fund in proportion to
its holdings of the Portfolio, regardless of whether such interest, dividends or
gain have been distributed by the Portfolio. Investment income received by a
Fund from sources within foreign countries may be subject to foreign income or
other taxes, with respect to which shareholders may be entitled to claim a
credit or deduction. See "The Funds Taxes" immediately above.
8. OTHER INFORMATION
PERFORMANCE INFORMATION
Each Fund's performance may be quoted in advertising in terms of yield
or total return. Both types are based on historical results and are not intended
to indicate future performance. A Fund's yield is a way of showing the rate of
income earned by the Fund as a percentage of the Fund's share price. Yield is
calculated by dividing the net investment income of a Fund for the stated period
by the average number of shares entitled to receive dividends and expressing the
result as an annualized percentage rate based on the Fund's share price at the
end of the period. Total return refers to the average annual compounded rates of
return over some representative period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
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the investment, after giving effect to the reinvestment of all dividends and
distributions and deductions of expenses during the period. A Fund also may
advertise its total return over different periods of time or by means of
aggregate, average, year by year, or other types of total return figures.
Because average annual returns tend to smooth out variations in a Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results. A computation of yield or total return that does not take
into account the sales load paid by an investor will be higher than a
computation based on the public offering price of the shares purchased that does
take into account payment of a sales load. Each Fund's advertisements may
reference ratings and rankings among similar funds by independent evaluators
such as Morningstar, Lipper Analytical Services, Inc. or IBC/Donoghue, Inc. In
addition, the performance of a Fund may be compared to recognized indices of
market performance. The comparative material found in a Fund's advertisements,
sales literature or reports to shareholders may contain performance ratings.
These are not to be considered representative or indicative of future
performance.
BANKING LAW MATTERS
Banking laws and regulations generally permit a bank or bank affiliate
to purchase shares of an investment company as agent for and upon the order of a
customer and in the view of FAS would permit a bank or bank affiliate to serve
as a Processing Organization or perform sub-transfer agent or similar services
for the Trust and its shareholders. If a bank or bank affiliate were prohibited
from performing all or a part of the foregoing services, its shareholder
customers would be permitted to remain shareholders of the Trust and alternative
means for continuing to service them would be sought. It is not expected that
shareholders would suffer adverse financial consequences as a result of any
changes in bank or bank affiliate service arrangements.
DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of a Fund as of 4:00
p.m., Eastern Time, on each Fund Business Day by dividing the value of the
Fund's net assets (I.E., the value of its portfolio securities and other assets
less its liabilities) by the number of that Fund's shares outstanding at the
time the determination is made. Securities owned by a Fund or Portfolio for
which market quotations are readily available are valued at current market value
or, in their absence, at fair value as determined by the Board, the Core Trust
Board or the Schroder Core Board, as applicable, or pursuant to procedures
approved by the Board, the Core Trust Board, or the Schroder Core Board, as
applicable.
THE TRUST AND ITS SHARES
The Trust was originally incorporated in Maryland on March 24, 1980 and
assumed the name of Forum Funds, Inc. on March 16, 1987. On January 5, 1996,
Forum Funds, Inc. was reorganized as a Delaware business trust under the name
Forum Funds. The Trust has an unlimited number of authorized shares of
beneficial interest. The Board may, without shareholder approval, divide the
authorized shares into an unlimited number of separate portfolios or series
(such as the Fund) and may in the future divide portfolios or series into two or
more classes of shares (such as Investor and Institutional Shares). Currently
the authorized shares of the Trust are divided into 23 separate series.
Generally, shares will be voted in the aggregate without reference to a
particular portfolio or class, except if the matter affects only one portfolio
or class or voting by portfolio or class is required by law, in which case
shares will be voted separately by portfolio. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
shareholder meetings will be held only when specifically required by Federal or
state law. Shareholders (and Trustees) have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a portfolio is entitled
to the shareholder's pro rata share of all dividends and distributions arising
from that portfolio's assets and, upon redeeming shares, will receive the
portion of the portfolio's net assets represented by the redeemed shares.
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From time to time, certain shareholders may own a large percentage of
the shares of the Fund. Accordingly, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote. As of the date
hereof, due to the initial investment in Small Company Opportunities Fund, prior
to the public offering of shares, FFSI may be deemed to control the Fund.
CORE & GATEWAY STRUCTURE
THE PORTFOLIOS. Each of Equity Index Fund, International Equity Fund
and Emerging Markets Fund seeks to achieve its investment objective by investing
all of its investable assets in a Portfolio, which has substantially the same
investment objective and policies as the Fund. Small Company Opportunities Fund
currently seeks to achieve its investment objective by investing in several
Portfolios. Accordingly, the Portfolios directly acquire their own securities
and the Funds acquire an indirect interest in those securities. Index Portfolio,
International Portfolio, Small Cap Index Portfolio, Small Company Stock
Portfolio, Small Company Value Portfolio and Small Cap Value Portfolio are
separate series of Core Trust, a business Trust organized under the laws of the
State of Delaware in September 1994. Schroder EM Core Portfolio and Schroder
U.S. Smaller Companies Portfolio are separate series of Schroder Core, a
business trust organized under the laws of the State of Delaware in September
1995. Each of Core Trust and Schroder Core is registered under the Act as an
open-end management investment company. Core Trust currently has 22 separate
portfolios and Schroder Core currently has four separate portfolios. The assets
of each Portfolio, belong only to, and the liabilities of each Portfolio are
borne solely by, the Portfolio and no other portfolio of the respective trust.
The investment objective and fundamental investment policies of the
Funds and the Portfolios can be changed only with shareholder approval. See
"Investment Objectives and Policies" and "Management" for a complete description
of the Portfolios' investment objective, policies, restrictions, management, and
expenses.
The Funds' investment in the Portfolios is in the form of a
non-transferable beneficial interest. As of the date of this Prospectus, each of
the Portfolios has at least one other open-end management investment company
that invests in the Portfolio. The Portfolios may permit other investment
companies or institutional investors to invest in them. All investors in a
Portfolio will invest on the same terms and conditions as the Fund and will pay
a proportionate share of the Portfolio's expenses.
The Portfolios normally will not hold meetings of investors except as
required by the Act. Each investor in a Portfolio will be entitled to vote in
proportion to its relative beneficial interest in the Portfolio. On most issues
subject to a vote of investors, as required by the Act and other applicable law,
a Fund will solicit proxies from shareholders of the Fund and will vote its
interest in the Portfolio in proportion to the votes cast by its shareholders.
If there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all investors in the Portfolio; indeed, if
other investors hold a majority interest in a Portfolio, they could hold have
voting control of the Portfolio.
The Portfolios will not sell their shares directly to members of the
general public. Another investor in a Portfolio, such as an investment company,
that might sell its shares to members of the general public would not be
required to sell its shares at the same public offering price as a Fund invests
in the Portfolio, and could have different advisory and other fees and expenses
than the Fund. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests in a Portfolio.
Information regarding the funds that invest in the Schroder EM Core Portfolio
and Schroder U.S. Smaller Companies Portfolio and any such funds in the future
will be available from Schroder Core by calling Forum Financial Services, Inc.
at (800) 290-9826. Information regarding the funds that invests in the other
Portfolios and any such funds in the future will be available from Core Trust by
calling Forum Financial Services, Inc. at (207) 879-1900.
Under the Federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Both Core Trust and Schroder Core,
their respective Trustees and certain of their officers are required to sign the
registration statement of the Trust and the registration statements of certain
other publicly-offered investors in the Portfolio. In addition, under the
Federal securities laws, Core Trust and Schroder Core could be liable for a
misstatements or omissions of a material fact in
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any proxy soliciting material of a publicly-offered investor in Core Trust or
Schroder Core, including the Fund. Under the Trust Instrument for Core Trust,
each investor in Index Portfolio or International Portfolio, including the
Trust, indemnifies Core Trust and its Trustees and officers ("Core Trust
Indemnitees") against certain claims. Likewise, under the Trust Instrument for
the Schroder Core, each investor in the Schroder EM Core Portfolio, including
the Trust, indemnifies Schroder Core and its Trustees and officers ("Schroder
Core Indemnitees") against certain claims. Indemnified claims are those brought
against Core Trust Indemnitees or Schroder Core Indemnitees but based on a
misstatement or omission of a material fact in the investor's registration
statement or proxy materials, except to the extent such claim is based on a
misstatement or omission of a material fact relating to information about Core
Trust or Schroder Core in the investor's registration statement or proxy
materials that was supplied to the investor by Core Trust or Schroder Core.
Similarly, Core Trust and Schroder Core indemnify each investor in their
respective Portfolios, including the Funds, for any claims brought against the
investor with respect to the investor's registration statement or proxy
materials, to the extent the claim is based on a misstatement or omission of a
material fact relating to information about Core Trust or Schroder Core that is
supplied to the investor by Core Trust or Schroder Core. In addition, each
registered investment company investor in a Portfolio indemnifies each Core
Trust Indemnitee or Schroder Core Indemnitee, as applicable, against any claim
based on a misstatement or omission of a material fact relating to information
about a series of the registered investment company that did not invest in the
Core Trust or Schroder Core. The purpose of these cross-indemnity provisions is
principally to limit the liability of each of Core Trust and Schroder Core to
information that it knows or should know and can control. With respect to other
prospectuses and other offering documents and proxy materials of investors in
Core Trust or in Schroder Core, Core Trust's and Schroder Core's liability is
similarly limited to information about and supplied by Core Trust or Schroder
Core, respectively.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIOS. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a Portfolio had a large investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
A Fund may withdraw its entire investment from a Portfolio at any time,
if the Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if there were other
investors in a Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it would incur brokerage fees or other transaction
costs. If a Fund withdrew its investment from a Portfolio, the Board would
consider what action might be taken, including the management of the Fund's
assets in accordance with its investment objective and policies by the Fund's
Adviser, or another investment adviser or the investment of Fund's assets in
another pooled investment entity. The inability of a Fund to find a suitable
replacement investment, in the event that the Fund's Adviser did not manage the
Fund's assets directly, could have a significant impact on shareholders of the
Fund.
Each investor in a Portfolio, including a Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust or
Schroder Core, as applicable. The risk to an investor in a Portfolio of
incurring financial loss on account of such liability, however, would be limited
to circumstances in which the Portfolio was unable to meet its obligations. Upon
liquidation of a Portfolio, investors, including the Fund, would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS'
SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER
MAY NOT LAWFULLY BE MADE.
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EQUITY INDEX FUND
INVESTORS EQUITY FUND
SMALL COMPANY OPPORTUNITIES FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
Account Information and
Shareholder Servicing: Distributor:
Forum Financial Corp. Forum Financial Services, Inc.
P.O. Box 446 Two Portland Square
Portland, Maine 04112 Portland, Maine 04101
207-879-0001 207-879-1900
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MARCH ___, 1998
Forum Funds (the "Trust") is a registered open-end investment company. This
Statement of Additional Information supplements the "Preliminary Prospectus"
dated November 15, 1997 offering shares of Equity Index Fund, Investors Equity
Fund, Small Company Opportunities Fund, International Equity Fund and Emerging
Markets Fund (each a Fund and collectively the "Funds") and should be read only
in conjunction with the Prospectus, a copy of which may be obtained by an
investor without charge by contacting the Trust's Distributor at the address
listed above.
Each Fund, except for Investors Equity Fund currently seeks to achieve its
investment objective by holding the securities of one or more separate
portfolios of registered open-end management investment company.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
TABLE OF CONTENTS
PAGE
1. General......................................................
2. Investment Policies..........................................
3. Investment Limitations.......................................
4. Performance Data.............................................
5. Management...................................................
6. Determination of Net Asset Value.............................
7. Portfolio Transactions.......................................
8. Additional Purchase and
Redemption Information....................................
9. Taxation.....................................................
10. Other Information............................................
Appendix A - Description of Securities Ratings
Appendix B - Text of Forum Brochure
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1. GENERAL
THE TRUST. The Trust is registered with the SEC as an open-end, management
investment company and was organized as a business trust under the laws of the
State of Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to
the assets and liabilities of Forum Funds, Inc. Forum Funds, Inc. was
incorporated on March 24, 1980 and assumed the name of Forum Funds, Inc. on
March 16, 1987. The Board has the authority to issue an unlimited number of
shares of beneficial interest of separate series with no par value per share and
to create separate classes of shares within each series. The Trust currently has
authorized shares of twenty-four series, including series that have not
commenced operation as of the date of this SAI. The series of the Trust are as
follows:
Investors High Grade Bond Fund
Investors Bond Fund
TaxSaver Bond Fund
Daily Assets Cash Fund
Daily Assets Treasury Fund
Daily Assets Government Fund
Daily Assets Municipal Fund
Daily Assets Treasury Obligations Fund
Payson Value Fund
Payson Balanced Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund
Austin Global Equity Fund
Oak Hall Equity Fund
Quadra Limited Maturity Treasury Fund
Quadra Value Equity Fund
Quadra Growth Fund
Quadra International Equity Fund
Quadra Opportunistic Bond Fund
Equity Index Fund
Investors Equity Fund
International Equity Fund
Emerging Markets Fund
Investors Growth Fund
DEFINITIONS. As used in this Statement of Additional Information, the following
terms shall have the meanings listed:
"Board" means the Board of Trustees of Forum Funds.
"Core Trust" means Core Trust (Delaware), a Delaware business trust.
"Core Trust Board" means the Board of Trustees of Core Trust (Delaware).
"Core Trust Portfolio" means Index Portfolio, Small Cap Index Portfolio, Small
Company Stock Portfolio, Small Company Value Portfolio and Small Cap Value
Portfolio, each, a series of Core Trust.
"FAS" means Forum Administrative Services, LLC.
"FAcS" means Forum Accounting Services, LLC.
"FFC" means Forum Financial Corp.
"FFSI" means Forum Financial Services, Inc.
"Forum Advisors" means Forum Advisors, Inc.
"Fund" means Equity Index Fund, Investors Equity Fund, Small Company
Opportunities Fund, International Equity Fund or Emerging Markets Fund.
"Fund Business Day" has the meaning ascribed thereto in the current Prospectus
of the Funds.
"NRSRO" means a nationally recognized statistical rating organization.
"Norwest" means Norwest Investment Management, Inc.
"Portfolio" means Index Portfolio, Schroder U.S. Smaller Companies Portfolio,
International Portfolio, Schroder EM Core Portfolio, Small Cap Index Portfolio,
Small Company Stock Portfolio, Small Company Value Portfolio or Small Cap Value
Portfolio.
"SAI" means this Statement of Additional Information.
"SCMI" means Schroder Capital Management International, Inc.
"SEC" means the U.S. Securities and Exchange Commission.
"Schroder Core" means Schroder Capital Funds.
"Schroder Core Board" means the Board of Trustees of Schroder Core.
"Schroder Core Portfolio" means Schroder U.S. Smaller Companies Portfolio,
International Portfolio and Schroder EM Core Portfolio.
"Trust" means Forum Funds, a Delaware business trust.
"U.S. Government Securities" has the meaning ascribed thereto by the current
Prospectus of the Funds.
"1940 Act" means the Investment Company Act of 1940, as amended.
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2. INVESTMENT POLICIES
INTRODUCTION
The following information supplements the discussion found under "Investment
Objective and Policies" in the Prospectus. Each of Equity Index Fund,
International Equity Fund and Emerging Markets Fund currently seeks to achieve
its investment objective by investing all of its investment assets in a
Portfolio, which has substantially the same investment objective and policies.
Because each Fund has the same investment policies as the Portfolio in which it
invests and currently invests all of its assets in that Portfolio, investment
policies for these Funds and the Portfolios in which they invest are generally
discussed in reference to the Fund. Small Company Opportunities Fund currently
seeks to achieve its investment objective by investing its assets in two or more
Portfolios. Accordingly, the Fund may invest in certain of the instruments
described below through the Portfolios in which it invests.
Each of International Fund and Emerging Markets Fund will normally invest at
least 65% of its total assets in equity securities of companies domiciled
outside the United States, including common and preferred stock, convertible
securities, depository receipts, and warrants or rights to purchase such equity
securities. Investments also may be made in debt obligations of foreign
governments, corporations and international or supranational organizations (and
their agencies or instrumentalities).
For temporary defensive purposes, to accumulate cash for investments, or to meet
anticipated redemptions, each Fund may invest in (or enter into repurchase
agreements with banks and broker dealers with respect to) short-term debt
securities, including Treasury bills and other U.S. Government securities, and
certificates of deposit and bankers' acceptances of U.S. banks. The Funds may
also hold cash and time deposits in foreign banks, denominated in any major
foreign currency. In anticipation of foreign exchange requirements and to avoid
losses due to adverse movements in foreign currency exchange rates, the
International Equity Fund and Emerging Markets Fund also may enter into forward
contracts to purchase and sell foreign currencies. See "Forward Foreign Currency
Exchange Contracts" below.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Investment Policies" in the
Prospectus sets forth the circumstances in which a Fund may invest in
"restricted securities". In connection with the Funds' original purchase of
restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund. When
registration is required, however, a considerable period may elapse between the
decision to sell the securities and the time the Fund would be permitted to sell
such securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, a Fund may not be
able to obtain as favorable a price as that prevailing at the time of the
decision to sell.
LOANS OF PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities subject to the restrictions stated
in the Prospectus. Under applicable regulatory requirements (which are subject
to change), the loan collateral must (a) on each business day, at least equal
the market value of the loaned securities and (b) must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Fund is permitted to invest. To be acceptable as collateral, letters
of credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. When lending portfolio securities, the Fund receives
from the borrower an amount equal to the interest paid or the dividends declared
on the loaned securities during the term of the loan plus the interest on the
collateral securities (less any finders' or administrative fees the Fund pays in
arranging the loan). A Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum amount of
interest required by the lending guidelines established by the Board. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund
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or the investment adviser to the Fund. The terms of a Fund's loans must meet
certain tests under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five business days' notice or in time to vote on any
important matter.
U.S. GOVERNMENT SECURITIES
Each Fund may invest in obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities which have remaining maturates not
exceeding one year. Agencies and instrumentalities which issue or guarantee debt
securities and which have been established or sponsored by the U.S. Government
include the Bank for Cooperatives, the Export-Import Bank, the Federal Farm
Credit System, the Federal Home Loan Banks, the Federal Home Loan Mortgage
Corporation, the Federal Intermediate Credit Banks, the Federal Land Banks, the
Federal National Mortgage Association, the Government National Mortgage
Association and the Student Loan Marketing Association. Except for obligations
issued by the U.S. Treasury and the Government National Mortgage Association,
none of the obligations of the other agencies or instrumentalities referred to
above are backed by the full faith and credit of the U.S. Government.
BANK OBLIGATIONS
Each Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation.
Each Fund also may invest in certificates of deposit issued by foreign banks,
denominated in any major foreign currency. Each Fund will invest in instruments
issued by foreign banks which, in the view of its investment adviser and the
Trustees of the Trust, Core Trust or Schroder Core, are of credit-worthiness and
financial stature in their respective countries comparable to U.S. banks used by
the Fund.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Funds may invest in commercial paper, that is, short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by a Fund for temporary
defensive purposes consists of direct obligations of domestic issuers which, at
the time of investment, are rated "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" by Standard & Poor's Corporation ("S&P"), or securities
which, if not rated, are issued by companies having an outstanding debt issue
currently rated Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the
highest commercial paper rating assigned by Moody's and the rating "A-1" is the
highest commercial paper ratings assigned by S&P.
REPURCHASE AGREEMENTS
Each Fund may invest in securities subject to repurchase agreements with U.S.
banks or broker-dealers maturing in seven days or less. In a typical repurchase
agreement the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed-upon time and
price. The repurchase price exceeds the sale price, reflecting an agreed-upon
interest rate effective for the period the buyer owns the security subject to
repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. Each Fund's investment adviser will monitor the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to insure that the value of the
security always equals or exceeds the repurchase price. In the event of default
by the seller under the repurchase agreement, a Fund may have difficulties in
exercising its rights to the underlying securities and may incur costs and
experience time delays in connection with
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the disposition of such securities. To evaluate potential risks, the investment
adviser reviews the credit-worthiness of those banks and dealers with which the
Fund enters into repurchase agreements.
CONVERTIBLE SECURITIES
The Funds may invest in convertible preferred stocks and convertible debt
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
carry less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's worth
if it were to be exchanged for the underlying security, at market value,
pursuant to its conversion privilege).
DEBT-TO-EQUITY CONVERSIONS
Emerging Markets Fund may invest up to 5% of its net assets in debt-to-equity
conversions. Debt-to-equity conversion programs are sponsored in varying degrees
by certain emerging market countries, particularly in Latin America, and permit
investors to use external debt of a country to make equity investments in local
companies. Many conversion programs relate primarily to investments in
transportation, communication, utilities and similar infrastructure-related
areas. The terms of the programs vary from country to country, but include
significant restrictions on the application of proceeds received in the
conversion and on the repatriation of investment profits and capital. When
inviting conversion applications by holders of eligible debt, a government
usually specifies the minimum discount from par value that it will accept for
conversion. SCMI believes that debt-to-equity conversion programs may offer
investors opportunities to invest in otherwise restricted equity securities that
have a potential for significant capital appreciation and intends to invest
assets of the Portfolio to a limited extent in such programs under appropriate
circumstances. There can be no assurance that debt-to-equity conversion programs
will continue or be successful or that the Portfolio will be able to convert all
or any of its emerging market debt portfolio into equity investments.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
To hedge against adverse price movements in the securities held in its portfolio
and the currencies in which they are denominated (as well as in the securities
it might wish to purchase and their denominated currencies) International Equity
Fund and Emerging Markets Fund may engage in transactions in forward foreign
currency contracts.
A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell a currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by the parties)
at a price set at the time of the contract. International Equity Fund and
Emerging Markets Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit a Fund's ability to effectively hedge its investments
in those emerging markets. Hedging against a decline in the value of a currency
does not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. Such transactions also limit
the opportunity for gain if the value of the hedged currencies should rise. In
addition, it may not be possible for a Fund to hedge against a devaluation that
is so generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
A Fund will enter into forward contracts under certain instances. When a Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may, for example, wish to secure the price of the security
in U.S. dollars or some other foreign currency which the Portfolio is
temporarily holding in its portfolio. By entering into a forward contract for
the purchase or sale (for a fixed amount of dollars or other currency) of the
amount of foreign currency involved in the underlying security transactions, a
Fund will be able to protect itself
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against possible loss (resulting from adverse changes in the relationship
between the U.S. dollar or other currency being used for the security purchase
and the foreign currency in which the security is denominated) during the period
between the date on which the security is purchased or sold and the date on
which payment is made or received.
In addition, when a Fund anticipates purchasing securities at some future date,
and wishes to secure the current exchange rate of the currency in which those
securities are denominated against the U.S. dollar or some other foreign
currency, it may enter into a forward contract to purchase an amount of currency
equal to part or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars or other currency.
In all of the above instances, if the currency in which a Fund's portfolio
securities (or anticipated portfolio securities) are denominated rises in value
with respect to the currency which is being purchased, then the Fund will have
realized fewer gains than if the Fund had not entered into the forward
contracts. Furthermore, the precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible, since the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures.
To the extent that a Fund enters into forward foreign currency contracts to
hedge against a decline in the value of portfolio holdings denominated in a
particular foreign currency resulting from currency fluctuations, there is a
risk that the Fund may nevertheless realize a gain or loss as a result of
currency fluctuations after such portfolio holdings are sold should the Fund be
unable to enter into an "offsetting" forward foreign currency contract with the
same party or another party. A Fund may be limited in its ability to enter into
hedging transactions involving forward contracts by the Internal Revenue Code
requirements relating to qualifications as a regulated investment company (see
"Taxation").
A Fund is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by SCMI. Generally, a Fund will not enter into a forward contract
with a term of greater than one year.
OPTIONS AND HEDGING
As discussed in the Prospectus, certain Funds (and Portfolios) may write covered
call options against securities held in its portfolio and covered put options on
eligible portfolio securities and may purchase options of the same series to
effect closing transactions; and may hedge against potential changes in the
market value of its investments (or anticipated investments) by purchasing put
and call options on portfolio (or eligible portfolio) securities (and the
currencies in which they are denominated) and engaging in transactions involving
futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC Options"). Listed options
are issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives a Fund the right to buy from the OCC (in the U.S.) or
other clearing corporation or exchange, the underlying security or currency
covered by the option at the stated exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell, to the OCC (in the U.S.) or other clearing corporation
or exchange, the underlying security or currency at that exercise price prior to
the expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give a Fund the right to sell the
underlying security or currency to the OCC (in the U.S.) or other clearing
corporation or exchange at the stated exercise price. Upon notice of exercise of
the put option, the writer of the option would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange at the exercise price.
The OCC or other clearing corporation or exchange that issues listed options
ensures that all transactions in such options are properly executed. OTC options
are purchased from or sold (written) to dealers or financial institutions
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which have entered into direct agreements with a Fund. With OTC options,
variables such as expiration date, exercise price and premium will be agreed
between a Fund and the transacting dealer. If the transacting dealer fails to
make or take delivery of the securities or amount of foreign currency underlying
an option it has written, a Fund would lose the premium paid for the option as
well as any anticipated benefit of the transaction. A Fund will engage in OTC
option transactions only with member banks of the Federal Reserve System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers which have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million.
OPTIONS ON FOREIGN CURRENCIES. International Equity Fund and Emerging Markets
Fund may purchase and write options on foreign currencies for purposes similar
to those involved with investing in forward foreign currency exchange contracts.
For example, in order to protect against declines in the dollar value of
portfolio securities which are denominated in a foreign currency, a Fund may
purchase put options on an amount of such foreign currency equivalent to the
current value of the portfolio securities involved. As a result, a Fund would be
able to sell the foreign currency for a fixed amount of U.S. dollars, thereby
securing the dollar value of the portfolio securities (less the amount of the
premiums paid for the options). Conversely, a Fund may purchase call options on
foreign currencies in which securities it anticipates purchasing are denominated
to secure a set U.S. dollar price for such securities and protect against a
decline in the value of the U.S. dollar against such foreign currency. A Fund
may also purchase call and put options to close out written option positions.
A Fund may also write covered call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to a Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, a Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. A Fund may also write options to close out long call
option positions. A covered put option on a foreign currency would be written by
the Fund for the same reason it would purchase a call option, namely, to hedge
against an increase in the U.S. dollar value of a foreign security which the
Fund anticipates purchasing. Here, the receipt of the premium would offset, to
the extent of the size of the premium, any increased cost to a Fund resulting
from an increase in the U.S. dollar value of the foreign security. However, a
Fund could not benefit from any decline in the cost of the foreign security
which is greater than the price of the premium received. A Fund may also write
options to close out long put option positions.
Markets in foreign currency options are relatively new and a Fund's ability to
establish and close out positions on such options is subject to the maintenance
of a liquid secondary market. Although a Fund will not purchase or write such
options unless and until, in the opinion of the SCMI, the market for them has
developed sufficiently to ensure that their risks are not greater than the risks
in connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar: as a result, the price of the option
position may vary with changes in the value of either or both currencies and may
have no relationship to the investment merits of a foreign security, including
foreign securities held in a "hedged" investment portfolio. 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, investors 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.
There is no systematic reporting of last sale information for foreign currencies
or any 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 and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To the extent that the
U.S. options markets are
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closed while the markets for the underlying currencies remain open, significant
price and rate movements may take place in the underlying markets that are not
reflected in the options market.
COVERED CALL WRITING. Emerging Markets Fund is permitted to write covered call
options on portfolio securities and on the U.S. dollar and foreign currencies in
which they are denominated, without limit. Equity Index Fund and Investors
Equity Fund may write covered calls on up to 100% of their total assets if the
calls are listed on a domestic securities or commodities exchange. Generally, a
call option is "covered" if a Fund owns (or has the right to acquire without
additional cash consideration (or for additional cash consideration held for the
Fund by its Custodian in a segregated account) the underlying security
(currency) subject to the option. In the case of call options on U.S. Treasury
Bills, however, the Fund might own U.S. Treasury Bills of a different series
from those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is also
covered if a Fund holds a call on the same security as the underlying security
(currency) of the written option, where the exercise price of the call used for
coverage is equal to or less than the exercise price of the call or greater than
the exercise price of the call written if the mark to market difference is
maintained by a Fund in cash, U.S. Government securities or other high grade
debt obligations which the Portfolio holds in a segregated account maintained
with its custodian.
A Fund will receive a premium from the purchaser in return for a call it has
written. Receipt of such premiums may enable a Fund to earn a higher level of
current income than it would earn from holding the underlying securities
(currencies) alone. Moreover, the premium received will offset a portion of the
potential loss incurred by a Fund if the securities (currencies) underlying the
option are ultimately sold (exchanged) by the Fund at a loss. Furthermore, a
premium received on a call written on a foreign currency will ameliorate any
potential loss of value on the portfolio security due to a decline in the value
of the currency. However, during the option period, the covered call writer has,
in return for the premium, given up the opportunity for capital appreciation
above the exercise price should the market price of the underlying security (or
the exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received will fluctuate with varying economic market conditions. If the market
value of the portfolio securities (or the currencies in which they are
denominated) upon which call options have been written increases, a Fund may
receive a lower total return from the portion of its portfolio upon which calls
have been written than it would have had such calls not been written.
With respect to listed options and certain OTC options, during the option period
a Fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once a Fund
has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security (currency) from being
called, to permit the sale of an underlying security (or the exchange of the
underlying currency) or to enable a Fund to write another call option on the
underlying security (currency) with either a different exercise price or
expiration date or both. A Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).
If a call option expires unexercised, a Fund realizes a gain in the amount of
the premium on the option less the commission paid. Such a gain, however, may be
offset by depreciation in the market value of the underlying security
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(currency) during the option period. If a call option is exercised, a Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on the option less the commission paid.
Options written by a Fund will normally have expiration dates of up to eighteen
months from the date written. The exercised price of a call option may be below,
equal to or above the current market value of the underlying security at the
time the option is written.
COVERED PUT WRITING. As a writer of a covered put option, a Fund would incur an
obligation to buy the security underlying the option from the purchaser of the
put, at the option's exercise price at any time during the option period, at the
purchaser's election (certain listed and OTC put options written by a Fund will
be exercisable by the purchaser only on a specific date). A put is "covered" if
at all times a Fund maintains with its custodian (in a segregated account) cash,
U.S. Government securities or other high grade obligations in an amount equal to
at least the exercise price of the option. Similarly, a short put position could
be covered by a Fund by its purchase of a put option on the same security
(currency) as the underlying security of the written option, where the exercise
price of the purchased option is equal to or more than the exercise price of the
put written or less than the exercise price of the put written if the marked to
market difference is maintained by a Fund in cash, U.S. Government securities or
other high grade debt obligations which the Fund holds in a segregated account
maintained at its custodian. In writing puts, a Fund assumes the risk of loss
should the market value of the underlying security (currency) decline below the
exercise price of the option (any loss being decreased by the receipt of the
premium on the option written). In the case of listed options, during the option
period a Fund may be required, at any time, to make payment of the exercise
price against delivery of the underlying security (currency). The operation of
and limitations on covered put options in other respects are substantially
identical to those of call options.
A Fund will write put options for three purposes: (1) to receive the income
derived from the premiums paid by purchasers; (2) when the investment adviser
wishes to purchase the security (or a security denominated in the currency
underlying the option) underlying the option at a price lower than its current
market price (in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought); and (3) to close out a long put
option position. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the differences between the exercise price of
the option and the current market price of the underlying securities
(currencies) when the put is exercised, offset by the premium received (less the
commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. Equity Index Fund and Investors Equity Fund may
purchase put options ("puts") that relate to: (i) securities it holds, (ii)
Stock Index Futures (whether or not it holds such Stock Index Futures in its
portfolio), or (iii) broadly-based stock indices. The Fund may not sell puts
other than those it previously purchased, nor purchase puts on securities it
does not hold. The fund may purchase calls: (a) as to securities, broadly-based
stock indices or Stock Index Futures, or (b) to effect a "closing purchase
transaction" to terminate its obligation on a call it has previously written. A
call or put may be purchased only if, after such purchase, the value of all put
and call options held by the Fund would not exceed 5% of the Fund's total
assets. Emerging Markets Fund may purchase listed and OTC call and put options
in amounts equaling up to 5% of its total assets. A Fund may purchase a call
option in order to close out a covered call position (see "Covered Call Writing"
above), to protect against an increase in price of a security it anticipates
purchasing or, in the case of a call option on foreign currency, to hedge
against an adverse exchange rate move of the currency in which the security it
anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The purchase of the call option to effect a
closing transaction on a call written over-the-counter may be a listed or an OTC
option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by a Fund.
A Fund may purchase put options on securities (currencies) which it holds in its
portfolio to protect itself against a decline in the value of the security and
to close out written put option positions. If the value of the underlying
security (currency) were to fall below the exercise price of the put purchased
in an amount greater then the premium paid for the option, a Fund would incur no
additional loss. In addition, a Fund may sell a put option it has previously
purchased prior to the sale of the securities (currencies) underlying such
option. Such a sale would result
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in a net gain or loss depending upon whether the amount received on the sale is
more or less than the premium and other transaction costs paid on the put option
that is sold. Any such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by a Fund expired without being sold or exercised, the premium
would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call writer
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price if the market price of the
underlying security (or the value of its denominated currency) increases, but
has retained the risk of loss if the price of the underlying security (or the
value of its denominated currency) declines. The writer has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price.
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell an underlying security at a time when it might otherwise
be advantageous to do so. A covered put option writer who is unable to effect a
closing purchase transaction or to purchase an offsetting OTC option would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a covered put
writer would be unable to utilize the amount held in cash or U.S. Government or
other high grade short-term obligations as security for the put option for other
investment purposes until the exercise or expiration of the option.
A Fund's ability to close out its position as a writer of an option is dependent
upon the existence of a liquid secondary market on option exchanges. There is no
assurance that such a market will exist, particularly in the case of OTC
options, since such options will generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. However, a Fund may be
able to purchase an offsetting option that does not close out its position as a
writer but constitutes an asset of equal value to the obligation under the
option written. If a Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to maintain
the securities subject to the call, or the collateral underlying the put, even
though it might not be advantageous to do so, until a closing transaction can be
entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.
In the event of the bankruptcy of a broker through which a Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by a Fund, the
Fund could experience a loss of all or part of the value of the option.
Transactions will be entered into by a Fund only with brokers or financial
institutions deemed creditworthy by its investment adviser or subadviser.
Exchanges have established limitations governing the maximum number of options
on the same underlying security or futures contract (whether or not covered)
that may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which a Fund may write.
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The hours of trading for options may not conform to the hours during which the
underlying securities are traded. If the option markets close before the markets
for the underlying securities, significant price and rate movements can take
place in the underlying markets that cannot be reflected in the option markets.
The extent to which a Fund may enter into transactions involving options may be
limited by the Internal Revenue Code's requirements for qualification as a
regulated investment company and a Fund's intention to qualify as such (see
"Taxation").
FUTURES CONTRACTS. Certain Funds may purchase and sell interest rate, currency,
and index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills, and/or any foreign government fixed-income security
("interest rate" futures), on various currencies ("currency futures") and on
such indices of U.S. and foreign securities as may exist or come into being
("index futures").
A Fund will purchase or sell interest rate futures contracts for the purpose of
hedging some or all of the value of its portfolio securities (or anticipated
portfolio securities) against changes in prevailing interest rates. If the
investment adviser anticipates that interest rates may rise and, concomitantly,
the price of certain of its portfolio securities fall, a Fund may sell an
interest rate futures contract. If declining interest rates are anticipated, a
Fund may purchase an interest rate futures contract to protect against a
potential increase in the price of securities the Fund intends to purchase.
Subsequently, appropriate securities may be purchased by a Fund in an orderly
fashion; as securities are purchased, corresponding futures positions would be
terminated by offsetting sales of contracts.
A Fund will purchase or sell index futures contracts for the purpose of hedging
some or all of its portfolio (or anticipated portfolio) securities against
changes in their prices. If it anticipates that the prices of securities it
holds may fall, a Fund may sell an index futures contract. Conversely, if a Fund
wishes to hedge against anticipated price rises in those securities which it
intends to purchase, the Fund may purchase an index futures contract.
A Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
A Fund will enter into currency futures contracts for the same reasons as set
forth above for entering into forward foreign currency exchange contracts;
namely, to secure the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out short or long positions maintained by a
Fund in corresponding futures contracts.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that a Fund will be able to enter into a closing
transaction.
INTEREST RATE FUTURES CONTRACTS. When a Fund enters into an interest rate
futures contract, it is initially required to deposit with its custodian (in a
segregated account in the name of the broker performing the transaction) an
"initial margin" of cash or U.S. Government securities or other high grade
short-term obligations equal to approximately 2% of the contract amount. Initial
margin requirements are established by the exchanges on which futures contracts
trade and may change. In addition, brokers may establish margin deposit
requirements in excess of those required by the exchanges.
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Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of money by a
brokers' client but is, rather, a good faith deposit on the futures contract
that will be returned to a Fund upon the proper termination of the futures
contract. The margin deposits made are marked to market daily and a Fund may be
required to make subsequent deposits of cash or U.S. Government securities
(called "variation margin") with the Fund's futures contract clearing broker,
which are reflective of price fluctuations in the futures contract.
CURRENCY FUTURES. Generally, foreign currency futures provide for the delivery
of a specified amount of a given currency, on the exercise date, for a set
exercise price denominated in U.S. dollars or other currency. Foreign currency
futures contracts would be entered into for the same reason and under the same
circumstances as forward foreign currency exchange contracts. SCMI will assess
such factors as cost spreads, liquidity and transaction costs in determining
whether to use futures contracts or forward contracts in its foreign currency
transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are subject to the
same risks that apply generally to the buying and selling of futures. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, a Fund must accept or make delivery of the underlying foreign currency in
accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
INDEX FUTURES CONTRACTS. Each Fund, except International Equity Fund, may invest
in index futures contracts. An index futures contract sale creates an obligation
by a Fund, as seller, to deliver cash at a specified future time. An index
futures contract purchase would create an obligation by a Fund, as purchaser, to
take delivery of cash at a specified future time. Futures contracts on indices
do not require the physical delivery of securities, but provide for a final cash
settlement on the expiration date that reflects accumulated profits and losses
credited or debited to each party's account.
A Fund is required to maintain margin deposits with brokerage firms through
which it effects index futures contracts in a manner similar to that described
above for interest rate futures contracts. In addition, due to current industry
practice, daily variations in gains and losses on open contracts are required to
be reflected in cash in the form of variation margin payments. A Fund may be
required to make additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, a Fund may elect to
close the position by taking an opposite position, which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to a Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. A Fund may purchase and write call and put options
on futures contracts traded on an exchange and may enter into closing
transactions with respect to such options to terminate an existing position. 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 (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
A Fund will purchase and write options on futures contracts for purposes
identical to those set forth above for the purchase of a futures contract
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(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the investment
adviser wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Adviser seeks to hedge. Any premiums received in the writing of options on
futures contracts may provide a further hedge against losses resulting from
price declines in portions of a Fund's investment portfolio.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, a Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in SCMI's opinion, the market for such options has developed sufficiently
that the risks in connection with them are not greater than the risks in
connection with transactions in the underlying foreign currency futures
contracts.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. A Fund may not enter
into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of a Fund's total
assets, after taking into account unrealized gains and unrealized losses on such
contracts it has entered into, provided, however, that in the case of an option
that is in-the-money (the exercise price of the call (put) option is less (more)
than the market price of the underlying security) at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. However, there is no
overall limitation on the percentage of a Fund's assets which may be subject to
a hedge position. In addition, in accordance with the regulations of the
Commodity Futures Trading Commission ("CFTC") under which a Fund is exempted
from registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions for purposes of
hedging a part or all of its portfolio. Except as described above, there are no
other limitations on the use of futures and options thereon by a Fund.
The writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option on a futures contract
are included in initial margin deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. A Fund may sell
a futures contract to protect against the decline in the value of securities (or
the currency in which they are denominated) held by a Fund. However, it is
possible that the futures market may advance and the value of a Fund's
securities (or the currency in which they are denominated) may decline. If this
occurs, a Fund will lose money on the futures contract and also experience a
decline in value of its portfolio securities. While this might occur for only a
very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If a Fund purchases a futures contract to hedge against the increase in value of
securities it intends to buy (or the currency in which they are denominated),
and the value of such securities (currencies) decreases, then a Fund may
determine not to invest in the securities as planned and will realize a loss on
the futures contract that is not offset by a reduction in the price of the
securities.
If a Fund has sold a call option on a futures contract, it will cover this
position by holding (in a segregated account maintained at its Custodian) cash,
U.S. Government Securities or other high grade debt obligations equal in value
(when added to any initial or variation margin on deposit) to the market value
of the securities (currencies) underlying the futures contract or the exercise
price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting a Fund to purchase the same contract at a price no higher than
the price at which the short position was established.
In addition, if a Fund holds a long position in a futures contract it will hold
cash, U.S. Government Securities or other high grade debt obligations equal to
the purchase price of the contract (less the amount of initial or variation
margin on deposit) in a segregated account maintained for a Fund by its
Custodian. Alternatively, a Fund could
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cover its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held by
the Fund.
Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, a Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, a Fund may be required to
take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
a Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon that are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges and brokerage
commissions, clearing costs and other transaction costs may be higher. Greater
margin requirements may limit a Fund's ability to enter into certain commodity
transactions on foreign exchanges. Moreover, differences in clearance and
delivery requirements on foreign exchanges may cause delays in the settlement of
a Fund's foreign exchange transactions.
In the event of the bankruptcy of a broker through which a Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by a Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by a Fund only with brokers
or financial institutions deemed creditworthy by the Fund's investment adviser.
While the futures contracts and options transactions to be engaged in by a Fund
for the purpose of hedging its portfolio securities are not speculative in
nature, there are risks inherent in the use of such instruments. One such risk
which may arise in employing futures contracts to protect against the price
volatility of portfolio securities (and the currencies in which they are
denominated) is that the prices of securities and indices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of a Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which a Fund seeks a hedge. A correlation may
also be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are generally
minor and would diminish as the contract approached maturity.
There may exist an imperfect correlation between the price movements of futures
contracts purchased by a Fund and the movements in the prices of the securities
(currencies) which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities or currency markets and futures markets could
result. Price distortions could also result if investors in futures contracts
choose to make or take delivery of underlying securities rather than engage in
closing transactions due to the resultant reduction in the liquidity of the
futures market. In addition, because the deposit requirements in the futures
markets are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market can be anticipated with the
resulting speculation causing temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which a Fund may invest. In the event a liquid
market does not exist, it may not be possible to close out a futures position,
and in the event of adverse price movements, a Fund would continue to be
required to make daily cash payments of
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variation margin. In addition, limitations imposed by an exchange or board of
trade on which futures contracts are traded may compel or prevent a Fund from
closing out a contract, which may result in reduced gain or increased loss to
the Fund. The absence of a liquid market in futures contracts might cause a Fund
to make or take delivery of the underlying securities (currencies) at a time
when it may be disadvantageous to do so.
The extent to which a Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such.
TAX ASPECTS OF HEDGING INSTRUMENTS. The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986 (the "Code"). One of
the tests for such qualification is that less than 30% of its gross income must
be derived from gains realized on the sale of securities held for less than
three months. Due to this limitation, the Fund will limit the extent to which it
engages in the following activities, but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts that expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts purchased less than
three months previously; (iv) exercising puts held by the Fund for less than
three months; and (v) writing calls on investments held for less than three
months.
WARRANTS AND STOCK RIGHTS. A Fund may invest in warrants, which are options to
purchase an equity security at a specified price (usually representing a premium
over the applicable market value of the underlying equity security at the time
of the warrant's issuance). A Fund may not invest more than 5% of its net assets
(at the time of investment) in warrants (other than those that have been
acquired in units or attached to other securities). No more than 2% of a Fund's
net assets (at the time of investment) may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Investments in warrants
involve certain risks, including the possible lack of a liquid market for the
resale of the warrants, potential price fluctuations as a result of speculation
or other factors and failure of the price of the underlying security to reach a
level at which the warrant can be prudently exercised (in which case the warrant
may expire without being exercised, resulting in the loss of a Fund's entire
investment therein). The prices of warrants do not necessarily move parallel to
the prices of the underlying securities. Warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
In addition, a Fund may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.
FOREIGN SECURITIES
Investment in the securities of foreign issuers may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may be less active than U.S. markets, trading may be thin and consequently
securities prices may be more volatile. The Funds' investment adviser, will, in
general, invest only in securities of companies and governments of countries
which, in its judgment, are both politically and economically stable.
Nevertheless, 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 the
repatriation of foreign capital and changes in foreign governmental attitudes
toward private investment, possibly leading to nationalization, increased
taxation, or confiscation of Portfolio assets.
DEPOSITORY RECEIPTS
Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
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trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders of
these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust
company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
USE OF FORWARD CONTRACTS IN FOREIGN EXCHANGE TRANSACTIONS
To protect or "hedge" against adverse movements in foreign currency exchange
rates, International Equity Fund and Emerging Markets Fund may invest in forward
contracts to purchase or sell an agreed-upon amount of a specified currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. Such
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. Although such contracts tend to minimize the risk of loss due
to a decline in the value of the currency which is sold, they expose a Fund to
the risk that the counterparty is unable to perform and they tend to limit
commensurately any potential gain which might result should the value of such
currency increase during the contract period.
HIGH YIELD/JUNK BONDS
International Equity Fund may invest up to 5% of its assets in bonds rated below
Baa by Moody's or BBB by S&P (commonly known as "high yield/high risk
securities" or "junk bonds"). Emerging Markets Fund may invest up to 35% of its
assets in such high yield/high risk securities. Securities rated lower than Baa
by Moody's or BBB by S&P are classified as non-investment grade securities and
are considered speculative. Junk bonds may be issued as a consequence of
corporate restructurings (such as leveraged buyouts, mergers, acquisitions, debt
recapitalizations, or similar events) or by smaller or highly leveraged
companies. Although the growth of the high yield securities market in the 1980's
paralleled a long economic expansion, recently many issuers have been affected
by adverse economic and market conditions. It should be recognized that an
economic downturn or increase in interest rates is likely to have a negative
effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goal, or to obtain additional financing. In addition, the market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the market for investment grade securities. Under adverse market or
economic conditions, the market for high yield securities could contract
further, independent of any specific adverse changes in the condition of a
particular issuer. As a result, the Fund could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under these circumstances, may be less than
the prices used in calculating the Fund's net asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Fund may have to use subjective rather than
objective criteria to value its junk bond investments accurately and rely more
heavily on the judgment of the Fund's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by federally
insured savings and loans associations of their investments in high yield bonds.
Also, from time to time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructurings such as takeovers, mergers or leveraged buyouts. These
laws could adversely affect the Fund's net asset value and investment practices,
the market for high yield securities, the financial condition of issuers of
these securities, and the value of outstanding high yield securities.
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Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.
SHORT SALES AGAINST-THE-BOX
After the Fund makes a short sale against-the-box, while the short position is
open, the Fund must own an equal amount of the securities sold short; or by
virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out.
3. INVESTMENT LIMITATIONS
The following investment restrictions restate or are in addition to those
described under "Investment Objective and Policies" and "Additional Investment
Policies and Risk Considerations" in the Prospectus. Each Fund has adopted the
following investment limitations which are fundamental policies of the Funds,
unless otherwise stated. Each Fund that invests in a Portfolio has the same
fundamental investment policies as the Portfolio in which it invests. Thus,
reference to any Fund that invests in a Portfolio includes reference to the
Portfolio in which that Fund invests:
(a) Diversification:
No Fund (other than Emerging Markets Fund) may, with respect to 75% of
its assets, purchase a security if as a result: (i) more than 5% of its
assets would be invested in the securities of any single issuer or (ii)
the Fund would own more than 10% of the outstanding voting securities
of any single issuer. This restriction does not apply to securities
issued by the U.S. Government, its agencies or instrumentalities.
(b) Illiquid Securities
No Fund (except for Small Company Opportunities Fund) will invest more
than 10% of its assets in "illiquid securities", which are securities
that cannot be disposed of within seven days at their then current
value. For purposes of this limitation, "illiquid securities" includes,
except in those circumstances described below: (i) "restricted
securities", which are securities that cannot be resold to the public
without registration under the Federal securities laws, and (ii)
securities of issuers having a record (together with all predecessors)
of less than three years of continuous operation.
As a nonfundamental policy, Small Company Opportunities Fund may not
acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15% of the Fund's net assets
(taken at current value) would be invested in repurchase agreements not
entitling the holder to payment of principal within seven days and in
securities which are not readily marketable, including securities that
are not readily marketable by virtue of restrictions on the sale of
such securities to the public without registration under the 1993 Act,
as amended ("Restricted Securities").
(c) Concentration
Neither Equity Index Fund or Investors Equity Fund may 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; provided, however, that there
is no limit on investments in U.S. Government Securities, repurchase
agreements covering U.S. Government Securities, securities,
mortgage-related or housing-related securities, municipal securities
and issuers domiciled in a single country; that financial service
companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified
finance); and that utility companies are classified according to their
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services (for example, gas, gas transmission, electric and gas,
electric and telephone. Notwithstanding anything to the contrary, to
the extent permitted by the 1940 Act, the Fund may invest in one or
more investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment companies
in which it invests as its own for purposes of this policy.
Small Company Opportunities 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; provided, however, that there is no limit on
investments in U.S. government securities. Notwithstanding anything to
the contrary, to the extent permitted by the 1940 Act, the Fund may
invest in one or more investment companies; provided that, except to
the extent the Fund invests in other investment companies pursuant to
Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the
investment companies in which it invests as its own for purposes of
this policy.
International Equity 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; provided: (1) there is no limit on investments in
U.S. Government Securities, or in repurchase agreements covering U.S.
Government Securities; (2) there is no limit on investment in issuers
domiciled in a single country; (3) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance); and (4)
utility companies are classified according to their services (for
example, gas, gas transmission, electric and gas, electric and
telephone). Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment companies
in which it invests as its own for purposes of this policy.
Emerging Markets Fund will not purchase a security if, as a result,
more than 25% of the Fund's or Portfolio'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: (1) investments in U.S. government securities, in
repurchase agreements covering U.S. government securities, in
securities issued by the states, territories or possessions of the
United States ("municipal securities") or in foreign government
securities; or (2) investment in issuers domiciled in a single
jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund or Portfolio may invest in one or
more investment companies; provided that, except to the extent the it
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund or Portfolio treats the assets of the
investment companies in which it invests as its own for purposes of
this policy.
(d) Underwriting Activities
No Fund (except Small Company Opportunities Fund) will underwrite
securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under U.S. securities laws.
Small Company Opportunities Fund may not underwrite securities of other
issuers, except to the extent that the Fund may be considered to be
acting as an underwriter in connection with the disposition of
portfolio securities.
(e) Borrowing
Equity Index Fund, Investors Equity Fund, Small Company Opportunities
Fund and International Equity Fund may borrow money for temporary or
emergency purposes, including the meeting of redemption requests, but
no in excess of 33 1/3% of the value of the Fund's total assets (as
computed immediately after the borrowing).
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Emerging Markets Fund will not borrow money if, as a result,
outstanding borrowings would exceed an amount equal to one third of the
Fund's or Portfolio's total assets.
As a non-fundamental policy, Small Company Opportunities Fund's
borrowings for other than temporary or emergency purposes or meeting
redemption requests may not exceed an amount equal to 5% of the Fund's
net assets.
(f) Pledging
International Fund may not pledge, mortgage or hypothecate its assets
to an extent greater than 10% of the value of the total assets of the
Fund.
As a non-fundamental policy, Equity Index Fund, Investors Equity Fund
and Small Company Opportunities Fund may not pledge, mortgage,
hypothecate or encumber any of its assets except to secure permitted
borrowings or to secure other permitted transactions.
(g) Margin and Short Sales
International Equity Fund may not purchase securities on margin or sell
short.
No Fund (other than International Equity Fund and Small Company
Opportunities Fund) may: (i) purchase securities on margin; however, the Fund
may make margin deposits in connection with any Hedging Instruments, which it
may use as permitted by any of its other fundamental policies; or (ii) sell
securities short.
As non-fundamental policies, Small Company Opportunities Fund may not
purchase securities on margin, or make short sales of any securities
(except short sales against the box), except for the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities. Small Company Opportunities Fund may make margin deposits
in connection with permitted transactions in options, futures contracts
and options on futures contracts.
(h) Investing for Control
No Fund (except for Small Company Opportunities Fund) may make
investments for the purpose of exercising control or management.
(i) Real Estate
No Fund (except for Small Company Opportunities Fund) may purchase or
sell real estate, provided that the a Fund may invest in securities
issued by companies which invest in real estate or interests therein.
Small Company Opportunities Fund may not purchase or sell real estate
or any interest therein, except that it may invest in debt obligations
secured by real estate or interests therein or securities issued by
companies that invest in real estate or interests therein. As a
non-fundamental policy, Small Company Opportunities Fund may not invest
in real estate limited partnerships.
(j) Lending
International Fund will not make loans to other persons, provided that
for purposes of this restriction, entering into repurchase agreements,
acquiring corporate debt securities and investing in U.S. Government
obligations, short-term commercial paper, certificates of deposit and
bankers' acceptances shall not be deemed to be the making of a loan.
Equity Index Fund and Investors Equity Fund will not lend money except
in connection with the acquisition of that portion of
publicly-distributed debt securities which the Fund's investment
policies
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and restrictions permit it to purchase (see "Investment Objective" and
"Investment Policies" in the Prospectus); the Funds may also make
loans of portfolio securities (see "Loans of Portfolio Securities")
and enter into repurchase agreements (see "Repurchase Agreements");
Small Company Opportunities Fund may not make loans, except the Fund
may enter into repurchase agreements, purchase debt securities that are
otherwise permitted investments and lend portfolio securities.
Emerging Markets Fund will not lend money except in connection with the
acquisition of debt securities which the Fund's investment policies and
restrictions permit it to purchase (see "Investment Objective" and
"Investment Policies" in the Prospectus); the Portfolio may also make
loans of portfolio securities (see "Loans of Portfolio Securities") and
enter into repurchase agreements (see "Repurchase Agreements");
(k) Purchases and Sales of Commodities
International Equity Fund will invest in commodities; commodity
contracts other than foreign currency forward contracts; or oil, gas
and other mineral resource, lease, or arbitrage transactions.
Small Company Opportunities Fund may not purchase or sell physical
commodities unless acquired as a result of owning securities or other
instruments, but it may purchase, sell or enter into financial options
and futures and forward currency contracts and other financial
contracts or derivative instruments.
No Fund (other than International Equity Fund and Small Company
Opportunities Fund) will invest in commodities or commodity contracts
(other than Hedging Instruments which it may use as permitted by any of
its other fundamental policies, whether or not any such Hedging
Instrument is considered to be a commodity or a commodity contract);
(l) Options and Futures Contracts
International Equity Fund may not write, purchase or sell options or
puts, calls, straddles, spreads, or combinations thereof.
No Fund (other than International Equity Fund and Small Company
Opportunities Fund) may purchase or write puts or calls except as
permitted by any of its other fundamental investment policies.
(n) Warrants
No Fund (except for Small Company Opportunities Fund) may invest in
warrants, valued at the lower of cost or market, more than 5% of the
value of the Portfolio's net assets (included within that amount, but
not to exceed 2% of the value of the Portfolio's net assets, may be
warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities may be deemed to be without value.). This policy is
non-fundamental with respect to Equity Index Fund and Small Company
Opportunities Fund.
(o) Other Investment Companies
As a non-fundamental policy, Small Company Opportunities Fund may not
invest in securities of another investment company, except to the
extent permitted by the 1940 Act.
(p) Issuance of Senior Securities
Small Company Opportunities Fund may not issue senior securities except
to the extent permitted by the 1940 Act.
(q) Lending of Portfolio Securities
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As a non-fundamental policy, Diversified Small Cap Fund may not lend
portfolio securities if the total value of all loaned securities would
exceed 25% of its total assets.
4. PERFORMANCE DATA
The Funds may, from time to time, include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a Fund
over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P (1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
Quotations of total return will reflect only the performance of a hypothetical
investment in a Fund during the particular time period shown. Total return for a
Fund will vary based on changes in market conditions and the level of the Fund's
expenses, and no reported performance figure should be considered an indication
of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, a Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of a Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
5. MANAGEMENT
TRUSTEES AND OFFICERS
THE TRUST
The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
John Y. Keffer,* Chairman and President (age 54)
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President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Administrative Services, LLC (a mutual fund
administrator), Forum Financial Corp. (a registered transfer agent)
and Forum Advisors, Inc. (a registered investment adviser). Mr. Keffer
is a Trustee and/or officer of various registered investment companies
for which Forum Administrative Services, LLC serves as manager or
administrator and for which Forum Financial Services, Inc. serves as
distributor. His address is Two Portland Square, Portland, Maine
04101.
Costas Azariadis, Trustee (age 53)
Professor of Economics, University of California, Los Angeles, since
July 1992. Prior thereto, Dr. Azariadis was Professor of Economics at
the University of Pennsylvania. His address is Department of
Economics, University of California, Los Angeles, 405 Hilgard Avenue,
Los Angeles, California 90024.
James C. Cheng, Trustee (age 54)
President of Technology Marketing Associates (a marketing consulting
company) since September 1991. Prior thereto, Mr. Cheng was President
and Chief Executive Officer of Network Dynamics, Incorporated (a
software development company). His address is 27 Temple Street,
Belmont, Massachusetts 02178.
J. Michael Parish, Trustee (age 53)
Partner at the law firm of Winthrop Stimson Putnam & Roberts since
1989. Prior thereto, he was a partner at LeBoeuf, Lamb, Leiby &
MacRae, a law firm of which he was a member from 1974 to 1989. His
address is 40 Wall Street, New York, New York 10005.
Mark D. Kaplan, Vice President, Assistant Treasurer and Assistant Secretary (age
41)
Managing Director at Forum Financial Services, Inc. since September
1995. Prior thereto, Mr. Kaplan was Managing Director and Director of
Research at H.M. Payson & Co. His address is Two Portland Square,
Portland, Maine 04101.
David I. Goldstein, Secretary (age 35)
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1991. Prior thereto, Mr. Goldstein was associated
with the law firm of Kirkpatrick & Lockhart. Mr. Goldstein is also
Secretary or Assistant Secretary of various registered investment
companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine
04101.
Max Berueffy, Assistant Secretary (age 44)
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1994. Prior thereto, Mr. Berueffy was on the staff of
the U.S. Securities and Exchange Commission for seven years, first in
the appellate branch of the Office of the General Counsel, then as a
counsel to Commissioner Grundfest and
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finally as a senior special counsel in the Division of Investment
Management. Mr. Berueffy is also Secretary or Assistant Secretary of
various registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
Cheryl O. Tumlin, Assistant Secretary (age 31)
Assistant Counsel, Forum Financial Services, Inc., with which she has
been associated since July 1996. Prior thereto, Ms. Tumlin was on the
staff of the U.S. Securities and Exchange Commission as an attorney in
the Division of Market Regulation and prior thereto Ms. Tumlin was an
associate with the law firm of Robinson Silverman Pearce Aronsohn &
Berman in New York, New York. Ms. Tumlin is also Assistant Secretary
of various registered investment companies for which Forum
Administrative Services, LLC or Forum Financial Services, Inc. serves
as manager, administrator and/or distributor. Her address is Two
Portland Square, Portland, Maine 04101.
M. Paige Turney, Assistant Secretary (age 28).
Fund Administrator, Forum Financial Services, Inc., with which she has
been associated since 1995. Ms. Turney was employed from 1992 as a
Senior Fund Accountant with First Data Corporation in Boston,
Massachusetts. Prior thereto she was a student at Montana State
University. Ms. Turney is also Assistant Secretary of various
registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
TRUSTEE COMPENSATION. Each Trustee of the Trust (other than John Y. Keffer, who
is an interested person of the Trust) is paid $1,000 for each Board meeting
attended (whether in person or by electronic communication) and is paid $1,000
for each committee meeting attended on a date when a Board meeting is not held.
As of March 31, 1997, in addition to $1,000 for each Board meeting attended,
each Trustee receives $100 per active portfolio of the Trust. To the extent a
meeting relates to only certain portfolios of the Trust, Trustees are paid the
$100 fee only with respect to those portfolios. Trustees are also reimbursed for
travel and related expenses incurred in attending meetings of the Board. No
officer of the Trust is compensated by the Trust.
The following table provides the aggregate compensation paid to each Trustee.
The Trust has not adopted any form of retirement plan covering Trustees or
officers. Information is presented for the fiscal year ended March 31, 1997.
<TABLE>
<S> <C> <C> <C> <C>
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
Mr. Keffer None None None None
Mr. Azariadis $4,000 None None $4,000
Mr. Cheng $4,000 None None $4,000
Mr. Parish $4,000 None None $4,000
</TABLE>
THE PORTFOLIOS
TRUSTEES AND OFFICERS OF CORE TRUST. The Trustees and officers of Core Trust and
their principal occupations during the past five years and ages are set forth
below. Each Trustee who is an "interested person" (as defined by the 1940 Act)
of Core Trust is indicated by an asterisk. Messrs. Keffer, Azariadis, Cheng and
Parish, Trustees of Core Trust, and Mr. Goldstein, Secretary of Core Trust, all
currently serve as Trustees and/or officers of the Trust. Accordingly, for
background information pertaining to these Trustees, see "Management Trustees
and Officers -The Trust."
John Y. Keffer,* Chairman and President.
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Costas Azariadis, Trustee, Age 53.
James C. Cheng, Trustee, Age 54.
J. Michael Parish, Trustee, Age 53.
David I. Goldstein, Secretary (age 35)
Sara M. Clark, Vice President, Assistant Secretary and Treasurer., Age
33.
Managing Director, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark
was Controller of Wright Express Corporation (a national credit card
company) and for six years prior thereto was employed at Deloitte &
Touche LLP as an accountant. Ms. Clark is also an officer of various
registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. Her address
is Two Portland Square, Portland, Maine 04101.
Thomas G. Sheehan, Assistant Secretary, Age 42.
Managing Director and Counsel, Forum Financial Services, Inc., with
which he has been associated since 1993. Prior thereto, Mr. Sheehan
was Special Counsel to the Division of Investment Management of the
SEC. Mr. Sheehan is also an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
TRUSTEES AND OFFICERS OF SCHRODER CORE. The following information relates to the
principal occupations of each Trustee and executive officer of the Schroder Core
during the past five years and shows the nature of any affiliation with
Schroder. Messrs. Keffer, Goldstein and Sheehan, officers of Schroder Core, all
currently serve as officers of the Trust or Core Trust. Accordingly, for
background information pertaining to these officers, see "Trustees and Officers
- -- The Trust" and "Trustees and Officers -- The Portfolios -- Trustees and
Officers of Core Trust above.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
John I. Howell, Greenwich, Connecticut - Trustee of the Trust - Private
Consultant since February 1987; Honorary Director, American International Group,
Inc.; Director, American International Life Assurance Company of New York.
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<PAGE>
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust retired since March, 1988; prior thereto, consultant to
SCMI since February 1, 1984.
Mark J. Smith (b), 33 Gutter Lane, London, England - President and Trustee of
the Trust - First Vice President of SCMI since April 1990; Director and Vice
President, Schroder Advisors.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton (b)(c), 787 Seventh Avenue, New York, New York -
Vice President of the Trust Secretary of SCM since July 1995; Secretary of
Schroder Advisors since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd.
since 1989.
Catherine S. Wooledge, Two Portland Square, Portland, Maine 04101 - Assistant
Treasurer and Assistant Secretary of the Trust - Counsel, Forum Financial
Services, Inc. since November 1996. Prior thereto, associate at Morrison &
Foerster, Washington, D.C. from October 1994 to November 1996, associate
corporate counsel at Franklin Resources, Inc. from September 1993 to September
1994, and prior thereto associate at Drinker Biddle & Reath, Philadelphia, PA.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
John Y. Keffer, Vice President of the Trust.
Jane P. Lucas(c), 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Director and Senior Vice President SCMI; Director of SCM since September
1995; Assistant Director Schroder Investment Management Ltd.
since June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the Trust.
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Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
Alexandra Poe, 787 Seventh Avenue, New York, New York - Secretary and Vice
President of the Trust - Vice President of SCMI since August 1996; Fund Counsel
and Senior Vice President of Schroder Advisors since August 1996; prior thereto
an investment management attorney with Gordon Altman Butowsky Weitzen Shalov &
Wein since July 1994; prior thereto counsel and Vice President of Citibank, N.A.
since 1989.
Mary Kunkemueller, 787 Seventh Avenue, New York, New York - Assistant Secretary
of the Trust.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Advisors is a wholly owned subsidiary of SCMI, which is a wholly
owned subsidiary of Schroders Incorporated, which in turn is an indirect, wholly
owned U.S. subsidiary of Schroders plc. (c) Schroder Capital Management, Inc.
("SCMI") is a wholly owned subsidiary of Schroder Wertheim Holdings Incorporated
which is a wholly owned subsidiary of Schroders, Incorporated, which in turn is
an indirect wholly owned U.S. subsidiary of Schroders plc.
INVESTMENT ADVISERS
H.M. Payson, Inc. ("Payson") serves as investment adviser to Investors Equity
Fund pursuant to an investment advisory agreement with the Trust. Subject to the
general control of the Board, Forum Advisors is responsible for among other
things, developing a continuing investment program for the Fund in accordance
with its investment objective and reviewing the investment strategies and
policies of the Fund. Payson was incorporated under the laws of Delaware in 1987
and is registered under the Investment Advisers Act of 1940. For its services,
an advisory fee at an annual rate of 0.65% of Investor Equity Fund's average
daily net assets.
Payson entered into an investment sub-advisory agreement with Peoples Heritage
to exercise certain investment discretion over the assets (or a portion of
assets) of the Fund. Subject to the general supervision of the Board, Peoples is
responsible for, among other things, developing a continuing investment program
for the Fund in accordance with its investment objective and reviewing the
investment strategies and policies of the Fund. Peoples Heritage, located at One
Portland Square, Portland, Maine 04101, is a subsidiary of Peoples Heritage
Financial Group, a multi-bank holding company. As of December 1, 1997, Peoples
Heritage Financial Group had assets of $6.5 billion and Peoples Heritage and its
affiliates managed assets with a value of approximately $932 million. Payson
pays a fee to Peoples for its subadviser services of 0.25% of the Fund's average
daily net assets. This fee is borne solely by Payson and does not increase the
fee paid by shareholders of the Fund.
Forum Advisors serves as investment adviser to the Fund pursuant to an
investment advisory agreement with the Trust. Subject to the general control of
the Board, Forum Advisors is responsible for, among other things, developing a
continuing investment program for the Fund in accordance with its investment
objective and reviewing the investment strategies and policies of the Fund.
Forum Advisors was organized under the laws of Delaware in 1997 and is
registered under the Investment Advisory Act of 1940. For its services, Forum
Advisors receives an advisory fee at an annual rate of 0.__% of the Fund's
average daily net assets.
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Subject to the general supervision of the Core Trust Board, Norwest provides
investment advisory services to Index Portfolio, Small Cap Index Portfolio,
Small Company Stock Portfolio, Small Company Value Portfolio and Small Cap Value
Portfolio pursuant to an investment advisory agreement with the Core Trust.
Norwest manages the investment and reinvestment of the assets of Index Portfolio
and Small Cap Index Portfolio and continuously reviews, supervises and
administers those Portfolios' investments. In this regard, it is the
responsibility of Norwest to make decisions relating to Index Portfolio's and
Small Cap Index Portfolio's investments and to place purchase and sale orders
regarding investments with brokers or dealers selected by it in its discretion.
For its services with respect to the Portfolios, Norwest receives a monthly
advisory fee equal on an annual basis to 0.15% of Index Portfolio's and 0.25% of
Small Cap Index Portfolio's average daily net assets, which Index Fund and Small
Company Opportunities Fund bear indirectly . Norwest oversees the investment
decisions of the investment subadvisers employed by Norwest and Core Trust to
subadvise Small Company Stock Portfolio, Small Company Value Portfolio and Small
Cap Value Portfolio of Core Trust. For its services, Norwest receives fees of
0.90%, 0.90% and 0.95% of the average daily net assets of Small Company Stock
Portfolio, Small Company Value Portfolio and Small Cap Value Portfolio,
respectively. Norwest, which is located at Norwest Center, Sixth Street and
Marquette, Minneapolis, Minnesota 55479, is an indirect subsidiary of Norwest
Corporation, a multi-bank holding company that was incorporated under the laws
of Delaware in 1929. As of October 31, 1997, Norwest Corporation had assets of
$___ billion, which made it the 11th largest bank holding company in the United
States. As of October 31, 1997, Norwest and its affiliates managed assets with a
value of approximately $___ billion.
To assist Norwest in carrying out its obligations, Core Trust and Norwest have
retained the services of the investment subadvisers described below. Each
investment subadviser makes investment decisions for the Portfolio to which it
serves as investment subadviser and continually reviews, supervises and
administers the Portfolio's investment program with respect to that portion, if
any, of the Portfolio's assets that Norwest believes should be managed by the
investment subadviser. Currently, each investment subadviser manages all of the
assets of the Portfolio that it subadvises. Norwest (and not the Portfolios) pay
each investment subadviser a fee for its investment subadvisory services. This
compensation does not increase the amount paid by the Portfolios to Norwest for
investment advisory services.
Crestone, which is located at 7720 East Belleview Avenue, Suite 220, Englewood,
Colorado 80111, serves as investment subadviser to Small Company Stock
Portfolio. Crestone, an indirect investment subsidiary of Norwest Corporation,
provides investment advice regarding companies with small market capitalization
to various clients, including institutional investors. As of June 30, 1997,
Crestone managed assets with a value of approximately $534 million.
Peregrine, which is located at LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402, serves as investment subadviser to Small Company
Value Portfolio. Peregrine, an indirect investment advisory subsidiary of
Norwest Corporation, provides investment advisory services to corporate and
public pension plans, profit-sharing plans, savings-investment plans and 401(k)
plans. As of June 30, 1997, Peregrine managed approximately $5.0 billion in
assets.
Smith, which is located at 500 Crescent Court, Suite 250, Dallas, Texas 75201,
is a registered investment adviser. Smith provides investment management
services to company retirement plans, foundations, endowments, trust companies
and high net worth individuals using a disciplined equity style. As of June 13,
1997, Smith managed over $200 million in assets.
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as Adviser to
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio
pursuant to an investment advisory agreement with Schroder Capital Funds. SCMI
serves as Adviser to International Portfolio pursuant to an investment advisory
agreement with Core Trust (Delaware). SCMI is a wholly-owned U.S. subsidiary of
Schroders Incorporated, the wholly-owned U.S. holding company subsidiary of
Schroders plc. Schroders plc is the holding company parent of a large worldwide
group of banks and financial service companies (referred to as the "Schroder
Group"), with associated companies and branch and representative offices located
in seventeen countries worldwide. The Schroder Group specializes in providing
investment management services, with Group funds under management currently in
excess of $90 billion.
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Pursuant to the investment advisory agreements, SCMI is responsible for managing
the investment and reinvestment of the assets included in each of Schroder U.S.
Smaller Companies Portfolio, Schroder EM Core Portfolio and International
Portfolio and for continuously reviewing, supervising and administering the
Portfolio's investments. In this regard, it is the responsibility of SCMI to
make decisions relating to the Portfolios' investments and to place purchase and
sale orders regarding such investments with brokers or dealers selected by it in
its discretion. SCMI also furnishes to the Board, which has overall
responsibility for the business and affairs of Schroder Core, periodic reports
on the investment performance of the Portfolio.
Under the terms of the investment advisory agreement, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.
For its services, each of Schroder U.S. Smaller Companies Portfolio,
International Portfolio and Schroder EM Core Portfolio pay SCMI a fee at an
annual rate of 0.60%, 0.45% and 1.00% of its average daily net assets,
respectively.
Each investment advisory or subadvisory agreement will continue in effect
provided such continuance is approved annually (i) by the holders of a majority
of the outstanding voting securities of the respective Fund or Portfolio (as
defined by the 1940 Act) or by the Board, Schroder Core Board or Core Trust
Board, as applicable, and (ii) by a majority of the Trustees, Schroder Core
Trustees or Core Trust Trustees, as applicable, who are not parties to such
agreement or "interested persons" (as defined in the 1940 Act) of any such
party. Each investment advisory or subadvisory agreement may be terminated
without penalty by vote of the Trustees of the Trust, Schroder Core or Core
Trust, as applicable, or the interestholders of the Fund or Portfolio on 60
days' written notice to the adviser, or by the adviser on 60 days' written
notice to the Trust, Schroder Core or Core Trust and it will terminate
automatically if assigned. The investment advisory or subadvisory agreements
also provide that, with respect to each Fund or Portfolio, neither the
investment adviser or subadviser nor its personnel shall be liable for any error
of judgment or mistake of law or for any act or omission in the performance of
its duties to the Fund or Portfolio, except for lack of good faith, provided
that nothing in the agreements shall protect, or purport to protect, the adviser
or subadviser against liability by reason of willful misfeasance, bad faith or
gross negligence in the performance of the its duties or by reason of reckless
disregard of its obligations and duties under the investment advisory or
subadvisory agreement.
ADMINISTRATIVE SERVICES
THE FUNDS
Forum Administrative Services, LLC ("FAS") acts as administrator to the Trust on
behalf of the Fund pursuant to an Administration Agreement with the Trust. As
administrator, FAS provides management and administrative services necessary to
the operation of the Trust (which include, among other responsibilities,
negotiation of contracts and fees with, and monitoring of performance and
billing of, the transfer agent and custodian and arranging for maintenance of
books and records of the Trust), and provides the Trust with general office
facilities. The Administration Agreement will remain in effect for a period of
twelve months with respect to the Fund and thereafter is automatically renewed
each year for an additional term of one year, subject to approval by the Board
or the Shareholders, and, in either case, by a majority of the Trustees who are
not interested persons of any party to the Administration Agreement.
The Administration Agreement terminates automatically if it is assigned and may
be terminated without penalty with respect to the Fund by vote of the Fund's
shareholders or by either party on not more than 60 days' written notice. The
Administration Agreement also provides that FAS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of Forum's duties or by reason of
reckless disregard of its obligations and duties under the Administration
Agreement.
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At the request of the Board, FAS provides persons satisfactory to the Board to
serve as officers of the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
FAS, Forum Advisors, Norwest, SCMI, Peoples Heritage, Payson, Smith or their
affiliates.
THE PORTFOLIOS
On behalf of the Core Trust Portfolios, Core Trust has entered into an
administration agreement with Forum Financial Services, Inc. For its
administrative services, FFSI receives from the portfolios a fee at an annual
rate of ____ of the Core Trust Portfolios' average daily net assets.
On behalf of the Schroder Core Portfolios, the Schroder Core has entered into an
administrative services agreement with Schroder Fund Advisors Inc. ("Schroder
Advisors"), 787 Seventh Avenue, New York, New York 10019. Schroder Core and
Schroder Advisors have entered into a Sub-Administration Agreement with Forum
Financial Services, Inc. ("Forum"). Pursuant to their agreements, Schroder
Advisors and Forum provide certain management and administrative services
necessary for the Portfolio's operations, other than the investment management
and administrative services provided to the Portfolio by SCMI pursuant to the
investment advisory agreement, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and (iii) general supervision of the operation of the
Portfolio, including coordination of the services performed by the Portfolio's
investment adviser, transfer agent, custodian, independent accountants, legal
counsel and others. Schroder Advisors is a wholly-owned subsidiary of SCMI, and
is a registered broker-dealer organized to act as administrator and distributor
of mutual funds. Effective July 5, 1995, Schroder Advisors changed its name from
Schroder Capital Distributors Inc.
For these services, Schroder Advisors receives from the Schroder Core Portfolios
a fee at the annual rate of 0.15% of each Portfolio's average daily net assets.
Payment for Forum's services is made by Schroder Advisors and is not a separate
expense of the Portfolio.
The administrative services agreement and sub-administration agreement are
terminable with respect to the Schroder Core Portfolios without penalty, at any
time, by vote of a majority of the Schroder Core Trustees who are not
"interested persons" of Schroder Core and who have no direct or indirect
financial interest in the operation of the Portfolios' Distribution Plan or in
the administrative services agreement or sub-administration agreement, upon not
more than 60 days' written notice to Schroder Advisors or Forum, as appropriate,
or by vote of the holders of a majority of the shares of the Portfolio, or, upon
60 days' notice, by Schroder Advisors or Forum. The administrative services
agreement will terminate automatically in the event of its assignment.
The sub-administration agreement is terminable with respect to the Portfolio
without penalty, at any time, by the Board of Schroder Core, Schroder Advisors
and the investment adviser upon 60 days' written notice to Forum or by Forum
upon 60 days' written notice to the Portfolio and Schroder Advisors, and the
investment adviser, as appropriate.
CUSTODIAN
Pursuant to a Custodian Agreement (the "Custodian Agreement"), The First
National Bank of Boston, P.O. Box 1959, Boston, Massachusetts 02105, acts as the
custodian of the Funds' assets. The custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, determining income
and collecting interest on Fund investments. The Fund's custodian employs
foreign subcustodians to provide custody of the Fund's foreign assets in
accordance with applicable regulations. The custodian is paid a fee at an annual
rate of 0.02% of the first $100 million of the average daily net assets of the
Fund, 0.015% on the next $100 million of the average daily net assets of the
Fund and 0.0001% of the average daily net assets over $200 million, and certain
transaction fees.
The Chase Manhattan Bank, N.A., through its Global Securities Services division
located in London, England, acts as custodian of the Schroder Core Portfolios'
assets, but plays no role in making decisions as to the purchase or sale of
portfolio securities for the Portfolios. Pursuant to rules adopted under the
1940 Act, the Schroder Core Portfolios
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may maintain its foreign securities and cash in the custody of certain eligible
foreign banks and securities depositories. Selection of these foreign custodial
institutions is made by the Schroder Core Board following a consideration of a
number of factors, including (but not limited to) the reliability and financial
stability of the institution; the ability of the institution to perform capably
custodial services for the Portfolios; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Portfolio assets.
DISTRIBUTOR
Forum Financial Services, Inc. ("Forum"), an affiliate of FAS, is the Trust's
distributor and acts as the agent of the Trust in connection with the offering
of shares of the Fund pursuant to a Distribution Agreement. The Distribution
Agreement will continue in effect for twelve months and will continue in effect
thereafter only if its continuance is specifically approved at least annually by
the Board or by vote of the shareholders entitled to vote thereon, and in either
case, by a majority of the Trustees who (i) are not parties to the Distribution
Agreement, (ii) are not interested persons of any such party or of the Trust and
(iii) with respect to any class for which the Trust has adopted a distribution
plan, have no direct or indirect financial interest in the operation of that
distribution plan or in the Distribution Agreement, at a meeting called for the
purpose of voting on the Distribution Agreement. All subscriptions for shares
obtained by Forum are directed to the Trust for acceptance and are not binding
on the Trust until accepted by it. Forum receives no compensation or
reimbursement of expenses for the distribution services provided pursuant to the
Distribution Agreement and is under no obligation to sell any specific amount of
Fund shares.
The Distribution Agreement provides that Forum shall not be liable for any error
of judgment or mistake of law or in any event whatsoever, except for willful
misfeasance, bad faith or gross negligence in the performance of Forum's duties
or by reason of reckless disregard of its obligations and duties under the
Distribution Agreement.
The Distribution Agreement is terminable with respect to the Fund without
penalty by the Trust on 60 days' written notice when authorized either by vote
of the Fund's shareholders or by a vote of a majority of the Board, or by Forum
on 60 days' written notice. The Distribution Agreement will automatically
terminate in the event of its assignment.
Forum may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Fund in this manner should acquaint themselves with
their institution's procedures and should read this Prospectus in conjunction
with any materials and information provided by their institution. The financial
institution and not its customers will be the shareholder of record, although
customers may have the right to vote shares depending upon their arrangement
with the institution.
TRANSFER AGENT
Forum Financial Corp. ("FFC") acts as transfer agent of the Trust pursuant to a
transfer agency agreement (the "Transfer Agency Agreement"). The Transfer Agency
Agreement provided, with respect to each Fund, for an initial term of one year
from its effective date and for its continuance in effect for successive
twelve-month periods thereafter, provided that the agreement is specifically
approved at least annually by the Board or, with respect to either Fund, by a
vote of the shareholders of that Fund, and in either case by a majority of the
directors who are not parties to the Transfer Agency Agreement or interested
persons of any such party at a meeting called for the purpose of voting on the
Transfer Agency Agreement.
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Among the responsibilities of FFC as agent for the Trust are: (1) answering
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Fund may be effected and certain
other matters pertaining to the Fund; (2) assisting shareholders in initiating
and changing account designations and addresses; (3) providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records, assisting in processing purchase and redemption transactions and
receiving wired funds; (4) transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; (5) verifying shareholder
signatures in connection with changes in the registration of shareholder
accounts; (6) furnishing periodic statements and confirmations of purchases and
redemptions; (7) arranging for the transmission of proxy statements, annual
reports, prospectuses and other communications from the Trust to its
shareholders; (8) arranging for the receipt, tabulation and transmission to the
Trust of proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and (9) providing such other related services as the
Trust or a shareholder may reasonably request.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation as custodian, investment manager, nominee, agent or fiduciary for
its customers or clients who are shareholders of the Fund with respect to assets
invested in the Fund. FFC or any sub-transfer agent or other processing agent
may elect to credit against the fees payable to it by its clients or customers
all or a portion of any fee received from the Trust or from FFC with respect to
assets of those customers or clients invested in the Fund. FFC, FAS or
sub-transfer agents or processing agents retained by FFC may be Processing
Organizations (as defined in the Prospectus) and, in the case of sub- transfer
agents or processing agents, may also be affiliated persons of FFC or Forum.
For its services under the Transfer Agency Agreement, FFC receives: (i) a fee at
an annual rate of 0.25 percent of the average daily net assets of the Fund and
(ii) a fee of $24,000 per year; such amounts to be computed and paid monthly in
arrears by the Fund; and (iii) Annual Shareholder Account Fees of $25.00 for a
retail and $125.00 for an institutional shareholder account; such fees to be
computed as of the last business day of the prior month.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation for acting as custodian, investment manager, nominee, agent or
fiduciary for its customers or clients who are shareholders of the Fund with
respect to assets invested in the Fund.
FFC also is the Portfolio's transfer agent pursuant to a Transfer Agency
Agreement between Schroder Core and FFC. FFC is compensated for those services
in the amount of $12,000 per year plus certain interestholder account fees.
FUND ACCOUNTING
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting services
for the Funds pursuant to a Fund Accounting Agreement with the Trust. The Fund
Accounting Agreement will continue in effect only if such continuance is
specifically approved at least annually by the Board of Trustees or by a vote of
the shareholders of the Trust and in either case by a majority of the Trustees
who are not parties to the Fund Accounting Agreement or interested persons of
any such party, at a meeting called for the purpose of voting on the Fund
Accounting Agreement. Under its agreement, FAcS prepares and maintains books and
records prepares and maintains books and records of the Fund on behalf of the
Trust as required under the 1940 Act, calculates the net asset value per share
of each Fund and dividends and capital gain distributions and prepares periodic
reports to shareholders and the Securities and Exchange Commission. For its
services, FAcS receives from the Trust with respect to the Fund a fee of
$12,000.
FAcS also performs portfolio accounting services for the Core Trust Portfolios
pursuant to a Fund Accounting Agreement between Core Trust and FAcS. For its
services, FAcS receives a fee of $60,000 per year, plus additional surcharges
based upon total assets or security positions.
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FFC performs portfolio accounting services for the Schroder Core Portfolios
pursuant to a Fund Accounting Agreement between Schroder Core and FFC. For its
services, FFC is receives a fee of $60,000 per year, plus additional surcharges
based upon total assets or security positions.
6. DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of each Fund as of
4:00 p.m., Eastern Time, on each Fund Business Day by dividing the value of the
Fund's net assets (I.E., the value of its portfolio securities and other assets
less its liabilities) by the number of that Fund's shares outstanding at the
time the determination is made. Securities owned by a Fund or Portfolio listed
on the recognized stock exchanges are valued at the last reported trade price,
prior to the time when the assets are valued, on the exchange on which the
securities are principally traded. Listed securities traded on recognized stock
exchanges where last trade prices are not available are valued at mid-market
prices. Securities traded in over-the-counter markets, or listed securities for
which no trade is reported on the valuation date, are valued at the most recent
reported mid-market price. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith using methods approved by the Board.
Trading in securities on European and Far Eastern Securities exchanges and
over-the-counter markets may not take place on every day that the New York Stock
Exchange is open for trading. Furthermore, trading takes place in various
foreign markets on days on which a Portfolio's NAV is not calculated. If events
materially affecting the value of foreign securities occur between the time when
their price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by the
Schroder Core Board or the Board.
All assets and liabilities of a Portfolio or Fund denominated in foreign
currencies are converted to U.S. dollars at the mid price of such currencies
against U.S. dollars last quoted by a major bank prior to the time when NAV of
the Fund or Portfolio is calculated.
7. PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for each Portfolio and Fund and for the other investment
advisory clients of the investment advisers are made with a view to achieving
their respective investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner which in the
investment adviser's opinion is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by a Fund or Portfolio of negotiated brokerage commissions. Such
commissions vary among different brokers. Also, a particular broker may charge
different commissions according to such factors as the difficulty and size of
the transaction. Transactions in foreign securities generally involve the
payment of fixed brokerage commissions, which are generally higher than those in
the United States. Since most brokerage transactions for the Schroder EM Core
Portfolio and International Portfolio will be placed with foreign
broker-dealers, certain portfolio transaction costs for the Portfolios may be
higher than fees for similar transactions executed on U.S. securities exchanges.
There is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Funds or
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Portfolios usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Funds or Portfolios includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
The Investment Advisory Agreements authorize and direct the investment advisers
to place orders for the purchase and sale of assets with brokers or dealers
selected by the investment advisers in their discretion and to seek "best
execution" of such portfolio transactions. An investment adviser places all such
orders for the purchase and sale of portfolio securities and buys and sells
securities for a Fund or Portfolio through a substantial number of brokers and
dealers. In so doing, the investment adviser uses its best efforts to obtain for
the Fund or Portfolio the most favorable price and execution available. The Fund
or Portfolio may, however, pay higher than the lowest available commission rates
when the investment adviser believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. In seeking the most favorable price and execution, the
investment adviser, having in mind the Fund's or Portfolio's best interests,
considers all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealers involved and the quality of service rendered by the
broker-dealers in other transactions.
It has for many years been a common practice in the investment advisory business
as conducted in certain countries, including the United States, for advisers of
investment companies and other institutional investors to receive research
services from broker-dealers which execute portfolio transactions for the
clients of such advisers. Consistent with this practice, and investment adviser
may receive research services from broker-dealers with which it places the
Fund's or Portfolio's portfolio transactions. These services, which in some
cases may also be purchased for cash, include such items as general economic and
security market reviews, industry and company reviews, evaluations of securities
and recommendations as to the purchase and sale of securities. Some of these
services are of value to the investment adviser in advising various of its
clients (including the Fund or Portfolio), although not all of these services
are necessarily useful and of value in managing the Portfolio. The investment
advisory fee paid by a Portfolio is not reduced because the investment adviser
and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), an investment adviser may cause a Fund or Portfolio to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the Act) to it an amount of disclosed commission for effecting a securities
transaction in excess of the commission which another broker-dealer would have
charged for effecting that transaction.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Schroder Core Board has authorized SCMI to employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
which are affiliated with SCMI, to effect securities transactions of the
Portfolio on various foreign securities exchanges on which Schroder Securities
has trading privileges, provided certain other conditions are satisfied as
described below.
Payment of brokerage commissions to Schroder Securities for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on securities exchanges paid by
a registered investment company to a broker which is an affiliated person of
such investment company or an affiliated person of another person so affiliated
not exceed the usual and customary broker's commissions for such transactions.
It is the Schoder Portfolios' policy that commissions paid to Schroder
Securities will in the judgment of the officers of SCMI responsible for making
portfolio decisions and selecting brokers, be (i) at least as favorable as
commissions contemporaneously charged by Schroder Securities on comparable
transactions for its most favored unaffiliated customers and (ii) at least as
favorable as those which would be charged on comparable transactions by other
qualified brokers having comparable execution capability. The Board of Trustees
of Schroder Core, including a majority of the non-interested Trustees, has
adopted procedures pursuant to Rule 17e-1 promulgated by the Securities and
Exchange Commission under Section 17(e) to ensure that commissions paid to
Schroder Securities by the Schroder Portfolio satisfy the foregoing standards.
The Board will review all transactions at least quarterly for compliance with
these procedures.
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The Funds have no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Securities and will not direct brokerage to Schroder
Securities in recognition of research services. Schroder Securities commenced
operations in 1990.
The annual portfolio turnover rate of a Fund (or Portfolio) may exceed 50% but
will not ordinarily exceed 100%.
8. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Detailed information pertaining to the purchase of shares of each Fund,
redemption of shares and the determination of the net asset value of Fund shares
is set forth in the Prospectus under "Purchases and Redemptions of Shares".
Shares of each Fund are sold on a continuous basis by the distributor.
Set forth below is an example of the method of computing the offering price of a
Fund's shares. The example assumes a purchase of shares of beneficial interest
aggregating less than $100,000 subject to the schedule of sales charges set
forth in the Prospectus at a price based on the net asset value per share of the
Fund on _______.
Net Asset Value Per Share $ X.XX
Sales Charge, 4.00% of offering
price (4.17% of net asset value
per share) $ X.XX
Offering to Public $ X.XX
In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily, from time to
time, to reimburse a Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to transactions effected for the benefit of a
shareholder which is applicable to a Fund's shares as provided in the
Prospectus.
The Trust has filed a formal election with the Securities and Exchange
Commission pursuant to which a Fund will only effect a redemption in portfolio
securities if a shareholder is redeeming more than $250,000 or 1% of the Fund's
total net assets, whichever is less, during any 90-day period.
REDEMPTION IN KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have difficulty in
finding a buyer for portfolio securities received in payment for redeemed
shares. Portfolio securities may decline in value between the time of receipt by
the shareholder and conversion to cash. A redemption in kind of a Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
EXCHANGE PRIVILEGE
The exchange privilege permits shareholders of each Fund to exchange their
shares for shares of any other fund of the Trust or shares of certain other
portfolios of investment companies which retain FAS or its affiliates as
investment adviser or distributor and which participate in the Trust's exchange
privilege program ("Participating Fund"). For Federal income tax purposes,
exchange transactions are treated as sales on which a purchaser will realize a
capital gain or loss depending on whether the value of the shares redeemed is
more or less than his basis in such shares at the time of the transaction.
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By use of the exchange privilege, the shareholder authorizes the Transfer Agent
to act upon the instruction of any person representing himself to either be, or
to have the authority to act on behalf of, the investor and believed by the
Transfer Agent to be genuine. The records of the Transfer Agent of such
instructions are binding. Proceeds of an exchange transaction may be invested in
another Participating Fund in the name of the shareholder.
Exchange transactions will be made on the basis of relative net asset values per
share at the time of the exchange transaction plus any sales charge applicable
to the Participating Fund whose shares are being acquired. Shares of any
Participating Fund may be redeemed and the proceeds used to purchase, without a
sales charge, shares of any other Participating Fund that are offered without a
sales charge. Shares of any Participating Fund purchased with a sales charge may
be redeemed and the proceeds used to purchase, without a sales charge, shares of
any other Participating Fund otherwise sold with the same sales charge. If the
Participating Fund purchased in the exchange transaction imposes a higher sales
charge than was paid originally on the exchanged shares, the shareholder will be
responsible for the difference between the two sales charges. Shares acquired
through the reinvestment of dividends and distributions are deemed to have been
acquired with a sales charge rate equal to that paid on the shares on which the
dividend or distribution was paid.
The terms of the exchange privilege are subject to change, and the privilege may
be terminated by any of the Participating Funds or the Trust. However the
privilege will not be terminated, and no material change that restricts the
availability of the privilege to shareholders will be implemented, without
reasonable advance notice to shareholders.
9. TAXATION
The Funds intend to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company the Fund intends to distribute to shareholders at
least 90% of its net investment income (which includes, among other items,
dividends, interest and the excess of any net short-term capital gains over net
long-term capital losses), and to meet certain diversification of assets, source
of income, and other requirements of the Code. By so doing, a Fund will not be
subject to Federal income tax on its net investment income and net realized
capital gains (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders. If a Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, a Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses realized during the
one-year period ending October 31, of such year, and (3) all such ordinary
income and capital gains for previous years that were not distributed during
such years. A distribution will be treated as paid during the calendar year if
it is declared by the Fund in October, November or December of the year with a
record date in such month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivable or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivable or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, gains or
losses on disposition of debt securities denominated in a foreign currency
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition as well as gains
or losses from certain foreign currency transactions and options on certain
foreign currency transactions, generally are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "Section 988" gains or
losses, may increase or decrease the amount of the Fund's net investment income
to be distributed to its shareholders as ordinary income.
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Generally, the hedging transactions undertaken by the Fund may be deemed
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
The requirements applicable to regulated investment companies such as the Fund
may limit the extent to which the Fund will be able to engage in transactions in
options and forward contracts.
Distributions of net investment income (including realized net short-term
capital gain) are taxable to shareholders as ordinary income. It is not expected
that such distributions will be eligible for the dividends received deduction
available to corporations.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss although
such shares may have been held by the shareholder for one year or less. Further,
a loss realized on a disposition will be disallowed to the extent the shares
disposed of are replaced (whether by reinvestment or distributions or otherwise)
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
Federal tax status of distributions.
Distributions by a Fund reduce the net asset value of the Fund's shares. Should
a distribution reduce the net asset value below a shareholder's cost basis, such
distribution nevertheless would be taxable to the shareholder as ordinary income
or capital gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital. In particular, investors should
be careful to consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at that time includes the amount of
the forthcoming distribution. Those purchasing just prior to a distribution will
receive a distribution which will nevertheless be taxable to them.
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally will
be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-term
depending upon the shareholder's holding period for the shares.
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The Funds intend to minimize foreign income and withholding taxes by investing
in obligations the payments with respect to which will be subject to minimal or
no such taxes insofar as this objective is consistent with the Funds' income
objective. However, since a Fund may incur foreign taxes, it intends, if it is
eligible to do so, to elect under Section 853 of the Code to treat each
shareholder as having received an additional distribution from the Fund, in the
amount indicated in a notice furnished to him, as his pro rata portion of income
taxes paid to or withheld by foreign governments with respect to interest,
dividends and gain on the Fund's foreign portfolio investments. The shareholder
then may take the amount of such foreign taxes paid or withheld as a credit
against his Federal income tax, subject to certain limitations. If the
shareholder finds it more to his advantage to do so, he may, in the alternative,
deduct the foreign tax withheld as an itemized deduction, in computing his
taxable income. Each shareholder is referred to his tax adviser with respect to
the availability of the foreign tax credit.
The Funds will be required to report to the Internal Revenue Service (the "IRS")
all distributions as well as gross proceeds from the redemption of the Fund
shares, except in the case of certain exempt shareholders. All such
distributions and proceeds generally will be subject to withholding of Federal
income tax at a rate of 31% ("backup withholding") in the case of nonexempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be reduced by the
amount required to be withheld. Any amounts withheld may be credited against the
shareholder's Federal income tax liability. Investors may wish to consult their
tax advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and their treatment under state and local income tax
laws may differ from the Federal income tax treatment. Shareholders should
consult their tax advisors with respect to particular questions of Federal,
state and local taxation. Shareholders who are not U.S. persons should consult
their tax advisors regarding U.S. and foreign tax consequences of ownership of
shares of the Fund including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower rate under a tax
treaty).
10. OTHER INFORMATION
ORGANIZATION
THE TRUST AND ITS SHARES
The Trust was originally incorporated in Maryland on March 24, 1980 and assumed
the name of Forum Funds, Inc. on March 16, 1987. On January 5, 1996, Forum
Funds, Inc. was reorganized as a Delaware business trust. The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may in the future
divide portfolios or series into two or more classes of shares (such as Investor
and Institutional Shares). Currently the authorized shares of the Trust are
divided into 16 separate series.
Each share of each fund of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertain to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular portfolio or class, except if
the matter affects only one portfolio or class or voting by portfolio or class
is required by law, in which case shares will be voted separately by portfolio
or class, as appropriate. Delaware law does not require the Trust to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
(and Trustees) have available certain procedures for the removal of Trustees.
There are no
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conversion or preemptive rights in connection with shares of the Trust. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a portfolio is entitled to the shareholder's pro rata
share of all dividends and distributions arising from that portfolio's assets
and, upon redeeming shares, will receive the portion of the portfolio's net
assets represented by the redeemed shares.
CORE TRUST AND SCHRODER CORE
Core Trust is a business trust organized under the laws of the State of Delaware
in September 1994. Schroder Core is a business trust organized under the laws of
the State of Delaware in September 1995. Each of Core Trust and Schroder Core is
registered under the Act as an open-end management investment company.
Currently, Core Trust has __ separate portfolios and Schroder Core has four
separate portfolios. The assets of each Portfolio, a diversified portfolio,
belong only to, and the liabilities of the Portfolio are borne solely by, the
Portfolio and no other Portfolio of the respective trust.
Under each of Core Trust's and Schroder Core's Trust Instrument, the Trustees
are authorized to issue beneficial interest in one or more separate and distinct
series. Investments in a Portfolio have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Each investor in a Portfolio is entitled to a vote in proportion to the amount
of its investment therein. Investors in a Portfolio and other series
(collectively, the "portfolios") of Core Trust or Schroder Core will all vote
together in certain circumstances (e.g., election of the Trustees and
ratification of auditors, as required by the 1940 Act and the rules thereunder).
One or more portfolios could control the outcome of these votes. Investors do
not have cumulative voting rights, and investors holding more than 50% of the
aggregate interests in Core Trust or in Schroder Core or in a Portfolio, as the
case may be, may control the outcome of votes. The Trust is not required and has
no current intention to hold annual meetings of investors, but Core Trust and
Schroder Core each will hold special meetings of investors when (1) a majority
of the Trustees determines to do so or (2) investors holding at least 10% of the
interests in Core Trust or Schroder Core (or a Portfolio) request in writing a
meeting of investors in Core Trust or Schroder Core (or a Portfolio). Except for
certain matters specifically described in the Trust Instruments, the Trustees
may amend the Trust's Trust Instrument without the vote of investors.
Core Trust and Schroder Core, with respect to a Portfolio, may enter into a
merger or consolidation, or sell all or substantially all of its assets, if
approved by the respective Board (without approval of the interestholders of the
Portfolio. A Portfolio may be terminated (1) upon liquidation and distribution
of its assets, if approved by the vote of a majority of the Portfolio's
outstanding voting securities (as defined in the 1940 Act) or (2) by the
Trustees of Core Trust or Schroder Core on written notice to the Portfolio's
investors. Upon liquidation or dissolution of any Portfolio, the investors
therein would be entitled to share pro rata in its net assets available for
distribution to investors.
Core Trust and Schroder Core are organized as a business trust under the laws of
the State of Delaware. Each trust's interestholders are not personally liable
for the obligations of the trust under Delaware law. The Delaware Business Trust
Act provides that an interestholder of a Delaware business trust shall be
entitled to the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust interestholder liability exists in many other states,
including Texas. As a result, to the extent that Core Trust or Schroder Core or
an interestholder is subject to the jurisdiction of courts in those states, the
courts may not apply Delaware law, and may thereby subject Core Trust or
Schroder Core to liability. To guard against this risk, the Trust Instruments of
Core Trust and Schroder Core disclaims liability for acts or obligations of the
trust and requires that notice of such disclaimer be given in each agreement,
obligation and instrument entered into by Core Trust, Schroder Core or their
respective Trustees, and provides for indemnification out of Trust property of
any interestholder held personally liable for the obligations of Core Trust and
Schroder Core. Thus, the risk of an interestholder incurring financial loss
beyond his investment because of shareholder liability is limited to
circumstances in which (1) a court refuses to apply Delaware law, (2) no
contractual limitation of liability is in effect, and (3) Core Trust or Schroder
Core, as applicable, itself is unable to meet its obligations. In light of
Delaware law, the nature of the trusts' business, and the nature of its assets,
the Board believes that the risk of personal liability to a Trust interestholder
is remote.
PLACEMENT AGENT
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Forum Financial Services, Inc., Two Portland Square, Portland, Maine 04101,
serves as Core Trust's and Schroder Core's placement agent. FFSI receives no
compensation for such placement agent services.
COUNSEL
Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, 1200 G Street,
N.W. Washington, D.C. 20005.
Kirkpatrick & Lockhart, 1800 Massachusetts Avenue, N.W., Washington D.C. 20036,
counsel to Core Trust passes upon certain legal matters in connection with Core
Trust.
Ropes & Gray, One International Place, Boston, Massachusetts, 02110, counsel to
the Schroder Core Portfolios, passes upon certain legal matters in connection
with the interests in the Schroder Core Portfolios.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, 02110,
independent auditors, act as auditors for the Trust.
Coopers & Lybrand LLP ("Coopers & Lybrand") serves as independent accountants
for the Schroder Core Portfolios. Coopers & Lybrand provides audit services and
consultation in connection with review of U.S. Securities and Exchange
Commission filings. Coopers & Lybrand's address is One Post Office Square,
Boston, Massachusetts 02109.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
1. CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Note: Those bonds in the Aa and A groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1 and A1.
STANDARD AND POOR'S CORPORATION ("S&P")
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Note: The ratings for AA and A may be modified by the addition of a plus (+) or
minus (-) sign to show the relative standing within the rating category.
FITCH INVESTORS SERVICE, INC. ("FITCH")
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA categories.
2. COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE, INC.
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
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.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S CORPORATION
S&P's two highest commercial paper ratings are A and B. Issues assigned an A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues with
an A-2 designation is strong. However, the relative degree of safety is not as
high as for issues designated A-1. A-3 issues have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations. Issues rated B are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing conditions
or short-term adversities.
FITCH INVESTORS SERVICE, INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 ratings.
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APPENDIX B - TEXT OF FORUM BROCHURE
In connection with its advertisements, a Fund may provide a description of the
Fund's investment adviser and its affiliates, which are service providers to the
Fund. Text which is currently in use is set forth below.
"FORUM FINANCIAL GROUP OF COMPANIES
Forum Financial Group of Companies represent more than a decade of diversified
experience with every aspect of mutual funds. The Forum Family of Funds has
benefited from the informed, sharply focused perspective on mutual funds that
experience makes possible.
The Forum Family of Funds has been created and managed by affiliated companies
of Portland-based Forum Financial Group, among the nation's largest mutual fund
administrators providing clients with a full line of services for every type of
mutual fund.
The Forum Family of Funds is designed to give investment representatives and
investors a broad choice of carefully structured and diversified portfolios,
portfolios that can satisfy a wide variety of immediate as well as long-term
investment goals.
Forum Financial Group has developed its "brand name" family of mutual funds and
has made them available to the investment public and to institutions on both the
national and regional levels.
For more than a decade Forum has had direct experience with mutual funds from a
different perspective, a perspective made possible by Forum's position as a
leading designer and full-service administrator and manager of mutual funds of
all types.
Today Forum Financial Group administers and provides services for over 120
mutual funds for 17 different fund managers, with more than $30 billion in
client assets. Forum has its headquarters in Portland, Maine, and has offices in
Seattle, Bermuda, and Warsaw, Poland. In a joint venture with Bank Handlowy, the
largest and oldest commercial bank in Poland, Forum operates the only
independent transfer agent and mutual fund accounting business in Poland. Forum
directs an off-shore and hedge fund administration business through its Bermuda
office. It employs more than 230 professionals worldwide.
From the beginning, Forum developed a plan of action that was effective with
both start- up funds, and funds that needed restructuring and improved services
in order to live up to their potential. The success of its innovative approach
is evident in Forum's growth rate over the years, a growth rate that has
consistently outstripped that of the mutual fund industry as a whole, as well as
that of the fund service outsource industry.
Forum has worked with both domestic and international mutual fund sponsors,
designing unique mutual fund structures, positioning new funds within the
sponsors' own corporate planning and targeted markets.
Forum's staff of experienced lawyers, many of whom have been associated with the
Securities and Exchange Commission, have been available to work with fund
sponsors to customize fund components and to evaluate the potential of various
fund structures.
Forum has introduced fund sponsors to its unique proprietary Core and Gateway(R)
partnership, helping them to take advantage of this full-service master/feeder
structure.
Fund sponsors understand that even the most efficiently and creatively designed
fund can disappoint shareholders if it is inadequately serviced. That is the
reason why fund sponsors have relied on Forum to meet all of a fund's complex
compliance, regulatory, and filing needs.
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Forum's full service commitment includes providing state-of- the-art accounting
support (Forum has 8 CPAs on staff, as well as senior accountants who have been
associated with Big 6 accounting firms). Forum's proprietary accounting system
is continually upgraded and can provide custom-built modules to satisfy a fund's
specific requirements. This service is joined with transfer agency and
shareholder service groups that draw their strength both from the high caliber
of the people staffing each unit and from Forum's advanced technology support
system.
More than a decade of experience with mutual funds has given Forum practical
hands-on experience and knowledge of how mutual funds function "from the inside
out."
Forum has put that experience to work by creating the Forum Family of Funds, a
family where each member is designed and positioned for your best investment
advantage, and where each fund is serviced with the utmost attention to the
delivery of timely, accurate, and comprehensive shareholder information.
INVESTMENT ADVISERS
Forum Investment Advisors, LLC offers the services of portfolio managers with
the highest qualifications--because without such direction, a comprehensive and
goal-oriented investment program and ongoing investment strategy are not
possible. Serving as portfolio managers for the Forum Family of Funds are
individuals with decades of experience with some of the country's major
financial institutions.
Individual funds in the Forum Family of Funds invest in portfolios that have as
their investment adviser nationally recognized institutions, including Schroder
Capital Management International, Inc., a major figure in worldwide mutual funds
that, with its affiliates, managed over $175 billion as of September 30, 1997.
Forum Funds are also managed by the portfolio managers of H.M. Payson & Co.,
founded in Portland, Maine in 1854 and one of the oldest investment firms in the
country. Payson has approximately $1 billion in assets under management, with
clients that include pension plans, endowment funds, and institutional and
individual accounts.
FORUM INVESTMENT ADVISORS, LLC
Forum Investment Advisors, LLC is the largest Maine based investment adviser
with approximately $1.4 billion in assets under management. The portfolio
managers have decades of combined experience in a cross section of the country's
financial markets. The managers have specific, day-to-day experience in the
asset class portfolios they manage, bringing critical focus to meeting each
fund's explicit investment objectives. The portfolio managers have been involved
in investing the assets of large insurance companies, banks, pension plans,
individuals, and of course mutual funds. Forum Investment Advisors, LLC has a
staff of analysts and investment administrators to meet the demands of serving
shareholders in our funds.
FORUM FAMILY OF FUNDS
It has been said that mutual fund investment offerings--of which there are
nearly 10,000, with assets spread across stock, bond, and money market funds
worth more than $4 trillion--come in a rainbow of varieties. A better
description would be a "spectrum" of varieties, the spectrum graded from green
through amber and on to red. In simpler terms, from low risk investments,
through moderate to high risk. The lower the risk, the lower the possible reward
- -- the higher the risk, the higher the potential reward.
The Forum Family of Funds provides conservative investment opportunities that
reduce the risk of loss of capital, using underlying money market investments
U.S. Government securities (although the shares of the Forum Funds are neither
insured nor guaranteed by the U.S. Government or its agencies), thus cushioning
the investment against market volatility. These funds offer regular income,
ready access to your money, and flexibility to buy or sell at any time.
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In the less conservative but still not aggressive category are funds in the
Forum Family that seek to provide steady income and, in certain cases, tax-free
earnings. Such investments provide important diversification to an investment
portfolio.
Growth funds in the Forum Family more aggressively pursue a high return at the
risk of market volatility. These funds include domestic and international stock
mutual funds."
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included in the Prospectus:
Not Applicable
Included in the Statement of Additional Information:
Not Applicable
(b) EXHIBITS.
NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE. ALL
REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PREEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 2-67052.
(1)* Copy of the Trust Instrument of the Registrant dated August
29, 1995 (filed as Exhibit 1 to PEA No. 34 via EDGAR on May 9,
1996, accession number 0000912057-96-008780).
(2)* Copy of By-Laws of the Registrant (filed as Exhibit (2) to PEA
No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707)
(3) None.
(4) (a) Sections 2.04 and 2.06 of Registrant's Trust Instrument
provide as follows:
"SECTION 2.04 TRANSFER OF SHARES. Except as
otherwise provided by the Trustees, Shares shall be
transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees
or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the
genuineness of such execution and authorization and
of such other matters as may be required by the
Trustees. Upon such delivery the transfer shall be
recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
"SECTION 2.06 ESTABLISHMENT OF SERIES. The
Trust created hereby shall consist of one or more
Series and separate and distinct records shall be
maintained by the Trust for each Series and the
assets associated with any such Series shall be held
and accounted for separately from the assets of the
Trust or any other Series. The Trustees shall have
full power and authority, in their sole discretion,
and without obtaining any prior authorization or vote
of the Shareholders of any Series of the Trust, to
establish and designate and to change in any manner
any such Series of Shares or any classes of initial
or additional Series and to fix such preferences,
voting powers, rights and privileges of such Series
or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or
any Series or classes thereof into a greater or
lesser number, to classify or reclassify any issued
Shares or any Series or classes thereof into one or
more
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Series or classes of Shares, and to take such
other action with respect to the Shares as the
Trustees may deem desirable. The establishment and
designation of any Series shall be effective upon the
adoption of a resolution by a majority of the
Trustees setting forth such establishment and
designation and the relative rights and preferences
of the Shares of such Series. A Series may issue any
number of Shares and need not issue shares. At any
time that there are no Shares outstanding of any
particular Series previously established and
designated, the Trustees may by a majority vote
abolish that Series and the establishment and
designation thereof.
"All references to Shares in this Trust
Instrument shall be deemed to be Shares of any or all
Series, or classes thereof, as the context may
require. All provisions herein relating to the Trust
shall apply equally to each Series of the Trust, and
each class thereof, except as the context otherwise
requires.
"Each Share of a Series of the Trust shall
represent an equal beneficial interest in the net
assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata
share of all distributions made with respect to such
Series. Upon redemption of his Shares, such
Shareholder shall be paid solely out of the funds and
property of such Series of the Trust."
(5) (a)* Form of Investment Advisory Agreement between
Registrant and H.M. Payson & Co. relating to the
Payson Value Fund and the Payson Balanced Fund (filed
as Exhibit 5(b) to PEA No. 33 via EDGAR on January 5,
1996, accession number 0000912057-96-000216).
(b)* Investment Advisory Agreement between Registrant and Quadra
Capital Partners, L.P. (filed as Exhibit (5)(c) to PEA No.
41 via EDGAR on December 31, 1996, accession number
0000912057-96-030646).
(c)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and Anhalt/O'Connell, Inc. (filed as Exhibit
(5)(d) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
(d)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and Carl Domino Associates, L.P. (filed as
Exhibit (5)(e) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
(e)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and McDonald Investment Management, Inc.
(filed as Exhibit (5)(f) to PEA No. 41 via EDGAR on December
31, 1996, accession number 0000912057-96-030646).
(f)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and LM Capital Management, Inc. (filed as
Exhibit (5)(g) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
(g)* Investment Advisory Agreement between the Registrant and
Austin Investment Management, Inc. (filed as Exhibit (5)(j)
to PEA No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(h)* Investment Advisory Agreement between the Registrant and Oak
Hall Capital Advisors, Inc. (filed as Exhibit (5)(k) to PEA
No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
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(i)* Investment Advisory Agreement between Norwest Bank
Minnesota, N.A. and Core Trust (Delaware) relating to Index
Portfolio (filed as Exhibit 5(a) to Amendment No. 5 the
Registration Statement of Core Trust (Delarware), File No.
811-8858, via EDGAR on September 30, 1996, accession number
0000912057-96-021568).
(j)* Investment Advisory Agreement between Schroder Capital
Management International, Inc. and Schroder Capital Funds,
relating to Schroder U.S. Smaller Companies Portfolio,
International Equity Fund and Schroder Emerging Markets Fund
Institutional Portfolio (filed as Exhibit 5 to Amendment No.
1 to the Registration Statement of Schroder Capital Funds,
File No. 811-9130, via EDGAR on August 9, 1996, accesssion
number 0000898432-96-000341.
(k)* Form of Investment Advisory Agreement between Core Trust
(Delware) and Forum Investment Advisors, LLC relating to
Treasury Portfolio, Treasury Cash Portfolio, Cash Portfolio,
Government Cash Portfolio and Municipal Cash Portfolio
(filed as Exhibit 5(n) to PEA No. 52 via EDGAR on November
24, 1997, accession number 0001047469-97-005953).
(l)* Investment Advisory Agreement between Core Trust (Delaware)
and Schroder Capital Management International, Inc. relating
to International Portfolio (filed as Exhibit 5(b) to
Amendment No. 5 to the Registration Statement of Core Trust
(Delaware), File No. 811-8858, via EDGAR on September 30,
1996, accession number 0000912057-96-021568).
(m)* Investment Advisory Agreement between Registrant and Forum
Investment Advisors, LLC (filed as Exhibit 5(p) to PEA 56
via EDGAR on December 31, 1997, accession number
0001004402-97-000281).
(6) (a)* Form of Selected Dealer Agreement between Forum Financial
Services, Inc. and securities brokers (filed as Exhibit 6(c)
to PEA 21).
(b)* Form of Bank Affiliated Selected Dealer Agreement between
Forum Financial Services, Inc. and bank affiliates filed as
Exhibit 6(d) of PEA 21).
(c)* Distribution Agreement between Registrant and Forum
Financial Services, Inc. (filed as Exhibit 6(f) to PEA No.
43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(7) None.
(8) (a)* Form of Transfer Agency Agreement between Registrant and
Forum Financial Corp. (filed as Exhibit 8(a) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(b)* Form of Custodian Agreement between Registrant and the First
National Bank of Boston (filed as Exhibit 8(b) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(9) (a)* Administration Agreement between Registrant and Forum
Administrative Services, LLC (filed as Exhibit 6(e) to PEA
No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(b)* Shareholder Service Plan of Registrant relating to the
Quadra Funds and Form of Shareholder Service Agreement
relating to Quadra Funds (filed as Exhibit 9(b) to PEA No.
49 via EDGAR on November 5, 1997, accession number
0001004402-97-000163).
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(c)* Form of Shareholder Service Plan of Registrant and Form of
Shareholder Service Agreement relating to the Daily Assets
Treasury Fund, Daily Assets Cash Fund, Daily Assets
Government Fund, Daily Assets Tax-Exempt Fund and Daily
Assets Treasury Obligations Fund (filed as Exhibit 9(c) to
PEA No. 50 via EDGAR on November 12, 1997, accession no.
0001004402-97-000189).
(10)*Opinion of Seward & Kissel dated January 5, 1996 (filed as
Exhibit 10 of PEA No. 33 via EDGAR on January 5, 1996, accession
number 0000912057-96-000216).
(11) None.
(12) None.
(13)*Investment Representation letter of Reich & Tang, Inc. as
original purchaser of shares of registrant (filed as Exhibit 13
to Registration Statement).
(14)*Form of Disclosure Statement and Custodial Account Agreement
applicable to individual retirement accounts (filed as Exhibit 14
of PEA No. 21).
(15) (a)* Form of Rule 12b-1 Plan adopted by the Registrant (filed as
Exhibit 15 of PEA No. 16).
(b)* Rule 12b-1 Plan adopted by the Registrant with respect to
the Payson Value Fund and the Payson Balanced Fund (filed as
Exhibit 8(c) of PEA No. 20).
(16) Schedule of Sample Performance Calculations (filed as Exhibit 16
to PEA No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
Other Exhibits*:
Powers of Attorney (filed as Exhibit 99 to PEA No. 34 via EDGAR
on May 9, 1996, accession number 0000912057-96-008780).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF DECEMBER 31, 1997
TITLE OF CLASS NUMBER OF HOLDERS
Investors High Grade Bond Fund 0
Investors Bond Fund 55
TaxSaver Bond Fund 40
Daily Assets Cash Fund 22
Daily Assets Treasury Fund 96
Daily Assets Government Fund 2
Daily Assets Municipal Fund 3
Daily Assets Treasury Obligations Fund 2
Payson Value Fund 326
Payson Balanced Fund 378
Maine Municipal Bond Fund 391
New Hampshire Bond Fund 81
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Austin Global Equity Fund 13
Oak Hall Equity Fund 186
Quadra Limited Maturity Treasury Fund 3
Quadra Value Equity Fund 14
Quadra Growth Fund 7
Quadra International Equity Fund 8
Quadra Opportunistic Bond Fund 6
Equity Index Fund 2
Investors Equity Fund
International Equity Fund 1
Emerging Markets Fund 1
Investors Growth Fund 2
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act, SECTION
5.2 of the Registrant's Trust Instrument provides as follows:
"5.2. INDEMNIFICATION.
"(a) Subject to the exceptions and limitations contained in
Section (b) below:
"(i) Every Person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as a "Covered
Person") shall be indemnified by the Trust to the fullest
extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of being or having
been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
"(ii) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
"(b) No indemnification shall be provided hereunder to a
Covered Person:
"(i) Who shall have been adjudicated by a court or
body before which the proceeding was brought (A) to be liable
to the Trust or its Holders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Covered Person's office
or (B) not to have acted in good faith in the reasonable
belief that Covered Person's 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
the Trustee's or officer's 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
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"(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as
opposed to a full trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees
or by independent counsel.
"(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other rights to
which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such
a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
"(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of
the character described in paragraph (a) of this Section 5.2 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 5.2; provided, however, that
either (a) such Covered Person shall have provided appropriate security
for such undertaking, (b) the Trust is insured against losses arising
out of any such advance payments or (c) 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 5.2.
"(e) Conditional advancing of indemnification monies under
this Section 5.2 for actions based upon the 1940 Act may be made only
on the following conditions: (i) the advances must be limited to
amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation
of a settlement; (ii) advances may be made only upon receipt of a
written promise by, or on behalf of, the recipient to repay that amount
of the advance which exceeds that amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety
bond, other suitable insurance or an equivalent form of security which
assures that any repayments may be obtained by the Trust without delay
or litigation, which bond, insurance or other form of security must be
provided by the recipient of the advance, or (b) a majority of a quorum
of the Trust's disinterested, non-party Trustees, or an independent
legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
"(f) In case any Holder or former Holder of any Series shall
be held to be personally liable solely by reason of the Holder or
former Holder being or having been a Holder of that Series and not
because of the Holder or former Holder acts or omissions or for some
other reason, the Holder or former Holder (or the Holder or former
Holder's heirs, executors, administrators or other legal
representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability.
The Trust, on behalf of the affected Series, shall, upon request by the
Holder, assume the defense of any claim made against the Holder for any
act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series."
Paragraph 4 of each Investment Advisory Agreement provides in substance as
follows:
"4. We shall expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you
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, you against
any
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liability to us or and to our security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder."
Paragraphs 3(f) and (g) and paragraph 5 of the Management and Distribution
Agreement provide as follows:
"(f) We agree to indemnify, defend and hold you, your several officers
and directors, and any person who controls you within the meaning of
Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which you, your
officers and directors or any such controlling person may incur, under
the Securities Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in
our Registration Statement or Prospectus in effect from time to time
under the Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not
misleading; provided, however, that in no event shall anything
contained in this paragraph 3(f) be so construed as to protect you
against any liability to us or our security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this
paragraph. Our agreement to indemnify you, your officers and directors
and any such controlling person as aforesaid is expressly conditioned
upon our being notified of any action brought against you, your
officers and directors or any such controlling person, such
notification to be given by letter or by telegram addressed to us at
our principal office in New York, New York, and sent to us by the
person against whom such action is brought within ten days after the
summons or other first legal process shall have been served. The
failure so to notify us of any such action shall not relieve us from
any liability which we may have to the person against whom such action
is brought by reason of any such alleged untrue statement or omission
otherwise than on account of our indemnity agreement contained in this
paragraph 3(f). We will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of good
standing chosen by us and approved by you. In the event we do elect to
assume the defense of any such suit and retain counsel of good standing
approved by you, the defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by any of
them; but in case we do not elect to assume the defense of any such
suit, or in case you do not approve of counsel chosen by us, we will
reimburse you or the controlling person or persons named as defendant
or defendants in such suit, for the fees and expenses of any counsel
retained by you or them. Our indemnification agreement contained in
this paragraph 3(f) and our representations and warranties in this
agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of you, your
officers and directors or any controlling person and shall survive the
sale of any shares of our common stock made pursuant to subscriptions
obtained by you. This agreement of indemnity will inure exclusively to
your benefit, to the benefit of your successors and assigns, and to the
benefit of your officers and directors and any controlling persons and
their successors and assigns. We agree promptly to notify you of the
commencement of any litigation or proceeding against us in connection
with the issue and sale of any shares of our common stock.
"(g) You agree to indemnify, defend and hold us, our several officers
and directors, and person who controls us within the meaning of Section
15 of the Securities Act, free and harmless from and against any and
all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which we, our
officers or directors, or any such controlling person may incur under
the Act or under common law or otherwise, but only to the extent that
such liability, or expense incurred by us, our officers or directors or
such controlling person resulting from such claims or demands shall
arise out of or be based upon any alleged untrue statement of a
material fact contained in information furnished in writing by you in
your capacity as distributor to us for use in our Registration
Statement or Prospectus in effect from time to time under the Act, or
shall arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be stated
in the Registration Statement or Prospectus or necessary to make such
information not misleading. Your agreement to indemnify us, our
officers and
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directors, and any such controlling person as aforesaid is
expressly conditioned upon your being notified of any action brought
against us, our officers or directors or any such controlling person,
such notification to be given by letter or telegram addressed to you at
your principal office in New York, New York, and sent to you by the
person against whom such action is brought, within ten days after the
summons or other first legal process shall have been served. You shall
have a right to control the defense of such action, with counsel of
your own choosing, satisfactory to us, if such action is based solely
upon such alleged misstatement or omission on your part, and in any
other event you and we, our officers or directors or such controlling
person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify
you of any such action shall not relieve you from any liability which
you may have to us, to our officers or directors, or to such
controlling person by reason of any such untrue statement or omission
on your part otherwise than on account of your indemnity agreement
contained in this paragraph 3(g).
"5 We shall expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you
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, you against
any liability to us or to our security holders to which you would
otherwise be subject by reason or willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder."
Section 9(a) of the Distribution Services Agreement provides:
"The Company agrees to indemnify, defend and hold the Underwriter, and
any person who controls the Underwriter within the meaning of Section
15 of the Securities Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act or
under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Company's
Registration Statement or the Prospectus or Statement of Additional
Information in effect from time to time under the Securities Act and
relating to the Fund or arising out of or based upon any alleged
omission to state a material fact required to be stated in any thereof
or necessary to make the statements in any thereof not misleading;
provided, however, that in no event shall anything herein contained be
so construed as to protect the Underwriter against any liability to the
Company or its security holders to which the Underwriter would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of the
Underwriter's reckless disregard of its obligations and duties under
this agreement. The Company's agreement to indemnify the Underwriter
and any controlling person as aforesaid is expressly conditioned upon
the Company's being notified of the commencement of any action brought
against the Underwriter or any such controlling person, such
notification to be given by letter or by telegram addressed to the
Company at its principal office in New York, New York, and sent to the
Company by the person against whom such action is brought within ten
days after the summons or other first legal process shall have been
served. The Company will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of good
standing chosen by the Company and approved by the Underwriter. In the
event the Company elects to assume the defense of any such suit and
retain counsel of good standing approved by the Underwriter, the
defendants in the suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Company
does not elect to assume the defense of the suit or in case the
Underwriter does not approve of counsel chosen by the Company, the
Company will reimburse the Underwriter or the controlling person or
persons named defendant or defendants in the suit for the fees and
expenses of any counsel retained by the Underwriter or such person. The
indemnification agreement contained in this Section 9 shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of the Underwriter or any controlling person and
shall survive the sale of the Fund's shares made pursuant to
subscriptions obtained by the Underwriter. This agreement of indemnity
will inure exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of any
controlling persons and their successors and assigns.
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The Company agrees promptly to notify the Underwriter of the
Underwriter of the commencement of any litigation or proceeding
against the Company in connection with the issue and sale of any of
shares of the Fund. The failure to do so notify the Company of the
commencement of any such action shall not relieve the Company from any
liability which it may have to the person against whom the action is
brought by reason of any alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained in this
Section 9."
In so far as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
Forum Investment Advisors, LLC
The description of Forum Investment Advisors, LLC (investment adviser
to each of Daily Assets Treasury Fund, Daily Assets Treasury
Obligations Fund, Daily Assets Government Fund, Daily Assets Cash Fund,
Daily Assets Municipal Fund, Investors High Grade Bond Fund, Investors
Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire
Bond Fund and Investors Growth Fund) under the captions "Management "
and "Management - Adviser" in the Prospectuses and Statements of
Additional Information, constituting certain of Parts A and B,
respectively, of this Registration Statement, are incorporated by
reference herein.
The following are the members of Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101, including their business
connections which are of a substantial nature.
Forum Holdings Corp., Member.
Forum Financial Group, LLC., Member.
Both Forum Holdings Corp. and Forum Financial Group, LLC are
controlled by John Y. Keffer, Chairman and President of the
Registrant. Mr. Keffer is President of Forum Financial Group, LLC. Mr.
Keffer is also a director and/or officer of various registered
investment companies for which the various Forum Financial Group of
Companies provides services.
The following are the officers of Forum Investment Advisors, LLC,
including their business connections which are of a substantial nature.
Each officer may serve as an officer of various registered investment
companies for which the Forum Financial Group of Companies provides
services.
William J. Lewis, Director.
Director of Forum Investment Advisors, LLC.
Sara M. Morris, Treasurer.
Chief Financial Officer, Forum Financial Group, LLC. Ms. Morris
serves as an officer of several other Forum affiliated companies.
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David I. Goldstein, Secretary.
General Counsel, Forum Financial Group, LLC. Mr. Goldstein serves
as an officer of several other Forum affiliated companies.
Dana A. Lukens, Assistant Secretary.
Corporate Counsel, Forum Financial Group, LLC. Mr. Lukens also
serves as an officer of several other Forum affiliated companies.
Margaret J. Fenderson, Assistant Treasurer.
Corporate Accounting Manager, Forum Financial Group, LLC. Ms.
Fenderson also serves as an officer of several other Forum
affiliated companies.
H.M. Payson & Co.
The descriptions of H.M. Payson & Co. under the caption "Management -
Adviser" in the Prospectus and Statement of Additional Information,
with respect to the Payson Value Fund and the Payson Balanced Fund,
constituting certain of Parts A and B, respectively, of this
Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of
H.M. Payson & Co., including their business connections which are of a
substantial nature. The address of H.M. Payson & Co. is One Portland
Square, Portland, Maine 04101.
Adrian L. Asherman, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1955, General
Partner from 1964 to 1987 and Managing Director since 1987. His
address is One Portland Square, Portland, Maine 04101.
John C. Downing, Managing Director and Treasurer.
Portfolio Manger of H.M. Payson since 1983 and Managing Director
since 1992. Mr. Downing has been associated with H.M. Payson
since 1983. His address is One Portland Square, Portland, Maine
04101.
William A. Macleod, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1984 and Managing
Director since 1989. His address is One Portland Square,
Portland, Maine 04101.
Thomas M. Pierce, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1975, General
Partner from 1981 to 1987 and Managing Director since 1987. His
address is One Portland Square, Portland, Maine 04101.
Peter E. Robbins, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1992, except for the
period from January 1988 to October 1990. During that period, Mr.
Robbins was president of Mariner Capital Group, a real estate
development and non-financial asset management business. General
Partner of H.M. Payson & Co. from 1986 to 1987, and Managing
Director from 1987 to 1988, and since 1993.
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John H. Walker, Managing Director and President.
Portfolio Manager of H.M. Payson & Co. since 1967, General
Partner from 1974 to 1987, and Managing Director since 1987. Mr.
Walker is also a Director of York Holding Company and York
Insurance Company. His address is One Portland Square, Portland,
Maine 04101.
Teresa M. Esposito, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. Her address is
One Portland Square, Portland, Maine 04101.
John C. Knox, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. His address is
One Portland Square, Portland, Maine 04101.
Harold J. Dixon, Managing Director and Secretary.
Managing Director of H.M. Payson & Co. since 1995. His address is
One Portland Square, Portland, Maine 04101.
Laura McDill, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. Her address is
One Portland Square, Portland, Maine 04101.
Austin Investment Management, Inc.
The description of Austin Investment Management, Inc. under the caption
"Management - Adviser" in the Prospectus and Statement of Additional
Information with respect to the Austin Global Equity Fund, constituting
part of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following is the director and principal executive officer of Austin
Investment Management, Inc. 375 Park Avenue, New York, New York 10152,
including his business connections which are of a substantial nature.
Peter Vlachos, Director, President Treasurer and Secretary
Oak Hall Capital Advisors, Inc.
The description of Oak Hall Capital Advisors, Inc. under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Oak Hall Equity Fund, constituting part
of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of, Oak
Hall Capital Advisors, Inc. 122 East 42nd Street, New York, New York
10168, including their business connections which are of a substantial
nature.
Alexander G. Anagnos, Director and Portfolio Manager.
Consultant to American Services Corporation and Financial Advisor
to WR Family Associates.
Lewis G. Cole, Director.
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Partner, the Law Firm of Strook, Strook & Lavan.
John C. Hathaway, President, director and Portfolio Manager.
John J. Hock, Executive Vice President.
Charles D. Klein, Portfolio Manager.
Director, American Securities Corporation and Financial Advisor
to WR Family Associates.
David P. Steinmann, Executive Vice President, Secretary and Treasurer.
Administrator WR Family Associates and Secretary and Treasurer of
American Securities Corporation.
Carl Domino Associates, L.P.
The description of Carl Domino Associates, L.P. under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Quadra Value Equity Fund, constituting
part of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of, Carl
Domino Associates, L.P., 580 Village Blvd., West Palm Beach, FL 33409
including their business connections which are of a substantial nature.
Carl J. Domino, Managing Partner & Portfolio Manager.
Paul Scoville, Jr., Senior Portfolio Manager.
Ann Fritts Syring, Senior Portfolio Manager.
John Wagstaff-Callahan, Senior Portfolio Manager.
Prior to joining Carl Domino Associates, L.P., Mr.
Wagstaff-Callahan was a Trustee with Batterymarch Financial
Management, Boston, Massachusetts.
Stephen Krider Kent, Jr., Senior Portfolio Manager.
Prior to joining Carl Domino Associates, L.P., Mr. Kent was a
Senior Portfolio Manager with Gamble, Jones Holbrook & Bent,
Carlsbad, California.
Anhalt/O'Connell, Inc.
The description of Anhalt/O'Connell, Inc. under the caption "Management -
Advisor" in the Prospectus and Statement of Additional Information with
respect to the Quadra Limited Maturity Treasury Fund, constituting part
of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of,
Anhalt/O'Connell, Inc., 345 South Figueroa Street, Suite 303, Los
Angeles, CA, including their business connections which are of a
substantial nature.
Paul Edward Anhalt, Managing Director and Chairman.
Mr. Anhalt is also a partner of Anhalt/O'Connell, a partnership,
and was formerly Managing Director and Consulting Economist of
Trust Company of the West.
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Michael Frederick O'Connell, Managing Director
Mr. O'Connell is also a partner of Anhalt/O'Connell, a
partnership, and was formerly Managing Director of Trust Company
of the West and Vice President of Institutional Research
Services, Inc., a registered broker-dealer.
LM Capital Management, Inc.
The description of LM Capital Management, Inc., under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Quadra Opportunistic Bond Fund,
constituting part of Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.
The following are the directors and principal executive officers of, LM
Capital Management, Inc., including their business connections which are
of a substantial nature.
Luis Malzel, Managing Director.
John Chalker, Managing Director
McDonald Investment Management, Inc.
The description of McDonald Investment Management, Inc., under the
caption "Management - Advisor" in the Prospectus and Statement of
Additional Information with respect to the Quadra International Equity
Fund, constituting part of Parts A and B, respectively, of this
Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of
McDonald Investment Management, Inc., including their business
connections which are of a substantial nature.
John McDonald, President and Chief Investment Officer.
Ron Belcot, Vice President - Research and Trading.
Bill Hallman, Vice President.
Ray DiBernardo, Vice President., Managing Director
Mr. DiBernardo was formerly a portfolio manager with Royal Trust.
Smith Asset Management Group, L.P.
The description of Smith Asset Management Group, L.P., under the caption
"Management - Investment Advisory Services" in the Prospectus and
Statement of Additional Information with respect to the Quadra Growth
Fund, constituting part of Parts A and B, respectively, of this
Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of Smith
Asset Management Group, L.P., including their business connections which
are of a substantial nature.
Mr. Stephen Smith, Chief Investment Officer
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Norwest Investment Management, Inc.
The description of Norwest Investment Management, Inc. ("NIM"), under
the caption "Management Investment Advisers and Portfolio Managers" in
the Prospectus for Equity Index Fund and "Management --Adviser" or
"Management - Investment Advisers and Portfolio Managers" in the
Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated by
reference herein.
The following are the directors and principal executive officers of
NIM, including their business connections which are of a substantial
nature. The address of Norwest Corporation, the parent of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), which is the parent of NIM, is
Norwest Center, Sixth Street and Marquette Avenue, Minneapolis, MN
55479. Unless otherwise indicated below, the principal business address
of any company with which the directors and principal executive
officers are connected is also Sixth Street and Marquette Avenue,
Minneapolis, MN 55479.
P. Jay Kiedrowski, Chairman, Chief Executive Officer and President, has
been affiliated with NIM since 1989. Mr. Kiedrowski is also Executive
Vice President of Norwest Bank Minnesota, N.A., and has served in
various capacities as an employee of Norwest Bank Minnesota, N.A.
and/or its affiliates since August, 1987.
James W. Paulsen, Chief Investment Officer, has served in this capacity
since January, 1997.
Stephen P. Gianoli, Senior Vice President and Chief Executive Officer
has been affiliated with NIM in various capacities since 1986.
David S. Lunt, Vice President and Senior Portfolio Manager has been
affiliated with NIM since 1997.
Richard C. Villars, Vice President and Senior Portfolio Manager has
been affiliated with NIM since 1997.
Lee K. Chase, Vice President, has been affiliated with NIM since 1997.
Andrew Owen, Vice President, has been affiliated with NIM since 1997.
Eileen A. Kuhry, Investment Compliance Specialist, has been affiliated
with NIM since 2997.
Schroder Capital Management International Inc.
The description of Schroder Capital Management International Inc.
("Schroder") under the caption "Management - Investment Advisers and
Portfolio Managers." in the Prospectus for International Equity Fund
and Emerging Markets Fund and "Management - Investment Advisers and
Portfolio Managers" in the Statement of Additional Information relating
to those funds, constituting certain of Parts A and B, respectively, of
the Registration Statement, are incorporated by reference herein.
The following are the directors and principal officers of Schroder,
including their business connections of a substantial nature. The
address of each company listed, unless otherwise noted, is 33 Gutter
Lane, London EC2V 8AS, United Kingdom. Schroder Capital Management
International Limited ("Schroder Ltd.") is a United Kingdom affiliate
of Schroder which provides investment management services international
clients located principally in the United States.
David M. Salisbury. Chief Executive Officer, Director and Chairman of
SCMI; Joint Chief Executive and Director of Schroder Ltd.
Richard R. Foulkes. Deputy Chairman/Executive Vice President of SCMI.
Mr. Foulkes is also a Director of Schroder Ltd.
99
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John A. Troiano. Chief Executive and Director of SCMI. Mr. Troiano is
also a Director of Schroder Ltd.
David Gibson. Senior Vice President and Director of SCMI. Director of
Schroder Capital Management and Senior Vice President of Schroder Ltd.
John S. Ager. Senior Vice President and Director of SCMI. Mr. Ager is
also a Director of Schroder Ltd.
Sharon L. Haugh. Executive Vice President and Director of SCMI,
Director and Chairman of Schroder Advisors Inc., and Director of
Schroder Ltd.
Gavin D.L. Ralston. Senior Vice President and Managing Director of
SCMI; Director of Schroder Ltd.
Mark J. Smith. Senior Vice President and Director of SCMI. Mr. Smith
is also Director of Schroder Ltd.
Robert G. Davy. Senior Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for
which SCMI and/or its affiliates provide investment services.
Jane P. Lucas. Senior Vice President and Director of SCMI; Director of
Schroder Advisors Inc.; Director of Schroder Capital Management.
C. John Govett. Director of SCMI; Group Managing Director of Schroder
Ltd. And Director of Schroders plc.
Phillipa J. Gould. Senior Vice President and Director of SCMI.
Louise Croset. First Vice President and Director of SCMI, also First
Vice President of Schroder Ltd.
Abdallah Nauphal, Group Vice President and Director of SCMI.
ITEM 29. PRINCIPAL UNDERWRITER.
(a) Forum Financial Services, Inc., Registrant's underwriter,
serves as underwriter to Core Trust (Delaware), The CRM Funds,
The Cutler Trust, The Highland Family of Funds, Monarch Funds,
Norwest Funds, Norwest Select Funds and Sound Shore Fund, Inc.
(b) John Y. Keffer, President of Forum Financial Services, Inc.,
is the Chairman and President of the Registrant. Sara M.
Morris is the Treasurer of Forum Financial Services. David I.
Goldstein, Secretary of Forum Financial Services, Inc., is the
Secretary of the Registrant. Margaret J. Fenderson is the
Assistant Treasurer of Forum Financial Services, Inc. and Dana
Lukens is the Assistant Secretary of Forum Financial Services,
Inc. Their business address is Two Portland Square, Portland,
Maine 04101.
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Forum Administrative Services, LLC
and Forum Financial Corp., Two Portland Square, Portland, Maine 04101. The
records required to be maintained under Rule 31a-1(b)(1) with respect to
journals of receipts and deliveries of securities and receipts and disbursements
of cash are maintained at the offices of the Registrant's custodian, The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts 02106. The
records required to be maintained under Rule
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31a-1(b)(5), (6) and (9) are maintained at the offices of the Registrant's
adviser or subadviser, as listed in Item 28 hereof.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(i) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the latter of the effective date of Registrant's Securities
Act of 1933 Registration Statement relating to the prospectuses
offering those shares or the commencement of public shares of the
respective shares; and,
(i) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.
101
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Portland, and State of Maine on the 27th day of
January, 1998.
FORUM FUNDS
By: /s/ John Y. Keffer
--------------------------
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the following
persons on the 27th day of January, 1998.
SIGNATURES TITLE
(a) Principal Executive Officer
/s/ John Y. Keffer President
--------------------- and Chairman
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Mark D. Kaplan Assistant
---------------------- Treasurer
Mark D. Kaplan
(c) A majority of the Trustees
/s/ John Y. Keffer Trustee
----------------------
John Y. Keffer
James C. Cheng* Trustee
J. Michael Parish* Trustee
Costas Azariadis* Trustee
By: /s/ John Y. Keffer
----------------------
John Y. Keffer
Attorney in Fact*
102
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SIGNATURES
On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Forum Funds to be signed in the
City of Portland, State of Maine on the 27th day of January, 1998.
CORE TRUST (DELAWARE)
By: /s/ John Y. Keffer
--------------------------
John Y. Keffer, President
This amendment to the Registration Statement of Forum Funds has been signed
below by the following persons in the capacities indicated on the 27th day of
January, 1998.
SIGNATURES TITLE
(a) Principal Executive Officer
/s/ John Y. Keffer Chairman
----------------------- and President
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Sara M. Morris Treasurer
----------------------
Sara M. Morris
(c) A majority of the Trustees
/s/ John Y. Keffer Trustee
----------------------
John Y. Keffer
Costas Azariadis* Trustee
J. Michael Parish* Trustee
James C. Cheng* Trustee
By: /s/ John Y. Keffer
------------------------
John Y. Keffer
Attorney in Fact*
103
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SIGNATURES
On behalf of Schroder Capital Funds, being duly authorized, I have duly caused
this amendment to the Registration Statement of Forum Funds to be signed in the
City of New York, State of New York on the 27th day of January, 1998.
SCHRODER CAPITAL FUNDS
By: /s/ Catherine A. Mazza
--------------------------
Catherine A. Mazza
This amendment to the Registration Statement of Forum Funds has been signed
below by the following persons in the capacities indicated on the 27th day of
January, 1998.
SIGNATURES TITLE
(a) Principal Executive Officer
Mark J. Smith
*By: /s/Thomas G. Sheehan President and Trustee
------------------------
Thomas G. Sheehan
Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
Thomas G. Sheehan Assistant Treasurer
/s/ Thomas G. Sheehan
----------------------------
Thomas G. Sheehan
Attorney-in-Fact
(c) Majority of the Trustees
Peter E. Guernsey Trustee
John I. Howell Trustee
Hermann C. Schwab Trustee
By: /s/ Thomas G. Sheehan
--------------------------
Thomas G. Sheehan
Attorney-in-Fact
