As filed with the Securities and Exchange Commission on January 7, 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. 57
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 59
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
(AS REQUIRED BY RULE 404(A))
PART A
(Prospectus offering Shares of Oak Hall(R) Small Cap Contrarian 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
</TABLE>
2
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(All other Prospectuses)
Not Applicable in this Filing
3
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
(SAI offering Shares of Oak Hall(R) Small Cap Contrarian 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
(AS REQUIRED BY RULE 404(A))
PART B
(All other SAIs)
Not Applicable in this Filing
5
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OAK HALL(R) SMALL CAP CONTRARIAN FUND
- --------------------------------------------------------------------------------
Two Portland Square
Portland, Maine 04101
ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING:
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
(207) 879-0001
(800) 625-4255
- --------------------------------------------------------------------------------
PROSPECTUS March __, 1998
This Prospectus offers shares of the Oak Hall(R) Small Cap Contrarian Fund (the
"Fund"), which is a diversified portfolio of Forum Funds (the "Trust"), an
open-end, management investment company. The investment objective of the Fund is
to seek capital appreciation by investing primarily in a portfolio of common
stock and securities convertible into common stock. The Fund seeks to achieve
its objective by investing primarily in equity securities of companies with
small market capitalizations. Shares of the Fund are offered to investors
without any sales charge.
This Prospectus sets forth concisely the information concerning the Fund and the
Trust that a prospective investor should know before investing. The Trust has
filed with the Securities and Exchange Commission a Statement of Additional
Information dated March ___, 1998, which contains more detailed information
about the Fund and the Trust and which is hereby incorporated into this
Prospectus by reference. An investor may obtain a copy of the Statement of
Additional Information without charge by contacting Shareholder Servicing at the
address or phone number listed above.
Table of Contents
<TABLE>
<S> <C> <C> <C> <C>
1. Prospectus Summary..................... 2 5. Purchases and Redemptions of
Shares...................................... 9
2. Financial 6. Dividends and Tax
Highlights............................. 3 Matters.................................... 12
3. Investment Objective and Policies 4 7. Other
Information................................. 13
4. Management............................. 8 8. 15
</TABLE>
Investors should read this Prospectus and retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
6
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1. PROSPECTUS SUMMARY
SUMMARY OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES. The Fund seeks capital appreciation by
investing primarily in a portfolio of common stock and securities convertible
into common stock. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with small market capitalizations. A
small capitalization company has a market capitalization of $1 billion or less
at the time of the Fund's investment. A company's market capitalization is the
total market value of its outstanding common stock. See "Investment Objective,
Policies and Limitations."
MANAGEMENT. Oak Hall(R) Capital Advisors, L.P. (the "Adviser") is the
Fund's investment adviser and makes investment decisions for the Fund. Forum
Financial Services, Inc., ("FFSI") distributes the Fund's shares and Forum
Administrative Services, LLC ("FAS") administers the Fund. See "Management."
PURCHASES AND REDEMPTIONS. Shares of the Fund are offered at their net
asset value without a sales charge to investors who plan to invest a minimum of
$10,000 in the Fund directly and a $5,000 minimum initial investment on shares
purchased through certain broker-dealers. Shares of the Fund may be redeemed
from the Fund at their net asset value on any Fund Business Day. See "Purchases
and Redemptions of Shares."
DIVIDENDS. Dividends representing the net investment income of the Fund are
declared and paid at least annually. Net capital gains realized by the Fund, if
any, also will be distributed annually. Dividends and distributions are
reinvested in additional shares of the Fund unless a shareholder elects to have
them paid in cash. See "Dividends and Tax Matters."
CERTAIN RISK FACTORS. There can be no assurance that the Fund will achieve
its investment objective and the Fund's net asset value will fluctuate based
upon changes in the value of its portfolio securities. An investment in the Fund
may be an appropriate investment for investors willing to tolerate possibly
significant fluctuations in the Fund's net asset value while seeking long-term
returns that are potentially higher than market averages. The securities of
small capitalization companies typically are more thinly traded than those of
larger companies. Small capitalization securities may have greater growth
potential in the long-run than other types of securities. In the shorter term,
however, the prices of small capitalization securities may fluctuate
significantly in response to news about the company, the markets or the economy.
See "Investment Objective, Policies and Limitations." The Fund is not intended
to provide a complete or balanced investment program for all investors.
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EXPENSES OF INVESTING IN THE FUND
The purpose of the following table is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. There are no transaction or sales charges
associated with purchases and redemptions.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after fee waivers)................................ 0.75%
12b-1 Fees....................................................... None
Other Expenses (after expense reimbursements).................... 0.75%
-----
Total Fund Operating Expenses (after expense reimbursements)..... 1.50%
As of the date of this prospectus, the Adviser has voluntarily
undertaken to waive a portion of its fees and assume certain expenses of the
Fund to the extent that total expenses exceed 1.50%. The amounts of expenses are
based on actual amounts incurred during the Fund's most recent fiscal year ended
March 31, 1997, adjusted to reflect the elimination of the Fund's Rule 12b-1
plan. For the fiscal year ended March 31, 1997, the Fund incurred fees under
Rule 12b-1 equal to 0.02% of the Fund's average net assets. Absent certain
expense reimbursements and fee waivers, during the most recent fiscal year, the
Investment Advisory Fees, Other Expenses, and Total Operating Expenses of the
Fund would be 0.75%, 2.16%, and 2.93%, respectively. Expense reimbursements and
fee waivers are voluntary and may be reduced or eliminated at any time. For a
further description of the various costs and expenses incurred in the Fund's
operation, see "Management."
EXAMPLE
The following is a hypothetical example that indicates the dollar
amount of expenses an investor would pay assuming a $1,000 investment, a 5%
annual return, reinvestment of all dividends and distributions and full
redemption at the end of each period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$15 $47 $87 $179
The example is based on the expenses listed in the "Annual Fund Operating
Expenses" table above. The 5% annual return is not a prediction of and does not
represent the Fund's projected returns; rather it is required by government
regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN THOSE INDICATED.
8
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2. FINANCIAL HIGHLIGHTS
The following represents selected data for a single share outstanding
of the Fund for the periods indicated. The information for the six month period
ended September 30, 1997 is unaudited. The information for the periods ending
March 31, 1997 and June 30, 1996, 1995 and 1994 was audited in connection with
an audit of the Trust's financial statements by Deloitte & Touche, independent
auditors. The financial statements and auditors' report thereon are contained in
the Annual Report which is incorporated by reference into the Statement of
Additional Information. The information for the period ending June 30, 1993 was
audited by other independent auditors. Further information about the Fund's
performance is contained in the Annual Report, which may be obtained without
charge by contacting the Fund's transfer agent.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
OAK HALL SMALL CAP CONTRARIAN FUND
---------------------------------------------------------------------
SIX MONTHS NINE MONTHS YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER MARCH 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
30, 1997 1997 1996 1995 1994 1993(A)
------------- -------------- ----------- ------------ ------------- --------------
(UNAUDITED)
Net Asset Value, Beginning of Period $13.80 $13.61 $11.33 $12.55 $14.30 $10.00
------------- -------------- ----------- ------------ ------------- ---------------
Investment Operations:
Net Investment Income (Loss) (0.13) (0.15) (0.32)(b) (0.03)(b) (0.09) _
Net Realized and Unrealized Gain
(Loss) on Investments 4.50 0.34 2.60 (0.10) (0.52) 4.31
------------- --------------- ----------- ------------ ------------- --------------
Total from Investment Operations 4.37 0.19 2.28 (0.13) (0.61) 4.31
Distributions From:
Net Realized Gain on Investments - _ _ (1.09) (1.14) (0.01)
------------ --------------- ----------- ------------ ------------- -------------
Net Asset Value, End of Period $18.17 $13.80 $13.61 $11.33 $12.55 $14.30
============= =============== =========== ============ ============= =============
Total Return 31.67%(c) 1.40%(c) 20.12% (1.07%) (5.14%) 45.12%(d)
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted) $6,950 $7,310 $12,257 $16,399 $35,470 $12,581
Ratios to Average Net Assets:
Expenses Including
Reimbursement/Waiver 2.00%(d) 2.00%(d) 2.00% 2.00% 2.01% 1.23%(d)
Expenses Excluding
Reimbursement/Waiver 2.75%(d) 2.93%(d) 2.44% _% 2.17% 5.91%(d)
Net Investment Income (Loss)
Including Reimbursement/Waiver (1.46%)(d) (1.13%)(d) (1.14%) (.23%) (.96%) (0.07%)(d)
Average Commission Rate (e) $0.0657 $0.0673 $0.0601 N/A N/A N/A
Portfolio Turnover Rate 52.13% 95.05% 157.01% 115.33% 168.61% 187.94%
</TABLE>
(a) The Fund commenced operations on July 13, 1992.
(b) Calculated using the weighted average shares outstanding.
(c) Not annualized.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.
9
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3. INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation by
investing primarily in a portfolio of common stock and securities convertible
into common stock. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with small market capitalizations.
Except during periods when the Fund assumes a temporary defensive position, the
Fund will have at least 65% of its total assets invested in common stock and
securities convertible into common stock. There can be, of course, no assurance
that the Fund will achieve its investment objective.
The Fund intends to invest principally in small capitalization companies
that, in the view of the Adviser are temporarily out of favor or simply
undiscovered, yet possess upside growth potential coupled with attractive
valuations. The Adviser seeks to identify and invest in companies it believes
have a minimum of downside risk and whose stock is selling at a substantial
discount from previous peak prices. In addition, the Adviser seeks to invest in
companies whose fundamental attributes, in the Adviser's opinion, are improving
but whose improvement has not been fully recognized by the investment community.
The Adviser could be characterized as a small cap value contrarian manager. In
seeking investment opportunities, the Adviser relies primarily on a company by
company analysis (rather than broader analysis of industry or economic trends)
with the bulk of the research being done in-house. The Fund may invest in the
securities of issuers in any industry, but the Adviser emphasizes investments in
those industries for which the Adviser believes the economic cycle is improving,
or where the economic cycle has less impact. While the stocks of the companies
in which the Fund invests are actively traded, the Fund may purchase the shares
of small companies whose stock is less actively traded and which have greater
appreciation potential and a correspondingly higher level of risk and volatility
than larger companies whose shares are actively traded. The securities in which
the Fund invests may be traded on securities exchanges or over-the-counter.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities,
including convertible debt and convertible preferred stock. The Fund will invest
only in convertible securities that are rated in one of the four highest rating
categories by Moody's Investors Service, Inc. ("Moody's") or by Standard &
Poor's Corporation. Securities in the four highest rating categories are
generally considered to be investment grade, although Moody's indicates that
securities rated Baa have speculative characteristics and that changes in
economic conditions are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. The
Fund may purchase unrated convertible securities if the Adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not be as actively traded as rated securities.
The Fund may retain securities whose rating has
10
<PAGE>
been lowered below the lowest permissible rating category (or that are unrated
and determined by the Adviser to be of comparable quality) if the Adviser
determines that retaining such security is in the best interests of the Fund. A
further description of the various rating categories is included in Appendix A
to the Statement of Additional Information.
ADDITIONAL INVESTMENT POLICIES
FOREIGN SECURITIES. The Fund may invest up to 30% of the value of its
total assets in securities of foreign issuers, in American Depository Receipts
("ADRs") and in securities denominated in foreign currencies (collectively,
"foreign securities"). Investments in foreign securities involve certain risks,
such as exchange rate fluctuations, political or economic instability of the
issuer or the country of issue and the possible imposition of exchange controls,
withholding taxes on dividends or interest payments, confiscatory taxes or
expropriation. Securities registration, custody and settlements of foreign
securities may in some instances be subject to delays and legal and
administrative uncertainties. Foreign securities may also be subject to greater
fluctuations in price than securities of domestic corporations denominated in
U.S. dollars. Foreign securities and their markets may not be as liquid as
domestic securities and their markets, and foreign brokerage commissions and
custody fees are generally higher than those in the United States. In addition,
less information may be publicly available about a foreign company than about a
domestic company, and foreign companies may not be subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. With respect to its permitted investments in
foreign securities, currently the Fund limits the amount of its assets that may
be invested in one country or denominated in one currency (other than the U.S.
dollar) to 25%. The Fund may invest in sponsored and unsponsored ADRs, which are
receipts issued by an American
11
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bank or trust company evidencing ownership of underlying securities issued by a
foreign issuer. 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.
The Fund may utilize foreign currency forward contracts in order to hedge
against uncertainty in the level of future foreign exchange rates. The Fund will
not enter into these contracts for speculative purposes. These contracts involve
an obligation to purchase or sell a specific currency at a specified future
date, usually less than one year from the date of the contract, at a specified
price. The Fund may enter into foreign currency forward contracts to manage
currency risks and to facilitate transactions in foreign securities. These
contracts involve a risk of loss if the Adviser fails to predict currency values
correctly. For a description of the foreign currency forward contracts in which
the Fund invests and the risks associated therewith, see "Foreign Currency
Forward Contracts" in the SAI.
12
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TEMPORARY DEFENSIVE POSITION. When the Adviser believes that business
or financial conditions warrant, the Fund may assume a temporary defensive
position. For temporary defensive purposes, the Fund may invest without limit in
cash or in investment grade cash equivalents, including (i) short-term
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities ("U.S. Government Securities"), (ii) prime quality
certificates of deposit, bankers' acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States, (iii) prime
quality commercial paper, and (iv) repurchase agreements covering any of the
securities in which the Fund may invest directly, and, subject to the limits of
the Investment Company Act of 1940 (the "Investment Company Act,") money market
mutual funds. During periods when and to the extent that the Fund has assumed a
temporary defensive position, it will not be pursuing its investment objective.
GENERAL
PORTFOLIO TRANSACTIONS. The frequency of portfolio transactions (the
portfolio turnover rate) will vary from year to year depending on market
conditions. From time to time the Fund may engage in active short-term trading
to take advantage of price movements affecting individual issues, groups of
issues or markets. This will increase the Fund's rate of turnover and will
result in higher total brokerage costs for the Fund. An annual turnover rate of
100% would occur, for example, if all of the securities in the Fund were
replaced once in a period of one year. The Adviser weighs the anticipated
benefits of short-term investments against these consequences.
The Fund has no obligation to deal with any specific broker or dealer
in the execution of portfolio transactions. Consistent with its policy of
obtaining the best net results, the Fund may conduct brokerage transactions
through certain affiliates of the Adviser. The Board of Trustees of the Trust
has adopted policies to ensure that these transactions are reasonable and fair
and that the commissions charged are comparable to those charged by
non-affiliated qualified broker-dealers.
CHANGES IN INVESTMENT OBJECTIVE AND POLICIES. The investment objective
of the Fund is a fundamental policy of the Fund and, along with any other
policies of the Fund that are deemed to be fundamental, may not be changed
without approval of the holders of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act. A majority of the Fund's
outstanding voting securities means the lesser of 67% of the shares of the Fund
present or represented at a meeting at which the holders of more than 50% of the
outstanding shares of the Fund are present or represented or more than 50% of
the outstanding shares of the Fund. Except as otherwise indicated, investment
policies of the Fund are not deemed to be fundamental and may be changed by the
Board of Trustees without shareholder approval. A further description of the
Fund's investment policies is contained in the Statement of Additional
Information.
INVESTMENT LIMITATIONS. The Fund has adopted the following investment
limitations which, except for (5), are fundamental policies of the Fund.
Additional fundamental and
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nonfundamental limitations are listed in the Statement of Additional
Information. The Fund may not:
(1) Borrow money, except the Fund may enter into commitments to
purchase securities in accordance with its investment program, including
delayed-delivery and when-issued securities and reverse repurchase agreements,
provided that the total amount of any such borrowing does not exceed 33 1/3% of
the Fund's total assets.
(2) Make loans to other persons except for loans of portfolio
securities, through the use of repurchase agreements, and through the purchase
of debt securities that are otherwise permitted investments.
(3) Purchase the securities of issuers (other than U.S. Government
Securities) conducting their business activity in the same industry if,
immediately after such purchase, the value of investments in such industry would
comprise 25% or more of the value of the Fund's total assets.
(4) Purchase a security if, as a result (a) more than 5% of the Fund's
total assets would be invested in the securities of a single issuer, or (b) the
Fund would own more than 10% of the outstanding voting securities of a single
issuer. This limitation applies only with respect to 75% of the Fund's total
assets and does not apply to U.S. Government Securities.
(5) Invest more than 15% of its net assets in securities that are not
readily marketable, including repurchase agreements maturing in more than seven
days.
If a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later change
in percentage resulting from a change in the market values of the Fund's assets
or redemptions of Fund shares will not be considered a violation of the
limitation.
4. MANAGEMENT
The business of the Trust is managed under the direction of the Board
of Trustees. The Board formulates the general policies of the Fund and generally
meets quarterly to review the results of the Fund, monitor investment practices
and discuss other matters affecting the Fund and the Trust.
INVESTMENT ADVISER
Oak Hall(R) Capital Advisors, L.P. is the investment adviser of the
Fund pursuant to an Investment Advisory Agreement with the Trust. Subject to the
general control of the Board of Trustees, the Adviser makes investment decisions
for the Fund. For its services under the Advisory Agreement, the Adviser
receives an advisory fee at an annual rate of 0.75% of the average daily net
assets of the Fund. The Adviser's fees are accrued daily and paid monthly. The
Adviser, in its sole discretion, may waive all or any portion of its advisory
fee. Any waiver would have the effect of
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increasing the Fund's yield for the period during which the waiver was in effect
and would not be recouped by the Adviser at a later date.
Ed Cimilluca, Co-Chief Executive of the Adviser, has been the Fund's
co-portfolio manager since January 1, 1997. Prior to his association with the
Adviser, Mr. Cimilluca was Director of Research at J. & W. Seligman and prior
thereto was a Managing Director of Lehman Brothers, Inc. Mr. Cimilluca has
approximately 25 years in the investment management business. His approach to
investing is consistent with the Fund's emphasis on value investing in
out-of-favor sectors of the market.
John W. Morosani, Co-Chief Executive of the Adviser, has been the Fund's
co-portfolio manager since January 1, 1997. Prior to his association with the
Adviser, Mr. Morosani was Director of Research at S. G. Warburg & Co., Inc., and
prior thereto was an Associate Director at C. J. Lawrence, Inc. Mr. Morosani has
approximately 20 years in the investment management business. His approach to
investing is consistent with the Fund's emphasis on value investing in
out-of-favor sectors of the market.
The Adviser, which is located at 24th Floor, 122 East 42nd Street, New
York, New York 10168, is a registered investment adviser and provides investment
management services to pension plans, endowment funds, institutional and
individual accounts. As of the date of this Prospectus, the Adviser had
approximately $140 million of assets under management. The Adviser was
incorporated under the laws of the State of New York in 1984 and is a wholly
owned subsidiary of American Securities Holding Corporation ("ASHC"). ASHC is
wholly owned by a trust, the beneficiaries of which are members of the William
Rosenwald family.
ADMINISTRATION
On behalf of the Fund, the Trust has entered into an Administration
Agreement with FAS. 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 which the Trust is obligated to pay for), providing the
Trust with general office facilities and providing persons satisfactory to the
Board of Trustees to serve as officers of the Trust. For these services, FAS
receives a fee computed and paid monthly at an annual rate of 0.25% of the
average daily net assets of the Fund. Like the Adviser, FAS, in its sole
discretion, may waive all or any portion of its fees. FAS was organized under
the laws of the State of Delaware on December 29, 1995 and as of the date
hereof, FAS and FFSI provided management, administrative and distribution
services to registered investment companies and collective investment funds with
assets of approximately $30 billion.
15
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DISTRIBUTION
FFSI acts as distributor of the Fund's shares but receives no fees for its
services. FFSI is a registered broker-dealer and investment adviser and is a
member of the National Association of Securities Dealers, Inc.
SHAREHOLDER SERVICES
The Trust has adopted a shareholder services plan providing that the
Trust may obtain the services of the Adviser and other qualified financial
institutions to act as shareholder servicing agents for their customers. Under
this plan, the Trust has authorized Forum to enter into agreements pursuant to
which the shareholder servicing agent performs certain shareholder services not
otherwise provided by the Fund's transfer agent. For these services, the Trust
pays the shareholder servicing agent a fee of up to 0.25% of the average daily
net assets of the shares owned by investors for which the shareholder servicing
agent maintains a servicing relationship.
Among the services provided by shareholder servicing agents are:
answering customer inquiries regarding account matters; assisting shareholders
in designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Fund
shares held beneficially; and providing such other services as the Trust or a
shareholder may request.
TRANSFER AGENT
The Trust has entered into a Transfer Agency Agreement with Forum
Financial Corp. (the "Transfer Agent") pursuant to which the Transfer Agent acts
as the Fund's transfer agent and dividend disbursing agent. The Transfer Agent
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. The
Transfer Agent also performs other transfer agency functions and acts as
dividend disbursing agent for the Trust. Pursuant to an agreement with the
Trust, Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
services for the Fund, including determination of the Fund's net asset value. As
of the date of this Prospectus, each of FAS, FFSI, the Transfer Agent and FAcS
was controlled by John Y. Keffer, President and Chairman of the Trust and each
was located at Two Portland Square, Portland, Maine 04101.
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EXPENSES OF THE TRUST
The Adviser has voluntarily undertaken to assume certain expenses of
the Fund (or waive its respective fees). This undertaking is designed to place a
maximum limit on expenses (including all fees to be paid to the Adviser but
excluding taxes, interest, brokerage commissions and other portfolio transaction
expenses and extraordinary expenses) of 1.50%, of the average daily net assets
of the Fund. Fee waivers are voluntary and may be reduced or eliminated at any
time.
5. PURCHASES AND REDEMPTIONS OF SHARES
GENERAL
PURCHASES. Fund shares may be purchased without a sales charge at their
net asset value next determined on any weekday except days when the New York
Stock Exchange ("NYSE") 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 "Other
Information - Determination of Net Asset Value."
Fund shares are issued after an order in proper form, accompanied by
funds on deposit at a Federal Reserve Bank ("Federal Funds"), is received by the
Transfer Agent. An investor's funds will not be accepted or invested by the Fund
during the period before the Fund's receipt of Federal Funds. The Fund's net
asset value is calculated at the close of regular trading on the NYSE (normally
4:00 p.m., Eastern time) on each Fund Business Day. Fund shares become entitled
to receive dividends on the day after the shares are issued to an investor.
The Fund reserves the right to reject any subscription for the purchase
of its shares and may, in the Adviser's discretion, accept portfolio securities
in lieu of cash as payment for Fund shares. Stock certificates are issued only
to shareholders of record upon their written request, and no certificates are
issued for fractional shares.
REDEMPTIONS. There is no redemption charge, no minimum period of
investment, and no restriction on frequency of redemptions. The date of payment
of redemption proceeds may not be
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postponed for more than seven days after shares are tendered to the Transfer
Agent for redemption by a shareholder of record. The right of redemption may not
be suspended except in accordance with the Investment Company Act.
Redemptions are effected at a price equal to the net asset value per
share next determined following acceptance 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 participate in
dividends declared after the day on which a redemption becomes effective.
PURCHASE AND REDEMPTION PROCEDURES
Investors may obtain the account application necessary to open an
account by writing the Transfer Agent at the following address:
Oak Hall(R) Small Cap Contrarian Fund
P.O. Box 446
Portland, Maine 04112
There is a $10,000 minimum for initial investments in the Fund and a
$5,000 minimum for subsequent purchases, except for individual retirement
accounts (See "Individual Retirement Accounts"). There is a $5,000 minimum
initial investment on purchases made through certain broker-dealers.
Shareholders will receive from the Trust periodic statements listing account
activity during the statement period.
The Fund sells and redeems its shares on a continuing basis at their
net asset value next determined following the receipt by the Transfer Agent of a
purchase or redemption order in proper form including, in the case of purchases,
Federal Funds. An investor's funds will not be accepted or invested by the Fund
during the period before the Fund's receipt of Federal Funds.
INITIAL PURCHASE OF SHARES
MAIL. Investors may send a check made pay-
able to the Trust along with a completed account application to the Transfer
Agent at the following address:
Oak Hall(R) Small Cap Contrarian Fund
P.O. Box 446
Portland, Maine 04112
Checks are accepted at full value subject to collection. Payment by a
check drawn on any member of the Federal Reserve System can normally be
converted into Federal Funds within two business days after receipt of the
check. Checks drawn on some non-member banks may take longer.
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<PAGE>
BANK WIRE. To make an initial investment in the Fund using the fedwire
system for transmittal of money among banks, an investor should first telephone
the Transfer Agent at 800-625-4255 or 207-879-0001 to obtain an account number
for an initial investment. The investor should then instruct a member commercial
bank to wire his money immediately to:
BankBoston
Boston, Massachusetts
ABA # 011000390
For Credit to: Forum Financial Corp.
Account # 541-54171
Oak Hall Small Cap Contrarian Fund
(Investor's Name)
(Investor's Account Number)
The investor should then promptly complete and mail the account
application.
Any investor planning to wire funds should instruct his bank early in
the day so the wire transfer can be accomplished the same day. There may be a
charge by the investor's bank for transmitting the money by bank wire, and there
also may be a charge for use of Federal Funds. The Trust does not charge
investors for the receipt of wire transfers. Payment in the form of a bank wire
received prior to 4:00 p.m., Eastern time on a Fund Business Day will be treated
as a Federal Funds payment received before that time.
THROUGH BROKERS AND OTHER FINANCIAL INSTITUTIONS. Shares may be
purchased and redeemed through brokers and other financial institutions that
have entered into sales agreements with Forum. These institutions may charge
their customers a fee for their services and are responsible for promptly
transmitting purchase, redemption and other requests to the Trust. The Trust is
not responsible for the failure of any institution to promptly forward these
requests or otherwise carry out its obligations to its customers.
Investors who purchase shares will be subject to the procedures of
their institution, which may include charges, limitations, investment minimums,
cutoff times and restrictions in addition to, or different from, those
applicable to shareholders who invest in the Fund directly. Certain shareholder
services may not be available to shareholders who have purchased through a
broker-dealer or other institution. These investors should acquaint themselves
with their institution's procedures and should read this Prospectus in
conjunction with any materials and information provided by their institution.
Customers who purchase Fund shares in this manner may or may not be the
shareholder of record and, subject to their institution's and the Fund's
procedures, may have Fund shares transferred into their name. There is typically
a one to five day settlement period for purchases and redemptions through
broker-dealers.
SUBSEQUENT PURCHASES OF SHARES
Subsequent purchases may be made by mailing a check or by sending a
bank wire as indicated above. Shareholders using the wire system for subsequent
purchases should first
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telephone the Transfer Agent at 800-625-4255 or 207-879-0001 to notify it of the
wire transfer. All payments should clearly indicate the shareholder's name and
account number.
REDEMPTION OF SHARES
Redemption requests will not be effected 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 in the Fund through wire
transfers. Normally redemption proceeds are paid immediately following any
redemption, but in no event later than seven days after redemption, by check
mailed to the shareholder of record at his record address. Shareholders that
wish to redeem shares by Telephone or 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. These privileges may be modified or terminated by the
Trust at any time. 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 $10,000 ($2,000 for IRAs). The Fund will not redeem accounts that fall
below these amounts solely as a result of a reduction in net asset value.
REDEMPTION 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 certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed and all written requests for redemption must be signed by the
shareholder with signature guaranteed.
When a signature guarantee is called for, including any instruction to
change the record name or address, the designated bank account, the dividend
election, or the telephone redemption option election on an account, the
shareholder should have "Signature Guaranteed" stamped under his signature and
signed by a commercial bank or trust company, a broker, dealer or securities
exchange, a credit union or a savings association that is authorized to
guarantee signatures.
TELEPHONE REDEMPTION. A shareholder that has elected telephone
redemption privileges may make a telephone redemption request by calling the
Transfer Agent at 800-625-4255 or 207-879-0001. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone, the Trust and the
Transfer Agent will employ reasonable procedures to confirm that such
instructions are genuine. Shareholders must provide the Transfer Agent with the
shareholder's account number, the exact name in which the shares are registered
and some additional form of identification such as a password. The Trust or the
Transfer Agent may employ other procedures such as recording certain
transactions. If such procedures are followed, neither the Transfer Agent nor
the Trust will be liable for any losses due to unauthorized or fraudulent
redemption requests. 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 privilege may be difficult to implement. In the event a shareholder
is unable to reach the Transfer Agent by
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<PAGE>
telephone requests may be mailed or hand-delivered to the Transfer Agent. 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. Shares for which certificates have
been issued may not be redeemed by telephone.
BANK WIRE REDEMPTION. With respect to any redemption of more than
$10,000, a shareholder who has elected wire redemption privileges may request
the Fund to transmit the 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 to be able to
redeem shares by telephone.
OTHER REDEMPTION MATTERS. 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.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be a suitable investment vehicle for part or all of the
assets held in individual retirement accounts ("IRAs"). The minimum initial
investment for investors opening an IRA or investing through their own IRA is
$2,000, and the minimum subsequent investment is $250. Individuals may make
tax-deductible IRA contributions of up to a maximum of $2,000 annually. However,
the deduction will be reduced if the individual or, in the case of a married
individual either the individual or the individual's spouse is an active
participant in an employer-sponsored retirement plan and the individual (or, in
certain cases, the married couple) has adjusted gross income above certain
levels.
6. DIVIDENDS AND TAX MATTERS
DIVIDENDS
Dividends of the Fund's net investment income are declared and paid
annually. Net capital gains realized by the Fund, if any, also will be
distributed annually. Shareholders may choose either to have all dividends
reinvested in additional shares of the Fund or received in cash or to have
dividends of net capital gain reinvested in additional shares of the Fund and
dividends of net investment income paid in cash. All dividends are treated in
the same manner for Federal income tax purposes whether received in cash or
reinvested in shares of the Fund. All dividends are reinvested unless another
option is selected. Income dividends will be reinvested at the Fund's net asset
value as of the last day of the period with respect to which the dividends are
paid and capital gains dividends will be reinvested at the net asset value of
the Fund on the payment date for the dividend. Cash payments may be made more
than seven days following the date on which dividends would otherwise be
reinvested.
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<PAGE>
TAXES
The Fund intends to continue to qualify for each fiscal year to be
taxed as a "regulated investment company" under the Internal Revenue Code of
1986 (the "Code"). As such, the Fund will not be liable for Federal income and
excise taxes on the net investment income and capital gains distributed to its
shareholders in accordance with the applicable provisions of the Code. The Fund
intends to distribute all of its net income and net capital gains each year.
Accordingly, the Fund should thereby avoid all Federal income and excise taxes.
Dividends paid by the Fund out of its net investment income (including
realized net short term capital gains) are taxable to the shareholders of the
Fund as ordinary income notwithstanding that such dividends are reinvested in
additional shares of the Fund. Distributions of net long-term capital gains, if
any, realized by the Fund are taxable to the shareholders as long-term capital
gains, regardless of the length of time the shareholder may have held his shares
in the Fund at the time of distribution. A portion of the Fund's dividends may
qualify for the dividends received deduction available to corporations.
If a shareholder holds shares for six months or less and during that
period receives a distribution taxable to him as a long-term capital gain, any
loss realized on the sale of his shares during that six-month period would be a
long- term loss to the extent of the distribution. Distributions to shareholders
will be treated in the same manner for Federal income tax purposes whether
received in cash or reinvested in additional shares of the Fund.
Any dividend or distribution received by a shareholder on shares of the
Fund will have the effect of reducing the net asset value of his shares by the
amount of the dividend or distribution. Furthermore, a dividend or distribution
made shortly after the purchase of shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him as
described above.
The Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions and
redemptions) paid to a non-corporate shareholder unless such shareholder
certifies in writing that the social security or tax identification number
provided is correct and that the shareholder is not subject to backup
withholding for prior underreporting to the Internal Revenue Service.
Reports containing appropriate information with respect to the Federal
income tax status of dividends and distributions paid during the year by the
Fund will be mailed to shareholders shortly after the close of each year.
7. OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of the Fund as of the
close of regular trading on the New York Stock Exchange (normally 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
22
<PAGE>
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the number of shares
outstanding at the time the determination is made. Securities owned by the Fund
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 of
Trustees. Purchases and redemptions will be effected at the time of
determination of net asset value next following the receipt of any purchase or
redemption order as described under "Purchases and Redemptions of Shares."
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 __ separate series. Prior to
November 25, 1996, the Fund was a separate portfolio named Oak Hall(R) Equity
Fund of Stone Bridge Funds, Inc., a Maryland corporation. On January 1, 1998,
the Fund changed its name to the Oak Hall(R) Small Cap Contrarian Fund.
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
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.
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.
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<PAGE>
PERFORMANCE INFORMATION
The Fund's performance may be quoted in advertising in terms of yield
or total return. Both types of performance are based on the Fund's historical
results and are not intended to indicate future performance. The Fund's yield is
a way of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. To calculate yield, the Fund takes the
interest income it earned from its portfolio of investments for a 30 day period
(net of expenses), divides it by the average number of shares entitled to
receive dividends, and expresses the result as an annualized percentage rate
based on the Fund's share price at the beginning of the 30 day period. The
Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the Fund's performance had been constant over the entire period. Because average
annual returns tend to smooth out variations in the Fund's returns, shareholders
should recognize that they are not the same as actual year-by-year results. To
illustrate the components of overall performance, the Fund may separate its
cumulative and average annual returns into income results and capital gain or
loss.
The Fund's advertisements may refer to ratings and rankings among
similar funds by independent evaluators such as Morningstar, Lipper Analytical
Services, Inc. or CDA/Weisenberger. In addition, the performance of the Fund may
be compared to recognized indices or market performance. The comparative
material found in the 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUND'S 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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<PAGE>
OAK HALL(R) SMALL CAP CONTRARIAN FUND
Prospectus
March __, 1998
[LOGO]
25
<PAGE>
OAK HALL EQUITY FUND
- --------------------------------------------------------------------------------
Investment Advisor: Account Information and
Oak Hall Capital Advisors, L.P. Shareholder Servicing:
122 East 42nd Street Forum Financial Corp.
New York, New York 10005 Two Portland Square
(212) 622-1996 Portland, Maine 04101
800-625-4255
207-879-0001
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
March __, 1998
Forum Funds (the "Trust") is a registered open-end investment company. This
Statement of Additional Information ("SAI") supplements the Prospectus dated
March __, 1998 offering shares of the Oak Hall Equity Fund (the "Fund") and
should be read only in conjunction with the Prospectus, a copy of which may be
obtained without charge by contacting Forum Financial Corp. at the address
listed above.
TABLE OF CONTENTS
PAGE
1. Investment Policies
and Limitations...................................... 2
2. Performance Data....................................... 15
3. Management............................................. 17
4. Determination of Net Asset Value....................... 23
5. Portfolio Transactions................................. 23
6. Custodian.............................................. 24
7. Additional Purchase and
Redemption Information............................... 24
8. Taxation............................................... 25
9. Other Matters.......................................... 26
Appendix A - Description of Securities Ratings
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.
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<PAGE>
1. INVESTMENT POLICIES AND LIMITATIONS
RATINGS AS INVESTMENT CRITERIA
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P") are private services that provide ratings of the credit quality of debt
obligations, including convertible securities. A description of the range of
ratings assigned to corporate bonds, including convertible securities by Moody's
and S&P is included in Appendix A to this Statement of Additional Information.
The Fund may use these ratings in determining whether to purchase, sell or hold
a security. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices. Subsequent
to its purchase by the Fund, an issue of securities may cease to be rated or its
rating may be reduced. Oak Hall Capital Advisors, L.P. (the "Adviser") will
consider such an event in determining whether the Fund should continue to hold
the obligation. Credit ratings attempt to evaluate the safety of principal and
interest payments and do not evaluate the risks of fluctuations in market value.
Also, rating agencies may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates.
CONVERTIBLE SECURITIES
The Fund may invest in convertible 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. A
convertible security entitles the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to nonconvertible debt securities in
that they ordinarily provide a stable stream of income with generally higher
yields than those of common stocks of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to comparable nonconvertible securities. Although no
securities investment is without some risk, investment in convertible securities
generally entails less risk than in the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income security.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to
27
<PAGE>
fluctuation in value than the underlying stocks since they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security generally will sell at a premium over its conversion value
determined by the extent to which investors place value on the right to acquire
the underlying common stock while holding a fixed income security.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by the Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
Convertible securities which are rated b by Moody's generally lack
characteristics of a desirable investment. Convertible securities which are
rated B by S&P are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation.
WARRANTS
The 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) and usually during a specified period of time. To the extent
that the market value of the security that may be purchased upon exercise of the
warrant rises above the exercise price, the value of the warrant will tend to
rise. To the extent that the exercise price equals or exceeds the market value
of such security, the warrants will have little or no market value. If a warrant
is not exercised within the specified time period, it will become worthless and
the Fund will lose the purchase price paid for the warrant and the right to
purchase the underlying security. The Fund may not invest more than 2% of its
net assets in warrants not traded on the American or New York Stock Exchange.
TEMPORARY DEFENSIVE POSITION
When the Adviser believes that business or financial conditions warrant, the
Fund may assume a temporary defensive position. For temporary defensive
purposes, the Fund may invest without limit in cash or in investment grade cash
equivalents, including (i) short-term obligations of the U.S. Government and its
agencies or instrumentalities, (ii) certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of commercial banks doing
business in the United States that have, at the time of investment, total assets
in excess of one billion dollars (or the equivalent in other currencies) and
that are members of the Federal Deposit Insurance Corporation, (iii) commercial
paper of prime quality rated A-2 or higher by S&P or Prime-2 or higher by
Moody's or, if not rated, determined by the Adviser to be of comparable quality,
(iv) repurchase agreements covering any of the securities in which the Fund may
invest directly and (v) money market mutual funds.
FOREIGN CURRENCY FORWARD CONTRACTS
Investments in foreign companies will usually involve currencies of foreign
countries. In addition, the Fund may temporarily hold funds in bank deposits in
foreign currencies during the completion of investment programs.
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<PAGE>
Accordingly, the value of the assets of the Fund as measured in United States
dollars may be affected by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. The Fund may conduct foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
foreign currency forward contracts ("forward contracts") to purchase or sell
foreign currencies. A forward contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
(usually less than one year) from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers and involve the risk that the other
party to the contract may fail to deliver currency when due, which could result
in losses to the Fund. A forward contract generally has no deposit requirement,
and no commissions are charged at any stage for trades. Foreign exchange dealers
realize a profit based on the difference between the price at which they buy and
sell various currencies.
The Fund may enter into forward contracts under two circumstances. First, with
respect to specific transactions, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying security transactions, the Fund
may be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.
Second, the Fund may enter into forward currency contracts in connection with
existing portfolio positions. For example, when the Adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, the Fund may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency.
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. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Forward contracts involve the
risk of inaccurate predictions of currency price movements, which may cause the
Fund to incur losses on these contracts and transaction costs. The Adviser does
not intend to enter into forward contracts on a regular or continuous basis, and
will not do so if, as a result, the Fund will have more than 25% of the value of
its total assets committed to such contracts or the contracts would obligate the
Fund to deliver an amount of foreign currency in excess of the value of the
Fund's portfolio securities or other assets denominated in that currency.
At or before the settlement of a forward currency contract, the Fund may either
make delivery of the foreign currency or terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract. If the Fund
chooses to make delivery of the foreign currency, it may be required to obtain
the currency through the conversion of assets of the Fund into the currency. The
Fund may close out a forward contract obligating it to purchase a foreign
currency by selling an offsetting contract. If the Fund engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been a change in forward contract prices. Additionally, although forward
contracts may tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.
There is no systematic reporting of last sale information for foreign currencies
and there is no regulatory requirement that quotations available through dealers
or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market. The interbank market in foreign currencies is a global,
around-the-clock market.
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Under normal circumstances, consideration of the prospect for currency parities
will be incorporated in a longer term investment decision made with regard to
overall diversification strategies. When required by applicable regulatory
guidelines, the Fund will set aside cash, U.S. Government securities or other
liquid assets in a segregated account with its custodian in the prescribed
amount.
HEDGING STRATEGIES
The Adviser may engage in certain options and futures strategies to attempt to
hedge the Fund's portfolio. The instruments in which the Fund may invest include
(i) options on securities, stock indexes and foreign currencies, (ii) stock
index and foreign currency futures contracts ("futures contracts"), and (iii)
options on futures contracts. Use of these instruments is subject to regulation
by the Securities and Exchange Commission (the "SEC"), the several options and
futures exchanges upon which options and futures are traded, and the Commodities
Futures Trading Commission (the "CFTC"). No assurance can be given, however,
that any strategies will succeed.
The Fund will not use leverage in its hedging strategies. In the case of
transactions entered into as a hedge, the Fund will hold securities, currencies
or other options or futures positions whose values are expected to offset
("cover") its obligations thereunder. The Fund will not enter into a hedging
strategy that exposes the Fund to an obligation to another party unless it owns
either (1) an offsetting ("covered") position or (2) cash, U.S. Government
securities or other liquid assets with a value sufficient at all times to cover
its potential obligations. When required by applicable regulatory guidelines,
the Fund will set aside cash, U.S. Government securities or other liquid assets
in a segregated account with its custodian in the prescribed amount. Any assets
used for cover or held in a segregated account cannot be sold or closed out
while the hedging strategy is outstanding, unless they are replaced with similar
assets. As a result, there is a possibility that the use of cover or segregation
involving a large percentage of a Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
The Fund is subject to the following restrictions in its use of options and
futures contracts. The Fund will not (i) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the Fund's
total assets would be hedged through the use of options or futures contracts,
(ii) purchase futures contracts or write put options if, as a result, the Fund's
total obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 25% of its total assets, or (iii) purchase call
options if, as a result, the current value of options premiums for options
purchased would exceed 5% of the Fund's total assets.
OPTIONS STRATEGIES. The Fund may purchase put and call options written by others
and write (sell) put and call options covering specified securities, stock
index-related amounts or currencies. A put option (sometimes called a "standby
commitment") gives the buyer of the option, upon payment of a premium, the right
to deliver a specified amount of a security or currency to the writer of the
option on or before a fixed date at a predetermined price. A call option
(sometimes called a "reverse standby commitment") gives the purchaser of the
option, upon payment of a premium, the right to call upon the writer to deliver
a specified amount of a security or currency on or before a fixed date, at a
predetermined price. The predetermined prices may be higher or lower than the
market value of the underlying currency or security. The Fund may buy or sell
both exchange-traded and over-the-counter ("OTC") options. The Fund will
purchase or write an option only if that option is traded on a recognized U.S.
options exchange or if the Adviser believes that a liquid secondary market for
the option exists. When the Fund purchases an OTC option, it relies on the
dealer from which it has purchased the OTC option to make or take delivery of
the securities or currency underlying the option. Failure by the dealer to do so
would result in the loss of the premium paid by the Fund as well as the loss of
the expected benefit of the transaction. OTC options and the securities
underlying these options, currently are treated as illiquid securities.
The Fund may purchase call options on equity securities that the Adviser intends
to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased as a means of participating in an
anticipated price increase of a security on a more limited risk basis than would
be possible if the security itself were purchased. In the event of a decline in
the price of the underlying security, use of this strategy would serve to limit
the potential loss to the Fund to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Fund either sells or exercises the option, any profit eventually realized
will be reduced by the premium paid. The Fund may similarly purchase put options
in order to hedge against a decline in market value of securities held in its
portfolio. The put enables the Fund to sell the underlying security at the
predetermined exercise price; thus the potential for loss to the Fund is limited
to the option premium paid. If the market price of the underlying security is
higher than the exercise price of the put, any profit the Fund realizes on the
sale of the security would be reduced by the premium paid for the put option
less any amount for which the put may be sold.
The Fund may write covered call options. The Fund may write call options on
behalf of the Fund when the Adviser believes that the market value of the
underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection against a decrease in the market price of a security, in an amount
equal to the call premium received less any transaction costs. The Fund may
write covered put options only to effect closing transactions.
The Fund may purchase and write put and call options on stock indices in much
the same manner as the equity security options discussed above, except that
stock index options may serve as a hedge against overall fluctuations in the
securities markets (or market sectors) or as a means of participating in an
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anticipated price increase in those markets. The effectiveness of hedging
techniques using stock index options will depend on the extent to which price
movements in the stock index selected correlate with price movements of the
securities which are being hedged. Stock index options are settled exclusively
in cash.
FOREIGN CURRENCY OPTIONS AND RELATED RISKS. The Fund may take positions in
options on foreign currencies in order to hedge against the risk of foreign
exchange fluctuation on foreign securities the Fund holds in its portfolio or
which it intends to purchase. Options on foreign currencies are affected by the
factors discussed in "Foreign Currency Forward Transactions" which influence
foreign exchange sales and investments generally.
The value of foreign currency options is dependent upon the value of the foreign
currency relative to the U.S. dollar and has no relationship to the investment
merits of a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that may be
involved in the use of foreign currency options, the Fund may be disadvantaged
by having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
To the extent that the U.S. options markets are closed while the market for the
underlying currencies remains open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
markets.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The Fund may effectively
terminate its right or obligation under an option contract by entering into a
closing transaction. For instance, if the Fund wished to terminate its potential
obligation to sell securities or currencies under a call option it had written,
a call option of the same type would be purchased by the Fund. Closing
transactions essentially permit the Fund to realize profits or limit losses on
its options positions prior to the exercise or expiration of the option. In
addition:
(1) The successful use of options depends upon the Adviser's ability to
forecast the direction of price fluctuations in the underlying securities or
currency markets, or in the case of a stock index option, fluctuations in the
market sector represented by the index.
(2) Options normally have expiration dates of up to nine months.
Options that expire unexercised have no value. Unless an option purchased by the
Fund is exercised or unless a closing transaction is effected with respect to
that position, a loss will be realized in the amount of the premium paid.
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(3) A position in an exchange listed option may be closed out only on
an exchange which provides a market for identical options. Most exchange listed
options relate to equity securities. Exchange markets for options on foreign
currencies are relatively new and the ability to establish and close out
positions on the exchanges is subject to the maintenance of a liquid secondary
market. Closing transactions may be effected with respect to options traded in
the over-the-counter markets (currently the primary markets for options on
foreign currencies) only by negotiating directly with the other party to the
option contract or in a secondary market for the option if such market exists.
There is no assurance that a liquid secondary market will exist for any
particular option at any specific time. If it is not possible to effect a
closing transaction, the Fund would have to exercise the option which it
purchased in order to realize any profit. The inability to effect a closing
transaction on an option written by the Fund may result in material losses to
the Fund.
(4) The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs.
FUTURES STRATEGIES. A futures contract is a bilateral agreement wherein one
party agrees to accept, and the other party agrees to make, delivery of cash,
securities or currencies as called for in the contract at a specified future
date and at a specified price. For stock index futures contracts, delivery is of
an amount of cash equal to a specified dollar amount times the difference
between the stock index value at the time of the contract and the close of
trading of the contract.
The Fund may sell stock index futures contracts in anticipation of a general
market or market sector decline that may adversely affect the market values of
the Fund's securities. To the extent that the Fund's portfolio correlates with a
given stock index, the sale of futures contracts on that index could reduce the
risks associated with a market decline and thus provide an alternative to the
liquidation of securities positions. The Fund may purchase a stock index futures
contract if a significant market or market sector advance is anticipated. These
purchases would serve as a temporary substitute for the purchase of individual
stocks, which stocks may then be purchased in the future.
The Fund may purchase call options on a stock index future as a means of
obtaining temporary exposure to market appreciation at limited risk. This
strategy is analogous to the purchase of a call option on an individual stock,
in that it can be used as a temporary substitute for a position in the stock
itself. The Fund may purchase a call option on a stock index future to hedge
against a market advance in stocks which the Fund planned to acquire at a future
date. The Fund may also purchase put options on stock index futures contracts.
These purchases are analogous to the purchase of protective puts on individual
stocks, where a level of protection is sought below which no additional economic
loss would be incurred by the Fund. The Fund may write covered call options on
stock index futures contracts as a partial hedge against a decline in the prices
of stocks held in the Fund's portfolio. This is analogous to writing covered
call options on securities.
The Fund may sell foreign currency futures contracts to hedge against possible
variations in the exchange rate of the foreign currency in relation to the U.S.
dollar. In addition, the Fund may sell foreign currency futures contracts when
the Adviser anticipates a general weakening of foreign currency exchange rates
that could adversely affect the market values of the Fund's foreign securities
holdings. The Fund may purchase a foreign currency futures contract to hedge
against an anticipated foreign exchange rate increase pending completion of
anticipated transactions. Such a purchase would serve as a temporary measure to
protect the Fund against such increase. The Fund may also purchase call or put
options on foreign currency futures contracts to obtain a fixed foreign exchange
rate at limited risk. The Fund may write call options on foreign currency
futures contracts as a partial hedge against the effects of declining foreign
exchange rates on the value of foreign securities.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING. No
price is paid upon entering into futures contracts; rather, the Fund is required
to deposit with its custodian in a segregated account in the name of the futures
broker an amount of cash or U.S. Government securities generally equal to 5% or
less of the contract value. This amount is known as initial margin. Subsequent
payments, called variation margin, to and from the broker, would be made on a
daily basis as the value of the futures position varies. When writing a call on
a futures contract, variation margin must be deposited in accordance with
applicable exchange rules. The initial margin in futures
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transactions is in the nature of a performance bond or good-faith deposit on the
contract that is returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied.
Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such futures contracts. For example, futures contracts on broad-based stock
indices can currently be entered into with respect to the Standard & Poor's 500
Stock Index on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange, the Value Line Composite
Stock Index on the Kansas City Board of Trade and the Major Market Index of the
Chicago Board of Trade.
Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for the Fund to close a
position, and in the event of adverse price movements, the Fund would have to
make daily cash payments of variation margin. In addition:
(1) Successful use by the Fund of futures contracts and related options
will depend upon the Adviser's ability to predict movements in the direction of
the overall securities and currency markets, which requires different skills and
techniques than predicting changes in the prices of individual securities.
Moreover, futures contracts relate not to the current level of the underlying
instrument but to the anticipated levels at some point in the future; thus, for
example, trading of stock index futures may not reflect the trading of the
securities which are used to formulate an index or even actual fluctuations in
the relevant index itself.
(2) The price of futures contracts may not correlate perfectly with
movement in the price of the hedged securities or currencies due to price
distortions in the futures market or otherwise. There may be several reasons
unrelated to the value of the underlying securities or currencies which causes
this situation to occur. As a result, a correct forecast of general market
trends still may not result in successful hedging through the use of future
contracts over the short term.
(3) There is no assurance that a liquid secondary market will exist for
any particular contract at any particular time. In such event, it may not be
possible to close a position, and in the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin.
(4) Like other options, options on futures contracts have a limited
life. The Fund will not trade options on futures contracts on any exchange or
board of trade unless and until, in the Adviser's opinion, the market for such
options has developed sufficiently that the risks in connection with options on
futures transactions are not greater than the risks in connection with futures
transactions.
(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs is all that is at
risk. Sellers of options on futures contracts, however, must post an initial
margin and are subject to additional margin calls which could be substantial in
the event of adverse price movements.
(6) The Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of added
brokerage commissions.
(7) Buyers and sellers of foreign currency futures contracts are
subject to the same risks that apply to the buying and selling of futures
generally. 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. In addition, settlement of
foreign currency futures contracts must occur within the country issuing that
currency. Thus, the Fund must accept or make delivery of the underlying foreign
currency in accordance with any
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U.S. or foreign restrictions or regulations regarding the maintenance of foreign
banking arrangements by U.S. residents, and the Fund may be required to pay any
fees, taxes or charges associated with such delivery which are assessed in the
issuing country.
REGULATORY COMPLIANCE WITH RESPECT TO COMMODITY FUTURES CONTRACTS
AND COMMODITY OPTIONS
The Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in the Prospectus and above. The Fund
will only invest in futures contracts, options on futures contracts and other
options contracts that are subject to the jurisdiction of the CFTC after filing
a notice of eligibility and otherwise complying with the requirements of Section
4.5 of the rules of the CFTC. Under that section the Fund would be permitted to
purchase such futures or options contracts only for bona fide hedging purposes
within the meaning of the rules of the CFTC; provided, however. that in
addition, with respect to positions in commodity futures and option contracts
not for bona fide hedging purposes, the Fund represents that the aggregate
initial margin and premiums required to establish these positions (subject to
certain exclusions) will not exceed 5% of the liquidation value of the Fund's
assets after taking into account unrealized profits and losses on any such
contract the Fund has entered into.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Fund sells a security
and simultaneously commits to repurchase that security from the buyer at an
agreed upon price on an agreed upon future date. The resale price in a reverse
repurchase agreement reflects a market rate of interest that is not related to
the coupon rate or maturity of the sold security. For certain demand agreements,
there is no agreed upon repurchase date and interest payments are calculated
daily, often based upon the prevailing overnight repurchase rate.
Generally, a reverse repurchase agreement enables the Fund to recover for the
term of the reverse repurchase agreement all or most of the cash invested in the
portfolio securities sold and to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if the interest
cost to the Fund of the reverse repurchase transaction is less than the cost of
obtaining the cash otherwise. In addition, interest costs on the money received
in a reverse repurchase agreement may exceed the return received on the
investments made by the Fund with those monies. The use of reverse repurchase
agreement proceeds to make investments may be considered to be a speculative
technique.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may purchase portfolio securities on a when-issued and purchase or sell
portfolio securities on forward commitment basis. When-issued or forward
commitment transactions arise when securities are purchased by the Fund with
payment and delivery to take place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time it
enters into the transaction. In those cases, the purchase price and the interest
rate payable on the securities are fixed on the transaction date and delivery
and payment may take place a month or more after the date of the transaction.
When the Fund enters into a forward commitment transaction, it becomes obligated
to purchase securities and it has all of the rights and risks attendant to
ownership of the security, although delivery and payment occur at a later date.
To facilitate such acquisitions, the Fund will maintain with its custodian a
separate account with portfolio securities in an amount at least equal to such
commitments.
At the time the Fund makes the commitment to purchase securities on a
when-issued or forward commitment basis, the Fund will record the transaction as
a purchase and thereafter reflect the value each day of such securities in
determining its net asset value. The value of the fixed income securities to be
delivered in the future will fluctuate as interest rates and the credit of the
underlying issuer vary. On delivery dates for such transactions, the Fund will
meet its obligations from maturities, sales of the securities held in the
separate account or from other available sources of cash. The Fund generally has
the ability to close out a purchase obligation on or before the settlement date,
rather than purchase the security. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its
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acquisition, it could, as with the disposition of any other portfolio
obligation, realize a gain or loss due to market fluctuation.
To the extent the Fund engages in when-issued or delayed delivery transactions,
it will do so for the purpose of acquiring securities consistent with the Fund's
investment objectives and policies and not for the purpose of investment
leverage or to speculate in interest rate changes. The Fund will only make
commitments to purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities, but the Fund reserves
the right to dispose of the right to acquire these securities before the
settlement date if deemed advisable.
The use of when-issued transactions and forward commitments enables the Fund to
hedge against anticipated changes in interest rates and prices. For instance, in
periods of rising interest rates and falling bond prices, the Fund might sell
securities which it owned on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising bond prices, a
Fund might sell a security and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if the Adviser were to forecast
incorrectly the direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices inferior to the
current market values.
When-issued securities may include bonds purchased on a "when, as and if issued"
basis under which the issuance of the securities depends upon the occurrence of
a subsequent event, such as approval of a proposed financing by appropriate
municipal authorities. Any significant commitment of the Fund's assets committed
to the purchase of securities on a "when, as and if issued" basis may increase
the volatility of its net asset value. No when-issued or forward commitments
will be made by the Fund if, as a result, more than 10% of the value of the
Fund's total assets would be committed to such transactions.
INVESTMENT LIMITATIONS
The Fund has adopted the following additional investment limitations which are
fundamental policies of the Fund and may not be changed without shareholder
approval. The Fund may not:
(1) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted to be incurred by the Fund. The deposit in
escrow of securities in connection with the writing of put and call
options, collateralized loans of securities and collateral arrangements
with respect to margin for futures contracts are not deemed to be
pledges or hypothecations for this purpose.
(2) Borrow money, except that the Fund may enter into commitments to
purchase securities in accordance with its investment program,
including delayed-delivery and when-issued securities and reverse
repurchase agreements, provided that the total amount of any such
borrowing does not exceed 33 1/3% of the Fund's total assets.
(3) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter for purpose of
the Securities Act of 1933.
(4) Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such
as mortgage pass-throughs and collateralized mortgage obligations, or
issued by companies that invest in real estate or interests therein.
(5) Purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent a Fund from purchasing or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities).
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(6) Issue senior securities except that (a) the Fund may engage in
transactions that may result in the issuance of senior securities to
the extent permitted under applicable regulations and interpretations
of the Investment Company Act of 1940 ("1940 Act") or an exemptive
order; (b) the Fund may acquire securities to the extent otherwise
permitted by its investment policies, the acquisition of which may
result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; and
(c) subject to the restrictions set forth above, the Fund may borrow
money as authorized by the 1940 Act.
The Fund has adopted the following nonfundamental investment limitations that
may be changed by the Trust's Board of Trustees (the "Board of Trustees")
without shareholder approval. The Fund:
(a) May borrow money for temporary or emergency purposes in an amount
not exceeding 5% of the value of its total assets at the time when the
loan is made; provided that any such temporary or emergency borrowings
representing more than 5% of the Fund's total assets must be repaid
before the Fund may make additional investments.
(b) May not purchase securities on margin, except for the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities, but the Fund may make margin deposits in
connection with permitted transactions in options, futures and options
on futures.
(c) May not invest in securities of another registered investment
company except to the extent permitted by the 1940 Act.
(d) May not invest in interests in oil or gas or interests in other
mineral exploration or development programs.
(e) May not invest in or hold securities of any issuer if officers and
directors of the Trust or the Adviser, individually owning beneficially
more than 1/2 of 1% of the securities of the issuer, in the aggregate
own more than 5% of the issuer's securities.
(f) May not invest in securities (other than fully-collateralized debt
obligations) issued by companies that have conducted continuous
operations for less than three years, including the operations of
predecessors, unless guaranteed as to principal and interest by an
issuer in whose securities the Fund could invest, if as a result, more
than 5% of the value of the fund's total assets would be so invested.
(g) May not invest more than 15% of its net assets in securities that
are not readily marketable, including repurchase agreements maturing in
more than seven days.
Except as required by the 1940 Act, whenever an amended or restated investment
policy or limitation states a maximum percentage of the Fund's assets that may
be invested, such percentage limitation will be determined immediately after and
as a result of the acquisition of such security or other asset. Any subsequent
change in values, assets or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment
limitations. If the Fund were to invest in money market funds as described in
limitation (c), it would indirectly incur its proportionate share of the
advisory and other expenses of the money market fund.
FUNDAMENTAL POLICIES
Those policies of the Fund which are deemed to be fundamental may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities. A majority of the Fund's outstanding voting securities, as
defined in the 1940 Act means the lesser of: (i) 67% of the shares of the Fund
present or represented at a shareholders meeting at which the holders of more
than 50% of the shares are present or represented or (ii) more than 50% of the
outstanding shares of the Fund.
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<PAGE>
2. PERFORMANCE DATA
The Fund may quote performance in various ways. All performance information
supplied by the Fund in advertising is historical and is not intended to
indicate future returns. The Fund's net asset value, yield and total return will
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.
The Fund's total return for the fiscal year ended March 31, 1997 was 1.40%. This
figure represents unannualized total return for the nine month period June 30,
1996 through March 31, 1997. Total return for the twelve months ending March 31,
1997 was 3.0%. For the period beginning July 13, 1992 (the commencement of
public operations) to March 31, 1997, the Fund's average annual total return was
10.92%.
In performance advertising the Fund may compare any of its performance
information with data published by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment companies ("Fund
Tracking Companies"). The Fund may also compare any of its performance
information with the performance of recognized stock, bond and other indices,
including but not limited to the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, the Salomon Brothers Bond Index, the
Shearson Lehman Bond Index, U.S. Treasury bonds, bills or notes and changes in
the Consumer Price Index as published by the U.S. Department of Commerce. The
Fund may refer to general market performances over past time periods such as
those published by Ibbotson Associates. In addition, the Fund may refer in such
materials to mutual fund performance rankings and other data published by Fund
Tracking Companies. Performance advertising may also refer to discussions of the
Fund and comparative mutual fund data and ratings reported in independent
periodicals, such as newspapers and financial magazines.
TOTAL RETURN CALCULATIONS
The Fund may advertise total return. Total returns quoted in advertising reflect
all aspects of the Fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical historical investment in the Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative return of
100% over ten years would produce an average annual return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that the performance is not
constant over time but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Fund.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such periods
according to the following formula:
P(1+T)n = ERV; where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value (ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 payment made
at the beginning of the applicable period.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the
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<PAGE>
relationship of these factors and their contributions to total return. Total
returns, yields, and other performance information may be quoted numerically or
in a table, graph, or similar illustration.
Period total return is calculated according to the following formula:
PT = (ERV/P-1); where:
PT = period total return;
The other definitions are the same as in average annual total
return above.
3. MANAGEMENT
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.
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 55)
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.
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<PAGE>
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 46)
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 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. 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. Prior thereto she was a student at
Montana State University 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.
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<PAGE>
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> <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 INVESTMENT ADVISER
Pursuant to an investment advisory agreement with the Trust (the "Advisory
Agreement"), the Fund's investment adviser, Oak Hall Capital Advisors, L.P.
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Fund's investments and effecting portfolio
transactions for the Fund. The Advisory Agreement will remain in effect for a
period of twelve months from the date of its effectiveness and will continue in
effect thereafter only if its continuance is specifically approved at least
annually by the Board of Trustees or by vote of the shareholders, and in either
case by a majority of the Trustees who are not parties to the Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreement.
The Advisory Agreement is terminable without penalty by the Trust with respect
to the Fund on 60 days' written notice when authorized either by vote of its
shareholders or by a vote of a majority of the Board of Trustees, or by the
Adviser on 60 days' written notice to the Trust, and will automatically
terminate in the event of its assignment. The Advisory Agreement also provides
that, with respect to the Fund, the Adviser shall not 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, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to others.
In addition to receiving its advisory fee from the Fund of 0.75% of the Fund's
average daily net assets, the Adviser may also act and be compensated as
investment manager for its clients with respect to assets which are invested in
the Fund. In some instances the Adviser may elect to credit against any
investment management fee received from a client who is also a shareholder in
the Fund an amount equal to all or a portion of the fees received by the Adviser
or any affiliate of the Adviser from the Fund with respect to the client's
assets invested in the Fund.
The following table shows the dollar amount of fees payable under the Investment
Advisory Agreement between the Fund and Oak Hall Capital Advisors, L.P., the
amount of fee that was waived by the Adviser, if any, and the actual fee
received by the Adviser. The data is for the past three fiscal years.
<TABLE>
<S> <C> <C> <C>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------- ------ --------
Oak Hall Equity Fund
Year Ended March 31, 1997 $54,263 $54,263 $0
Year Ended June 30, 1996 110,257 64,502 45,755
Year Ended June 30, 1995 194,367 0 194,367
</TABLE>
ADMINISTRATION
Pursuant to an Administration Agreement approved by the Board of Trustees on
June 19, 1997, Forum Administrative Services, LLC ("FAS") supervises the overall
management of the Trust (which includes, among other responsibilities,
negotiation of contracts and fees with, and monitoring of performance and
billing of, the
40
<PAGE>
transfer agent, fund accountant and custodian and arranging for maintenance of
books and records of the Trust). FAS also provides persons satisfactory to the
Board of Trustees 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 (and persons providing services to the Trust may include) FAS, the
Adviser or their respective affiliates. In addition, under the Agreement, FAS is
directly responsible for managing the Trust's regulatory and legal compliance
and overseeing the preparation of its registration statement.
Until May 31, 1994, Stone Bridge Trust Company ("SBTC"), as administrator, and
FFSI, as sub-administrator, supervised the overall management of the Fund, which
was then a series of The Stone Bridge Funds, Inc., a registered management
investment company (the "Company"), including the administrative duties
described above, pursuant to a Co-Administration Agreement and a Distribution
and Administration Agreement, respectively. Effective June 1, 1994, the Company
entered into an Administration and Distribution Agreement with FFSI under which
FFSI provided the administration and distribution services it has provided since
the Fund's inception and assumed the administrative responsibilities formerly
performed by SBTC. As of November 25, 1996, administrative services were
provided to the Fund pursuant to a Management and Distribution Agreement between
the Trust and FFSI. Effective June 19, 1997, administrative services are
provided by FAS under the current Administration Agreement with the Trust.
For the fiscal years ending March 31, 1997 and June 30, 1996 and 1995, the fees
under the former Administration and Distribution Agreement and Management and
Distribution Agreement were $18,088, $36,752 and $75,871, respectively.
DISTRIBUTION
FFSI acts as distributor of the Fund's shares pursuant to a Distribution
Agreement with the Trust approved by the Board on June 19, 1997 (the
"Distribution Agreement"). The Distribution Agreement will remain in effect for
a period of twelve months from the date of its effectiveness and will continue
in effect thereafter only if its continuance is specifically approved at least
annually by the Board of Trustees or by the shareholders and, in either case, by
a majority of the Trustees who are not parties to the agreement or interested
persons of any such party and do not have any direct or indirect financial
interest in the Distribution Agreement.
The Distribution 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 to the agreement on 60 days' written notice to
the Trust. The Distribution Agreement also provides that FFSI 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 its duties or by reason of
reckless disregard of its obligations and duties under the Distribution
Agreement.
On December 5, 1997, the Board of Trustees terminated a distribution plan
previously adopted by the Board of Trustees in accordance with Rule 12b-1 under
the 1940 Act ("Plan"). The Plan required the Trust and FFSI to prepare, at least
quarterly, written reports setting forth all amounts expended for distribution
purposes by FFSI pursuant to the Plan and identifying the distribution
activities for which those expenditures were made. For the fiscal year ended
March 31, 1997, $1,184.01 was expended pursuant to the Plan for the printing and
mailing of prospectuses to other than current shareholders of the Fund and
$61.77 was expended in telephone charges related to prospective investors.
41
<PAGE>
TRANSFER AGENT AND FUND ACCOUNTANT
Forum Financial Corp. (the "Transfer Agent") acts as transfer agent and dividend
disbursing agent of the Trust pursuant to a Transfer Agency Agreement. For its
services, the Transfer Agent receives with respect to the Fund an annual fee of
$12,000 plus $25 per shareholder account. Pursuant to a Fund Accounting
Agreement, Forum Accounting Services, LLC ("FAcS") provides the Fund with
portfolio accounting, including the calculation of the Fund's net asset value.
For these services, FAcS receives with respect to the Fund an annual fee of
$36,000 plus certain surcharges based upon the amount and type of the Fund's
portfolio transactions and positions.
Both the Transfer Agency Agreement and Fund Accounting Agreement were approved
by the Board of Trustees, including a majority of the Trustees who are not
parties to the respective agreements or interested persons of any such party, at
a meeting called for the purpose of voting on the respective agreements. Each of
these agreements will remain in effect for a period of one year and will
continue in effect thereafter only if its continuance is specifically approved
at least annually by the Board of Trustees or by a vote of the shareholders and
in either case by a majority of the Trustees who are not parties to the
respective agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the respective agreement.
EXPENSES
Subject to the obligations of the Adviser to reimburse the Trust for its excess
expenses as described in the Prospectus, the Trust has, under the Advisory
Agreement, confirmed its obligation to pay all its other expenses.
The Trust's expenses include: interest charges, taxes, brokerage fees and
commissions; certain insurance premiums; fees, interest charges and expenses of
the Trust's custodian and transfer agent; fees of pricing, interest, dividend,
credit and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; compensation of the Trust's trustees;
compensation of the Trust's officers and employees who are not employees of the
Adviser, FAS or their respective affiliates and costs of other personnel
performing services for the Trust; costs of corporate meetings; Securities and
Exchange Commission registration fees and related expenses; state securities
laws registration fees and related expenses; the fees payable under the Advisory
Agreement, the Administration Agreement and the Distribution and
Sub-Administration Agreement; and any fees and expenses payable pursuant to the
Plan.
OTHER INFORMATION
As of December 31, 1997 the officers and directors of the Trust owned as a group
owned less than 1% of the outstanding shares of the Fund. Also as of that date,
the following persons owned of record 5% or more of the outstanding shares of
the Fund:
Shareholder Percentage
- ----------- ----------
Maryann Wolf 11.34%
55 Central Park West
New York, NY 10023
Simeon Gold and 7.71%
Heide Gold JT Ten
136 East 76th Street
New York, NY 10021
4. DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of the Fund as of the close
of regular trading (normally 4:00 p.m. Eastern time) on the New York Stock
Exchange ("NYSE") on each day the New York Stock Exchange is open for trading.
The NYSE is normally closed on the following holidays: New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
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<PAGE>
5. PORTFOLIO TRANSACTIONS
The Fund generally purchases and sells securities through brokers who charge
commissions. Allocations of transactions to brokers and dealers and the
frequency of transactions are determined by the Adviser in its best judgment and
in a manner deemed to be in the best interest of shareholders of the Fund rather
than by any formula. The primary consideration is prompt execution of orders in
an effective manner and at the most favorable price available to the Fund.
The Fund may not always pay the lowest commission or spread available. Rather,
in determining the amount of commission, including certain dealer spreads, paid
in connection with Fund transactions, the Adviser takes into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Adviser may also take into account
payments made by brokers effecting transactions for the Fund (i) to the Fund or
(ii) to other persons on behalf of the Fund for services provided to it for
which it would be obligated to pay.
In addition, the Adviser may give consideration to research services furnished
by brokers to the Adviser for its use and may cause the Fund to pay these
brokers a higher amount of commission than may be charged by other brokers. Such
research and analysis may be used by the Adviser in connection with services to
clients other than the Fund, and the Adviser's fee is not reduced by reason of
the Adviser's receipt of the research services.
Investment decisions for the Fund will be made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser or its affiliates. If, however, the Fund and other investment
companies or accounts managed by the Adviser are contemporaneously engaged in
the purchase or sale of the same security, the transactions may be averaged as
to price and allocated equitably to each account. In some cases, this policy
might adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund. In addition, when purchases or sales of the
same security for the Fund and for other investment companies and accounts
managed by the Adviser occur contemporaneously, the purchase or sale orders may
be aggregated in order to obtain any price advantages available to large
denomination purchases or sales.
The Fund contemplates that, consistent with the policy of obtaining best net
results, brokerage transactions may be conducted through the Adviser's
affiliates, affiliates of those persons or Forum. The Advisory Agreement
authorizes the Adviser to so execute trades. The Board of Trustees has adopted
procedures in conformity with applicable rules under the Investment Company Act
to ensure that all brokerage commissions paid to these persons are reasonable
and fair. For the Trust's fiscal years ended March 31, 1997, and June 30, 1996
and 1995 the aggregate brokerage commissions incurred by the Fund were $66,316,
$198,598 and $450,930, respectively, of which 0%, 5.1% and 11.37% ($0, $10,095
and $51,250), respectively, was paid to American Securities Corporation, an
affiliate of the Adviser. During those periods, approximately 0%, 4.67% and
5.66%, respectively, of the total dollar amount of transactions by the Fund
involving the payment of commissions were effected through American Securities
Corporation.
6. 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 . 01% of the average daily net assets over $200 million, and certain
transaction fees.
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<PAGE>
7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis by FFSI at the net asset value
next determined without any sales charge. As of March 31, 1997, the Fund's net
asset value was $13.80.
Proceeds of redemptions normally are paid in cash. However, payments may be made
wholly or partly in portfolio securities if the Board of Trustees determines
economic conditions exist which would make payment in cash detrimental to the
best interests of the Fund. If payment for shares redeemed is made wholly or
partly in portfolio securities, brokerage costs may be incurred by the
shareholder in converting the securities to cash. The Trust has filed an
election with the Securities and Exchange Commission pursuant to which the Fund
may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.
In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to transactions effected for the benefit of a shareholder which
is applicable to the Fund's shares as provided in the Prospectus from time to
time.
Shareholders' rights of redemption may not be suspended, except (i) for any
period during which the New York Stock Exchange, Inc. is closed (other than
customary weekend and holiday closings) or during which the Securities and
Exchange Commission determines that trading thereon is restricted, (ii) for any
period during which an emergency (as determined by the Securities and Exchange
Commission) exists as a result of which disposal by the Fund of its securities
is not reasonably practicable or as a result of which it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(iii) for such other period as the Securities and Exchange Commission may by
order permit for the protection of the shareholders of the Fund.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that (i) are not restricted as to transfer either by law
or liquidity of market and (ii) have a value which is readily ascertainable (and
not established only by valuation procedures).
8. TAXATION
The Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. Such qualification does not, of course, involve governmental
supervision of management or investment practices or policies. Investors should
consult their own counsel for a complete understanding of the requirements the
Fund must meet to qualify for such treatment. The information set forth in the
Prospectus and the following discussion relate solely to Federal income taxes on
dividends and distributions by the Fund and assumes that the Fund qualifies as a
regulated investment company. Investors should consult their own counsel for
further details and for the application of state and local tax laws to his or
her particular situation.
A portion of the dividends paid out of the Fund's net ordinary income may be
eligible for the dividends received deduction allowed to corporations.
For federal income tax purposes, gains and 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 receivables or
pays such liabilities are treated as ordinary income or ordinary loss.
Similarly, gains or losses from the disposition of foreign currencies, from the
disposition of debt securities denominated in a foreign currency, or from the
disposition of a forward contract denominated in a foreign currency which are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also are treated as
ordinary gain or loss.
For federal income tax purposes, when equity or over-the-counter put and call
options which the Fund has purchased or sold or expire unexercised, the premiums
paid by the Fund give rise to short or long-term capital losses
44
<PAGE>
at the time of sale or expiration (depending on the Fund's holding period with
respect to the put or call). When put and call options written by the Fund
expire unexercised, the premiums received by the Fund give rise to short-term
capital gains at the time of expiration. When the Fund exercises a call, the
purchase price of the security purchased is increased by the amount of the
premium paid by the Fund. When the Fund exercises a put, the proceeds from the
sale of the related security are decreased by the premium paid. When a put or
call written by the Fund is exercised, the purchase price (selling price in the
case of a call) of the security is decreased (increased in the case of a call)
for tax purposes by the premium received. There may be short or long term gains
and losses associated with closing purchase or sale transactions.
In addition, the use of certain hedging strategies such as writing and
purchasing options, futures contracts and options on futures contracts, and
entering into foreign currency forward contracts and other foreign instruments,
involves complex rules that will determine for income tax purposes the character
and timing of recognition of income received in connection therewith.
9. OTHER MATTERS
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of the Trust
are passed upon by Seward & Kissel, 1200 G. Street, NW, Washington, DC 20005.
Deloitte & Touche, LLP, 125 Summer Street, Boston, Massachusetts, 02110,
independent auditors, have been selected as auditors for the Trust.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year ended March 31,
1997 (included in the Annual Report to Shareholders) are delivered along with
this Statement of Additional Information and are incorporated herein by
reference. In addition, the unaudited financial statements of the Fund for the
semi-annual period ended September 30, 1997 (included in the Fund's Semi-Annual
Report) are delivered along with this SAI and are incorporated herein by
reference.
45
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
CORPORATE BONDS (INCLUDING CONVERTIBLE DEBT)
(A) MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's rates corporate bond issues, including convertible debt issues,
as follows:
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 sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments of or maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1, and B1.
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<PAGE>
(B) STANDARD & POOR'S CORPORATION ("S&P")
S&P rates corporate bond issues, including convertible debt issues, as
follows:
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.
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas, they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Bonds rated `BB' have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
Bonds rated `B' have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal payments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
Bonds rated `CCC' have currently identifiable vulnerability to default,
and are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued. The rating
`Cl' is reserved for income bonds on which no interest is being paid.
Bonds are rated D when the issue is in payment default, or the obligor
has filed for bankruptcy. Bonds rated `D' are in payment default. The `D' rating
category is used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired, unless S&P
believes that such payments will made during such grace period. The `D' rating
also will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Note: The ratings from AA to CCC may be modified by the addition of a
plus (+) or minus (-) sign to show the relative standing within the rating
category.
PREFERRED STOCK
(A) MOODY'S
Moody's rates preferred stock issues as follows:
47
<PAGE>
An issue which is rated aaa is a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.
An issue which is rated "aa" is a high-grade preferred stock. This
rating indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue which is rated "a" is an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue which is rated "baa" is a medium-grade preferred stock,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
An issue which is rated "ba" has speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
An issue which is rated "c" can be regarded as having extremely poor
prospects of ever attaining any real investment standing. This is the lowest
rated class of preferred or preference stock.
(B) STANDARD & POOR'S
Standard & Poor's rates preferred stock issues as follows:
"AAA" is the highest rating that is assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations.
A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."
An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas if normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
Preferred stock rated "BB," "B," and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
48
<PAGE>
The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
A preferred stock rated "C" is a non-paying issue.
A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
To provide more detailed indications of preferred stock quality, the
ratings from "AA" to "B" may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories.
49
<PAGE>
SEMI-ANNUAL REPORT
- - ------------------------------------------------------------------------------
Dear Shareholder:
For the six month period ended September 30, 1997, the Oak Hall Equity Fund was
up 32%, which is equal to the performance of the Russell 2000. This period marks
the emergence of small stocks from their long period of underperformance and is
the first period in several years where the market has rotated from large
capitalization, multi-national companies to more domestically-oriented, small
capitalization issues. Over this same period, the Dow Jones Industrials were up
21% and the S&P 500 was up 25%, clearly lagging most small cap indices.
The reasons for this are many, but clearly large cap stocks had become very
richly priced versus their growth rates, and intrinsic values within the small
cap sector stood out starkly. Also, the weakening of the dollar versus most
major currencies put a damper on multi-national earnings, causing investors to
look at sectors and stocks where that risk was less palpable. Lastly, from a
risk assessment point of view, as long term interest rates continued to decline,
the relative attractiveness of small capitalization stocks became enhanced, and
consequently funds flows moved toward that area.
During the period, we added a fair number of new stocks while also removing a
good number. In two cases, Noble Drilling and Waban, the stocks had reached our
target prices, and were sold. In the case of Caraustar and JLG Industries, our
concerns about the strength in the sectors of the economy in which those
companies operate caused us to reassess our investments. We initiated positions
in Carmike Cinema, Cellular Technical Services, Cracker Barrel Old Store,
Footstar, Gadzooks, Harte Hanks Communications, Hologics, and Inso. All of the
stocks added reflect the Oak Hall Capital style-- companies which are
out-of-favor with good balance sheets and a solid plan to get their operations
back on track.
Looking forward, we are optimistic that small stocks will continue to
outperform. Despite the lofty levels that most indices are trading at, we also
feel that we will be able to continue to find the kind of investment ideas that
have worked so well for us so far this year. The increasing volatility of the
market, in general, and the hair-triggered response of disappointed "momentum"
investors, have created many investment ideas--particularly in health care,
retailing and technology. Provided that long term interest rates remain stable
and inflation remains contained, we will continue to be optimistic about the
U.S. stock market. Our value/contrarian style has served us in good stead over
the past six months, and we remain very confident. As of the writing of this
letter, many Asian and Latin American markets have fallen precipitously, which
is a cause for concern. On the other hand, the U.S. market looks more like a
"safe haven" than ever and small stocks should do well being insulated from many
of those international issues.
If you have any questions or would like additional information, please call
(800) OAK HALL. We appreciate your decision to invest with our Oak Hall Equity
Fund.
Edward Cimilluca, Portfolio Manager
John Morosani, Portfolio Manager
Oak Hall Capital Advisors, L.P.
50
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - -------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (97.8%)
APPAREL & ACCESSORY STORES (3.7%)
6,300 Claire's Stores, Inc........................................ $ 140,932
5,500 Gadzooks, Inc.(a)........................................... 115,500
-----------
256,432
-----------
BUSINESS SERVICES (12.0%)
10,300 Advo, Inc.(a)............................................... 187,975
22,000 Cellular Technical Services Co.(a).......................... 127,876
13,700 Inso Corp.(a)............................................... 171,250
18,800 Wonderware Corp.(a)......................................... 345,452
-----------
832,553
-----------
CHEMICALS & ALLIED PRODUCTS (2.3%)
10,200 Perrigo Co.(a).............................................. 160,650
-----------
COMMUNICATIONS (3.6%)
15,800 Vanguard Cellular Systems, Inc.(a).......................... 248,850
-----------
EATING & DRINKING PLACES (8.9%)
3,200 Cracker Barrel Old Country
Store, Inc................................................. 103,601
9,100 Lone Star Steakhouse & Saloon, Inc.(a)...................... 189,964
6,600 Outback Steakhouse, Inc.(a)................................. 182,325
14,700 Rare Hospitality International, Inc.(a)..................... 141,489
-----------
617,379
-----------
ELECTRIC, GAS, & SANITARY SERVICES (2.7%)
5,500 KeySpan Energy Corp......................................... 183,565
-----------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (2.7%)
5,300 Teleflex, Inc............................................... 183,513
-----------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT &
RELATED SERVICES (1.4%)
6,100 American Oncology Resources, Inc.(a)........................ 98,363
-----------
HEALTH SERVICES (4.8%)
29,900 Physician Reliance Network, Inc.(a)......................... 332,641
-----------
HOME FURNITURE, FURNISHINGS & EQUIPMENT
STORES (3.3%)
29,600 The Bombay Co., Inc.(a)..................................... 227,551
-----------
INDUSTRIAL & COMMERCIAL MACHINERY (5.9%)
7,500 Greenfield Industries....................................... 215,625
5,300 Pentair, Inc................................................ 195,439
-----------
411,064
-----------
INSURANCE AGENTS, BROKERS, & SERVICES (2.5%)
5,700 E.W. Blanch Holdings, Inc................................... 176,344
-----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - -------------------------------------------------------------------------------- -----------
<C> <S> <C>
LUMBER & WOOD PRODUCTS, EXCEPT FURNITURE (3.3%)
12,100 Champion Enterprises, Inc.(a)............................... $ 231,415
-----------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (2.6%)
6,400 Hologic, Inc.(a)............................................ 179,601
-----------
MOTION PICTURES (1.8%)
4,100 Carmike Cinemas, Inc.(a).................................... 123,000
-----------
OIL (1.8%)
25,900 Southern Pacific Petroleum NL(a)............................ 127,881
-----------
OIL & GAS EXTRACTION (10.2%)
52,800 Abacan Resource Corp.(a).................................... 165,003
13,300 Snyder Oil Corp............................................. 301,745
6,600 Suncor, Inc................................................. 242,550
-----------
709,298
-----------
PRINTING & PUBLICATIONS (6.0%)
4,300 Belo (A.H.) Corp............................................ 208,550
6,300 Harte-Hanks Communications, Inc............................. 207,508
-----------
416,058
-----------
REAL ESTATE INVESTMENT (2.5%)
7,400 Ocwen Asset Investment Corp................................. 170,200
-----------
RETAIL SALES (5.5%)
5,300 Footstar, Inc(a)............................................ 142,769
9,300 Zale Corp.(a)............................................... 241,219
-----------
383,988
-----------
SAVINGS INSTITUTION, FEDERALLY CHARTERED (1.9%)
6,300 Dime Bancorp, Inc........................................... 131,907
-----------
TEXTILE MILL PRODUCTS (3.0%)
7,700 Mohawk Industries, Inc.(a).................................. 210,789
-----------
TRANSPORTATION EQUIPMENT (3.0%)
8,000 Avondale Industries, Inc.(a)................................ 211,001
-----------
WHOLESALE TRADE-DURABLE GOODS (2.4%)
10,700 Heilig-Meyers Co............................................ 164,514
-----------
TOTAL COMMON STOCKS (COST $5,435,645) .......................................... 6,788,557
-----------
SHORT-TERM HOLDINGS (2.2%)
149,254 Boston 1784 Institutional U.S. Treasury Money Market Fund... 149,254
-----------
TOTAL SHORT-TERM HOLDINGS (COST $149,254) ...................................... 149,254
-----------
TOTAL INVESTMENTS (100.0%) (COST $5,584,899) ................................... $ 6,937,811
-----------
-----------
</TABLE>
(a) Non-income producing security.
- - ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. FORUM FUNDS-REGISTERED TRADEMARK-
51
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost....................................................... $ 5,584,899
Net unrealized appreciation (depreciation)................................ 1,352,912
-------------
Total investments at value.............................................. 6,937,811
Cash........................................................................ 32,975
Interest, dividends and other receivables................................... 952
Receivable from Adviser (Note 3)............................................ 21,741
Organization costs, net of amortization (Note 2)............................ 21,083
-------------
Total assets.................................................................... 7,014,562
-------------
LIABILITIES:
Payable for securities purchased............................................ 32,620
Payable to related parties (Note 3)......................................... 4,231
Accrued fees and other expenses............................................. 28,137
-------------
Total liabilities............................................................... 64,988
-------------
NET ASSETS...................................................................... $ 6,949,574
-------------
-------------
COMPONENTS OF NET ASSETS:
Paid in capital............................................................. $ 6,571,660
Undistributed net investment income (loss).................................. (48,412)
Unrealized appreciation (depreciation) on investments....................... 1,352,912
Accumulated net realized gain (loss)........................................ (926,586)
-------------
NET ASSETS...................................................................... $ 6,949,574
-------------
-------------
SHARES OF BENEFICIAL INTEREST................................................... 382,445
-------------
-------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)....................... $ 18.17
-------------
-------------
</TABLE>
- - ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. FORUM FUNDS-REGISTERED TRADEMARK-
52
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
STATEMENT OF OPERATIONS
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30,
1997
(UNAUDITED)
---------------
<S> <C>
INVESTMENT INCOME:
Dividend income.......................................................... $ 17,617
---------------
EXPENSES:
Investment advisory (Note 3)............................................. 24,812
Administration (Note 3).................................................. 8,270
Transfer agent (Note 3).................................................. 9,425
Custody.................................................................. 3,332
Accounting (Note 3)...................................................... 20,000
Audit.................................................................... 8,750
Directors................................................................ 560
Directors' and officers' insurance....................................... 2,260
Legal.................................................................... 1,563
Amortization of organization costs (Note 2).............................. 2,789
Registration............................................................. 5,776
Reporting................................................................ 1,600
Miscellaneous............................................................ 1,704
---------------
Total expenses............................................................... 90,841
Fees waived (Note 3)..................................................... (24,812)
---------------
Net expenses................................................................. 66,029
---------------
NET INVESTMENT INCOME (LOSS)................................................. (48,412)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold............................. 418,538
Net change in unrealized appreciation (depreciation) on investments...... 1,381,355
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS....................... 1,799,893
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 1,751,481
---------------
---------------
</TABLE>
- - ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. FORUM FUNDS-REGISTERED TRADEMARK-
53
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, NINE MONTHS
1997 ENDED YEAR ENDED
(UNAUDITED) MARCH 31, 1997 JUNE 30, 1996
-------------- -------------- --------------
<C> <S> <C> <C> <C>
NET ASSETS, Beginning of Period....................... $ 7,310,193 $ 12,257,172 $ 16,399,153
-------------- -------------- --------------
OPERATIONS:
Net investment income (loss)...................... (48,412) (81,451) (167,927)
Net realized gain (loss) on investments sold...... 418,538 1,549,981 1,994,837
Net change in unrealized appreciation
(depreciation) on investments................... 1,381,355 (1,235,295) 982,857
-------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations............................... 1,751,481 233,235 2,809,767
-------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS (a):
Sale of shares.................................... 464,060 77,336 2,632,932
Redemption of shares.............................. (2,576,160) (5,257,550) (9,584,680)
-------------- -------------- --------------
Net increase (decrease) from capital (2,112,100) (5,180,214) (6,951,748)
transactions..................................
-------------- -------------- --------------
Net increase (decrease)......................... (360,619) (4,946,979) (4,141,981)
-------------- -------------- --------------
NET ASSETS--End of Period (b)......................... $ 6,949,574 $ 7,310,193 $ 12,257,172
-------------- -------------- --------------
-------------- -------------- --------------
(a) Shares Issued (Redeemed)
Sale of shares................................. 30,131 5,429 204,931
Redemption of shares........................... (177,272) (376,722) (751,248)
-------------- -------------- --------------
Net increase (decrease) in shares............ (147,141) (371,293) (546,317)
-------------- -------------- --------------
-------------- -------------- --------------
(b) Includes undistributed net investment income
(loss) of:..................................... $ (48,412) $ -- $ --
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
- - ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. FORUM FUNDS-REGISTERED TRADEMARK-
54
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Forum Funds-Registered Trademark- (the "Trust") is an open-end management
investment company organized as a Delaware business trust. The Trust currently
has fourteen active investment portfolios. The Trust Instrument of the Trust
authorizes each Fund to issue an unlimited number of shares of beneficial
interest without par value. Included in this report is Oak
Hall-Registered Trademark- Equity Fund (the "Fund"), a diversified portfolio of
the Trust that commenced operations on July 13, 1992.
Effective November 25, 1996, the Fund was reorganized as a series of the Trust.
As a result of this reorganization, the Fund's fiscal year end changed from June
30 to March 31. See Note 5.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the fiscal period. Actual results could differ from those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION--Securities held by the Fund for which market quotations
are readily available are valued using the last reported sales price
provided by independent pricing services. If no sales are reported, the mean
of the last bid and asked price is used. In the absence of readily available
market quotations, securities are valued at fair value as determined by the
Board of Trustees. Securities with a maturity of 60 days or less are valued
at amortized cost.
INTEREST AND DIVIDEND INCOME--Interest income is accrued as earned.
Dividends on securities held by the Funds are recorded on the ex-dividend
date.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income and
capital gain, if any, are declared and paid at least annually. Distributions
are based on amounts calculated in accordance with applicable income tax
regulations.
ORGANIZATION COSTS--The costs incurred by the Fund in connection with its
organization and registration of shares have been capitalized and are being
amortized using the straight-line method over a five year period beginning
with the commencement of the Fund's operations.
FEDERAL TAXES--The Fund intends to qualify and continue to qualify each year
as a regulated investment company and distribute all of its taxable income.
In addition, by distributing in each calendar year
- - ------------------------------------------------------------------------------
FORUM FUNDS-REGISTERED TRADEMARK-
55
<PAGE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
OAK HALL-REGISTERED TRADEMARK- EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
substantially all of its net investment income, capital gain and certain
other amounts, if any, the Fund will not be subject to a federal excise tax.
Therefore, no federal income tax provision is required.
EXPENSE ALLOCATION--The Trust accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly
attributable to more than one Fund are allocated among the respective Funds.
REALIZED GAIN AND LOSS--Security transactions are accounted for on a trade
date basis and realized gain and loss on investments sold are determined on
the basis of identified cost.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser to the Fund is Oak Hall-Registered Trademark- Capital
Advisors, Inc. (the "Adviser"). Pursuant to an Investment Advisory Agreement,
the Adviser receives an advisory fee from the Fund at an annual rate of 0.75% of
the average daily net assets of the Fund. The Adviser has voluntarily waived a
portion of their fees so that total expenses of the Fund would not exceed 2.00%
of average net assets. For the six months ended September 30, 1997, the Adviser
waived fees totaling $24,812.
Effective June 19, 1997, the administrator of the Fund is Forum Administrative
Services, Limited Liability Company ("FAS"). FAS receives an administrative fee
56
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Audited financial statements for the fiscal year ended March 31, 1997
including Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, Notes to Financial
Statements, Financial Highlights, Portfolio of Investments and Report
of Independent Auditors were filed with the Securities and Exchange
Commission via EDGAR for Oak Hall Equity Fund on June 6, 1997,
accession number 0000912057-97-019699 pursuant to Rule 30b2-1 under the
Investment Company Act of 1940, as amended, and incorporated herein by
reference.
Unaudited financial statements for the period ended September 30, 1997
including Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, Notes to Financial
Statements, Financial Highlights and Schedule of Investments were filed
with the Securities and Exchange Commission via EDGAR for Oak Hall
Equity Fund on December 8, 1997, accession number 0001047469-97-007068
pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as
amended, and incorporated herein by reference.
(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
57
<PAGE>
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 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
Forum Advisors, Inc. (filed as Exhibit 5(a) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(b)* 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).
(c)* 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).
58
<PAGE>
(d)* 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).
(e)* 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).
(f)* 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).
(g)* 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).
(j)* 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).
(k)* 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).
(l)* 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).
(m)* 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.
(n)* 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).
(o)* 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).
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(p) Investment Advisory Agreement between Registrant and Forum
Investment Advisors, LLC, filed as Exhibit 5(p) to PEA No.
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).
(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) Consent of independent auditors.
(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).
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(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 1, 1997
TITLE OF CLASS NUMBER OF HOLDERS
Investors Bond Fund 74
TaxSaver Bond Fund 48
Daily Assets Cash Fund 15
Daily Assets Treasury Fund 73
Daily Assets Government Fund 0
Daily Assets TaxSaver Fund 0
Payson Value Fund 312
Payson Balanced Fund 378
Maine Municipal Bond Fund 387
New Hampshire Bond Fund 78
Austin Global Equity Fund 12
Oak Hall Equity Fund 188
Quadra Limited Maturity Treasury Fund 4
Quadra Value Equity Fund 16
Quadra International Equity Fund 10
Quadra Opportunistic Bond Fund 6
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;
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"(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
"(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
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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 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
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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 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
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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. 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.
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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.
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.
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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.
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.
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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.
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.
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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.
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.
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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
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, Sound Shore Fund, Inc.,
and Trans Adviser Funds, 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 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.
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ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 6th
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 6th day of January, 1998.
SIGNATURES TITLE
(a) Principal Executive Officer
/S/ JOHN Y. KEFFER
------------------- President
John Y. Keffer and Chairman
(b) Principal Financial and Accounting Officer
/S/ ROBERT B. CAMPBELL Treasurer
------------------------
Robert B. Campbell
(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*
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INDEX TO EXHIBITS
EXHIBIT
11 Consent of Independent Auditors
73
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EXHIBIT (11)
74
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Post-Effective Amendment No. 57 to Registration
Statement File No. 2-67052 of Forum Funds of our report dated May 9, 1997, on
behalf of Oak Hall(R) Equity Fund (the "Fund"), a separate series of Forum
Funds, incorporated by reference in the Statement of Additional Information,
which is a part of such Registration Statement, and to the references to us
under the headings "Financial Highlights" in the Prospectus for the Fund, which
is a part of such Registration Statement, and "Auditors" in the Statement of
Additional Information.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
January 6, 1998
75
