LOGO PROSPECTUS
MASTRAPASQUA July 1, 2000
& ASSOCIATES
Mastrapasqua Growth Value Fund seeks
long-term capital appreciation by MASTRAPASQUA
investing primarily in the common GROWTH
stock of companies whose valuation VALUE FUND
may not yet reflect the prospects
for accelerated earnings/cash flow
growth.
The Fund does not pay Rule 12b-1
(distribution) fees.
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUND'S SHARES
OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
MASTRAPASQUA & ASSOCIATES
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TABLE OF CONTENTS
RISK/RETURN SUMMARY 2
PERFORMANCE 3
FEE TABLE 4
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT
STRATEGIES AND PRINCIPAL RISKS 5
MANAGEMENT 8
YOUR ACCOUNT 11
How to Contact the Fund 11
General Information 11
Buying Shares 12
Selling Shares 16
Exchange Privileges 18
Retirement Accounts 19
OTHER INFORMATION 20
FINANCIAL HIGHLIGHTS 21
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RISK/RETURN SUMMARY
CONCEPTS TO UNDERSTAND INVESTMENT OBJECTIVE
COMMON STOCK Mastrapasqua Growth Value Fund (the "Fund") seeks long-term capital
means an equity or appreciation.
ownership interest in a
company PRINCIPAL INVESTMENT STRATEGIES
CASH FLOW GROWTH The Fund invests primarily in the common stock of companies whose valuation
means a dramatic may not yet reflect the prospects for accelerated earnings or cash flow
increase in a company's growth. The Fund seeks growth opportunities among companies of various market
earnings and/or cash capitalizations but primarily invests in domestic medium to large
flow capitalization companies such as those included in the Russell 3000(R)Index.
MARKET CAPITALIZATION PRINCIPAL RISKS OF INVESTING IN THE FUND
means the value of a
company's common stock in You could lose money on your investment in the Fund or the Fund could
the stock market underperform other investments. The principal risks of an investment in the
Fund include:
o The stock market goes down
o The stock market continues to undervalue the stocks in the Fund's portfolio
o The value of a share of the Fund fluctuates
o The Fund's investment adviser (the "Adviser") makes poor investment decisions
o The value of medium capitalization companies may fluctuate more than that of
large capitalization companies
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WHO MAY WANT TO INVEST IN THE FUND
The Fund may be appropriate for you if you:
o Are willing to tolerate significant changes in the value of your
investment
o Are pursuing a long-term goal
o Are willing to accept higher short-term risk for potential long-term
return
The Fund may not be appropriate for you if you:
o Need regular income or stability of principal
o Are pursuing a short-term goal or investing emergency reserves
o Want an investment that pursues market trends or focuses only on
particular sectors or industries
PERFORMANCE
Performance information is not provided because the Fund had not commenced
operations prior to the date of this Prospectus.
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FEE TABLE
The following table describes the various fees and expenses that you will pay if
you invest in the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
The Fund has no Shareholder fees.
ANNUAL FUND OPERATING EXPENSES (1) (expenses that are deducted from Fund assets)
Management Fees 1.00%
Other Expenses 1.24%
TOTAL ANNUAL FUND OPERATING EXPENSES 2.24%
Fee Waiver and Expense Reimbursement(2) 0.59%
Net Expenses 1.65%
(1) Based on estimated amounts for the Fund's fiscal year ending May 31,
2001.
(2) Based on contractual fee waivers and expense reimbursements that may
decrease after September 30, 2001.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund and then redeem all of your
shares at the end of each period. The example also assumes that your investment
has a 5% annual return, that the Fund's operating expenses remain the same and
that distributions are reinvested. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$168 $700 $1,200 $2,575
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INVESTMENT OBJECTIVE, PRINCIPLE
INVESTMENT STRATEGIES AND PRINCIPLE RISKS
CONCEPTS TO UNDERSTAND INVESTMENT OBJECTIVE
UNDERVALUED SECURITIES The Fund seeks long-term capital appreciation.
means securities that the
Adviser believes are PRINCIPAL INVESTMENT STRATEGIES
trading at prices below
their true value INVESTMENT POLICIES
PRICE/EARNINGS RATIO The Fund invests primarily in the common stock of companies that the Adviser
means the price of a believes have a demonstrated record of achievement and excellent prospects for
stock divided by its earnings or cash flow growth over a 3 to 5 year period. In selecting
earnings per share investments for the Fund, the Adviser looks for undervalued securities.
The Fund invests primarily in the common stock of domestic medium to
large capitalization companies such as those included in the Russell
3000(R) Index. From time to time, however, the Fund may invest in companies
with a market capitalization of less than $1 billion and own securities of
foreign-based companies. The Fund may also invest up to 15% of its assets
in common stock that is not actively traded on a national or regional stock
exchange or market.
THE ADVISER'S PROCESS
When selecting investments for the Fund's portfolio, the Adviser utilizes a
process that considers the securities of core companies. A core company is
a company that the Adviser believes has shown consistent above-average
long-term growth in earnings and cash flow and has excellent prospects for
future growth. Core companies generally have projected 3 to 5 year earnings
and cash flow growth rates that exceed the Adviser's assessment of the
companies' risk-adjusted price-to-earnings ratio. It is anticipated that,
under normal market conditions, approximately 2/3 of the Fund's portfolio
will consist of core companies.
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The balance of the Fund's investment portfolio may consist of securities of
"accelerated earnings or cash flow growth" companies that the Adviser believes
are either currently enjoying or are projected to enjoy a dramatic increase in
earnings and/or cash flow. These companies often have been overlooked by the
financial community and are believed by the Adviser to have valuations that have
not been fully recognized by the market. In the Adviser's opinion, these
companies may experience an uncharacteristically rapid growth rate during the
immediate 18 to 36 months. These companies are typically newer additions to the
portfolio and may become core holdings over time.
The Adviser expects to hold investments for an average of 18 to 36 months.
However, changes in the Adviser's outlook and market conditions may
significantly affect the amount of time the Fund holds a security. The Fund may
make short-term trades in order to take advantage of changing market, industry
or company conditions. The Fund's portfolio turnover may vary greatly from year
to year and during a particular year. The Adviser does not set a price target
for its holdings in order to determine when to sell an investment, but generally
will sell a security if one or more of the following occurs:
o A change in the fundamentals of a company or industry
o The price of a security is deemed to be excessive when compared to its
value
o The Adviser believes that company management has not accurately assessed
thecompany's prospects
TEMPORARY DEFENSIVE MEASURES In order to respond to adverse market, economic or
other conditions, the Fund may assume a temporary defensive position and invest
without limit in cash and prime quality cash equivalents such as commercial
paper and money market instruments. As a result, the Fund may be unable to
achieve its investment objective.
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PRINCIPAL INVESTMENT RISKS
GENERAL The Fund is designed for investors who are investing for the long term
and is not intended for investors seeking assured income or preservation of
capital. The Fund's net asset value and investment return will fluctuate based
upon changes in the value of its portfolio securities. The market value of
securities in which the Fund invests is based upon the market's perception of
value and is not necessarily an objective measure of the securities' value.
There is no assurance that the Fund will achieve its investment goal. An
investment in the Fund is not by itself a complete or balanced investment
program.
There is the risk that the market will not recognize what the Adviser believes
to be the true value of the stocks held by the Fund for an unexpectedly long
time. There is also the risk that the earnings of the companies in which the
Fund invests will not continue to grow at expected rates, thus causing the price
of the underlying stocks to decline. The smaller a company's market
capitalization, the greater the potential for price fluctuations and volatility
of its stock due to lower trading volume for the stock, less publicly available
information about the company and less liquidity in the market for the stock.
The potential for price fluctuations in the stock of a medium capitalization
company may be greater than that of a large capitalization company. There is
also the risk that the Adviser's judgment as to the growth potential or value of
a stock may prove to be wrong. Finally, a decline in investor demand for the
stocks held by the Fund also may adversely affect the value of the securities.
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MANAGEMENT
The Fund is a series of Forum Funds (the "Trust"), an open-end, management
investment company (mutual fund). The business of the Trust and of the Fund is
managed under the direction of the Board of Trustees (the "Board"). The Board
formulates the general policies of the Fund and meets periodically to review the
Fund's performance, monitor investment activities and practices and discuss
other matters affecting the Fund. Additional information regarding the Board, as
well as the Trust's executive officers, may be found in the Statement of
Additional Information ("SAI").
THE ADVISER
The Fund's Adviser is Mastrapasqua & Associates, 814 Church Street, Suite 600,
Nashville, TN 37203. The Adviser was incorporated in January 1993 and currently
provides investment advisory services to individuals, banks, pension and profit
sharing plans, trusts, corporations and other business entities, as well as
other investment companies.
Subject to the general control of the Board, the Adviser makes investment
decisions for the Fund. For its services, the Fund pays the Adviser an advisory
fee at an annual rate of 1.00% of the average daily net assets of the Fund.
As of March 31, 2000, the Adviser had approximately $1.8 billion of assets under
management.
PORTFOLIO MANAGERS
FRANK MASTRAPASQUA Chairman and Chief Executive Officer of the Adviser since
1993. Mr. Mastrapasqua shares responsibility for the day-to-day management of
the Fund with Thomas Trantum. Mr. Mastrapasqua has more than 30 years of
experience in the investment industry and prior to his establishment of the
Adviser, was a Partner and Director of Research at J.C. Bradford & Co. Prior to
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that, Mr. Mastrapasqua was a Senior Vice President, Chief Economist and Manager
of Fixed Income Research at Salomon Smith Barney.
THOMAS TRANTUM President of the Adviser since 1993. Mr. Trantum is jointly
responsible for the day-to-day management of the Fund. Mr. Trantum has more than
30 years experience in the investment industry and prior to the establishment of
the Adviser, was a Partner and Senior Security Analyst at J.C. Bradford & Co.
Prior to that, Mr. Trantum was Chief Executive Officer of Gulf & Mississippi
Corporation, a railroad holding company.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide services to the Fund.
As of March 31, 2000, Forum provided administration and distribution services to
investment companies and collective investment funds with assets of
approximately $67 billion.
Forum Fund Services, LLC ("FFS"), a registered broker-dealer and member of the
National Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Fund's shares. The distributor acts as the representative of
the Trust in connection with the offering of the Fund's shares. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of the Fund's shares.
Forum Administrative Services, LLC ("FAdS") provides administrative services to
the Fund, Forum Accounting Services, LLC is the Fund's accountant, Forum
Shareholder Services, LLC ("Transfer Agent") is the Fund's transfer agent and
Forum Trust, LLC is the Fund's custodian.
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The Trust has adopted a shareholder servicing plan under which the Trust pays
FAdS a fee for providing shareholder service activities that are not otherwise
provided by the Transfer Agent. FAdS may pay this fee to various financial
institutions that provide shareholder servicing to their customers invested in
the Fund.
FUND EXPENSES
The Fund pays for all of its expenses. The Fund's expenses are comprised of its
own expenses as well as Trust expenses that are allocated among the Fund and the
other funds of the Trust. The Adviser or other service providers may waive all
or any portion of their fees and/or reimburse certain expenses of the Fund. Any
waiver or expense reimbursement would have the effect of increasing the Fund's
performance for the period during which the waiver or reimbursement was in
effect and may not be recouped at a later date.
The Adviser has undertaken to waive a portion of its fees and to reimburse
expenses of the Fund in order to limit the Fund's expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses) to 1.65% or
less of the average daily net assets of the Fund until September 30, 2001.
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YOUR ACCOUNT
HOW TO CONTACT GENERAL INFORMATION
THE FUND
You may purchase or sell (redeem) shares at the net asset value of a share
WRITE TO US AT: (NAV) next calculated after the Transfer Agent receives your request in
Forum Funds proper form. For instance, if the Transfer Agent receives your purchase
P.O. Box 446 request in proper form after 4:00 p.m., Eastern time, your transaction will
Portland, Maine 04112 be priced at the next business day's NAV. The Fund cannot accept orders that
request a particular day or price for the transaction or any other special
OVERNIGHT ADDRESS: conditions.
Forum Funds
Two Portland Square The Fund does not issue share certificates.
Portland, Maine 04101
If you purchase shares directly from the Fund, you will receive quarterly
TELEPHONE US AT: statements and a confirmation of each transaction. You should verify the
(800) 448-0982 (Toll Free) accuracy of all transactions in your account as soon as you receive your
(207) 879-0001 The Fund reserves the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
WIRE INVESTMENTS (OR ACH service or privilege.
PAYMENTS) TO US AT:
Bankers Trust Company WHEN AND HOW NAV IS DETERMINED The Fund calculates its NAV as of the close
New York, New York of the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each
ABA #021001033 weekday except days when the New York Stock Exchange is closed. The time at
FOR CREDIT TO: which NAV is calculated may change in case of an emergency or if the New
Forum Shareholder York Stock Exchange closes early. The Fund's NAV is determined by taking
Services, LLC the market value of all securities owned by the Fund (plus all other assets
Account# 01-465-547 such as cash), subtracting liabilities and then dividing the result (net
Mastrapasqua Growth assets) by the number of shares outstanding. The Fund values securities for
Value Fund which market quotations are readily available at current market value. If
(Your Name) market quotations are not readily available, then the Fund values
(Your Account Number) securities at fair value pursuant to procedures adopted by the Board.
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TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Fund. Financial institutions may charge transaction
fees and may set different minimum investments or limitations on buying or
selling shares. These institutions may also provide you with certain shareholder
services such as periodic account statements and trade confirmations summarizing
your investment activity. Consult a representative of your financial institution
for more information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, sole proprietorship, joint and Uniform Gifts to Minors
Act ("UGMA") or Uniform Transfers to Minors Act ("UTMA") accounts, the check
must be made payable to "Mastrapasqua Growth Value Fund" or to one or more
owners of the account and endorsed to "Mastrapasqua Growth Value Fund." For all
other accounts, the check must be made payable on its face to "Mastrapasqua
Growth Value Fund." No other method of check payment is acceptable (for
instance, you may not pay by travelers check).
PURCHASES BY AUTOMATED CLEARING HOUSE ("ACH") This service allows you to
purchase shares through an electronic transfer of money from a checking or
savings account. When you make an additional purchase by telephone, the Transfer
Agent will automatically debit your pre-designated bank account for the desired
amount. You may call (800) 448-0982 to request an ACH transaction.
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WIRES Instruct your financial institution to make a Federal Funds wire payment
to us. Your financial institution may charge you a fee for this service.
MINIMUM INVESTMENTS The Fund accepts investments in the following minimum
amounts:
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MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
Standard Accounts $2,000 $250
Traditional and Roth IRA Accounts $1,000 $250
Accounts With Systematic Investment Plans $1,000 $250
ACCOUNT REQUIREMENTS
TYPE OF ACCOUNT REQUIREMENT
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons required
Individual accounts are owned by one person, as are sole to sign exactly as their names appear on the accounts
proprietorship accounts.
Joint accounts have two or more owners (tenants)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a custodial
These custodial accounts provide a way to give money account under UGMA or UTMA
to a child and obtain tax benefits o The custodian must sign instructions in a manner
indicating custodial capacity
BUSINESS ENTITIES o Submit a Corporate/Organization Resolution form or
similar document
TRUSTS o The trust must be established before an account can
be opened
o Provide a certified trust document, or the pages from
the trust document that identify the trustees
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INVESTMENT PROCEDURES
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application and/or a o Fill out an investment slip from a confirmation or
Corporate/Organization Resolution form write us a letter
o Complete the application and/or resolution form (if o Write your account number on your check
applicable) o Mail us the slip (or your letter) and the check
o Mail us your application, resolution form (if
applicable) and a check
BY WIRE BY WIRE
o Call or write us for an account application and/or a o Call to notify us of your incoming wire
Corporate/Organization Resolution form o Instruct your bank to wire your money to us
o Complete the application and/or resolution form
o Call us to fax the completed application and/or
resolution form and we will assign you an account
number
o Mail us your original application and/or resolution
form
o Instruct your bank to wire your money to us
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application and/or a o Complete the systematic investment section of the
Corporate/Organization Resolution form application
o Complete the application and/or resolution form (if o Attach a voided check to your application
applicable) o Mail us the completed application and voided check
o Call us to fax the completed application and/or
resolution form and we will assign you an account
number
o Mail us your original application and/or resolution
form
o Make an ACH payment
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SYSTEMATIC INVESTMENTS You may invest a specified amount of money in the Fund
once or twice a month on specified dates. These payments are taken from your
bank account by ACH payment. Systematic investments must be for at least $250.
LIMITATIONS ON PURCHASES The Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Fund or its operations. This includes those from any individual or group
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who, in the Fund's view, is likely to engage in excessive trading (including two
or more substantial redemptions or exchanges out of the Fund followed by
substantial repurchases into the Fund within a calendar year).
CANCELED OR FAILED PAYMENTS The Fund accepts checks and ACH transfers at full
value subject to collection. If the Fund does not receive your payment for
shares or you pay with a check or ACH transfer that does not clear, your
purchase will be canceled. You will be responsible for any losses or expenses
incurred by the Fund or the Transfer Agent, and the Fund may redeem shares you
own in the account (or another identically registered account that you maintain
with the Transfer Agent) as reimbursement. The Fund and its agents have the
right to reject or cancel any purchase or exchange due to nonpayment.
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SELLING SHARES
The Fund processes redemption orders promptly. Generally, the Fund will send
redemption proceeds to you within a week. Delays may occur in cases of very
large redemptions, excessive trading or during unusual market conditions. If the
Fund has not yet collected payment for the shares you are selling, it may delay
sending redemption proceeds for up to 15 calendar days.
HOW TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if your redemption is for $5,000 or
more and you did not decline wire redemption privileges on your account
application
o Call us with your request (unless you declined telephone redemption
privileges on your account application) (See "By Telephone") or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges on your
account application) (See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
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WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000.
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
SYSTEMATIC WITHDRAWALS You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Systematic withdrawals must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and the Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
Specific requirements are listed in the SAI or may be obtained by calling the
Transfer Agent.
SMALL ACCOUNTS If the value of your account falls below $1,000 ($500 for IRAs),
the Fund may ask you to increase your balance. If the account value is still
below $1,000 ($500 for IRAs) after 60 days, the Fund may close your account and
send you the proceeds. The Fund will not close your account if it falls below
these amounts solely as a result of a reduction in your account's market value.
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REDEMPTIONS IN KIND The Fund reserves the right to pay redemption proceeds in
portfolio securities rather than in cash. These redemptions "in kind" usually
occur if the amount to be redeemed is large enough to affect the Fund's
operations (for example, if it represents more than 1% of the Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional Fund shares. In
addition, the amount of any outstanding (unpaid for six months or more) checks
for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy Investor class shares of any money market
fund of the Trust by telephone or in writing. For a list of funds available for
exchange, you may call the Transfer Agent. Because exchanges are a sale and
purchase of shares, they may have tax consequences.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Fund reserves the right to limit exchanges. You may exchange
your shares by mail or telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
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HOW TO EXCHANGE
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of each fund you are exchanging
o The dollar amount or number of shares you want to sell (and exchange)
o Open a new account and complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
RETIREMENT ACCOUNTS
The Fund offers IRA accounts, including traditional and Roth IRAs. Fund shares
may also be appropriate for other retirement plans. Before investing in any IRA
or other retirement plan, you should consult your tax adviser. Whenever making
an investment in an IRA, be sure to indicate the year in which the contribution
is made.
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OTHER INFORMATION
DISTRIBUTIONS
The Fund distributes its net investment income quarterly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
The Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Fund's distribution of net income (including short-term capital gain) is
taxable to you as ordinary income. The Fund's distributions of long-term capital
gain is taxable to you as long-term capital gain regardless of how long you have
held your Fund shares.
If you buy shares shortly before the Fund makes a distribution, you may pay the
full price for the shares and then receive a portion of the price back as a
distribution that may be taxable to you.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
The Fund will send you information about the Fund's distributions paid during
the year shortly after December 31 of each year.
For further information about the tax effects of investing in the Fund,
including state and local tax matters, please see the SAI and consult your tax
adviser.
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ORGANIZATION
The Trust is a Delaware business trust. The Fund does not expect to hold
shareholders' meetings unless required by Federal or Delaware law. Shareholders
of each series of the Trust are entitled to vote at shareholders' meetings
unless a matter relates only to specific series (such as approval of an advisory
agreement for the Fund). From time to time, large shareholders may control the
Fund or the Trust.
The Trust, the Adviser and FFS have each adopted a code of ethics under Rule
17j-1 of the 1940 Act which are designed to eliminate conflicts of interest
between the Fund and personnel of the Trust, the Adviser and FFS. The codes
permit such personnel to invest in securities, including securities that may be
purchased or held by the Fund, subject to certain limitations.
FINANCIAL HIGHLIGHTS
Financial highlights are not provided because the Fund had not commenced
operations prior to the date of this prospectus.
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NOTES:
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NOTES:
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NOTES:
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LOGO
FOR MORE INFORMATION MASTRAPASQUA
& ASSOCIATES
The following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the Fund's investments will be available in the MASTRAPASQUA
Fund's annual and semi-annual reports to shareholders. In the Fund's annual GROWTH
report, you will find a discussion of the market conditions and investment VALUE FUND
strategies that significantly affected the Fund's
performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the Fund and is incorporated
by reference into this Prospectus.
CONTACTING THE FUND
You can get free copies of both reports (when available) and the SAI, request
other information and discuss your questions about the Fund by contacting the
Fund at:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 448-0982
(207) 879-0001
SECURITIES AND EXCHANGE COMMISSION INFORMATION
You can also review the Fund's reports (when available) and SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). The
scheduled hours of operation of the Public Reference Room may be obtained by
calling the SEC at (202) 942-8090. You can get copies of this information,
for a fee, by e-mail or by writing to:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102 Forum Funds
E-mail address: [email protected] P.O. Box 446
Portland, Maine 04112
Free copies of the reports and SAI are available from the (800) 448-0982
SEC's Internet Web Site at http://www.sec.gov. (207) 879-0001
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Investment Company Act File No. 811-3023
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STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 2000
MASTRAPASQUA
GROWTH VALUE FUND
INVESTMENT ADVISER:
Mastrapasqua & Associates
814 Church Street, Suite 600
Nashville, TN 37203
ACCOUNT INFORMATION
AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLCSM
P.O. Box 446
Portland, Maine 04112
(800) 448-0982
(207) 879-0001
This Statement of Additional Information (the "SAI") supplements the Prospectus
dated July 1, 2000, as may be amended from time to time, offering shares of
Mastrapasqua Growth Value Fund, a separate series of Forum Funds, a registered,
open-end management investment company. This SAI is not a prospectus and should
only be read in conjunction with the Prospectus. You may obtain the Prospectus
without charge by contacting Forum Shareholder Services at the address or
telephone number listed above.
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TABLE OF CONTENTS
GLOSSARY......................................................................1
1. INVESTMENT POLICIES AND RISKS.............................................2
2. INVESTMENT LIMITATIONS....................................................9
3. PERFORMANCE DATA AND ADVERTISING.........................................11
4. MANAGEMENT...............................................................15
5. PORTFOLIO TRANSACTIONS...................................................19
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...........................22
7. TAXATION.................................................................24
8. OTHER MATTERS............................................................28
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS..............................A-1
APPENDIX B - OTHER ADVERTISEMENT MATTERS....................................B-1
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GLOSSARY
As used in this SAI, the following terms have the meanings listed.
"Adviser" means Mastrapasqua & Associates.
"Board" means the Board of Trustees of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means Forum Trust, LLC, the custodian of the Fund's assets.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of the
Fund.
"FAdS" means Forum Administrative Services, LLC, the administrator of
the Fund.
"Fitch" means Fitch IBCA, Inc.
"FFS" means Forum Fund Services, LLC, the distributor of the shares of
the Fund.
"Fund" means Mastrapasqua Growth Value Fund.
"Moody's" means Moody's Investors Service.
"NRSRO" means a nationally recognized statistical rating organization.
"NAV" means net asset value per share.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's, a Division of the McGraw Hill Companies.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent of the Fund.
"Trust" means Forum Funds.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
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1. INVESTMENT POLICIES AND RISKS
The Fund is a diversified series of the Trust. This section discusses in greater
detail than the Fund's Prospectus certain investments that the Fund may make.
A. EQUITY SECURITIES
1. COMMON AND PREFERRED STOCK
GENERAL. Common stock represents an equity (ownership) interest in a company,
and usually possesses voting rights and earns dividends. Dividends on common
stock are not fixed but are declared at the discretion of the issuer. Common
stock generally represents the riskiest investment in a company. In addition,
common stock generally has the greatest appreciation and depreciation potential
because increases and decreases in earnings are usually reflected in a company's
stock price.
Preferred stock is a class of stock having a preference over common stock as to
the payment of dividends and the recovery of investment should a company be
liquidated, although preferred stock is usually junior to the debt securities of
the issuer. Preferred stock typically does not possess voting rights and its
market value may change based on changes in interest rates.
RISKS. The fundamental risk of investing in common and preferred stock is the
risk that the value of the stock might decrease. Stock values fluctuate in
response to the activities of an individual company or in response to general
market and/or economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than
preferred stocks, fixed-income securities and money market investments. The
market value of all securities, including common and preferred stocks, is based
upon the market's perception of value and not necessarily the book value of an
issuer or other objective measure of a company's worth. If you invest in the
Fund, you should be willing to accept the risks of the stock market and should
consider an investment in the Fund only as a part of your overall investment
portfolio.
2. CONVERTIBLE SECURITIES
GENERAL. The Fund may invest in rated or unrated convertible securities.
Convertible securities include debt securities, preferred stock or other
securities that may be converted into or exchanged for a given amount of common
stock of the same or a different issuer during a specified period and at a
specified price in the future. A convertible security entitles the holder to
receive interest on debt or the dividend on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Convertible
securities rank senior to common stock in a company's capital structure but are
usually subordinate to comparable nonconvertible securities. 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 fluctuation in value than
the underlying stocks because they have fixed income characteristics; and (3)
provide the potential for capital appreciation if the market price of the
underlying common stock increases.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security 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.
RATINGS. The Fund's investments in convertible securities are subject to credit
risk relating to the financial condition of the issuers of the convertible
securities that the Fund holds. Unrated convertible securities may not be as
actively traded as rated securities. Because a downgrade often results in a
reduction in the market price of the security, sale of a downgraded security may
result in a loss.
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RISKS. Investment in convertible securities generally entails less risk than an
investment in the issuer's common stock. Convertible securities are typically
issued by smaller capitalized companies whose stock price may be volatile.
Therefore, the price of a convertible security may reflect variations in the
price of the underlying common stock in a way that nonconvertible debt does not.
The extent to which such risk is reduced, however, depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security.
3. WARRANTS & STOCK RIGHTS
GENERAL. Warrants, typically issued with preferred stock or bonds, give the
holder the right to purchase a given number of shares of common stock at a
specified price and time. The price usually represents a premium over the market
value of the common stock at the time of the warrant's issuance. Warrants
typically have no voting rights with respect to the common stock, receive no
dividends and have no rights with respect to the assets of the issuer. The Fund
will limit its purchases of warrants to not more than 5% of the value of its
assets. The Fund may also invest up to 5% of the value of its assets in stock
rights. A stock rights is an option given to a shareholder to buy additional
shares of common stock at a predetermined price during a specified time.
RISKS. Investments in warrants involve certain risks, including the possible
lack of a liquid market for the resale of the warrants, potential price
fluctuations due to adverse market conditions or other factors and failure of
the price of the common stock to rise. If the warrant is not exercised within
the specified time period, it becomes worthless.
B. FOREIGN SECURITIES
GENERAL. The Fund may invest in securities of foreign issuers but expects to
limit investments in foreign issuers to less than 15% of its assets. Investments
in the securities of foreign issuers may involve risks in addition to those
normally associated with investments in the securities of U.S. issuers.
RISKS. Dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to
you. Commission rates payable on foreign transactions are generally higher than
in the United States. Foreign accounting, auditing and financial reporting
standards differ from those in the United States, and therefore, less
information may be available about foreign companies than is available about
issuers of comparable U.S. companies. Foreign securities also may trade less
frequently and with lower volume and may exhibit greater price volatility than
United States securities. All foreign investments are subject to risks of: (1)
foreign political and economic instability; (2) adverse movements in foreign
exchange rates; (3) the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital; and (4) changes in foreign
governmental attitudes towards private investment, including potential
nationalization, increased taxation or confiscation of your assets.
Changes in foreign exchange rates will affect the U.S. dollar value of all
foreign currency-denominated securities held by the Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult, if not impossible, to
predict.
Income from foreign securities will be received and realized in foreign
currencies, and the Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar after the Fund's income has been earned and computed in
U.S. dollars may require the Fund to liquidate portfolio securities to acquire
sufficient U.S. dollars to make a distribution. Similarly, if the exchange rate
declines between the time the Fund incurs expenses in U.S. dollars and the time
such expenses are paid, the Fund may be required to liquidate additional foreign
securities to purchase the U.S. dollars required to meet such expenses.
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C. DEPOSITARY RECEIPTS
GENERAL. A depositary receipt is a receipt for shares of a foreign-based company
that entitles the holder to distributions on the underlying security. Depositary
receipts include sponsored and unsponsored American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and other similar global
instruments. ADRs typically are issued by a U.S. bank or trust company, evidence
ownership of underlying securities issued by a foreign company, and are designed
for use in U.S. securities markets. EDRs (sometimes called Continental
Depositary Receipts) are receipts issued by a European financial institution
evidencing an arrangement similar to that of ADRs, and are designed for use in
European securities markets. The Fund invests in depositary receipts in order to
obtain exposure to foreign securities markets.
RISKS. Unsponsored depositary receipts may be created without the participation
of the foreign issuer. Holders of these receipts generally bear all the costs of
the depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depositary receipt. The bank or trust company depositary of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
D. REPURCHASE AGREEMENTS
GENERAL
The Fund may enter into repurchase agreements. Repurchase agreements are
transactions in which the Fund purchases securities from a bank or securities
dealer and simultaneously commits to resell the securities to the bank or dealer
at an agreed-upon date and at a price reflecting a market rate of interest
unrelated to the purchased security. During the term of a repurchase agreement,
the Fund's custodian maintains possession of the purchased securities and any
underlying collateral, which is maintained at not less than 100% of the
repurchase price. Repurchase agreements allow the Fund to earn income on its
uninvested cash for periods as short as overnight, while retaining the
flexibility to pursue longer-term investments.
RISKS
The Fund may be exposed to the risks of financial failure or insolvency of the
counter party to the transaction. To help reduce those risks, the Adviser
monitors and evaluates the creditworthiness of counterparties to the Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal credit risks and the benefits from the
transaction justify the attendant risks.
E. LEVERAGE
1. GENERAL
The Fund may use leverage to increase potential returns. Leverage involves
special risks and may involve speculative investment techniques. Leverage exists
when cash made available to the Fund through an investment technique is used to
make additional Fund investments. Lending portfolio securities are transactions
involving leverage. The Fund uses these investment techniques only when the
Adviser believes that the leveraging and the returns available to the Fund from
investing the cash will provide investors a potentially higher return.
2. SECURITIES LENDING
The Fund may lend portfolio securities in an amount up to 33 1/3% of its assets
to brokers, dealers and other financial institutions. Securities loans must be
continuously collateralized and the collateral must have market value at least
equal to the value of the Fund's loaned securities, plus accrued interest. In a
portfolio securities lending transaction, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
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securities during the term of the loan as well as the interest on the collateral
securities, less any fees (such as finders or administrative fees) the Fund pays
in arranging the loan. The Fund may share the interest it receives on the
collateral securities with the borrower. The terms of a Fund's loan permits the
Fund to reacquire loaned securities on five business days' notice or in time to
vote on any important matter. Loans are subject to termination at the option of
a Fund or the borrower at any time, and the borrowed securities must be returned
when the loan is terminated.
3. RISKS
Leverage creates the risk of magnified capital losses. Borrowings and other
liabilities that exceed the equity base of the Fund may magnify losses incurred
by a Fund. Leverage may involve the creation of a liability that requires a Fund
to pay interest (for instance, reverse repurchase agreements) or the creation of
a liability that does not entail any interest costs (for instance, forward
commitment costs).
The risks of leverage include a higher volatility of the net asset value of the
Fund's securities and the relatively greater effect on the net asset value of
the securities caused by favorable or adverse market movements or changes in the
cost of cash obtained by leveraging and the yield from invested cash. So long as
a Fund is able to realize a net return on its investment portfolio that is
higher than interest expense incurred, if any, leverage will result in higher
current net investment income for the Fund than if the Fund were not leveraged.
Changes in interest rates and related economic factors could cause the
relationship between the cost of leveraging and the yield to change so that
rates involved in the leveraging arrangement may substantially increase relative
to the yield on the obligations in which the proceeds of the leveraging have
been invested. To the extent that the interest expense involved in leveraging
approaches the net return on a Fund's investment portfolio, the benefit of
leveraging will be reduced, and, if the interest expense on borrowings were to
exceed the net return to investors, the Fund's use of leverage would result in a
lower rate of return than if the Fund were not leveraged. In an extreme case, if
a Fund's current investment income were not sufficient to meet the interest
expense of leveraging, it could be necessary for the Fund to liquidate certain
of its investments at an inappropriate time.
SEGREGATED ACCOUNTS. In order to attempt to reduce the risks involved in various
transactions involving leverage, the Fund's custodian will set aside and
maintain, in a segregated account, cash and liquid securities. The account's
value, which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions.
F. ILLIQUID AND RESTRICTED SECURITIES
1. GENERAL
The Fund may not acquire securities or invest in repurchase agreements if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the securities. Illiquid securities include: (1)
repurchase agreements not entitling the holder to payment of principal within
seven days; (2) purchased over-the-counter options; (3) securities which are not
readily marketable; and (4) except as otherwise determined by the Adviser,
securities subject to contractual or legal restrictions on resale because they
have not been registered under the 1933 Act ("restricted securities").
2. RISKS
Limitations on resale may have an adverse effect on the marketability of a
security and the Fund might also have to register a restricted security in order
to dispose of it, resulting in expense and delay. The Fund might not be able to
dispose of restricted or illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemptions. There can be no
assurance that a liquid market will exist for any security at any particular
time. Any security, including securities determined by the Adviser to be liquid,
can become illiquid.
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3. DETERMINATION OF LIQUIDITY
The Adviser makes determinations of liquidity pursuant to guidelines approved by
the Board. The Adviser determines and monitors the liquidity of the portfolio
securities and reports periodically on its decisions to the Board. The Adviser
takes into account a number of factors in reaching liquidity decisions,
including but not limited to: (1) the frequency of trades and quotations for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
G. U.S. GOVERNMENT SECURITIES
1. GENERAL
U.S. Government Securities may be supported by the full faith and credit of the
United States (e.g., mortgage-related securities and certificates of the
Government National Mortgage Association and securities of the Small Business
Administration); by the right of the issuer to borrow from the U.S. Treasury
(e.g., Federal Home Loan Bank securities); by the discretionary authority of the
U.S. Treasury to lend to the issuer (e.g., Fannie Mae (formerly the Federal
National Mortgage Association) securities); or solely by the creditworthiness of
the issuer (e.g., Federal Home Loan Mortgage Corporation securities).
2. RISKS
Holders of U.S. Government Securities not backed by the full faith and credit of
the United States must look principally to the agency or instrumentality issuing
the obligation for repayment and may not be able to assert a claim against the
United States in the event that the agency or instrumentality does not meet its
commitment. No assurance can be given that the U.S. Government would provide
support if it is not obligated to do so by law. Neither the U.S. Government nor
any of its agencies or instrumentalities guarantees the market value of the
securities they issue.
H. BANK OBLIGATIONS
1. GENERAL
The Fund may invest in obligations of U.S. banks including certificates of
deposit, bankers' acceptances, having total assets at the time of purchase in
excess of $1 billion. Such banks must also be members of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft that
has been drawn by a customer and are usually backed by goods in international
trade. Certificates of deposit which are payable at the stated maturity date and
bear a fixed rate of interest, generally may be withdrawn on demand by the Fund
but may be subject to early withdrawal penalties which could reduce the Fund's
performance.
The Fund also may invest in certificates of deposit issued by foreign banks,
denominated in any major foreign currency. The Fund will invest in instruments
issued by foreign banks which, in the view of its investment adviser and the
Trust's Trustees, are of credit-worthiness and financial stature in their
respective countries comparable to U.S. banks in which the Fund invests.
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2. RISKS
Obligations of banks are debt securities. The value of debt securities may
fluctuate in response to changes in interest rates. An increase in interest
rates typically cause a fall in the value of the debt securities in which the
Fund may invest. Debt securities are also subject to the risk that the issuer's
financial condition may change. The issuer, for example, may default or become
unable to pay interest or principal due on the security.
I. CORE AND GATEWAY(R)
The Fund may seek to achieve its investment objective by converting to a Core
and Gateway structure. Under a Core and Gateway structure the Fund would hold,
as its only investment, shares of another investment company having
substantially the same investment objective and policies. The Board will not
authorize conversion to a Core and Gateway structure if it would materially
increase costs to the Fund's shareholders. The Board will not convert a Fund to
a Core and Gateway structure without notice to the shareholders.
J. TEMPORARY DEFENSIVE POSITION
The Fund may assume a temporary defensive position and may invest without limit
in commercial paper and other money market instruments that are of prime
quality. Prime quality instruments are those instruments that are rated in one
of the two highest short-term rating categories by an NRSRO or, if not rated,
determined by the Adviser to be of comparable quality.
Money market instruments usually have maturities of one year or less. The money
market instruments in which the Fund may invest include U.S. Government
Securities, time deposits, bankers' acceptances and certificates of deposit of
depository institutions (such as banks), corporate notes and short-term bonds
and money market mutual funds. The Fund may only invest in money market mutual
funds to the extent permitted by the 1940 Act.
The money market instruments in which the Fund may invest may have variable or
floating rates of interest. These obligations include master demand notes that
permit investment of fluctuating amounts at varying rates of interest pursuant
to direct arrangement with the issuer of the instrument. These obligations often
include the right, after a given period, to prepay the outstanding principal
amount of the obligations upon a specified number of days' notice. These
obligations generally are not traded, nor generally is there an established
secondary market for these obligations. To the extent a demand note does not
have a 7-day or shorter demand feature and there is no readily available market
for the obligation, it is treated as an illiquid security.
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Fund: (1) the term "1940 Act"
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely; and (2) the term "Code" includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Fund may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of the Fund's assets or purchases and redemptions of shares will not be
considered a violation of the limitation.
Fundamental policies of the Fund cannot be changed without the affirmative vote
of the lesser of: (1) 50% of the outstanding shares of the Fund; or (2) 67% of
the shares of the Fund present or represented at a shareholders meeting at which
the holders of more than 50% of the outstanding shares of the Fund are present
or represented. A nonfundamental policy of the Fund may be changed by the Board
without shareholder approval. The Fund's investment objective is a fundamental
policy.
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A. FUNDAMENTAL LIMITATIONS
The Fund has adopted the following fundamental policies.
1. DIVERSIFICATION
The Fund may not, with respect to 75% of its assets, purchase a
security if as a result: (1) more than 5% of its assets would be
invested in the securities of any single issuer; or (2) the Fund would
own more than 10% of the outstanding voting securities of any single
issuer. This restriction does not apply to securities issued by the
U.S. Government, its agencies or instrumentalities or securities of
investment companies. The Fund reserves the right to invest up to 100%
of its investable assets in one investment company.
2. CONCENTRATION
The Fund will not invest 25% or more of the value of its assets in any
one industry.
3. UNDERWRITING ACTIVITIES
The Fund will not underwrite securities issued by other persons except
to the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under U.S.
securities laws.
4. BORROWING
The Fund may borrow money, but not in excess of 33 1/3% of the value of
the Fund's total assets (computed immediately after the borrowing)
subject to investment limitations specified in the Fund's prospectus.
5. MARGIN AND SHORT SALES
The Fund may not purchase securities on margin; however, the Fund may
make margin deposits in connection with permissible futures contracts,
options and other investments. The Fund may not sell securities short.
6. INVESTING FOR CONTROL
The Fund may not make investments for the purpose of exercising control
or management.
7. REAL ESTATE
The Fund may not purchase or sell real estate, provided that the Fund
may invest in securities issued by companies that invest in real estate
or interests therein.
8. COMMODITIES
The Fund may not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options and
futures contracts or from investing in securities or other instruments
backed by physical commodities).
9. LENDING
The Fund will not lend money except in connection with the acquiring of
permissible debt instruments. The Fund may make loans of portfolio
securities and enter into repurchase agreements.
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10. SENIOR SECURITIES
The Fund may not issue senior securities except to the extent permitted
by the 1940 Act.
B. NONFUNDAMENTAL LIMITATIONS
The Fund has adopted the following nonfundamental investment limitations:
1. ILLIQUID SECURITIES
The Fund may not invest more than 15% of its net assets in illiquid
assets such as: (1) securities that cannot be disposed of within seven
days at their then-current value, (2) repurchase agreements not
entitling the holder to payment of principal within seven days and (3)
securities subject to restrictions on the sale of the securities to the
public without registration under the 1933 Act ("restricted
securities") that are not readily marketable. The Fund may treat
certain restricted securities as liquid pursuant to guidelines adopted
by the Board of Trustees.
2. WARRANTS
The Fund may not invest in warrants, valued at the lower of cost or
market, more than 5% of the value of the Fund's net assets (included
within that amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by the Fund in units or
attached to securities may be deemed to be without value).
3. PLEDGING
The Fund may not purchase securities on margin; however, the Fund may
make margin deposits in connection with any hedging instruments, which
it may use as permitted by any of its other fundamental policies.
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
The Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
The Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper Inc., iMoneyNet, Inc. (IBC Financial Data, Inc.),
CDA/Wiesenberger or other companies which track the investment
performance of investment companies ("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including
but not limited to the Standard & Poor's 500(R) Index, the Russell
2000(R) Index, the Russell MidcapTM Index, the Russell 1000(R) Value
Index, the Russell 2500(R) Index, the Morgan Stanley - Europe,
Australia, Far East Index, the Dow Jones Industrial Average, the
Salomon Brothers Bond Index, the Shearson Lehman Bond Index, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index
as published by the U.S. Department of Commerce.
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Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of the Fund but rather are standards by
which the Fund's Adviser and shareholders may compare the performance of the
Fund to an unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
The Fund may refer to: (1) general market performances over past time periods
such as those published by Ibbotson Associates (for instance, its "Stocks,
Bonds, Bills and Inflation Yearbook"); (2) mutual fund performance rankings and
other data published by Fund Tracking Companies; and (3) material and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.
The Fund's performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
The Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for the Fund used in advertising are computed by
dividing the Fund's interest income (in accordance with specific standardized
rules) for a given 30 day or one month period, net of expenses, by the average
number of shares entitled to receive income distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income in accordance
with specific standardized rules) in order to arrive at an annual percentage
rate.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining the Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for the Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Financial intermediaries may charge their customers that
invest in the Fund fees in connection with that investment. This will have the
effect of reducing the Fund's after-fee yield to those shareholders.
The yields of the Fund are not fixed or guaranteed, and an investment in the
Fund is not insured or guaranteed. Accordingly, yield information should not be
used to compare shares of the Fund with investment alternatives, which, like
money market instruments or bank accounts, may provide a fixed rate of interest.
Also, it may not be appropriate to compare the Fund's yield information directly
to similar information regarding investment alternatives that are insured or
guaranteed.
Yield quotations are based on amounts invested in the Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
10
<PAGE>
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
2. TOTAL RETURN CALCULATIONS
The Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
Total return figures may be based on amounts invested in the Fund net of sales
charges that may be paid by an investor. A computation of total return that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns the Fund: (1) determines the growth or decline in value of a
hypothetical historical investment in the Fund over a stated period; and (2)
calculates the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would produce an
average annual total return of 7.18%. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that performance is not constant over time but changes from year to year, and
that average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
Average annual total return is calculated according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value: ERV is the
value, at the end of the applicable
period, of a hypothetical $1,000 payment
made at the beginning of the applicable
period
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results.
OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
The Fund may quote unaveraged or cumulative total returns that reflect
the Fund's performance over a stated period of time.
Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to
total return.
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<PAGE>
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period. Total returns may be quoted with or without
taking into consideration the Fund's front-end sales charge or contingent
deferred sales charge (if applicable).
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total
return above
C. OTHER MATTERS
The Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Fund's investment adviser, summaries of
the views of the portfolio managers with respect to the financial markets, or
descriptions of the nature of the Adviser's and its staff's management
techniques; (7) the results of a hypothetical investment in the Fund over a
given number of years, including the amount that the investment would be at the
end of the period; (8) the effects of investing in a tax-deferred account, such
as an individual retirement account or Section 401(k) pension plan; (9) the net
asset value, net assets or number of shareholders of the Fund as of one or more
dates; and (10) a comparison of the Fund's operations to the operations of other
funds or similar investment products, such as a comparison of the nature and
scope of regulation of the products and the products' weighted average maturity,
liquidity, investment policies, and the manner of calculating and reporting
performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,188 at the end
of the second year (an increase of $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of the Fund's performance.
The Fund may advertise information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in the Fund at periodic intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in the Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
12
<PAGE>
<TABLE>
<S> <C> <C> <C>
SYSTEMATIC SHARE SHARES PURCHASED
PERIOD INVESTMENT PRICE
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
------------------ ------------------ ------------------
Total Invested: $600 Average Price: $15.17 Total Shares: 41.81
</TABLE>
In connection with its advertisements, the Fund may provide "shareholder's
letters" which serve to provide shareholders or investors with an introduction
into the Fund's, the Trust's or any of the Trust's service provider's policies
or business practices
13
<PAGE>
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust and certain
related information is set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk
(*).
<TABLE>
<S> <C> <C>
NAME, DATE OF BIRTH AND POSITION(S) WITH PRINCIPAL OCCUPATION(S) DURING
ADDRESS THE TRUST PAST 5 YEARS
John Y. Keffer* Chairman and Member and Director, Forum Financial Group, LLC (a mutual fund
Born: July 15, 1942 President services holding company)
Two Portland Square Director, Forum Fund Services, LLC (Trust's underwriter)
Portland, ME 04101 Officer of six other investment companies for which Forum
Financial Group, LLC provides services
............................... ................... ..................................................................
Costas Azariadas Trustee Professor of Economics, University of California-Los Angeles
Born: February 15, 1943 Visiting Professor of Economics, Athens University of Economics
Department of Economics and Business 1998-1999
University of California Trustee of Core Trust (Delaware), a registered investment
Los Angeles, CA 90024 company.
............................... ................... ..................................................................
James C. Cheng Trustee President, Technology Marketing Associates (marketing company
Born: July 26, 1942 for small and medium size businesses in New England)
27 Temple Street Trustee of Core Trust (Delaware), a registered investment
Belmont, MA 02718 company.
............................... ................... ..................................................................
J. Michael Parish Trustee Partner, Thelen Reid & Priest LLP (law firm)
Born: November 9, 1943 Trustee of Core Trust (Delaware), a registered investment
40 West 57th Street company.
New York, NY 10019
............................... ................... ..................................................................
David I. Goldstein Vice President General Counsel, Forum Financial Group LLC
Born: August 3, 1961 Officer of five other investment companies for which Forum
Two Portland Square Financial Group, LLC provides services
Portland, ME 04101
............................... ................... ..................................................................
Ronald H. Hirsch Treasurer Managing Director, Forum Financial Group, LLC since 1999
Born: October 14, 1943 Member of the Board - Citibank Germany 1991 - 1998
Two Portland Square Officer of six other investment companies for which Forum
Portland, ME 04101 Financial Group, LLC provides services
............................... ................... ..................................................................
Leslie K. Klenk Secretary Counsel, Forum Financial Group, LLC since 1998
Born: August 24, 1964 Associate General Counsel, Smith Barney Inc. (brokerage firm)
Two Portland Square 1993 - 1998
Portland, ME 04101 Officer of one other investment company for which Forum
Financial Group, LLC provides services
</TABLE>
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee of the Trust is paid an annual retainer fee of $6,000 for his
service to the Trust. In addition, each Trustee is paid a fee of $750 for each
Board meeting attended (whether in person or by electronic communication).
Trustees are also reimbursed for travel and related expenses incurred in
attending Board meetings. Mr. Keffer receives no compensation (other than
reimbursement for travel and related expenses) for his service as a Trustee. No
officer of the Trust is compensated by the Trust but officers are reimbursed for
travel and related expenses incurred in attending Board meetings held outside of
Portland, Maine.
The following table sets forth the fees paid to each Trustee by the Trust and by
the "Fund Complex." The Fund Complex includes the Trust and Core Trust
(Delaware), another registered investment company.
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
AGGREGATE ACCRUED AS PART OF BENEFITS UPON FROM TRUST AND FUND
COMPENSATION FROM TRUST EXPENSES RETIREMENT COMPLEX(1)
NAME, POSITION FUND(1)
John Y. Keffer,
Chairman and President
$0 $0 $0 $0
......................... ...................... ...................... ...................... ......................
Costas Azariadis,
Trustee $514 $0 $0 $19,000
......................... ...................... ...................... ...................... ......................
James C. Cheng,
Trustee
$514 $0 $0 $19,000
......................... ...................... ...................... ...................... ......................
J. Michael Parish,
Trustee $514 $0 $0 $19,000
(1) Estimated compensation for the current fiscal year based on existing
agreements.
</TABLE>
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as the investment adviser to the Fund pursuant to an
investment advisory agreement with the Trust. Under this agreement, the Adviser
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Fund's investments and effecting portfolio
transactions for the Fund.
2. FEES
In addition to the investment advisory fee paid by the Fund, the Adviser may
also act and be compensated as investment manager for its clients with respect
to assets they invest in the Fund.
3. PROVISIONS OF ADVISER'S AGREEMENT
PERIOD. The Adviser's agreement remains in effect for a period of two years from
the date of its effectiveness. Subsequently, the agreement must be approved at
least annually by the Board or by majority vote of the Fund's shareholders, and
in either case by a majority of the Trustees who are not parties to the
agreement or interested persons of any party to the agreement.
TERM. The agreement is terminable without penalty by the Trust on 60 days'
written notice when authorized either by a vote of the Fund's shareholders or by
a majority vote of the Board, or by the Adviser on 60 days' written notice to
the Trust. The agreement terminates immediately upon assignment.
STANDARD OF CARE. Under the agreement, the Adviser is not liable for any mistake
of judgment or in any event whatsoever except for breach of fiduciary duty,
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
the agreement.
D. DISTRIBUTOR
1. FFS
FFS serves as the distributor (also known as principal underwriter) of the
shares of the Fund pursuant to a distribution agreement with the Trust and is
located at Two Portland Square, Portland, Maine 04101. FFS is a registered
broker-dealer and is a member of the National Association of Securities Dealers,
Inc.
15
<PAGE>
FFS, FAdS, FAcS, the Transfer Agent, and the Custodian are each controlled
indirectly by Forum Financial Group, LLC. Forum Financial Group, LLC is
controlled by John Y. Keffer.
Under a distribution agreement with the Trust (the "Distribution Agreement"),
FFS acts as the agent of the Trust in connection with the offering of shares of
the Fund. FFS continually distributes shares of the Fund on a best efforts
basis. FFS has no obligation to sell any specific quantity of Fund shares.
FFS may enter into arrangements with various financial institutions through
which you may purchase or redeem shares. FFS may, at its own expense and from
its own resources, compensate certain persons who provide services in connection
with the sale or expected sale of shares of the Fund.
FFS may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.
2. FEES
For distribution services under the Agreement, the Distributor receives: (i) any
applicable sales charge assessed upon investors in connection with the purchase
of Shares; (ii) from the Trust, any applicable contingent deferred sales charge
("CDSC") assessed upon investors in connection with the redemption of Shares;
(iii) from the Trust, the distribution service fees with respect to the Shares
of certain classes for which a Plan is effective (the "Distribution Fee"); and
(iv) from the Trust, the shareholder service fees with respect to the Shares of
certain classes for which a Service Plan is effective (the "Shareholder Service
Fee").
3. OTHER PROVISIONS OF DISTRIBUTION AGREEMENT
The agreement remains in effect for a period of two years from the date of its
effectiveness. Subsequently, the agreement must be approved at least annually by
the Board or by majority vote of the Fund's shareholders, and in either case by
a majority of the Trustees who are not parties to the agreement or interested
persons of any such party.
The agreement is terminable without penalty by the Trust on 60 days' written
notice when authorized either by a vote of the Fund's shareholders or by a
majority vote of the Board, or by the Adviser on 60 days' written notice to the
Trust. The agreement terminates immediately upon assignment.
Under the agreement, the Distributor is not liable for any mistake of judgment
or in any event whatsoever except for breach of fiduciary duty, willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
agreement.
Under the agreement, FFS and certain related parties (such as FFS's officers and
persons that control FFS) are indemnified by the Trust against all claims and
expenses in any way related to alleged untrue statements of material fact
contained in the Trust's Registration Statement with respect to the Fund or any
alleged omission of a material fact required to be stated in the Registration
Statement to make statements contained therein not misleading. The Trust,
however, will not indemnify FSS for any such misstatements or omissions if they
were made in reliance upon information provided in writing by FSS in connection
with the preparation of the Registration Statement.
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
FAdS serves as the administrator of the Fund (and of the Trust as a whole)
pursuant to an administration agreement with the Trust. Under this agreement
FAdS is responsible for the supervision of the overall management of the Trust,
16
<PAGE>
providing the Trust with general office facilities and providing persons
satisfactory to the Board to serve as officers of the Trust.
For its services, FAdS receives a fee from the Fund at an annual rate of 0.20%
of the average daily net assets of the Fund.
The Administration Agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. The Administration Agreement is terminable without penalty by the Trust
or by FAdS with respect to the Fund on 60 days' written notice.
Under the Administration Agreement, FAdS is not liable to the Trust or the
Trust's shareholders for any act or omission, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the agreement. Under the
Administration Agreement, FAdS and certain related parties (such as FAdS's
officers and persons who control FAdS) are indemnified by the Trust against any
and all claims and expenses related to FAdS's actions or omissions that are
consistent with FAdS's contractual standard of care.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an accounting agreement with the Trust (the
"Accounting Agreement"), Forum Accounting Services, LLC (FAcS) provides fund
accounting services to the Fund. These services include calculating the NAV per
share of the Fund and preparing the Fund's financial statements and tax returns.
For its services, FAcS receives a fee from the Fund at an annual rate of $36,000
with certain surcharges based upon the number and type of the Fund's portfolio
transactions and positions. The fee is accrued daily by the Fund and is paid
monthly based on the transactions and positions for the previous month.
The Accounting Agreement must be approved at least annually by the Board or by
majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. The Accounting Agreement is terminable without penalty by the Trust or by
FAcS with respect to the Fund on 60 days' written notice.
Under the Accounting Agreement, FAcS is not liable for any action or omission in
the performance of its duties to the Fund, except for willful misfeasance, bad
faith, gross negligence or by reason of reckless disregard of its obligations
and duties under the agreement. Under the Accounting Agreement, FAcS and certain
related parties (such as FAcS's officers and persons who control FAcS) are
indemnified by the Trust against any and all claims and expenses related to
FAcS's actions or omissions that are consistent with FAcS's contractual standard
of care.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to a transfer agent
agreement with the Trust (the "Transfer Agent Agreement"), the Transfer Agent
maintains an account for each shareholder of record of the Fund and is
responsible for processing purchase and redemption requests and paying
distributions to shareholders of record. The Transfer Agent is located at Two
Portland Square, Portland, Maine 04101 and is registered as a transfer agent
with the SEC.
For its services, the Transfer Agent receives 0.25% of the average daily net
assets of the Fund, an annual fee of $12,000 and $18 per shareholder account.
17
<PAGE>
The Transfer Agent Agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. The Transfer Agent Agreement is terminable without penalty by the Trust
or by the Transfer Agent with respect to the Fund on 60 days' written notice.
Under the Transfer Agent Agreement, the Transfer Agent is not liable for any act
in the performance of its duties to the Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties under the
agreement. Under the Transfer Agent Agreement, the Transfer Agent and certain
related parties (such as the Transfer Agent's officers and persons who control
the Transfer Agent) are indemnified by the Trust against any and all claims and
expenses related to FAdS's actions or omissions that are consistent with FAdS's
contractual standard of care.
4. CUSTODIAN
Forum Trust, LLC safeguards and controls the Fund's cash and securities,
determines income and collects interest on Fund investments. The Custodian may
employ subcustodians to provide custody of the Fund's assets. The Custodian is
located at Two Portland Square, Portland, Maine 04101.
For its services, the Custodian receives a fee that is primarily based on an
annualized percentage of the average daily net assets of the Fund. The Fund also
pays an annual domestic custody fee as well as certain other transaction fees.
5. FORUM FINANCIAL GROUP
Forum Financial Group provides administration, fund accounting, transfer agent
and shareholder services, fund distribution and custody services to mutual
funds, hedge funds and other pooled investment vehicles, servicing more than $85
billion in U.S. client assets from its Portland, Maine, headquarters.
6. LEGAL COUNSEL
Seward & Kissel LLP, 1200 G Street, N.W., Washington, D.C. 20005, passes upon
legal matters in connection with the issuance of shares of the Trust.
7. INDEPENDENT AUDITORS
Deloitte & Touche LLP, 200 Berkeley Street, 14th Floor, Boston, Massachusetts,
02116-5022, independent auditors, have been selected as auditors for the Fund.
The auditors audit the annual financial statements of the Fund and provide the
Fund with an audit opinion. The auditors also review certain regulatory filings
of the Fund and the Fund's tax returns.
5. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected: (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the Fund
18
<PAGE>
purchases or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers). These securities normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for these
securities.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.
B. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser places orders for the purchase and sale of securities with brokers
and dealers selected by and in the discretion of the Adviser. The Fund does not
have any obligation to deal with any specific broker or dealer in the execution
of portfolio transactions. Allocations of transactions to brokers and dealers
and the frequency of transactions are determined by the Adviser in its best
judgment and in a manner deemed to be in the best interest of the Fund rather
than by any formula.
The Adviser seeks "best execution" for all portfolio transactions. This means
that the Adviser seeks the most favorable price and execution available. The
Adviser's primary consideration in executing transactions for the Fund is prompt
execution of orders in an effective manner and at the most favorable price
available.
1. CHOOSING BROKER-DEALERS
The Fund may not always pay the lowest commission or spread available. The
spread is the difference between the bid and offer price. Rather, in determining
the amount of commissions (including certain dealer spreads) paid in connection
with securities transactions, the Adviser takes into account factors such as
size of the order, difficulty of execution, efficiency of the executing broker's
facilities (including the research services described below) and any risk
assumed by the executing broker.
Consistent with applicable rules and the Adviser's duties, the Adviser may: (1)
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund; and (2) take into
account payments made by brokers effecting transactions for the Fund (these
payments may be made to the Fund or to other persons on behalf of the Fund for
services provided to the Fund for which those other persons would be obligated
to pay.)
There are occasions on which portfolio transactions may be executed as part of
concurrent authorizations to purchase or sell the same securities for more than
one account served by the Adviser, some of which accounts may have similar
investment objectives. Although such concurrent authorizations potentially could
be either advantageous or disadvantageous to any one or more particular
accounts, they will be effected only when the Adviser believes that to do so
will be in the best interest of the affected accounts. When such concurrent
authorizations occur, the objective will be to allocate the execution in a
manner equitable to the accounts involved. Clients are typically allocated
securities with prices averaged on a per-share or per-bond basis.
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause the Fund to pay these brokers a higher
amount of commission than may be charged by other brokers. This research is
designed to augment the Adviser's own internal research and investment strategy
capabilities. This research may be used by the Adviser in connection with
services to clients other than the Fund, and not all research services may be
used by the Adviser in connection with the Fund. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
19
<PAGE>
The Adviser has full brokerage discretion. It evaluates the range and quality of
a broker's services in placing trades including securing best price,
confidentiality, clearance and settlement capabilities, promptness of execution
and the financial stability of the broker-dealer. Under certain circumstances,
the value of research provided by a broker-dealer may be a factor in the
selection of a broker. This research would include reports that are common in
the industry. Typically, the research will be used to service all of the
Adviser's accounts although a particular client may not benefit from all the
research received on each occasion. The nature of the services purchased for
clients include industry research reports and periodicals, quotation systems,
software for portfolio management and formal databases.
Occasionally, the Adviser may execute a transaction through a broker and pay a
slightly higher commission than another broker might charge. The higher
commission is paid because of the Adviser's need for specific research, for
specific expertise a firm may have in a particular type of transaction (due to
factors such as size or difficulty), or for speed/efficiency in execution. Since
most of the Adviser's brokerage commissions for research are for economic
research on specific companies or industries, and since the Adviser is involved
with a limited number of securities, most of the commission dollars spent for
industry and stock research directly benefit the clients.
3. COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to the Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
4. TRANSACTIONS THROUGH AFFILIATES
The Adviser may effect brokerage transactions through affiliates of the Adviser
(or affiliates of those persons) pursuant to procedures adopted by the Trust.
5. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Fund are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser or its affiliates. Investment decisions are the product of many
factors, including basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. In addition two or more clients may
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which, in the Adviser's opinion,
is equitable to each and in accordance with the amount being purchased or sold
by each. There may be circumstances when purchases or sales of a portfolio
security for one client could have an adverse effect on another client that has
a position in that security. In addition, when purchases or sales of the same
security for the Fund and other client accounts managed by the Adviser occurs
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. From time to time
the Fund may engage in active short-term trading to take advantage of price
movements affecting individual issues, groups of issues or markets. An annual
portfolio turnover rate of 100% would occur if all of the securities in the Fund
were replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs to the Fund and a possible increase in
short-term capital gains or losses.
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C. SECURITIES OF REGULAR BROKER-DEALERS
From time to time the Fund may acquire and hold securities issued by its
"regular brokers and dealers" or the parents of those brokers and dealers. For
this purpose, regular brokers and dealers are the 10 brokers or dealers that:
(1) received the greatest amount of brokerage commissions during the Fund's last
fiscal year; (2) engaged in the largest amount of principal transactions for
portfolio transactions of the Fund during the Fund's last fiscal year; or (3)
sold the largest amount of the Fund's shares during the Fund's last fiscal year.
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
You may effect purchases or redemptions or request any shareholder privilege in
person at the Transfer Agent's offices located at Two Portland Square, Portland,
Maine 04101.
The Fund accepts orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
Shares of the Fund as well as other funds of the Trust may not be available for
sale in the sate in which you reside. Please check with the Transfer Agent or
your investment professional to determine a class or fund's availability.
B. ADDITIONAL PURCHASE INFORMATION
The distributor sells shares of the Fund on a continuous basis. The Fund
reserves the right to refuse any purchase request.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that: (1) are not restricted as to transfer by law and
are not illiquid; and (2) have a value, which is readily ascertainable.
1. IRAS
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Fund.
If you purchase shares through a financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in the Fund directly. Information concerning any
charges or services will be provided to customers by the financial institution.
Investors purchasing shares of the Fund in this manner should acquaint
themselves with their institution's procedures and should read the Prospectus in
conjunction with any materials and information provided by their institution.
When you purchase the Fund's shares through a financial institution, you may or
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may not be the shareholder of record and, subject to your institution's
procedures, you may have Fund shares transferred into your name. There is
typically a three-day settlement period for purchases and redemptions through
broker-dealers. Certain financial institutions may also enter purchase orders
with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your institution for further
information. If you hold shares through a financial institution, the Fund may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
Investors purchasing shares of the Fund through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
C. ADDITIONAL REDEMPTION INFORMATION
The Fund may redeem shares involuntarily to reimburse the Fund for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to
transactions effected for the benefit of a shareholder which is applicable to
the Fund's shares as provided in the Prospectus.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted; (2) an emergency (as determined by the SEC) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) the SEC may by order permit for
the protection of the shareholders of the Fund.
2. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of the
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
brokerage costs may be incurred by the shareholder in converting the securities
to cash. The Trust has filed an election with the SEC pursuant to which the Fund
may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.
3. SIGNATURE GUARANTEES
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name.
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, distribution,
telephone redemption or exchange option or any other election in
connection with your account
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D. NAV DETERMINATION
In determining the Fund's NAV, securities for which market quotations are
readily available are valued at current market value using the last reported
sales price. If no sale price is reported, the average of the last bid and ask
price is used. If no average price is available, the last bid price is used. If
market quotations are not readily available, then securities are valued at fair
value as determined by the Board (or its delegate).
E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at the Fund's NAV as
of the last day of the period with respect to which the distribution is paid.
Distributions of capital gain will be reinvested at the NAV of the Fund on the
payment date for the distribution. Cash payments may be made more than seven
days following the date on which distributions would otherwise be reinvested.
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal income tax law and assumes that the Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting the Fund and its shareholders that are not described in the
prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Fund or the implications to shareholders. The
discussions here and in the prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Fund and
their shareholders. Any of these changes or court decisions may have a
retroactive effect.
All investors should consult their own tax advisor as to the federal, state,
local and foreign tax provisions applicable to them.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of the Fund.
The tax year end of the Fund is May 31 (the same as the Fund's fiscal year end).
1. MEANING OF QUALIFICATION
As a regulated investment company, the Fund will not be subject to federal
income tax on the portion of its net investment income (that is, taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (that is, the excess of long-term capital gains over
long-term capital losses) that it distributes to shareholders. In order to
qualify as a regulated investment company the Fund must satisfy the following
requirements:
o The Fund must distribute at least 90% of its investment company
taxable income (that is, net investment income and capital gain net
income) for the tax year. (Certain distributions made by the Fund
after the close of its tax year are considered distributions
attributable to the previous tax year for purposes of satisfying this
requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing.
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o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's assets in
securities of the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's assets may be invested in
the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or
in two or more issuers which the Fund controls and which are engaged
in the same or similar trades or businesses.
2. FAILURE TO QUALIFY
If for any tax year the Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of the Fund's current and accumulated earnings and profits.
A portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on the Fund's income and performance. It is possible that the Fund will
not qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its net investment income
for each tax year. These distributions are taxable to you as ordinary income.
These distributions may qualify for the 70% dividends-received deduction for
corporate shareholders.
The Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but the Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to you
as long-term capital gain, regardless of how long you have held shares.
The Fund may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
All capital loss carryovers are listed in the Fund's financial statements. Any
such losses may not be carried back.
Distributions by the Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduces your tax basis in the shares and is treated as gain from
the sale of the shares to the extent your basis would be reduced below zero.
All distributions by the Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another Fund). If you receive a
distribution in the form of additional shares, it will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
You may purchase shares whose NAV at the time reflects undistributed net
investment income or recognized capital gain, or unrealized appreciation in the
value of the assets of the Fund. Distributions of these amounts are taxable to
you in the manner described above, although the distribution economically
constitutes a return of capital to you.
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If you purchase shares of the Fund just prior to the ex-dividend date of a
distribution, you will be taxed on the entire amount of the distribution
received, even though the net asset value per share on the date of the purchase
reflected the amount of the distribution.
If you hold shares for six months or less and redeem shares at a loss after
receiving a capital gain distribution, the loss will be treated as a long-term
capital loss to the extent of the distribution.
Ordinarily, you are required to take distributions by the Fund into account in
the year in which they are made. A distribution declared in October, November or
December of any year and payable to you on a specified date in those months,
however, is deemed to be received by you (and made by the Fund) on December 31
of that calendar year if the distribution is actually paid in January of the
following year.
You will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) to them during the year.
C. CERTAIN TAX RULES APPLICABLE TO THE FUND'S TRANSACTIONS
For federal income tax purposes, when put and call options purchased by the Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by the Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gains at the time of expiration. When the Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When the Fund exercises a put, the
proceeds from the sale of the underlying security are decreased by the premium
paid. When a put or call written by the Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by the Fund at the end of each tax year
are "marked to market" and treated for federal income tax purposes as though
sold for fair market value on the last business day of the tax year. Gains or
losses realized by the Fund on Section 1256 contracts generally is considered
60% long-term and 40% short-term capital gains or losses. The Fund can elect to
exempt its Section 1256 contracts that are part of a "mixed straddle" (as
described below) from the application of Section 1256.
Any option, futures contract, or other position entered into or held by the Fund
in conjunction with any other position held by the Fund may constitute a
"straddle" for federal income tax purposes. A straddle of which at least one,
but not all, the positions are Section 1256 contracts, may constitute a "mixed
straddle." In general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (1) the loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
straddle; (2) the Fund's holding period in straddle positions be suspended while
the straddle exists (possibly resulting in gain being treated as short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain straddle positions which are part of a mixed straddle and
which are non-Section 1256 positions be treated as 60% long-term and 40%
short-term capital loss; (4) losses recognized with respect to certain straddle
positions which would otherwise constitute short-term capital losses be treated
as long-term capital losses; and (5) the deduction of interest and carrying
charges attributable to certain straddle positions may be deferred. Various
elections are available to the Fund that may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In general, the
straddle rules described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of Section 1256 contracts.
D. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of
ordinary its taxable income for the calendar year; and (2) 98% of its capital
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gain net income for the one-year period ended on October 31 of the calendar
year. The balance of the Fund's income must be distributed during the next
calendar year. The Fund will be treated as having distributed any amount on
which it is subject to income tax for any tax year ending in a calendar year.
For purposes of calculating the excise tax, the Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year; and (2) excludes foreign currency gains and
losses incurred after October 31 of any year in determining the amount of
ordinary taxable income for the current calendar year. The Fund will include
foreign currency gains and losses incurred after October 31 in determining
ordinary taxable income for the succeeding calendar year.
The Fund intends to make sufficient distributions of its ordinary taxable income
and capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax. Investors should note, however, that the Fund may
in certain circumstances be required to liquidate portfolio investments to make
sufficient distributions to avoid excise tax liability.
E. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of the Fund in an amount equal to the difference between the proceeds
of the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
the sale or redemption (a so called "wash sale"). In general, any gain or loss
arising from the sale or redemption of shares of the Fund will be considered
capital gain or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. Any capital loss arising from the sale or
redemption of shares held for six months or less, however, is treated as a
long-term capital loss to the extent of the amount of capital gain distributions
received on such shares. For this purpose, the special holding period rules of
Code Section 246(c) (3) and (4) generally will apply in determining the holding
period of shares. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
F. WITHHOLDING TAX
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide correct tax payer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
G. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income distributions paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower applicable treaty rate) upon the gross amount of the distribution.
The foreign shareholder generally would be exempt from U.S. federal income tax
on gain realized on the sale of shares of the Fund, capital gain distributions
from the Fund and amounts retained by the Fund that are designated as
undistributed capital gain.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income
distributions, capital gain distributions, and any gain realized upon the sale
of shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or U.S. corporations.
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In the case of a noncorporate foreign shareholder, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein.
The tax rules of other countries with respect to distributions from the Fund can
differ from the rules for U.S. federal income taxation described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in the Fund, distributions from the Fund and the
applicability of foreign taxes and related matters.
H. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from the Fund can differ from the rules for U.S.
federal income taxation described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in the
Fund, distributions from the Fund and the applicability of state and local taxes
and related matters.
8. OTHER MATTERS
A. THE TRUST AND ITS SHAREHOLDERS
1. GENERAL INFORMATION
The Trust's predecessor, Forum Funds, Inc. was established on March 24, 1980
under the name Fahnestock Daily Income Fund, Inc. Forum Funds was organized as a
business trust under the laws of the State of Delaware on August 29, 1995. On
January 5, 1996 the Trust succeeded to the assets and liabilities of Forum
Funds, Inc.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in its series. As of
the date hereof, the Trust consisted of the following shares of beneficial
interest:
Investors Bond Fund Payson Value Fund
TaxSaver Bond Fund Payson Balanced Fund
Investors High Grade Bond Fund Austin Global Equity Fund
Maine Municipal Bond Fund Polaris Global Value Fund
New Hampshire Bond Fund Investors Equity Fund
Daily Assets Government Fund Equity Index Fund
Daily Assets Treasury Obligations Fund Investors Growth Fund
Daily Assets Cash Fund BIA Small-Cap Growth Fund
Daily Assets Government Obligations Fund BIA Growth Equity Fund
Daily Assets Municipal Fund Mastrapasqua Growth Value Fund
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate series and may divide series into classes of
shares; the costs of doing so will be borne by the Trust.
The Trust and the Fund will continue indefinitely until terminated.
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2. SERIES AND CLASSES OF THE TRUST
Each series or class of the Trust may have a different expense ratio and each
class' performance will be affected by its expenses.
3. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency, shareholder service and administration expenses) are borne
solely by those shares. Each class votes separately with respect to the
provisions of any Rule 12b-1 plan that pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted separately by individual series except if: (1) the 1940 Act
requires shares to be voted in the aggregate and not by individual series; and
(2) when the Trustees determine that the matter affects more than one series and
all affected series must vote. The Trustees may also determine that a matter
only affects certain classes of the Trust and thus only those such classes are
entitled to vote on the matter. Delaware law does not require the Trust to hold
annual meetings of shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by federal or state law. There are
no conversion or preemptive rights in connection with shares of the Trust.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
Upon written request of shareholders representing 10% or more of the Trust's (or
a series') outstanding shares may, as set forth in the Trust Instrument, call
meetings of the Trust (or series) for any purpose related to the Trust (or
series), including, in the case of a meeting of the Trust, the purpose of voting
on removal of one or more Trustees.
4. CERTAIN REORGANIZATION TRANSACTIONS
The Trust or any series may be terminated upon the sale of its assets to, or
merger with, another open-end, management investment company or series thereof,
or upon liquidation and distribution of its assets. The Trustees may, without
prior shareholder approval, change the form of organization of the Trust by
merger, consolidation or incorporation. Under the Trust Instrument, the Trustees
may, without shareholder vote, cause the Trust to merge or consolidate into one
or more trusts, partnerships or corporations or cause the Trust to be
incorporated under Delaware law, so long as the surviving entity is an open-end,
management investment company that will succeed to or assume the Trust's
registration statement.
5. CODE OF ETHICS
The Trust, the Adviser, and FFS have each adopted a code of ethics under Rule
17j-1 of the 1940 Act which are designed to eliminate conflicts of interest
between the Fund and personnel of the Trust, the Adviser and FFS. The codes
permit such personnel to invest in securities, including securities that may be
purchased or held by the Fund, subject to certain limitations.
B. FUND OWNERSHIP
As of July 1, 2000, and prior to the public offering of the Fund, the Adviser
beneficially owned 100% of and may be deemed to control the Fund. Frank
Mastrapasqua owns 100% of the shares of the Adviser. As of the same date, the
Trustees and officers of the Trust in the aggregate owned less than 1% of the
outstanding Shares of the Fund. From time to time, certain shareholders may own
a large percentage of the shares of the Fund. Accordingly, those shareholders
may be able to greatly affect (if not determine) the outcome of a shareholder
vote.
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C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the Trust believes that the securities
regulators of some states, however, have indicated that they and the courts in
their state may decline to apply Delaware law on this point. The Forum Funds'
Trust Instrument (the document that governs the operation of the Trust) contains
an express disclaimer of shareholder liability for the debts, liabilities,
obligations and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply, no contractual limitation of
liability was in effect and the portfolio is unable to meet its obligations.
The Trust Instrument provides that the Trustees shall not be liable to any
person other than the Trust and its shareholders. In addition, the Trust
Instrument provides that the Trustees shall not be liable for any conduct
whatsoever, provided that a Trustee is not protected against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, reference to the copy of such contract or other documents
filed as exhibits to the registration statement.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
AAA Bonds, which are rated Aaa, are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA Bonds, 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 that make the long-term risk appear
somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
some time in the future.
BAA Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
BA Bonds, 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.
B Bonds, which are rated B generally, lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA Bonds, 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. Ca Bonds, which are rated Ca, represent
obligations that are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
NOTE
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
A-1
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2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only
in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
NOTE Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree
of speculation and C the highest. While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments
on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category is
used when payments on an obligation are not made on the date due even
if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
NOTE Plus (+) or minus (-). The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
The "r" symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns that are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
risk-such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse
floaters.
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+
AA High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions.
A+
A,A- Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+
BBB
BBB- Below-average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic
cycles.
BB+
BB
BB- Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according
to industry conditions. Overall quality may move up or down frequently
within this category.
B+
B,B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
A-3
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BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
CCC
CC,C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal imminent
default.
DDD Default. Securities are not meeting current obligations and are
DD,D extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% - 90%
of such outstandings, and `D' the lowest recovery potential, i.e.
below 50%.
B. PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
AAA An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
AA An issue that is rated "aa" is considered a high- grade preferred
stock. This rating indicates that there is a reasonable assurance the
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
A An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater then in
the "aaa" and "aa" classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
BAA An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
BA An issue which is rated "ba" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this
class.
B An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
A-4
<PAGE>
CAA An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
CA An issue that is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
C This is the lowest rated class of preferred or preference stock. Issues
so rated can thus be regarded as having extremely poor prospects of
ever attaining any real investment standing.
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
A category.
BB
B,CCC Preferred stock rated BB, B, and CCC is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BB indicates the lowest degree of
speculation and CCC the highest. While such issues will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
A-5
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C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
2. STANDARD AND POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that
the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than obligations in higher rating categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to
meet its financial commitment on the obligation; however, it faces
major ongoing uncertainties that could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation.
A-6
<PAGE>
D A short-term obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
3. FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for timely
repayment under Fitch IBCA's national rating scale for that country,
relative to other obligations in the same country. This rating is
automatically assigned to all obligations issued or guaranteed by the
sovereign state. Where issues possess a particularly strong credit
feature, a "+" is added to the assigned rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the relative
degree of risk is slightly higher than for issues classified as `A1'
and capacity for timely repayment may be susceptible to adverse changes
in business, economic, or financial conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is more
susceptible to adverse changes in business, economic, or financial
conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is uncertain
relative to other obligors in the same country. The capacity for timely
repayment is susceptible to adverse changes in business, economic, or
financial conditions.
C Obligations for which there is a high risk of default to other obligors
in the same country or which are in default.
A-7
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B-1
APPENDIX B - OTHER ADVERTISEMENT MATTERS
Some of you might recall the Mastrapasqua name (more about that below) from our
former association with the company: beginning in 1995 Forum provided full
service to TransAdviser Funds, for two of which Mastrapasqua acted as
subadviser. Dr. Frank Mastrapasqua, Chairman and CEO, welcomes the return to
Forum: "I now have an opportunity to bring my company's investment philosophy
fully to bear on the new fund. We are counting on smooth day-to-day operations
because we have already experienced the quality service Forum delivers."
Dr. Mastrapasqua gave a brief explication of the name in a guest interview with
Money Manager Review. "`Mas-tra-pas-qua' is my Italian family name and it means
`Master of Easter.' We take great pride in using the Mastrapasqua name since it
can only be recalled from `learned memory' and once embedded in that module, is
seldom forgotten." Now that you have Master of Easter solidly in your own
module, you will have a convenient grip on memorizing the name of Forum's next
likely client, about whom there will be more in a subsequent issue.
B-1
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