As filed with the Securities and Exchange Commission on December 18, 2000
File Nos. 2-67052 and 811-3023
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 85
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 87
FORUM FUNDS
(Formerly "Forum Funds, Inc.")
Two Portland Square
Portland, Maine 04101
(207) 879-1900
Leslie K. Klenk, Esq.
Forum Fund Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
--------------------------------------------------------------------------------
It is proposed that this filing become effective:
immediately upon filing pursuant to Rule 485, paragraph (b)
on _________________ pursuant to Rule 485, paragraph (b)
60 days after filing pursuant to Rule 485, paragraph (a)(1)
on _________________ pursuant to Rule 485, paragraph (a)(1)
X 75 days after filing pursuant to Rule 485, paragraph (a)(2)
on ________________pursuant to Rule 485, paragraph (a)(2)
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:Shares of BrownIA Maryland Bond Fund.
<PAGE>
PROSPECTUS
December 22, 2000
BROWNIA MARYLAND BOND FUND
The Fund seeks high current income exempt from
both Federal and Maryland State income taxes
without assuming undue risk by investing
primarily in municipal securities and U.S.
Government securities.
You may purchase Fund shares without a
sales charge.
The Fund does not incur Rule 12b-1
(distribution) fees.
The Securities and Exchange
Commission has not
approved or disapproved
the Fund's shares or
determined whether this
Prospectus is accurate
or complete.
Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY 2
PERFORMANCE 3
FEE TABLE 4
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS 6
MANAGEMENT 10
YOUR ACCOUNT 13
How to Contact the Fund 13
General Information 13
Buying Shares 14
Selling Shares 18
Exchange Privileges 20
OTHER INFORMATION 22
FINANCIAL HIGHLIGHTS 23
<PAGE>
RISK/RETURN SUMMARY
CONCEPTS TO UNDERSTAND
DEBT SECURITY means a security such as a bond or note that obligates the issuer
to pay the security owner a specified sum of money (interest) at set intervals
as well as to repay the principal amount of the security at its maturity.
MATURITY means the date on which a debt security is (or may be) due and payable.
BOND means a debt security with a long-term maturity, usually 5 years or longer.
NOTE means a debt security with a short-term maturity, usually less than 1 year.
NRSRO means a "nationally recognized statistical rating organization," such as
Standard & Poor's, that rates debt securities by relative credit risk.
INVESTMENT GRADE SECURITY means a debt security rated in one of the four highest
long-term or two highest short-term ratings categories by an NRSRO or unrated
and determined to be of comparable quality by the Fund's Adviser at the time of
purchase.
MUNICIPAL SECURITY means a debt security issued by or on behalf of a state, its
local governments and public financing authorities, and by U.S. territories and
possessions.
INVESTMENT OBJECTIVE
BrownIA Maryland Bond Fund (the "Fund") seeks to provide a high level of current
income exempt from both Federal and Maryland State income taxes without undue
risk.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in investment grade Maryland municipal securities.
The Fund may also invest in municipal securities issued by U.S. territories and
possessions and U.S. Government securities. Generally, the weighted average
maturity of the Fund's portfolio securities will be between 5 and 10 years.
PRINCIPAL RISKS OF INVESTING IN THE FUND
You could lose money on your investment in the Fund or the Fund could
underperform other investments. The principal risks of an investment in the Fund
include:
o The Fund's share price, yield, and total return will fluctuate in response
to price movements in the debt securities markets
o The value of most debt securities fall when interest rates rise; the longer
a debt security's maturity and the lower its credit quality, the more its
value typically falls in response to an increase in interest rates
o The Fund cannot collect interest and principal payments on a debt security
if the issuer defaults
o Issuers may prepay fixed rate securities when interest rates fall, forcing
the Fund to invest in securities with lower interest rates
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o The Fund is non-diversified. The Fund may focus its investments in the
securities of a comparatively small number of issuers. Concentration of the
Fund in securities of a limited number of issuers exposes it to greater
market risk and potential monetary losses than if its assets were
diversified among the securities of a greater number of issuers
o Economic and political changes in Maryland may have a greater effect on the
Fund than if the Fund invested in municipal securities of various states
o The Fund's investment adviser (the "Adviser") may make poor investment
decisions
WHO MAY WANT TO INVEST IN THE FUND
The Fund may be appropriate for you if you:
o Are a Maryland resident
o Are an income-oriented investor in a high tax bracket and desire tax-exempt
income
o Seek income and more price stability than stocks offer
o Seek capital preservation
o Are pursuing a long-term goal
The Fund may NOT be appropriate for you if you:
o Are not a Maryland resident
o Are pursuing a short-term goal or are investing emergency reserves
o Are investing funds in a tax-deferred or tax-exempt account (such as an
IRA)
o Do not desire tax-exempt income
PERFORMANCE
Performance information is not provided because the Fund had not commenced
operations prior to the date of this Prospectus.
3
<PAGE>
FEE TABLE
The following tables describe the various fees and expenses that you will pay if
you invest in the Fund. Shareholder fees are charges you pay when buying,
selling, or exchanging shares of the Fund. Operating expenses, which include
fees of the Adviser, are paid out of the Fund's assets and are factored into the
Fund's share price rather than charged directly to shareholder accounts.
SHAREHOLDER FEES
<TABLE>
<S> <C>
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Maximum Deferred Sales Charge (Load) None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses 0.60%
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 1.10%
</TABLE>
(1) Based on estimated amounts for the Fund's fiscal year ending May 31, 2001.
(2) The Adviser has voluntarily undertaken to waive its fee so that total
annual fund expenses do not exceed 0.75% of the average daily net assets of
the Fund. Fee waivers may be reduced or eliminated at any time.
4
<PAGE>
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. This
example assumes that you invest $10,000 in the Fund for the time periods
indicated, you pay the maximum sales charge 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 as stated in the
above table 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
$112 $350
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
CONCEPTS TO UNDERSTAND
YIELD CURVE means a graph that plots the yield of all bonds of similar quality
against the bonds' maturities.
PRIVATE ACTIVITY BOND means a bond that is issued by or on behalf of public
authorities to finance privately operated facilities. Private activity bonds are
primarily revenue securities.
GENERAL OBLIGATION SECURITY means a security whose principal and interest
payments are secured by a municipality's full faith and credit and taxing power.
REVENUE SECURITY means a security whose principal and interest generally are
payable from revenues of a particular facility, class of facilities, or from the
proceeds of a special excise or other tax.
INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income exempt from both
Federal and Maryland State income taxes without undue risk.
PRINCIPAL INVESTMENT STRATEGIES
THE ADVISER'S PROCESS The Adviser continuously monitors economic factors such as
interest rate outlook and technical factors such as the shape of the yield curve
in combination with the stated objective of the Fund to determine an appropriate
maturity profile for the Fund's investment portfolio. The Adviser then
principally searches for securities that satisfy the maturity profile of the
Fund and that provide the greatest potential return relative to the risk of the
security. The Adviser may sell a debt security if:
o Revised economic forecasts or interest rate outlook requires a
repositioning of the portfolio
o The security subsequently fails to meet the Adviser's investment criteria
o A more attractive security is found or funds are needed for another purpose
o The Adviser believes that the security has reached its appreciation
potential
PRINCIPAL INVESTMENT POLICIES The Fund invests primarily in investment grade
Maryland municipal securities. The Fund may also invest in municipal securities
issued by U.S. territories or possessions and U.S. Government securities. The
Fund may also invest in municipal securities issued by other states. Normally,
the Fund will invest at least 80% of the Fund's total assets in securities the
interest of which is exempt from Federal and Maryland State income taxes.
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Municipal securities include municipal bonds, notes, and leases. Municipal
leases are securities that permit government issuers to acquire property and
equipment without the security being subject to constitutional and statutory
requirements for the issuance of long-term debt securities. The Fund invests in
general obligation securities and revenue securities, including private activity
bonds. Generally, the average weighted maturity of the Fund's portfolio
securities will be between 5 and 10 years.
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.
PRINCIPAL INVESTMENT RISKS
GENERAL The Fund's net asset value, yield, and total 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 objective. An
investment in the Fund is not by itself a complete or balanced investment
program.
The value of your investment in the Fund may change in response to changes in
interest rates. An increase in interest rates typically causes a fall in the
value of the securities in which the Fund invests. The longer a debt security's
maturity, the more its value typically falls in response to an increase in
interest rates. An additional risk is that issuers may prepay fixed rate
securities when interest rates fall, forcing the Fund to invest in securities
with lower interest rates.
7
<PAGE>
Your investment in the Fund is also subject to the risk that the financial
condition of an issuer of a security held by the Fund may cause it to default or
become unable to pay interest or principal due on the security. This risk
generally increases as security credit ratings fall.
Your investment in the Fund is subject to the risk that the Adviser may make
poor investment decisions.
The Fund is non-diversified. The Fund may focus a larger percentage of its
assets in the securities of fewer issuers. Concentration of the Fund in
securities of a limited number of issuers exposes it to greater market risk and
potential monetary losses than if its assets were diversified among the
securities of a greater number of issuers.
SPECIFIC RISKS INVOLVING MARYLAND MUNICIPAL SECURITIES Economic or political
factors in Maryland may adversely affect issuers of Maryland municipal
securities. Adverse economic or political factors will affect the Fund's net
asset value more than if the Fund invested in more geographically diverse
investments. As a result, the value of the Fund's assets may fluctuate more
widely than the value of shares of a fund investing in securities relating to a
number of different states.
In addition to the state's general obligations, the Fund will invest a
significant portion of its assets in bonds that are rated according to the
issuer's individual creditworthiness, such as bonds of local governments and
public authorities. While local governments in Maryland depend principally on
their own revenue sources, they could experience budget shortfalls due to
cutbacks in state aid. Certain fund holdings do not rely on any government for
money to service their debt. Bonds issued by governmental authorities may depend
wholly on revenues generated by the project they financed or
8
<PAGE>
on other dedicated revenue streams. The credit quality of these "revenue" bonds
may vary from that of the state's general obligations.
The following is a summary of the NRSRO ratings for Maryland municipal
securities. As of July 19, 2000, 2000, Maryland general obligation bonds were
rated Aaa by Moody's Investor Services and AAA by Standard & Poor's and Fitch
IBCA, Inc. There can be no assurance that Maryland general obligation bonds or
the securities of any Maryland political subdivision, authority or corporation
owned by the Fund will be rated in any category or will not be downgraded by an
NRSRO. Further information concerning the State of Maryland is contained in the
Statement of Additional Information (the "SAI").
9
<PAGE>
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 SAI.
THE ADVISER
The Fund's Adviser is Brown Advisory Incorporated, Furness House, 19 South
Street, Baltimore, Maryland 21202. The Adviser is a fully owned subsidiary of
Brown Investment Advisory & Trust Company, a trust company operating under the
laws of Maryland. Brown Investment Advisory & Trust Company is a fully owned
subsidiary of Brown Capital Holdings Incorporated, a holdings company
incorporated under the laws of Maryland in 1998. Prior to 1998, Brown Investment
Advisory & Trust Company operated as a subsidiary of Bankers Trust under the
name Alex.Brown Capital Advisory & Trust Company.
Subject to the general control of the Board, the Adviser makes investment
decisions for the Fund. The Adviser receives an advisory fee of 0.50% of the
average daily net assets of the Fund. The Adviser has voluntarily agreed to
waive its fee in order to limit total annual operating expenses to 0.75% or less
of the Fund's average daily net assets. Fee waivers may be reduced or eliminated
at any time.
As of October 31, 2000, the Adviser and its affiliates had approximately $4.8
billion of assets under management.
10
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A committee of investment professionals makes all investment decisions for the
Fund and no other person is primarily responsible for making recommendations to
that committee.
OTHER SERVICE PROVIDERS
Forum Financial Group, LLC and its affiliates (collectively "Forum") provide
services to the Fund. As of October 31, 2000, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $123 billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Fund's shares. The distributor acts as the 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 provides administrative services to the Fund,
Forum Accounting Services, LLC is the Fund's fund accountant, Forum Shareholder
Services, LLC ("Transfer Agent") is the Fund's transfer agent, and Forum Trust,
LLC is the Fund's custodian.
11
<PAGE>
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 increases the Fund's performance for the period
during which the waiver or reimbursement is in effect and may not be recouped at
a later date.
The Adviser has voluntarily undertaken to waive its fee in order to limit the
Fund's expenses (excluding taxes, interest, portfolio transaction expenses and
extraordinary expenses) to 0.75% or less of the average daily net assets of the
Fund.Waivers may be reduced or eliminated at any time.
12
<PAGE>
YOUR ACCOUNT
HOW TO CONTACT
THE FUND
WRITE TO US AT:
BrownIA Funds
P.O. Box 446
Portland, Maine 04112
OVERNIGHT ADDRESS:
BrownIA Funds
Two Portland Square
Portland, Maine 04101
TELEPHONE US AT:
(800) 540-6807 (toll free) or
(207) 879-0001
WIRE INVESTMENTS
(OR ACH PAYMENTS)
TO:
Bankers Trust Company
New York, New York
ABA #021001033
FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 01-465-547
BrownIA Maryland Bond Fund
(Your Name)
(Your Account Number)
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share (NAV)
next calculated after the Transfer Agent receives your request in proper form
(as described in this Prospectus on pages 14 through 21). For instance, if the
Transfer Agent receives your purchase request in proper form after 4:00 p.m.,
Eastern time, your transaction will 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 conditions.
The Fund does not issue share certificates.
If you purchase shares directly from the Fund, you will receive monthly
statements and a confirmation of each transaction. You should verify the
accuracy of all transactions in your account as soon as you receive your
confirmations.
The Fund reserves the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED The Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may change in case of an emergency. The Fund's NAV is determined by
taking the market value of all securities owned by the Fund (plus all other
assets such as cash), subtracting liabilities, and then dividing the result (net
assets) by the number of shares outstanding. The Fund values securities for
which market quotations are readily available at current market value. If market
quotations are not readily available, the Fund values securities at fair value
pursuant to procedures adopted by the Board.
13
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TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees (other than sales charges) charged
by that institution may be different than those of the Fund. 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. The Fund and the Adviser also reserve the right to accept
in kind contributions of securities in exchange for shares of the Fund.
CHECKS For individual, sole proprietorship, joint, Uniform Gift to Minors
Act ("UGMA"), or Uniform Transfers to Minors Act ("UTMA") accounts, the
check must be made payable to "BrownIA Funds" or to one or more owners of
the account and endorsed to "BrownIA Funds." For all other accounts, the
check must be made payable on its face to "BrownIA Funds." No other method
of check payment is acceptable (for instance, you may not pay by traveler's
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 a payment by telephone, the Transfer Agent
will automatically debit your pre-designated bank account for the desired
amount. Your financial institution may charge you a fee for this service.
You may call (800) 94FORUM or (800) 943-6786 to request an ACH transaction.
14
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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:
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
Standard Accounts $5,000 $100
Accounts With Systematic Investment Plans $2,000 $100
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENT
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear on
proprietorship accounts. Joint accounts have two or more the account
owners (tenants)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the UGMA or the UTMA
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
15
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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 o Fill out an investment slip from a
Corporate/Organization Resolution form if applicable) confirmation or write us a letter
o Complete the application (and resolution form) o Write your account number on your check
o Mail us your application (and resolution form) o Mail us the slip (or your letter) and the check
and a check
BY WIRE BY WIRE
o Call or write us for an account application (and o Call to notify us of your incoming wire
Corporate/Organization Resolution form if applicable) o Instruct your bank to wire your money to us
o Complete the application (and resolution form)
o Call us to fax the completed application (and
resolution form) and we will assign you an account
number
o Mail us your original application (and 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 o Complete the systematic investment section of
Corporate/Organization Resolution form if applicable) the application
o Complete the application (and resolution form) o Attach a voided check to your application
o Call us to fax the completed application (and o Mail us the completed application and voided
resolution form) and we will assign you an account check
number
o Mail us your original application (and resolution
form)
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in the Fund
once or twice a month on specified dates. These payments are taken from your
bank account by ACH payment. Systematic investments must be for at least $100.
16
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LIMITATIONS ON PURCHASES The Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Fund or its operations. This includes those from any individual or group
who, in the Fund's view, are 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. Under normal circumstances, the
Fund will send redemption proceeds to you within a week. If the Fund has not yet
collected payment for the shares you are selling, it may delay sending
redemption proceeds 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 redemptions 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 Redemption 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 the 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.
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 withdrawals, distribution, telephone
redemption or exchange option, or any other election in connection with
your account
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SMALL ACCOUNTS If the value of your account falls below $1,000, the Fund may ask
you to increase your balance. If the account value is still below $1,000 after
60 days, the Fund may close your account and send you the proceeds. The Fund
will not close your account if it falls below this amount solely as a result of
a reduction in your account's market value.
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 exchange your Fund shares and buy shares of other Trust series managed
by the Adviser. You may also exchange Fund shares for Investor Shares of the
Trust's money market funds. 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).
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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.
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
21
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OTHER INFORMATION
DISTRIBUTIONS
The Fund distributes its net investment income monthly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For 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 taxes.
Generally, you are not subject to Federal income taxes on the Fund's
distributions of tax-exempt interest income. In addition, interest received by
the Fund from investments in Maryland municipal securities and U.S. Government
securities is generally exempt from Maryland State and local income taxes. The
Fund's distributions of taxable interest, other investment income, and
short-term capital gain are taxable to you as ordinary income. The Fund's
distributions of long-term capital gain are taxable to you as long-term capital
gain regardless of how long you have held your Fund shares. It is anticipated
that substantially all of the Fund's net income will be exempt from Federal and
Maryland State income taxes.
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay Federal income tax on your pro rata share of the net income generated from
these securities.
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Distributions of interest income on certain private activity bonds are an item
of tax preference for purposes of individual and corporate Federal Alternate
Minimum Tax ("AMT"). Distributions of net income from tax-exempt obligations are
included in "adjusted current earnings" of corporations for Federal AMT
purposes.
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 income tax status of 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.
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.
FINANCIAL HIGHLIGHTS
Financial highlights are not provided because the Fund had not commenced
operations prior to the date of this Prospectus.
23
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NOTES
<PAGE>
BROWNIA MARYLAND BOND FUND
FOR MORE INFORMATION
The following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the Fund's investments will be available
in the Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last 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)
the SAI, request other information, and discuss your
questions about the Fund by contacting the Fund at:
BrownIA Funds
P.O. Box 446
Portland, Maine 04112
800-540-6807 (toll free)
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
ofthe 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. 20549-6009
E-mail address: [email protected]
Free copies of the reports and SAI are available from the SEC's Internet Web
Site at www.sec.gov
Investment Company Act File No. 811-3023.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[FORUM
LOGO]
December 20, 2000
INVESTMENT ADVISER: BROWNIA MARYLAND BOND FUND
Brown Advisory Incorporated
Furness House
19 South Street
Baltimore, Maryland 21202
ACCOUNT INFORMATION AND SHAREHOLDER
SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 805-8258
(207) 879-0001
This Statement of Additional Information (the "SAI") supplements the Prospectus
dated December 20, 2000, as may be amended from time to time, offering shares of
BrownIA Maryland Bond Fund, a 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, LLC at the address or telephone
number listed above.
<PAGE>
TABLE OF CONTENTS
GLOSSARY 2
1. INVESTMENT POLICIES AND RISKS 3
3. INFORMATION CONCERNING THE STATE OF MARYLAND 9
4. INVESTMENT LIMITATIONS 9
5. PERFORMANCE DATA AND ADVERTISING 12
6. MANAGEMENT 15
7. PORTFOLIO TRANSACTIONS 21
8. PURCHASE AND REDEMPTION INFORMATION 24
9. TAXATION 25
10. OTHER MATTERS 30
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS A-1
APPENDIX B - MISCELLANEOUS TABLES B-1
APPENDIX C - PERFORMANCE DATA C-1
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GLOSSARY
--------------------------------------------------------------------------------
As used in this SAI, the following terms have the meanings listed.
"Adviser" means Brown Advisory Inc.
"Board" means the Board of Trustees of the Trust.
"CFTC" means Commodities Future Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means the Forum Trust, LLC, 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.
"FFS" means Forum Fund Services, LLC, the distributor of the Fund's
shares.
"Fitch" means Fitch IBCA, Inc.
"FSS" means Forum Shareholder Services, LLC, the transfer agent of the
Fund.
"Fund" means BrownIA Maryland Bond Fund.
"IRS" means Internal Revenue Service.
"Moody's" means Moody's Investors Service.
"NAV" means net asset value per share.
"NRSRO" means a nationally recognized statistical rating organization.
"SAI" means Statement of Additional Information.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's Corporation, A Division of the McGraw
Hill Companies.
"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.
2
<PAGE>
1. INVESTMENT POLICIES AND RISKS
--------------------------------------------------------------------------------
The Fund is a non-diversified series of the Trust. This section discusses in
greater detail than the Fund's Prospectus certain investments that the Fund can
make.
A. DEBT SECURITIES
1. GENERAL
MUNICIPAL SECURITIES The Fund may invest in municipal securities. Municipal
securities are issued by the states, territories and possessions of the United
States, their political subdivisions (such as cities, counties and towns) and
various authorities (such as public housing or redevelopment authorities),
instrumentalities, public corporations and special districts (such as water,
sewer or sanitary districts) of the states, territories, and possessions of the
United States or their political subdivisions. In addition, municipal securities
include securities issued by or on behalf of public authorities to finance
various privately operated facilities, such as industrial development bonds,
that are backed only by the assets and revenues of the non-governmental user
(such as hospitals and airports). The Fund may invest up to 5% of its total
assets in municipal securities of issuers located in any one territory or
possession of the United States.
Municipal securities are issued to obtain funds for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities are
classified as general obligation or revenue bonds or notes. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable from revenue derived from a particular facility, class of facilities, or
the proceeds of a special excise tax or other specific revenue source, but not
from the issuer's general taxing power. The Fund will not invest more than 25%
of its total assets in a single type of revenue bond. Private activity bonds and
industrial revenue bonds do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on whose
behalf they are issued.
Municipal leases are entered into by state and local governments and authorities
to acquire equipment and facilities such as fire and sanitation vehicles,
telecommunications equipment, and other assets. Municipal leases (which normally
provide for title to the leased assets to pass eventually to the government
issuer) have evolved as a means for governmental issuers to acquire property and
equipment without meeting the constitutional and statutory requirements for the
issuance of debt. The debt-issuance limitations of many state constitutions and
statutes are deemed to be inapplicable because of the inclusion in many leases
or contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis.
U.S. GOVERNMENT SECURITIES The Fund may invest in U.S. Government Securities.
U.S. Government Securities include securities issued by the U.S. Treasury and by
U.S. Government agencies and instrumentalities. U.S. Government Securities may
be supported by the full faith and credit of the United States (such as the
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 (for example, Federal Home Loan
Bank securities); by the discretionary authority of the U.S. Treasury to lend to
the issuer (for example, Fannie Mae (formerly the Federal National Mortgage
Association) securities); or solely by the creditworthiness of the issuer (for
example, Federal Home Loan Mortgage Corporation securities).
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 were 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.
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<PAGE>
VARIABLE AND FLOATING RATE SECURITIES The Fund may invest in variable and
floating rate securities. Debt securities that have variable or floating rates
of interest, may under certain limited circumstances, have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to one or more interest
rate indices or market interest rates (the "underlying index"). The interest
paid on these securities is a function primarily of the underlying index upon
which the interest rate adjustments are based. These adjustments minimize
changes in the market value of the obligation. Similar to fixed rate debt
instruments, variable and floating rate instruments are subject to changes in
value based on changes in market interest rates or changes in the issuer's
creditworthiness. The rate of interest on securities may be tied to U.S.
Government Securities or indices on those securities as well as any other rate
of interest or index.
Variable and floating rate demand notes of corporations are redeemable upon a
specified period of notice. These obligations include master demand notes that
permit investment of fluctuating amounts at varying interest rates under direct
arrangements with the issuer of the instrument. The issuer of these obligations
often has the right, after a given period, to prepay the outstanding principal
amount of the obligations upon a specified number of days' notice.
Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, the Fund might be entitled to
less than the initial principal amount of the security upon the security's
maturity. The Fund intends to purchase these securities only when the Adviser
believes the interest income from the instrument justifies any principal risks
associated with the instrument. The Adviser may attempt to limit any potential
loss of principal by purchasing similar instruments that are intended to provide
an offsetting increase in principal. There can be no assurance that the Adviser
will be able to limit the effects of principal fluctuations and, accordingly,
the Fund may incur losses on those securities even if held to maturity without
issuer default.
There may not be an active secondary market for any particular floating or
variable rate instruments, which could make it difficult for the Fund to dispose
of the instrument during periods that the Fund is not entitled to exercise any
demand rights it may have. The Fund could, for this or other reasons, suffer a
loss with respect to those instruments. The Adviser monitors the liquidity of
the Fund's investment in variable and floating rate instruments, but there can
be no guarantee that an active secondary market will exist.
2. RISKS
GENERAL The market value of the interest-bearing debt securities held by the
Fund will be affected by changes in interest rates. There is normally an inverse
relationship between the market value of securities sensitive to prevailing
interest rates and actual changes in interest rates. The longer the remaining
maturity (and duration) of a security, the more sensitive the security is to
changes in interest rates. All debt securities, including U.S. Government
Securities, can change in value when there is a change in interest rates.
Changes in the ability of an issuer to make payments of interest and principal
and in the markets' perception of an issuer's creditworthiness will also affect
the market value of that issuer's debt securities. As a result, an investment in
the Fund is subject to risk even if all debt securities in the Fund's investment
portfolio are paid in full at maturity. In addition, certain debt securities may
be subject to extension risk, which refers to the change in total return on a
security resulting from an extension or abbreviation of the security's maturity.
Yields on debt securities, including municipal securities, are dependent on a
variety of factors, including the general conditions of the debt securities
markets, the size of a particular offering, the maturity of the obligation and
the rating of the issue. Under normal conditions, debt securities with longer
maturities tend to offer higher yields and are generally subject to greater
price movements than obligations with shorter maturities. A portion of the
municipal securities held by the Fund may be supported by credit and liquidity
enhancements, such as letters of credit (which are not covered by federal
deposit insurance) or puts or demand features of third party financial
institutions, generally domestic and foreign banks.
4
<PAGE>
The issuers of debt securities are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors that
may restrict the ability of the issuer to pay, when due, the principal of and
interest on its debt securities. The possibility exists, therefore, that as a
result of bankruptcy, litigation or other conditions, the ability of an issuer
to pay, when due, the principal of and interest on its debt securities may
become impaired.
2. CREDIT RISK
The Fund's investment in debt securities is subject to the credit risk relating
to the financial condition of the issuers of the securities that the Fund holds.
To limit credit risk, the Fund may only invest in debt securities that are rated
"Baa" or higher by Moody's or "BBB" or higher by S&P at the time of purchase.
The Fund may purchase unrated debt securities if, at the time of purchase, the
Adviser believes that they are of comparable quality to rated securities that
the Fund may purchase. It is anticipated that the average credit rating of the
debt securities held by the Fund will be "Aa" as per Moody's or "AA" as per S&P.
The Fund will limit its investment in debt securities rated "Baa" by Moody's or
"BBB" by S&P to 10% of the Fund's total assets.
The Fund may retain securities whose rating has been lowered below the lowest
permissible rating category if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, the sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Adviser
may use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate, and rating may have different market prices.
If an issue of securities ceases to be rated or if its rating is reduced after
it is purchased by the Fund, the Adviser will determine whether the Fund should
continue to hold the obligation. To the extent that the ratings given by an
NRSRO may change as a result of changes in such organizations or their rating
systems, the Adviser will attempt to substitute comparable ratings. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings. An issuer's current financial
condition may be better or worse than a rating indicates.
3. SPECIAL RISKS INVOLVING PUERTO RICO MUNICIPAL SECURITIES
Fund investments in the Commonwealth of Puerto Rico and its public corporations
(as well as the U.S. territories of Guam and the Virgin Islands) require careful
assessment of certain risk factors, including reliance on substantial federal
assistance and favorable tax programs that have recently become subject to
phaseout by Congress. As of June 1, 2000, Puerto Rico's general obligations were
rated Baa1 by Moody's and A by Standard & Poor's.
B. FUTURES
1. GENERAL
The Fund may purchase futures contracts to: (1) enhance the Fund's performance;
or (2) to hedge against a decline in the value of securities owned by the Fund
or an increase in the price of securities that the Fund plans to purchase. The
Fund may invest in futures contracts on market indices based in whole or in part
on securities in which the Fund may invest.
A futures contract is a bilateral agreement where one party agrees to accept,
and the other party agrees to make, delivery of cash or an underlying debt
security, as called for in the contract, at a specified date and at an agreed
upon price. The Fund may invest in municipal bond futures and Treasury bond and
note futures.
A municipal bond futures contract is based on the value of the Bond Buyer Index
("BBI") which is comprised of 40 actively traded general obligation and revenue
5
<PAGE>
bonds. The rating of a BBI issue must be at least "A". To be considered, the
issue must have at least 19 years remaining to maturity, a first call date
between 7 and 16 years, and at least one call at par prior to redemption. No
physical delivery of the securities is made in connection with municipal bond
futures. Rather these contracts are usually settled in cash of they are not
closed out prior to their expiration date.
A Treasury bond futures contract is based on the value of an equivalent 20 year,
6% Treasury bond. Generally, any Treasury bond with a remaining maturity or term
to call of 15 years as of the first day of the month in which the
contracts are scheduled to be exercised will qualify as a deliverable security
pursuant to a Treasury bond futures contract. A Treasury note futures contract
is based on the value of an equivalent 10 year, 6% Treasury note. Generally, any
Treasury note with a remaining maturity or term to call of 6 1/2 years or 10
years, respectively, as of the first day of the month in which the contracts are
scheduled to be exercised will qualify as a deliverable security pursuant to
Treasury note futures contract.
Since a number of different Treasury notes will qualify as a deliverable
security upon the exercise of the option, the price that the buyer will actually
pay for those securities will depend on which ones are actually delivered.
Normally, the exercise price of the futures contract is adjusted by a conversion
factor that takes into consideration the value of the deliverable security if it
were yielding 6% as of the first day of the month in which the contract is
scheduled to be exercised.
2. RISKS
Use of these instruments is subject to regulation by the SEC, the futures
exchanges on which futures are traded or by the CFTC. No assurance can be given
that any hedging or income strategy will achieve its intended result.
There are certain investment risks associated with futures transactions. These
risks include: (1) imperfect correlation between movements in the prices of
futures and movements in the price of the securities (or indices) hedged or used
for cover which may cause a given hedge not to achieve its objective; (2) the
fact that the skills and techniques needed to trade these instruments are
different from those needed to select the securities in which the Fund invests;
and (3) lack of assurance that a liquid secondary market will exist for any
particular instrument at any particular time, which, among other things, may
hinder the Fund's ability to limit exposures by closing its positions. The
potential loss to the Fund from investing in certain types of futures
transactions is unlimited.
Other risks include limitation by the futures exchanges on the amount of
fluctuation permitted in certain futures contract prices during a single trading
day. The Fund may be forced, therefore, to liquidate or close out a futures
contract position at a disadvantageous price. The Fund may use various futures
contracts that are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
in those contracts will develop or continue to exist. The Fund's activities in
the futures market may result in higher portfolio turnover rates and additional
brokerage costs, which could reduce the Fund's yield.
If the Fund will be financially exposed to another party due to its investments
in futures, the Fund will maintain either: (1) an offsetting ("covered")
position in the underlying security or an offsetting futures contract; or (2)
cash, receivables and liquid debt securities with a value sufficient at all
times to cover its potential obligations. The Fund will comply with SEC
guidelines with respect to coverage of these strategies and, if the guidelines
require, will set aside cash, liquid securities and other permissible assets
("Segregated Assets") in a segregated account with the Custodian in the
prescribed amount. Segregated Assets cannot be sold or closed out while the
hedging strategy is outstanding, unless the Segregated Assets are replaced with
similar assets. As a result, there is a possibility that the use of cover or
segregation involving a large percentage of the Fund's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
6
<PAGE>
C. REPURCHASE AGREEMENTS
1. 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.
2. RISKS
Repurchase Agreements involve credit risk. Credit risk is the risk that a
counterparty to a transaction will be unable to honor its financial obligation.
In the event that bankruptcy, insolvency or similar proceedings are commenced
against a counterparty, the Fund may have difficulties in exercising its rights
to the underlying securities or currencies, as applicable. The Fund may incur
costs and expensive time delays in disposing of the underlying securities and it
may suffer a loss. Failure by the other party to deliver a security or currency
purchased by the Fund may result in a missed opportunity to make an alternative
investment. Favorable insolvency laws that allow the Fund, among other things,
to liquidate the collateral held in the event of the bankruptcy of the
counterparty reduce counterparty insolvency risk with respect to repurchase
agreements.
D. BORROWING
1. GENERAL
The Fund may borrow money from banks for temporary or emergency purposes in an
amount up to 33 1/3% of the Fund's total assets. The purchase of securities is
prohibited if a Fund's borrowing exceeds 5% or more of the Fund's total assets.
2. RISKS
Borrowing creates the risk of magnified capital losses. If the Fund buys
securities with borrowed funds and the value of the securities declines, the
Fund may be required to provide the lender with additional funds or liquidate
its position in these securities to continue to secure or repay the loan. The
Fund may also be obligated to liquidate other portfolio positions at an
inappropriate time in order to pay off the loan or any interest payments
associated with the loan. To the extent that the interest expense involved in a
borrowing transaction approaches the net return on the Fund's investment
portfolio, the benefit of borrowing will be reduced, and, if the interest
expense is incurred as a result of borrowing were to exceed the net return to
investors, the Fund's use of borrowing would result in a lower rate of return
than if the Fund did not borrow. The size of any loss incurred by the Fund due
to borrowing will depend on the amount borrowed. The greater the percentage
borrowed, the greater potential of gain or loss to the Fund.
E. LEVERAGE TRANSACTIONS
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 and entering into
purchasing securities on a when-issued, delayed delivery or forward commitment
basis are transactions that result in 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.
7
<PAGE>
SECURITIES LENDING The Fund may lend portfolio securities in an amount up to 10%
of its total 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 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 the Fund's loans permit 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 the Fund or the borrower at any time,
and the borrowed securities must be returned when the loan is terminated.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase securities
offered on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. When these transactions are negotiated, the price,
which is generally expressed in yield terms, is fixed at the time the commitment
is made, but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs after 15-45 days after the transaction.
During the period between a commitment and settlement, no payment is made for
the securities purchased by the purchaser and thus, no interest accrues to the
purchaser from the transaction. At the time the Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, the Fund will
record the transaction as a purchase and thereafter reflect the value each day
of such securities in determining its net asset value.
The Fund will not enter into a when-issued or forward commitment if, as a
result, more than 25% of the Fund's total assets would be committed to such
transactions.
2. RISKS
Leverage creates the risk of magnified capital losses. Losses incurred by the
Fund may be magnified by borrowings and other liabilities that exceed the equity
base of the Fund. Leverage may involve the creation of a liability that requires
the Fund to pay interest 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
the 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 the 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
the 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. TEMPORARY DEFENSIVE POSITION
The Fund may invest in prime quality money market instruments, pending
investment of cash balances. The Fund may also assume a temporary defensive
position and may invest without limit in prime quality money market instruments.
8
<PAGE>
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 and fixed
rates of return. The money market instruments in which the Fund may invest
include short-term U.S. Government Securities, commercial paper, bankers'
acceptances, certificates of deposit, interest-bearing savings deposits of
commercial banks, repurchase agreements concerning securities in which the Fund
may invest, and money market mutual funds.
G. CORE AND GATEWAY(R)
The Fund may seek to achieve its investment objective by converting to a Core
and Gateway structure. The Fund operating under a Core and Gateway structure
holds, 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 the Fund
to a Core and Gateway structure without notice to the shareholders.
2. INFORMATION CONCERNING THE STATE OF MARYLAND
--------------------------------------------------------------------------------
Material in this section was compiled from several public sources, including
statements from the State of Maryland Office of the Treasurer and the 1999
Comprehensive Annual Financial Report of the State of Maryland. Maryland us much
more reliant on the service and government sectors than the nation is as a
whole, while the manufacturing sector is much less significant than it is
nationwide. Although the information is believed to be accurate, none of the
information obtained has been verified independently. While the following
summarizes the most current information available from these sources, it does
not reflect economic conditions or developments that may have occurred or trends
that may have materialized since the dates indicated.
The State of Maryland has a population of approximately 5.1 million. Services,
trade, and government are among the leading areas of employment. Growth,
generally, slowed in 1999 from an average annual rate of 4.2% over the prior
four years. Construction and services have experienced the highest levels of
growth, 3.7% and 3.8%, respectively. The telecommunications sector remains
strong with anticipated annual growth rates of approximately 2%. Overall,
non-agricultural employment rates increased 2.1% in 1999 and are expected to
slow to 1.6% in 2000 and rebound again to 2.1% in 2001. Maryland's unemployment
rate as of fiscal 1999 was 4.0%. A tight labor market and strong wage growth
contributed to a 5.7% increase in personal income in 1999. It is anticipated
that personal income levels will remain stable in 2000 and increase again in
2001.
The State of Maryland enacts its budget annually. The budget uses a legally
mandated budgetary fund structure. Maryland also maintains accounts to conform
with generally accepted accounting principles but financial control is exercised
under the budgetary system. The largest sources of revenues are broad-based
taxes, including income, sales, motor vehicle, and property taxes.
Maryland general obligation bonds are rated Aaa by Moody's, and AAA by both S&P
and Fitch. As of June 30, 1999, Maryland had $5.1 billion in State tax-supported
debt. Authorized but unissued general obligation bonds totaled $1 billion.
3. 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.
9
<PAGE>
A fundamental policy of the Fund and the Fund's investment objective 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.
A. FUNDAMENTAL LIMITATIONS
The Fund has adopted the following investment limitations, that cannot be
changed by the Board without shareholder approval. The Fund may not:
BORROWING MONEY
Borrow money, except for temporary or emergency purposes (including the meeting
of redemption requests) and except for entering into reverse repurchase
agreements, and provided that borrowings do not exceed 33 1/3% of the Fund's
total assets (computed immediately after the borrowing).
CONCENTRATION
Purchase a security if, as a result, more than 25% of the Fund's total assets
would be invested in securities of issuers conducting their principal business
activities in the same industry. For purposes of this limitation, there is no
limit on: (1) investments in U.S. Government Securities, in repurchase
agreements covering U.S. Government Securities, in tax-exempt securities issued
by the states, territories or possessions of the United States ("municipal
securities") or in foreign government securities; or (2) investments in issuers
domiciled in a single jurisdiction. Notwithstanding anything to the contrary, to
the extent permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund invests in
other investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act, the
Fund treats the assets of the investment companies in which it invests as its
own for purposes of this policy.
DIVERSIFICATION
Purchase a security (other than a U.S. Government Security or security of an
investment company) if, as a result: (1) with respect to 50% of the Fund's total
assets, more than 5% of the Fund's total assets would be invested in the
securities of a single issuer; or (2) with respect to 50% of the Fund's total
assets, the Fund would own more than 10% of the outstanding voting securities of
any single issuer; or (3) more than 25% of the Fund's total assets would be
invested in the securities of any single issuer.
The District of Columbia, each state and territory, each political subdivision,
agency, instrumentality and authority thereof, and each multi-state agency of
which the District of Columbia, a state or territory is a member is deemed to be
a separate "issuer." When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision is treated as the issuer.
Similarly, in the case of private activity bonds, if the bond is backed only by
the assets and revenues of the nongovernmental user, then the nongovernmental
user is treated as the issuer. If in either case, however, the creating
government or some other agency guarantees a security, that guarantee is
considered a separate security and is treated as an issue of such government or
other agency.
UNDERWRITING ACTIVITIES
Underwrite (as that term is defined in the 1933 Act) securities issued by other
persons except, to the extent that in connection with the disposition of the
Fund's assets, the Fund may be deemed to be an underwriter.
10
<PAGE>
LENDING
Make loans to other parties. For purposes of this limitation, entering into
repurchase agreements, lending securities, and acquiring any debt security are
not deemed to be the making of loans.
PURCHASES AND SALES OF REAL ESTATE
Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities backed by real estate or securities of companies engaged
in the real estate business).
PURCHASES AND SALES OF COMMODITIES
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 or futures contracts or from investing in
securities or other instruments backed by physical commodities).
ISSUANCE OF SENIOR SECURITIES
Issue senior securities to the extent permitted by the 1940 Act.
B. NON - FUNDAMENTAL LIMITATIONS
The Fund has adopted the following investment limitations that may be changed by
the Board without shareholder approval. The Fund may not:
SECURITIES OF INVESTMENT COMPANIES
Invest in the securities of any investment company except to the extent
permitted by the 1940 Act.
SHORT SALES
Sell securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short (short sales "against
the box"), and provided that transactions in futures contracts are not deemed to
constitute selling securities short.
PURCHASES ON MARGIN
Purchase securities on margin, except that the Fund may use short-term credit
for the clearance of the Fund's transactions, and provided that initial and
variation margin payments in connection with futures contracts shall not
constitute purchasing securities on margin.
LIQUIDITY
Invest more than 15% of its net assets in illiquid assets such as: (i)
securities that cannot be disposed of within seven days at their then-current
value, (ii) repurchase agreements not entitling the holder to payment of
principal within seven days and (iii) 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.
11
<PAGE>
OPTIONS AND FUTURES
Invest in futures or options contracts regulated by the CFTC except for (1) bona
fide hedging purposes within the meaning of the rules of the CFTC and (2) for
other purposes if, as a result, no more than 5% of the Fund's net assets would
be invested in initial margin and premiums (excluding amounts "in-the-money")
required to establish the contracts.
BORROWING
Purchase or otherwise acquire any security if, the total of borrowings would
exceed 5% of the value of its total assets.
EXERCISING CONTROL OF ISSUERS
Make investments for the purpose of exercising control of an issuer. Investments
by the Fund in entities created under the laws of foreign countries solely to
facilitate investment in securities in that country will not be deemed the
making of investments for the purpose of exercising control.
4. 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 Capital
International - Europe, Australasia and Far East Index, the Dow Jones
Industrial Average, the Salomon Smith Barney Indices, the Lehman Bond
Indices, U.S. Treasury bonds, bills or notes, and changes in the
Consumer Price Index as published by the U.S. Department of Commerce.
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of 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.
12
<PAGE>
B. PERFORMANCE CALCULATIONS
The Fund's performance may be quoted in terms of yield or total return. Table 1
in Appendix C includes
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 Fund may also quote tax equivalent yields, which show the taxable yields a
shareholder would have to earn to equal a fund's tax-free yield after taxes. A
tax equivalent yield is calculated by dividing a fund's tax-free yield by one
minus a stated Federal, state or combined Federal and state tax rate.
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, which are insured or
guaranteed.
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 assumes all of the Fund's distributions are reinvested.
13
<PAGE>
AVERAGE ANNUAL TOTAL RETURN Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total return
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 total 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 total 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 total 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. For instance, the Fund may quote unaveraged or cumulative total
returns, which reflect the Fund's performance over a stated period of time.
Moreover, total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to illustrate the
relationship of these factors and their contributions to total return.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total
return above
3. OTHER MATTERS
The Fund may also include a variety of 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
14
<PAGE>
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 NAV,
net assets, or number of shareholders of the Fund as of one or more dates; and
(10) a comparison of the Fund's operations to the operations of other funds or
similar investment products, such as a comparison of the nature and scope of
regulation of the products and the products' weighted average maturity,
liquidity, investment policies, and the manner of calculating and reporting
performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,188 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% 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 systematic
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 a fund, the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
SYSTEMATIC SHARE SHARES
PERIOD INVESTMENT PRICE PURCHASED
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
Total Invested $600 Average Price $15.17 Total Shares 41.81
In connection with its advertisements, 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 providers' policies
or business practices.
5. MANAGEMENT
--------------------------------------------------------------------------------
A. TRUSTEES AND OFFICERS
The names of the Trustees and officers of the Trust, their position with the
Trust, address, date of birth and principal occupations during the past five
years are set forth below. Each Trustee who is an "interested person" (as
defined by the 1940 Act) of the Trust is indicated by an asterisk (*).
15
<PAGE>
<TABLE>
<S> <C>
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
DATE OF BIRTH AND ADDRESS PAST 5 YEARS
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
John Y. Keffer*, Chairman and President Member and Director, Forum Financial Group, LLC (a mutual fund
Born: July 15, 1942 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 and
Department of Economics Business 1998 - 1999
University of California Trustee of one other investment company for which Forum Financial
Los Angeles, CA 90024 Group, LLC provides services
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
James C. Cheng, Trustee President, Technology Marketing Associates
Born: July 26, 1942 (marketing company for small and medium size businesses in New
27 Temple Street England)
Belmont, MA 02718 Trustee of one other investment company for which Forum Financial
Group, LLC provides services
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
J. Michael Parish, Trustee Partner, Thelen Reid & Priest LLP (law firm) since 1995
Born: November 9, 1943 Partner, Winthrop, Stimson, Putnam & Roberts (law firm) 1989 - 1995
40 West 57th Street Trustee of one other investment company for which Forum Financial
New York, NY 10019 Group, LLC provides services
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
Thomas G. Sheehan, Vice President Managing Director, Forum Financial Group, LLC
Born: July 15, 1954 Officer of four other investment companies for which Forum Financial
Two Portland Square Group, LLC provides services
Portland, ME 04101
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
Dale Denno, Vice President General Counsel, Forum Financial Group, LLC since September 2000
Born: May 1, 1950 Vice President, Marketing & Development, Unum Life Insurance Company 1995-2000
Two Portland Square
Portland, ME 04101
-------------------------------------------- -----------------------------------------------------------------------
-------------------------------------------- -----------------------------------------------------------------------
Ronald H. Hirsch, Treasurer Managing Director, Operations/Finance and Operations/Sales, Forum
Born: October 14, 1943 Financial Group, LLC since 1999
Two Portland Square Member of the Board - Citibank Germany 1991 - 1998
Portland, ME 04101 Officer of six other investment companies for which Forum 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) 1993 -
Two Portland Square 1998
Portland, ME 04101 Officer of two 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 a quarterly retainer fee of $1,750 for his
service to the Trust. In addition, each Trustee will be paid a fee of $500 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 Trustee of the
Trust. 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 estimated fees to be paid to each Trustee by
the Fund and the Fund Complex, which includes all series of the Trust and
another investment company for which Forum Financial Group, LLC provides
services for the fiscal year ended May 31, 2001.
15
<PAGE>
Compensation Total Compensation from the
Trustee from the Funds Fund Complex*
-------------------------- ------------------ -------------------------------
-------------------------- ------------------ -------------------------------
John Y. Keffer $0 $0
-------------------------- ------------------ -------------------------------
-------------------------- ------------------ -------------------------------
Costas Azariadis $525.21 $18,000
-------------------------- ------------------ -------------------------------
-------------------------- ------------------ -------------------------------
James C. Cheng $525.21 $18,000
-------------------------- ------------------ -------------------------------
-------------------------- ------------------ -------------------------------
J. Michael Parish $525.21 $18,000
-------------------------- ------------------ -------------------------------
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to the Fund pursuant to an investment
advisory agreement with the Trust. Under its 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. OWNERSHIP OF ADVISER
The Adviser is a fully owned subsidiary of Brown Investment Advisory & Trust
Company, a trust company operating under the laws of Maryland. Brown Investment
Advisory & Trust Company is a fully owned subsidiary of Brown Capital Holdings
Incorporate, a holding company incorporated under the laws of Maryland in 1998.
3. FEES
The Adviser's fee is calculated as a percentage of the Fund's average net
assets. The fee, if not waived, is accrued daily by the Fund and is paid monthly
based on average net assets for the previous month.
In addition to receiving its advisory fee from the Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets they invested in the Fund. If you have a separately managed account with
the Adviser with assets invested in the Fund, the Adviser will credit an amount
equal to all or a portion of the fees received by the Adviser against any
investment management fee received from you.
Table 1 in Appendix B shows the dollar amount of the fees payable by the Fund to
the Adviser, the amount of fees waived by the Adviser, and the actual fees
received by the Adviser. The data are for the past three fiscal years (or
shorter period depending on the Fund's commencement of operations).
4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Adviser's agreement remains in effect for a period of two years from the
date of its effectiveness and then the agreement must be approved annually.
Subsequently, the Adviser's 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 (other than as Trustees of the Trust).
The Adviser's agreement is terminable without penalty by the Trust with respect
to the Fund on 60 days' written notice when authorized either by vote of the
Fund's shareholders or by a majority vote of the Board, or by the Adviser on 60
days' written notice to the Trust. The agreement terminates immediately upon
assignment.
Under its agreement, the Adviser is not liable for any error of judgment,
mistake of law, or in any event whatsoever except for willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the agreement.
17
<PAGE>
B. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of the
Fund, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
FFS, FAdS, FAcS and FSS are each controlled indirectly by Forum Financial Group,
LLC, which is controlled by John Y. Keffer.
Under a distribution agreement (the "Distribution Agreement") with the Trust,
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 shareholder
service fees even though shares of the Fund are sold without a sales charge.
These financial institutions may otherwise act as processing agents, and will be
responsible for promptly transmitting purchase, redemption and other requests to
the Fund.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times, and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Fund in this manner should acquaint themselves with
their institution's procedures and should read this Prospectus in conjunction
with any materials and information provided by their institution. The financial
institution, and not its customers, will be the shareholder of record, although
customers may have the right to vote shares depending upon their arrangement
with the institution.
FFS does not receive a fee for services performed under the Distribution
Agreement.
2. OTHER PROVISIONS OF THE DISTRIBUTOR'S AGREEMENT
The Distribution Agreement with respect to the Fund must be approved at least
annually by the Board or by majority vote of the shareholders of that Fund, and
in either case by a majority of the Trustees who are not parties to the
agreement or interested persons of any such party (other than as Trustees of the
Trust).
The Distribution Agreement is terminable without penalty by the Trust with
respect to the Fund on 60 days' written notice when authorized either by vote of
the Fund's shareholders, or by a majority vote of the Board, or by FFS on 60
days' written notice to the Trust.
Under the Distribution Agreement, FFS is not liable to the Trust or the Trust's
shareholders for any error of judgment or mistake of law, for any loss arising
out of any investment, or for any act or omission in the performance of its
duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under the agreement.
Under the Distribution 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 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
18
<PAGE>
indemnify FFS for any such misstatements or omissions if they were made in
reliance upon information provided in writing by FFS in connection with the
preparation of the Registration Statement.
C. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
As administrator, pursuant to an administration agreement with the Trust, FAdS
is responsible for the supervision of the overall management of the Trust,
providing the Trust with general office facilities, and providing persons
satisfactory to the Board to serve as officers of the Trust.
For its services, FAdS receives a fee from the Fund at an annual rate of 0.10%
of the first $100 million of the Fund's average daily net assets and 0.75% of
the Fund's average daily net assets in excess of $100 million , subject to a
minimum fee of $40,000. The fee is accrued daily by the Fund and is paid monthly
based on average net assets for the previous month.
The Administration Agreement with respect to the Fund must be approved at least
annually by the Board or by majority vote of the shareholders of that Fund, and
in either case by a majority of the Trustees who are not parties to the
agreement or interested persons of any such party (other than as Trustees of the
Trust). The Administration Agreement is terminable without penalty by the Trust
or by FAdS with respect to the Fund on 60 days' written notice to the Trust.
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
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.
Table 2 in Appendix B shows the dollar amount of the fees payable by the Fund to
FAdS, the amount of the fee waived by FAdS, and the actual fees received by
FAdS. The data is for the past three fiscal years (or shorter period depending
on the Fund's commencement of operations).
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust (the "Accounting
Agreement"), FAcS provides fund accounting services to the Fund. These services
include calculating the NAV of the Fund and preparing the Fund's financial
statements and tax returns.
For its services, FAcS receives a fee from the Fund at an annual rate of $36,000
plus $3,000 for the preparation of tax returns and 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 with respect to the Fund 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 (other than as Trustees of the Trust). 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 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.
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Under the Accounting Agreement, in calculating the Fund's NAV, FAcS is deemed
not to have committed an error if the NAV it calculates is within 1/10 of 1% of
the actual NAV (after recalculation). The agreement also provides that FAcS will
not be liable to a shareholder for any loss incurred due to an NAV difference if
such difference is less than or equal to 1/2 of 1% or less than or equal to
$10.00. In addition, FAcS is not liable for the errors of others, including the
companies that supply securities prices to FAcS and the Fund.
Table 3 in Appendix B shows the dollar amount of the fees payable by the Fund to
FAcS, the amount of the fee waived by FAcS, and the actual fees received by
FAcS. The data is for the past three fiscal years (or shorter period depending
on the Fund's commencement of operations).
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust ("Transfer Agency Agreement"), FSS 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. FSS is
located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, FSS receives a fee from the Fund at an annual rate of $18,000
plus $25 per shareholder account. The fee is accrued daily by the Fund and is
paid monthly based on the average net assets for the previous month.
The Transfer Agency Agreement with respect to the Fund 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 (other than as Trustees of the Trust). The
Transfer Agency Agreement is terminable without penalty by the Trust or by FFS
with respect to the Fund on 60 days' written notice.
Under the Transfer Agency Agreement, FSS 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 agreement, FSS and certain related parties (such as FSS's officers and
persons who control FSS) are indemnified by the Trust against any and all claims
and expenses related to FSS's actions or omissions that are consistent with
FSS's contractual standard of care.
Table 4 in Appendix B shows the dollar amount of the fees payable by the Fund to
FSS, the amount of the fee waived by FSS, and the actual fees received by FSS.
The data is for the past three fiscal years (or shorter period depending on the
Fund's commencement of operations).
4. SHAREHOLDER SERVICING AGENT
Pursuant to a Shareholder Service Plan (the "Plan") between the Trust and FAdS
effective December 31, 2000, FAdS is authorized to perform, or arrange for the
performance of, certain activities relating to the servicing and maintenance of
shareholder accounts not otherwise provided by FSS ("Shareholder Servicing
Activities"). Under the Plan, FAds may enter into shareholder service agreements
with financial institutions or other persons who provide Shareholder Servicing
Activities for their clients invested in the Fund.
Shareholder Servicing Activities shall include one or more of the following: (1)
establishing and maintaining accounts and records for shareholders of the Fund;
(2) answering client inquiries regarding the manner in which purchases,
exchanges and redemptions of shares of the Trust may be effected and other
matters pertaining to the Trust's services; (3) providing necessary personnel
and facilities to establish and maintain client accounts and records; (4)
assisting clients in arranging for processing purchase, exchange and redemption
transactions; (5) arranging for the wiring of funds; (6) guaranteeing
shareholder signatures in connection with redemption orders and transfers and
changes in shareholder-designated accounts; (7) integrating periodic statements
with other shareholder transactions; and (8) providing such other related
services as the shareholder may request.
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As compensation for the Shareholder Servicing Activities, the Trust pays the
shareholder servicing agent, through FAdS, with respect to the Fund, a fee of up
to 0.25% of that Fund's average daily net assets of the shares owned by
investors for which the shareholder servicing agent maintains a servicing
relationship.
Any material amendment to the Plan must be approved by the Board, including a
majority of the Disinterested Trustees. The Plan may be terminated without
penalty at any time: (1) by vote of a majority of the Board, including a
majority of the Trustees who are not parties to the Plan or interested persons
of any such party; or (2) by FAdS.
5. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, 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 domestic and foreign assets. The Custodian is
located at Two Portland Square, Portland, Maine 04101.
For its services, the Custodian receives 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. These fees are accrued daily by the
Fund and are paid monthly based on average net assets and transactions for the
previous month.
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,
02116-5002, independent auditors, have been selected as independent auditors for
the Fund. The auditor audits the annual financial statements of the Fund and
provides the Fund with an audit opinion. The auditors also review certain
regulatory filings of the Fund and the Fund's tax returns.
6. PORTFOLIO TRANSACTIONS
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A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the Fund
purchases or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers). These securities normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for these
securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected: (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
The price of securities purchased from underwriters includes a disclosed fixed
commission or concession paid by the issuer to the underwriter, and prices of
securities purchased from dealers serving as market makers reflects the spread
between the bid and asked price.
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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. COMMISSIONS PAID
Table 5 in Appendix B shows the aggregate brokerage commissions paid by the Fund
as well as aggregate commissions paid to an affiliate of the Fund or the
Adviser. The data presented are for the past three fiscal years (or shorter
period depending on the Fund's commencement of operations).
C. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser places orders for the purchase and sale of securities with
broker-dealers selected by and in the discretion of the Adviser. The Fund has no
obligation to deal with a 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.
D. CHOOSING BROKER-DEALERS
The Fund may not always pay the lowest commission or spread available. Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection with securities transactions, the Adviser takes into account
factors such as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the research services described below)
and any risk assumed by the executing broker.
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) 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).
E. 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.
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 obtained for
clients include industry research reports and periodicals, quotation systems,
software for portfolio management and formal data bases.
Occasionally, the Adviser utilizes a broker and pays a slightly higher
commission than another 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
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commissions for research are for economic research on specific companies or
industries, and since the Adviser follows a limited number of securities, most
of the commission dollars spent for industry and stock research directly benefit
the Adviser's clients and the Fund's investors.
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. 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.
1. 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.
2. TRANSACTIONS THROUGH AFFILIATES
The Adviser may effect transactions through affiliates of the Adviser (or
affiliates of those persons) pursuant to procedures adopted by the Trust.
3. 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 advised
by the Adviser or its affiliates. Investment decisions are the product of many
factors, including basic suitability for the particular client involved.
Likewise, 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.
4. 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 the securities in a fund were
replaced once in a period of one year. High portfolio turnover rates may result
in increased brokerage costs to the Fund and a possible increase in short-term
capital gains or losses.
5. SECURITIES OF REGULAR BROKER-DEALERS
From time to time, the Fund may acquire and hold securities issued by its
"regular brokers and dealers" or the parents of those brokers and dealers. For
this purpose, regular brokers and dealers means the 10 brokers or dealers that:
(1) received the greatest amount of brokerage commissions during the Fund's last
fiscal year; (2) engaged 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.
Table 6 in Appendix B lists the regular brokers and dealers of the Funds whose
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securities (or the securities of the parent company) were acquired during the
past fiscal year and the appropriate value of the Funds' holdings at those
securities as of the Funds most recent fiscal year.
7. PURCHASE AND REDEMPTION INFORMATION
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A. GENERAL INFORMATION
You may effect purchases or redemptions or request any shareholder privilege in
person at FSS'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.
Not all classes or funds of the Trust may be available for sale in the state in
which you reside. Please check with your investment professional to determine a
class or fund's availability.
B. ADDITIONAL PURCHASE INFORMATION
Shares of the Fund are sold on a continuous basis by the distributor at net
asset value ("NAV") without any sales charge. Accordingly, the offering price
per share is the same as the NAV.
The Fund reserves the right to refuse any purchase request.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that: (1) are not restricted as to transfer by law and
are not illiquid; and (2) have a value that is readily ascertainable (and not
established only by valuation procedures).
C. UGMAS/UTMAS
If the custodian's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the custodian must provide instructions in a
manner indicating custodial capacity.
D. 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. When you purchase the Fund's
shares through a financial institution, you may or may not be the shareholder of
record and, subject to your institution's procedures, you may have Fund shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your financial institution for
further information. If you hold shares through a financial institution, the
Fund may confirm purchases and redemptions to the financial institution, which
will provide you with confirmations and periodic statements. The Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
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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.
E. ADDITIONAL REDEMPTION INFORMATION
The Fund may redeem shares involuntarily to: (1) reimburse the Fund for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased; or (2) 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.
F. 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.
G. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. If deemed appropriate and
advisable by the Adviser, the Fund may satisfy a redemption request from a
shareholder by distributing portfolio securities pursuant to procedures adopted
by the Board. 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.
H. NAV DETERMINATION
In determining the Fund's NAV, securities for which market quotations are
readily available are valued at current market value using the valuation price
provided by an independent pricing service. If an independent pricing service is
unable to provide a valuation for a security held in the Fund's portfolio, the
security 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 valued at fair value
as determined by the Board (or its delegate).
I. DISTRIBUTIONS
Distributions of net investment income will be reinvested at the Fund's NAV
(unless you elect to receive distributions in cash) 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 Fund's NAV (unless you elect to receive
distributions in cash) 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.
8. TAXATION
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The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal and Maryland state income tax law and
assumes that the Fund qualifies as a regulated investment company (as discussed
below). This information is only a summary of certain key tax considerations
affecting the Fund and its shareholders and is in addition to the information
provided in the Prospectus. No attempt has been made to present a complete
explanation of the tax treatment of the Fund or the tax implications to
shareholders. The discussions here and in the Prospectus are not intended as
substitutes for careful tax planning.
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This "Taxation" section is based on laws, including the Code and regulations and
judicial and administrative decisions in effect on the date hereof. Future
legislative or administrative changes or court decisions may significantly
change the tax rules applicable to the Fund and its shareholders. Any of these
changes or court decisions may have a retroactive effect.
Investors should consult their own tax advisors 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).
B. MEANING OF QUALIFICATION
As a regulated investment company, the Fund will not be subject to federal
income tax on the portion of its investment company taxable income (that is,
taxable interest, dividends, net short-term capital gains and other taxable
ordinary income, net of expenses) and net capital gain (that is, the excess of
net long-term capital gains over net short-term capital losses) that it
distributes to shareholders. In order to qualify to be taxed 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 each tax year and at least 90% of its income from its
tax-exempt obligations. 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 each year from
dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of securities, or other
income (including gains from options and futures contracts) derived
with respect to its business of investing in securities.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash, cash items, U.S.
Government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of an issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and
which are engaged in the same, similar or related trades or
businesses.
C. 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.
Failure to qualify as a regulated investment company would thus have a
significant 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.
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D. FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its net investment income
for each tax year. Distributions of investment company taxable income
(generally, taxable net investment income and any net short-term capital gain)
are taxable to you as ordinary income. Income from tax-exempt interest
obligations is not included in investment company taxable income. If at the
close of each quarter of a taxable year of the Fund, at least 50% of the value
of the Fund's total assets consists of certain obligations the interest on which
is excludable from gross income under Section 103(a) of the Code, the Fund may
pay "exempt-interest" dividends to its shareholders. Those dividends constitute
the portion of the aggregate dividends (excluding capital gain distributions),
as designated by the fund, equal to the excess of the fund's excludable interest
over certain amounts disallowed as deductions. Exempt interest dividends paid by
the Fund are generally exempt from federal income tax; however, the amount of
such dividends must be reported on the recipient's federal income tax return.
The Fund anticipates distributing substantially all of its net capital gain (net
long-term capital gains over net short-term capital losses )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. These distributions do
not qualify for the dividends-received deduction.
Distributions by the Fund that do not constitute ordinary income dividends ,
exempt interest dividends,or capital gain dividends will be treated as a return
of capital. Return of capital distributions reduce your tax basis in your shares
and are 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 distributions
in the form of additional shares, you 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 with an NAV at the time of purchase that 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.
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 shareholders of record on a specified date
in those months, however, is deemed to be paid by the Fund and received by you
on December 31 of that calendar year if the distribution is paid by the Fund in
January of the following year.
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay federal or Maryland state income tax on your pro rata share of the net
income generated by those securities.
Interest on indebtedness incurred to purchase or carry shares of a regulated
investment company paying exempt-interest dividends generally will not be
deductible for federal and state income tax purposes to the extent attributable
to exempt-interest dividends. In addition, exempt-interest dividends are
included in determining the portion, if any, of a person's social security and
railroad retirement benefits that are subject to federal income taxes.
The Fund will send you information annually as to the U.S. tax consequences of
distributions made (or deemed made) during the year.
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E. CERTAIN TAX RULES APPLICABLE TO THE FUNDS' TRANSACTIONS
Certain regulated futures contracts and forward currency contracts are
considered "Section 1256 contracts" for federal income tax purposes. Section
1256 contracts held by the Fund at the end of each tax year are "marked to
market" and treated for federal income tax purposes as though sold for fair
market value on the last business day of the tax year. Gains or losses realized
by the Fund on Section 1256 contracts generally are considered 60% long-term and
40% short-term capital gains or losses. Application of these rules to Section
1256 contracts held by the Fund may alter the timing and character of
distributions to you.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 futures contract or other position entered into or held by the Fund in
conjunction with any other position held by the Fund may constitute a "straddle"
for federal income tax purposes. A straddle of which at least one, but not all,
the positions are Section 1256 contracts, may constitute a "mixed straddle." In
general, straddles are subject to certain rules that may affect the character
and timing of the Fund's gains and losses with respect to straddle positions by
requiring, among other things, that: (1) the loss realized on disposition of one
position of a straddle may not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such straddle; (2) the
Fund's holding period in straddle positions be suspended while the straddle
exists (possibly resulting in gain being treated as short-term capital gain
rather than long-term capital gain); (3) the losses recognized with respect to
certain straddle positions which are part of a mixed straddle and which are
non-Section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (4) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as
long-term capital losses; and (5) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to the Fund, which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by the Fund if all of the
offsetting positions consist of Section 1256 contracts.
F. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 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.
The Fund intends to make sufficient distributions of its ordinary taxable income
and capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax. Investors should note, however, that the Fund
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
G. SALE, EXCHANGE, OR REDEMPTION OF SHARES
In general, you will recognize gain or loss on the sale, exchange, or redemption
of shares of the Fund in an amount equal to the difference between the proceeds
of the sale,exchange, or redemption and your adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if you purchase
(for example, by reinvesting dividends) Fund shares or shares that are
substantially identical to Fund shares within 30 days before or after the sale,
exchange, or redemption (a so called "wash sale"). If disallowed, the loss will
be reflected in an upward adjustment to the basis of the shares purchased. In
general, any gain or loss arising from the sale or redemption of shares of the
Fund will be considered capital gain or loss and will be long-term capital gain
or loss if the shares were held for longer than one year. Any capital loss
arising from the sale, exchange, or redemption of shares held for six months or
less, however, will be disallowed to the extent of any exempt interest dividends
received with respect to those shares, and any portion of the loss that isn ot
disallowed will be treated as a long-term capital loss to the extent of the
amount of distributions of net capital gain received on such shares. In
determining the holding period of such shares for this purpose, any period
during which your risk of loss is offset by means of options, short sales or
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similar transactions is not counted. Capital losses in any year are deductible
only to the extent of capital gains plus, in the case of a non-corporate
taxpayer, $3,000 of ordinary income.
H. BACKUP WITHHOLDING
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide its correct taxpayer
identification number; (2) who, to the Fund's knowledge, has furnished an
incorrect number; (3) who is otherwisesubject to backup withholding;or (4) who
has failed to certify to the Fund that it is not subject to backup withholding
or that it is a corporation or other "exempt recipient." Backup withholding is
not an additional tax; any amounts so withheld may be credited against a
shareholder's federal income tax liability or refunded.
I. FOREIGN SHAREHOLDERS
Taxation of a shareholder who, under the Code, is a nonresident alien
individual, foreign trust or estate, foreign corporation or foreign partnership
("foreign shareholder"), depends on whether the income from the Fund is
"effectively connected" with a U.S. trade or business carried on by the foreign
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of ordinary income
(and short-term capital gains) paid to a foreign shareholder will be subject to
U.S. withholding tax at the rate of 30% (or a lower treaty rate), if applicable
upon the gross amount of the distribution. The foreign shareholder generally
would be exempt from U.S. federal income tax on gain realized on the sale of
shares of the Fund and distributions of net capital gain from the Fund.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income
distributions, capital gain distributions, and any gain realized upon the sale
of shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or U.S. corporations.
In the case of a non-corporate 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 U.S. federal income tax rules described above. These foreign
rules are not discussed herein. Foreign shareholders are urged to consult their
own tax advisors as to the consequences of foreign tax rules with respect to an
investment in the Fund.
J. STATE AND LOCAL TAXES
The tax rules of the various states of the United States and their local
jurisdictions with respect to distributions from the Fund can differ from the
U.S. federal income tax rules described above. Except for the Maryland state and
local tax rules specifically discussed herein, these state and local rules are
not discussed in this summary. Shareholders are urged to consult their tax
advisors as to the consequences of state and local tax rules with respect to an
investment in the Fund.
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K. MARYLAND TAXES
Distributions attributable to interest received or capital gains recognized by
the Fund on Maryland municipal obligations and certain U.S. government
obligations are generally exempt from Maryland state and local income taxes.
Distributions attributable to the Fund's other income or gains, however, are
generally subject to these taxes. Interest on indebtedness incurred by a
shareholder to purchase or carry Fund shares generally is not deductible for
purposes of Maryland state or local income tax.
Distributions of income derived from interest on Maryland municipal obligations
may not be exempt from taxation under the laws of states other than Maryland.
L. ALTERNATIVE MINIMUM TAX
To the extent the Fund receives interest on certain private activity bonds, a
proportionate part of the exempt-interest dividends paid by the Fund may be
treated as an item of tax preference for the Federal alternative minimum tax and
Maryland's tax on tax preference items. In addition to the preference item for
interest on private activity bonds, corporate shareholders must include the full
amount of exempt-interest dividends in computing tax preference items for
purposes of the alternative minimum tax.
9. OTHER MATTERS
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A. THE TRUST AND ITS SHAREHOLDERS
1. GENERAL INFORMATION
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:
Austin Global Equity Fund Investors Equity Fund
BrownIA Growth Equity Fund Investors Growth Fund
BrownIA Small-Cap Growth Fund Investors High Grade Bond Fund
BrownIA Maryland Bond Fund Maine TaxSaver Bond Fund
Daily Assets Cash Fund(1) Mastrapasqua Growth Value Fund
Daily Assets Government Fund(1) New Hampshire TaxSaver Bond Fund
Daily Assets Government Obligations Fund(1) Payson Balanced Fund
Daily Asset Municipal Fund(1) Payson Value Fund
Daily Assets Treasury Obligations Fund(1) Polaris Global Value Fund
Equity Index Fund TaxSaver Bond Fund
Investors Bond Fund The Advocacy Fund
(1) The Trust offers shares of beneficial interest in an institutional,
institutional service, and investor share class of these series.
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, the Funds' investment adviser and the principal underwriter have
adopted codes of ethics under Rule 17j-1, as amended, of the 1940 Act. These
codes permit personnel subject to the codes to invest in securities, including
securities that may be purchased or held by the Fund.
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 its
expenses will effect each class' performance.
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 series or class (and certain other expenses
such as transfer agency, shareholder service and administration expenses) are
borne solely by those shares and each series or class votes separately with
respect to the provisions of any Rule 12b-1 plan which pertains to the series or
class and other matters for which separate series or 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 series or classes
of the Trust and thus only those such series or 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.
Shareholders representing 10% or more of the Trust's (or a series') 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. Generally, such terminations
must be approved by the vote of the holders of a majority of the outstanding
shares of the Trust or the Fund. The Trustees, may, without prior shareholder
approval change the form of organization of the Trust by merger, consolidation
or incorporation. Under the Trust Instrument, the Trustees may, without
shareholder vote, cause the Trust or certain series 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. FUND OWNERSHIP
As of Decembeer 18, 2000, the officers and Trustees of the Trust, as a group,
owned less than 1% of the 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. As of December 18, 2000, and
prior to the public offering of the Fund, Forum Financial Group, LLC or its
affiliates, beneficially owned 100% of the Fund and may be deemed to control the
Fund. "Control" for this purpose is the ownership of 25% or more of the Fund's
voting securities. It is not expected that Forum Financial Group, LLC will
continue to control the Fund after its public offering.
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6. 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 states may decline to apply Delaware law on this point. The Trust's 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's 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.
FAdS believes that, in view of the above, there is no risk of personal liability
to shareholders.
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.
7. 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.
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.
B. 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.
C. FINANCIAL STATEMENTS
Financial statements are not available because the Fund had not commenced
operations prior to the date of this SAI.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
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BONDS (INCLUDING CONVERTIBLE BONDS)
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 which 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 which 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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STANDARD & 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 which
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 which are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities;
A-2
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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.
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.
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
A-3
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to changes in circumstances or in economic conditions than is the case
for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
CCC
CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal imminent
default.
DDD
DD, D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% - 90%
of such outstanding amounts, and `D' the lowest recovery potential,
i.e. below 50%.
PREFERRED STOCK
MOODY'S INVESTORS SERVICE
AAA An issue which 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 which 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 which 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.
A-4
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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 which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
CAA An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
CA An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
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.
STANDARD & POOR'S CORPORATION
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.
A-5
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N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
SHORT TERM RATINGS
MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that
the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than obligations in higher rating categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
satisfactory.
A-6
<PAGE>
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 which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation.
D A short-term obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for timely
repayment under Fitch IBCA's national rating scale for that country,
relative to other obligations in the same country. This rating is
automatically assigned to all obligations issued or guaranteed by the
sovereign state. Where issues possess a particularly strong credit
feature, a "+" is added to the assigned rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the relative
degree of risk is slightly higher than for issues classified as `A1'
and capacity for timely repayment may be susceptible to adverse change
sin business, economic, or financial conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is more
susceptible to adverse changes in business, economic, or financial
conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is uncertain
relative to other obligors in the same country. The capacity for timely
repayment is susceptible to adverse changes in business, economic, or
financial conditions.
C Obligations for which there is a high risk of default to other obligors
in the same country or which are in default.
A-7
<PAGE>
APPENDIX B - MISCELLANEOUS TABLES
--------------------------------------------------------------------------------
TABLE 1 - INVESTMENT ADVISORY FEES
The following table shows the dollar amount of fees payable to the Adviser with
respect to the Fund, the amount of fee that was waived by the Adviser, if any,
and the actual fees received by the Adviser.
<TABLE>
<S> <C> <C>
ADVISORY FEE PAYABLE ADVISORY FEE WAIVED ADVISORY FEE RETAINED
Advisory fee information is not provided because the Fund had not commenced
operations prior to the date of this SAI.
TABLE 2 - ADMINISTRATION FEES
The following table shows the dollar amount of fees payable to FAdS with respect
to the Fund, the amount of fee that was waived by FAdS, if any, and the actual
fees received by FAdS.
ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
PAYABLE WAIVED RETAINED
Administration fee information is not provided because the Fund had not
commenced operations prior to the date of this SAI.
TABLE 3 - ACCOUNTING FEES
The following table shows the dollar amount of fees paid to FAcS with respect to
the Fund, the amount of fee that was waived by FAcS, if any, and the actual fees
received by FAcS.
ACCOUNTING FEE PAYABLE ACCOUNTING FEE WAIVED ACCOUNTING FEE RETAINED
Accounting fee information is not provided because the Fund had not commenced
operations prior to the date of this SAI.
TABLE 4 - TRANSFER AGENCY FEES
The following table shows the dollar amount of fees payable to FSS with respect
to the Fund, the amount of fee that was waived by FSS, if any, and the actual
fees received by FSS.
TRANSFER AGENCY FEE TRANSFER AGENCY FEE TRANSFER AGENCY FEE
PAYABLE WAIVED RETAINED
</TABLE>
Transfer agency fee information is not provided because the Fund had not
commenced operations prior to the date of this SAI.
B-1
<PAGE>
TABLE 5 - COMMISSIONS
The following table shows the brokerage commissions of the Fund. The data is for
the past three fiscal years (or shorter period if the Fund has been in operation
for a shorter period).
<TABLE>
<S> <C> <C> <C>
TOTAL BROKERAGE % OF BROKERAGE
COMMISSIONS ($) COMMISSIONS % OF
PAID TO AN PAID TO AN TRANSACTIONS
TOTAL BROKERAGE AFFILIATE OF AFFILIATE OF EXECUTED BY AN
COMMISSIONS ($) THE FUND OR THE FUND OR AFFILIATE OF THE
ADVISER ADVISER FUND OR ADVISER
</TABLE>
Brokerage commission information is not provided because the Fund had not
commenced operations prior to the date of this SAI.
TABLE 6 - SECURITIES OF REGULAR BROKERS OR DEALERS
The following table lists the regular brokers and dealers of the Fund whose
securities (or the securities of the parent company) were acquired during the
past fiscal year and the aggregate value of the Fund's holdings of those
securities as of the Fund's most recent fiscal year.
REGULAR BROKER OR DEALER VALUE HELD
Information regarding securities positions held in the securities of regular
brokers and dealers of the Fund is not included as the Fund had not commenced
operations prior to the date of this SAI.
B-2
<PAGE>
APPENDIX C - PERFORMANCE DATA
--------------------------------------------------------------------------------
TABLE 1 - TOTAL RETURNS & 30 DAY YIELDS
Performance information is not provided because the Fund had not commenced
operations prior to the date of this SAI.
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant as amended and restated on August 14, 2000
(Exhibit incorporated by reference as filed as Exhibit (a) in
post-effective amendment No. 83 via EDGAR on September 29, 2000, accession
number 0001004402-00-000327).
(b) By-Laws of Registrant (Exhibit incorporated by reference as filed as
Exhibit (2) in post-effective amendment No. 43 via EDGAR on July 31, 1997,
accession number 0000912057-97-025707).
(c) See Sections 2.04 and 2.07 of the Trust Instrument as filed as Exhibit (a).
(d) (1) Investment Advisory Agreement between Registrant and H.M. Payson &
Co. relating to Payson Value Fund and Payson Balanced Fund dated
December 18, 1995 (Exhibit incorporated by reference as filed as
Exhibit (5)(a) in post-effective amendment No. 62 via EDGAR on May 26,
1998, accession number 0001004402-98-000307).
(2) Investment Advisory Agreement between Registrant and Austin Investment
Management, Inc. relating to Austin Global Equity Fund dated as of
June 14, 1996 (Exhibit incorporated by reference as filed as Exhibit
(5)(d) in post-effective amendment No. 62 via EDGAR on May 26, 1998,
accession number 0001004402-98-000307).
(3) Investment Advisory Agreement between Registrant and Forum Investment
Advisors, LLC relating to Investors Bond Fund, Investors Growth Fund,
Investors High Grade Bond Fund, Maine TaxSaver Bond Fund, New
Hampshire TaxSaver Bond Fund and TaxSaver Bond Fund dated as of
January 2, 1998 (Exhibit incorporated by reference as filed as Exhibit
(5)(p) in post-effective amendment No. 56 via EDGAR on December 31,
1997, accession number 0001004402-97-000281).
(4) Investment Advisory Agreement between Registrant and Polaris Capital
Management, Inc. dated as of June 1, 1998 (Exhibit incorporated by
reference as filed as Exhibit (5)(h) in post-effective amendment No.
63 via EDGAR on June 8, 1998, accession number 0001004402-98-000339).
(5) Investment Advisory Agreement between Registrant and Brown Investment
Advisory & Trust Company relating to BrownIA Small-Cap Growth Fund and
BrownIA Growth Equity Fund dated as of June 29, 1999 (Exhibit
incorporated by reference as filed as Exhibit (d)(7) in post-effective
amendment No. 73 via EDGAR on July 30, 1999, accession number
0001004402-99-000341).
(6) Investment Advisory Agreement between Registrant and Mastrapasqua &
Associates relating to Mastrapasqua Growth Value Fund dated July 1,
2000 (Exhibit incorporated by reference as filed as Exhibit (d)(8) in
post-effective amendment No. 81 via EDGAR on July 31, 2000, accession
number 0001004402-00-000261).
(7) Investment Advisory Agreement between Registrant and Trillium Asset
Management Corporation relating to The Advocacy Fund dated as of July
26, 2000 (Exhibit incorporated by reference as filed as Exhibit (d)(9)
in post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
(8) Investment Advisory Agreement between Registrant and The Stratevest
Group, N.A. relating to Investors Equity Fund, dated as of August 14,
2000 (Exhibit incorporated by reference as filed as Exhibit (d)(8) in
post-effective amendment No. 83 via EDGAR on September 29, 2000,
accession number 0001004402-00-000327).
(9) Form of Investment Advisory Agreement between Registrant and Brown
Advisory Incorporated relating to BrownIA Maryland Bond Fund (filed
herewith).
1
<PAGE>
(e) (1) Form of Selected Dealer Agreement between Forum Financial
Services, Inc. and securities brokers (Exhibit incorporated by
reference as filed as Exhibit (6)(a) in post-effective amendment No.
62 via EDGAR on May 26, 1998, accession number 0001004402-98-000307).
(2) Form of Bank Affiliated Selected Dealer Agreement between Forum
Financial Services, Inc. and bank affiliates (Exhibit incorporated by
reference as filed as Exhibit (6)(b) in post-effective amendment No.
62 via EDGAR on May 26, 1998, accession number 0001004402-98-000307).
(3) Distribution Agreement between Registrant and Forum Fund Services, LLC
relating to, Austin Global Equity Fund, BrownIA Small-Cap Growth Fund,
BrownIA Growth Equity Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Maine TaxSaver Bond Fund, Mastrapasqua Growth Value Fund,
New Hampshire TaxSaver Bond Fund, Payson Balanced Fund, Payson Value
Fund, Polaris Global Value Fund, TaxSaver Bond Fund, The Advocacy
Fund, and Investor Shares, Institutional Shares and Institutional
Service Shares of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund dated as of February
28, 1999 (Exhibit incorporated by reference as filed as Exhibit (e)(3)
in post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
(4) Form of Distribution Agreement between Registrant and Forum Fund
Services, LLC relating to, Austin Global Equity Fund, BrownIA
Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA Maryland
Bond Fund, Equity Index Fund, Investors Bond Fund, Investors Equity
Fund, Investors Growth Fund, Investors High Grade Bond Fund, Maine
TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New Hampshire
TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris
Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and Investor
Shares, Institutional Shares and Institutional Service Shares of Daily
Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund, Daily Assets Cash Fund and Daily
Assets Municipal Fund (Exhibit incorporated by reference as filed as
Exhibit (e)(4) in post-effective amendment No. 84 via EDGAR on October
17, 2000, accession number 0001004402-00-000346).
(f) None.
(g) (1) Custodian Agreement between Registrant and Forum Trust, LLC
relating to Austin Global Equity Fund, BrownIA Small-Cap Growth Fund,
BrownIA Growth Equity Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Maine TaxSaver Bond Fund, Mastrapasqua Growth Value Fund,
New Hampshire TaxSaver Bond Fund, Payson Balanced Fund, Payson Value
Fund, Polaris Global Value Fund, TaxSaver Bond Fund, The Advocacy
Fund, and Investor Shares, Institutional Shares and Institutional
Service Shares of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund (Exhibit incorporated
by reference as filed as Exhibit (g)(1) in post-effective amendment
No. 82 via EDGAR on August 14, 2000, accession number
0001004402-00-000283).
(2) Form of Custodian Agreement between Registrant and Forum Trust, LLC
dated May 12, 1999 relating to Austin Global Equity Fund, BrownIA
Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA Maryland
Bond Fund, Equity Index Fund, Investors Bond Fund, Investors Equity
Fund, Investors Growth Fund, Investors High Grade Bond Fund, Maine
TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New Hampshire
TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris
Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and Investor
2
<PAGE>
Shares, Institutional Shares and Institutional Service Shares of Daily
Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund, Daily Assets Cash Fund and Daily
Assets Municipal Fund (Exhibit incorporated by reference as filed as
Exhibit (g)(2) in post-effective amendment No. 84 via EDGAR on October
17, 2000, accession number 0001004402-00-000346).
(3) Master Custodian Agreement between Forum Trust, LLC and Bankers Trust
Company relating to Austin Global Equity Fund, BrownIA Small-Cap
Growth Fund, BrownIA Growth Equity Fund, Equity Index Fund, Investors
Bond Fund, Investors Equity Fund, Investors Growth Fund, Investors
High Grade Bond Fund, Maine TaxSaver Bond Fund, Mastrapasqua Growth
Value Fund, New Hampshire TaxSaver Bond Fund, Payson Balanced Fund,
Payson Value Fund, Polaris Global Value Fund, TaxSaver Bond Fund, The
Advocacy Fund, and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Treasury Obligations
Fund, Daily Assets Government Fund, Daily Assets Government
Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal
Fund dated April 20, 1999 (Exhibit incorporated by reference as filed
as Exhibit (g)(2) in post-effective amendment No. 82 via EDGAR on
August 14, 2000, accession number 0001004402-00-000283).
(4) Form of Master Custodian Agreement between Forum Trust, LLC and
Bankers Trust Company relating to Austin Global Equity Fund, BrownIA
Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA Maryland
Bond Fund, Equity Index Fund, Investors Bond Fund, Investors Equity
Fund, Investors Growth Fund, Investors High Grade Bond Fund, Maine
TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New Hampshire
TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris
Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and Investor
Shares, Institutional Shares and Institutional Service Shares of Daily
Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund, Daily Assets Cash Fund and Daily
Assets Municipal Fund (Exhibit incorporated by reference as filed as
Exhibit (g)(4) in post-effective amendment No. 84 via EDGAR on October
17, 2000, accession number 0001004402-00-000346).
(h) (1) Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Austin Global Equity Fund,
BrownIA Small-Cap Growth Fund, BrownIA Growth Equity Fund, Equity
Index Fund, Investors Bond Fund, Investors Equity Fund, Investors
Growth Fund, Investors High Grade Bond Fund, Maine TaxSaver Bond Fund,
Mastrapasqua Growth Value Fund, New Hampshire TaxSaver Bond Fund,
Payson Balanced Fund, Payson Value Fund, Polaris Global Value Fund,
TaxSaver Bond Fund, The Advocacy Fund, and Investor Shares,
Institutional Shares and Institutional Service Shares of Daily Assets
Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets
Government Obligations Fund, Daily Assets Cash Fund and Daily Assets
Municipal Fund dated as of June 19, 1997 and amended as of December 5,
1997 (Exhibit incorporated by reference as filed as Exhibit (h)(1) in
post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
(2) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Austin Global Equity Fund,
BrownIA Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA
Maryland Bond Fund, Equity Index Fund, Investors Bond Fund, Investors
Equity Fund, Investors Growth Fund, Investors High Grade Bond Fund,
Maine TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New
Hampshire TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund,
Polaris Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Treasury Obligations Fund, Daily Assets Government
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund (Exhibit incorporated by reference as
filed as Exhibit (h)(2) in post-effective amendment No. 84 via EDGAR
on October 17, 2000, accession number 0001004402-00-000346).
3
<PAGE>
(3) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC relating to Austin Global Equity Fund, BrownIA Small-Cap
Growth Fund, BrownIA Growth Equity Fund, Equity Index Fund, Investors
Bond Fund, Investors Equity Fund, Investors Growth Fund, Investors
High Grade Bond Fund, Maine TaxSaver Bond Fund, Mastrapasqua Growth
Value Fund, New Hampshire TaxSaver Bond Fund, Payson Balanced Fund,
Payson Value Fund, Polaris Global Value Fund, TaxSaver Bond Fund, The
Advocacy Fund, and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Treasury Obligations
Fund, Daily Assets Government Fund, Daily Assets Government
Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal
Fund dated as of June 19, 1997, as amended December 5, 1997 (Exhibit
incorporated by reference as filed as Exhibit (h)(2) in post-effective
amendment No. 82 via EDGAR on August 14, 2000, accession number
0001004402-00-000283).
(4) Form of Fund Accounting Agreement between Registrant and Forum
Accounting Services, LLC relating to Austin Global Equity Fund,
BrownIA Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA
Maryland Bond Fund, Equity Index Fund, Investors Bond Fund, Investors
Equity Fund, Investors Growth Fund, Investors High Grade Bond Fund,
Maine TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New
Hampshire TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund,
Polaris Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Treasury Obligations Fund, Daily Assets Government
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund (Exhibit incorporated by reference as
filed as Exhibit (h)(4) in post-effective amendment No. 84 via EDGAR
on October 17, 2000, accession number 0001004402-00-000346).
(5) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC relating to Austin Global Equity Fund,
BrownIA Small-Cap Growth Fund, BrownIA Growth Equity Fund, Equity
Index Fund, Investors Bond Fund, Investors Equity Fund, Investors
Growth Fund, Investors High Grade Bond Fund, Maine TaxSaver Bond Fund,
Mastrapasqua Growth Value Fund, New Hampshire TaxSaver Bond Fund,
Payson Balanced Fund, Payson Value Fund, Polaris Global Value Fund,
TaxSaver Bond Fund, The Advocacy Fund, and Investor Shares,
Institutional Shares and Institutional Service Shares of Daily Assets
Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets
Government Obligations Fund, Daily Assets Cash Fund and Daily Assets
Municipal Fund dated as of May 19, 1998, as amended May 21, 1999
(Exhibit incorporated by reference as filed as Exhibit (h)(3) in
post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
(6) Form of Transfer Agency and Services Agreement between Registrant and
Forum Shareholder Services, LLC relating to Austin Global Equity Fund,
BrownIA Small-Cap Growth Fund, BrownIA Growth Equity Fund, BrownIA
Maryland Bond Fund, Equity Index Fund, Investors Bond Fund, Investors
Equity Fund, Investors Growth Fund, Investors High Grade Bond Fund,
Maine TaxSaver Bond Fund, Mastrapasqua Growth Value Fund, New
Hampshire TaxSaver Bond Fund, Payson Balanced Fund, Payson Value Fund,
Polaris Global Value Fund, TaxSaver Bond Fund, The Advocacy Fund, and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Treasury Obligations Fund, Daily Assets Government
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund (Exhibit incorporated by reference as
filed as Exhibit (h)(6) in post-effective amendment No. 84 via EDGAR
on October 17, 2000, accession number 0001004402-00-000346).
(7) Shareholder Service Plan of Registrant dated December 5, 1997 and Form
of Shareholder Service Agreement relating to the Daily Assets Treasury
Obligations Fund, Daily Assets Government Fund, Daily Assets
Government Obligations Fund, Daily Assets Cash Fund and Daily Assets
Municipal Fund (Exhibit incorporated by reference as filed as Exhibit
(9)(c) in post-effective amendment No. 50 via EDGAR on November 12,
1997, accession number 0001004402-97-000189).
4
<PAGE>
(8) Shareholder Service Plan of Registrant dated March 18, 1998 and Form
of Shareholder Service Agreement relating to Polaris Global Value Fund
(Exhibit incorporated by reference as filed as Exhibit (9)(d) in
post-effective amendment No. 65 via EDGAR on September 30, 1998,
accession number 0001004402-98-000530).
(9) Shareholder Service Plan of Registrant dated March 1, 2000 relating to
BrownIA Small Cap Growth Fund, and BrownIA Growth Equity Fund (Exhibit
incorporated by reference as filed as Exhibit (9)(d) in post-effective
amendment No. 78 via EDGAR on April 17, 2000, accession number
0001004402-00-000112).
(10) Form of Shareholder Service Plan of Registrant relating to BrownIA
Small Cap Growth Fund, BrownIA Growth Equity Fund and BrownIA Maryland
Bond Fund (Exhibit incorporated by reference as filed as Exhibit
(h)(10) in post-effective amendment No. 84 via EDGAR on October 17,
2000, accession number 0001004402-00-000346).
(11) Shareholder Service Plan of Registrant dated July 1, 2000 related to
Mastrapasqua Growth Value Fund (Exhibit incorporated by reference as
filed as Exhibit (h)(7) in post-effective amendment No. 82 via EDGAR
on August 14, 2000, accession number 0001004402-00-000283).
(i) (1) Opinion of Seward & Kissel LLP dated January 5, 1996 (Exhibit
incorporated by reference as filed as Exhibit (10)(a) in
post-effective amendment No. 33 via EDGAR on January 5, 1996,
accession number 0000912057-96-000216).
(2) Consent of Seward & Kissel LLP dated June 14, 2000 (Exhibit
incorporated by reference as filed as Exhibit (i)(2) in post-effective
amendment No. 80 via EDGAR on June 30, 2000, accession number
0001004402-00-000233).
(j) None.
(k) None.
(l) Investment Representation letter of Reich & Tang, Inc. as original
purchaser of shares of Registrant (Exhibit incorporated by reference as
filed as Exhibit (13) in post-effective amendment No. 62 via EDGAR on May
26, 1998, accession number 0001004402-98-000307).
(m) (1) Rule 12b-1 Plan effective January 1, 1999 adopted by the Investor
Shares of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily Asset
Cash Fund and Daily Assets Municipal Fund (Exhibit incorporated by
reference as filed as Exhibit (15)(b) in post-effective amendment No.
69 via EDGAR on December 15, 1998, accession number
0001004402-98-000648).
(2) Rule 12b-1 Plan effective August 15, 2000 adopted by The Advocacy Fund
(Exhibit incorporated by reference as filed as Exhibit (m)(2) in
post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
(n) 18f-3 plan adopted by Registrant (Exhibit incorporated by reference as
filed as Exhibit (18) in post-effective amendment No. 62 via EDGAR on May
26, 1998, accession number 0001004402-98-000307).
(p) (1) Code of Ethics adopted by Registrant (Exhibit incorporated by
reference as filed as Exhibit (p)(1) in post-effective amendment No.
83 via EDGAR on September 29, 2000, accession number
0001004402-00-000327).
(2) Code of Ethics adopted by Brown Investment Advisory & Trust Company
and Brown Advisory Incorporated (Exhibit incorporated by reference as
filed as Exhibit (p)(2) in post-effective amendment No. 83 via EDGAR
on September 29, 2000, accession number 0001004402-00-000327).
(3) Code of Ethics adopted by H.M. Payson & Co (Exhibit incorporated by
reference as filed as Exhibit (p)(3) in post-effective amendment No.
83 via EDGAR on September 29, 2000, accession number
0001004402-00-000327).
5
<PAGE>
(4) Code of Ethics adopted by Austin Investment Management, Inc. (Exhibit
incorporated by reference as filed as Exhibit (p)(4) in post-effective
amendment No. 82 via EDGAR on August 14, 2000, accession number
0001004402-00-000283).
(5) Code of Ethics adopted by Forum Fund Services, LLC and Forum
Investment Advisors, LLC (Exhibit incorporated by reference as filed
as Exhibit (p)(5) in post-effective amendment No. 78 via EDGAR on
April 17, 2000, accession number 0001004402-00-000112).
(6) Code of Ethics adopted by Polaris Capital Management, Inc. (Exhibit
incorporated by reference as filed as Exhibit (p)(6) in post-effective
amendment No. 82 via EDGAR on August 14, 2000, accession number
0001004402-00-000283).
(7) Code of Ethics adopted by The Stratevest Group, N.A. (Exhibit
incorporated by reference as filed as Exhibit (p)(7) in post-effective
amendment No. 82 via EDGAR on August 14, 2000, accession number
0001004402-00-000283).
(8) Code of Ethics adopted by Wells Capital Management Incorporated
(Exhibit incorporated by reference as filed as Exhibit (p)(8) in
post-effective amendment No. 78 via EDGAR on April 17, 2000, accession
number 0001004402-00-000112).
(9) Code of Ethics adopted by Wells Fargo Bank N.A. (Exhibit incorporated
by reference as filed as Exhibit (p)(9) in post-effective amendment
No. 78 via EDGAR on April 17, 2000, accession number
0001004402-00-000112).
(10) Joint Code of Ethics adopted by Wells Fargo Funds Trust, Wells Fargo
Variable Trust and Wells Fargo Core Trust (Exhibit incorporated by
reference as filed as Exhibit (p)(10) in post-effective amendment No.
78 via EDGAR on April 17, 2000, accession number
0001004402-00-000112).
(11) Code of Ethics adopted by Mastrapasqua & Associates (Exhibit
incorporated by reference as filed as Exhibit (p)(11) in
post-effective amendment No. 79 via EDGAR on May 31, 2000, accession
number 0001004402-00-000185).
(12) Code of Ethics adopted by Trillium Asset Management Corporation
(Exhibit incorporated by reference as filed as Exhibit (p)(12) in
post-effective amendment No. 82 via EDGAR on August 14, 2000,
accession number 0001004402-00-000283).
Other Exhibits:
(A) Power of Attorney for James C. Cheng, Costas Azariadis and J. Michael
Parish, Trustees of Registrant (Exhibit incorporated by reference as filed
as Other Exhibit in post-effective amendment No. 34 via EDGAR on May 9,
1996, accession number 0000912057-96-008780).
(B) Power of Attorney for John Y. Keffer, Trustee of Registrant (Exhibit
incorporated by reference as filed as Other Exhibit in post-effective
amendment No. 65 via EDGAR on September 30, 1998, accession number
0001004402-98-000530).
(C) Power of Attorney for John Y. Keffer, James C. Cheng, Costas Azariadis and
J. Michael Parish, Trustees of Core Trust (Delaware) (Exhibit incorporated
by reference as filed as Other Exhibit in post-effective amendment No. 15
to the registration statement of Monarch Funds via EDGAR on December 19,
1997, accession number 0001004402-97-000264).
(D) Powers of Attorney for the Trustees of Wells Fargo Core Trust (Exhibit
incorporated by reference as filed as exhibits (j)(1), (j)(2), (j)(3),
(j)(4), (j)(5), (j)(6), (j)(7), (j)(8), (j)(9), (j)(10), (j)(11) and
(j)(12) as filed in post-effective amendment No. 10 to the registration
statement of Wells Fargo Funds Trust via EDGAR on May 10, 2000, accession
number 0000925421-00-000034).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUNDS
Daily Assets Treasury Obligations Fund, Daily Assets Government Fund
and Daily Assets Municipal Fund may be deemed to control Treasury Cash
Portfolio, Government Portfolio and Municipal Cash Portfolio,
respectively, each a series of Core Trust (Delaware).
6
<PAGE>
ITEM 25. INDEMNIFICATION
In accordance with Section 3803 of the Delaware Business Trust Act,
Section 10.02 of Registrant's Trust Instrument provides as follows:
"10.02. INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
"(i) Every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of being or having
been a Trustee or officer and against amounts paid or incurred by him
in the settlement thereof;
(ii) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) Who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
Covered Person's office or (B) not to have acted in good faith in the
reasonable belief that Covered Person's action was in the best interest
of the Trust; or
(ii) In the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Trustee's or officer's office,
(A) By the court or other body approving the
settlement;
(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or
(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full
trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 5.2 may be paid by the Trust
or Series from time to time prior to final disposition thereof upon
7
<PAGE>
receipt of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust or Series if it is
ultimately determined that he is not entitled to indemnification under
this Section 5.2; provided, however, that either (a) such Covered
Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance
payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Section 5.2.
(e) Conditional advancing of indemnification monies under this Section
5.2 for actions based upon the 1940 Act may be made only on the
following conditions: (i) the advances must be limited to amounts used,
or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or
on behalf of, the recipient to repay that amount of the advance which
exceeds that amount which it is ultimately determined that he is
entitled to receive from the Trust by reason of indemnification; and
(iii) (a) such promise must be secured by a surety bond, other suitable
insurance or an equivalent form of security which assures that any
repayments may be obtained by the Trust without delay or litigation,
which bond, insurance or other form of security must be provided by the
recipient of the advance, or (b) a majority of a quorum of the Trust's
disinterested, non-party Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
(f) In case any Holder or former Holder of any Series shall be held to
be personally liable solely by reason of the Holder or former Holder
being or having been a Holder of that Series and not because of the
Holder or former Holder acts or omissions or for some other reason, the
Holder or former Holder (or the Holder or former Holder's heirs,
executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust, on behalf of
the affected Series, shall, upon request by the Holder, assume the
defense of any claim made against the Holder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the
Series."
With respect to indemnification of an adviser to the Trust, the
Investment Advisory Agreements between the Trust and Austin Investment
Management, Inc., H.M. Payson & Co., and Forum Investment Advisers,
LLC include language similar to the following:
"SECTION 4. STANDARD OF CARE. We shall expect of you, and you will give
us the benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking these
services that you shall not be liable hereunder for any mistake of
judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to
protect, you against any liability to us or to our security holders to
which you would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of your duties
hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder."
With respect to indemnification of an adviser to the Trust, the
Investment Advisory Agreements between the Trust and Polaris Capital
Management, Inc., Mastrapasqua & Associates, Brown Investment Advisors
& Trust Company, Brown Advisory Incorporated and Trillium Asset
Management Corporation provide similarly as follows:
8
<PAGE>
"SECTION 5. STANDARD OF CARE. (a) The Trust shall expect of the
Adviser, and the Adviser will give the Trust the benefit of, the
Adviser's best judgment and efforts in rendering its services to the
Trust. The Adviser shall not be liable hereunder for error of judgment
or mistake of law or in any event whatsoever, except for lack of good
faith, provided that nothing herein shall be deemed to protect, or
purport to protect, the Adviser against any liability to the Trust or
to the Trust's security holders to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of the Adviser's duties hereunder, or by reason of
the Adviser's reckless disregard of its obligations and duties
hereunder. (b) The Adviser shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control including, without limitation, acts of
civil or military authority, national emergencies, labor difficulties
(other than those related to the Adviser's employees), fire, mechanical
breakdowns, flood or catastrophe, acts of God, insurrection, war, riots
or failure of the mails, transportation, communication or power supply.
With respect to indemnification of the underwriter of the Trust,
Section 8 of the Distribution Agreement provides:
"(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls
the Distributor within the meaning of section 15 of the Securities Act
or section 20 of the 1934 Act ("Distributor Indemnitees") free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims, demands,
actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectuses or arising
out of or based upon any alleged omission to state a material fact
required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection with the preparation of
the Registration Statement or exhibits to the Registration Statement by
or on behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Trust shall indemnify and hold each Distributor Indemnitee
free and harmless from and against any Distributor Claim; provided,
that the term Distributor Claim for purposes of this sentence shall
mean any Distributor Claim related to the matters for which the
Distributor has requested amendment to the Registration Statement and
for which the Trust has not filed a Required Amendment, regardless of
with respect to such matters whether any statement in or omission from
the Registration Statement was made in reliance upon, or in conformity
with, information furnished to the Trust by or on behalf of the
Distributor.
(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the
Trust and approved by the Distributor, which approval shall not be
withheld unreasonably. The Trust shall advise the Distributor that it
will assume the defense of the suit and retain counsel within ten (10)
days of receipt of the notice of the claim. If the Trust assumes the
defense of any such suit and retains counsel, the defendants shall bear
the fees and expenses of any additional counsel that they retain. If
the Trust does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Trust or has been
advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust
will reimburse any Distributor Indemnitee named as defendant in such
suit for the reasonable fees and expenses of any counsel that person
retains. A Distributor Indemnitee shall not settle or confess any claim
without the prior written consent of the Trust, which consent shall not
be unreasonably withheld or delayed.
9
<PAGE>
(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"),
free and harmless from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable
counsel fees incurred in connection therewith), but only to the extent
that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other
expenses result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus or any alleged omission of a
material fact required to be stated or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust in writing in connection with the preparation of the Registration
Statement or Prospectus by or on behalf of the Distributor; or
(ii) any act of, or omission by, the Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement ("Trust Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Trust Claim and may retain counsel of good standing chosen
by the Distributor and approved by the Trust, which approval shall not
be withheld unreasonably. The Distributor shall advise the Trust that
it will assume the defense of the suit and retain counsel within ten
(10) days of receipt of the notice of the claim. If the Distributor
assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel
that they retain. If the Distributor does not assume the defense of any
such suit, or if the Trust does not approve of counsel chosen by the
Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to
the Distributor, the Distributor will reimburse any Trust Indemnitee
named as defendant in such suit for the reasonable fees and expenses of
any counsel that person retains. A Trust Indemnitee shall not settle or
confess any claim without the prior written consent of the Distributor,
which consent shall not be unreasonably withheld or delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a
Distributor Indemnitee or Trust Indemnitee, respectively, by the person
against whom such action is brought within twenty (20) days after the
summons or other first legal process is served. Such notice shall refer
to the person or persons against whom the action is brought. The
failure to provide such notice shall not relieve the party entitled to
such notice of any liability that it may have to any Distributor
Indemnitee or Trust Indemnitee except to the extent that the ability of
the party entitled to such notice to defend such action has been
materially adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Distributor Indemnitee or Trust Indemnitee and shall survive the sale
and redemption of any Shares made pursuant to subscriptions obtained by
the Distributor. The indemnification provisions of this Section will
inure exclusively to the benefit of each person that may be a
Distributor Indemnitee or Trust Indemnitee at any time and their
respective successors and assigns (it being intended that such persons
be deemed to be third party beneficiaries under this Agreement).
(g) Each party agrees promptly to notify the other party of the
commencement of any litigation or proceeding of which it becomes aware
arising out of or in any way connected with the issuance or sale of
Shares.
10
<PAGE>
(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organic Documents or any applicable
statute or regulation or shall require the Distributor to take any
action contrary to any provision of its Articles of Incorporation or
Bylaws or any applicable statute or regulation; provided, however, that
neither the Trust nor the Distributor may amend their Organic Documents
or Articles of Incorporation and Bylaws, respectively, in any manner
that would result in a violation of a representation or warranty made
in this Agreement.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or its security holders
to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Forum Investment Advisors, LLC
The description of Forum Investment Advisors, LLC (investment adviser
to Investors High Grade Bond Fund, Investors Bond Fund, Investors
Growth Fund, Maine TaxSaver Bond Fund, New Hampshire TaxSaver Bond
Fund, TaxSaver Bond Fund and the Institutional, Institutional Service
and Investor Shares of Daily Assets Treasury Obligations Fund, Daily
Assets Government Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund) contained in Parts A
and B of post-effective amendment No. 81 (accession number
0001004402-00-000261) to the Trust's Registration Statement, is
incorporated by reference herein.
The following are the members of Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101, including their business
connections, which are of a substantial nature.
Forum Holdings Corp. I., Manager
Forum Trust, LLC, Member.
Both Forum Holdings Corp. I. and Forum Trust, LLC are controlled
indirectly by John Y. Keffer, Chairman and President of the
Registrant. Mr. Keffer is Director and President of Forum Trust, LLC
and Director of Forum Financial Group, LLC. Mr. Keffer is also a
director and/or officer of various registered investment companies for
which the various operating subsidiaries of Forum Financial Group, LLC
provide services.
The following are the officers of Forum Investment Advisors, LLC,
including their business connections that are of a substantial nature.
Each officer may serve as an officer of various registered investment
companies for which the Forum Financial Group provides services.
<TABLE>
<S> <C> <C>
Name Title Business Connection
.................................... ................................... ..................................
David I. Goldstein Director Forum Investment Advisors, LLC
................................... ..................................
Secretary Forum Financial Group, LLC
................................... ..................................
Officer Other Forum affiliated companies
.................................... ................................... ..................................
Marc D. Keffer Assistant Secretary Forum Investment Advisors, LLC
................................... ..................................
Corporate Counsel Forum Financial Group, LLC
................................... ..................................
Officer Other Forum affiliated companies
.................................... ................................... ..................................
Ronald Hirsch Treasurer Forum Investment Advisors, LLC
................................... ..................................
Treasurer Forum Financial Group, LLC
................................... ..................................
Officer Other Forum affiliated companies
11
<PAGE>
(b) H.M. Payson & Co.
The description of H.M. Payson & Co. (investment adviser to Payson
Value Fund, Payson Balanced Fund) contained in Parts A and B of
post-effective amendment No. 81 to the Trust's Registration Statement
(accession number 0001004402-00-000261), is incorporated by reference
herein.
The following are the directors and principal executive officers of
H.M. Payson & Co., including their business connections, which are of
a substantial nature. The address of H.M. Payson & Co. is One Portland
Square, Portland, Maine 04101.
Name Title Business Connection
..................................... .................................. ...................................
Adrian L. Asherman Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
John C. Downing Managing Director, Treasurer H.M. Payson & Co.
..................................... .................................. ...................................
Thomas M. Pierce Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
Peter E. Robbins Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
John H. Walker Managing Director, President H.M. Payson & Co.
..................................... .................................. ...................................
Teresa M. Esposito Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
John C. Knox Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
Harold J. Dixon Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
Michael R. Currie Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
William O. Hall, III Managing Director H.M. Payson & Co.
..................................... .................................. ...................................
William N. Weikert Managing Director H.M. Payson & Co.
(c) Austin Investment Management, Inc.
The description of Austin Investment Management, Inc. (investment
adviser to Austin Global Equity Fund) contained in Parts A and B of
post-effective amendment No. 81 to the Trust's Registration Statement
(accession number 0001004402-00-000261), is incorporated by reference
herein.
The following is the director and principal executive officer of
Austin Investment Management, Inc., 375 Park Avenue, New York, New
York 10152, including his business connections, which are of a
substantial nature.
Name Title Business Connection
..................................... .................................. ...................................
Peter Vlachos Director, President, Treasurer, Austin Investment Management Inc.
Secretary
(d) The Stratevest Group, N. A.
The description of The Stratevest Group, N.A. ("Stratevest")
(investment adviser to Investors Equity Fund) contained in Parts A and
B of post-effective amendment No. 83 to the Trust's Registration
Statement (accession number 0001004402-00-000327), is incorporated by
reference herein.
The following are the principal executive officers and directors of
Stratevest including their business connections which are of a
substantial nature. The address of Stratevest is 111 Main Street,
Burlington, VT, 05401 and, unless otherwise indicated below, the
address is the principal address of any company with which the
principal executive officers and directors are connected.
Name Title Business Connection
..................................... .................................. ...................................
Richard E. Johnson CEO and Director Stratevest
..................................... .................................. ...................................
Robert B. Esau Executive Vice President Stratevest
..................................... .................................. ...................................
Gary L. Robinson Executive Vice President Stratevest
..................................... .................................. ...................................
James W. Gribbons Sr. Executive Vice President Stratevest
..................................... .................................. ...................................
Robert A. Knowles, Jr. Sr. Executive Vice President Stratevest
..................................... .................................. ...................................
William S. Wolff Sr. Vice President Stratevest
..................................... .................................. ...................................
Molly Dillon Sr. Vice President Stratevest
..................................... .................................. ...................................
John M. Fullerton Sr. Vice President Stratevest
..................................... .................................. ...................................
12
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
Robert Wiseman Sr. Vice President Stratevest
..................................... .................................. ...................................
Walter L. Parr Sr. Vice President Stratevest
..................................... .................................. ...................................
Jonathan W. White Sr. Vice President Stratevest
..................................... .................................. ...................................
Robert E. Hussey Sr. Vice President Stratevest
..................................... .................................. ...................................
Dana Mitiguy Sr. Vice President Stratevest
..................................... .................................. ...................................
Dorothy Wentworth Sr. Vice President Stratevest
..................................... .................................. ...................................
Christopher G. Chapman Vice President Stratevest
..................................... .................................. ...................................
Perry Condon Vice President Stratevest
..................................... .................................. ...................................
A. James Cota Vice President Stratevest
..................................... .................................. ...................................
J. Alan Day Vice President Stratevest
..................................... .................................. ...................................
Carol P. Smith Vice President Stratevest
..................................... .................................. ...................................
Sandy Baker Vice President Stratevest
..................................... .................................. ...................................
H. Ashley Smith, Jr. Vice President Stratevest
..................................... .................................. ...................................
William J. Judge Vice President Stratevest
..................................... .................................. ...................................
Leila J. Baroody Vice President Stratevest
..................................... .................................. ...................................
Reginald P. Vincent Vice President Stratevest
..................................... .................................. ...................................
Frederick G. Natale, Jr. Vice President Stratevest
..................................... .................................. ...................................
Thomas E. Malinowski Vice President Stratevest
..................................... .................................. ...................................
William Smith Vice President Stratevest
..................................... .................................. ...................................
Melissa Whitmore Vice President Stratevest
..................................... .................................. ...................................
John Conroe Vice President Stratevest
..................................... .................................. ...................................
Sandra J. Kidwell Vice President Stratevest
..................................... .................................. ...................................
Mark Nagelsmith Vice President Stratevest
..................................... .................................. ...................................
Sharry Rutzken Vice President Stratevest
..................................... .................................. ...................................
Judith E. Zalansky Vice President Stratevest
..................................... .................................. ...................................
Christopher W. McCarthy Vice President Stratevest
..................................... .................................. ...................................
Nancy S. Hudson Vice President Stratevest
..................................... .................................. ...................................
Timothy J. O'Malley Vice President Stratevest
..................................... .................................. ...................................
Peter C. Armbuster Vice President Stratevest
..................................... .................................. ...................................
Steven Kalloch Vice President Stratevest
..................................... .................................. ...................................
Thomas J. Christensen Vice President Stratevest
..................................... .................................. ...................................
Jeffrey Oldfield Vice President Stratevest
..................................... .................................. ...................................
Don Smith Vice President Stratevest
..................................... .................................. ...................................
Robert P. Dinan Vice President Stratevest
..................................... .................................. ...................................
Michael B. MacDonald Vice President Stratevest
..................................... .................................. ...................................
Bruce L. Poznak Vice President Stratevest
..................................... .................................. ...................................
Arlene C. Folsom Vice President Stratevest
..................................... .................................. ...................................
Brian S. Wallace Vice President Stratevest
..................................... .................................. ...................................
Debra A. Patten Vice President Stratevest
..................................... .................................. ...................................
Kevin Brown Vice President Stratevest
..................................... .................................. ...................................
Steve Eddy Vice President Stratevest
..................................... .................................. ...................................
John Gibbons Vice President Stratevest
..................................... .................................. ...................................
Larry Pelletier Vice President Stratevest
..................................... .................................. ...................................
Carolyn May Vice President Stratevest
..................................... .................................. ...................................
Kathryn Dion Vice President Stratevest
..................................... .................................. ...................................
James Hillman Vice President Stratevest
..................................... .................................. ...................................
Janet Milley Vice President Stratevest
..................................... .................................. ...................................
John H. Budd Director Stratevest
..................................... .................................. ...................................
Mirick O'Connell Director Stratevest
1700 BankBoston Tower
Worcester, MA 01608-1477
13
<PAGE>
..................................... .................................. ...................................
Name Title Business Connection
..................................... .................................. ...................................
Gretchen B. Morse Director Stratevest
.................................. ...................................
United Way of Chittenden County
95 St. Paul Street
Burlington, VT 05401
..................................... .................................. ...................................
Joseph S. Pieciak, Jr. Director Stratevest
.................................. ...................................
Joseph Pieciak & Co., P.C.
4 Park Place P.O. Box 797
Brattelboro, VT 05301-0797
..................................... .................................. ...................................
Barry N. Stone Director Stratevest
.................................. ...................................
Barry Stone Insurance Agency
P.O. Box 9507
S. Burlington, VT 05407-9507
..................................... .................................. ...................................
George Smith Director Stratevest
.................................. ...................................
George Smith, CPA
406 Main Street
Great Barrington, MA 01230
..................................... .................................. ...................................
Jeffrey Cook Director Stratevest
.................................. ...................................
Cain, Hibbard, Myers & Cook
66 West Street
Pittsfield, MA 01201-5764
..................................... .................................. ...................................
Joseph A. Desmond Director Stratevest
.................................. ...................................
The Concord Group
4 Bouton Street
Concord, NH 03301-05023
..................................... .................................. ...................................
John E. Menario Director Stratevest
..................................... .................................. ...................................
Banknorth Group
One Portland Square
P.O. Box 9540
Portland, ME 04112-9540
..................................... .................................. ...................................
Andrew W. Mickey Director Stratevest
.................................. ...................................
Banknorth Group
One Portland Square
P.O. Box 9540
Portland, ME 04112-9540
..................................... .................................. ...................................
(e) Brown Investment Advisory & Trust Company
The description of Brown Investment Advisory & Trust Company
("Brown")(investment adviser to BrownIA Small-Cap Growth Fund and
BrownIA Growth Equity Fund) contained in Parts A and B of
post-effective amendment No. 83 to the Trust's Registration Statement
(accession number 0001004402-00-000327), is incorporated by reference
herein.
The following are the directors and principal executive officers of
Brown, including their business connections, which are of a substantial
nature. The address of Brown is Furness House, 19 South Street,
Baltimore, Maryland 21202 and, unless otherwise indicated below, that
address is the principal business address of any company with which the
directors and principal executive officers are connected.
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
Michael D. Hankin President, Chief Executive Brown
Officer, Trustee
------------------------------------ ----------------------------------
President The Maryland Zoological Society
------------------------------------ ----------------------------------
Trustee The Valleys Planning Council
<PAGE>
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
David L. Hopkins, Jr. Trustee Brown
------------------------------------ ----------------------------------
Director Westvaco Corporation
------------------------------------ ----------------------------------
Director Metropolitan Opera Association
------------------------------------ ----------------------------------
Trustee and Chairman, Finance Episcopal Church Foundation
Committee
------------------------------------ ----------------------------------
Trustee Maryland Historical Society
------------------------------------ ------------------------------------ ----------------------------------
Frank Bonsal Trustee Brown
------------------------------------ ------------------------------------ ----------------------------------
Truman T. Semans Vice Chairman of the Board of Brown
Trustees
------------------------------------ ----------------------------------
Trustee, Member and Former Duke University
Chairman of Investment Committee
------------------------------------ ----------------------------------
Trustee, Chairman of Finance Lawrenceville School
Committee and Member of Investment
and Executive Committees
------------------------------------ ----------------------------------
Board of Directors, Member of Chesapeake Bay Foundation
Investment and Executive Committees
------------------------------------ ----------------------------------
Chairman Flag Investors Mutual Funds
------------------------------------ ----------------------------------
Investment Committee Member Mercy Medical Center
------------------------------------ ----------------------------------
Investment Committee Member St. Mary's Seminary
------------------------------------ ----------------------------------
Investment Committee Member Archdiocese of Baltimore
------------------------------------ ----------------------------------
Investment Committee Member Robert E. Lee Memorial Foundation
------------------------------------ ----------------------------------
Investment Committee Member W. Alton Jones Foundation
------------------------------------ ------------------------------------ ----------------------------------
William C. Baker Trustee Brown
------------------------------------ ----------------------------------
President and Chief Executive Chesapeake Bay Foundation
Officer
------------------------------------ ----------------------------------
Trustee John Hopkins Hospital
------------------------------------ ----------------------------------
Member Washington College Board of
Visitors and Governors
------------------------------------ ----------------------------------
Director Baltimore Community Foundation
<PAGE>
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
Jack S. Griswold Trustee Brown
------------------------------------ ----------------------------------
Managing Director Armata Partners
------------------------------------ ----------------------------------
Director Alex. Brown Realty
------------------------------------ ----------------------------------
Trustee The Baltimore Community
Foundation
------------------------------------ ----------------------------------
Trustee The Chesapeake Bay Foundation
Living Classrooms
------------------------------------ ----------------------------------
Chairman Maryland Historical Society
------------------------------------ ----------------------------------
Member Washington College Board of
Visitors and Governors
------------------------------------ ----------------------------------
Treasurer Washington College
------------------------------------ ----------------------------------
Chair Campaign for Washington's College
------------------------------------ ------------------------------------ ----------------------------------
Earl L. Linehan Trustee Brown
------------------------------------ ----------------------------------
President Woodbrook Capital, Inc.
------------------------------------ ----------------------------------
Chairman Strescon Industries
------------------------------------ ----------------------------------
Chairman UMBC Board of Visitors
------------------------------------ ----------------------------------
Chairman Investment Committee Gilman School
------------------------------------ ----------------------------------
Board of Directors Member Stoneridge, Inc.
------------------------------------ ----------------------------------
Board of Directors Member Sagemaker, Inc.
------------------------------------ ----------------------------------
Board of Directors Member Medical Mutual Liability
Insurance Society of Maryland
------------------------------------ ----------------------------------
Board of Directors Member Heritage Properties, Inc.
------------------------------------ ----------------------------------
Board of Directors Member St. Mary's Seminary & University
------------------------------------ ----------------------------------
Board of Directors Member St. Ignatius Loyola Academy
------------------------------------ ----------------------------------
Board of Directors Member University of Notre Dame
Advisory Council
<PAGE>
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
Walter D. Pinkard, Jr. Trustee Brown
------------------------------------ ----------------------------------
President and Chief Executive Colliers Pinkard
Officer
------------------------------------ ----------------------------------
Chairman The Americas region of Colliers
International
------------------------------------ ----------------------------------
Vice President France Foundation
------------------------------------ ----------------------------------
Chairman The Baltimore Community
Foundation
------------------------------------ ----------------------------------
Board of Directors Member France-Merrick Foundation
------------------------------------ ----------------------------------
Trustee The John Hopkins University
------------------------------------ ----------------------------------
Trustee The Greater Baltimore Committee
------------------------------------ ----------------------------------
Trustee Gilman School
------------------------------------ ----------------------------------
Trustee Calvert School
------------------------------------ ----------------------------------
Trustee The Baltimore Community
Foundation
------------------------------------ ----------------------------------
Trustee The East Baltimore Community
Development Bank
------------------------------------ ----------------------------------
Trustee The Greater Baltimore Alliance
------------------------------------ ----------------------------------
Director Baltimore Reads, Inc.
------------------------------------ ----------------------------------
Trustee The Downtown Baltimore District
Authority
------------------------------------ ----------------------------------
Trustee The Yale University Development
Board
------------------------------------ ----------------------------------
Trustee The Maryland Business Roundtable
for Education
------------------------------------ ------------------------------------ ----------------------------------
John J.F. Sherrerd Trustee Brown
------------------------------------ ----------------------------------
Director Provident Mutual Life Insurance
Company
------------------------------------ ----------------------------------
Director C. Brewer and Company
------------------------------------ ----------------------------------
Trustee, Vice Chairman of Princeton University
Executive Committee
------------------------------------ ----------------------------------
Trustee, Chairman of Investment The Robertson Foundation
Committee
------------------------------------ ----------------------------------
Trustee GESU School
------------------------------------ ----------------------------------
Director and Executive Committee Princeton Investment Management
Member
------------------------------------ ----------------------------------
Board of Overseers University of Pennsylvania
Wharton School.
------------------------------------ ------------------------------------ ----------------------------------
David M. Churchill, CPA Chief Financial Officer Brown
------------------------------------ ------------------------------------ ----------------------------------
(f) Brown Advisory Incorporated
The description of Brown Advisory Incorporated ("Brown
Advisory")(investment adviser to BrownIA Maryland Bond Fund) contained
in Parts A and B of this amendment to the Trust's Registration
Statement, is incorporated by reference herein.
The following are the directors and principal executive officers of
Brown Advisory, including their business connections, which are of a
substantial nature. The address of Brown Advisory is Furness House, 19
South Street, Baltimore, Maryland 21202 and, unless otherwise
indicated below, that address is the principal business address of any
company with which the directors and principal executive officers are
connected.
14
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
Michael D. Hankin President Brown Advisory and Brown
.................................. ...................................
President, Chief Executive Brown Investment Advisory & Trust
Officer, Trustee Co.
.................................. ...................................
President The Maryland Zoological Society
.................................. ...................................
Trustee The Valleys Planning Council
..................................... .................................. ...................................
David L. Hopkins, Jr. Treasurer Brown Advisory and Brown
.................................. ...................................
Chairman Brown Investment Advisory & Trust
Co.
.................................. ...................................
Director Westvaco Corporation
.................................. ...................................
Director Metropolitan Opera Association
.................................. ...................................
Trustee and Chairman, Finance Episcopal Church Foundation
Committee
.................................. ...................................
Trustee Maryland Historical Society
..................................... .................................. ...................................
Edward Dunn III Secretary Brown Advisory and Brown
.................................. ...................................
Secretary Brown Investment Advisory & Trust
Co.
(g) Polaris Capital Management, Inc.
The description of Polaris Capital Management, Inc.
("Polaris")(investment adviser to Polaris Global Value Fund) contained
in Parts A and B of post-effective amendment No. 83 (accession number
0001004402-00-000327) to the Trust's Registration Statement, is
incorporated by reference herein.
The following are the directors and principal executive officers of
Polaris, including their business connections, which are of a
substantial nature. The address of Polaris is 125 Summer Street,
Boston, Massachusetts 02110 and, unless otherwise indicated below, that
address is the principal business address of any company with which the
directors and principal executive officers are connected.
Name Title Business Connection
..................................... .................................. ...................................
Bernard R. Horn, Jr. President, Portfolio Manager Polaris
..................................... .................................. ...................................
Edward E. Wendell, Jr. Treasurer Polaris
.................................. ...................................
President Boston Investor Services, Inc.
..................................... .................................. ...................................
(h) Mastrapasqua & Associates
The description of Mastrapasqua & Associates ("Mastrapasqua")
(investment adviser to Mastrapasqua Growth Value Fund) contained in
Parts A and B of post-effective amendment No. 80 to the Trust's
Registration Statement (accession number 0001004402-00-000233), is
incorporated by reference herein.
The following are the directors and principal executive officers of
Mastrapasqua, including their business connections, which are of a
substantial nature. The address of Mastrapasqua is 814 Church Street,
Suite 600, Nashville, Tennessee, 37203 and, unless otherwise indicated
below, that address is the principal business address of any company
with which the directors and principal executive officers are
connected.
Name Title Business Connection
..................................... .................................. ...................................
Frank Mastrapasqua Chairman, CEO and Portfolio Mastrapasqua
Manager
..................................... .................................. ...................................
Thomas A. Trantum President, Portfolio Manager and Mastrapasqua
Security Analyst
15
<PAGE>
(i) Trillium Asset Management Corporation
The description of Trillium Asset Management Corporation (the
"Adviser") (investment adviser to The Advocacy Fund) contained in Parts
A and B of post-effective amendment No. 82 to the Trust's Registration
Statement (accession number 0001004402-00-000283), is incorporated by
reference herein.
The following are the directors and principal executive officers of the
Adviser, including their business connections, which are of a
substantial nature. The address of the Adviser is 711 Atlantic Avenue,
Boston, Massachusetts 02111-2809 and, unless otherwise indicated below,
that address is the principal business address of any company with
which the directors and principal executive officers are connected.
Name Title Business Connection
..................................... .................................. ...................................
Joan Bavaria President, Board of Directors Adviser
Member, Treasurer
.................................. ...................................
President, Treasurer and Director FRDC California Corporation
(dissolved)
.................................. ...................................
President, Treasurer and Franklin Insight, Inc. (Purchased
Director (formerly) by the Adviser)
.................................. ...................................
Founding Co-Chair Coalition for Environmentally
Responsible Economies
Boston, MA
.................................. ...................................
Director (formerly) Green Seal
Washington, DC
.................................. ...................................
Director Lighthawk San Francisco, CA
.................................. ...................................
Advisory Board The Greening of Industry
Worcester, MA
.................................. ...................................
Director (formerly) Social Investment Forum
Boston, MA
.................................. ...................................
Chair (formerly) National Advisory Committee for
Policy and Technology's
Subcommittee, Community Based
Environmental Policy
Washington, DC
..................................... .................................. ...................................
Patrick J. McVeigh Executive Vice President Adviser
.................................. ...................................
Director SEED Haiti Community Development
Loan Fund
99 High Street,
Brookline, MA 02445
..................................... .................................. ...................................
Shelley Alpern Director, Assistant Vice Adviser
President
.................................. ...................................
Student (formerly) University of Texas
Austin, TX
..................................... .................................. ...................................
Samuel B. Jones, Jr., CFA Senior Vice President, Chief Adviser
Investment Officer
.................................. ...................................
Chairman 1991-1997 Standards and Policy
Member 1982-1999 Subcommittee, Association for
Investment Management and Research
Charlottesville, VA 22903
.................................. ...................................
Member (formerly) Council of Examiners, Institute
of Chartered Financial Analysts
Charlottesville, VA 22903
..................................... .................................. ...................................
F. Farnum Brown, Jr., Ph.D. Senior Vice President Adviser327 West Main Street
Durham, NC 27701-3215
.................................. ...................................
Director (until 6/98) Durham Community Land Trust
1401 Morehead Avenue
Durham, NC 27707
..................................... .................................. ...................................
16
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
Susan Baker Martin Vice President Adviser
.................................. ...................................
Trustee Congregational Church of South
Dartmouth
Middle Street
Dartmouth, MA
..................................... .................................. ...................................
Lisa Leff, CFA Vice President Adviser
.................................. ...................................
Director and Employee (until Smith Barney Asset Management
1999) 388 Greenwich Street
New York, NY 10013
.................................. ...................................
Director (until 1999) Social Investment Forum
Washington, DC
.................................. ...................................
Founder and Co-Chair (until 1999) Social Investment Security
Analysts Group, New York Society
of Security Analysts
New York, NY
.................................. ...................................
Director Verite
Amherst, MAs
.................................. ...................................
Director (until 1999) Maternity Center Association
23rd and Park Avenue
New York, NY
..................................... .................................. ...................................
Stephanie R. Leighton, CFA Vice President Adviser
.................................. ...................................
Treasurer Local Enterprise Assistance Fund,
Boston, MA
.................................. ...................................
Executive Committee Member New England Chapter of the Social
Investment Forum
Boston, MA
..................................... .................................. ...................................
Cheryl I. Smith, CFA Vice President Adviser
.................................. ...................................
Finance Committee (Director, Resist
formerly) 259 Elm Street, Suite 201
Somerville, MA 02144
.................................. ...................................
Treasurer Performing Artists at Lincoln
School
Kennard Road
Brookline, MA 02445
..................................... .................................. ...................................
Eric Becker, CFA Vice President Adviser
.................................. ...................................
Director Interlock Media, Inc.
Cambridge, MA
..................................... .................................. ...................................
Linnie McLean Senior Vice President Adviser
.................................. ...................................
Loan Committee Boston Community Loan Fund
Boston, MA
..................................... .................................. ...................................
Patricia L. Davidson Vice President Adviser
.................................. ...................................
Member Program Committee, The Women's
Foundation
340 Pine Street
San Francisco, CA 94104
..................................... .................................. ...................................
Diane M. DeBono Senior Vice President Adviser
..................................... .................................. ...................................
17
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
James Crawford, JD Board of Directors Member Adviser
.................................. ...................................
Professor, Associate Dean University of California,
(retired) Berkley, CA
..................................... .................................. ...................................
Thomas Gladwin, Ph.D. Board of Directors Member Adviser
.................................. ...................................
.................................. ...................................
Professor New York University
Stern School of Business
44 W. 4th Street
New York, NY
.................................. ...................................
Max McGraw Professorship of University of Michigan
Sustainable Enterprise and Ann Arbor, MI 48109
Associated Directorship
..................................... .................................. ...................................
Robert Glassman Board of Directors Member Adviser
.................................. ...................................
Chairman and Co-Chairman Wainwright Bank & Trust Company
63 Franklin Street
Boston, MA 02110
.................................. ...................................
Chairman Investment Committee The Boston Foundation
Boston, MA
..................................... .................................. ...................................
Sally Greenberg, JD Board of Directors Member Adviser
.................................. ...................................
Senior Product Safety Counsel Consumers Union
1666 Connecticut Avenue N.W.
Washington, DC 20009
.................................. ...................................
President (past) Massachusetts Women's Bar
Association
Boston, MA
.................................. ...................................
Eastern States Civil Rights Anti-Defamation League
Counsel 1 Lincoln Plaza
Boston, MA
..................................... .................................. ...................................
Charles Grigsby Board of Directors Member Adviser
.................................. ...................................
Senior Vice President Mass Capital Resource Company
420 Boylston Street
Boston, MA 02116
.................................. ...................................
Director and Acting Deputy City of Boston Neighborhood
Development Department
26 Court Street
Boston, MA 02108
.................................. ...................................
Member (formerly) Federal Reserve Bank Small
Business Advisory Committee
.................................. ...................................
Member (formerly) Massachusetts State Board of
Education
..................................... .................................. ...................................
Milton Moskowitz Board of Directors Member Adviser
.................................. ...................................
Writer Mill Valley, CA 94941
..................................... .................................. ...................................
Carol O'Cleireacain, Ph.D. Board of Directors Member
.................................. ...................................
Economic Consultant New York, NY
.................................. ...................................
Senior Fellow Brookings Institution, Center on
Urban and Metropolitan Policy
1775 Massachusetts Avenue N.W.,
Washington, DC 20036
.................................. ...................................
Chair (formerly) Council of Institutional
Investors Executive Committee
18
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
John Plukas Board of Directors Member Adviser
.................................. ...................................
President and Co-Chairman Wainwright Bank & Trust Company
63 Franklin Street
Boston, MA 02110
.................................. ...................................
Director New England Foundation for the
Arts
Boston, MA
..................................... .................................. ...................................
George Rooks Portfolio Manager, Board of Adviser
Directors Member
.................................. ...................................
President and Owner Heritage Capital Management
31 Milk Street
Boston, MA
.................................. ...................................
Investment Manager J.L. Kaplan Associates
29 Commonwealth Avenue
Boston, MA
.................................. ...................................
President (formerly) First Capital Corporation of
Boston
Boston, MA
.................................. ...................................
President (formerly) First Venture Capital Corporation
Boston, MA
.................................. ...................................
Portfolio Manager (formerly) BankBoston
Boston, MA
.................................. ...................................
Trustee Jewish Federation of the North
Shore
Boston, MA
..................................... .................................. ...................................
Elliot Sclar, Ph.D. Chairman, Board of Directors Adviser
.................................. ...................................
Professor Columbia University School of
Architecture
New York, NY
.................................. ...................................
Director, Vice President Franklin Insight, Inc.
(Formerly)
.................................. ...................................
Director Wainwright Bank & Trust Company
63 Franklin Street
Boston, MA 02110
..................................... .................................. ...................................
William Torbert, Ph.D. Board of Directors Member Adviser
.................................. ...................................
Professor Boston College
Chestnut Hill, MA
(i) Wells Fargo Bank, N.A.
The description of Wells Fargo Bank, N.A. ("Wells Fargo Bank"), the
investment adviser for the Portfolio in which Equity Index Fund
invests, contained in Parts A and B of post-effective amendment No. 83
(accession number 0001004402-00-000327) to the Trust's Registration
Statement, is incorporated by reference herein.
The following are the directors and principal executive officers of
Wells Fargo Bank, including their business connections, which are of a
substantial nature. The address of Wells Fargo Bank is 420 Montgomery
Street, San Francisco, California 94105 and, unless otherwise indicated
below, that address is the principal business address of any company
with which the directors and principal executive officers are
connected.
19
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
H. Jesse Arnelle Director Wells Fargo Bank
.................................. ...................................
455 Market Senior Partner Arnelle, Hastie, McGee, Willis &
Street San Francisco, CA 94105 Greene
.................................. ...................................
Director Armstrong World Industries, Inc.
.................................. ...................................
Director Eastman Chemical Corporation
.................................. ...................................
Director FPL Group, Inc.
..................................... .................................. ...................................
Michael R. Bowlin Director Wells Fargo Bank
.................................. ...................................
Highway 150 Chairman of the Board of Atlantic Richfield Co. (ARCO)
Santa Paula, CA 93060 Directors, Chief Executive
Officer, Chief Operating Officer
and President
..................................... .................................. ...................................
Edward Carson Director Wells Fargo Bank
.................................. ...................................
633 West Fifth Street Chairman of the Board and Chief First Interstate Bancorp
Los Angeles, CA 90071 Executive Officer
.................................. ...................................
Director Aztar Corporation
.................................. ...................................
Director Castle & Cook, Inc.
.................................. ...................................
Director Terra Industries, Inc.
..................................... .................................. ...................................
William S. Davilla Director Wells Fargo Bank
.................................. ...................................
618 Michillinda Ave. President (Emeritus) and The Vons Companies, Inc.
Arcadia, CA 91007 Director
.................................. ...................................
Director Pacific Gas & Electric Company
..................................... .................................. ...................................
Rayburn S. Dezember Director Wells Fargo Bank
.................................. ...................................
3200 San Fernando Road Director CalMat Co.
Los Angeles, CA 90065
.................................. ...................................
Director Tejon Ranch Company
.................................. ...................................
Director The Bakersfield Californian
.................................. ...................................
Trustee Whittier College
..................................... .................................. ...................................
Paul Hazen Chairman of the Board of Wells Fargo Bank
Directors
.................................. ...................................
Chairman of the Board of Wells Fargo & Company
Directors
.................................. ...................................
Director Phelps Dodge Corporation
.................................. ...................................
Director Safeway, Inc.
..................................... .................................. ...................................
Robert K. Jaedicke Director Wells Fargo Bank
.................................. ...................................
Graduate School of Business Professor (Emeritus) Graduate School of Business
Stanford University Stanford University
Stanford, CA 94305
.................................. ...................................
Director Bailard Biehl & Kaiser Real
Estate Investment Trust, Inc.
.................................. ...................................
Director Boise Cascade Corporation
.................................. ...................................
Director California Water Service Company
.................................. ...................................
Director Enron Corporation
.................................. ...................................
Director GenCorp, Inc.
.................................. ...................................
Director Homestake Mining Company
..................................... .................................. ...................................
Thomas L. Lee Director Wells Fargo Bank
.................................. ...................................
10302 Avenue 7 1/2 Chairman and Chief Executive The Newhall Land and Farming
Firebaugh, CA 93622 Officer Company
.................................. ...................................
Director CalMat Co.
.................................. ...................................
Director First Interstate Bancorp
..................................... .................................. ...................................
20
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
Ellen Newman Director Wells Fargo Bank
.................................. ...................................
323 Geary Street President Ellen Newman Associates
Suite 507
San Francisco, CA 94102
.................................. ...................................
Chair (Emeritus) of the Board of University of California at San
Trustees Francisco Foundation
.................................. ...................................
Director California Chamber of Commerce
..................................... .................................. ...................................
Philip J. Quigley Director Wells Fargo Bank
.................................. ...................................
130 Kearney Street Rm. 3700 San Chairman, President and Chief Pacific Telesis Group
Francisco, CA 94108 Executive Officer
..................................... .................................. ...................................
Carl E. Reichardt Director Wells Fargo Bank
.................................. ...................................
.................................. ...................................
Director Columbia/HCA Healthcare
Corporation
.................................. ...................................
Director Ford Motor Company
.................................. ...................................
Director Newhall Management Corporation
.................................. ...................................
Director Pacific Gas and Electric Company
.................................. ...................................
Retired Chairman of the Board of Wells Fargo & Company
Directors and Chief Executive
Officer
..................................... .................................. ...................................
Donald B. Rice Director Wells Fargo Bank
.................................. ...................................
2049 Century Park East President and Chief Executive Teledyne, Inc.
Los Angeles, CA 90067 Officer
.................................. ...................................
Retired Secretary The United States Air Force
.................................. ...................................
Director Vulcan Materials Company
..................................... .................................. ...................................
Richard J. Stegemeier Director Wells Fargo Bank
.................................. ...................................
Chairman (Emeritus) Unocal Corporation
.................................. ...................................
Director Foundation Health Corporation
.................................. ...................................
Director Halliburton Company
.................................. ...................................
Director Northrop Grumman Corporation
.................................. ...................................
Director Outboard Marine Corporation
.................................. ...................................
Director Pacific Enterprises
.................................. ...................................
Director First Interstate Bancorp
..................................... .................................. ...................................
Susan G. Swenson Director Wells Fargo Bank
.................................. ...................................
651 Gateway Blvd. President and Chief Executive Cellular One
San Francisco, CA 94080 Officer
..................................... .................................. ...................................
David M. Tellep Director Wells Fargo Bank
.................................. ...................................
Retired Chairman of the Board Martin Lockheed Corporation
and Chief Executive Officer
.................................. ...................................
Director Edison International and Southern
California Edison Company
.................................. ...................................
Director First Interstate Bancorp
..................................... .................................. ...................................
Chang-Lin Tien Director Wells Fargo Bank
.................................. ...................................
Chancellor University of California at
Berkeley
.................................. ...................................
Director Raychem Corporation
..................................... .................................. ...................................
21
<PAGE>
Name Title Business Connection
..................................... .................................. ...................................
John A. Young Director Wells Fargo Bank
.................................. ...................................
3000 Hanover Street President, Chief Executive Hewlett-Packard Company
Palo Alto, CA 9434 Officer and Director
.................................. ...................................
Director Chevron Corporation
.................................. ...................................
Director Lucent Technologies
.................................. ...................................
Director Novell, Inc.
.................................. ...................................
Director Shaman Pharmaceuticals Inc.
..................................... .................................. ...................................
William F. Zuendt Director Wells Fargo Bank
.................................. ...................................
President Wells Fargo & Company
.................................. ...................................
Director 3Com Corporation
.................................. ...................................
Director California Chamber of Commerce
(j) Wells Capital Management Incorporated
The description of Wells Capital Management ("WCM"), the investment
sub-adviser for the Portfolio in which Equity Index Fund invests,
contained in Parts A and B of post-effective amendment No. 83
(accession number 0001004402-00-000327) of the Trust's Registration
Statement, is incorporated by reference herein.
The following are the directors and principal executive officers of
WCM, including their business connections, which are of a substantial
nature. The address of WCM is 525 Market Street, San Francisco,
California 94105 and, unless otherwise indicated below, that address is
the principal business address of any company with which the directors
and principal executive officers are connected.
Name Title Business Connection
..................................... .................................. ...................................
Allen J. Ayvazian Chief Equity Officer WCM
..................................... .................................. ...................................
Robert Willis President and Chief Investment WCM
Officer
..................................... .................................. ...................................
Brigid Breen Chief Compliance Officer WCM
..................................... .................................. ...................................
Jose Casas Chief Operating Officer WCM
..................................... .................................. ...................................
Larry Fernandes Principal WCM
..................................... .................................. ...................................
Jacqueline Anne Flippin Principal WCM
..................................... .................................. ...................................
Stephen Galiani Senior Principal Director WCM
..................................... .................................. ...................................
Madeleine Gish Senior Principal WCM
..................................... .................................. ...................................
Kelli Ann Lee Managing Director WCM
..................................... .................................. ...................................
Melvin Lindsey Managing Director WCM
..................................... .................................. ...................................
Clark Messman Chief Legal Officer WCM
..................................... .................................. ...................................
Brian Mulligan Managing Director WCM
..................................... .................................. ...................................
Thomas O'Malley Managing Director WCM
..................................... .................................. ...................................
Clyde Ostler Director WCM
..................................... .................................. ...................................
Guy Rounsaville Director WCM
..................................... .................................. ...................................
Katherine Schapiro Senior Principal WCM
..................................... .................................. ...................................
Gary Schlossbertg Economist WCM
</TABLE>
22
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter, serves as
underwriter for the following investment companies registered under the
Investment Company Act of 1940, as amended:
The Cutler Trust Monarch Funds
Memorial Funds Sound Shore Fund, Inc.
Forum Funds TrueCrossing Funds
(b) The following officers of Forum Fund Services, LLC, the Registrant's
underwriter, hold the following positions with the Registrant. Their
business address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
..................................... .................................. ...................................
John Y. Keffer Director Chairman, President
..................................... .................................. ...................................
David I. Goldstein Secretary Vice President
..................................... .................................. ...................................
Ronald H. Hirsch Treasurer Treasurer
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained at the offices of Forum
Administrative Services, LLC and Forum Shareholder Services, LLC, Two
Portland Square, Portland, Maine 04101. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts
and deliveries of securities and receipts and disbursements of cash are
maintained at the offices of the Registrant's custodian, as listed
under "Custodian" in Part B to this Registration Statement. The records
required to be maintained under Rule 31a-1(b)(5), (6) and (9) are
maintained at the offices of the Registrant's adviser or subadviser, as
listed in Item 26 hereof.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
None.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
amendment to its registration statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Portland, and State of Maine on
December 18, 2000.
FORUM FUNDS
By: /S/ John Y. Keffer
-----------------------------------------
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on
December 18, 2000.
(a) Principal Executive Officer
/S/ John Y. Keffer
--------------------------------------------
John Y. Keffer
President and Chairman
(b) Principal Financial Officer
/S/ Ronald H. Hirsch
--------------------------------------------
Ronald H. Hirsch
Treasurer
(c) A majority of the Trustees
/S/ John Y. Keffer
--------------------------------------------
John Y. Keffer
Trustee
James C. Cheng, Trustee
J. Michael Parish, Trustee
Costas Azariadis, Trustee
By: /S/ John Y. Keffer
-----------------------------------------
John Y. Keffer
Attorney in Fact*
*Pursuant to powers of attorney previously filed as Other Exhibits to this
Registration Statement.
24
<PAGE>
INDEX TO EXHIBITS
(d)(9) Form of Investment Advisory Agreement between Registrant and Brown
Advisory Incorporated.
25
<PAGE>
Exhibit (d)(9)
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ______________ 2000, by and between Forum
Funds, a Delaware business trust, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Brown
Advisory Incorporated, a Maryland corporation, with its principal office and
place of business at Furness House, 19 South Street, Baltimore, Maryland 21202
(the "Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment company
and may issue its shares of beneficial interest, no par value (the "Shares"), in
separate series; and
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series of the Trust listed in Appendix A hereto (each, a
"Fund" and collectively, the "Funds"), and the Adviser is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Adviser hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs the Adviser, subject to the direction and
control of the Board, to manage the investment and reinvestment of the assets in
each Fund and, without limiting the generality of the foregoing, to provide
other services as specified herein. The Adviser accepts this employment and
agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Trust has delivered to the Adviser
copies of: (i) the Trust's Trust Instrument and Bylaws (collectively, as amended
from time to time, "Organic Documents"); (ii) the Trust's Registration Statement
and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the 1940 Act (the "Registration Statement"); (iii) the
Trust's current Prospectuses and Statements of Additional Information of each
Fund (collectively, as currently in effect and as amended or supplemented, the
"Prospectus"); and (iv) all procedures adopted by the Trust with respect to the
Funds (i.e., repurchase agreement procedures), and shall promptly furnish the
Adviser with all amendments of or supplements to the foregoing. The Trust shall
deliver to the Adviser: (x) a certified copy of the resolution of the Board of
Trustees of the Trust (the "Board") appointing the Adviser and authorizing the
execution and delivery of this Agreement; (y) a copy of all proxy statements and
related materials relating to the Funds; and (z) any other documents, materials
or information that the Adviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Adviser has delivered, or will deliver within 45 days, to the
Trust a copy of its code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act (the "Code"). The Adviser shall promptly furnish the Trust
with all amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST
In order for the Adviser to perform the services required by this
Agreement, the Trust: (i) shall cause all service providers to the Trust to
furnish information to the Adviser and to assist the Adviser as may be required;
and (ii) shall ensure that the Adviser has reasonable access to all records and
documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser will make decisions with respect to all purchases and
sales of securities and other investment assets in each Fund. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, at the risk of and in the name of the Trust, to
place orders and issue instructions with respect to those transactions of the
Funds. In all purchases, sales and other transactions in securities and other
investments for the Funds, the Adviser is authorized to exercise full discretion
and act for the Trust in the same manner and with the same force and effect as
the Trust might or could do with respect to such purchases, sales or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or other
transactions.
Consistent with Section 28(e) of the Securities and Exchange Act of
1934, as amended, the Adviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Adviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Adviser or its affiliates.
Whenever the Adviser simultaneously places orders to purchase or sell the same
asset on behalf of a Fund and one or more other accounts advised by the Adviser,
the orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account.
(b) The Adviser will report to the Board at each meeting thereof as
requested by the Board all material changes in each Fund since the prior report,
and will also keep the Board informed of important developments affecting the
Trust, the Funds and the Adviser, and on its own initiative, will furnish the
Board from time to time with such information as the Adviser may believe
appropriate for this purpose, whether concerning the individual companies whose
securities are included in the Funds' holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which the Funds maintain investments, or otherwise. The Adviser will also
furnish the Board with such statistical and analytical information with respect
to investments of the Funds as the Adviser may believe appropriate or as the
Board reasonably may request. In making purchases and sales of securities and
other investment assets for the Funds, the Adviser will bear in mind the
policies set from time to time by the Board as well as the limitations imposed
by the Organic Documents and Registration Statement, the limitations in the 1940
Act, the Securities Act, the Internal Revenue Code of 1986, as amended, and
other applicable laws and the investment objectives, policies and restrictions
of the Funds.
(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(d) The Adviser will report to the Board all material matters related
to the Adviser. On an annual basis, the Adviser shall report on its compliance
with its Code to the Board and upon the written request of the Trust, the
Adviser shall permit the Trust, or its representatives to examine the reports
required to be made to the Adviser under the Code. The Adviser will notify the
Trust of any change of control of the Adviser and any changes in the key
personnel who are either the portfolio manager(s) of the Fund or senior
management of the Adviser, in each case prior to or promptly after such change.
(e) The Adviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Adviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such periods
and in such locations as may be required by applicable law, all documents and
records relating to the services provided by the Adviser pursuant to this
Agreement required to be prepared and maintained by the Adviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Adviser shall be the
property of the Trust. The Trust, or its representatives, shall have access to
such books and records at all times during the Adviser's normal business hours.
Upon the reasonable request of the Trust, copies of any such books and records
shall be provided promptly by the Adviser to the Trust or its representatives.
(f) The Adviser will cooperate with each Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to those accountants for the performance of the accountants' duties.
(g) The Adviser will provide the Funds' custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Funds' assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, the Adviser is
responsible for assisting in the fair valuation of all Fund assets and will use
its reasonable efforts to arrange for the provision of prices from parties who
are not affiliated persons of the Adviser for each asset for which the Funds'
fund accountant does not obtain prices in the ordinary course of business.
(h) The Adviser shall authorize and permit any of its directors,
officers and employees who may be duly elected as Trustees or officers of the
Trust to serve in the capacities in which they are elected.
(i) The Adviser shall have no duties or obligations pursuant to this
Agreement (other than the continuation of its preexisting duties and
obligations) during any period in which the Fund invests all (or substantially
all) of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to each Fund, a fee at an annual rate as listed in Appendix A
hereto. Such fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. If fees begin to accrue in
the middle of a month or if this Agreement terminates before the end of any
month, all fees for the period from that date to the end of that month or from
the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement with respect to a Fund, the Trust shall pay to the Adviser such
compensation as shall be payable prior to the effective date of termination.
(b) The Adviser shall reimburse expenses of each Fund or waive its fees
to the extent necessary to maintain a Fund's expense ratio at an agreed-upon
amount for a period of time specified in a separate letter of agreement. The
Adviser's reimbursement of a Fund's expenses shall be estimated and paid to the
Trust monthly in arrears, at the same time as the Trust's payment to the Adviser
for such month.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
(d) The Trust shall be responsible for and assumes the obligation for
payment of all of its expenses, including: (i) the fee payable under this
Agreement; (ii) the fees payable to each administrator under an agreement
between the administrator and the Trust; (iii) expenses of issue, repurchase and
redemption of Shares; (iv) interest charges, taxes and brokerage fees and
commissions; (v) premiums of insurance for the Trust, its trustees and officers,
and fidelity bond premiums; (vi) fees and expenses of third parties, including
the Trust's independent public accountant, custodian, transfer agent, dividend
disbursing agent and fund accountant; (vii) fees of pricing, interest, dividend,
credit and other reporting services; (viii) costs of membership in trade
associations; (ix) telecommunications expenses; (x) funds' transmission
expenses; (xi) auditing, legal and compliance expenses; (xii) costs of forming
the Trust and maintaining its existence; (xiii) costs of preparing, filing and
printing the Trust's Prospectuses, subscription application forms and
shareholder reports and other communications and delivering them to existing
shareholders, whether of record or beneficial; (xiv) expenses of meetings of
shareholders and proxy solicitations therefor; (xv) costs of maintaining books
of original entry for portfolio and fund accounting and other required books and
accounts, of calculating the net asset value of Shares and of preparing tax
returns; (xvi) costs of reproduction, stationery, supplies and postage; (xvii)
fees and expenses of the Trust's trustees and officers; (xviii) the costs of
personnel (who may be employees of the Adviser, an administrator or their
respective affiliated persons) performing services for the Trust; (xix) costs of
Board, Board committee, shareholder and other corporate meetings; (xx) SEC
registration fees and related expenses; (xxi) state, territory or foreign
securities laws registration fees and related expenses; and (xxii) all fees and
expenses paid by the Trust in accordance with any distribution or service plan
or agreement related to similar matters.
SECTION 5. STANDARD OF CARE
(a) The Trust shall expect of the Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust. The Adviser shall not be liable hereunder for mistake
of judgment or mistake of law or in any event whatsoever, except for lack of
good faith, provided that nothing herein shall be deemed to protect, or purport
to protect, the Adviser against any liability to the Trust or to the Trust's
security holders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties hereunder, or by reason of the Adviser's reckless disregard of
its obligations and duties hereunder.
(b) The Adviser shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
date above after approval by (1) a majority of the outstanding voting securities
of that Fund and (2) a majority of the Board who are not interested parties of
the Trust.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of one year from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; provided that
such continuance is specifically approved at least annually: (i) by the Board or
by the vote of a majority of the outstanding voting securities of the Fund, and,
in either case; (ii) by a majority of the Trust's trustees who are not parties
to this Agreement or interested persons of any such party (other than as
trustees of the Trust); provided further, however, that if the continuation of
this Agreement is not approved as to a Fund, the Adviser may continue to render
to that Fund the services described herein in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty: (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser; or (ii) by the Adviser on 60 days' written notice to the
Trust. This Agreement shall terminate immediately upon its assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's directors, officers or employees to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, firm, individual or
association.
SECTION 8. REPRESENTATIONS OF ADVISER.
The Adviser represents and warrants that: (i) it is either registered
as an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act;
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement; (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement; and (iv) will promptly notify the Trust of the
occurrence of any event that would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the direction and control of the
Board, one or more persons who are registered as investment advisers pursuant to
the Advisers Act or who are exempt from registration thereunder ("Subadvisers").
Each Subadviser's employment will be evidenced by a separate written agreement
approved by the Board and, if required, by the shareholders of the applicable
Fund. The Adviser shall not be liable hereunder for any act or omission of any
Subadviser, except to exercise good faith in the employment of the Subadviser
and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Adviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Adviser's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Funds.
SECTION 11. RIGHTS TO NAME
If the Adviser ceases to act as investment adviser to the Trust or any
Fund whose name includes the term "BrownIA" (the "Mark") or if the Adviser
requests in writing, the Trust shall take prompt action to change the name of
the Trust or any such Fund to a name that does not include the Mark. The Adviser
may from time to time make available without charge to the Trust for the Trust's
use any marks or symbols owned by the Adviser, including marks or symbols
containing the Mark or any variation thereof, as the Adviser deems appropriate.
Upon the Adviser's request in writing, the Trust shall cease to use any such
mark or symbol at any time. The Trust acknowledges that any rights in or to the
Mark and any such marks or symbols which may exist on the date of this Agreement
or arise hereafter are, and under any and all circumstances shall continue to
be, the sole property of the Adviser. The Adviser may permit other parties,
including other investment companies, to use the Mark in their names without the
consent of the Trust. The Trust shall not use the Mark in conducting any
business other than that of an investment company registered under the 1940 Act
without the permission of the Adviser.
SECTION 12. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the 1940 Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall affect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(d) This Agreement shall be governed by, and the provisions of this Agreement
shall be construed and interpreted under and in accordance with, the laws of the
State of New York.
(e) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement between those parties with respect to
the subject matter hereof, whether oral or written.
(f) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(g) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(j) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund of the Trust are separate and
distinct from the assets and liabilities of each other Fund and that no Fund
shall be liable or shall be charged for any debt, obligation or liability of any
other Fund, whether arising under this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Adviser shall be liable at law or in equity for the Adviser's obligations
under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof and each
party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FORUM FUNDS
John Y. Keffer
President
BROWN ADVISORY INCORPORATED
By:
Title:
<PAGE>
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
BrownIA Maryland Bond Fund 0.50%
