As filed with the Securities and Exchange Commission on May 31, 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. 79
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 81
FORUM FUNDS
(Formerly "Forum Funds, Inc.")
Two Portland Square
Portland, Maine 04101
(207) 879-1900
D. Blaine Riggle, Esq.
Forum Fund Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
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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 August 15, 2000 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: The Advocacy Fund.
<PAGE>
LOGO
PROSPECTUS
SEPTEMBER 1, 2000
THE ADVOCACY FUND
The Fund seeks long-term capital appreciation. You may purchase Fund shares
without a sales charge.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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....................................................
PERFORMANCE INFORMATION................................................
FEE TABLES.............................................................
INVESTMENT OBJECTIVE, Principal INVESTMENT STRATEGIES
AND Principal RISKS....................................................
MANAGEMENT.............................................................
YOUR ACCOUNT...........................................................
How to Contact the Fund
General Information
Buying Shares
Selling Shares
Exchange Privileges
Retirement Accounts
ADVISER PAST PERFORMANCE...............................................
OTHER INFORMATION......................................................
FINANCIAL HIGHLIGHTS...................................................
2
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RISK/RETURN SUMMARY
[Margin callout: CONCEPTS TO UNDERSTAND
COMMON STOCK means an equity or ownership interest in a company
LARGE-CAP STOCKS mean securities of companies the market capitalization
of which is in excess of $10 billion
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market
GROWTH AT A REASONABLE PRICE INVESTING means to invest in stocks of
companies that, in the Adviser's opinion, offer faster than average
projected earnings growth relative to their industry peer group, but
which are attractively valued relative to their industry]
THE ADVOCACY FUND
INVESTMENT OBJECTIVE The investment goal of The Advocacy Fund (the "Fund"), as
managed by its investment adviser, Trillium Asset Management Corporation (the
"Adviser"), is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund uses a "growth at a reasonable price
investing" style by investing under normal circumstances at least 65 percent of
its total assets in the common stock of large-cap domestic companies that the
Adviser believes have superior earnings growth prospects relative to their
industry, but which are available at attractive valuations. The Fund seeks to
invest in companies that the Adviser believes are making a positive contribution
to society and the economy and whose business practices meet the criteria
outlined in "Social Objectives" (see below) In addition, a limited portion of
the Fund's portfolio will be used to purchase securities of certain companies in
order to advocate policy changes within the companies.
PRINCIPAL RISKS OF INVESTING IN THE FUND
You could lose money on your investment in the Fund, or the Fund could
under-perform other investments, if any of the following occur:
o The stock market does not recognize the earnings potential of the
stocks in the Fund's portfolio
o The Adviser's judgment as to the growth potential of a stock proves
to be wrong
o The stock market goes down
o The Fund's social criteria may eliminate some stocks, which might have
higher returns than the stocks from which the Adviser is able to
choose
o Changes in company social policies may cause the sale of stocks that
subsequently perform well
WHO MAY WANT TO INVEST IN THE FUND
The Fund may be appropriate for you if you:
o Want your assets invested to further social equity and environmental
sustainability
o Are looking for a well-diversified equity portfolio providing
potential growth of your investment
o Are willing to tolerate significant changes in the value of your
investment
o Are pursuing a long-term goal
o Are willing to accept the higher short-term risk of a stock fund
The Fund may NOT be appropriate for you if you:
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o Want an investment that pursues market trends or focuses only on
particular sectors or industries
o Need regular income or stability of principal
o Are pursuing a short-term goal or investing emergency reserves
PERFORMANCE INFORMATION
Performance information is not provided because the Fund had not commenced
operations prior to the date of this Prospectus.
FEE TABLES
The following tables describe the fees and expenses that you will bear 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 (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases 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 (1)
(expenses that are deducted from Fund assets)
Advisory Fees 0.65%
Distribution (12b-1) Fees 0.25%
Other Expenses 0.60%
Total Annual Fund Operating Expenses(2) 1.50%
(1) Based on estimated amounts for the current fiscal year ending June
30, 2001.
(2) The Adviser has voluntarily undertaken to waive a portion of its
fees and assume certain expenses to the extent that total annual
fund expenses exceed 1.50% of the net assets of the Fund.
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 then redeem all of your
shares at the end of the period. The example also assumes that your investment
has a 5% annual return, that the Fund's operating expenses remain the same and
that distributions are reinvested. Although your actual costs may be higher or
lower, under these assumptions your costs would be:
--------------------------------------- -------------------------------------
After One Year $153
--------------------------------------- -------------------------------------
After Three Years $474
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS
INVESTMENT OBJECTIVE
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The investment objective of the Fund is long-term capital appreciation. There is
no assurance that the Fund will achieve this objective.
PRINCIPAL INVESTMENT STRATEGIES
[Margin callout: CONCEPT TO UNDERSTAND
FUNDAMENTAL ANALYSIS means the analysis of a company's financial
condition used to help forecast the future value of its stock price.
This analysis includes a review of a company's balance sheet and income
statement, asset history, earnings history, product or service
development and management productivity]
The Fund uses a "growth at a reasonable price investing" style by investing
under normal circumstances at least 65 percent of its total assets in the common
stock of large-cap domestic companies that the Adviser believes have superior
earnings growth prospects, but which are available at attractive valuations. The
Adviser uses in-house research and other sources to conduct a fundamental
analysis of prospective Fund investments. As part of this analysis, the Adviser
may meet with management or visit prospective companies. The Fund may also
invest in companies that the Adviser believes do not have particularly strong
earnings histories but do have other attributes that may contribute to
accelerated growth in the foreseeable future. In addition, the Fund seeks to
invest in companies that it believes are making a positive contribution to
society and the economy and whose business practices meet the criteria outlined
in "Social Objectives" (see below). A limited portion of the portfolio will be
used to purchase securities of companies which do not have outstanding records
in their industry but which pass minimal social criteria, in order to advocate
policy changes within the companies. Common stock often gives the owner the
right to vote on measures affecting the company's organization and operations.
The Fund intends to use its position as an owner to initiate dialogue with
company management concerning their social and business practices, and may
initiate shareholder resolutions with companies. The Fund does not intend to
exercise control over the management of companies in which it invests.
THE ADVISER'S PROCESSES - PURCHASING PORTFOLIO SECURITIES
[Margin callout: CONCEPTS TO UNDERSTAND
PRICE/EARNINGS RATIO means the price of a share of stock divided by the
company's earnings per share
PRICE/CASH FLOW means the price of a stock divided by free cash flow
per share
SECTOR means a commonly used grouping of industries expected to
perform similarly under various economic conditions]
The Adviser's investment process begins with sector allocations based on
economic outlook and risk/return expectations for each sector. Within sector
allocations, the Adviser seeks large cap stocks with earnings growth prospects
that the Adviser believes are superior to their industries, but which are
available at price/earnings ("P/E") ratios or price/cash flow ratios comparable
to their industry peer groups. The stock selection process emphasizes companies
that the Adviser believes make a positive contribution to society and the
economy; however, stocks are added to the Fund portfolio only after financial
analysis indicates investment attractiveness. Financial analysis includes
multi-factor valuation and risk modeling, in-house fundamental research,
including balance sheet and income statement analysis. Technical analysis is
used by the Adviser to monitor price movements and help determine entry and exit
points for specific stocks. The Adviser believes that companies with superior
earnings growth prospects are businesses that have:
o Significant market opportunities (both in terms of magnitude and
duration) where the companies are leaders or potential leaders in their
respective markets
o Proprietary products and services, new product development and product
cycle leadership that sustains strong brand franchises
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o A strong management team that is proactive, consistently executes
effectively and anticipates and adapts to change
o Positive records on the environment, global human rights, employee,
diversity, labor issues, corporate citizenship, weapons issues and
animal rights
The Adviser then focuses on those companies that, over a several year horizon,
have the ability to grow at above average rates for their industries, given the
Adviser's belief that superior investment returns are better achieved by low
portfolio turn-over. Factors considered include:
o Product cycles, pricing flexibility and product or geographic mix
o Cash flow and financial strength to fund growth
o Catalysts for growth such as the development of new products, changes
in business mix, regulation, or management, and industry consolidation
The Adviser then uses a range of valuation techniques including analyses of P/E
ratios relative to the overall equity market, expected growth to P/E ratios
relative to the market, and price/cash flow to identify those companies whose
stocks are attractively valued relative to the market, their peer groups and
their own price history. The Adviser selects stocks considering both
diversification by sector and attractiveness of valuation relative to
prospective growth.
THE ADVISER'S PROCESSES - SELLING PORTFOLIO SECURITIES
In making its decision to sell a stock in the Fund's portfolio, the Adviser
monitors the companies in the Fund's portfolio to determine if there have been
any fundamental changes in the companies. The Adviser may sell a stock if:
o It subsequently fails to meet the Adviser's initial investment
criteria
o Changes in macroeconomic conditions prompt a change in industry sector
allocation
o A more attractively priced company is found or funds are needed for
other purposes
o It becomes overvalued relative to the long term expectation for the
stock price
o A company's positive social or environmental attributes turn negative
and dialogue and shareholderengagement fail to change the company's
policies
SOCIAL OBJECTIVES
In addition to its attempt to provide a positive return on your investment, the
Fund includes an additional goal of creating positive social change and
improving corporate practices through active stock ownership. The Adviser will
seek to promote sustainable environmental, economic and social policies and
practices by communicating with management of portfolio companies on critical
social and environmental issues. On behalf of the Fund, the Adviser may
participate in the shareholder resolution process.
The Fund's stock selections will emphasize "positive investment", i.e., the
search for, and investment in, companies making a positive contribution to
society in both their domestic and international operations. The Fund will seek
to invest in companies that consciously and continuously strive to implement
sustainable practices, and are socially progressive, as well as companies that
are responsive to shareholder activism.
As part of its analysis, the Adviser will evaluate corporate social and
environmental performance in many areas, including but not limited to:
o Environmental practices and policies
o Global human rights
o Use of sweatshop and/or child labor
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o Diversity in the workplace and in senior management positions
o Labor-management relations
o Corporate philanthropy and investment in local communities
o Military contracting with the U.S. or foreign governments
o Product safety
o Ethical management practices
o Animal research and testing
o Stakeholder relations
o Corporate governance practices
o Corporate management incentive and compensation plans
o Corporate lobbying practices and political action committee contributions
PRINCIPAL INVESTMENT RISKS
The value of the Fund's investments will fluctuate as the stock market
fluctuates and therefore the Fund's net asset value and total return will
fluctuate based upon changes in the value of its portfolio securities. Upon
redemption, an investment in the Fund may be worth more or less than its
original value. An investment in the Fund is not by itself a complete or
balanced investment program. Nevertheless, investing in equity securities with
predominantly large capitalizations may be important for investors seeking a
diversified portfolio, particularly for long-term investors able to tolerate
short-term fluctuations in the value of their investments. This type of market
movement may affect the price of the securities of a single issuer, a segment of
the domestic stock market or the entire market.
All investments made by the Fund have some risk. Among other things, the market
value of any security in which the Fund may invest is based upon the market's
perception of value and not necessarily the book value of an issuer or other
objective measure of the issuer's worth. Because the Fund invests in common
stocks, based upon an expectation of the companies' rate of profit growth, there
is a risk that the stocks will not continue to grow at expected rates, thus
causing the price of the stock to decline. There is also the risk that the
market will not recognize the earnings potential of a stock. A decline in
investor demand for stocks may also adversely affect the value of these
securities. In addition, the investment style for the Fund could fall out of
favor with the market. In other words, if investors lose interest in large
capitalization stocks, then the net asset value of the Fund could also decrease.
There is also the risk that the Fund's social criteria may eliminate some
stocks, which might have higher returns than the stocks from which the Adviser
is able to choose. Changes in company social policies might also cause the sale
of stocks that subsequently perform well.
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 the Fund is
managed under the direction of the Board of Trustees (the "Board"). The Board
formulates the general policies of the Fund and meets periodically to review the
Fund's performance, monitor investment activities and practices and discuss
other matters affecting the Fund. Additional information regarding the Board, as
well as the Trust's executive officers, may be found in the Statement of
Additional Information ("SAI").
THE ADVISER
Trillium Asset Management Corporation (the "Adviser ") is a registered
investment adviser, originally founded in 1982, under the name Franklin Research
& Development Corporation. The name changed to Trillium Asset Management
Corporation in April, 1999. The Adviser is headquartered in Boston,
Massachusetts.
7
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The Adviser has been owned by its employees since inception. Ownership is
broadly distributed among current employees. Wainwright Bank & Trust Company of
Boston owns a 30% preferred equity position in the Adviser.
The Adviser and its predecessors have provided investment advisory and
management services to clients for over eighteen years. As of the date of this
Prospectus, the Adviser has over $675 million in assets under management. For
its services, the Adviser receives an advisory fee at an annual rate of 0.65% of
the average daily net assets of the Fund.
PORTFOLIO MANAGERS
Cheryl Smith, Ph.D., CFA, Samuel Jones Jr., CFA, and F. Farnum Brown Jr., Ph.D.
are responsible for the day-to-day investment management of the Fund. Each
portfolio manager's business experience is as follows:
CHERYL I. SMITH, Ph.D., CFA, Vice President
Ms. Smith is a senior portfolio manager and research analyst covering the
communications sector. Ms. Smith has been with the Adviser from 1987 to 1992 and
since rejoining the Adviser in 1997. From 1992 to 1997, she was a portfolio
manager with United States Trust Company in Boston, Massachusetts. She is a
Chartered Financial Analyst charterholder and holds a B.S.F.S. from Georgetown
University School of Foreign Service, and earned M.A., M.Phil., and Ph.D.
degrees in Economics from Yale University.
SAMUEL B. JONES, JR., CFA, Senior Vice President, Chief Investment Officer
Mr. Jones is a senior portfolio manager and research analyst, covering the
technology, communications equipment, energy services, and utility sectors. Mr.
Jones has been with the Adviser since 1992. He is a Chartered Financial Analyst
charterholder and received his B.S. and M. B. A. degrees from the University of
Michigan.
F. FARNUM BROWN, JR., Ph.D., Senior Vice President
Mr. Brown is a senior portfolio manager, research analyst and manager of the
Durham, North Carolina office for the Adviser. Mr. Brown has been with the
Adviser since 1994 and received his bachelor's, master's and doctoral degrees
from the University of North Carolina at Chapel Hill.
OTHER SERVICE PROVIDERS
The Forum Financial Group of companies ("Forum") provide services to the Fund.
As of March 31, 2000, Forum provided administration and distribution services to
investment companies and collective investment funds with assets of
approximately $67 billion.
Forum Fund Services, LLC, 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 agent 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 Shareholder Services, LLC ("Transfer Agent") is the Fund's transfer agent.
DISTRIBUTION EXPENSES
The Fund has a distribution plan adopted under SEC rule 12b-1 that allows the
Fund to pay asset-based sales charges or distribution fees for the distribution
and sale of its shares. The amount of these fees is 0.25% of the Fund's average
daily net assets. Because these fees are paid out of the Fund's assets on an
8
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on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
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 various
series of the Trust. The Adviser or other service providers may voluntarily
waive all or any portion of their fees, which are accrued daily and paid
monthly. Any waiver would have the effect of increasing the Fund's performance
for the period during which the waiver was in effect and may not be recouped at
a later date.
The Adviser has undertaken to waive its fees and assume certain expenses of the
Fund in order to limit the Fund's expenses (excluding taxes, interest, portfolio
transaction expenses and extraordinary expenses) to 1.50% or less of the average
daily net assets of the Fund.
YOUR ACCOUNT
[Margin call out: HOW TO CONTACT THE FUND
WRITE TO US AT:
The Advocacy Fund
P.O. Box 446
Portland, Maine 04112
OVERNIGHT ADDRESS:
The Advocacy Fund
Two Portland Square
Portland, Maine 04101
TELEPHONE US TOLL-FREE AT:
(800) XXX-XXXX
WIRE INVESTMENTS (OR ACH PAYMENTS) TO US AT:
Bankers Trust Company
New York, New York
ABA #021001033
FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 01-465-547
Re: The Advocacy Fund
(Your Name)
(Your Account Number)
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GENERAL INFORMATION
You pay no sales charge to purchase or sell (redeem) shares of the Fund. You may
purchase or sell Fund shares at the net asset value per share (NAV) next
calculated after the Transfer Agent receives your request in proper form. For
instance, if the Transfer Agent receives your purchase request in proper form
after 4:00 p.m., your transaction will be priced at the next 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.
You will receive statements at least quarterly and a confirmation of each
transaction. You should verify the accuracy of all transactions in your account
as soon as you receive your confirmation.
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 ("NYSE") (normally 4:00 p.m., Eastern time) on each
weekday except days when the NYSE is closed. The time at which NAV is calculated
may be changed in case of an emergency or if the NYSE closes early. 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 all liabilities and then
dividing the result 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 estimated fair value, as determined by the Board.
TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Fund. Financial institutions may charge transaction
fees and may set different minimum investments or limitations on buying or
selling shares. These institutions may also provide you with certain shareholder
services such as periodic account statements and trade confirmations summarizing
your investment activity. Consult a representative of your financial institution
for more information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, sole proprietorship, joint, Uniform Gift to
Minors Act ("UGMA") or Uniform Transfer to Minors Act ("UTMA")
accounts, the check must be made payable to "The Advocacy Fund" or to
one or more owners of the account and endorsed to "The Advocacy Fund."
For all other accounts, the check must be made payable on its face to
"The Advocacy Fund." No other method of check payment is acceptable
(for instance, you may not pay by travelers check).
PURCHASES BY AUTOMATED CLEARING HOUSE ("ACH") This service allows you
to purchase additional shares through an electronic transfer of money
from a checking or savings account. When you make an additional
purchase by telephone, the Transfer Agent will automatically debit your
pre-designated bank account for the desired amount. You may call (800)
XXX-XXXX to request an ACH transaction.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
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MINIMUM INVESTMENTS The Fund accepts investments in the following minimum
amounts:
------------------------- -------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
---------------------------------- ------------------------- -------------------
Standard Minimum Accounts $2,000 $250
---------------------------------- ------------------------- -------------------
Traditional and Roth IRA Accounts $2,000 $250
---------------------------------- ------------------------- -------------------
Accounts With Automatic Investment $1,000 $100
Plans
---------------------------------- ------------------------- -------------------
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
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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
proprietorship accounts. Joint accounts can have two or on the account
more owners (tenants)
------------------------------------------------------------ ---------------------------------------------------------
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the UGMA or 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
------------------------------------------------------------ ---------------------------------------------------------
INVESTMENT PROCEDURES
------------------------------------------------------------ ---------------------------------------------------------
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
------------------------------------------------------------ ---------------------------------------------------------
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
and/or a Corporate/Organization Resolution form confirmation or write us a letter
o Complete the application o Write your account number on your check
o Mail us your application and a check o Mail us the slip (or your letter) and the check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
and/or a Corporate/Organization Resolution form o Instruct your bank to wire your money to us
o Complete the application
o Call us to fax the completed application and we BY SYSTEMATIC INVESTMENT
will assign you an account number o Call or write us for an "Systematic Investment
o Mail us your original application Plan" form
o Instruct your bank to wire your money to us o Complete the form
o Attach a voided check to your form
o Mail us the form
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BY ACH PAYMENT
o Call or write us for an account application
and/or a Corporate/Organization Resolution form
o Complete the application
o Call us to fax the completed application and we
will assign you an account number
o Mail us your original application
o 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. Automatic investments must be for at least $100.
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, is likely to engage in excessive trading (usually
defined as more than four redemptions or exchanges out of 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 in the Fund) as
reimbursement. The Fund and its agents have the right to reject or cancel any
purchase or exchange due to nonpayment.
SELLING SHARES
Redemption orders are processed promptly. Generally, the Fund will send
redemption proceeds to you within a week. Delays may occur in cases of very
large redemptions, excessive trading or during unusual market conditions. The
Fund may delay sending redemption proceeds until it has collected payment for
the shares you are selling, which may take 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 requests are only available if you provided bank account
information on your account application and your request is for
$10,000 or more
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")
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BY TELEPHONE
o Call us with your request (unless you declined telephone authorization
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you OR
o Wired to you (unless you did not provide bank account information
on your account application (See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your form
o Mail us your completed application
--------------------------------------------------------------------------------
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES You may have your redemption proceeds wired to you if
you provided bank account information on your account application or by
completing a separate form. The minimum amount that may be redeemed by wire is
$5,000.
SYSTEMATIC WITHDRAWALS If you own shares of the Fund with an aggregate value of
at least $10,000, you may request 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. Automatic redemptions 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 automatic investment or redemption, distribution, telephone
redemption or exchange option or any other election in connection with
your account
SMALL ACCOUNTS If the value of your account falls below $1,000 ($500 for IRAs or
accounts with an established automatic investment plan), the Fund may ask you to
increase your balance. If the account value is still below $1,000 (or $500 in
the case of IRAs or accounts with an established automatic investment plan)
after 60 days, the Fund may close your account and send you the proceeds. The
Fund will not close your account if it falls below these amounts solely as a
result of changes in market value.
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REDEMPTIONS IN KIND The Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions in kind usually occur
if the amount to be redeemed is large enough to affect 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 by telephone or in writing your Fund shares for Investor Shares
of the Trust's money market funds. Because exchanges are treated as a sale and
purchase of shares, they may have tax consequences.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Fund reserves the right to limit exchanges. You may exchange
your shares by mail or telephone, unless you declined telephone exchange
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
--------------------------------------------------------------------------------
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 the funds you are exchanging
o The dollar amount or number of shares you want to sell (and exchange)
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
--------------------------------------------------------------------------------
RETIREMENT ACCOUNTS
The Fund offers both traditional and Roth IRA accounts. Before investing in any
IRA or other retirement plan, you should consult your tax advisers. Whenever
making an investment in an IRA, be sure to indicate the year in which the
contribution is made.
ADVISER PAST PERFORMANCE
The following table sets forth the performance data relating to the historical
performance of those private account clients (i.e., non-investment company
clients) managed by Trillium Asset Management Corporation (the "Adviser") that
have investment objectives and investment policies, strategies, and risks
substantially similar to those of the Fund. The Adviser does not manage
registered investment companies with investment objectives and investment
policies, strategies and risks substantially similar to those of the Fund. While
the Adviser is primarily responsible for the Fund's performance, the information
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<PAGE>
presented does not represent the past performance of any Fund. You should not
consider this performance data as an indication of future performance of the
Fund.
All returns presented were calculated on a total return basis, include the
reinvestment of all dividends and interest and take into account accrued income
and realized and unrealized gains and losses. All returns reflect the deduction
of the actual investment advisory fees or highest investment advisory fees
charged, brokerage commissions and execution costs paid by the adviser's private
accounts, without provision for federal or state income taxes. Custodial fees,
if any, were not included in the calculations.
You should be aware that the use of a methodology different from that used below
to calculate performance could result in different performance data. The Fund's
performance is calculated using the method required by the U.S. Securities and
Exchange Commission ("SEC"), which differs from the method used to calculate the
performance of the private accounts. The private accounts are not subject to the
same types of expenses to which the Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed by
the Investment Company Act of 1940 or Subchapter M of the Internal Revenue Code
of 1986, as amended. The performance results for the private accounts would have
been adversely affected (i.e., lower) if the private accounts included in the
composite had been regulated as an investment company under the federal security
laws.
<TABLE>
<S> <C> <C> <C>
----------------------------- ----------------------------- --------------------------- -------------------
Trillium Asset Management Trillium Asset Management S&P 500 Index(3)
Corporation Balanced Corporation Composite;
Composite for the Large Large Capitalization Core
Capitalization Core Style(1) Style; Equity Returns
Period Only(2)
----------------------------- ----------------------------- --------------------------- -------------------
3/31/97-12/31/97 15.35% 28.92% 29.88%
----------------------------- ----------------------------- --------------------------- -------------------
1998 14.57% 30.89% 28.58%
----------------------------- ----------------------------- --------------------------- -------------------
1999 10.99% 29.58% 21.03%
----------------------------- ----------------------------- --------------------------- -------------------
1 Year Ended 3/31/00(4) 12.19% 30.52% 17.94%
----------------------------- ----------------------------- --------------------------- -------------------
2000 to Date(4) 2.61% 4.36% 2.29%
----------------------------- ----------------------------- --------------------------- -------------------
Since Inception (3/31/97)(4)
14.61% 31.65% 27.39%
----------------------------- ----------------------------- --------------------------- -------------------
</TABLE>
(1) The presentation above describes and contains four accounts valued, as of
March 31, 2000, at $4.977 million. These four accounts include all taxable
accounts managed by the Adviser which are managed in the Large Capitalization
Core Style.
(2) Accounts included in the Trillium Asset Management Corporation Balanced
Composite for the Large Capitalization Core Style have equity benchmarks between
35% and 45% of the total account. Therefore, for comparison purposes for the
Fund, which is an equity fund, the equity segment returns are shown separately.
(3) The S&P 500(R) Index is the Standard & Poor's 500 Index, a widely
recognized, unmanaged index of common stock. The index figures assume
reinvestment of all dividends paid by stocks included in the index. One cannot
invest directly in the index.
(4) Average annual return through March 31, 2000. Returns for less than a one
year period are not annualized.
OTHER INFORMATION
DISTRIBUTIONS
The Fund distributes its net investment income quarterly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
15
<PAGE>
TAXES
The Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Fund's distribution of net income (or short-term capital gain) is taxable to
you as ordinary income. The Fund's distribution of long-term capital gain is
taxable to you as long-term capital gain.
If you buy shares just before the Fund makes a distribution, you will pay the
full price for the shares and then receive a portion of the price back as a
taxable distribution. The sale or exchange of Fund shares is a taxable
transaction for income tax purposes.
The Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year.
For further information about the tax effects of investing in the Fund, please
see the SAI and consult your tax adviser. You should also consult your tax
adviser regarding any state and local taxes that may be applicable to the Fund's
distributions.
FINANCIAL HIGHLIGHTS
Financial highlights are not provided because the Fund had not commenced
operations prior to the date of this Prospectus.
16
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION LOGO
The following documents will be available free upon request:
ANNUAL/SEMI ANNUAL REPORTS
The Fund will provide annual and semi-annual reports to shareholders that will
provide additional information about the Fund's investments. 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 THE ADVOCACY
its preceding fiscal year. FUND
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the Fund and is incorporated by
reference into this Prospectus.
CONTACTING THE FUND
You can get free copies of both reports (when available) and the SAI, request
other information and discuss your questions about the Fund by contacting the
Fund at:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
800-XXX-XXXX (toll free) The Advocacy Fund
Two Portland Square
SECURITIES AND EXCHANGE COMMISSION INFORMATION Portland, ME 04101
You can also review the Fund's reports and SAI at the Public Reference 800-XXX-XXXX
Room of the Securities and Exchange Commission ("SEC"). The scheduled
hours of operation of the Public Reference Room may be obtained by calling Adviser:
the SEC at (202) 942-8090. You can get copies of this information, for a Trillium Asset Management
fee, by e-mail or by writing to: Corporation
711 Atlantic Avenue
Public Reference Room Boston, MA 02111
Securities and Exchange Commission 800-548-5684
Washington, D.C. 20549-0102
E-mail address: public [email protected]
Free copies of the Fund's reports (when available) and SAI are available from
the SEC's Internet Web Site at http://www.sec.gov.
Investment Company Act File No. 811-3023.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 2000
THE ADVOCACY FUND
FUND INFORMATION:
The Advocacy Fund
Two Portland Square
Portland, Maine 04101
(800) XXX-XXXX
INVESTMENT ADVISER:
Trillium Asset Management Corporation
711 Atlantic Avenue
Boston, MA 02445
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) XXX-XXXX
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
This Statement of Additional Information (the "SAI") supplements the Prospectus
dated September 1, 2000, as may be amended from time to time, offering shares of
The Advocacy Fund (the "Fund"), a separate series of Forum Funds, a registered,
open-end management investment company (the "Trust"). 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 shareholder services at the
address or telephone number listed above.
<PAGE>
TABLE OF CONTENTS
Glossary ..........................................................1
1. Investment Policies and Risks......................................2
A. Equity Securities.........................................2
B. Securities Ratings Information............................4
C. Temporary Defensive Position..............................4
D. Illiquid and Restricted Securities........................5
E. Foreign Securities........................................6
F. Options and Futures.......................................7
G. Borrowing.................................................9
H. Core and Gateway(R).......................................10
I. Other Investments.........................................10
2. Investment Limitations.............................................10
A. Fundamental Limitations...................................11
B. Nonfundamental Limitations................................12
3. Performance Data and Advertising...................................13
A. Performance Data..........................................13
B. Performance Calculations..................................14
C. Other Matters.............................................17
4. Management.........................................................18
A. Trustees and Officers.....................................18
B. Compensation of Trustees and Officers.....................19
C. Investment Adviser........................................20
D. Distributor...............................................21
E. Other Fund Service Providers..............................22
5. Portfolio Transactions.............................................24
A. How Securities are Purchased and Sold.....................24
B. Adviser Responsibility for Purchases and Sales............25
C. Securities of Regular Broker-Dealers......................27
6. Additional Purchase and Redemption Information.....................28
A. General Information.......................................28
B. Additional Purchase Information...........................28
C. Additional Redemption Information.........................29
D. NAV Determination.........................................30
E. Distributions.............................................30
7. Taxation ..........................................................30
A. Qualification as a Regulated Investment Company...........30
B. Fund Distributions........................................32
C. Certain Tax Rules Applicable to the Funds Transactions....32
D. Federal Excise Tax .......................................33
E. Sale or Redemption of Shares..............................34
F. Withholding Tax...........................................34
G. Foreign Shareholders......................................34
H. State and Local Taxes.....................................35
8. Other Matters......................................................36
A. The Trust and its Shareholders............................36
B. Fund Ownership............................................38
C. Limitations on Shareholders' and Trustees' Liability......38
D. Registration Statement....................................38
Appendix A - Description of Securities Ratings..............................A-1
<PAGE>
1. GLOSSARY
As used in this SAI, the following terms have the meanings listed.
"Adviser" means Trillium Asset Management Corporation.
"Board" means the Board of Trustees of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means the custodian of the Fund's assets.
"FAdS" means Forum Administrative Services, LLC, the administrator of
the Fund.
"Fitch" means Fitch IBCA, Inc.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of the
Fund.
"FFS" means Forum Fund Services, LLC, the distributor of the Fund's
shares.
"Fund" means The Advocacy Fund.
"Moody's" means Moody's Investors Service.
"NRSRO" means a nationally recognized statistical rating organization.
"NAV" means net asset value per share.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's, A Division of the McGraw Hill Companies.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent of the Fund.
"Trust" means Forum Funds.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
<PAGE>
1. INVESTMENT POLICIES AND RISKS
The Fund is a diversified series of the Trust. The following discussion
supplements the disclosure in the Prospectus for the Fund's investment
techniques, strategies and risks.
A. EQUITY SECURITIES
1. COMMON AND PREFERRED STOCK
GENERAL. Common stock represents an equity (ownership) interest in a company,
and usually possesses voting rights and earns dividends. Dividends on common
stock are not fixed but are declared at the discretion of the issuer. Common
stock generally represents the riskiest investment in a company. In addition,
common stock generally has the greatest appreciation and depreciation potential
because increases and decreases in earnings are usually reflected in a company's
stock price.
Preferred stock is a class of stock having a preference over common stock as to
the payment of dividends and the recovery of investment should a company be
liquidated, although preferred stock is usually junior to the debt securities of
the issuer. Preferred stock typically does not possess voting rights and its
market value may change based on changes in interest rates.
RISKS. The fundamental risk of investing in common and preferred stock is the
risk that the value of the stock might decrease. Stock values fluctuate in
response to the activities of an individual company or in response to general
market and/or economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than
preferred stocks, fixed-income and money market investments. The market value of
all securities, including common and preferred stocks, is based upon the
market's perception of value and not necessarily the book value of an issuer or
other objective measures of a company's worth. If you invest in the Fund, you
should be willing to accept the risks of the stock market and should consider an
investment in the Fund only as a part of your overall investment portfolio.
2. CONVERTIBLE SECURITIES
GENERAL. Convertible securities include debt securities, preferred stock or
other securities that may be converted into or exchanged for a given amount of
common stock of the same or a different issuer during a specified period and at
a specified price in the future. A convertible security entitles the holder to
receive interest on debt or the dividend on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Convertible
securities rank senior to common stock in a company's capital structure but are
usually subordinated to comparable nonconvertible securities. Convertible
securities have unique investment characteristics in that they generally: (1)
have higher yields than common stocks, but lower yields than comparable
non-convertible securities; (2) are less subject to fluctuation in value than
the underlying stocks since they have fixed income characteristics; and (3)
provide the potential for capital appreciation if the market price of the
underlying common stock increases. A convertible security may be subject to
1
<PAGE>
redemption at the option of the issuer at a price established in the convertible
security's governing instrument. If a convertible security is called for
redemption, the Fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
RISKS. Investment in convertible securities generally entails less risk than an
investment in the issuer's common stock. Convertible securities are typically
issued by smaller capitalized companies whose stock price may be volatile.
Therefore, the price of a convertible security may reflect variations in the
price of the underlying common stock in a way that nonconvertible debt does not.
The extent to which such risk is reduced, however, depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security.
3. WARRANTS
GENERAL. Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to purchase a given number of shares of
common stock at a specified price and time. The price usually represents a
premium over the applicable market value of the common stock at the time of the
warrant's issuance. Warrants have no voting rights with respect to the common
stock, receive no dividends and have no rights with respect to the assets of the
issuer.
RISKS. Investments in warrants involve certain risks, including the possible
lack of a liquid market for the resale of the warrants, potential price
fluctuations due to adverse market conditions or other factors and failure of
the price of the common stock to rise. If the warrant is not exercised within
the specified time period, it becomes worthless.
4. DEPOSITARY RECEIPTS
GENERAL. The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"). ADRs typically are issued by a U.S. bank or trust company,
evidence ownership of underlying securities issued by a foreign company, and are
designed for use in U.S. securities markets. The Fund may invest in depositary
receipts in order to obtain exposure to foreign securities markets.
RISKS. Unsponsored depositary receipts may be created without the participation
of the foreign issuer. Holders of these receipts generally bear all the costs of
the depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depository receipt. The bank or trust company depositary of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
2
<PAGE>
B. SECURITY RATINGS INFORMATION
The Fund's investments in preferred and fixed income securities, are subject to
credit risk relating to the financial condition of the issuers of the securities
that the Fund holds. To limit credit risk, the Fund invests its assets in debt
securities that are considered investment grade. Investment grade means rated in
the top four long-term rating categories or top two short-term rating categories
by an NRSRO, or unrated and determined by the Adviser to be of comparable
quality.
The lowest long-term ratings that are investment grade for convertible bonds are
"Baa" in the case of Moody's and "BBB" in the case of S&P and Fitch; for
preferred stock are "Baa" in the case of Moody's and "BBB" in the case of S&P
and Fitch; and for short-term debt, including commercial paper, are "Prime-2"
(P-2) in the case of Moody's, "A-2" in the case of S&P and "F-2" in the case of
Fitch.
Unrated securities may not be as actively traded as rated securities. The Fund
may retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Fund may
use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by 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.
C. TEMPORARY DEFENSIVE POSITION
The Fund may assume a temporary defensive position and may invest without limit
in commercial paper and other money market instruments that are of prime
quality. Prime quality instruments are those instruments that are rated in one
of the two highest short-term rating categories by an NRSRO or, if not rated,
determined by the Adviser to be of comparable quality.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which the Fund may invest
include U.S. Government Securities, time deposits, bankers acceptances and
3
<PAGE>
certificates of deposit corporate notes and short-term bonds and money market
mutual funds.
D. ILLIQUID AND RESTRICTED SECURITIES
1. GENERAL
The Fund may not acquire securities or invest in repurchase agreements if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the securities. Illiquid securities include: (1)
repurchase agreements not entitling the holder to payment of principal within
seven days; (2) purchased over-the-counter options; (3) securities which are not
readily marketable; and (4) securities subject to contractual or legal
restrictions on resale because they have not been registered under the 1933 Act,
except as otherwise determined by the Adviser ("restricted securities").
2. RISKS
Limitations on resale may have an adverse effect on the marketability of a
security and the Fund might also have to register a restricted security in order
to dispose of it, resulting in expense and delay. The Fund might not be able to
dispose of restricted or illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemption requests. There
can be no assurance that a liquid market will exist for any security at any
particular time. Any security, including securities determined by the Adviser to
be liquid, can become illiquid.
3. DETERMINATION OF LIQUIDITY
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid and has delegated the function of making
determinations of liquidity to the Adviser, pursuant to guidelines approved by
the Board. The Adviser determines and monitors the liquidity of the portfolio
securities and reports periodically on its decisions to the Board. The Adviser
takes into account a number of factors in reaching liquidity decisions,
including but not limited to: (1) the frequency of trades and quotations for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
4
<PAGE>
E. FOREIGN SECURITIES
The Fund may invest in foreign securities. Investments in the securities of
foreign issuers may involve risks in addition to those normally associated with
investments in the securities of U.S. issuers. All foreign investments are
subject to risks of: (1) foreign political and economic instability; (2) adverse
movements in foreign exchange rates; (3) the imposition or tightening of
exchange controls or other limitations on repatriation of foreign capital; and
(4) changes in foreign governmental attitudes towards private investment,
including potential nationalization, increased taxation or confiscation of the
Fund's assets.
Dividends payable on foreign securities may be subject to foreign withholding
taxes, thereby reducing the income available for distribution to you. Commission
rates payable on foreign transactions are generally higher than in the United
States. Foreign accounting, auditing and financial reporting standards differ
from those in the United States and therefore, less information may be available
about foreign companies than is available about issuers of comparable U.S.
companies. Foreign securities also may trade less frequently and with lower
volume and may exhibit greater price volatility than U.S. securities.
Changes in foreign exchange rates will affect the U.S. dollar value of all
foreign currency-denominated securities held by the Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult, if not impossible, to
predict.
Income from foreign securities will be received and realized in foreign
currencies, and the Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar after the Fund's income has been earned and computed in
U.S. dollars may require the Fund to liquidate portfolio securities to acquire
sufficient U.S. dollars to make a distribution. Similarly, if the exchange rate
declines between the time the Fund incurs expenses in U.S. dollars and the time
such expenses are paid, the Fund may be required to liquidate additional foreign
securities to purchase the U.S. dollars required to meet such expenses.
F. OPTIONS AND FUTURES
1. GENERAL
The Fund may purchase or sell (write) put and call options 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 purchase or write options on securities in which it
may invest or on market indices based in whole or in part on such securities.
Options purchased or written by the Fund must be traded on an exchange or
over-the-counter.
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<PAGE>
The Fund may invest in futures contracts on market indices based in whole or in
part on securities in which the Fund may invest. The Fund may also purchase or
write put and call options on these futures contracts. Options and futures are
considered to be derivatives. Use of these instruments is subject to regulation
by the SEC, the options and futures exchanges on which futures and options are
traded or by the CFTC. No assurance can be given that any hedging or option
income strategy will achieve its intended result.
Currently, the Fund has no intention of investing in options or futures for
purposes other than hedging. If the Fund will be financially exposed to another
party due to its investments in options or futures, the Fund will maintain
either: (1) an offsetting ("covered") position in the underlying security or an
offsetting option or 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
debt 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.
2. OPTIONS AND FUTURES STRATEGIES
OPTIONS ON SECURITIES. A call option is a contract under which the purchaser of
the call option, in return for a premium paid, has the right to buy the security
underlying the option at a specified price at any time during the term of the
option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price. A put option gives its purchaser, in
return for a premium, the right to sell the underlying security at a specified
price during the term of the option. The writer of the put, who receives the
premium, has the obligation to buy, upon exercise of the option, the underlying
security at the exercise price. The amount of a premium received or paid for an
option is based upon certain factors, including the market price of the
underlying security, the relationship of the exercise price to the market price,
the historical price volatility of the underlying security, the option period
and interest rates.
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional options on securities except that stock index
options are settled exclusively in cash and do not involve delivery of
securities. Thus, upon exercise of stock index options, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.
OPTIONS ON FUTURES. Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
6
<PAGE>
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.
FUTURES CONTRACTS AND INDEX FUTURES CONTRACTS. A futures contract is a bilateral
agreement where one party agrees to accept, and the other party agrees to make,
delivery of cash, an underlying security or a currency, as called for in the
contract, at a specified date and at an agreed upon price. A bond or stock index
futures contract involves the delivery of an amount of cash equal to a specified
dollar amount times the difference between the bond or stock index value at the
close of trading of the contract and at the price designated by the futures
contract. No physical delivery of the securities comprising the index is made.
Generally, these futures contracts are closed out prior to the expiration date
of the contracts.
3. LIMITATIONS ON OPTIONS AND FUTURES TRANSACTIONS
The Fund may not buy a put option if the exercise value of all put options
written by the Fund would exceed 50% of the Fund's total assets or sell a call
option if the exercise value of all call options written by the Fund would
exceed the value of the Fund's assets. The Fund may not purchase any call or put
option on a futures contract if the premiums associated with all such options
held by the Fund would exceed 5% of the Fund's total assets as of the date the
option is purchased.
The Fund may enter into futures contracts only if the aggregate of initial
margin deposits for open futures contract positions does not exceed 5% of the
Fund's total assets. In addition, the current market value of open futures
positions held by the Fund may not exceed 50% of its total assets.
4. RISKS
There are certain investment risks associated with options and futures
transactions. These risks include: (1) dependence on the Adviser's ability to
predict movements in the prices of individual securities and fluctuations in the
general securities markets; (2) imperfect correlations between movements in the
prices of options and movements in the price of the securities (or indices)
hedged or used for cover which may cause a given hedge not to achieve its
objective; (3) 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 (4) 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 the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price, and the possible loss of the entire premium paid for options
7
<PAGE>
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices on related options
during a single trading day. The Fund may be forced, therefore, to liquidate or
close out a futures contract position at a disadvantageous price. There is no
assurance that a counterparty in an over-the-counter option transaction will be
able to perform its obligations. 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 and options markets may result in higher portfolio turnover rates and
additional brokerage costs, which could reduce the Fund's yield.
G. BORROWING
1. GENERAL
The Fund may borrow money from a bank in amounts up to 33 1/3 percent of the
Fund's total assets for, among other things, the purchase of securities. The
Fund will generally borrow money to increase its returns. Typically, if a
security purchased with borrowed funds increases in value, the Fund may sell the
security, repay the loan, and secure a profit.
2. RISKS
The use of borrowing involves special risks, including 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. If the interest expense due to a borrowing
transaction exceeds the net return on the Fund's investment portfolio, 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.
H. CORE AND GATEWAY(R)
The Fund may seek to achieve its investment objective by converting to a Core
and Gateway(R) 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.
8
<PAGE>
I. OTHER INVESTMENTS
Although the Fund does not currently plan to invest in securities other than
those referenced in the Prospectus and this SAI, it may invest in a variety of
other investments.
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Fund: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely; and (2) the term Code includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Fund may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of the Fund's assets or purchases and redemptions of shares will not be
considered a violation of the limitation.
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, which are fundamental
policies of the Fund.
1. ISSUANCE OF SENIOR SECURITIES
The Fund may not issue senior securities except pursuant to Section 18 of the
1940 Act.
2. BORROWING MONEY
The Fund may not borrow money if, as a result, outstanding borrowings would
exceed an amount equal to 33 1/3% of the Fund's total assets.
3. UNDERWRITING ACTIVITIES
The Fund may not underwrite securities issued by other persons except, to the
extent that in connection with the disposition of portfolio securities, the Fund
may be deemed to be an underwriter.
9
<PAGE>
4. CONCENTRATION
The Fund may not purchase a security if, as a result, more than 25% of the
Fund's total assets would be invested in securities of issuers conducting their
principal business activities in the same industry. For purposes of this
limitation, there is no limit on: (a) 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 (b) 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) or (F) 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.
5. PURCHASES AND SALES OF REAL ESTATE
The Fund may not 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).
6. PURCHASES AND SALES OF COMMODITIES
The Fund may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities).
7. MAKING LOANS
The Fund may not 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.
8. DIVERSIFICATION
The Fund is "diversified" as that term is defined in the 1940 Act. The Fund may
not, with respect to 75% of its assets, purchase a security (other than a U.S.
Government Security or security of an investment company) if, as a result: (a)
more than 5% of the Fund's total assets would be invested in the securities of a
single issuer; or (b) the Fund would own more than 10% of the outstanding voting
securities of a single issuer.
B. NONFUNDAMENTAL LIMITATIONS
The Fund has adopted the following investment limitations, which are not
fundamental policies of the Fund.
10
<PAGE>
1. SHORT SALES
The Fund may not 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 and options are not deemed to constitute selling securities short.
2. PURCHASES ON MARGIN
The Fund may not 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
and options on futures contracts shall not constitute purchasing securities on
margin.
3. ILLIQUID SECURITIES
The Fund may not invest more than 15% of its net assets in illiquid assets such
as: (a) securities that cannot be disposed of within seven days at their
then-current value, (b) repurchase agreements not entitling the holder to
payment of principal within seven days and (c) 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.
4. BORROWING
The Fund may not purchase or otherwise acquire any security if, the total of
borrowings would exceed 5% of the value of its total assets.
5. OPTION CONTRACTS
The Fund may not invest in options contracts regulated by the CFTC except for
(a) bona fide hedging purposes within the meaning of the rules of the CFTC and
(b) 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.
The Fund (a) will not hedge more than 50% of its total assets by buying put
options, and writing call options (so called "short positions"), (b) will not
buy futures contracts or write put options whose underlying value exceeds 25% of
the Fund's total assets, and (c) will not buy call options with a value
exceeding 5% of the Fund's total assets.
6. EXERCISING CONTROL OF ISSUERS
The Fund may not 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
11
<PAGE>
be deemed the making of investments for the purpose of exercising control.
7. SECURITIES OF INVESTMENT COMPANIES
The Fund may not invest in the securities of any investment company except to
the extent permitted by the 1940 Act.
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
The Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
The Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper Inc., iMoneyNet, Inc., 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) Index,
the Russell 2500(R) Index, the Morgan Stanley - Europe, Australian and
Far East Index, the Dow Jones Industrial Average, the Salomon Brothers
Bond Index, the Shearson Lehman Bond Index, U.S. Treasury bonds, bills
or notes and changes in the Consumer Price Index as published by the
U.S. Department of Commerce.
Performance information may be presented numerically or in a table, graph or
similar illustration.
Indices are not used in the management of 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.
12
<PAGE>
The Fund's performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
The Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for the Fund used in advertising are computed by
dividing the Fund's interest income (in accordance with specific standardized
rules) for a given 30 day or one month period, net of expenses, by the average
number of shares entitled to receive income distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income in accordance
with specific standardized rules) in order to arrive at an annual percentage
rate.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining the Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for the Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Financial intermediaries may charge their customers that
invest in the Fund fees in connection with that investment. This will have the
effect of reducing the Fund's after-fee yield to those shareholders.
The yields of the Fund are not fixed or guaranteed, and an investment in the
Fund is not insured or guaranteed. Accordingly, yield information should not be
used to compare shares of the Fund with investment alternatives, which, like
money market instruments or bank accounts, may provide a fixed rate of interest.
Also, it may not be appropriate to compare the Fund's yield information directly
to similar information regarding investment alternatives, which are insured or
guaranteed.
Yield quotations are based on amounts invested in the Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges. The Fund
does not charge a sales charge.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
13
<PAGE>
Where:
a = dividends and interest earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
2. TOTAL RETURN CALCULATIONS
The Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
Total return figures may be based on amounts invested in the Fund net of sales
charges that may be paid by an investor. A computation of total return that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges. The Fund
does not charge a sales charge.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns the Fund: (1) determines the growth or decline in value of a
hypothetical historical investment in the Fund over a stated period; and (2)
calculates the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would produce an
average annual total return of 7.18%. While average annual 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.
14
<PAGE>
OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
The Fund may quote unaveraged or cumulative total returns, which
reflect the Fund's performance over a stated period of time.
Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to
total return.
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
C. OTHER MATTERS
The Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Fund's investment adviser, summaries of
the views of the portfolio managers with respect to the financial markets, or
descriptions of the nature of the Adviser's and its staff's management
techniques; (7) the results of a hypothetical investment in the Fund over a
given number of years, including the amount that the investment would be at the
end of the period; (8) the effects of investing in a tax-deferred account, such
as an individual retirement account or Section 401(k) pension plan; (9) the net
asset value, net assets or number of shareholders of the Fund as of one or more
dates; and (10) a comparison of the Fund's operations to the operations of other
funds or similar investment products, such as a comparison of the nature and
15
<PAGE>
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 $1,118 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 automatic investment
and systematic withdrawal plans, including the principle of dollar cost
averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in the Fund at periodic intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in the Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
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 AVERAGE TOTAL
INVESTED $600 PRICE $15.17 SHARES 41.81
</TABLE>
In connection with its advertisements, the Fund may provide "shareholder's
letters" which serve to provide shareholders or investors with an introduction
into the Fund's, the Trust's or any of the Trust's service provider's policies
or business practices.
The Adviser's social mission is symbolized by a trillium. The trillium, a member
of the lily family, is a three-petaled flower that grows best in rich, shady,
undisturbed forest. All its parts, from sepals to leaves, grow in groups of
three. A trillium takes four to seven years to evolve from seed to flower. The
trillium symbolizes the weaving together of the three elements of
sustainability: Ecology (or a healthy environment; Equity (or social justice);
and Economy (or healthy commerce). The Adviser is a majority employee and
women-owned firm guided by the belief that investing can return a profit to the
16
<PAGE>
investor, while also promoting social and economic justice.
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
The names of the Trustees and officers of the Trust, their positions with the
Trust, address, date of birth and principal occupations during the past five
years are set forth below. The Trustee who is an "interested person" (as defined
by the 1940 Act) of the Trust is indicated by an asterisk (*).
<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 President, Forum Financial Group, LLC (a mutual fund services holding
Born: July 15, 1942 company)
Two Portland Square President, Forum Fund Services, LLC (Trust's underwriter)
Portland, ME 04101 Chairman & President*, Core Trust (Delaware) (registered investment
company)
-------------------------------------------- -----------------------------------------------------------------------
Costas Azariadas, Trustee Professor of Economics, University of California-Los Angeles
Born: February 15, 1943 Trustee, Core Trust (Delaware)
Department of Economics
University of California
Los Angeles, CA 90024
-------------------------------------------- -----------------------------------------------------------------------
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, Core Trust (Delaware)
-------------------------------------------- -----------------------------------------------------------------------
J. Michael Parish, Trustee Partner, Thelen Reid & Priest LLP (law firm) since 1995
Born: November 9, 1943 Trustee, Core Trust (Delaware)
40 West 57th Street
New York, NY 10019
-------------------------------------------- -----------------------------------------------------------------------
David I. Goldstein, Vice President General Counsel, Forum Financial Group LLC
Born: August 3, 1961 Secretary, Forum Fund Services, LLC (Trust's underwriter)
Two Portland Square
Portland, ME 04101
-------------------------------------------- -----------------------------------------------------------------------
Stacey Hong, Treasurer Director, Fund Accounting, Forum Financial Group, LLC
Born: May 10, 1966 Treasurer, Core Trust (Delaware)
Two Portland Square
Portland, Me 04101
-------------------------------------------- -----------------------------------------------------------------------
Leslie K. Klenk, Secretary Counsel, Forum Financial Group, LLC since 1998
Born: August 24, 1964 Vice President/Associate General Counsel, Smith Barney Inc.
17
<PAGE>
Two Portland Square (brokerage firm) from 1993 through 1998
Portland, Me 04101
-------------------------------------------- -----------------------------------------------------------------------
Pamela Stutch, Asst. Secretary Staff Attorney, Forum Financial Group, LLC since 1998
Born: June 29, 1967 Law Student, Temple University from 1994-1997
Two Portland Square
Portland, Me 04101
-------------------------------------------- -----------------------------------------------------------------------
</TABLE>
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee of the Trust (other than John Y. Keffer, who is an interested
person of the Trust) is paid $1,000 for each Board meeting attended (whether in
person or by electronic communication) and $1,000 for each audit committee
meeting attended on a date when a Board meeting is not held. In addition to the
$1,000 for each Board meeting attended, each Trustee is paid $100 per active
portfolio of the Trust. To the extent a meeting relates to only certain
portfolios of the Trust, Trustees are paid the $100 fee only with respect to
those portfolios. Trustees are also reimbursed for travel and related expenses
incurred in attending meetings of the Board.
Trustees that are affiliated with the Adviser receive no compensation for their
services or reimbursement for their associated expenses. No officer of the Trust
is compensated by the Trust.
The following table sets forth the fees paid to each Trustee by the Trust for
the fiscal year ended June 30, 2000.
<TABLE>
<S> <C> <C> <C> <C>
-------------------------- ------------------ -------------- --------------- -------------------------------
Compensation Total Compensation from Trust
Trustee from Trust(1) Benefits Retirement and Fund Complex(1)
-------------------------- ------------------ -------------- --------------- -------------------------------
John Y. Keffer $0 $0 $0 $0
-------------------------- ------------------ -------------- --------------- -------------------------------
Costas Azariadis $13,300 $0 $0 $23,800
-------------------------- ------------------ -------------- --------------- -------------------------------
James C. Cheng $14,800 $0 $0 $25,300
-------------------------- ------------------ -------------- --------------- -------------------------------
J. Michael Parish $14,800 $0 $0 $25,300
-------------------------- ------------------ -------------- --------------- -------------------------------
</TABLE>
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 that 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.
18
<PAGE>
2. OWNERSHIP OF ADVISER
The Adviser, Trillium Asset Management Corporation, is a registered investment
advisor, originally founded in 1982 under the name Franklin Research &
Development. The name changed to Trillium Asset Management Corporation in April,
1999. Trillium Asset Management Corporation is headquartered in Boston,
Massachusetts.
3. FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee 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 the client.
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. 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.
The Adviser's agreement is terminable without penalty by the Trust regarding 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.
D. 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 the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC, which is controlled by John Y. Keffer.
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Under its 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 receives no compensation for its distribution services. Shares are sold with
no sales commission; accordingly, FFS receives no sales commissions. FFS may
enter into arrangements with various financial institutions through which you
may purchase or redeem shares of the Fund. 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.
2. OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT
FFS's distribution 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.
FFS'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 FFS on 60 days' written
notice to the Trust.
Under its 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 its 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 Fund'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
indemnify FSS for any such misstatements or omissions if they were made in
reliance upon information provided in writing by FSS in connection with the
preparation of the Registration Statement.
The Fund has a distribution plan adopted under SEC Rule 12b-1 that allows the
Fund to pay asset-based sales charges or distribution fees for the distribution
and sale of its shares. These fees are charged at an annual rate of 0.25 percent
of the average daily net assets of the Fund's shares. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges. Each applicable service provider is to reimbursed for
the expenses it incurs. The service provider may incur expenses for any
distribution-related purpose it deems necessary or appropriate, including the
following principal activities: (a) compensation to employees and expenses,
including overhead, travel and telephone and other communication expenses, of
the service provider, (b) the incremental costs of printing and distributing
prospectuses, statements of additional information, annual reports and other
periodic reports for use in connection with the offering for sale of Fund shares
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to any prospective investors, (c) preparing, printing and distributing sales
literature and advertising materials used in connection with the offering of
Fund shares for sale to the public.
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust, providing the Trust
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Trust.
For its services, FAdS receives a fee from the Fund at an annual rate as
follows: (a) $24,000 per year; and (b) 0.05% of the average daily net assets of
the Fund for the first $1 billion of Fund assets. The fee is accrued daily by
the Fund and is paid monthly based on average net assets for the previous month.
FAdS's administration agreement must be approved at least annually by the Board
or by majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. FAdS's agreement is terminable without penalty by the Trust or by FAdS
with respect to the Fund on 60 days' written notice.
Under the 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.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to the Fund. These services include calculating the NAV per
share of the Fund (and class) and preparing the Fund's financial statements and
tax returns.
For its services, FAcS receives a fee from the Fund at an annual rate as follows
: (a) $36,000 per year; (b) 0.02% of the average daily net assets of the Fund
for the first $100 million of Fund assets; (c) 0.005% of the average daily net
assets of the Fund in excess of $100 million; and (d) certain surcharges based
upon the number of portfolio positions. The fee is accrued daily by the Fund and
is paid monthly based on the positions for the previous month.
FAcS's accounting agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. FAcS's agreement is terminable without penalty by the Trust or by FAcS
with respect to the Fund on 60 days' written notice.
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Under the 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.
Under the agreement, in calculating the Fund's NAV per share, FAcS is deemed not
to have committed an error if the NAV per share it calculates is within 1/10 of
1% of the actual NAV per share (after recalculation). 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.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust, 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 $24,000
and $24 per shareholder account. The fee is accrued daily by the Fund and is
paid monthly.
The Transfer Agent agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party. The Transfer Agent's agreement is terminable without penalty by the Trust
or by the Transfer Agent with respect to the Fund on 60 days' written notice.
Under the 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.
4. 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. The Custodian has hired
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Deutsche Bank, 130 Liberty Street, New York, New York, 10006, to serve as
sub-custodian for the Fund.
For its services, the Custodian receives a fee from the Fund at an annual rate
as follows: (a) $3,600 per year; and (b) 0.01% for the first $1 billion in Fund
assets. 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.
5. LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Trust are passed
upon by Seward & Kissel LLP, 1200 G Street, N.W., Washington, D.C. 20005.
6. INDEPENDENT AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, 02110,
independent auditors, have been selected as independent auditors for the Fund.
The auditors audit the annual financial statements of the Fund and provide the
Fund with an audit opinion. The auditors also review certain regulatory filings
of the Funds and the Fund's tax returns.
5. PORTFOLIO TRANSACTIONS
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.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
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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. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser places orders for the purchase and sale of securities with brokers
and dealers selected by and in the discretion of the Adviser. The Fund 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.
1. 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) take into
account payments made by brokers effecting transactions for the Fund (these
payments may be made to the Fund or to other persons on behalf of the Fund for
services provided to the Fund for which those other persons would be obligated
to pay).
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause the Fund to pay these brokers a higher
amount of commission than may be charged by other brokers. This research is
designed to augment the Adviser's own internal research and investment strategy
capabilities. This research may be used by the Adviser in connection with
services to clients other than the Fund, and not all research services may be
used by the Adviser in connection with the Fund. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
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
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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 databases.
Occasionally, the Adviser may effect a transaction through a broker and pay a
slightly higher commission than another might charge. If this is done it will be
because of the Adviser's need for specific research, for specific expertise a
firm may have in a particular type of transaction (due to factors such as size
or difficulty), or for speed/efficiency in execution. Since most of the
Adviser's brokerage commissions for research are for economic research on
specific companies or industries, and since the Adviser follows a limited number
of securities, most of the commission dollars spent for industry and stock
research directly benefit the clients.
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.
3. COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to the Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
4. TRANSACTIONS THROUGH AFFILIATES
The Adviser may effect transactions through affiliates of the Adviser (or
affiliates of those persons) pursuant to procedures adopted by the Trust.
5. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Fund are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser or its affiliates. Investment decisions are the product of many
factors, including basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which, in the
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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 occur contemporaneously, the purchase or sale orders may be aggregated
in order to obtain any price advantages available to large denomination
purchases or sales.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. From time to time
the Fund may engage in active short-term trading to take advantage of price
movements affecting individual issues, groups of issues or markets. Higher
portfolio turnover rates may result in increased brokerage costs to the Fund and
a possible increase in short-term capital gains or losses.
C. SECURITIES OF REGULAR BROKER-DEALERS
From time to time the Fund may acquire and hold securities issued by its
"regular brokers and dealers" or the parents of those brokers and dealers. For
this purpose, regular brokers and dealers 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.
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
You may effect purchases or redemptions or request any shareholder privilege in
person at the Transfer Agent's offices located at Two Portland Square, Portland,
Maine 04101.
The Fund accepts orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
B. ADDITIONAL PURCHASE INFORMATION
Shares of the Fund are sold on a continuous basis by the distributor at net
asset value ("NAV") per share without any sales charge. Accordingly, the
offering price per share is the same as the NAV per share.
The Fund reserves the right to refuse any purchase request.
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Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that: (1) are not restricted as to transfer by law and
are not illiquid; and (2) have a value which is readily ascertainable (and not
established only by valuation procedures).
1. IRAS
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Fund.
If you purchase shares through a financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in the Fund directly. 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 institution for further
information. If you hold shares through a financial institution, the Fund may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
Investors purchasing shares of the Fund through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
C. ADDITIONAL REDEMPTION INFORMATION
The Fund may redeem shares involuntarily to reimburse the Fund for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to
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transactions effected for the benefit of a shareholder which is applicable to
the Fund's shares as provided in the Prospectus.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted; (2) an emergency (as determined by the SEC) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) the SEC may by order permit for
the protection of the shareholders of the Fund.
2. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of the
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
you may incur brokerage costs in converting the securities to cash. The Trust
has filed an election with the SEC pursuant to which the Fund may only effect a
redemption in portfolio securities if the particular shareholder is redeeming
more than $250,000 or 1% of the Fund's total net assets, whichever is less,
during any 90-day period.
D. NAV DETERMINATION
In determining the Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
sales price. If no sale price is reported, the average of the last bid and ask
price is used. If no average price is available, the last bid price is used. If
market quotations are not readily available, then securities are valued at fair
value as determined by the Board (or its delegate).
E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at the Fund's NAV per
share (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 per share (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.
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal income tax law and assumes that the Fund
qualifies as a regulated investment company (as discussed below). Such
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information is only a summary of certain key federal income tax considerations
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Funds or the tax implications to shareholders. The
discussions here and in the prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Funds and
their shareholders. Any of these changes or court decisions may have a
retroactive effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of the Fund.
The tax year end of the Fund is June 30 (the same as the Fund's fiscal year
end).
1. MEANING OF QUALIFICATION
As a regulated investment company, the Fund will not be subject to federal
income tax on the portion of its 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 for the tax year. (Certain distributions made by the
Fund after the close of its tax year are considered distributions
attributable to the previous tax year for purposes of satisfying this
requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing in
securities.
o The Fund must satisfy the following asset diversification test at the
close of the quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of the issuer and as to which the Fund does not hold more
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than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
2. FAILURE TO QUALIFY
If for any tax year the Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of the Fund's current and accumulated earnings and profits.
A portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on the Fund's income and performance. It is possible that the Fund will
not qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. These distributions are taxable to you as
ordinary income. A portion of these distributions may qualify for the 70%
dividends-received deduction for corporate shareholders.
The Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but the Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to you
as long-term capital gain, regardless of how long you have held shares. These
distributions do not qualify for the dividends-received deduction.
Distributions by the Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce your tax basis in the 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 a
distribution 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 whose net asset value at the time reflects undistributed
net investment income or recognized capital gain, or unrealized appreciation in
the value of the assets of the Fund. Distributions of these amounts are taxable
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to you in the manner described above, although the distribution economically
constitutes a return of capital to you.
If you purchase shares of the Fund just prior to the ex-dividend date of a
distribution, you will be taxed on the entire amount of the distribution
received, even though the net asset value per share on the date of the purchase
reflected the amount of the distribution.
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 received by you (and made by the Fund)
on December 31 of that calendar year if the distribution is actually paid in
January of the following year.
You will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year.
C. CERTAIN TAX RULES APPLICABLE TO THE FUNDS' TRANSACTIONS
For federal income tax purposes, when put and call options purchased by the Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by the Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gain at the time of expiration. When the Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When the Fund exercises a put, the
proceeds from the sale of the underlying security are decreased by the premium
paid. When a put or call written by the Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by the Fund at the end of each tax year
are "marked to market" and treated for federal income tax purposes as though
sold for fair market value on the last business day of the tax year. Gains or
losses realized by the Fund on Section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses. The Fund can elect to
exempt its Section 1256 contracts that are part of a "mixed straddle" (as
described below) from the application of Section 1256.
Any option, futures contract, or other position entered into or held by the Fund
in conjunction with any other position held by the Fund may constitute a
"straddle" for federal income tax purposes. A straddle of which at least one,
but not all, the positions are Section 1256 contracts, may constitute a "mixed
straddle." In general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (1) the loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
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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.
D. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of 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.
For purposes of calculating the excise tax, the Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year; and (2) excludes foreign currency gains and
losses incurred after October 31 of any year in determining the amount of
ordinary taxable income for the current calendar year. The Fund will include
foreign currency gains and losses incurred after October 31 in determining
ordinary taxable income for the succeeding calendar year.
The Fund intends to make sufficient distributions of its ordinary taxable income
and capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax. Investors should note, however, that the Fund may
in certain circumstances be required to liquidate portfolio investments to make
sufficient distributions to avoid excise tax liability.
E. SALE OR REDEMPTION OF SHARES
In general, you will recognize gain or loss on the sale or redemption of shares
of the Fund in an amount equal to the difference between the proceeds of the
sale or redemption and 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) other shares of the Fund within 30 days before or after
the sale or redemption (a so called "wash sale"). If disallowed, the loss will
be reflected in an upward adjustment to the basis of the shares purchased. In
general, any gain or loss arising from the sale or redemption of shares of the
Fund will be considered capital gain or loss and will be long-term capital gain
or loss if the shares were held for longer than one year. Any capital loss
arising from the sale or redemption of shares held for six months or less,
however, is treated as a long-term capital loss to the extent of the amount of
capital gain distributions received on such shares. In determining the holding
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period of such shares for this purpose, any period during which your risk of
loss is offset by means of options, short sales or similar transactions is not
counted. Capital losses in any year are deductible only to the extent of capital
gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
F. WITHHOLDING TAX
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide its correct taxpayer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient." Backup
withholding is not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax liability or refunded.
G. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation or foreign partnership ("foreign
shareholder"), depends on whether the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of ordinary income
(and short-term capital gains) paid to a foreign shareholder will be subject to
U.S. withholding tax at the rate of 30% (or lower applicable treaty rate) upon
the gross amount of the distribution. The foreign shareholder generally would be
exempt from U.S. federal income tax on gain realized on the sale of shares of
the Fund and distributions of net capital gain from the Fund.
If the income from 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 noncorporate foreign shareholder, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein.
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The tax rules of other countries with respect to distributions from the Fund can
differ from the U.S. federal income taxation rules described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in the Fund.
H. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from the Fund can differ from the U.S. federal
income taxation rules described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in the
Fund.
8. OTHER MATTERS
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:
Investors Bond Fund Payson Value Fund
TaxSaver Bond Fund Payson Balanced Fund
Investors High Grade Bond Fund Oak Hall Small Cap Contrarian Fund
Maine Municipal Bond Fund Austin Global Equity Fund
New Hampshire Bond Fund Polaris Global Value Fund
Daily Assets Government Fund(1) Investors Equity Fund
Daily Assets Treasury Obligations Fund(1) Equity Index Fund
Daily Assets Cash Fund(1) Investors Growth Fund
Daily Assets Government Obligations Fund(1) The Advocacy Fund
Daily Assets Municipal Fund(1)
(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.
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The Trust and the Fund will continue indefinitely until terminated.
The Trust, the Adviser, and FFS have adopted codes 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 Fund, the Adviser and FFS. The codes permit such
personnel to invest in securities, including securities that may be purchased or
held by the Fund.
2. SERIES AND CLASSES OF THE TRUST
Each series or class of the Trust may have a different expense ratio and each
class' performance will be affected by its expenses. For more information on any
other class of shares of the Fund, investors may contact the Transfer Agent.
3. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency, shareholder service and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted separately by individual series except if: (1) the 1940 Act
requires shares to be voted in the aggregate and not by individual series; and
(2) when the Trustees determine that the matter affects more than one series and
all affected series must vote. The Trustees may also determine that a matter
only affects certain classes of the Trust and thus only those such classes are
entitled to vote on the matter. Delaware law does not require the Trust to hold
annual meetings of shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by federal or state law. There are
no conversion or preemptive rights in connection with shares of the Trust.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
Shareholders representing 10% or more of the Trust's (or a series') outstanding
shares may, as set forth in the Trust Instrument, call meetings of the Trust (or
series) for any purpose related to the Trust (or series), including, in the case
of a meeting of the Trust, the purpose of voting on removal of one or more
Trustees.
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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, including the Fund, to
merge or consolidate into one or more trusts, partnerships or corporations or
cause the Trust to be incorporated under Delaware law, so long as the surviving
entity is an open-end, management investment company that will succeed to or
assume the Trust's registration statement.
FUND OWNERSHIP
As of September 1, 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 September 1, 2000, and
prior to the public offering of the Fund, Forum Financial Group, LLC or its
affiliates, beneficially owned 100% of 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.
C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. 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
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which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, reference to the copy of such contract or other documents
filed as exhibits to the registration statement.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
AAA Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present 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.
A-1
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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.
2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only
in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
NOTE Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree
of speculation and C the highest. While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions 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.
A-2
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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; obligations exposed to severe prepayment
risk-such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse
floaters.
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+
AA High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions.
A+
A, A- Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+
BBB
BBB- Below-average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic
cycles.
A-3
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BB+
BB
BB- Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according
to industry conditions. Overall quality may move up or down frequently
within this category.
B+
B, B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
A-4
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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 outstandings, and `D' the lowest recovery potential, i.e.,
below 50%.
B. PREFERRED STOCK
1. 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-5
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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.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
A category.
A-6
<PAGE>
BB, B
CCC Preferred stock rated BB, B, and CCC is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BB indicates the lowest degree of
speculation and CCC the highest. While such issues will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
A-7
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PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
2. STANDARD AND POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that
the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than obligations in higher rating categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to
meet its financial commitment on the obligation; however, it faces
major ongoing uncertainties 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.
A-8
<PAGE>
3. FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for timely
repayment under Fitch IBCA's national rating scale for that country,
relative to other obligations in the same country. This rating is
automatically assigned to all obligations issued or guaranteed by the
sovereign state. Where issues possess a particularly strong credit
feature, a "+" is added to the assigned rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the relative
degree of risk is slightly higher than for issues classified as `A1'
and capacity for timely repayment may be susceptible to adverse 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-9
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant dated August 29, 1995 as amended on
June 25, 1999 (see Note 1).
(b) By-Laws of Registrant (see Note 2).
(c) See Sections 2.04 and 2.07 of the Trust Instrument 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 (see Note 3).
(2) Investment Advisory Agreement between Registrant and Austin
Investment Management, Inc. relating to Austin Global Equity Fund
dated as of June 14, 1996 (see Note 3).
(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
Municipal Bond Fund, New Hampshire Bond Fund and TaxSaver Bond
Fund dated as of January 2, 1998 (see Note 4).
(4) Investment Advisory Agreement between Registrant and Polaris
Capital Management, Inc. dated as of June 1, 1998 (see Note 5).
(5) Investment Advisory Agreement between Registrant and H.M. Payson &
Co. relating to Investors Equity Fund dated as of December 5, 1997
(see Note 6).
(6) Investment Subadvisory Agreement between H.M. Payson & Co. and
Peoples Heritage Bank relating to Investors Equity Fund dated as
of December 5, 1997 (see Note 7).
(7) Investment Advisory Agreement between Registrant and Brown
Investment Advisory & Trust Company relating to BIA Small-Cap
Growth Fund and BIA Growth Equity Fund, dated as of June 29, 1999
(see Note 1).
(8) Form of Investment Advisory Agreement between Registrant and
Mastrapasqua & Associates relating to Virtual Growth/Value Fund
(see Note 8).
(e) (1) Form of Selected Dealer Agreement between Forum Financial Services
, Inc. and securities brokers (see Note 3).
(2) Form of Bank Affiliated Selected Dealer Agreement between Forum
Financial Services, Inc. and bank affiliates (see Note 3).
(3) Distribution Agreement between Registrant and Forum Fund Services,
LLC relating to Austin Global Value Fund, BIA Growth Equity Fund,
BIA Small-Cap Growth Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Investor Shares, Institutional Shares and Institutional
Service Shares of Daily Assets Government Fund, Daily Assets
Treasury Obligations Fund, Daily Assets Government Obligations
Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund,
Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson
Balanced Fund, Payson Value Fund, Polaris Global Value Fund,
TaxSaver Bond Fund, The Advocacy Fund and Virtual Growth/Value
Fund dated as of February 28, 1999 (see Note 1).
(4) Sub-Distribution Agreement between Forum Fund Services, LLC and
Forum Financial Services, Inc. dated March 1, 1999 (see Note 9).
(f) None.
(g) (1) Custodian Agreement between Registrant and Forum Trust dated May
12, 1999 relating to Austin Global Equity Fund, BIA Small-Cap
<PAGE>
Growth Fund, BIA Growth Equity Fund, Equity Index Fund, Investors
Bond Fund, Investors Equity Fund, Investors Growth Fund,
Investors High Grade Bond Fund, Maine Municipal Bond Fund, New
Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund,
Polaris Global Value Fund, TaxSaver Bond Fund, Virtual
Growth/Value Fund and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Government Fund,
Daily Assets Treasury Obligations Fund, Daily Assets Government
Obligations Fund, Daily Assets Cash Fund and Daily Assets
Municipal Fund (see Note 9).
(2) Master Custodian Agreement between Forum Trust and Bankers Trust
Company relating to Austin Global Equity Fund, BIA Small-Cap
Growth Fund, BIA Growth Equity Fund, Equity Index Fund, Investors
Bond Fund, Investors Equity Fund, Investors Growth Fund, Investors
High Grade Bond Fund, Maine Municipal Bond Fund, New Hampshire
Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris Global
Value Fund, TaxSaver Bond Fund, Virtual Growth/Value Fund and
Investor Shares, Institutional Shares and Institutional Service
Shares of Daily Assets Government Fund, Daily Assets Treasury
Obligations Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund, dated April 20,
1999 (see Note 9).
(h) (1) Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Austin Global Equity
Fund, BIA Growth Equity Fund, BIA Small-Cap Growth Fund, Equity
Index Fund, Investors Bond Fund, Investors Equity Fund, Investors
Growth Fund, Investors High Grade Bond Fund, Maine Municipal Bond
Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value
Fund, Polaris Global Value Fund, TaxSaver Bond Fund, Virtual
Growth/Value Fund and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Government Fund,
Daily Assets Treasury Obligations 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 (see Note 9).
(2) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC relating to Austin Global Equity Fund, BIA Growth
Equity Fund, BIA Small-Cap Growth Fund, Equity Index Fund,
Investors Bond Fund, Investors Equity Fund, Investors Growth
Fund, Investors High Grade Bond Fund, Maine Municipal Bond Fund,
New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund,
Polaris Global Value Fund, TaxSaver Bond Fund, Virtual
Growth/Value Fund and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Government Fund,
Daily Assets Treasury Obligations 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 (see Note 9).
(3) Transfer Agency and Services Agreement between Registrant and
Forum Shareholder Services, LLC relating to Austin Global Equity
Fund, BIA Growth Equity Fund, BIA Small-Cap Growth Fund, Investors
Bond Fund, Investors Equity Fund, Investors Growth Fund, Investors
High Grade Bond Fund, Maine Municipal Bond Fund, New Hampshire
Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris Global
Value Fund, TaxSaver Bond Fund, Virtual Growth/Value Fund and
Investor Shares, Institutional Shares and Institutional Service
Shares of Daily Assets Government Fund, Daily Assets Treasury
Obligations 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 (See Note 10).
(4) Shareholder Service Plan of Registrant dated December 5, 1997 and
Form of Shareholder Service Agreement relating to the Daily Assets
Government Obligations Fund, Daily Assets Cash Fund, Daily Assets
Government Fund, Daily Assets Municipal Fund and Daily Assets
Treasury Obligations Fund (see Note 11).
(5) Shareholder Service Plan of Registrant dated March 18, 1998 and
Form of Shareholder Service Agreement relating to Polaris Global
Value Fund (see Note 6).
(6) Shareholder Service Plan of Registrant dated March 1, 2000
relating to BIA Small Cap Growth Fund and BIA Growth Equity Fund
(see Note 8).
<PAGE>
(i) Opinion of Seward & Kissel LLP dated January 5, 1996 (see Note 12).
(j) None.
(k) None.
(l) Investment Representation letter of Reich & Tang, Inc. as original
purchaser of shares of Registrant (see Note 3).
(m) 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 (see Note 13).
(n) 18f-3 plan adopted by Registrant (see Note 3).
(p) (1) Code of Ethics adopted by Registrant (see Note 8).
(2) Code of Ethics adopted by Brown Investment Advisors (see Note 8).
(3) Code of Ethics adopted by H.M. Payson & Co (see Note 8).
(4) Code of Ethics adopted by Austin Investment Management, Inc. (see Note
8).
(5) Code of Ethics adopted by Forum Fund Services, LLC and Forum
Investment Advisors, LLC (see Note 8).
(6) Code of Ethics adopted by Polaris Capital Management, Inc. (see Note
8).
(7) Code of Ethics adopted by Peoples Heritage Bank (see Note 8).
(8) Code of Ethics adopted by Wells Capital Management Incorporated (see
Note 8).
(9) Code of Ethics adopted by Wells Fargo Bank N.A. (see Note 8).
(10) Joint Code of Ethics adopted by Wells Fargo Funds Trust, Wells Fargo
Variable Trust and Wells Fargo Core Trust (see Note 8).
(11) Code of Ethics adopted by Mastrapasqua & Associates (filed herewith).
(12) Code of Ethics adopted by Trillium Asset Management Corporation (filed
herewith).
Other Exhibits:
(A) Power of Attorney for James C. Cheng, Costas Azariadis and J. Michael
Parish, Trustees of Registrant (see Note 14).
(B) Power of Attorney for John Y. Keffer, Trustee of Registrant (see Note 6).
(C) Power of Attorney for John Y. Keffer, James C. Cheng, Costas Azariadis and
J. Michael Parish, Trustees of Core Trust (Delaware) (see Note 15).
--------------------------------------------------------------------------------
Note:
(1) Exhibit incorporated by reference as filed in post-effective amendment No.
73 via EDGAR on July 30, 1999, accession number 0001004402-99-000341.
(2) Exhibit incorporated by reference as filed in post-effective amendment No.
43 via EDGAR on July 31, 1997, accession number 0000912057-97-025707.
(3) Exhibit incorporated by reference as filed in post-effective amendment No.
62 via EDGAR on May 26, 1998, accession number 0001004402-98-000307.
(4) Exhibit incorporated by reference as filed in post-effective amendment No.
56 via EDGAR on December 31, 1997, accession number 0001004402-97-000281.
(5) Exhibit incorporated by reference as filed in post-effective amendment No.
63 via EDGAR on June 8, 1998, accession number 0001004402-98-000339.
<PAGE>
(6) Exhibit incorporated by reference as filed in post-effective amendment No.
65 via EDGAR on September 30, 1998, accession number 0001004402-98-000530.
(7) Exhibit incorporated by reference as filed in post-effective amendment No.
64 via EDGAR on July 31, 1998, accession number 0001004402-98-000421.
(8) Exhibit incorporated by reference as filed in post-effective amendment No.
78 via EDGAR on April 17, 2000, accession number 0001004402-00-000112.
(9) Exhibit incorporated by reference as filed in post-effective amendment No.
72 via EDGAR on June 16, 1999, accession number 0001004402-99-000308.
(10) Exhibit incorporated by reference as filed in post-effective amendment No.
75 via EDGAR on September 30, 1999, accession number 0001004402-99-000395.
(11) Exhibit incorporated by reference as filed in post-effective amendment No.
50 via EDGAR on November 12, 1997, accession number 0001004402-97-000189.
(12) Exhibit incorporated by reference as filed in post-effective amendment No.
33 via EDGAR on January 5, 1996, accession number 0000912057-96-000216.
(13) Exhibit incorporated by reference as filed in post-effective amendment No.
69 via EDGAR on December 15, 1998, accession number 0001004402-98-000648.
(14) Exhibit incorporated by reference as filed in post-effective amendment No.
34 via EDGAR on May 9, 1996, accession number 0000912057-96-008780.
(15) Exhibit incorporated by reference as filed in post-effective amendment No.
15 to the registration statement of Monarch Funds via EDGAR on December 19,
1997, accession number 0001004402-97-000264.
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).
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
<PAGE>
reasonable belief that Covered Person's action was in the best interest
of the Trust; or
(ii) In the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Trustee's or officer's office,
(A) By the court or other body approving the
settlement;
(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or
(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full
trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 5.2 may be paid by the Trust
or Series from time to time prior to final disposition thereof upon
receipt of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust or Series if it is
ultimately determined that he is not entitled to indemnification under
this Section 5.2; provided, however, that either (a) such Covered
Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance
payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Section 5.2.
(e) Conditional advancing of indemnification monies under this Section
5.2 for actions based upon the 1940 Act may be made only on the
following conditions: (i) the advances must be limited to amounts used,
or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or
on behalf of, the recipient to repay that amount 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
<PAGE>
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., Peoples Heritage Bank and Forum
Investment Advisers, LLC (Investors Bond Fund, Investors High Grade
Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire
Bond Fund and Investors Growth Fund) include language similar to the
following:
"Section 4. We shall expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us,
and we agree as an inducement to your undertaking these services that
you shall not be liable hereunder for any mistake of judgment or in any
event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, you against
any liability to us or 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 and Brown Investment
Advisors & Trust Company provide as follows:
"SECTION 5. STANDARD OF CARE. (a) The Trust shall expect of the
Adviser, and the Adviser will give the Trust the benefit of, the
Adviser's best judgment and efforts in rendering its services to the
Trust. The Adviser shall not be liable hereunder for 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
<PAGE>
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.
(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.
<PAGE>
(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.
(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, TaxSaver Bond
Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Investors
Growth Fund and the Institutional, Institutional Service and Investor
classes 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. 77 to the Trust's Registration
Statement (accession number 0001004402-99-000487) and in Parts A and B
of post-effective amendment No. 73 to the Trust's Registration
Statement (accession number 0001004402-99-000341) 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., Member.
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
President of Forum Trust, LLC and Forum Financial Group, LLC. Mr. Keffer is also
a director and/or officer of various registered investment companies for which
the various Forum Financial Group's operating subsidiaries provide services.
<PAGE>
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 Secretary Forum Investment Advisors, LLC
................................... ..................................
General Counsel Forum Financial Group, LLC
................................... ..................................
Officer other Forum affiliated companies
.................................... ................................... ..................................
John Burns Director Forum Investment Advisors, LLC
.................................... ................................... ..................................
Marc Keffer Assistant Secretary Forum Investment Advisors, LLC
................................... ..................................
Corporate Counsel Forum Financial Group, LLC
................................... ..................................
Officer other Forum affiliated companies
</TABLE>
(b) H.M. Payson & Co.
The description of H.M. Payson & Co. (investment adviser to Payson
Value Fund, Payson Balanced Fund and Investors Equity Fund) contained
in Parts A and B of post-effective amendment No. 73 to the Trust's
Registration Statement (accession number 0001004402-99-000341) 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.
<TABLE>
<S> <C> <C>
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.
</TABLE>
(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. 73 to the Trust's Registration Statement
(accession number 0001004402-99-000341), 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.
<PAGE>
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Peter Vlachos Director, President, Treasurer, Austin Investment Management Inc.
Secretary
</TABLE>
(d) Peoples Heritage Bank
The description of Peoples Heritage Bank ("Peoples") (investment
sub-adviser to Investors Equity Fund) contained in Parts A and B of
post-effective amendment No. 75 to the Trust's Registration Statement
(accession number 0001004402-99-000395) is incorporated by reference
herein.
The following are the officers of Peoples Trust and Investment Group,
including their business connections, which are of a substantial
nature, who provide investment advisory related services. Unless
otherwise indicated below, the principal business address of Peoples
with which these are connected is One Portland Square, Portland, Maine
04101.
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Gary L. Robinson Executive Vice President Peoples
..................................... .................................. ...................................
Dorothy M. Wentworth Vice President Peoples
..................................... .................................. ...................................
Stephen L. Eddy Vice President Peoples
..................................... .................................. ...................................
Dana R. Mitiguy Chief Investment Officer Peoples
..................................... .................................. ...................................
Larry D. Pelletier Vice President Peoples
217 Main Street
Lewiston, Maine 04240
..................................... .................................. ...................................
Carolyn B. May Vice President Peoples
217 Main Street
Lewiston, Maine 04240
..................................... .................................. ...................................
Kevin K. Brown Vice President Peoples
..................................... .................................. ...................................
Donald W. Smith Vice President Peoples
..................................... .................................. ...................................
John W. Gibbons Vice President Peoples
..................................... .................................. ...................................
Joseph M. Pratt Vice President Peoples
74 Hammond Street
Bangor, Maine 04401
..................................... .................................. ...................................
Lucy L. Tucker Vice President Peoples
..................................... .................................. ...................................
Nancy W. Bard Assistant Vice President Peoples
..................................... .................................. ...................................
Douglas P. Adams Trust Officer Peoples
..................................... .................................. ...................................
Melanie L. Bishop Trust Officer Peoples
..................................... .................................. ...................................
Jeffrey Oldfield Vice President Peoples
..................................... .................................. ...................................
Janet E. Milley Assistant Vice President Peoples
74 Hammond Street
Bangor, Maine 04401
..................................... .................................. ...................................
Kathryn Dion Vice President Peoples
217 Main Street
Lewiston, Maine 04240
</TABLE>
(e) Brown Investment Advisory & Trust Company
The description of Brown Investment Advisory & Trust Company
("Brown")(investment adviser to BIA Small-Cap Growth Fund and BIA
Growth Equity Fund) contained in Parts A and B of post-effective
amendment No. 72 to the Trust's Registration Statement (accession
number 0001004402-99-000308) 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.
<PAGE>
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Michael D. Hankin President, Chief Executive Brown
Officer, Trustee
.................................. ...................................
President The Maryland Zoological Society
.................................. ...................................
Trustee The Valleys Planning Council
..................................... .................................. ...................................
David L. Hopkins, Jr. Chairman Brown
.................................. ...................................
Director Westvaco Corporation
.................................. ...................................
Director Metropolitan Opera Association
.................................. ...................................
Trustee and Chairman, Finance Episcopal Church Foundation
Committee
.................................. ...................................
Trustee Maryland Historical Society
..................................... .................................. ...................................
Charles W. Cole, Jr. Vice Chairman of the Board of Brown
Trustees
.................................. ...................................
Director Flag Investors Mutual Funds
.................................. ...................................
Director Provident Bankshares Corporation
and Provident Bank of Maryland
.................................. ...................................
Director, Chairman of Investment The University of Maryland
Committee Foundation
.................................. ...................................
Board of Regents The University of Maryland Systems
.................................. ...................................
Member The Governor's Committee on
School Funding
.................................. ...................................
Member Investment Committee of Helix
Health System
.................................. ...................................
Chairman of Investment Committee France-Merrick Foundation
.................................. ...................................
Trustee and Chairman Baltimore Council on Foreign
Affairs
..................................... .................................. ...................................
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
..................................... .................................. ...................................
<PAGE>
..................................... .................................. ...................................
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
..................................... .................................. ...................................
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>
..................................... .................................. ...................................
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
<PAGE>
</TABLE>
(f) 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. 77 to the Trust's
Registration Statement (accession number 0001004402-99-000487) 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.
<PAGE>
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Bernard R. Horn, Jr. President, Portfolio Manager Polaris
..................................... .................................. ...................................
Edward E. Wendell, Jr. Treasurer Polaris
.................................. ...................................
President Boston Investor Services, Inc.
..................................... .................................. ...................................
</TABLE>
(g) Mastrapasqua & Associates
The description of Mastrapasqua & Associates
("Mastrapasqua")(investment adviser to Virtual Growth/Value Fund)
contained in Parts A and B of post-effective amendment 78 to the
Trust's Registration Statement (accession number 0001004402-00-000112)
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.
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Frank Mastrapasqua Chairman, CEO and Portfolio Mastrapasqua
Manager
..................................... .................................. ...................................
Thomas A. Trantum President, Portfolio Manager and Mastrapasqua
Security Analyst
</TABLE>
(h) 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 this amendment to the Trust's Registration Statement 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.
<TABLE>
<S> <C> <C>
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
<PAGE>
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
..................................... .................................. ...................................
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
..................................... .................................. ...................................
<PAGE>
..................................... .................................. ...................................
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
..................................... .................................. ...................................
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
..................................... .................................. ...................................
<PAGE>
..................................... .................................. ...................................
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
..................................... .................................. ...................................
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
..................................... .................................. ...................................
<PAGE>
..................................... .................................. ...................................
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
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter, serves as
underwriter for the following investment companies registered under the
Investment Company Act of 1940, as amended:
The Cutler Trust 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 President 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.
<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, State of Maine on May 31,
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 May 31,
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.
<PAGE>
INDEX TO EXHIBITS
(p)(11) Code of Ethics adopted by Mastrapasqua & Associates.
(p)(12) Code of Ethics adopted by Trillium Asset Management Corporation.
<PAGE>
Exhibit (p)(11)
MAY 15, 2000
MASTRAPASQUA & ASSOCIATES
CODE OF ETHICS
AND
INSIDER TRADING POLICY AND PROCEDURES
I. INTRODUCTION
Mastrapasqua & Associates ("Mastrapasqua") has adopted this Code of Ethics for
the purpose of instructing all employees, officers, and directors of the
investment adviser in its ethical obligations and to provide rules for its
personal securities transactions. All such employees, officers, directors and
trustees owe a fiduciary duty to the Client Accounts they manage. A fiduciary
duty means a duty of loyalty, fairness and good faith towards the Client
Accounts, and the obligation to adhere not only to the specific provisions of
this Code but to the general principles that guide the Code.
STATEMENT OF GENERAL PRINCIPLES
(i) The duty at all times to place the interests of the Client
Accounts first;
(ii) The requirement that all personal securities transactions be
conducted in a manner consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of interest or any
abuse of any individual's position of trust and responsibility; and
(iii) The fundamental standard that such employees, officers, directors
and trustees should not take inappropriate advantage of their
positions, or of their relationship with the Client Accounts.
It is imperative that the personal trading activities of the employees,
officers, and directors of Mastrapasqua be conducted with the highest regard for
these general principles in order to avoid any possible conflict of interest,
any appearance of a conflict, or activities that could lead to disciplinary
action. This includes executing transactions through or for the benefit of a
third party when the transaction is not in keeping with the general principles
of this Code.
All personal securities transactions must comply with Mastrapasqua's Code of
Ethics, Insider Trading Policy and Procedures and the Securities and Exchange
Commission's Rule 17J-1. Under this rule, no Employee may:
(i) employ any device, scheme or artifice to defraud Client Accounts;
(ii) make to the Client Accounts or any of its beneficiaries any untrue
statement of a material fact or omit to state to such client a material
fact necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
<PAGE>
(iii) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Client Accounts or any
of their beneficiaries; or
(iv) engage in any manipulative practice with respect to the Client
Accounts or any of their beneficiaries.
DEFINITIONS
A. Advisory Employees
Employees who participate in, make, or obtain information regarding
recommendations with respect to the purchase or sale of securities. The
Compliance Officer, Amy Newman, will maintain a current list of all Advisory
Employees.
B. Beneficial Interest
Ownership or any benefits of ownership, including the opportunity to directly or
indirectly profit or otherwise obtain financial benefits from any interest in a
security.
C. Client Account
Any securities account or portfolio managed or directed by Mastrapasqua.
D. Compliance Officer
Amy Newman or, in her absence, the alternate Compliance Officer, Jim Basham, or
their successors in such positions.
E. Employee Account
Each account in which an Employee or a member of his or her family has any
direct or indirect Beneficial Interest or over which such person exercises
control or influence, including, but not limited to, any joint account,
partnership, corporation, trust or estate. An Employee's family members include
the Employee's spouse, minor children, any person living in the home of the
Employee, and any relative of the Employee (including in-laws) to whose support
an Employee directly or indirectly contributes.
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F. Employees
The employees, officers and directors of Mastrapasqua, including Advisory
Employees. The Compliance Officer will maintain a current list of all Employees.
G. Exempt Transactions
Transactions which are (1) effected in an amount or in a manner over which the
Employee has no direct or indirect influence or control; (2) pursuant to a
systematic dividend reinvestment plan, systematic cash purchase plan or
systematic withdrawal plan; (3) in connection with the exercise or sale of
rights to purchase additional securities from an issuer and granted by such
issuer pro-rata to all holders of a class of its securities; (4) in connection
with the call by the issuer of a preferred stock or bond; (5) pursuant to the
exercise by a second party of a put or call option; (6) closing transactions no
more than five business days prior to the expiration of a related put or call
option; or (7) with respect to any affiliated or unaffiliated registered
open-end investment company.
H. Recommended List
The list of those Securities which the Advisory Employees currently are
recommending for purchase or sale on behalf of Client Accounts.
I. Related Securities
Securities issued by the same issuer or issuer under common control, or when
either security gives the holder any contractual rights with respect to the
other security, including options, warrants or other convertible securities.
J. Securities
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing agreement,
collateral-trust certificate, pre-organization certificate or subscription,
transferable share, investment contract, voting-trust certificate, certificate
of deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, or, in general, any interest or instrument commonly known as a
"security," or any certificate or interest or participation in temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase (including options) any of the foregoing, including any
option on a security that is convertible into or is exchangeable for any
security that is held or to be acquired by a fund; except for the following: (1)
securities issued by the government of the United States; (2) bankers'
acceptances; (3) bank certificates of deposit; (4) commercial paper; (5) debt
securities, provided that (a) the security has a credit rating of Aa or Aaa from
Moody's Investor Services, AA or AAA from Standard & Poor's Ratings Group, or an
equivalent rating from another rating service, or is unrated but comparably
creditworthy, (b) the security matures within twelve months of purchase, (c) the
market is very broad so that a large volume of transactions on a given day will
have relatively little effect on yields, and (d) the market for the instrument
features highly efficient machinery permitting quick and convenient trading in
virtually any volume; and 6) shares of registered open-end investment companies.
K. Securities Transaction
The purchase or sale, or any action to accomplish the purchase or sale, of a
Security for an Employee Account.
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PERSONAL INVESTMENT GUIDELINES
PERSONAL ACCOUNTS AND PRE-CLEARANCE
1. Employees must obtain prior written permission from the Compliance Officer to
open or maintain a margin account, or a joint or partnership account with
persons other than the Employee's spouse, parent, or child (including custodial
accounts).
2. No Employee may execute a Securities Transaction without first obtaining
Pre-Clearance from the Compliance Officer. Prior to execution, the Employee must
submit the Pre-Clearance form to the Compliance Officer, or in the case of a
Pre-Clearance request by the Compliance Officer, to the alternate Compliance
Officer.
Clients Accounts have been notified in the ADV and have agreed as part of the
Investment Management Agreement that (a) employee advisers will manage accounts
and perform investment advisory services for others; (b) depending upon
investment objectives and cash availability, that advisory employees may sell or
recommend the sale of a particular security for certain accounts and buy or
recommend the purchase of such security for other accounts, and accordingly,
transactions in particular accounts may not be consistent with transactions in
other accounts or with advisory employees investment recommendations; (c) where
there is a limited supply of a security, advisory employees cannot assure
absolute equality among all accounts and clients; and (d) advisory employees and
/or employees may from time to time have an interest, direct or indirect, in a
security which is purchased, sold or otherwise traded for the Client Account,
and advisory employee may effect transactions in said security for the Client
Account which may be the same as or different from the action which advisory
employee or employee may take with respect thereto for its or their accounts.
Settlement of Securities Transactions must be made on or before settlement date.
Extensions and pre-payments are not permitted.
The Personal Investment Guidelines in this Section III do not apply to Exempt
Transactions. Employees must remember that regardless of the transaction's
status as exempt or not exempt, the Employee's fiduciary obligations remain
unchanged.
LIMITATIONS ON PRE-CLEARANCE
1. After receiving a Pre-Clearance request, the Compliance Officer will promptly
review the request and will deny the request if the Securities Transaction
violate this Code.
2. Employees may not execute a Securities Transaction on a day during which a
purchase or sell order in that same Security or a Related Security is pending
for, or is being actively considered on behalf of, a Client Account. In order to
determine whether a Security is being actively considered on behalf of a Client
Account, the Compliance Officer will consult the current Recommended List and,
in the case of non-equity Securities, consult each Advisory Employee responsible
for investing in non-equity Securities for any Client Account. Securities
Transactions executed in violation of this prohibition shall be unwound or, if
not possible or practical, the Employee must disgorge to the appropriate Client
Account(s) the value received by the Employee due to any favorable price
differential received by the Employee. For example, if the Employee buys 100
shares at $10 per share, and a Client Account buys 1000 shares at $11 per share,
the Employee will pay $100 (100 shares x $1 differential) to the Client Account.
Advisory Employees shall not purchase or sell a security within five
calendar days before or two calendar days after a fund for which the Advisory
Employee makes or participates in making a recommendation trades in that
security. Any profits realized on trades within this proscribed period shall be
disgorged. This blackout period does not apply to money market mutual funds that
are advised by Mastrapasqua.
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3. Pre-Clearance requests involving a Securities Transaction by an Employee
within fifteen calendar days after any Client Account has traded in the same
Security or a Related Security will be evaluated by the Compliance Officer to
ensure that the proposed transaction by the Employee is consistent with this
Code and that all contemplated Client Account activity in the Security has been
completed. It is wholly within the Compliance Officer's discretion to determine
when Pre-Clearance will or will not be given to an employee if the proposed
transaction falls within the fifteen-day period.
4. Pre-Clearance procedures apply to any Securities Transactions in an initial
public offering or private placement. In connection with an initial public
offering or private placement acquisition, the Compliance Officer will take into
account, among other factors, whether the investment opportunity should be
reserved for a Client Account, and whether the opportunity is being offered to
the Employee by virtue of the Employee's position with Mastrapasqua. Employees
who have been authorized to acquire securities in an initial public offering or
private placement will, in connection therewith, be required to disclose that
investment if and when the Employee takes part in any subsequent investment in
the same issuer. In such circumstances, the determination to purchase Securities
of that issuer on behalf of a Client Account will be subject to an independent
review by the Compliance Officer or someone else with no personal interest in
the issuer.
5. Employees are prohibited from acquiring low priced over-the-counter equity
securities (or "penny stock") as defined in Section 3(a) of the Securities
Exchange Act of 1934.
OTHER RESTRICTIONS
1. Employees are prohibited from serving on the boards of directors of publicly
traded companies, absent prior authorization in accord with the general
procedures of this Code. The consideration of prior authorization will be based
upon a determination that the board service will be consistent with the
interests of Client Accounts. In the event that board service is authorized,
Employees serving as directors will be isolated from other Employees making
investment decisions with respect to the securities of the company in question.
2. No Employee may accept from a customer or vendor gifts or gratuities in an
amount greater than $100 per year that could be construed as compensation for
services. If there is a question regarding receipt of a gift, gratuity or
compensation, it is to be reviewed by the Compliance Officer.
3. All employees, officers, and directors are prohibited from taking personal
advantage of any opportunity properly belonging to a fund.
II. COMPLIANCE PROCEDURES
A. Employees Disclosure and Certification
1. At the commencement of employment with Mastrapasqua, each Employee must
certify that he or she has read and understands this Code and recognized that he
or she is subject to it, and must disclose all personal Securities holdings
within 10 days of becoming an employee.
2. The above disclosure and certification is also required annually, along with
an additional certification that the Employee has complied with the requirements
of this Code and has disclosed or reported all personal Securities Transactions
required to be disclosed or reported pursuant to the requirements of this Code.
Employees must confirm annually, in writing, the accuracy of the records
maintained by the compliance officer and record the date of such confirmation.
B. Pre-Clearance
1. Advisory Employees will maintain an accurate and current Recommended List at
all times, updating the list as necessary. The Advisory Employees will submit
all Recommended Lists to the Compliance Officer as they are generated, and the
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Compliance Officer will retain the Recommended Lists for use when reviewing
Employee compliance with this Code. Upon receiving a Pre-Clearance request, the
Compliance Officer will contact the trading desk and all Advisory Employees to
determine whether the Security the Employee intends to purchase or sell is or
was owned within the past seven (7) days by a Client Account, and whether there
are any pending purchase or sell orders for the Security. The Compliance Officer
will determine whether the Employee's request violates any prohibitions or
restrictions set out in this Code.
2. If authorized, the Pre-Clearance is valid for orders placed by the close of
business on the second trading day after the authorization is granted. If during
the two-day period the Employee becomes aware that the trade does not comply
with this Code or that the statements made on the request form are no longer
true, the Employee must immediately notify the Compliance Officer of that
information and the Pre-Clearance may be terminated. If, during the two-day
period, the trading desk is notified that a purchase or sell order for the same
Security or Related Security is pending or is being considered on behalf of a
Client Account, the trading desk will not execute the Employee Transaction and
will notify the Employee and the Compliance Officer that the Pre-Clearance is
terminated.
C. Compliance
1. All Employees must direct their broker, dealer or bank to send duplicate
copies of all confirmations and periodic account statements directly to the
Compliance Officer. Each Employee must report, no later than ten (10) days after
the close of each calendar quarter, on the Securities Transaction Report form
provided by the Mastrapasqua, all transactions in which the Employee acquired
any direct or indirect Beneficial Interest in a Security, including Exempt
Transactions, and certify that he or she has reported all transactions required
to be disclosed pursuant to the requirements of this Code.
2. The Compliance Officer will spot check the trading confirmations provided by
brokers to verify that the Employee obtained any necessary Pre-Clearance for the
transaction. On a quarterly basis, the Compliance Officer will compare all
confirmations with the Pre-Clearance records, to determine, among other things,
whether any Client Account owned the Securities at the time of the transaction
or purchased or sold the security within fifteen (15) days of the transaction.
The Employee's annual disclosure of Securities holdings will be reviewed by the
Compliance Officer for compliance with this Code, including transactions that
reveal a pattern of trading inconsistent with this Code.
3. If an Employee violates this Code, the Compliance Officer will report the
violation to management personnel of Mastrapasqua for appropriate remedial
action which, in addition to the actions specifically delineated in other
sections of this Code, may include a reprimand of the Employee, or suspension or
termination of the Employee's relationship with Mastrapasqua.
4. The Compliance Officer will Annually prepare a written report to the Trustees
that describes any issues under the code of ethics or insider trading policy and
procedures since the last report to the Trustees, including, but not limited to,
information about material violations of the code or procedures and sanctions
imposed in response to the material violations; and certifies that the Adviser
has adopted procedures reasonably necessary to prevent employees, officers, and
directors from violating the code.
5. The Compliance Officer shall maintain and cause to be maintained:
(a) a copy of any code of ethics adopted by Mastrapasqua which has
been in effect during the previous five (5) years in an easily
accessible place;
(b) a record of any violation of any code of ethics, and of any
action taken as a result of such violation, in an easily
accessible place for at least five (5) years after the end of
the fiscal year in which the violation occurs;
(c) a copy of each report made as required by Section V(c)(4) for
at least five (5) years after the end of the fiscal year in
which the report is made, the first two (2) years in an easily
accessible place;
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(d) a list of all persons who are, or within the past five years
have been, required to make reports or who were responsible
for reviewing these reports pursuant to any code of ethics
adopted by Mastrapasqua in an easily accessible place;
(e) a copy of each written report and certification required
pursuant to this Code for at least five (5) years after the
end of the fiscal year in which it is made, the first two (2)
years in an easily accessible place; and
(f) a record of any decision, and the reasons supporting the
decision, approving the acquisition by an employee of
securities under Section IV of this Code, for at least five
(5) years after the end of the fiscal year in which the
approval is granted.
III. Insider Trading Policy and Procedures
1. All employees and advisory employees will familiarize themselves with insider
trading rules. Any potential violation will be brought to the attention of the
Compliance Officer who will in turn make the circumstances known to advisory
employees who will determine if the proposed action is inappropriate or gives
the appearance of being inappropriate. No action will be permitted until given
specific clearance by the advisory employee and compliance officer.
2. Insider trading can occur when a person who possesses material non-public
information trades securities or communicates such information to others who
trade. The person who trades or "tips" information violates the law if he/she
has a fiduciary duty or other relationship of trust and confidence not to use
the information. Trading is also prohibited when a person who receives
information through a confidential relationship uses ("misappropriates") the
information for his/her own trading or tips to others.
3. Because insider trading undermines investor confidence in the fairness and
integrity of the securities markets, the Security and Exchange Commission has
treated the detection and prosecution of insider trading violations as one of
its enforcement priorities.
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Exhibit (p)(12)
TAMC CODE OF ETHICS
TRILLIUM ASSET MANAGEMENT ("TAMC") employees should conduct themselves with
integrity, dignity, and act in an ethical manner in their dealings with the
public, clients, colleagues, and fellow investment and social research
professionals.
While acting in any capacity on behalf of the corporation, TAMC employees should
conduct themselves in a manner consistent with the goals espoused in TAMC's
vision and mission statements.
TAMC employees should act with competence and strive to fulfill their fiduciary
duties to, and social objectives of, our clients.
TAMC employees should treat all clients fairly and equitably.
TAMC employees should comply with all state and federal laws, stock exchange
rules, and TAMC internal investment policies and guidelines.
TAMC employees should exercise objectivity to ensure that client interests, and
then those of Franklin Research, are placed ahead of their own interests.
TAMC analysts should recommend any securities that they believe are suitable for
investment in client portfolios without withholding such recommendations for
personal gain.
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