----------------------------------------
PROSPECTUS
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AUGUST 1, 1999
AS AMENDED JANUARY 5, 2000
INVESTORS HIGH GRADE BOND INVESTORS HIGH GRADE BOND FUND
FUND AND INVESTORS BOND FUND
SEEK HIGH CURRENT INCOME CONSISTENT INVESTORS BOND FUND
WITH CAPITAL PRESERVATION AND
PRUDENT INVESTMENT RISK. TAXSAVER BOND TAXSAVER BOND FUND
FUND SEEKS HIGH CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX.
THE FUNDS DO NOT PAY RULE 12B-1
(DISTRIBUTION) FEES.
The Securities and Exchange Commission
has not approved or disapproved any Fund's
shares or determined whether this Prospectus
is accurate or complete. Any representation
to the contrary is a criminal offense.
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[Picture graphics]
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TABLE OF CONTENTS
RISK/RETURN SUMMARY 2
PERFORMANCE 6
FEE TABLES 9
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS 11
MANAGEMENT 15
YOUR ACCOUNT 18
HOW TO CONTACT THE FUNDS 18
GENERAL INFORMATION 18
BUYING SHARES 19
SELLING SHARES 22
SALES CHARGES 25
EXCHANGE PRIVILEGES 26
RETIREMENT ACCOUNTS 27
OTHER INFORMATION 28
FINANCIAL HIGHLIGHTS 30
<PAGE>
RISK/RETURN SUMMARY
INVESTORS HIGH GRADE BOND FUND
[Margin callout: CONCEPTS TO UNDERSTAND
DEBT SECURITY means a security such as a bond or note that obligates
the issuer to pay the security owner a specified sum of money
(interest) at set intervals as well as to repay the principal amount of
the security at its maturity
MATURITY means the date on which a debt security is (or may be) due and
payable
BOND means a debt security with a long-term maturity of usually 5 years
or longer
NOTE means a debt security with a short-term maturity, usually less
than 5 years (less than 1 year for municipal securities)
NRSRO means a "nationally recognized statistical rating organization"
such as Standard & Poor's that rates debt securities by relative credit
risk
INVESTMENT GRADE SECURITY means a debt security rated in one of the
four highest long-term or two highest short-term ratings categories by
an NRSRO or unrated and determined to be of comparable quality
MUNICIPAL SECURITY means a debt security issued by or on behalf of the
states, their local governments and public financing authorities and
U.S. territories and possessions, the interest on which is exempt from
Federal income tax
U.S. GOVERNMENT SECURITIES means debt securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities]
INVESTMENT OBJECTIVE Investors High Grade Bond Fund (a "Fund") seeks a high
level of current income consistent with capital preservation and prudent
investment risk.
PRINCIPAL INVESTMENT STRATEGY The Fund invests primarily in U.S. Government
Securities and debt securities rated in one of the three highest rating
categories by an NRSRO. Generally, the average weighted maturity of the Fund's
portfolio securities is 7 years or less.
INVESTORS BOND FUND
INVESTMENT OBJECTIVE Investors Bond Fund (a "Fund") seeks a high level of
current income consistent with capital preservation and prudent investment risk.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in investment grade
debt securities. Generally, the average weighted maturity of the Fund's
portfolio securities is between 5 and 20 years.
TAXSAVER BOND FUND
INVESTMENT OBJECTIVE TaxSaver Bond Fund (a "Fund") seeks high current income
exempt from Federal income tax.
PRINCIPAL INVESTMENT STRATEGIES TaxSaver Bond Fund invests primarily in
investment grade municipal securities. Generally, the average weighted maturity
of the Fund's portfolio securities is between 5 and 15 years.
2
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
An investment in a Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money on your investment in a Fund or the Fund could
underperform other investments. The principal risks of an investment in a Fund
include:
o A Fund's share price, yield and total return will fluctuate in
response to price movements in the fixed income securities markets
o The value of most debt securities fall when interest rates rise; the
longer a debt security's maturity and the lower its credit quality,
the more its value typically falls in response to an increase in
interest rates
o A Fund can not collect interest and principal payments on a debt
security if the issuer defaults
o The Fund's investment adviser (the "Adviser") may make poor investment
decisions
o Issuers may prepay fixed rate securities when interest rates fall,
forcing a Fund to invest in securities with lower interest rate. For
Investors High Brade Bond Fund's and Investors Bond Fund's investment
in mortgage-backed and asset-backed securities, there is also the risk
that a decline in interest rates may result in losses in these
securities' values and a reduction in their yields as the holders of
the assets backing the securities may prepay their debts. Issuers may
also prepay (or call) fixed rate securities when interest rates fall,
forcing the Fund to sell such securities and invest the proceeds in
securities with lower interest rates. The prices of debt securities
with longer maturities are more volatile
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o Investors Bond Fund and TaxSaver Bond Fund are each non-diversified.
Each Fund may focus its investment assets in the securities of a
comparatively small number of issuers. Concentration of a Fund in
securities of a limited number of issuers exposes it to greater market
risk and potential monetary losses than if its assets were diversified
among the securities of a greater number of issuers
WHO MAY WANT TO INVEST IN THE FUNDS
Investors High Grade Bond Fund and Investors Bond Fund may be appropriate for
you if you:
o Seek income and more price stability than stocks offer
o Seek capital preservation
o Are pursuing a long-term goal
TaxSaver Bond Fund may be appropriate for you if you:
o Are an income-oriented investor in a high tax bracket and desire
tax-exempt income
o Seek income and more price stability than stocks offer
o Seek capital preservation
o Are pursuing a long-term goal
Investors High Grade Bond Fund and Investors Bond Fund may NOT be appropriate
for you if you:
o Are pursuing a short-term goal or are investing emergency reserves
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TaxSaver Fund may NOT be appropriate for you if you:
o Are pursuing a short-term goal or are investing emergency reserves
o Are investing funds in a tax-deferred or tax-exempt account (such as
an IRA)
o Do not require tax-exempt income
5
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PERFORMANCE
The following charts illustrate the variability of a Fund's returns. The charts
and the following tables provide some indication of the risks of investing in
Investors Bond Fund and TaxSaver Bond Fund by showing changes in each Fund's
performance from year to year and how each Fund's returns compare to a broad
measure of market performance. Information for Investors High Grade Bond Fund is
not included as it did not have a full calendar year of performance as of
December 31, 1998. PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND
DOES NOT NECESSARILY INDICATE FUTURE RESULTS.
INVESTORS BOND FUND
The following chart shows the annual total returns for each full calendar year
that the Fund has operated. The chart does not reflect sales charges and, if
reflected, the returns would be less than shown.
[EDGAR REPRESENTATION OF GRAPH CHART]
PAST PERFORMANCE CHART
Year Average Annual Total Return
- ---- ---------------------------
1990 9.54%
1991 16.12%
1992 7.46%
1993 12.53%
1994 -2.23%
1995 13.73%
1996 6.87%
1997 10.97%
1998 6.13%
The calendar year-to-date total return as of June 30, 1999 was -1.57%.
During the periods shown in the chart, the highest quarterly return was 6.09%
(for the quarter ended September 30, 1991) and the lowest quarterly return was
- -2.32% (for the quarter ended March 31, 1994).
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The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Government/Corporate Intermediate Index.
<TABLE>
<S> <C> <C>
INVESTORS LEHMAN GOVERNMENT/CORPORATE
YEAR(S) BOND FUND INTERMEDIATE INDEX
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1 Year 2.15% 8.42%
5 Years 6.10% 6.59%
Since Inception (10/2/89) 8.48% 8.20%(1)
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</TABLE>
(1) For the period 9/30/89 - 12/31/98
The Lehman Government/Corporate Intermediate Index is a market index of
fixed-rate government and investment grade securities with maturities of up to
10 years. The index is unmanaged and reflects the reinvestment of interest and
principal payments. Unlike the performance figures of the Fund, the index's
performance does not reflect the effect of expenses.
TAXSAVER BOND FUND
The following chart shows the annual total returns for each full calendar year
that the Fund has operated. The chart does not reflect sales charges and, if
reflected, the returns would be less than shown.
[EDGAR REPRESENTATION OF GRAPH CHART]
PAST PERFORMANCE CHART
Year Average Annual Total Return
- ---- ---------------------------
1990 7.07%
1991 10.55%
1992 8.89%
1993 10.51%
1994 -0.85%
1995 13.29%
1996 4.29%
1997 7.39%
1998 5.09%
The calendar year-to-date total return as of June 30, 1999 was -1.08%.
7
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During the periods shown in the chart, the highest quarterly return was 4.93%
(for the quarter ended March 31, 1995) and the lowest quarterly return was
- -2.02% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman 10-Year Municipal Bond Index.
<TABLE>
<S> <C> <C>
YEAR(S) TAXSAVER BOND FUND LEHMAN 10-YEAR MUNICIPAL BOND INDEX
- ------------------------------------------------------------------------------------------------------------------------
1 Year 1.14% 6.76%
5 Years 4.93% 6.63%
Since Inception (10/2/89) 6.86% 8.59% (1)
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</TABLE>
(1) For the period 9/30/89 - 12/31/98.
The Lehman 10-Year Municipal Bond Index is a market index of investment grade
fixed-rate municipal securities with an average maturity of 10 years. The index
is unmanaged and reflects the reinvestment of interest and principal payments.
Unlike the performance figures of the Fund, the index's performance does not
reflect the effect of expenses.
8
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FEE TABLES
The following tables describe the various fees and expenses that you will bear
if you invest in a Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases 3.75%
(as a percentage of the offering price)
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Maximum Deferred Sales Charge (Load) 1.00%(1)
Redemption Fee None
Exchange Fee None
- --------------------------------------------------------------------------------------------------------------
(1) Applicable only on purchases of $1 million or more.
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------------------------------------
INVESTORS HIGH GRADE BOND FUND
Management Fees 0.40%
Distribution (12b-1) Fees None
Other Expenses 0.72%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.12%
Fee Waiver and Expense Reimbursement(2) 0.42%
Net Expenses 0.70%
INVESTORS BOND FUND
Management Fees 0.40%
Distribution (12b-1) Fees None
Other Expenses 0.62%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.02%
Fee Waiver and Expense Reimbursement(2) 0.32%
Net Expenses 0.70%
TAXSAVER BOND FUND
Management Fees 0.40%
Distribution (12b-1) Fees None
Other Expenses 0.71%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.11%
Fee Waiver and Expense Reimbursement(2) 0.51%
Net Expenses 0.60%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on amounts incurred during each Fund's fiscal year ended March 31,
1999 stated as a percentage of assets.
(2) Based on certain contractual fee waivers and expense reimbursments that may
increase after July 31, 2000.
9
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EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in a Fund to the cost of investing in other mutual funds. This example
assumes that you invest $10,000 in a Fund for the time periods indicated, you
pay the maximum sales charge and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% annual
return, that the Fund's operating expenses remain the same as stated in the
above table and that distributions are reinvested. Although your actual costs
may be higher or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C>
INVESTORS HIGH GRADE BOND INVESTORS TAXSAVER
FUND BOND FUND BOND FUND
- ---------------------------------------------------------------------------------------------------------------
After 1 year $444 $444 $434
After 3 years $718 $688 $715
After 5 years $969 $917 $964
After 10 years $1,687 $1,576 $1,676
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
10
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
INVESTORS HIGH GRADE BOND FUND seeks to provide as high a level of current
income as is consistent with capital preservation and prudent investment risk.
INVESTORS BOND FUND seeks to provide as high a level of current income
consistent with capital preservation and prudent investment risk.
TAXSAVER BOND FUND seeks to provide a high level of current income exempt from
Federal income tax.
INVESTMENT STRATEGIES
THE ADVISER'S PROCESS
[Margin callout: CONCEPTS TO UNDERSTAND
YIELD CURVE means a graph that plots the yield of all bonds of
similar quality against the bonds' maturities
The Adviser continuously monitors economic factors such as interest rate
outlooks and technical factors such as the shape of the yield curve in
combination with the stated objective of a Fund to determine an appropriate
maturity profile for the Fund's investment portfolio. The Adviser then
principally searches for securities that satisfy the maturity profile of a Fund
and that provide the greatest potential return relative to the risk of the
security. The Adviser may sell a debt security if:
o Revised economic forecasts or interest rate outlook requires a
repositioning of the portfolio
o The security subsequently fails to meet the Adviser's investment
criteria
o A more attractive security is found or funds are needed for another
purpose
o The Adviser believes that the security has reached its appreciation
potential
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INVESTMENT POLICIES
[Margin callout: CONCEPTS TO UNDERSTAND
MORTGAGE-BACKED SECURITIES means debt securities whose principal and
interest payments come from a pool of mortgages created by various
lenders
ASSET-BACKED SECURITIES means debt securities whose principal and
interest payments come from a pool of assets such as car loans, leases
of real and personal property and credit card loans created by various
lenders
PRIVATE ACTIVITY BOND means a debt security that is issued by or on
behalf of public authorities to finance privately operated facilities.
Private Activity Bonds are primarily revenue securities
GENERAL OBLIGATION SECURITY means a security whose principal and
interest payment is secured by a municipality's full faith and credit
and taxing power
REVENUE SECURITY means a security whose principal and interest is
payable from revenues of a particular facility, class of facilities or
from the proceeds of a special excise or other tax
INVESTORS HIGH GRADE BOND FUND The Fund invests primarily in U.S. Government
Securities or debt securities that are rated in one of the three highest rating
categories by an NRSRO. The Fund normally invests at least 70% of its total
assets in U.S. Government Securities and at least 40% of those assets in
obligations of the U. S. Treasury, such as Treasury bonds, bills and notes. The
Fund may invest up to 30% of its total assets in mortgage-backed and
asset-backed securities. The Fund only invests in mortgage-backed securities
that are U.S. Government Securities or are rated in the two highest rating
categories of an NRSRO. The Fund may invest up to 10% of its total assets in
adjustable rate mortgage-backed securities and up to 10% of its total assets in
asset-backed securities. These securities must be rated in the highest rating
category by an NRSRO. The Fund invests in securities with varying maturities
from overnight to more than 30 years, but will not invest more than 25% of its
total assets in securities with maturities greater than 10 years. Generally, the
average weighted maturity of the Fund's portfolio securities is 7 years or less.
INVESTORS BOND FUND The Fund invests primarily in investment grade debt
securities, U.S. Government Securities and mortgage-backed and asset-backed
securities rated in the two highest rating categories by an NRSRO. The Fund may
invest up to 50% of its total assets in mortgage-backed securities and up to 15%
of its total assets in asset-backed securities. The Fund invests in securities
with varying maturities ranging from overnight to 30 years. Generally, the
average weighted maturity of the Fund's portfolio securities is between 5 and
20 years.
TAXSAVER BOND FUND The Fund invests primarily in investment grade municipal
securities. The Fund may, however, invest up to 20% of its total assets in
securities whose interest income is subject to Federal income tax. Municipal
securities include municipal bonds, notes and leases. Municipal leases are
securities that permit government issuers to acquire property and equipment
without the security being subject to the constitutional and statutory
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<PAGE>
requirements for the issuance of long-term debt. The Fund invests in general
obligation securities and revenue securities, including private activity bonds.
The Fund may invest over 25% of its total assets in private activity bonds.
Generally, the average weighted maturity of the Fund's portfolio securities is
between 5 and 15 years.
PORTFOLIO TURNOVER The frequency of portfolio transactions of each Fund
(the portfolio turnover rate) will vary from year to year depending on market
conditions. From time to time, a Fund may engage in active short-term trading to
benefit from yield disparities among different issues of debt securities, to
seek short-term profits during periods of fluctuating interest rates or for
other reasons. This type of trading will increase a Fund's portfolio turnover
rate and transaction costs and may negatively impact the Fund's performance.
This trading may also increase a Fund's capital gain. The Adviser weighs the
anticipated benefits of short-term investments against these consequences. Each
Fund's turnover rate is reported under "Financial Highlights."
TEMPORARY DEFENSIVE MEASURES In order to respond to adverse market, economic or
other conditions, a Fund may assume a temporary defensive position and invest
without limit in cash and prime quality cash equivalents such as commercial
paper and money market instruments. As a result, a Fund may be unable to achieve
its investment objective.
INVESTMENT RISKS
GENERAL A Fund's net asset value and total return will fluctuate based upon
changes in the value of its portfolio securities. The market value of securities
in which the Funds invest are based upon the market's perception of value and is
not necessarily an objective measure of a security's value. There is no
assurance that any Fund will achieve its investment objective. An investment in
a Fund is not by itself a complete or balanced investment program.
13
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The value of your investment in a Fund may change in response to changes in
interest rates. An increase in interest rates typically causes a fall in the
value of the debt securities in which the Funds invest. Your investment
in a Fund is also subject to the risk that the financial condition of an issuer
of a security held by the Fund may cause it to default or become unable to pay
interest or principal due on the security. This risk generally increases as
security credit ratings decrease. Your investment in a Fund is subject to the
risk that the Adviser may make poor investment decisions.
An additional risk is that issuers may prepay fixed rate securities when
interest rates fall, forcing a Fund to invest in securities with lower interest
rates. For Investors Bond Fund's and Investors High Grade Bond Fund's investment
in mortgage-backed and asset-backed securities, there is also the risk that a
decline in interest rates may result in holders of the assets backing the
securities prepaying their debts. This could result in potential losses on these
securities and a reduction in their yields. Alternatively, a rise in interest
rates may reduce the amount of prepayments. This may cause a Fund's average
maturity to rise as fewer holders of assets backing the securities may prepay
their debt.
Investors Bond Fund and TaxSaver Bond Fund are also non-diversified. Each Fund
may focus its investments in the securities of a comparatively small number of
issuers. Concentration of a Fund in securities of a limited number of issuers
exposes it to greater market risk and potential monetary losses than if its
assets were diversified among the securities of a greater number of issuers.
YEAR 2000 Certain computer systems may not process date-related information
properly on and after January 1, 2000. The Adviser is addressing this matter for
its systems. Each Fund's other service providers have informed the Fund that
they are taking similar measures. This matter, if not corrected, could adversely
affect the services provided to each Fund or the issuers in which the Fund
invests and, therefore, could lower the value of your shares.
14
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MANAGEMENT
Each Fund is a series of Forum Funds (the "Trust"), an open-end, management
investment company (mutual fund). The business of the Trust and of each Fund is
managed under the direction of the Board of Trustees (the "Board"). The Board
formulates the general policies of each 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
Each Fund's adviser is Forum Investment Advisors, LLC, Two Portland Square,
Portland, Maine 04101, serves as investment adviser to each Fund. The Adviser is
a privately owned company controlled by John Y. Keffer, who is Chairman of the
Board of the Trust.
Subject to the general control of the Board, the Adviser makes investment
decisions for each Fund. For the fiscal year ended March 31, 1999, each Fund
paid the Adviser an advisory fee of 0.40% of the average daily net assets of the
Fund.
As of June 30, 1999, the Adviser had approximately $2.3 billion of assets under
management.
PORTFOLIO MANAGER
LES C. BERTHY, Senior Portfolio Manager of the Adviser, has been primarily
responsible for the day-to-day management of each Fund since their inception.
Mr. Berthy has over 27 years of experience in the investment industry and prior
to his association with the Adviser in January 1991,
15
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was Managing Director and Co-Chief Executive Officer of Irwin Union Capital
Corp., an affiliate of Irwin Union Bank & Trust Co.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide services to each Fund.
As of June 30, 1999, Forum provided administration and distribution services to
investment companies and collective investment funds with assets of
approximately $73 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 each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each 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 each Fund's shares.
Forum Administrative Services, LLC provides administrative services to each
Fund, Forum Accounting Services, LLC is each Fund's fund accountant, Forum
Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer agent
and Forum Trust, LLC is each Fund's custodian.
16
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FUND EXPENSES
Each Fund pays for all of its expenses. Each Fund's expenses are comprised of
its own expenses as well as Trust expenses that are allocated among the Fund and
the other funds of the Trust. The Adviser or other service providers may
voluntarily waive all or any portion of their fees and/or reimburse certain
expenses of a Fund. Any fee waiver or expense reimbursement increases a Fund's
performance for the period during which the waiver is in effect.
Certain service providers have undertaken to waive a portion of their fees
and/or reimburse certain expenses in order to limit expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses) to 0.70% or
less of the average daily net assets of Investors High Grade Bond Fund and
Investors Bond Fund and 0.60% or less of the average daily net assets of
TaxSaver Bond Fund.
17
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YOUR ACCOUNT
[Margin call out: HOW TO CONTACT THE FUNDS
WRITE TO US AT:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
TELEPHONE US AT:
(800) 94FORUM or
(800) 943-6786 (Toll Free)
(207) 879-0001
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: (Name of Your Fund)
(Your Name)
(Your Account Number)]
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
(NAV) plus any applicable sales charge (or minus any applicable sales charge in
the case of redemptions) 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., Eastern time, your transaction
will be priced at the next business day's NAV plus the applicable sales charge.
A Fund cannot accept orders that request a particular day or price for the
transaction or any other special conditions.
The Funds do not issue share certificates.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations.
Each 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 Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may change in case of an emergency. A 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
(net assets) by the number of shares outstanding. A Fund values securities for
which market quotations are readily available at current market value. If market
quotations are not readily available, a Fund values securities at fair value.
18
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TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees (other than sales charges) charged
by that institution may be different than those of a 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, Uniform Gift to Minors Act ("UGMA") or Uniform
Transfers to Minors Act ("UTMA") accounts, the check must be made
payable to "Forum Funds" or to one or more owners of the account and
endorsed to "Forum Funds." For all other accounts, the check must be
made payable on its face to "Forum Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
ACH PAYMENT Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days to settle. Your financial institution may charge you a fee for
this service.
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 Each Fund accepts investments in the following minimum
amounts:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
Standard Account $2,000 $250
Traditional and Roth IRA Accounts $1,000 $250
Accounts With Systematic Investment Plans $250 $250
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
You can not invest in TaxSaver Bond Fund through an IRA account.
<TABLE>
<S> <C>
ACCOUNT REQUIREMENTS
- ----------------------------------------------------------------------------------------------------------------------------
TYPE OF ACCOUNT REQUIREMENT
- ----------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS: o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear on
proprietorship accounts. Joint accounts can have two or 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 Uniform Gift to Minors
child and obtain tax benefits. An individual can give up Act or the Uniform Transfers to Minors Act
to $10,000 a year per child without paying Federal gift tax o The trustee must sign instructions in a manner
indicating trustee capacity
BUSINESS ENTITIES o For entities with officers, provide an
original or certified copy of a resolution that
identifies the authorized signers for the account
o For entities with partners or other interested
parties, provide a certified partnership agreement or
organizational document, or certified pages from the
partnership agreement or organizational document, that
identify the partners or interested parties
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
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT 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
o Complete the application confirmation or write us a letter
o Mail us your application and a check o Write your account number on your 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
o Complete the application o Instruct your bank to wire your money to us
o Call us and we will assign you an account number
o Mail us your application
o Instruct your bank to wire your money to us
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete the systematic investment section of the
o Complete the application application
o Call us and we will assign you an account number o Attach a voided check to your application
o Mail us your application o Mail us the completed application
o Make an ACH payment
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Systematic investments must be for at least $250.
LIMITATIONS ON PURCHASES Each 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 a 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).
21
<PAGE>
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH transfers at full
value subject to collection. If a 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 a
Fund or the Transfer Agent, and the Fund may redeem shares you own in the
account (or another identically registered account maintained with the Transfer
Agent) as reimbursement. Each Fund and its agents have the right to reject or
cancel any purchase or exchange due to nonpayment.
SELLING SHARES
Each Fund processes redemption orders promptly. Generally, a 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. Each
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.
22
<PAGE>
- --------------------------------------------------------------------------------
TO SELL SHARES FROM YOUR ACCOUNT
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if your redemption is for $5,000 or
more and you did not decline wire redemption privileges on your account
application
o Call us with your request (unless you declined telephone
redemption privileges - See "By Telephone") OR
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you OR
o Wired to you (unless you declined wire redemption privileges -See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
- --------------------------------------------------------------------------------
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 redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000.
23
<PAGE>
SYSTEMATIC WITHDRAWALS You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Systematic withdrawals must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, 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 an IRA
account), a Fund may ask you to increase your balance. If the account value is
still below $1,000 ($500 for an IRA account) after 60 days, a Fund may close
your account and send you the proceeds. A Fund will not close your account if it
falls below these amounts solely as a result of a reduction in your account's
market value.
REDEMPTIONS IN KIND Each 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 a Fund's operations (for
example, if it represents more than 1% of the Fund's assets).
24
<PAGE>
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.
SALES CHARGES
PURCHASES A sales charge is assessed on purchases of a Fund's shares as follows:
<TABLE>
<S> <C> <C> <C>
SALES CHARGE (LOAD) AS %
OF:
PUBLIC NET ASSET
AMOUNT OF PURCHASE OFFERING PRICE VALUE* REALLOWANCE %
$0 to $49,999 3.75 3.90 3.25
$50,000 to $99,999 3.25 3.36 2.75
$100,000 to $249,999 2.75 2.83 2.25
$250,000 to $499,999 2.25 2.30 1.85
$500,000 to $999,999 1.75 1.78 1.45
$1,000,000 and up 0.00 0.00 1.00
</TABLE>
* Rounded to the nearest one-hundredth percent.
The offering price for the Funds' shares includes the relevant sales charge. The
commission paid to the distributor is the sales charge less the reallowance
paid to certain financial institutions purchasing shares. Normally, reallowances
are paid as indicated in the above table. From time to time, the distributor may
elect to reallow the entire sales charge for all sales during a particular
period.
From time to time and at its own expense, the distributor may provide
compensation, including financial assistance, to certain dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising campaigns or other dealer-sponsored special events.
25
<PAGE>
Compensation may include the provision of travel arrangements and lodging,
tickets for entertainment events and merchandise.
REDEMPTIONS A contingent deferred sales charge ("CDSC") is assessed on
redemptions of shares that were part of a purchase of $1 million or more. The
CDSC is assessed as follows:
REDEEMED WITHIN SALES CHARGE
- --------------------------------------------------------------------------------
First year of purchase 1.00%
Second year of purchase 0.50%
The CDSC is paid on the lower of the NAV of shares redeemed or the cost of the
shares. To satisfy a redemption request, the Fund will first liquidate shares
that are not subject to a CDSC such as shares acquired with reinvested dividends
and capital gains. The Fund will then liquidate shares in the order that they
were first purchased until your redemption request is satisfied.
REDUCED SALES CHARGES You may qualify for a reduced sales charge on Fund
purchases under rights of accumulation or a letter of intent. Certain persons
may also be eligible to purchase or redeem Fund shares without a sales charge.
Please see the SAI for further information.
EXCHANGE PRIVILEGES
You may exchange your Fund shares for shares of another fund of the Trust by
telephone or in writing. For a list of funds available for exchange, you may
call the Transfer Agent. If you exchange into a fund that has a higher sales
charge than the Fund, you will have to pay the difference between that fund's
sales charge and the Fund's sales charge. If you exchange into a fund that has
no sales charge or a lower sales charge than the Fund, you will not have to pay
a sales charge at the time of exchange. Because exchanges are a sale and
purchase of shares, they may have tax consequences.
26
<PAGE>
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 each Fund reserves the right to limit exchanges. You may exchange
your shares by mail or telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE
- --------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds from which you are exchanging and into which
you are exchanging
o The dollar amount or number of shares you want to sell (and exchange)
o Open a new account and complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
- --------------------------------------------------------------------------------
RETIREMENT ACCOUNTS
Investors High Grade Bond Fund and Investors Bond Fund offer IRA accounts,
including traditional and Roth IRA accounts. Before investing in any IRA or
other retirement plan, you should consult your tax adviser. Whenever making an
investment in an IRA, be sure to indicate the year in which the contribution is
made.
27
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Each Fund distributes its net investment income monthly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
INVESTORS BOND FUND AND INVESTORS HIGH GRADE BOND FUND A Fund's distribution of
net income (including short-term capital gain) is taxable to you as ordinary
income. A Fund's distribution of long-term capital gain is taxable to you as
long-term capital gain. Distributions also may be subject to certain state and
local taxes.
TAXSAVER BOND FUND Generally, you are not subject to Federal income tax on
the Fund's distribution of tax-exempt interest income. The Fund's distribution
of other investment income and short-term capital gain is taxable to you as
ordinary income. It is anticipated that substantially all of the Fund's net
income will be exempt from Federal income tax. Distributions, including
distributions that are exempt from Federal income tax, may be subject to certain
state and local taxes.
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay Federal income tax on your pro rata share of the net income generated from
these securities. Distributions of interest income on certain private activity
28
<PAGE>
bonds is an item of tax preference for purposes of individual and corporate
Federal alternative minimum tax (AMT). Distributions of net income
from tax-exempt obligations is included in the "adjusted current earnings" of
corporations for Federal AMT purposes. The Fund's distribution of long-term
capital gain is taxable to you as long-term capital gain regardless of how long
you have held your fund shares.
GENERAL If you buy shares shortly before a Fund makes a distribution, you may
pay the full price for the shares and then receive a portion of the price back
as a distribution that may be taxable to you.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Your 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 a Fund, including
state and local tax matters, please see the SAI and consult your tax adviser.
ORGANIZATION
The Trust is a Delaware business trust. No Fund expects to hold shareholders'
meetings unless required by Federal or Delaware law. Shareholders of each series
are entitled to vote at shareholders' meetings unless a matter relates only to
specific series (such as approval of an advisory agreement for a Fund). From
time to time, large shareholders may control a Fund or the Trust.
29
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's
financial performance. Total return in the table represents the rate an investor
would have earned (or lost) on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by
Deloitte & Touche LLP. Each Fund's financial statements and the auditor's report
are included in the Annual Report dated March 31, 1999, which is available upon
request, without charge.
INVESTORS HIGH GRADE BOND FUND
<TABLE>
<S> <C> <C>
YEAR ENDED MARCH 31,
1999 1998(A)
- ---------------------------------------------------------------------------------------------------------------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share $9.96 $10.00
Income From Investment
Operations:
Net Investment Income 0.57 0.02
Net Realized and Unrealized Gain (Loss) 0.03 (0.04)
on Investments
Total From Investment Operations 0.60 (0.02)
Less Distributions:
From Net Investment Income (0.57) (0.02)
From Net Realized Capital Gain (0.07) --
Total Distributions (0.64) (0.02)
Ending Net Asset Value Per Share $9.92 $9.96
OTHER INFORMATION
Ratios to Average Net Assets:
Net Expenses 0.70% 0.70%(d)
Gross Expenses(b) 1.12% 3.00%(d)
Net Investment Income 5.68% 5.56%(d)
Total Return(c) 6.12% (0.16%)
Portfolio Turnover Rate 172.60% -
Net Assets at End of Period
(in thousands) $35,754 $34,037
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on March 16, 1998.
(b) Reflects expense ratio in the absence of fee waivers and expense
reimbursements.
(c) Does not include sales charges.
(d) Annualized.
30
<PAGE>
INVESTORS BOND FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share $10.57 $10.19 $10.21 $10.00 $10.38
Income From Investment Operations:
Net Investment Income 0.67 0.71 0.71 0.74 0.82
Net Realized and Unrealized Gain
(Loss) on Investments (0.21) 0.38 - 0.21 (0.38)
Total From Investment Operations 0.46 1.09 0.71 0.95 0.44
Less Distributions:
From Net Investment Income (0.67) (0.71) (0.71) (0.74) (0.82)
From Net Realized Capital Gains (0.04) - (0.02) - -
Total Distributions (0.71) (0.71) (0.73) (0.74) (0.82)
Ending Net Asset Value Per Share $10.32 $10.57 $10.19 $10.21 $10.00
OTHER INFORMATION
Ratios to Average Net Assets:
Net Expenses 0.70% 0.70% 0.70% 0.43% 0.75%
Gross Expenses (a) 1.02% 1.22% 1.45% 1.36% 1.33%
Net Investment Income 6.33% 6.52% 6.94% 7.29% 8.19%
Total Return(b) 4.45% 10.98% 7.18% 9.84% 4.55%
Portfolio Turnover Rate 98.36% 116.65% 79.42% 42.89% 48.17%
Net Assets at End of Period
(in thousands) $70,446 $85,598 $22,190 $25,676 $25,890
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects expense ratio in the absence of fee waivers and expense
reimbursements.
(b) Does not include sales charge.
31
<PAGE>
TAXSAVER BOND FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share $10.75 $10.49 $10.57 $10.39 $10.35
Income From Investment Operations:
Net Investment Income 0.48 0.53 0.56 0.57 0.57
Net Realized and Unrealized Gain
(Loss) on Investments 0.04 0.27 (0.03) 0.18 0.04
Total From Investment Operations 0.52 0.80 0.53 0.75 0.61
Less Distributions:
From Net Investment Income (0.48) (0.53) (0.56) (0.57) (0.57)
From Net Realized Capital Gains (0.18) (0.01) (0.05) - -
Total Distributions (0.66) (0.54) (0.61) (0.57) (0.57)
Ending Net Asset Value Per Share $10.61 $10.75 $10.49 $10.57 $10.39
OTHER INFORMATION
Ratios to Average Net Assets:
Net Expenses 0.60% 0.60% 0.60% 0.60% 0.60%
Gross Expenses(a) 1.11% 1.36% 1.53% 1.48% 1.45%
Net Investment Income 4.48% 4.95% 5.28% 5.35% 5.62%
Total Return(b) 4.95% 7.75% 5.15% 7.36% 6.18%
Portfolio Turnover Rate 61.60% 92.87% 34.19% 61.61% 63.85%
Net Assets at End of Period
(in thousands) $37,447 $39,203 $17,757 $17,915 $16,018
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects expense ratio in the absence of fee waivers and expense
reimbursements.
(b) Does not include sales charges.
32
<PAGE>
[ACCOUNT APPLICATION]
<PAGE>
[ACCOUNT APPLICATION CONT.]
<PAGE>
<TABLE>
<S> <C>
- -------------------------------
FOR MORE INFORMATION FORUM
- ------------------------------- FUNDS
The following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS INVESTORS HIGH GRADE BOND FUND
Additional information about each Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In each Fund's INVESTORS BOND FUND
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance TAXSAVER BOND FUND
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about each Fund and is
incorporated by reference into this Prospectus.
CONTACTING THE FUNDS
You can get a free copy of both reports and the SAI, request other
information and discuss your questions about each Fund by contacting the
Fund at:
FORUM SHAREHOLDER SERVICES, LLC
P.O. Box 446
Portland, Maine 04112
800-943-6786
800-94FORUM
207-879-0001
SECURITIES AND EXCHANGE COMMISSION INFORMATION
You can also review each Fund's reports and SAI at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only
copies, for a fee, by writing to the following: [Logo]
Forum Funds
Public Reference Room P.O. Box 446
Securities and Exchange Commission Portland, Maine 04112
Washington, D.C. 20549-6009 800-94FORUM
E-mail address:[email protected] 800-943-6786
207-879-0001
The scheduled hours of operation of the Public Reference Room may be obtained by
calling the SEC at (202)942-8090. Free copies of the reports and SAIs are
available from the SEC's Internet website at http://www.sec.gov.
Investment Company Act File No. 811-3023.
</TABLE>
