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As filed with the Securities and Exchange Commission on October 11, 1996
File No. 811-8858
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6
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CORE TRUST (DELAWARE)
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
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David I. Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(Name and Address of Agent for Service)
Copies to:
R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart
South Lobby- 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
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EXPLANATORY NOTE
This Registration Statement is being filed by Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended. Beneficial interests
in the series of Registrant are not being registered under the Securities Act
of 1933, as amended, because such interests will be issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of that act. Investments in Registrant's series may
only be made by certain institutional investors, whether organized within or
without the United States (excluding individuals, S corporations,
partnerships, and grantor trusts beneficially owned by any individuals, S
corporations, or partnerships). This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in any series of Registrant.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(C))
PART A
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
Private Placement Memorandum relating to beneficial interest in the Index
Portfolio, Small Company Portfolio, International Portfolio and International
Portfolio II of Core Trust (Delaware), a registered open-end management
investment company.
Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------- --------------------------------
Item 1. Cover Page Not applicable
Item 2. Synopsis Not applicable
Item 3. Condensed Financial Information Not applicable
Item 4. General Description of
Registrant General Description of Registrant;
Investment Objectives, Investment
Programs; Other Investment
Policies and Limitations
Item 5. Management of the Fund Management of the Portfolios
Item 5A. Management's Discussion of
Fund Performance Not Applicable
Item 6. Capital Stock and
Other Securities Capital Stock and Other Securities
Item 7. Purchase of Securities Being
Offered Purchase of Securities
Item 8. Redemption or Repurchase Redemption or Repurchase
Item 9. Pending Legal Proceedings Pending Legal Proceedings
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(C))
PART B
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
Statement of Additiona Information relating to beneficial interest in the
Index Portfolio, Small Company Portfolio, International Portfolio and
International Portfolio II of Core Trust (Delaware), a registered open-end
management investment company.
Form N-1A Location in Statement of
Item No (Caption) Additional Information (Caption)
- ------- ------------------ ---------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Part A: Private Placement
Memorandum
Item 13. Investment Objectives and
Policies Investment Objectives and
Policies; Investment Limitations
Item 14. Management of the Fund Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities Control Persons and Principal
Holders of Securities
Item 16. Investment Advisory and
Other Services Investment Advisory and
Other Services
Item 17. Brokerage Allocation and
Other Practices Brokerage Allocation and
Other Practices
Item 18. Capital Stock and Other
Securities Capital Stock and Other
Securities
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Purchase, Redemption and Pricing
of Securities Being Offered
Item 20. Tax Status Tax Status
Item 21. Underwriters Underwriters
Item 22. Calculation of Performance Data Calculation of Performance Data
Item 23 Financial Statements Financial Statements
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PART A
CORE TRUST (DELAWARE)
TREASURY CASH PORTFOLIO
GOVERNMENT CASH PORTFOLIO
CASH PORTFOLIO
No changes are effected by this Post-Effective Amendment to the disclosure
regarding Treasury Cash Portfolio, Government Cash Portfolio and Cash
Portfolio included in Post-Effective Amendment No. 1 to Registrant's
Registration Statement filed September 1, 1995.
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PART B
CORE TRUST (DELAWARE)
TREASURY CASH PORTFOLIO
GOVERNMENT CASH PORTFOLIO
CASH PORTFOLIO
No changes are effected by this Post-Effective Amendment to the disclosure
regarding Treasury Cash Portfolio, Government Cash Portfolio and Cash
Portfolio included in Post-Effective Amendment No. 1 to Registrant's
Registration Statement filed September 1, 1995.
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PART A
CORE TRUST (DELAWARE)
TREASURY PORTFOLIO
No changes are effected by this Post-Effective Amendment to the disclosure
regarding Treasury Portfolio included in Post-Effective Amendment No. 4 to
Registrant's Registration Statement filed July 31, 1996.
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PART B
CORE TRUST (DELAWARE)
TREASURY PORTFOLIO
No changes are effected by this Post-Effective Amendment to the disclosure
regarding Treasury Portfolio included in Post-Effective Amendment No. 4 to
Registrant's Registration Statement filed July 31, 1996.
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PART A
CORE TRUST (DELAWARE)
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
Part A of this Registration Statement on Form N-1A, as amended through the
date hereof, relating to Index Portfolio, Small Company Portfolio,
International Portfolio and International Portfolio II of Core Trust
(Delaware), consists of the following Private Placement Memorandum.
Responses to Items 1, 2, 3 and 5A of Form N-1A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
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PART A
PRIVATE PLACEMENT MEMORANDUM
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
October 11, 1996
This Private Placement Memorandum relates to beneficial interests in Index
Portfolio, Small Company Portfolio, International Portfolio and International
Portfolio II (each a "Portfolio" and collectively the "Portfolios"),
diversified portfolios of Core Trust (Delaware) (the "Trust"), a registered,
open-end management investment company.
Investments in the Portfolios may only be made by certain institutional
investors, whether organized within or outside the United States (excluding
individuals, S corporations, partnerships, and grantor trusts beneficially
owned by any individuals, S corporations, or partnerships). An investor in a
Portfolio must also be an "accredited investor," as that term is defined
under Rule 501(a) of Regulation D under the Securities Act of 1933, as
amended.
The Trust has filed with the Securities and Exchange Commission ("SEC") a
Statement of Additional Information ("SAI") with repsect to the Portfolios
dated the same date as this Private Placement Memorandum and as may be
further amended from time to time, which contains more detailed information
about the Trust and the Portfolios and is incorporated into this Private
Placement Memorandum by reference. A prospective investor may obtain a copy
of the SAI without charge by contacting Forum Financial Services, Inc., the
Trust's placement agent (the "Placement Agent") at Two Portland Square,
Portland, Maine 04101 or by calling (207) 879-1900.
This Private Placement Memorandum does not constitute an offer to sell, or
the solicitation of an offer to buy, beneficial interests in any Portfolio.
An investor may subscribe for a beneficial interest in a Portfolio by
contacting the Placement Agent at Two Portland Square, Portland, Maine 04101,
(207) 879-1900, for a complete subscription package, including a subscription
agreement. The Trust and the Placement Agent reserve the right to refuse to
accept any subscription for any reason.
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TABLE OF CONTENTS
Page
General Description of Registrant 12
Management of the Portfolios 21
Capital Stock and Other Securities 24
Purchase of Securities 24
Redemption or Repurchase 25
Pending Legal Proceedings 26
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THE SECURITIES OF THE TRUST DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
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TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER (1) THE TERMS OF THE TRUST
INSTRUMENT OF THE TRUST AND (2) THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
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PART A
PRIVATE PLACEMENT MEMORANDUM
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
INDEX PORTFOLIO
October 11, 1996
Responses to Items 1, 2, 3 and 5A of Form N-1A (the form required to be used
for the registration statement of open-end, management investment companies)
have been omitted pursuant to paragraph 4 of Instruction F of the General
Instructions to Form N-1A.
GENERAL DESCRIPTION OF REGISTRANT (ITEM 4 OF FORM N-1A)
Core Trust (Delaware) (the "Trust") is an open-end, management investment
company which was organized as a business trust under the laws of the State
of Delaware pursuant to a Trust Instrument dated September 1, 1994, as
amended and restated November 1, 1994. The Trust offers unites without any
sales charge and units may be redeemed without charge.
Beneficial interests in the Trust are divided into eight separate diversified
subtrusts or "series," each having a distinct investment objective and
distinct investment policies. Four of these series -- Index Portfolio, Small
Company Portfolio, International Portfolio and International Portfolio II
(each a Portfolio) -- commenced operations on November 10, 1994. The assets
of each Portfolio belong only to that Portfolio, and the assets belonging to
a Portfolio are charged with the liabilities of that Portfolio and all
expenses, costs, charges and reserves attributable to that Portfolio. The
Trust is empowered to establish, without investor approval, additional
portfolios which may have different investment objectives and policies.
Beneficial interests in the Portfolios are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in a Portfolio may only be made by certain institutional
investors, whether organized within or outside the United States (excluding
individuals, S corporations, partnerships, and grantor trusts beneficially
owned by any individuals, S corporations, or partnerships). This registration
statement does not constitute an offer to sell, or the solicitation of an
offer to buy, any "security" as that term is defined in the 1933 Act.
Norwest Investment Management ("NIM"), a part of Norwest Bank Minnesota, N.A.
("Norwest"), serves as the investment adviser of Index Portfolio and Small
Company Portfolio. Schroder Capital Management International Inc.
("Schroder") serves as the investment adviser of International Portfolio and
International Portfolio II.
INVESTMENT OBJECTIVES
Index Portfolio's investment objective is to duplicate the return of the
Standard & Poor's 500 Composite Stock Price Index.
Small Company Portfolio's investment objective is to provide long-term
capital appreciation by investing primarily in small and medium-sized
U.S.-based companies ("domestic companies") that are either growing rapidly
or completing a period of significant change.
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International Portfolio's and International Portfolio II's investment objective
is to provide long-term capital appreciation by investing directly or indirectly
in high quality companies based outside the United States ("foreign companies").
The investment objective of each Portfolio is fundamental and may not be
changed without investor approval. There can be no assurance that any
Portfolio will achieve its investment objective.
INVESTMENT PROGRAMS
To achieve its respective investment objective, each of Index Portfolio and
Small Company Portfolio invests primarily in common stocks and other equity
securities of domestic companies, and each of International Portfolio and
International Portfolio II invests primarily in common stocks and other
equity securities of foreign companies. Under normal circumstances, each
Portfolio will invest at least 65% of its net assets in equity securities.
The domestic securities in which a Portfolio invests are generally listed on
a securities exchange or included in the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System. In the case
of smaller companies, these securities may be traded in the over-the-counter
securities market.
Additional investment techniques, features and restrictions concerning the
Portfolios' investment programs are described in Part B.
INDEX PORTFOLIO
Index Portfolio is designed to duplicate the return of the Standard & Poor's
500 Composite Stock Price Index with minimum tracking error, while also
minimizing transaction costs. Under normal circumstances, the Portfolio will
hold stocks representing 96% or more of the capitalization-weighted market
values of the Index. Portfolio transactions for the Portfolio generally are
executed only to duplicate the composition of the Index, to invest cash
received from portfolio security dividends or interestholder investments in
the Portfolio, and to raise cash to fund redemptions of beneficial interests.
The Portfolio may hold cash or cash equivalents for the purpose of
facilitating payment of the Portfolio's expenses or redemptions of beneficial
interests. For these and other reasons, the Portfolio's performance can be
expected to approximate, but not be equal to, that of the Index.
In addition, the Portfolio may utilize index futures contracts to a limited
extent. Index futures contracts are bilateral agreements whereby two parties
agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. As no physical delivery of securities comprising the index
is made, a purchaser of index futures contracts may participate in the
performance of the securities contained in the index without the required
capital commitment.
Index futures contracts may be used for several reasons: to simulate full
investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading or to reduce transactions costs.
For a description of futures contracts and their risks see "Risk
Considerations of Index Futures" below and "Hedging and Option Income
Strategies -- Futures Strategies" in the SAI.
The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion by Standard & Poor's Corporation ("S&P") on a
statistical basis. The inclusion of a stock in the Index in no way implies
that S&P believes the stock to be an attractive investment. The 500
securities, most of which trade on the New York Stock Exchange, represent
approximately 70% of the total market value of all U.S. common stocks. Each
stock in the Index is weighted by its market value. Because of the
market-value weighing, the 50 largest companies in the Index currently
account for approximately 47% of its value. The Index emphasizes
large-capitalizations and, typically, companies included in the Index are the
largest and most dominant firms in their respective industries.
The Portfolio is not sponsored, endorsed, sold or promoted by S&P, nor does
S&P make any representation or warranty, implied or express, to the
purchasers of the Portfolio or any member of the public regarding the
advisability
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of investing in index funds or the ability of the Index to track general
stock market performance. S&P does not guarantee the accuracy and/or the
completeness of the Index or any data included therein.
S&P makes no warranty, express or implied, as to the results to be obtained
by the Portfolio, owners of the Portfolio, any person or any entity from the
use of the Index or any data included therein. S&P makes no express or
implied warranties and expressly disclaims all such warranties of
merchantability or fitness for a particular purpose for use with respect to
the Index or any data included therein.
RISK CONSIDERATIONS OF INDEX FUTURES. Stock and bond index futures are often
referred to as "derivatives," which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of
another asset (such as, an index of securities). No physical delivery of
securities comprising the index is made. Generally, these futures contracts
are closed out prior to the expiration date of the contract. The Portfolio's
use of futures contracts subjects the Portfolio to certain investment risks
and transaction costs to which it might not otherwise be subject. These
risks include: (1) dependence on NIM'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
futures contracts and movements in the price of the securities 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 other securities in which the
Portfolio invests; (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 a Portfolio's ability to limit exposures by closing
its positions; (5) the possible need to defer closing out of certain futures
contracts to avoid adverse tax consequences; and (6) the potential for
unlimited loss when investing in futures contracts for which an offsetting
position is not held.
In addition, the futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single trading day.
The Portfolio may be forced, therefore, to liquidate or close out a futures
contract position at a disadvantageous price. There can be no assurance that
a liquid market will exist at a time when the Portfolio seeks to close out a
futures position or that a counterparty in an over-the-counter option
transaction will be able to perform its obligations. The Portfolio 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.
SMALL COMPANY PORTFOLIO
Small Company Portfolio invests primarily in the common stock of small and
medium size domestic companies (I.E., those whose market capitalizations are
less than $750 million at the time of the Portfolio's purchase). Companies
of this market capitalization level are well below that of the average
company in the Standard & Poor's 500 Composite Stock Price Index (the
"Index"). Market capitalization refers to the total market value of a
company's outstanding shares of common stock.
Under normal circumstances, the Portfolio will not invest more than 10% of
its total assets in the securities of a single issuer. The Portfolio does
not currently invest in preferred stock or securities convertible into common
stock but reserves the right to do so in the future.
In selecting securities for the Portfolio, NIM uses a Small Company Growth
investment style, a Small Company Stock style and a Small Company Value
style. Currently, the Portfolio's assets are invested 1/3 in the Small
Company Growth investment style, 1/3 in the Small Company Stock style and 1/3
in the Small Company Value style. The Portfolio may in the future change the
allocation among its investment styles or allocate its assets to additional
investment styles.
In selecting securities in the SMALL COMPANY GROWTH STYLE, NIM seeks to
identify companies that are rapidly growing (usually with relatively short
operating histories) or that are emerging from a period of investor neglect
by undergoing a dramatic change. These changes may involve a sharp increase
in earnings, the hiring of new
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management or measures taken to close the gap between its share price and
takeover/asset value. NIM may invest up to 10% of the assets allocated to
this style in foreign securities and in American Depository Receipts,
European Depository Receipts and other similar securities of foreign issuers.
See "Investment Programs -International Portfolio and International Portfolio
II - Foreign Investment Risks and Considerations." In investing in
accordance with this investment style, the Portfolio may not invest more than
10% of its total assets allocated to this style in the securities of a single
issuer. In addition, in investing in accordance with this style, the
Portfolio does not currently invest in preferred stock and securities
convertible into common stock but reserves the right to do so in the future.
In selecting securities in the SMALL COMPANY STOCK STYLE, NIM seeks
securities with significant price appreciation potential and attempts to
identify companies that show above average growth, as compared to long term
overall market growth. In investing assets allocated to this investment
style, NIM may invest in preferred stock and securities convertible into
common stock and may invest up to 20% of total assets allocated to this style
in foreign securities and in American Depository Receipts, European
Depository Receipts and other similar securities of foreign issuers. See,
"Investment Programs -- International Portfolio and International Portfolio
II --Foreign Investment Risks and Considerations."
In selecting securities in the SMALL COMPANY VALUE STYLE, NIM seeks
securities that are conservatively valued in the marketplace relative to
their underlying fundamentals. Value investing provides investors with a less
aggressive way to take advantage of growth opportunities of small companies.
In investing in accordance with this style, NIM will seek to invest in stocks
priced low, relative to the stock of comparable companies, determined by
price/earnings ratios, cash flows or other measures. Value investing
therefore may reduce downside risk while offering potential for capital
appreciation as a stock gains favor among other investors and its stock price
rises.
SMALL COMPANY INVESTMENT RISKS AND CONSIDERATIONS. Investments in smaller
companies generally involve greater risks than investments in larger
companies due to the small size of the issuer and the fact that the issuer
may have limited product lines, less access to financial markets and less
management depth. In addition, many of the securities of these firms trade
less frequently and in lower volumes than securities issued by larger firms.
The result is that the short-term volatility of those small company
securities is greater than the price volatility of the securities of larger,
more established companies that are widely held. The securities of small
companies may also be more sensitive to market changes generally than the
securities of large companies.
The companies in which the Portfolio invests may be in a relatively early
stage of development or may produce goods and services which have favorable
prospects for growth due to increasing demand or developing markets.
Frequently, such companies have a small management group and single product
or product line expertise. These characteristics may result in an enhanced
entrepreneurial spirit and greater focus which may make such firms
successful. NIM believes that such companies may develop into significant
business enterprises and that an investment in such companies offers a
greater opportunity for capital appreciation than an investment in larger,
more established entities. Small companies frequently retain a large part of
their earnings for research, development and investment in capital assets,
however, so that the prospects for immediate dividend income are limited.
While securities issued by smaller capitalization companies historically have
experienced greater market appreciation than the securities of larger
issuers, there is no assurance that they will continue to do so or that the
Portfolio will be successful in identifying companies whose securities will
appreciate.
INTERNATIONAL PORTFOLIO AND INTERNATIONAL PORTFOLIO II
International Portfolio and International Portfolio II are designed for
investors who desire to achieve international diversification of their
investments by participating in foreign securities markets. The Portfolios
should be considered only as a vehicle for international diversification and
not as a complete investment program.
International Portfolio and International Portfolio II will normally each
invest substantially all of its total assets in equity securities of foreign
companies. The Portfolios may also invest in the securities of closed-end
investment companies investing primarily in foreign securities and may invest
in debt obligations of foreign governments or their political subdivisions,
agencies or instrumentalities, of supranational organizations and of foreign
corporations.
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Investment will be diversified among securities of issuers in foreign
countries including, but not limited to, Japan, Germany, the United Kingdom,
France, the Netherlands, Singapore and Australia. In general, the Portfolios
will invest only in securities of companies and governments in countries that
Schroder, in its judgment, considers both politically and economically
stable. The Portfolios have no limit on the amount of their foreign assets
which may be invested in any one type of foreign instrument or in any foreign
country. However, the Portfolios will maintain investments in at least three
countries not including the United States. To the extent a Portfolio
concentrates its assets in a foreign country, the Portfolio will incur
greater risks.
International Portfolio and International Portfolio II may purchase preferred
stock and convertible debt securities, including convertible stock, and may
purchase American Depository Receipts, European Depository Receipts or other
similar securities of foreign issuers. The Portfolios may also enter into
foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to
protect against possible adverse movements in foreign exchange rates.
Although such contracts may reduce the risk of loss to a Portfolio from
adverse movements in currency values, the contracts also limit possible gains
from favorable movements.
FOREIGN INVESTMENT RISKS AND CONSIDERATIONS. All investments, domestic and
foreign, involve certain risks. 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 foreign political and economic instability, adverse
movements in foreign exchange rates, the imposition or tightening of exchange
controls or other limitations on repatriation of foreign capital, and changes
in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of foreign
investors' assets.
Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to
International Portfolio's and International Portfolio II's investors;
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, accordingly, less
information may be available about foreign companies than is available about
issuers of comparable securities in the United States; and foreign securities
may trade less frequently and with lower volume and may exhibit greater price
volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars
of all foreign currency-denominated securities held by the Portfolios.
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 each Portfolio is required to compute and distribute its
income in U.S. dollars. Accordingly, a decline in the value of a particular
foreign currency against the U.S. dollar occurring after a Portfolio's income
has been earned and computed in U.S. dollars may require the Portfolio to
liquidate portfolio securities to acquire sufficient U.S. dollars to make a
distribution. Similarly, if the exchange rate declines between the time a
Portfolio incurs expenses in U.S. dollars and the time such expenses are
paid, the Portfolio may be required to liquidate additional foreign
securities to purchase the U.S. dollars required to meet such expenses.
OTHER INVESTMENT POLICIES AND LIMITATIONS
All investment policies and limitations of a Portfolio that are designated as
fundamental, and each Portfolio's investment objective, may not be changed
without approval of the holders of a majority of the outstanding voting
interests (defined in the same manner as the phrase "vote of a majority of
the outstanding voting securities" is defined in the Investment Company Act
of 1940 ("1940 Act")) of the Portfolio. All other investment policies and
limitations of the Portfolios are not fundamental and may be changed by the
Trust's Board of Trustees without investor approval.
PORTFOLIO TRANSACTIONS
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The frequency of portfolio transactions ("portfolio turnover rate") for each
of the Portfolios for the periods ending May 31, 1996 and October 31, 1995,
respectively, were as follows: Index Fund, 7.21% and 7.73%; Small Company
Portfolio, 84.00% and 126.01%; International Portfolio, 14.12% and 29.41%;
and International Portfolio II, 17.58% and 28.19%. The portfolio turnover
rate of a Portfolio will vary from year to year depending upon a variety of
factors. An annual portfolio turnover rate of 100% would occur if all of the
securities in a Portfolio were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased brokerage costs to the
Portfolio and a possible increase in short-term capital gains (or losses).
Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and this may cause higher brokerage expenses to accrue
to International Portfolio and International Portfolio II than would be the
case for comparable transactions effected on U. S. securities exchanges.
Subject to a Portfolio's policy of obtaining the best price consistent with
quality of execution of transactions, NIM and Schroder, may employ Norwest
Investment Services, Inc., Schroder Securities Limited and other
broker-dealer affiliates of NIM or Schroder (collectively "Affiliated
Brokers") to effect brokerage transactions for the Portfolio. A Portfolio's
payment of commissions to Affiliated Brokers is subject to procedures adopted
by the Board to provide that the commissions will not exceed the usual and
customary broker's commissions charged by unaffiliated brokers. No specific
portion of a Portfolio's brokerage will be directed to Affiliated Brokers,
and in no event will a broker affiliated with an adviser directing the
transaction receive brokerage transactions in recognition of research
services provided to the adviser.
INVESTMENT LIMITATIONS
The Portfolios have adopted the investment limitations listed below, each of
which is a nonfundamental policy except as noted. Other investment
limitations, including additional provisions with respect to the limitations
listed below, are described in Part B.
DIVERSIFICATION. Each Portfolio is a "diversified" portfolio as defined in
the 1940 Act. As a fundamental policy, with respect to 75% of its assets,
each Portfolio may not purchase a security (other than a U.S. Government
Security, as defined below) if, as a result, (i) more than 5% of the
Portfolio's total assets would be invested in the securities of a single
issuer or (ii) the Portfolio would own more than 10% of the outstanding
voting securities of any single issuer.
CONCENTRATION. Each Portfolio is prohibited from concentrating its assets in
the securities of issuers in any industry. As a fundamental policy, each
Portfolio may not purchase securities if, immediately after the purchase,
more than 25% of the value of the Portfolio's total assets would be invested
in the securities of issuers conducting their principal business activities
in the same industry. This limit does not apply to investments in U.S.
Government Securities, repurchase agreements covering U.S. Government
Securities or investment company securities.
MARGIN AND SHORT SALES. No Portfolio may purchase securities on margin or
make short sales of securities, except short sales against the box. These
prohibitions do not restrict the Portfolios' ability to use short-term
credits necessary for the clearance of portfolio transactions and to make
margin deposits in connection with permitted transactions in options and
futures contracts.
COMMON STOCK, WARRANTS AND PREFERRED STOCK
Each Portfolio may invest in common stock, warrants and preferred stock.
Common stockholders are the owners of the company issuing the stock and,
accordingly, vote on various corporate governance matters such as mergers.
They are not creditors of the company, but rather, upon liquidation of the
company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and, if applicable,
preferred stockholders are paid. Preferred stock is a class of stock having
a preference over common stock as to dividends and, in the alternative, as to
the recovery of investment. A preferred stockholder is a shareholder in the
company and not a creditor of the
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company as is a holder of the company's fixed income securities. Dividends
paid to common and preferred stockholders are distributions of the earnings
of the company and not interest payments, which are expenses of the company.
Equity securities owned by a Portfolio may be traded in the over-the-counter
market or on a regional securities exchange and may not be traded every day
or in the volume typical of securities traded on a national securities
exchange. As a result, disposition by a Portfolio of a portfolio security to
meet redemptions by interestholders or otherwise may require the Portfolio to
sell these securities at a discount from market prices, to sell during
periods when disposition is not desirable, or to make many small sales over a
lengthy period of time. The market value of all securities, including equity
securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth.
Each Portfolio may invest in warrants, which are options to purchase an
equity security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time. Unlike
convertible securities and preferred stocks, warrants do not pay a fixed
dividend. Investments in warrants involve certain risks, including the
possible lack of a liquid market for the resale of the warrants, potential
price fluctuations as a result of speculation or other factors and failure of
the price of the underlying security to reach a level at which the warrant
can be prudently exercised (in which case the warrant may expire without
being exercised, resulting in the loss of the Portfolio's entire investment
therein).
CONVERTIBLE SECURITIES
Each Portfolio (except the Index Portfolio) may invest in convertible
securities, which include convertible debt, convertible preferred stock and
other securities exchangeable under certain circumstances for shares of
common stock. Convertible securities are fixed income securities or
preferred stock which generally may be converted at a stated price within a
specific amount of time into a specified number of shares of common stock. A
convertible security entitles the holder to receive interest paid or accrued
on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities have characteristics similar to nonconvertible debt
securities in that they ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers.
These securities are usually senior to common stock in a company's capital
structure, but usually are subordinated to non-convertible debt securities.
In general, the value of a convertible security is the higher of its
investment value (its value as a fixed income security) and its conversion
value (the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the value of a convertible security
generally increases when interest rates decline and generally decreases when
interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock. The Portfolios may
only invest in convertible securities that are investment grade.
A Portfolio may invest in equity-linked securities, including Preferred
Equity Redemption Cumulative Stock ("PERCS"), Equity - Linked Securities
("ELKS"), and Liquid Yield Option Notes ("LYONS"). Equity-Linked Securities
are securities that are convertible into or based upon the value of, equity
securities upon certain terms and conditions. The amount received by an
investor at maturity of these securities is not fixed but is based on the
price of the underlying common stock, which may rise or fall. In addition,
it is not possible to predict how equity-linked securities will trade in the
secondary market or whether the market for them will be liquid or illiquid.
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AMERICAN DEPOSITORY RECEIPTS; EUROPEAN DEPOSITORY RECEIPTS
Small Company Portfolio, International Portfolio and International Portfolio
II may each invest in sponsored and unsponsored American Depository Receipts
("ADRs"), which are receipts issued by an American bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer.
ADRs, in registered form, are designed for use in U.S. securities markets.
Unsponsored ADRs may be created without the participation of the foreign
issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depository of an unsponsored ADR may be under
no obligation to distribute shareholder communications received from the
foreign issuer or to pass through voting rights. Small Company Portfolio,
International Portfolio and International Portfolio II may also invest in
European Depository Receipts ("EDRs"), receipts issued by a European
financial institution evidencing an arrangement similar to that of ADRs, and
in other similar instruments representing securities of foreign companies.
EDRs, in bearer form, are designed for use in European securities markets.
FOREIGN EXCHANGE CONTRACTS
Changes in foreign currency exchange rates will affect the U.S. dollar values
of securities denominated in currencies other than the U.S. dollar. The rate
of exchange between the U.S. dollar and other currencies fluctuates in
response to forces of supply and demand in the foreign exchange markets.
These forces are affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation and
other factors. When investing in foreign securities a Portfolio usually
effects currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign exchange market. A Portfolio incurs
foreign exchange expenses in converting assets from one currency to another.
International Portfolio and International Portfolio II may each enter into
foreign currency forward contracts or currency futures or options contracts
for the purchase or sale of foreign currency to "lock in" the U.S. dollar
price of the securities denominated in a foreign currency or the U.S. dollar
value of interest and dividends to be paid on such securities, or to hedge
against the possibility that the currency of a foreign country in which a
Portfolio has investments may suffer a decline against the U.S. dollar. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of a
Portfolio's portfolio securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities.
Although the strategy of engaging in foreign currency transactions could
reduce the risk of loss due to a decline in the value of the hedged currency,
it could also limit the potential gain from an increase in the value of the
currency. The Portfolios do not intend to maintain a net exposure to such
contracts where the fulfillment of the Portfolios' obligations under such
contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolios' portfolio securities or
other assets denominated in the currency. A Portfolio will not enter into
these contracts for speculative purposes and will not enter into non-hedging
currency contracts. These contracts involve a risk of loss if Schroder fails
to predict currency values correctly. The Portfolios have no present
intention to enter into currency futures or options contracts but may do so
in the future.
ILLIQUID SECURITIES
Each Portfolio may invest up to 15% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Portfolio has valued the securities and
includes, among other things, repurchase
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agreements maturing in more than seven days and restricted securities other
than those the Portfolio's adviser has determined to be liquid pursuant to
guidelines established by the Trust's Board of Trustees. Limitations on
resale may have an adverse effect on the marketability of portfolio
securities, and the Portfolios might also have to register restricted
securities in order to dispose of them, resulting in expense and delay. A
Portfolio might not be able to dispose of restricted or other securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. There can be no assurance that a liquid market will
exist for any security at any particular time.
An institutional market has developed for certain securities that are not
registered under the 1933 Act, including repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on the issuer's ability to
honor a demand for repayment of the unregistered security. A security's
contractual or legal restrictions on resale to the general public or to
certain institutions 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, the Portfolio's investment
adviser may determine that such securities are not illiquid securities under
guidelines adopted by the Board. These guidelines take into account trading
activity in the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in
a particular Rule 144A security, a Portfolio's holdings of that security may
be illiquid.
BORROWING AND LENDING
As a fundamental policy, each Portfolio may borrow money for temporary or
emergency purposes, including the meeting of redemption requests, in amounts
up to 33 1/3% of the Portfolio's total assets as computed immediately after
the borrowing. Borrowing for other than temporary or emergency purposes or
meeting redemption requests is limited to 5% of the value of each Portfolio's
total assets. Each Portfolio may enter into reverse repurchase agreements.
When a Fund establishes a segregated account to limit the amount of
leveraging of the Fund with respect to certain investment techniques, such as
reverse repurchase agreements, the Fund does not treat those techniques as
involving borrowings (although they may have characteristics and risks
similar to borrowings and result in the Fund's assets being leveraged).
As a fundamental policy, no Portfolio may make loans except for loans of
portfolio securities, investments in repurchase agreements, and the purchase
of debt securities that are otherwise permitted investments for the Portfolio.
U.S. GOVERNMENT SECURITIES
Each Portfolio may invest in U.S. Government Securities. As used in Part A,
the term U.S. Government Securities means obligations issued or guaranteed as
to principal and interest by the U.S. Government, its agencies or
instrumentalities. The U.S. Government Securities in which a Portfolio may
invest include U.S. Treasury securities and obligations issued or guaranteed
by U.S. Government agencies and instrumentalities and backed by the full
faith and credit of the U.S. Government, such as those guaranteed by the
Small Business Administration or issued by the
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Government National Mortgage Association. In addition, the U.S. Government
Securities in which the Portfolios may invest include securities supported
primarily or solely by the creditworthiness of the issuer, such as securities
of the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation and the Tennessee Valley Authority. There is no guarantee that
the U.S. Government will support securities not backed by its full faith and
credit. Accordingly, although these securities have historically involved
little risk of loss of principal if held to maturity, they may involve more
risk than securities backed by the U.S. Government's full faith and credit.
REPURCHASE AGREEMENTS
Each Portfolio may from time to time enter into repurchase agreements,
transactions in which the Portfolio purchases a security and simultaneously
commits to resell that security to the seller at an agreed-upon price on an
agreed-upon future date, normally one to seven days later. The resale price
of a repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the purchased security. The
Portfolio's custodian maintains possession of the collateral underlying a
repurchase agreement, which has a market value, determined daily, at least
equal to the repurchase price, and which consists of the types of securities
in which a Portfolio may invest directly. International Portfolio and
International Portfolio II may enter into repurchase agreements with foreign
entities.
COMMERCIAL PAPER
Each Portfolio may invest in commercial paper. Commercial paper (short-term
promissory notes) is issued by companies to finance their or their
affiliates' current obligations.
TEMPORARY DEFENSIVE POSITION
When business or financial conditions warrant, each Portfolio may assume a
temporary defensive position and invest all or any portion of its assets in
cash or in cash equivalents, including (i) short-term U.S. Government
Securities, (ii) prime quality short-term instruments of commercial banks,
(iii) prime quality commercial paper, (iv) repurchase agreements with banks
and broker-dealers covering any of the securities in which the Portfolio may
invest directly and (v) to the extent permitted by the 1940 Act, shares of
money market mutual funds. During periods when and to the extent that a
Portfolio has assumed a temporary defensive position, it may not be pursuing
its investment objective. International Portfolio and International
Portfolio II may hold cash and bank instruments denominated in any major
foreign currency.
MANAGEMENT OF THE PORTFOLIOS (ITEM 5 OF FORM N-1A)
TRUSTEES AND OFFICERS
The business of the Trust is managed under the direction of the Board of
Trustees. Forum Financial Services, Inc. ("Forum") provides persons
satisfactory to the Board to serve as officers of the Trust. Part B contains
general background information about each Trustee and officer of the Trust.
INVESTMENT ADVISERS
NIM serves as investment adviser of Small Company Portfolio and Index
Portfolio pursuant to investment advisory agreements between Norwest and the
Trust. Norwest is a subsidiary of Norwest Corporation, a multi-bank holding
company with operations in 15 states and $50.3 billion in total assets
incorporated under the laws of Delaware in 1929. As of June 30, 1996, Norwest
Corporation was the 12th largest bank holding company in the United States in
terms of assets. Norwest became a subsidiary of Norwest Corporation in 1929
and, as of December 31, 1995, NIM managed or provided investment advice with
respect to assets totaling approximately $22 billion.
Schroder acts as investment adviser to the International Portfolio and
International Portfolio II pursuant to investment advisory agreements with
the Trust. Schroder, whose principal business address is 787 Seventh Avenue,
New York, New York 10019, is a wholly owned U.S. subsidiary of Schroders
Incorporated, the wholly owned U.S. holding company subsidiary of Schroders
plc. Schroders plc is the holding company parent of a large worldwide group
of
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banks and financial services companies (referred to as the "Schroder Group"),
with associated companies and branch and representative offices located in 18
countries worldwide. The Schroder Group specializes in providing investment
management services and had assets under management in excess of $100 billion
as of October 1, 1996.
NIM and Schroder are required to furnish at their expense all services,
facilities and personnel necessary in connection with managing their
respective Portfolio's investments and effecting portfolio transactions for
those Portfolios. Many persons on the staff of each of NIM and Schroder
contribute to the investment advisory services provided to the Portfolios.
The following persons, however, are primarily responsible for the day to day
management of the Portfolios' investment portfolios and, unless otherwise
noted, have been since inception of the Portfolios:
INDEX PORTFOLIO -David D. Sylvester and Laurie R. White. Mr. Sylvester
has been associated with Norwest for 15 years, the last 7 years as a
Vice President and Senior Portfolio Manager. He has over 20 years'
experience in managing securities portfolios. Ms. White has been a Vice
President and Senior Portfolio Manager of Norwest since 1991; from 1989
to 1991, she was a Portfolio Manager at Richfield Bank and Trust. Mr.
Sylvester and Ms. White have served as portfolio managers of the
Portfolio since January 1996.
SMALL COMPANY PORTFOLIO - Robert B. Mersky, Kirk McCown and Thomas H.
Forester. Mr. Mersky, Senior Portfolio Manager and an Officer of
Norwest and President of Peregrine Capital Management Inc., has held
various investment management positions with Norwest or its affiliates,
including Peregrine, since 1977. From 1980 to 1984 he was head of
investments for Norwest. Mr. McCown is founder, President and a
Director of Crestone Capital Management, Inc., an investment adviser
subsidiary of Norwest. Prior thereto, Mr. McCown was Senior Vice
President of Reich & Tang, L.P. Mr. Forester is an officer of Norwest
and Senior Vice President of Peregrine Capital Management, Inc. Mr.
Forester joined Peregrine in 1995. From 1992 to 1995 he was Vice
President of Lord Asset Management, an investment adviser. Mr. McCown
commenced serving as a portfolio manager of the Portfolio in June 1995.
Mr. Forester commenced serving as a portfolio manager of the Portfolio
in December 1995.
INTERNATIONAL PORTFOLIO AND INTERNATIONAL PORTFOLIO II - Laura
Luckyn-Malone, a Managing Director of Schroder since October 1995 and a
Senior Vice President and Director of Schroder since 1990, is primarily
responsible for managing the day-to-day operations of International
Portfolio and International Portfolio II. Prior to joining the Schroder
Group, Ms. Luckyn-Malone was a Principal of Scudder, Stevens & Clark,
Inc. Ms. Luckyn-Malone has served as portfolio manager of the
Portfolios since February 1995.
The investment advisory agreement for Small Company Portfolio and Index
Portfolio provides for advisory fees payable to Norwest at an annual rate of
0.90% and 0.15% of the applicable Portfolio's average annual daily net assets.
The investment advisory agreement for International Portfolio and
International Portfolio II provides for an advisory fee payable to Schroder
at an annual rate of 0.45% of each Portfolio's average annual daily net
assets.
NIM and Schroder place orders for the purchase and sale of assets they manage
with brokers and dealers selected by and in the discretion of the respective
adviser. NIM and Schroder seek "best execution" for all portfolio
transactions, but a Portfolio may pay higher than the lowest available
commission rates when an adviser believes it is reasonable to do so in light
of the value of the brokerage and research services provided by the broker
effecting the transaction.
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CUSTODIAN
Norwest serves as the custodian for Index Portfolio and Small Company
Portfolio and may appoint certain subcustodians to custody Small Company
Portfolio's foreign securities and other assets held in foreign countries.
Norwest receives no compensation for its custodial services. The Chase
Manhattan Bank, N.A. ("Chase") serves as the custodian for International
Portfolio and International Portfolio II and employs foreign subcustodians to
maintain those Portfolios' foreign assets outside the United States. For its
custodial services, Chase is compensated at an annual rate of 0.075% of each
of International Portfolio's and International Portfolio II's average daily
net assets.
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTANT
Forum supervises the overall management of the Trust, including the Trust's
receipt of services for which the Trust is obligated to pay, and provides the
Trust with general office facilities pursuant to an Administration Agreement
with the Trust. As of October 1, 1996, Forum acted as manager and
distributor of registered investment companies with assets of approximately
$16.0 billion. Forum, whose principal business address is Two Portland
Square, Portland, Maine 04101, is a registered broker-dealer and investment
adviser and is a member of the National Association of Securities Dealers,
Inc.
For its administrative services and facilities, Forum receives a fee at an
annual rate of 0.10% of the average daily net assets of each of Small Company
Portfolio, Index Portfolio and International Portfolio II. For International
Portfolio, Forum receives a fee at the annual rate of 0.15% of the
Portfolio's average daily net assets.
Forum Financial Corp. ("FFC"), Two Portland Square, Portland, Maine 04101, is
the Trust's transfer agent and fund accountant. FFC is an affiliate of
Forum. For its unitholder accounting services, FFC receives a fee of $12,000
per year for each Portfolio. For fund accounting services, FFC receives a
base fee of $36,000 per year ($60,000 in the case of International Portfolio
and International Portfolio II) plus additional amounts depending on the
assets of the Portfolio, the number and type of securities held by the
Portfolio and the portfolio turnover rate of the Portfolio.
EXPENSES
Each Portfolio is obligated to pay for all of its expenses. These expenses
include: governmental fees; interest charges; taxes; brokerage fees and
commissions; insurance premiums; investment advisory, custodial,
administrative and transfer agency and fund accounting fees, as described
above; compensation of certain of the Trust's Trustees; costs of membership
trade associations; fees and expenses of independent auditors and legal
counsel to the Trust; and expenses of calculating the net asset value of and
the net income of the Portfolios. Each Portfolio's expenses comprise Trust
expenses attributable to the Portfolio, which are allocated to the Portfolio,
and expenses not attributable to the Portfolio, which are allocated among the
Portfolios in proportion to their average net assets or as otherwise
determined by the Board.
The Trust was granted an exemptive order by the Securities and Exchange
Commission ("Commission"), which allows certain investment companies (or
series thereof) to invest less than all of its assets, but more than the
statutorily permitted limits, in Index Portfolio, Small Company Portfolio and
International Portfolio II. Under the amended terms of this exemptive order,
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Norwest currently waives its investment advisory fee for serving as
investment adviser to Small Company Portfolio and Index Portfolio and
reimburses International Portfolio II for all investment advisory fees
International Portfolio II pays to Schroder.
CAPITAL STOCK AND OTHER SECURITIES (ITEM 6 OF FORM N-1A)
The Trust was organized as a business trust under the laws of the State of
Delaware. Under the Trust Instrument, the Trustees are authorized to issue
beneficial interests in separate subtrusts or "series" of the Trust. The
Trust currently has eight series, (the Portfolios); the Trust reserves the
right to create and issue additional series.
Each investor in a Portfolio is entitled to participate equally in the
Portfolio's earnings and assets and to a vote in proportion to the amount of
its investment in the Portfolio. Investments in a Portfolio may not be
transferred, but an investor may withdraw all or any portion of its
investment at any time at net asset value ("NAV").
Investments in a Portfolio have no preemptive or conversion rights and are
fully paid and non-assessable, except as set forth below. The Trust is not
required and has no current intention to hold annual meetings of investors,
but the Trust will hold special meetings of investors when in the Trustees'
judgment it is necessary or desirable to submit matters to an investor vote.
Generally, interests will be voted in the aggregate without reference to a
particular Portfolio, except if the matter affects only one Portfolio or
Portfolio voting is required, in which case interests will be voted
separately by Portfolio. Investors have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified number
of investors. Upon liquidation of a Portfolio, investors will be entitled to
share pro rata in the Portfolio's net assets available for distribution to
investors.
A Portfolio's net income consists of (1) all dividends, accrued interest
(including earned discount, both original issue and market discount), and
other income, including any net realized gains on the Portfolio's assets,
less (2) all actual and accrued expenses of the Portfolio, amortization of
any premium, and net realized losses on the Portfolio's assets, all as
determined in accordance with generally accepted accounting principles. All
of a Portfolio's net income is allocated pro rata among the investors in the
Portfolio. A Portfolio's net income generally is not distributed to the
investors in the Portfolio, except as determined by the Trustees from time to
time, but instead is included in the NAV of the investors' respective
beneficial interests in the Portfolio.
Under the Portfolios' method of operations, they are not be subject to any
income tax. However, each investor in a Portfolio will be taxable on its
proportionate share (as determined in accordance with the Trust's Trust
Instrument and the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder) of the Portfolio's ordinary
income and capital gain. It is intended that each Portfolio's assets and
income will be managed in such a way that an investor in the Portfolio will
be able to satisfy the requirements of Subchapter M of the Code, assuming
that the investor invested all of its assets in the Portfolio.
Investor inquiries may be directed to Forum Financial Services, Inc.
PURCHASE OF SECURITIES (ITEM 7 OF FORM N-1A)
Beneficial interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. See "General Description of Registrant" above.
All investments in the Portfolios are made without a sales load, at the NAV
next determined after an order is received by the Portfolio.
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The NAV of each Portfolio is determined as of 4:00 P.M., Eastern Time
("Valuation Time"), on all weekdays, except New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day
("Business Day").
Each investor in a Portfolio may add to or reduce its investment in the
Portfolio. At the Valuation Time on each Business Day, the value of each
investor's beneficial interest in a Portfolio will be determined by
multiplying the Portfolio's NAV by the percentage, effective for that day,
that represents that investor's share of the aggregate beneficial interests
in the Portfolio. Any additions to or withdrawals of those interests which
are to be effected on that day will then be effected. Each investor's share
of the aggregate beneficial interests in the Portfolio then will be
recomputed using the percentage equal to the fraction (1) the numerator of
which is the value of the investor's investment in the Portfolio as of the
Valuation Time on that day plus or minus, as the case may be, the amount of
any additions to or withdrawals from such investment effected on that day and
(2) the denominator of which is the Portfolio's aggregate NAV as of the
Valuation Time on that day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investments in the
Portfolio by all investors. The percentages so determined then will be
applied to determine the value of each investor's respective interest in the
Portfolio as of the Valuation Time on the following Business Day.
Securities owned by a Portfolio for which market quotations are readily
available are valued at current market value or, in their absence, at fair
value as determined by the Board.
Trading in securities on European, Far Eastern and other international
securities exchanges and over-the-counter markets is normally completed well
before the close of business of each Business Day. In addition, trading in
foreign securities generally or in a particular country or countries may not
take place on all Business Days or may take place on days other than Business
Days. Trading does take place in various foreign markets, however, on days
on which the Portfolio's NAV is not calculated. Calculation of the NAV per
beneficial interest may not occur contemporaneously with the determination of
the prices of the foreign securities used in the calculation. Events
affecting the values of foreign securities that occur after the time their
prices are determined and before a Portfolio's determination of NAV will not
be reflected in the Portfolio's calculation of NAV unless NIM or Schroder
determines that the particular event would materially affect NAV, in which
case an adjustment would be made.
All assets and liabilities of a Portfolio denominated in foreign currencies
are converted into U.S. dollars at the mean of the bid and asked prices of
such currencies against the U.S. dollar last quoted by a major bank prior to
the time of conversion.
There is no minimum initial or subsequent investment in a Portfolio.
However, since each Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the return on its assets,
investments must be made in federal funds (i.e., monies credited to the
account of the Trust's custodian by a Federal Reserve Bank).
The Trust reserves the right to cease accepting investments in a Portfolio at
any time or to reject any investment order.
The exclusive placement agent for the Trust is Forum. The principal business
address of Forum is Two Portland Square, Portland, Maine 04101. Forum
receives no compensation for serving as the exclusive placement agent for the
Trust.
REDEMPTION OR REPURCHASE (ITEM 8 OF FORM N-1A)
An investor in a Portfolio may withdraw all or any portion of its investment
in the Portfolio at the NAV next determined after a withdrawal request in
proper form is furnished by the investor to the Trust. The proceeds of a
withdrawal will be paid by the Portfolio in federal funds normally on the
business day after the withdrawal is effected, but in any event within seven
days. Investments in a Portfolio may not be transferred. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days except when the New York Stock Exchange is closed (or when trading
thereon is restricted) for any reason other than its customary weekend or
holiday closings or under any emergency or other circumstances as determined
by the Commission.
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Redemptions from a Portfolio may be made wholly or partially in portfolio
securities if the Board determines that payment in cash would be detrimental
to the best interests of the Portfolio. The Trust has filed an election with
the Commission pursuant to which each Portfolio will only consider effecting
a redemption in portfolio securities if the particular interestholder is
redeeming more than $250,000 or 1% of the Portfolio's NAV, whichever is less,
during any 90-day period.
PENDING LEGAL PROCEEDINGS (ITEM 9 OF FORM N-1A)
Not applicable.
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PART B
CORE TRUST (DELAWARE)
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
Part B of this Registration Statement on Form N-1A, as amended through the
date hereof, relating to Index Portfolio, Small Company Portfolio,
International Portfolio and International Portfolio II of Core Trust
(Delaware), consists of the following Statement of Additional Information.
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PART B
STATEMENT OF ADDITIONAL INFORMATION
INDEX PORTFOLIO
SMALL COMPANY PORTFOLIO
INTERNATIONAL PORTFOLIO
INTERNATIONAL PORTFOLIO II
October 11, 1996
This Statement of Additional Information ("SAI") relates to beneficial
interests in the Index Portfolio, Small Company Portfolio, International
Portfolio and International Portfolio II (each a "Portfolio" and
collectively, the "Portfolios") of Core Trust (Delaware) (the "Trust"), a
registered, open-end management investment company, and supplements the
Private Placement Memorandum (the "Memorandum") dated October 11, 1996,
relating to the Portfolios.
Investments in a Portfolio may only be made by certain institutional
investors, whether organized within or outside the United States (excluding
individuals, S corporations, partnerships, and grantor trusts beneficially
owned by any individuals, S corporations, or partnerships). An investor in a
Portfolio must also be an "accredited investor," as that term is defined
under Rule 501(a) of Regulation D under the Securities Act of 1933, as
amended.
This Statement of Additional Information does not constitute an offer to
sell, or the solicitation of an offer to buy, beneficial interests in the
Portfolios. An investor may subscribe for a beneficial interest in a
Portfolio by contacting Forum Financial Services, Inc., the Trust's placement
agent (the "Placement Agent"), at Two Portland Square, Portland, Maine 04101,
(207) 879-1900, for a complete subscription package, including the Memorandum
and a subscription agreement. The Trust and the Placement Agent reserve the
right to refuses to accept any subscription for any reason.
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TABLE OF CONTENTS
Page
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General Information and History
Investment Objectives and Policies
Management of the Trust
Control Persons and Principal Holders of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Capital Stock and Other Securities
Purchase, Redemption and Pricing of Securities
Tax Status
Underwriters
Calculation of Performance Data
Financial Statements
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THE SECURITIES OF THE TRUST DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER (1) THE TERMS OF THE TRUST
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INSTRUMENT OF THE TRUST AND (2) THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
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GENERAL INFORMATION AND HISTORY (ITEM 12 OF FORM N-1A)
Not applicable.
INVESTMENT OBJECTIVES AND POLICIES (ITEM 13 OF FORM N-1A)
INVESTMENT POLICIES
Part A contains information about the investment objectives, policies and
restrictions of International Portfolio, International Portfolio II, Index
Portfolio and Small Company Portfolio (each a "Portfolio" and collectively
the "Portfolios") of Core Trust (Delaware) (the "Trust"). The following
discussion is intended to supplement the disclosure in Part A concerning the
Portfolios' investments, investment techniques and strategies and the risks
associated therewith. This Part B should be read only in conjunction with
Part A.
DEFINITIONS
As used in Part B, the following terms shall have the meanings listed:
"Board" shall mean the Board of Trustees of the Trust.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"U.S. Government Securities" shall mean obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Commission" shall mean the U.S. Securities and Exchange Commission.
CONVERTIBLE SECURITIES
Each Portfolio may invest in convertible securities. A convertible security
is a bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common
stocks of the same or similar issuers. Convertible securities rank senior to
common stock in a corporation's capital structure but are usually
subordinated to comparable non-convertible securities. Although no securities
investment is without some risk, investment in convertible securities
generally entails less risk than in the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed income
security. Convertible securities have unique investment characteristics in
that they generally (l) have higher yields than common stock, 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.
The value of a convertible security is a function of its "investment value"
(determined by a comparison of its yield with the yields of other securities
of comparable maturity and quality that do not have a conversion privilege)
and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is
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determined by the market price of the underlying common stock. If the
conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the
convertible security will be increasingly influenced by its conversion value.
In addition, a convertible security generally will sell at a premium over its
conversion value determined by the extent to which investors place value on
the right to acquire the underlying common stock while holding a fixed income
security.
A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Portfolio is called for
redemption, the Portfolio 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.
FOREIGN CURRENCY TRANSACTIONS
Investments by International Portfolio and International Portfolio II in
securities of foreign companies will usually involve the currencies of
foreign countries. In addition, these Portfolios may temporarily hold funds
in bank deposits in foreign currencies pending the completion of certain
investment programs. Accordingly, the value of the assets of a Portfolio, as
measured in U.S. dollars, may be affected by changes in foreign currency
exchange rates and exchange control regulations. In addition, a Portfolio may
incur costs in connection with conversions between various currencies. A
Portfolio may conduct foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or by entering into foreign currency forward contracts
("forward contracts") to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (usually less than one
year) from the date of the contract agreed upon by the parties, at a price
set at the time of the contract. Forward contracts in the principal foreign
currencies are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers and
involve the risk that the other party to the contract may fail to deliver
currency when due, which could result in losses to a Portfolio. A forward
contract generally has no deposit requirement, and no commissions are charged
at any stage for trades. Foreign exchange dealers realize a profit based on
the difference between the price at which they buy and sell various
currencies.
A Portfolio may enter into forward contracts under two circumstances. First,
with respect to specific transactions, when a Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of dollars, of the amount of foreign currency involved in the
underlying security transactions, the Portfolio may be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date the security is purchased or sold and the date on which
payment is made or received.
Second, a Portfolio may enter into forward contracts in connection with
existing portfolio positions. For example, when the investment adviser of
these Portfolios, Schroder Capital Management International Inc.
("Schroder"), believes that the currency of a particular foreign country may
suffer a substantial decline against the U.S. dollar, a Portfolio may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of the Portfolio's
investment securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward contracts involve the risk of inaccurate predictions of currency
price movements, which may cause a Portfolio to incur losses on these
contracts and transaction costs. Schroder does not intend to enter into
forward contracts on a regular or continuous basis and will not do so if, as
a result, a Portfolio will have more than 25 % of the value of its total
assets committed to such contracts or the contracts would obligate a
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Portfolio to deliver an amount of foreign currency in excess of the value of
the Portfolio's investment securities or other assets denominated in that
currency.
At or before the settlement of a forward currency contract, a Portfolio may
either make delivery of the foreign currency or terminate its contractual
obligation to deliver the foreign currency by purchasing an offsetting
contract. If a Portfolio chooses to make delivery of the foreign currency, it
may be required to obtain the currency through the conversion of assets of
the Portfolio into the currency. A Portfolio may close out a forward contract
obligating it to purchase a foreign currency by selling an offsetting
contract. If a Portfolio engages in an offsetting transaction, it will
realize a gain or a loss to the extent that there has been a change in
forward contract prices. Additionally, although forward contracts may tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.
There is no systematic reporting of last sale information for foreign
currencies, and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign
currencies is a global around-the-clock market.
When required by applicable regulatory guidelines, a Portfolio will set aside
cash, U.S. Government Securities or other liquid, high-grade debt securities
in a segregated account with its custodian in the prescribed amount.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolios may purchase securities on a when-issued or delayed delivery
basis. In those cases, the purchase price and the interest rate payable on
the securities are fixed on the transaction date and delivery and payment may
take place a month or more after the date of the transaction. At the time a
Portfolio makes the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction as a purchase and
thereafter reflect the value each day of such securities in determining its
net asset value.
A Portfolio will make commitments for such when-issued transactions only when
it has the intention of actually acquiring the securities. To facilitate such
acquisitions, a Portfolio will maintain with its custodian a separate account
with portfolio securities in an amount at least equal to such commitments. On
delivery dates for such transactions, the Portfolio will meet its obligations
from maturities of portfolio securities, sales of the securities held in the
separate account or from other available sources of cash. If a Portfolio
chooses to dispose of the right to acquire a when-issued security prior to
its acquisition, it could, as with the disposition of any other portfolio
obligation, realize a gain or loss due to market fluctuation.
DOMESTIC AND FOREIGN BANK OBLIGATIONS
Each Portfolio may invest in obligations of financial institutions, including
negotiable certificates of deposit, bankers' acceptances and time deposits of
U.S. banks (including savings banks and savings associations), foreign
branches of U.S. banks, foreign banks and their non-U.S. branches
(Eurodollars), U.S. branches and agencies of foreign banks (Yankee dollars),
and wholly-owned banking-related subsidiaries of foreign banks.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft
which has been drawn by a customer and are usually backed by goods in
international trade. Time deposits are non-negotiable deposits with a
banking institution that earn a specified interest rate over a given period.
Certificates of deposit and fixed time deposits, which are payable at the
stated maturity date and bear a fixed rate of interest, generally may be
withdrawn on demand but may be subject to early withdrawal penalties which
could reduce a Portfolio's yield. Deposits subject to early withdrawal
penalties or that mature in more than seven days are treated as illiquid
securities if there is no readily available market for the securities.
Obligations of foreign banks and their branches, agencies or subsidiaries may
be obligations of the parent, of the issuing branch, agency or subsidiary, or
both. Investments in foreign bank obligations are limited to banks and
branches located in countries which a Portfolio's investment adviser believes
do not present undue risk.
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Each Portfolio may invest in fixed-time deposits, which are payable at their
stated maturity date and bear a fixed rate of interest, and which generally
may be withdrawn on demand by the Portfolio but may be subject to early
withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation and could reduce the Portfolio's yield.
Although fixed-time deposits do not in all cases have a secondary market,
there are no contractual restrictions on a Portfolio's right to transfer a
beneficial interest in the deposits to third parties.
Investments that a Portfolio may make in securities of foreign branches of
domestic banks and domestic and foreign branches of foreign banks may involve
certain risks, including future political and economic developments, the
possible imposition of foreign withholding taxes on interest income payable
on such securities, the possible seizure or nationalization of foreign
deposits, differences from domestic banks in applicable accounting, auditing
and financial reporting standards, and the possible establishment of exchange
controls or other foreign governmental laws or restrictions applicable to the
payment of certificates of deposit or time deposits which might affect
adversely the payment of principal and interest on such securities held by
the Portfolio.
ILLIQUID SECURITIES
Each Portfolio may invest up to 15% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which a Portfolio has valued the securities and
includes, among other things, repurchase agreements maturing in more than
seven days and restricted securities other than those the Portfolio's
investment adviser has determined to be liquid pursuant to guidelines
established by the Board.
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid. The Board has delegated the function of
making day-to-day determinations of liquidity to the investment adviser of
each Portfolio, pursuant to guidelines approved by the Board. The investment
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. The investment adviser monitors the liquidity of the securities
held by each Portfolio and reports periodically on such decisions to the
Board.
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS
Each Portfolio may invest in investment grade fixed income securities,
including money market instruments. The market value of the interest-bearing
debt securities held by the Portfolios will be affected by changes in
interest rates. There is normally an inverse relationship between the market
value of securities sensitive to prevailing interest rates and actual changes
in interest rates. In other words, an increase in interest rates produces a
decrease in market value. Moreover, the longer the remaining maturity of a
security, the greater will be the effect of interest rate changes on the
market value of that security. Changes in the ability of an issuer to make
payments of interest and principal and in the market's perception of an
issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists, therefore, that, the
ability of any issuer to pay, when due, the principal of and interest on its
debt securities may become impaired.
RATING MATTERS. A Portfolio may purchase unrated securities if the
Portfolio's investment adviser determines the security to be of comparable
quality to a rated security that the Portfolio may purchase. Unrated
securities may not be as actively traded as rated securities. A Portfolio may
retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Portfolio's
investment adviser to be of
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comparable quality to securities whose rating has been lowered below the
lowest permissible rating category) if the investment adviser determines that
retaining such security is in the best interests of the Portfolio.
To limit credit risks, the Portfolios may only invest in securities that are
investment grade -i.e., rated in the top four long-term investment grades by
an NRSRO or in the top two short-term investment grades by an NRSRO.
Accordingly, the lowest permissible long-term investment grades for corporate
bonds, including convertible bonds, are Baa in the case of Moody's Investors
Service, Inc. ("Moody's") and BBB in the case of Standard & Poor's Ratings
Group ("S&P") and Fitch Investors Service, Inc. ("Fitch"); the lowest
permissible long-term investment grades for preferred stock are baa in the
case of Moody's and BBB in the case of S&P and Fitch; and the lowest
permissible short-term investment grades 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. All these ratings are generally
considered to be investment grade ratings, although Moody's indicates that
securities with long-term ratings of Baa have speculative characteristics.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which the
Portfolios invest may have variable or floating rates of interest and, under
certain limited circumstances, may have varying principal amounts. These
securities pay interest at rates that are adjusted periodically accordingly
to a specified formula, usually with reference to one or more interest rate
indices or market interest rates. Similar to fixed rate debt instruments,
variable and floating rate instruments are subject to changes in value based
on changes in market interest rates or changes in the issuer's
creditworthiness. There may not be an active secondary market for any
particular floating or variable rate instrument; this could make it difficult
for a Portfolio to dispose of the instrument if the issuer defaulted on its
repayment obligation at a time when the Portfolio was not entitled to
exercise any demand rights it might have. A Portfolio could, for this or
other reasons, suffer a loss with respect to the instrument. Each Portfolio's
investment adviser monitors the liquidity of the Portfolio's investment in
variable and floating rate instruments, but there can be no guarantee that an
active secondary market will exist.
Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, a Portfolio might be
entitled to less than the initial principal amount of the security upon the
security's maturity. Each Portfolio intends to purchase such securities only
when the Portfolio's investment adviser believes the interest income from the
instrument justifies any principal risks associated with the instrument. A
Portfolio's investment adviser may attempt to limit any potential loss of
principal by purchasing similar instruments that are intended to provide an
offsetting increase in principal. There can be no assurance that the
investment adviser will be able to limit principal fluctuations and,
accordingly, a Portfolio may incur losses on those securities even if held to
maturity without issuer default.
FOREIGN NATIONAL AND MUNICIPAL GOVERNMENT DEBT SECURITIES. The fixed income
securities in which International Portfolio and International Portfolio II
may invest include those issued by the governments of foreign countries or by
those countries' political subdivisions, agencies or instrumentalities, as
well as by supranational organizations such as the International Bank for
Reconstruction and Development. To the extent otherwise permitted, a
Portfolio may invest in these securities if Schroder believes that the
securities do not present undue risk.
INVESTMENT LIMITATIONS
Except as required by the 1940 Act, 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 a Portfolio's assets or purchases and redemptions of interests will
not be considered a violation of the limitation.
FUNDAMENTAL LIMITATIONS
Each Portfolio has adopted the following investment limitations which are
fundamental policies of the Portfolio and cannot be changed without the
affirmative vote of the lesser of (a) more than 50% of the outstanding
interests of the Portfolio or (b) 67% or more of the interests present at an
interestholders' meeting if more than 50% of the outstanding interests of the
Portfolio are represented at the meeting in person or by proxy.
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(1) DIVERSIFICATION: With respect to 75% of its assets, the Portfolio may
not purchase a security other than a U.S. Government Security if, as a
result, more than 5% of the Portfolio's total assets would be invested
in the securities of a single issuer or the Portfolio would own more
than 10% of the outstanding voting securities of any single issuer.
(2) CONCENTRATION: The Portfolio may not purchase securities if,
immediately after the purchase, more than 25% of the value of the
Portfolio's total assets would be invested in the securities of issuers
conducting their principal business activities in the same industry;
provided, however that there is no limit on investments in U.S.
Government Securities, repurchase agreements covering U.S. Government
Securities, and issuers domiciled in a single country; that financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and diversified
finance); and that utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone).
(3) BORROWING: The Portfolio may borrow money from a bank for temporary or
emergency purposes, including the meeting of redemption requests, but
not in excess of 33 1/3% of the value of the Portfolio's total assets
(as computed immediately after the borrowing).
(4) ISSUANCE OF SENIOR SECURITIES: The Portfolio may not issue senior
securities except to the extent permitted by the 1940 Act.
(5) UNDERWRITING ACTIVITIES: The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio may be considered
to be acting as an underwriter in connection with the disposition of
portfolio securities.
(6) MAKING LOANS: The Portfolio may not make loans, except the Portfolio may
enter into repurchase agreements, purchase debt securities that are
otherwise permitted investments and lend portfolio securities.
(7) PURCHASES AND SALES OF REAL ESTATE: The Portfolio may not purchase or
sell real estate, any interest therein or real estate limited
partnership interests, except that the Portfolio may invest in debt
obligations secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein.
(8) PURCHASES AND SALES OF COMMODITIES: The Portfolio may not purchase or
sell physical commodities or contracts, options or options on contracts
to purchase or sell physical commodities, provided that currencies and
currency-related contracts and contracts on indices are not deemed to
be physical commodities.
NONFUNDAMENTAL LIMITATIONS
Each Portfolio has adopted the following investment limitations which
are not fundamental policies of the Portfolio and may be changed by the
Board.
(1) BORROWING: Borrowing for other than temporary or emergency purposes or
meeting redemption requests is limited to 5% of the value of the
Portfolio's total assets. Where the Portfolio establishes a segregated
account to limit the amount of leveraging of the Portfolio with respect
to certain investment techniques, the Portfolio does not treat those
techniques as involving borrowings for purposes of this limitation.
(2) ILLIQUID SECURITIES: The Portfolio may not invest more than (i) 15% of
its net assets in illiquid securities, a term that means securities
that cannot be disposed of within seven days in the ordinary course of
business and includes, among other things, repurchase agreements
maturing in more than seven days, or (ii) 10% of its total assets in
securities subject to contractual restrictions on resale.
(3) OTHER INVESTMENT COMPANIES: The Portfolio may not invest in securities
of another investment company, except to the extent permitted by the
1940 Act.
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(4) MARGIN AND SHORT SALES: The Portfolio may not purchase securities on
margin or make short sales of securities (except short sales against
the box) except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities. The
Portfolio may make margin deposits in connection with permitted
transactions in options and futures contracts.
(5) UNSEASONED ISSUERS: The Portfolio may not invest in securities (other
than fully-collateralized debt obligations) issued by companies that
have conducted continuous operations for less than three years,
including the operations of predecessors, unless guaranteed as to
principal and interest by an issuer in whose securities the Portfolio
could invest, if, as a result, more than 5% of the value of the
Portfolio's total assets would be so invested.
(6) PLEDGING: The Portfolio may not pledge, mortgage, hypothecate or
encumber any of its assets except to secure permitted borrowings.
(7) INVESTMENTS BY OFFICERS AND TRUSTEES: The Portfolio may not invest in
or hold securities of any issuer if, to the Trust's knowledge, officers
and trustees of the Trust or an investment adviser to the Portfolio,
individually owning beneficially more than one-half of one percent of
the securities of the issuer, in the aggregate own more than 5% of the
issuer's securities.
(8) OIL, GAS AND MINERAL INVESTMENTS: The Portfolio may not invest in
interests in oil and gas or interests in other mineral exploration or
development programs, including oil, gas and other mineral leases and
the Portfolio may not invest in real estate limited partnerships.
RATINGS
Moody's, S&P, Fitch and other NRSROs are private services that provide
ratings of the credit quality of debt obligations, including convertible
securities. A description of certain ratings assigned to various types of
bonds and other securities by those NRSROs is set forth below. The
Portfolios may use these ratings to determine whether to purchase, sell or
hold a security. However, ratings are general and are not absolute standards
of quality. Consequently, securities with the same maturity, interest rate
and rating may have different market prices. If an issue of securities ceases
to be rated or if its rating is reduced after it is purchased by a Portfolio,
the investment adviser of the Portfolio will determine whether the Portfolio
should continue to hold the obligation. Credit ratings attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks
of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings. An issuer's current financial condition may
be better or worse than a rating indicates.
CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"). Moody's rates corporate bond
issues, including convertible debt issues, as follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt 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.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
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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.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Baa. The modifier 1 indicates that the company
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 company
ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS GROUP ("S&P"). S&P rates corporate bond issues,
including convertible debt issues, as follows:
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt rated in higher rated
categories.
Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Note: The ratings may be modified by the addition of a plus (+) or minus (-)
sign to show the relative standing within the major categories.
FITCH INVESTORS SERVICE, INC. ("FITCH"). Fitch rates corporate bond issues,
including convertible debt issues, as follows:
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated
in the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, shorter-term debt of these issuers is generally rate
F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the AAA category.
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PREFERRED STOCK
MOODY'S INVESTORS SERVICE, INC. Moody's rates preferred stock as follows:
An issue 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.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will retain relatively well maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
An issue 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.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
STANDARD & POOR'S RATINGS GROUP. S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue
and indicates an extremely strong capacity to pay the preferred stock
obligations.
A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a strong capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas 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
obligation in this category than for issues in the A category.
To provide more detailed indications of preferred stock quality, the ratings
from AA to BBB may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE, INC. Moody's two highest ratings for short-term
debt, including commercial paper, are Prime-1 and Prime-2. Both are judged
investment grade, to indicate the relative repayment ability of rated issuers.
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics: Leading market positions in well-established industries,
high rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earning coverage of fixed financial charges and high internal cash
generation, well-established access to a range of financial markets and
assured sources of alternate liquidity.
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Issuers rated Prime-2 (or related supporting institutions) by Moody's have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics of issuers rated Prime-1
but to a lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD AND POOR'S RATINGS GROUP. S&P's two highest commercial paper
ratings are A and B. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety. An A-l
designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation. The capacity
for timely payment on issues with an A-2 designation is satisfactory.
However, the relative degree of safety is not as high as for issues
designated A-1. A-3 issues have adequate capacity for timely payment. They
are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations. Issues rated
B are regarded as having only speculative capacity for timely payment.
FITCH INVESTORS SERVICE, INC. Fitch's short-term ratings apply to debt
obligations that are payable on demand or have original maturities of
generally up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes.
F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2. Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned F-1+ or F-1 rating.
F-3. Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
HEDGING AND OPTION INCOME STRATEGIES
Each Portfolio may engage in certain options and futures strategies to
attempt to hedge the Portfolio's investments. The instruments in which the
Portfolios may invest include (i) options on foreign currencies, (ii) index
and foreign currency futures contracts ("futures contracts"), and (iii)
options on futures contracts. Use of these instruments is subject to
regulation by the Commission, the several options and futures exchanges upon
which options and futures are traded, and the Commodities Futures Trading
Commission.
The various strategies referred to herein and in Part A are intended to
illustrate the type of strategies that are available to, and may be used by,
an investment adviser in managing a Portfolio's investments. No assurance can
be given, however, that any strategies will succeed.
The Portfolios will not use leverage in their hedging strategies. In the case
of transactions entered into as a hedge, a Portfolio will hold securities,
currencies or other options or futures positions whose values are expected to
offset ("cover") its obligations thereunder. A Portfolio will not enter into
a hedging strategy that exposes the Portfolio to an obligation to another
party unless it owns either (1) an offsetting ("covered") position or (2)
cash, U.S. Government Securities or other liquid, high-grade debt securities
with a value sufficient at all times to cover its potential obligations. When
required by applicable regulatory guidelines, a Portfolio will set aside
cash, U.S. Government Securities or other liquid, high-grade debt securities
in a segregated account with its custodian in the prescribed amount. Any
assets used for cover or held in a segregated account cannot be sold or
closed out while the hedging strategy is outstanding, unless they are
replaced with similar assets. As a result, there is a possibility that the
use of cover or segregation involving a
39
<PAGE>
large percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
OPTIONS STRATEGIES
A Portfolio may purchase put and call options written by others and write
(sell) put and call options covering currencies. A put option (sometimes
called a "standby commitment") gives the buyer of the option, upon payment of
a premium, the right to deliver a specified amount of currency to the writer
of the option on or before a fixed date at a predetermined price. A call
option (sometimes called a "reverse standby commitment") gives the purchaser
of the option, upon payment of a premium, the right to call upon the writer
to deliver a specified amount of currency on or before a fixed date, at a
predetermined price. The predetermined prices may be higher or lower than the
market value of the underlying currency. A Portfolio may buy or sell both
exchange-traded and over-the-counter ("OTC") options. A Portfolio will
purchase or write an option only if that option is traded on a recognized
U.S. options exchange or if its investment adviser believes that a liquid
secondary market for the option exists. When a Portfolio purchases an OTC
option, it relies on the dealer from which it has purchased the OTC option to
make or take delivery of the currency underlying the option. Failure by the
dealer to do so would result in the loss of the premium paid by the Portfolio
as well as the loss of the expected benefit of the transaction.
Upon selling an option, a Portfolio receives a premium from the purchaser of
the option. Upon purchasing an option the Portfolio pays a premium to the
seller of the option. The amount of premium received or paid by the Portfolio
is based upon certain factors, including the relationship of the exercise
price to the market price, the option period, and supply and demand.
FOREIGN CURRENCY OPTIONS AND RELATED RISKS
A Portfolio may take positions in options on foreign currencies in order to
hedge against the risk of foreign exchange fluctuation on foreign securities
the Portfolio holds in its portfolio or which it intends to purchase. Options
on foreign currencies are affected by the factors discussed in "Options
Strategies" and "Foreign Currency Forward Transactions" above which influence
foreign exchange sales and investments generally.
The value of foreign currency options is dependent upon the value of the
foreign currency relative to the U.S. dollar and has no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the use of foreign currency
options, a Portfolio may be disadvantaged by having to deal in an odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for
round lots.
To the extent that the U.S. options markets are closed while the market for
the underlying currencies remains open, significant price and rate movements
may take place in the underlying markets that cannot be reflected in the
options markets.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING
A Portfolio may effectively terminate its right or obligation under an option
contract by entering into a closing transaction. For instance, if the
Portfolio wished to terminate its potential obligation to sell currencies
under a call option it had written, a call option of the same type would be
purchased by the Portfolio. Closing transactions essentially permit the
Portfolio to realize profits or limit losses on its options positions prior
to the exercise or expiration of the option. In addition:
(1) The successful use of options depends upon the investment adviser's
ability to forecast the direction of price fluctuations in the currency
markets.
(2) Options normally have expiration dates of up to nine months. Options
that expire unexercised have no value. Unless an option purchased by a
Portfolio is exercised or unless a closing transaction is effected with
respect to that position, a loss will be realized in the amount of the
premium paid.
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(3) A position in an exchange-listed option may be closed out only on an
exchange which provides a market for identical options. Exchange markets for
options on foreign currencies are relatively new, and the ability to
establish and close out positions on the exchanges is subject to the
maintenance of a liquid secondary market. Closing transactions may be
effected with respect to options traded in the OTC markets (currently the
primary markets for options on foreign currencies) only by negotiating
directly with the other party to the option contract or in a secondary market
for the option if such market exists. There is no assurance that a liquid
secondary market will exist for any particular option at any specific time.
If it is not possible to effect a closing transaction, a Portfolio would have
to exercise the option which it purchased in order to realize any profit. The
inability to effect a closing transaction on an option written by a Portfolio
may result in material losses to the Portfolio.
(4) A Portfolio's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs.
FUTURES STRATEGIES
A futures contract is a bilateral agreement wherein one party agrees to
accept, and the other party agrees to make, delivery of cash, an underlying
debt security or the currency as called for in the contract at a specified
future date and at a specified price. For futures contracts with respect to
an index, delivery is of an amount of cash equal to a specified dollar amount
times the difference between the index value at the time of the contract and
the close of trading of the contract.
A Portfolio may purchase index futures contracts for several reasons: to
simulate full investment in the underlying index while retaining a cash
balance for fund management purposes, to facilitate trading, to reduce
transactions costs, or to seek higher investment returns when a futures
contract is priced more attractively than securities in the index.
A Portfolio may sell foreign currency futures contracts to hedge against
possible variations in the exchange rate of the foreign currency in relation
to the U.S. dollar. In addition, a Portfolio may sell foreign currency
futures contracts when its investment adviser anticipates a general weakening
of foreign currency exchange rates that could adversely affect the market
values of the Portfolio's foreign securities holdings. A Portfolio may
purchase a foreign currency futures contract to hedge against an anticipated
foreign exchange rate increase pending completion of anticipated
transactions. Such a purchase would serve as a temporary measure to protect
the Portfolio against such increase. A Portfolio may also purchase call or
put options on foreign currency futures contracts to obtain a fixed foreign
exchange rate at limited risk. A Portfolio may write call options on foreign
currency futures contracts as a partial hedge against the effects of
declining foreign exchange rates on the value of foreign securities.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING
No price is paid upon entering into futures contracts; rather, a Portfolio is
required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash or U.S. Government Securities generally
equal to 5% or less of the contract value. This amount is known as initial
margin. Subsequent payments, called variation margin, to and from the broker,
would be made on a daily basis as the value of the futures position varies.
When writing a call on a futures contract, variation margin must be deposited
in accordance with applicable exchange rules. The initial margin in futures
transactions is in the nature of a performance bond or good-faith deposit on
the contract that is returned to the Portfolio upon termination of the
contract, assuming all contractual obligations have been satisfied.
Holders and writers of futures and options on futures contracts can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, a futures contract or
related option with the same terms as the position held or written. Positions
in futures contracts may be closed only on an exchange or board of trade
providing a secondary market for such futures contracts.
Under certain circumstances, futures exchanges may establish daily limits in
the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily
limit has
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<PAGE>
been reached in a particular contract, no trades may be made that day at a
price beyond that limit. Prices could move to the daily limit for several
consecutive trading days with little or no trading and thereby prevent prompt
liquidation of positions. In such event, it may not be possible for a
Portfolio to close a position, and in the event of adverse price movements,
the Portfolio would have to make daily cash payments of variation margin. In
addition:
(1) Successful use by a Portfolio of futures contracts and related options
will depend upon its investment adviser's ability to predict movements in the
direction of the overall currency markets, which requires different skills
and techniques than predicting changes in the prices of individual
securities. Moreover, futures contracts relate not to the current level of
the underlying currency but to the anticipated levels at some point in the
future.
(2) The price of futures contracts may not correlate perfectly with movement
in the price of the hedged currencies due to price distortions in the futures
market or otherwise. There may be several reasons unrelated to the value of
the underlying currencies which causes this situation to occur. As a result,
a correct forecast of general market trends may still not result in
successful hedging through the use of futures contracts over the short term.
(3) There is no assurance that a liquid secondary market will exist for any
particular contract at any particular time. In such event, it may not be
possible to close a position, and in the event of adverse price movements, a
Portfolio would continue to be required to make daily cash payments of
variation margin.
(4) Like other options, options on futures contracts have a limited life. A
Portfolio will not trade options on futures contracts on any exchange or
board of trade unless and until, in its investment adviser's opinion, the
market for such options has developed sufficiently that the risks in
connection with options on futures transactions are not greater than the
risks in connection with futures transactions.
(5) Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs is all that is at
risk. Sellers of options on futures contracts, however, must post an initial
margin and are subject to additional margin calls which could be substantial
in the event of adverse price movements.
(6) A Portfolio's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of added
brokerage commissions.
(7) Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts
and their use as a hedging device similar to those associated with options on
foreign currencies described above. In addition, settlement of foreign
currency futures contracts must occur within the country issuing that
currency. Thus, a Portfolio must accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign restrictions or
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents, and the Portfolio may be required to pay any fees, taxes or
charges associated with such delivery which are assessed in the issuing
country.
MANAGEMENT OF THE TRUST (ITEM 14 OF FORM N-1A)
The Trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an
asterisk. John Y. Keffer and David R. Keffer are brothers.
John Y. Keffer*, Chairman and President (age 54).
President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Financial Corp. (a registered transfer agent) and
Forum Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Trustee/Director and/or officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
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Costas Azariadis, Trustee (age 52).
Professor of Economics, University of California, Los Angeles, since
July 1992. Prior thereto, Dr. Azariadis was Professor of Economics at
the University of Pennsylvania. His address is Department of
Economics, University of California, Los Angeles, 405 Hilgard Avenue,
Los Angeles, California 90024.
James C. Cheng, Trustee (age 53).
Founder and President, Technology Marketing Associates (a marketing
company for small and medium size businesses in New England) since
1991. During November 1991 to September 1994, Mr. Cheng provided
marketing and sales support to Forum. Mr. Cheng was President of
Network Dynamics, Inc. (a software development company). Prior thereto
His address is 27 Temple Street, Belmont, MA 02718.
J. Michael Parish, Trustee (age 52).
Partner at the law firm of Reid & Priest. Prior to 1995, Mr. Parish
was a partner at Winthrop Stimson Putnam & Roberts since 1989. His
address is 40 West 57th Street, New York, New York.
Sara M. Clark, Vice President, Assistant Secretary and Assistant
Treasurer (age 33).
Managing Director, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark
was Controller of Wright Express Corporation (a national credit card
company) and for six years prior thereto was employed at Deloitte &
Touche LLP as an accountant. Ms. Clark is also an officer of various
registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. Her address
is Two Portland Square, Portland, Maine 04101.
Thomas G. Sheehan, Vice President and Assistant Secretary (age 42).
Counsel, Forum Financial Services, Inc. since October, 1993. Prior
thereto, Mr. Sheehan was a Special Counsel in the Division of
Investment Management of the U.S. Securities and Exchange Commission in
Washington, D.C. His address is Two Portland Square, Portland, Maine
04101.
Richard C. Butt, Treasurer (age 40).
CPA, Managing Director, Operations, Forum Financial Corp. since 1996.
Prior thereto, Mr. Butt was a consultant in the financial services
division of KPMG Peat Marwick LLP ("KPMG"). Prior to his employment at
KPMG, Mr. Butt was President of 440 Financial Distributors, Inc., the
distribution subsidiary of 440 Financial Group, and Senior Vice
President of the parent company. Prior thereto, he was a Vice President
at Fidelity Services Company. Mr. Butt is responsible for fund
accounting and transfer agency at Forum. His address is Two Portland
Square, Portland, Maine 04101.
David I. Goldstein, Secretary (age 35).
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1991. Prior thereto, Mr. Goldstein was associated with
the law firm of Kirkpatrick & Lockhart, LLP. Mr. Goldstein is also an
officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
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Renee A. Walker, Assistant Secretary (age 26).
Fund Administrator, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, Ms. Walker was an
administrator at Longwood Partners (the manager of a hedge fund
partnership) for a year. After graduating from college, from 1991 to
1993, Ms. Walker was a sales representative assistant at PaineWebber
Incorporated (a broker-dealer). Her address is Two Portland Square,
Portland, Maine 04101.
Each Trustee of the Trust (other than persons who are interested persons of
the Trust) is paid $1,000 for each Board meeting attended (whether in person
or by electronic communication) plus $100 per active portfolio of the Trust
and is paid $1,000 for each Committee meeting attended on a date when a Board
meeting is not held. To the extent a meeting relates to only certain
portfolios of the Trust, Trustees are paid the $100 fee only with respect to
those portfolios. Trustees are also reimbursed for travel and related
expenses incurred in attending meetings of the Board. No officer of the
Trust is compensated by the Trust.
The following table provides the aggregate compensation paid to the Trustees
of the Trust by the Trust. Information is presented for the year ended May
31, 1996, the Portfolios' fiscal year end.
Total Compensation
from the Trust
--------------
Costas Azariadis $3,500
James C. Cheng $3,500
J. Michael Parish $3,500
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES (ITEM 15 OF FORM N-1A)
International Fund, a series of Norwest Advantage Funds, a Delaware business
trust registered with the SEC as an open-end management investment company,
has invested all of its investable assets in International Portfolio. As of
September 15, 1996, International Fund was the Portfolio's only
interestholder (other than nominal amounts invested by Forum and its
affiliates) and thus controlled the Portfolio. With respect to Index
Portfolio, Small Company Portfolio and International Portfolio II, series of
Norwest Advantage Funds have invested a portion of their investable assets in
the Portfolios pursuant to the terms of an exemptive order granted the Trust
by the Commission. As of September 15, 1996, these series owned all of the
units of, and therefore controlled, International Portfolio II, Index
Portfolio and Small Company Portfolio. See Part A and "Purchase, Redemption
and Pricing of Securities" below for a description of the exemptive order.
Norwest Advantage Funds has informed the Trust that whenever International
Fund is requested to vote on matters pertaining to International Portfolio,
International Fund will hold a meeting of its shareholders and will cast its
vote as instructed by its shareholders. This only applies to matters for
which International Fund would be required to have a shareholder meeting if
it directly held investment securities rather than invested in International
Portfolio. It is anticipated that any other registered investment company
(or series thereof) that may in the future invest in International Portfolio
will follow the same or a similar practice.
INVESTMENT ADVISORY AND OTHER SERVICES (ITEM 16 OF FORM N-1A)
INVESTMENT ADVISORY SERVICES
Norwest Investment Management, a part of Norwest Bank Minnesota, N.A.
("Norwest"), acts as investment adviser to Small Company Portfolio and Index
Portfolio and is required to furnish at its expense all services, facilities
and personnel necessary in connection with managing the investments of, and
effecting portfolio transactions for, those Portfolios.
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Schroder acts as investment adviser to International Portfolio and
International Portfolio II and is required to furnish at its expense all
services, facilities and personnel necessary in connection with managing the
investments of, and effecting portfolio transactions for, those Portfolios.
The investment advisory agreement for each Portfolio ("Advisory Agreement")
will continue in effect only if such continuance is specifically approved at
least annually by the Board or by vote of the interestholders of the
Portfolio, and, in either case, by a majority of the Trustees who are not
parties to the Advisory Agreement or interested persons of any such party, at
a meeting called for the purpose of voting on the Advisory Agreement.
The Advisory Agreement with respect to a Portfolio is terminable without the
payment of penalty, (i) by the Board or by a vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) on 60
days' written notice to Norwest or Schroder, as applicable, or (ii) by
Norwest or Schroder on 60 days' written notice to the Trust. Each Advisory
Agreement terminates automatically upon its assignment.
The advisory fees, as described in Part A, are accrued daily and paid
monthly. Either adviser in its sole discretion, may waive all or any portion
of its advisory fee with respect to each Portfolio. As described in Part A,
Norwest is obligated waive all investment advisory fees of Small Company
Portfolio and Index Portfolio and to reimburse all investment advisory fees
of International Portfolio II. Each Advisory Agreement provides that the
adviser may render service to others.
The following table shows the dollar amount of fees payable under the
Advisory Agreements between the investment advisors and the Trust with
respect to each Portfolio, the amount of the fee that was waived or
reimbursed by Norwest, if any, and the actual fee received by Norwest or
Schroder. The data is for the past fiscal year, November 1, 1995 through May
31, 1996 and for the Trust's first fiscal year ending October 31, 1995.
<TABLE>
<CAPTION>
Fee Waived or Fee Fee
Fee Reimbursed Retained by Retained by
Payable by Norwest Norwest Schroder
------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Index Portfolio
Year ended May 31, 1996 281,183 281,183 0 N/A
Year ended October 31, 1995 359,914 359,914 0 N/A
Small Company Portfolio
Year ended May 31, 1996 1,844,601 1,844,601 0 N/A
Year ended October 31, 1995 2,260,342 2,260,342 0 N/A
International Portfolio
Year ended May 31, 1996 316,701 0 0 316,701
Year ended October 31, 1995 368,007 0 0 368,007
International Portfolio II
Year ended May 31, 1996 1,005,925 1,005,925 0 1,005,925
Year ended October 31, 1995 1,231,536 1,231,536 0 1,231,536
</TABLE>
ADMINISTRATIVE SERVICES
Pursuant to an administration agreement with the Trust, Forum supervises the
overall administration of the Trust which includes, among other
responsibilities, overseeing the performance of administrative and
professional services rendered to the Trust by others, including its
custodian, transfer agent and fund accountant as well as legal and auditing
services; preparing and printing the periodic updating of the Trust's
registration statement, tax returns, and reports to interestholders and the
SEC; preparing, filing and maintaining the Trust's governing documents;
preparing and disseminating materials for meetings of the Board; and
providing the Trust with general office facilities.
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The Administration Agreement between Forum and the Trust will continue in
effect with respect to a Portfolio only if such continuance is specifically
approved at least annually by the Board or by the interestholders of that
Portfolio and, in either case, by a majority of the Trustees who are not
parties to the Management Agreement or interested persons of any such party.
The administration agreement may be terminated with respect to each Portfolio
without the payment of any penalty, (i) by the Board or by vote of a majority
of the Portfolio's outstanding voting securities (as defined in the 1940) Act
on 60 days' written notice to Forum or (ii) by Forum on 60 days' written
notice to the Trust.
The following table shows the dollar amount of fees payable under the
Administration Agreement between Forum and the Trust with respect to each
Portfolio, the amount of fee that was waived or reimbursed by Forum, if any,
and the actual fee received by Forum. The data is for the past fiscal year
and the fiscal year ended October 31, 1995. Forum's fees are accrued daily
and paid monthly.
Fee Fee Fee
Payable Waived Retained
-------- -------- ---------
Index Portfolio
Year ended May 31, 1996 $187,455 $7,045 $180,410
Year ended October 31, 1995 239,943 $16,182 239,943
Small Company Portfolio
Year ended May 31, 1996 204,956 1,250 203,706
Year ended October 31, 1995 251,149 0 251,149
International Portfolio
Year ended May 31, 1996 105,567 11,873 93,694
Year ended October 31, 1995 122,669 78,610 44,059
International Portfolio II
Year ended May 31, 1996 223,539 0 223,539
Year ended October 31, 1995 273,675 605 273,070
CUSTODIAN
Norwest, 733 Marquette Avenue, Minneapolis, Minnesota 55479-0040, is the
custodian of Small Company Portfolio's and Index Portfolio's assets. The
Chase Manhattan Bank, N.A., through its Global Custody Division located in
London, England, acts as custodian of International Portfolio's and
International Portfolio II's assets, but plays no role in making decisions as
to the purchase or sale of portfolio securities for the Portfolios. Pursuant
to rules adopted under the 1940 Act, each Portfolio may maintain its foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board following a consideration of a number of factors, including
the reliability and financial stability of the institution, the ability of
the institution to perform capably custodial services for the Portfolio, the
reputation of the institution in its national market, the political and
economic stability of the country in which the institution is located, and
further risks of potential nationalization or expropriation of Portfolio
assets. The custodian employs qualified foreign subcustodians to provide
custody of the Portfolios' foreign assets in accordance with applicable
regulations.
PORTFOLIO ACCOUNTING
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for each Portfolio pursuant to a Fund Accounting
Agreement with the Trust. The Fund Accounting Agreement will continue in
effect only if such continuance is specifically approved at least annually by
the Board or by a vote of the shareholders of the Trust and in either case by
a majority of the Trustees who are not parties to the Fund Accounting
Agreement or interested persons of any such party, at a meeting called for
the purpose of voting on the Fund Accounting Agreement.
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Under its agreement, FFC prepares and maintains books and records of each
Fund on behalf of the Trust that are required to be maintained under the 1940
Act, calculates the net asset value per share of each Fund (and class
thereof) and dividends and capital gain distributions and prepares periodic
reports to shareholders and the SEC. For its accounting services, FFC
receives from the Trust with respect to each Portfolio a fee of $36,000 per
year plus certain amounts based upon the type of Portfolio, and number and
types of portfolio transactions within each Portfolio. In addition, for its
interestholder recordkeeping services, FFC is paid $12,000 for each Portfolio.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, serves as independent auditors for the Portfolios.
BROKERAGE ALLOCATION AND OTHER PRACTICES (ITEM 17 OF FORM N-1A)
Investment decisions for the Portfolios will be made independently from those
for any other client account or investment company that is or may in the
future become managed by either Norwest or Schroder, as applicable, 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
Norwest's or Schroder's, as applicable, 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 portfolio securities for one or more
clients will have an adverse effect on other clients. In addition, when
purchases or sales of the same security for the Portfolio and other client
accounts managed by Norwest or Schroder occur contemporaneously, the purchase
or sale orders may be aggregated in order to obtain any price advantages
available to large denomination purchases or sales.
Purchases and sales of fixed income portfolio securities are generally
effected as principal transactions. These securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. There usually are no brokerage commissions paid for such
purchases. Purchases from underwriters of portfolio securities include a
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
ask prices In the case of securities traded in the foreign and domestic
over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed commission or markup In underwritten
offerings, the price includes a disclosed fixed commission or discount.
Purchases and sales of equity securities on exchanges are generally effected
through brokers who charge commissions except in the over-the-counter
markets. Allocations of transactions to brokers and dealers and the frequency
of transactions are determined by Norwest or Schroder, as applicable, in its
best judgment and in a manner deemed to be in the best interest of holders of
beneficial interests of the Portfolios rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner
and at the most favorable price available to the Portfolio. In transactions
on stock exchanges in the United States, these commissions are negotiated,
whereas on foreign stock exchanges these commissions are generally fixed.
Where transactions are executed in the over-the-counter market, the Portfolio
will seek to deal with the primary market makers; but where necessary in
order to obtain best execution, it will utilize the services of others. In
all cases the Portfolio will attempt to negotiate best execution.
A Portfolio may not always pay the lowest commission or spread available.
Rather, in determining the amount of commission, including certain dealer
spreads, paid in connection with securities transactions, Norwest and
Schroder take into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's facilities (including the
services described below) and any risk assumed by the executing broker.
Norwest and Schroder may also
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take into account payments made by brokers effecting transactions for a
Portfolio (i) to the Portfolio or (ii) to other persons on behalf of the
Portfolio for services provided to it for which it would be obligated to pay.
In addition, Norwest and Schroder may give consideration to research services
furnished by brokers for their use and may cause the Portfolio to pay these
brokers a higher amount of commission than may be charged by other brokers.
Such research and analysis may be used by Norwest and Schroder in connection
with services to clients other than the Portfolios, and advisory fees are not
reduced by reason of their receipt of the research services.
Subject to the general policies regarding allocation of portfolio brokerage
as set forth above, the Board has authorized Norwest and Schroder to employ
their respective affiliates to effect securities transactions of the
Portfolios, provided certain other conditions are satisfied. Payment of
brokerage commissions to an affiliate of Norwest or Schroder, as applicable,
for effecting such transactions is subject to Section 17(e) of the 1940 Act,
which requires, among other things, that commissions for transactions on
securities exchanges paid by a registered investment company to a broker
which is an affiliated person of such investment company, or an affiliated
person of another person so affiliated, not exceed the usual and customary
brokers' commissions for such transactions. It is the Portfolios' policy that
commissions paid to Schroder Muenchmeyer ("Muenchmeyer"), Norwest Investment
Services, Inc. ("Norwest Services") and other affiliates of either Norwest or
Schroder will, in the judgment of the adviser responsible for making
portfolio decisions and selecting brokers, be (i) at least as favorable as
commissions contemporaneously charged by the affiliate on comparable
transactions for its most favored unaffiliated customers and (ii) at least as
favorable as those which would be charged on comparable transactions by other
qualified brokers having comparable execution capability. The Board,
including a majority of the non-interested Trustees, has adopted procedures
to ensure that commissions paid to affiliates of Norwest or Schroder by the
Portfolios satisfy the foregoing standards.
The Trust has no understanding or arrangement to direct any specific portion
of its brokerage to Muenchmeyer or Norwest Services, and will not
direct brokerage to Muenchmeyer or Norwest Services in recognition of
research services.
For the fiscal years ended October 31, 1995 and May 31, 1996, the
aggregate brokerage commissions incurred by the Portfolios were as follows:
Index Portfolio, $84,456.51 and $74,898.21, Small company Portfolio
$758,509.92 and $784,781.71, International Portfolio $212,757.45 and
$188,843.90, and International Portfolio II $730,490.67 and $434,449.57, of
which 0.004% ($828.05) and 0% ($.00) was paid for the years ended October 31,
1995 and May 31, 1996, respectively, to Muenchmeyer with respect to
International Portfolio, and of which 0.001% ($966.05) and 0% ($0.00) was
paid for the years October 31, 1995 and May 31, 1996, respectively, to
Muenchmeyer with respect to International Portfolio II. During those
periods, approximately 0.002% and 0% of the total dollar amount of
transactions by International Portfolio, and 0.002% and 0% of the total
dollar amount of transactions by International Portfolio II involving the
payment of commissions were effected through Muenchmeyer, for the years ended
October 31, 1995 and May 31, 1996, respectively.
Transactions in futures contracts are executed through futures commission
merchants ("FCMs"), who receive brokerage commissions for their services.
The Trust's procedures in selecting FCMs to execute the Trust's transactions
in futures contracts, including procedures permitting the use of affiliates
of Norwest or Schroder, are similar to those in effect with respect to
brokerage transactions in securities.
The Trust will not purchase securities that are offered in underwritings in
which any affiliate of Norwest or Schroder is a member of the underwriting or
selling group, except pursuant to procedures adopted by the Board pursuant to
Rule 10f-3 under the 1940 Act. Among other things, these procedures require
that the spread or commission paid in connection with such a purchase be
reasonable and fair, the purchase be at not more than the public offering
price prior to the end of the first business day after the date of the public
offering and that Norwest, Schroder or any affiliates thereof not participate
in or benefit from the sale to the Trust.
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CAPITAL STOCK AND OTHER SECURITIES (ITEM 18 OF FORM N-1A)
Under the Trust Instrument, the Trustees are authorized to issue beneficial
interest in one or more separate and distinct series. Investments in each
Portfolio have no preference, preemptive, conversion or similar rights and
are fully paid and nonassessable, except as set forth below. Each investor
in a Portfolio is entitled to a vote in proportion to the amount of its
investment therein. Investors in the Portfolios will all vote together in
certain circumstances (e.g., election of the Trustees and ratification of
auditors, as required by the 1940 Act and the rules thereunder). One or more
Portfolios could control the outcome of these votes. Investors do not have
cumulative voting rights, and investors holding more than 50% of the
aggregate interests in the Trust or in a Portfolio, as the case may be, may
control the outcome of votes. The Trust is not required and has no current
intention to hold annual meetings of investors, but the Trust will hold
special meetings of investors when (1) a majority of the Trustees determines
to do so or (2) investors holding at least 10% of the interests in the Trust
(or a Portfolio) request in writing a meeting of investors in the Trust (or
Portfolio). Except for certain matters specifically described in the Trust
Instrument, the Trustees may amend the Trust's Trust Instrument without the
vote of investors.
The Trust, with respect to a Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Trust's Board. A Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2)
by the Trustees on written notice to the Portfolio's investors. Upon
liquidation or dissolution of any Portfolio, the investors therein would be
entitled to share pro rate in its net assets available for distribution to
investors.
The Trust is organized as a business trust under the laws of the State of
Delaware. The Trust's interestholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
provides that an interestholder of a Delaware business trust shall be
entitled to the same limitation of liability extended to shareholders of
private corporations for profit. However, no similar statutory or other
authority limiting business trust interestholder liability exists in many
other states, including Texas. As a result, to the extent that the Trust or
an interestholder is subject to the jurisdiction of courts in those states,
the courts may not apply Delaware law, and may thereby subject the Trust to
liability. To guard against this risk, the Trust Instrument of the Trust
disclaims liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation and
instrument entered into by the Trust or its Trustees, and provides for
indemnification out of Trust property of any interestholder held personally
liable for the obligations of the Trust. Thus, the risk of an interestholder
incurring financial loss beyond his investment because of shareholder
liability is limited to circumstances in which (1) a court refuses to apply
Delaware law, (2) no contractual limitation of liability is in effect, and
(3) the Trust itself is unable to meet its obligations.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES (ITEM 19 OF FORM N-1A)
Interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
section 4(2) of the 1933 Act. See "General Description of Registrant,"
"Purchase of Securities," and "Redemption or Repurchase" in Part A.
The Trust was granted an exemptive order by the Commission which allows only
open-end management investment companies or their separate series for which
Norwest (or any person controlled by, controlling or under common control
with Norwest) acts as investment adviser (collectively, "Norwest Gateways")
to invest in Index Portfolio, Small Company Portfolio and International
Portfolio II. The original exemptive order, which imposed several
substantive conditions upon the Trust and Norwest Advantage Funds, was
amended effective August 6, 1996, to permit any Norwest Advantage Fund to
invest all or a portion of its assets in a Core Trust portfolio, irrespective
of investment style, and which removed certain restrictions imposed on the
Trust thereby permitting the Trust to accept investments from persons other
than Norwest Advantage Funds.
TAX STATUS (ITEM 20 OF FORM N-1A)
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Each Portfolio is classified for federal income tax purposes as a separate
partnership that is not a "publicly traded partnership." As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses, deductions,
and credits, without regard to whether it has received any cash distributions
from the Portfolio. Each Portfolio also is not subject to Delaware income or
franchise tax.
Each investor in a Portfolio is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the investor satisfies the
requirements to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly,
each Portfolio intends to conduct its operations so that its investors that
intend to qualify as RICs ("RIC investors") will be able to satisfy all those
requirements.
Distributions to an investor from a Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the investor's
recognition of any gain or loss for federal income tax purposes, except that
(1) gain will be recognized to the extent any cash that is distributed
exceeds the investor's basis for its interest in the Portfolio before the
distribution, (2) income or gain will be recognized if the distribution is in
liquidation of the investor's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio,
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables, and (4) gain or loss may be recognized on
a distribution to an investor that contributed property to the Portfolio. An
investor's basis for its interest in a Portfolio generally will equal the
amount of cash and the basis of any property it invests in the Portfolio,
increased by the investor's share of the Portfolio's net income and gains and
decreased by (a) the amount of cash and the basis of any property the
Portfolio distributes to the investor and (b) the investor's share of the
Portfolio's losses.
Dividends and interest received by a Portfolio may be subject to income,
withholding, or other taxes imposed by foreign countries and; U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
Each Portfolio (except Index Portfolio) may invest in the stock of "passive
foreign investment companies" ("PFICs"). A PFIC is a foreign corporation
that, in general, meets either of the following tests: (1) at least 75% of
its gross income is passive or (2) an average of at least 50% of its assets
produce, or are held for the production of, passive income. Under certain
circumstances, a RIC that holds stock of a PFIC indirectly through its
interest in a Portfolio will be subject to federal income tax on its
proportionate share of a portion of any "excess distribution" received by the
Portfolio on the stock or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the RIC
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the RIC's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund," then in lieu of the foregoing tax and interest obligation,
each RIC investor in the Portfolio would be required to include in income
each year its proportionate share of the Portfolio's pro rata share of the
qualified electing fund's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) --
which most likely would have to be distributed by the RIC investor to satisfy
the distribution requirements applicable to it -- even if those earnings and
gain were not received by it. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Proposed regulations have been published pursuant to which certain RICs would
be entitled to elect to "mark to market" their stock in certain PFICs.
"Marking to market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market value
of each such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
The Portfolios' use of hedging strategies, such as writing (selling) and
purchasing options and futures and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses the Portfolios realize in
connection therewith. For each Portfolio, gains from
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the disposition of foreign currencies (except certain gains that may be
excluded by future regulations), and gains from hedging instruments derived
by it with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income for its RIC investors under
the requirement that at least 90% of a RIC's gross income each taxable year
consist of specified types of income. However, income from the disposition
by a Portfolio of hedging instruments (other than those on foreign
currencies) held for less than three months will be subject to the
requirement applicable to its RIC investors that less than 30% of a RIC's
gross income each taxable year consist of certain short-term gains
("Short-Short Limitation"). Income from the disposition of foreign
currencies, and hedging instruments on foreign currencies, that are not
directly related to a Portfolio's principal business of investing in
securities (or options and futures with respect thereto) also will be subject
to the Short-Short Limitation for its RIC investors if they are held for less
than three months.
If a Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether its RIC investors
satisfy the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. Each Portfolio will consider whether it should seek to qualify
for this treatment for its hedging transactions. To the extent a Portfolio
does not so qualify, it may be forced to defer the closing out of certain
hedging instruments beyond the time when it otherwise would be advantageous
to do so, in order for its RIC investors to qualify or continue to qualify as
RICs.
UNDERWRITERS (ITEM 21 OF FORM N-1A)
Forum Financial Services, Inc., Two Portland Square, Portland, Maine 04101,
the Portfolios' administrator, serves as the Trust's placement agent. Forum
receives no compensation for such placement agent services.
CALCULATION OF PERFORMANCE DATA (ITEM 22 OF FORM N-1A)
Not applicable.
FINANCIAL STATEMENTS (ITEM 23 OF FORM N-1A)
The statement of assets and liabilities, statement of operations and
statement of changes in net assets for each Portfolio, and the notes to each
of the foregoing statements, for the fiscal years ended May 31, 1996 and
October 31, 1995, and the report of the independent accountants, Coopers &
Lybrand L.L.P., thereon (included in the Annual Report of the Trust), which
follow, are incorporated herein by reference.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
INCLUDED IN PART A
Not Applicable.
INCLUDED IN PART B
For Index Portfolio Small Company Portfolio, International Portfolio and
International Portfolio II (each a "Portfolio" and collectively the
"Portfolios"):
Audited financial statements for the fiscal year ended May 31, 1996,
including: statements of assets and liabilities, statements of
operations, statements of changes in net assets, notes to financial
statements, schedules of investments and independent auditor's report
thereon. (included in the Core Trust (Delaware) Annual Report with
respect to the Portfolios as filed with the Securities and Exchange
Commission on August 6, 1996, as part of the Annual Report of certain
series of Norwest Advantage Funds that invest in the Portfolios,
pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as
amended) are incorporated herein by reference.
(B) EXHIBITS:
(1) Copy of Trust Instrument (See Note A)
(2) Not Applicable.
(3) Not Applicable.
(4) Not Applicable.
(5) (a) Copy of the Investment Advisory Agreement between Registrant
and Norwest Bank Minnesota, N.A ("Norwest") (See Note B).
(b) Copy of the Investment Advisory Agreement between Registrant
and Schroder Capital Management International Inc.(See Note B).
(c) Copy of the Investment Advisory Agreement between Registrant
and Linden Asset Management, Inc. (See Note B).
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(d) Copy of the Investment Advisory Agreement among Registrant,
Linden Asset Management, Inc. and Forum Advisors, Inc.
(See Note B).
(e) Copy of the Investment Advisory Agreement between Registrant
and Forum Advisors, Inc. (See Note B).
(f) Copy of the Investment Advisory Agreement among Registrant,
Forum Advisors, Inc., and Linden Asset Management, Inc.
relating to the Treasury Portfolio ofRegistrant (See Note B).
(g) Copy of the Investment Advisory Agreement between Registrant
and Linden Asset Management, Inc. relating to the Treasury
Portfolio of Registrant. (See Note B)
(6) Not required.
(7) Not Applicable.
(8) (a) Copy of the Custodian Agreement between Registrant and Norwest
(See Note B).
(b) Copy of the Custodian Agreement between Registrant and The
Chase Manhattan Bank, N.A. ("Chase") (See Note B).
(c) Copy of the Foreign Subcustody Agreement between Chase and
various foreign subcustodians (See Note A).
(d) Copy of the Custodian Agreement between Registrant and Imperial
Trust Company (See Note B).
(e) Copy of the Custodian Agreement between Registrant and First
National Bank of Boston, N.A. (See Note B).
(9) (a) Copy of the Administration Agreement between Registrant and
Forum Financial Services, Inc. (See Note B).
(b) Copy of the Fund Accounting Agreement between Registrant and
Forum Financial Corp. (See Note B).
(c) Copy of the Placement Agent Agreement between Registrant and
Forum. (See Note B).
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(d) Copy of the Administration Agreement between Registrant and
Forum with respect to Treasury Cash Portfolio, Government Cash
Portfolio, Cash Portfolio and Treasury Portfolio. (See Note B).
(e) Copy of the Fund Accounting Agreement between Registrant and
Forum Financial Corp. with respect to Treasury Cash Portfolio,
Government Cash Portfolio, Cash Portfolio and Treasury
Portfolio. (See Note B).
(f) Copy of the Placement Agent Agreement between Registrant and
Forum with respect to Treasury Cash Portfolio, Government Cash
Portfolio, Cash Portfolio and Treasury Portfolio. (See Note B).
(10) Not required.
(11) Not required.
(12) Not required.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
Note A: Filed in Registrant's Registration Statement on November 10, 1994.
Note B. Filed in Amendment No. 5 to Registrant's Registration Statement on
September 30, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As of September 30, 1996 substantially all of Registrant's securities were
owned by various series of Norwest Advantage Funds, a registered open-end
management investment company.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF SEPTEMBER 30, 1996
Title of Class of Shares
of Beneficial Interest Number of Holders
------------------------ -----------------
International Portfolio 2
International Portfolio II 6
Small Company Portfolio 6
Index Portfolio 5
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Treasury Cash Portfolio 2
Government Cash Portfolio 2
Cash Portfolio 2
Treasury Portfolio 2
ITEM 27. INDEMNIFICATION.
The Trust currently holds a directors' and officers' errors and
omissions insurance policy jointly with Forum Funds, the terms of which are
consistent with industry standards. The policy provides generally for the
indemnification against loss by the insured in connection with a judgment of
liability in certain litigation arising from the insured's wrongful act or an
error, act or omission by a person for whom the insured becomes legally
responsible. The policy provides coverage in the amount of $6,000,000. The
policy premiums are allocated between the Trust and Forum Funds based upon
the pro rata share of assets of each insured. The Trust's trustees and
officers also are insured under the Trust's fidelity bond purchased pursuant
to Rule 17j-1 under the Investment Company Act of 1940, as amended (the
"Act").
The general effect of Article 5 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the
fullest extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable
to the Registrant or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. This description is modified in its entirety by the
provisions of Article 5 of Registrant's Trust Instrument contained in this
Registration Statement as Exhibit 1 and incorporated herein by reference.
Provisions of each of Registrant's investment advisory agreements
provide that the respective investment adviser shall not be liable for any
mistake of judgment or in any event whatsoever, except for lack of good
faith, provided that nothing shall be deemed to protect, or purport to
protect, the investment adviser against any liability to Registrant or to
Registrant's interestholders to which the investment adviser would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of the investment adviser's duties, or by reason of the
investment adviser's reckless disregard of its obligations and duties
hereunder. This description is modified in its entirety by the provisions of
Registrant's Investment Advisory Agreements contained in this Registration
Statement as Exhibit 5 and incorporated herein by reference.
As custodian to certain portfolios of the Trust, under Section 18 of its
custodian agreement Norwest is not liable for any action taken in good faith
reliance upon the advice or statements of certain experts. Under that
agreement, the Trust has agreed to indemnify and hold Norwest harmless for
any loss, claim, damage or expense arising out of the custodian relationship;
provided such loss, claim, damage or expense is not the direct result of the
Custodian's negligence or willful misconduct. This description is modified
in its entirety by the provisions of Registrant's Custodian Agreement
contained in this Registration Statement as Exhibit 8(a) and incorporated
herein by reference.
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The indemnification provisions set forth under Section 1 paragraphs (f)
and (g) of the Placement Agent Agreement between FFSI (defined as "Forum"
under the agreement) and the Trust, specifically provide as follows:
(f) The Trust agrees to indemnify, defend and hold Forum, its several
officers and directors, and any person who controls Forum within the
meaning of Section 15 of the 1933 Act or Section 20 of the Securities
Exchange Act of 1934 (the "1934 Act") (for purposes of this Section 1(f),
collectively, "Covered Persons") free and harmless from and against any
and all claims, demands, liabilities and any counsel fees incurred in
connection therewith) which any Covered Person may incur under the 1933
Act, the 1934 Act, common law or otherwise, arising out of or based on
any untrue statement of a material fact contained in any registration
statement, private placement memorandum or other offering material
("Offering Material") or arising out of or based on any omission to state
a material fact required to be stated in any Offering Material or
necessary to make the statements in any Offering Material not misleading,
provided, however, that the Trust's agreement to indemnify Covered Persons
shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any financial and other statements as are furnished in
writing to the Trust by Forum in its capacity as Placement Agent for use
in the answers to any items of any registration statement or in any
statements made in any Offering Material, or arising out of or based on
any omission or alleged omission to state a material fact in connection
with the giving of such information required to be stated in such answers
or necessary to make the answers not misleading; and further provided that
the Trust's agreement to Section 1(e)shall not be deemed to cover any
liability to the Trust or its investors to which a Covered Person would
otherwise be subject by reason or willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of a Covered
Person's reckless disregard of its obligations and duties under this
Agreement. The Trust shall be notified of any action brought against a
Covered Person, such notification to be given by letter or by telegram
addressed to the Secretary of the Trust, promptly after the summons or
other first legal process shall have been duly and completely served upon
such Covered Person. The failure to notify the Trust of any such action
shall not relieve the Trust from any liability except to the extent that
the Trust shall have been prejudiced by such failure, or from any
liability that the Trust may have to the Covered Person against whom such
action is brought by reason of any such untrue statement or omission,
otherwise than on account of the Trust's indemnity agreement contained in
this Section 1(f). The Trust will be entitled to assume the defense of
any suit brought to enforce any such claim, demand or liability, but in
such case such defense shall be conducted by counsel chosen by the Trust
and approved by Forum, the defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by any of them;
but in case the Trust does not elect to assume the defense of any such
suit, or in case Forum reasonably does not approve of counsel chosen by
the Trust, the Trust will reimburse the Covered Person named as defendant
in such suit, for the fees and expenses of any
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counsel retained by Forum or such Covered Person. The Trust's
indemnification agreement contained in this Section (f) and the Trust's
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 Covered Persons, and shall survive the delivery of any Interests.
This agreement of indemnity will inure exclusively to Covered Persons and
their successors. The Trust agrees to notify Forum promptly of the
commencement of any litigation or proceedings against the Trust or any of
its officers or Trustees in connection with the issue and sale of any
Interests.
(g) Forum agrees to indemnify, defend and hold the Trust, its several
officers and trustees, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for
purposes of this Section 1(g) collectively, "Covered Persons") free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims,
demands, liabilities and any counsel fees incurred in connection therewith)
that Covered Persons may incur under the 1933 Act, the 1934 Act, or common
law or otherwise, but only to the extent that such liability or expense
incurred by a Covered Person resulting from such claims or demands shall
arise out of or be based on any untrue statement of a material fact
contained in information furnished in writing by Forum in its capacity as
Placement Agent to the Trust for use in the answers to any of the items of
any registration statement or in any statements in any Offering Material or
shall arise out of or be based on any omission to state a material fact in
connection with such information furnished in writing by Forum to the Trust
required to be stated in such answers or necessary to make such information
not misleading. Forum shall be notified of any action brought against a
Covered Person, such notification to be given by letter or telegram
addressed to Forum, Attention: Legal Department, promptly after the summons
or other first legal process shall have been duly and completely served
upon such Covered Person. Forum shall have the right of first control of
the defense of the action with counsel of its own choosing satisfactory to
the Trust if such action is based solely on such alleged misstatement or
omission on Forum's part, and in any other event each Covered Person shall
have the right to participate in the defense or preparation of the defense
of any such action. The failure to so notify Forum of any such action
shall not relieve Forum from any liability except to the extent that Forum
shall have been prejudiced by such failure, or from any liability that
Forum may have to Covered Persons by reason of any such untrue or alleged
untrue statement, or omission or alleged omission, otherwise than on
account of Forum's indemnity agreement contained in this Section 1(g).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Trust pursuant to the foregoing provisions, or otherwise, the Trust has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities
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<PAGE>
(other than the payment by the Trust of expenses incurred or paid by a
trustee, officer or controlling person of the Trust in the successful defense
of any action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
Trust will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
NORWEST BANK MINNESOTA, N.A.
The description of Norwest Bank Minnesota, N.A. in Parts A and B of this
Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of Norwest
Bank Minnesota, N.A., including their business connections which are of a
substantial nature. The address of Norwest Corporation, the parent of
Norwest Bank Minnesota, N.A., is Norwest Center, Sixth Street and Marquette
Avenue, Minneapolis, MN 55479. Unless otherwise indicated below, the
principal business address of any company with which the directors and
principal executive officers are connected is also Sixth Street and Marquette
Avenue, Minneapolis, MN 55479.
James R. Campbell, Director, President and Chief Executive Officer, has
held this position for the last two years. Mr. Campbell is also Executive
Vice President of Norwest Corporation, Director and Chairman of Norwest
Investment Advisors, Inc., and a Director of Flore Properties, Inc.,
Centennial Investment Corporation and Peregrine Capital Management, Inc.,
which is located at LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402-2056. Mr. Campbell is also a Director of a
number of non-profit organizations located in Minneapolis, Minnesota.
Within the last two years Mr. Campbell was a Director of Norwest Insurance,
Inc. and Norwest Equipment Finance, Inc.
Michael A. Graf, Controller and Cashier, also serves as Senior Vice
President and Controller of Norwest Corporation.
A. Rodney Boren, Jr., Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Boren is also a Director of
Norwest Trust Company, New York, New York and Norwest Foundation.
P. Jay Kiedrowski, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates since August 1987. Mr. Kiedrowski is also a Director and
Chairman of the Board of Norwest Investment Management, Inc. and President
of Norwest Investment Management, a part of Norwest.
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Scott A. Kisting, Director and Executive Vice President, is also a Director
of Norwest Insurance, Inc., IntraWest Insurance Company and Fidelity
National Life Insurance Company.
Edgar M. Morsman, Jr., Executive Vice President and Chief Lending Officer,
has served in various capacities as an employee of Norwest Bank Minnesota,
N.A. and/or its affiliates during the last two years. Mr. Morsman is also
a Director of Centennial Investment Corporation, First Interstate Equipment
Finance, Inc., Flore Properties, Inc., Norwest Credit, Inc., Norwest
Business Credit, Inc., R.D. Leasing, Inc. and Norwest Equipment Finance,
Inc., which is located at 733 Marquette Avenue, Suite 300, Minneapolis, MN
55479-2048.
Dharani P. Narayana, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Narayana is also a Director and
Chairman of Norwest Bank International, Director and Secretary of Norwest
Investments Limited, a Director of Norwest Bank International, Colorado,
a Director and Vice President of Norwest Bank International, Iowa, and a
Director of Norwest Bank International, Wisconsin. Mr. Narayana is also a
Director and Secretary of Minnetonka Overseas Investments Limited, and a
Director of Minnetonka Representaocoes Commerciais Ltda. and Nortico
Investments Ltd. all of which are located at Grand Cayman, Cayman Islands,
British West Indies.
William H. Queenan, Director, is also Executive Vice President of Norwest
Corporation.
John T. Thornton, Director, is also Executive Vice President and Chief
Financial Officer of Norwest Corporation. Mr. Thornton is also a Director
of Northern Prairie Indemnity, Limited, Grand Cayman, Cayman Islands,
British West Indies, a Director of Norwest Capital Markets, Inc.
Mr. Thornton is also a Director of Norwest Growth Fund, Inc., Norwest
Venture Capital Management, Inc. and Norwest Equity Capital, Inc., and
Director, President and Treasurer of Norwest Investors, Inc., and Director,
President and CEO of Norwest Limited, Inc., all located at 2800 Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, MN 54402. Mr.
Thornton is also Director and President of Superior Guaranty Insurance
Company and Norwest Holding Company, and a Director of Bettendorf Asset
Management, Inc. Mr. Thornton is also a Director of Eau Claire Asset
Management, Inc., Green Bay Asset Management, Inc., Iowa Asset Management,
Inc., LaCrosse Asset Management, Inc., South Bend Asset Management, Inc.,
South Dakota Asset Management, Inc., Waupun Asset Management, Inc., all
located at 100 West Commons Blvd., Suite 303, New Castle, DE 19720.
Richard C. Westergaard, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr.Westergaard is also a Director of
Norwest Business Credit, Inc., Norwest Credit, Inc., First Interstate
Equipment Finance, Inc. and R.D. Leasing, Inc. and a Director of Norwest
Equipment Finance, Inc. and Commonwealth Leasing Corporation, located at
Investors Building, 733 Marquette, Suite 300, Minneapolis, MN 55479-2048.
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Charles D. White, Senior Vice President, has served in various capacities
as an employee of Norwest Bank Minnesota, N.A. and/or its affiliates during
the last two years. Mr. White is also Treasurer and Chief Financial
Officer of Norwest Limited, Inc. Mr. White is also a Director of
Bettendorf Asset Management, Inc., Eau Claire Asset Management, Inc., Green
Bay Asset Management, Inc., IntraWest Asset Management, Inc., Iowa Asset
Management, Inc., LaCrosse Asset Management, Inc., South Bend Asset
Management, Inc., South Dakota Asset Management, Inc., and Waupun Asset
Management, Inc., located at 100 West Commons Boulevard, Suite 303, New
Castle, DE 19720.
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL, INC.
The description of Schroder Capital Management International, Inc.
("Schroder") in Parts A and B of the Registration Statement are incorporated
by reference herein.
The following are the directors and principal officers of Schroder, including
their business connections which are of a substantial nature. The address of
each company listed, unless otherwise noted, is 33 Gutter Lane, London EC2V
8AS, United Kingdom. Schroder Capital Management International Limited
("Schroder Ltd.") is a United Kingdom affiliate of Schroder which provides
investment management services international clients located principally in
the United States.
I. Peter Sedgwick, Chairman. Mr. Sedgwick is also Group Managing Director
- Investment Management of Schroders PLC, 120 Cheapside, London EC2V 6DS,
United Kingdom, the holding company of the various Schroder companies,
Chairman and Director of Schroder Ltd., Director and Chief Executive
Officer of Schroder Investment Management Limited, an investment management
company, Director of Schroder Investment Management (UK) Limited, Schroder
Personal Financial Management Limited, Schroder Investment Management
(Europe) Limited, Schroder Investment Trust Management Limited and Church,
Charity & Local Authorities Fund Managers Limited, 2 Fore Street, London
EC2Y 5AQ, United Kingdom, each an investment management company, and
Director, The Equitable Life Assurance Company, Walton Street, Aylesbury,
Bucks, United Kingdom, a life assurance company. Mr. Sedgwick is also a
director of various nominee companies and of various unit trust companies,
investment trusts and closed end investment companies for which Schroder
and/or its affiliates provide investment services.
David M. Salisbury, Chief Executive Officer. Mr. Salisbury is also the
Chief Executive Officer of Schroder Ltd. and Director of Dimensional Fund
Advisors Inc., 1299 Ocean Avenue, Santa Monica, California, an investment
advisory company and DFA Securities Inc., a broker dealer subsidiary of
Dimensional Fund Advisors Inc. located at the same address. Until October
1992 Mr. Salisbury was Chairman of Schroder Capital Distributors Inc.
("Schroder Distributors"), 787 Seventh Avenue, New York, New York, a broker
dealer. Mr. Salisbury is a director or former director of various
investment trust
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<PAGE>
companies and closed end investment companies for which Schroder and/or
its affiliates provide investment services.
John S. Ager, Director. Mr. Ager is also a Director of Schroder Ltd.
Richard R. Foulkes, Deputy Chairman and Director. Mr. Foulkes is also a
Director of Schroder Ltd. and Schroder Distributors.
Laura E. Luckyn-Malone, Managing Director. Ms. Luckyn-Malone is also a
Director of Schroder Wertheim Investment Services, Inc. and Schroder Ltd.
and President and Director of a closed-end investment company for which
Schroder and/or its affiliates provide investment services. Director and
President of Schroder Advisors.
David J. Mumford, Director. Mr. Mumford is also a Director of Schroder
Ltd. and Schroder Investment Management Limited and is Chairman of
Schroders Guernsey Limited, St. Julian's Avenue, St. Peter Port, Guernsey
C.J., a Guernsey based bank, and Director of J. Henry Schroder Wagg &
Company Limited, 120 Cheapside London EC2V 6DS, United Kingdom, a United
Kingdom based bank.
Gavin D.L. Ralston, Director. Mr. Ralston is also a Director of Schroder
Ltd.
Mark J. Smith, Director. Mr. Smith is also Director, Schroder Ltd. and
Schroder Investment Management (Guernsey) Limited, an investment management
company, and Director and Vice President of Schroder Distributors and
Director and Vice President of Schroder Advisors. Mr. Smith is also a
director of various investment trusts and open end investment companies
for which Schroder and/or its affiliates provide investment services.
Ton F. Tija, Director. Mr. Tija is also a Director of Schroder Ltd.
John A. Trioano, Managing Director. Mr. Trioano is also a Director of
Schroder Ltd. and Schroder Advisors, Chairman of Schroder Distributors and
President and Director open end investment companies for which Schroder
and/or its affiliates provide investment services.
Jane P. Lucas, Director. Ms. Lucas is also a Director of Schroder Wertheim
Investment Services, Inc. and Assistant Director of Schroder Investment
Management, Ltd.
Kathleen Adams, Vice President. Ms. Adams is also Vice President of
Schroder Distributors.
Mark J. Astley, Vice President.
Andrew R. Barker, First Vice President. Mr. Barker is also First Vice
President of Schroder Ltd.
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David A.W. Butler, First Vice President. Mr. Butler is also First Vice
President and Treasurer of Schroder Ltd. and an officer of open end
investment companies for which Schroder and/or its affiliates provide
investment services.
Richard J. Conyers, Vice President. Mr. Conyers is also Vice President of
Schroder Ltd. and Manger of Schroder Investment Management Limited.
Heather F. Crighton, Fund Manger. Ms. Crighton is also Fund Manager of
Schroder Ltd.
Louise Crouset, First Vice President. Mr. Crouset is also First Vice
President of Schroder Ltd. and, until October 1993, was Vice President of
Wellington Management, an investment adviser.
Robert C. Davy, Director. Mr. Davy is also a Director of Schroder Ltd. and
an officer of open end investment companies for which Schroder and/or its
affiliates provide investment services.
Margaret H. Douglas-Hamilton, Secretary. Ms. Douglas-Hamilton is also
First Vice President and General Counsel of Schroders Incorporated
("Schroders Inc."), 787 Seventh Avenue, New York, New York, the holding
company for various United States based Schroder affiliates.
Ms. Douglas-Hamilton is also Secretary to various Schroder affiliates,
including Schroder Distributors.
Lyn M. Fox, Vice President.
Stephen M. Futrell, Comptroller. Mr. Futrell is Treasurer of Schroders
Inc., President, Treasurer and Director of Schroder Distributors and an
officer of various open end investment companies for which Schroder
and/or its affiliates provide investment services.
David Gibson, First Vice President. Mr. Gibson is also First Vice
President of Schroder Ltd. and Assistant Director of Schroder Investment
Management Limited.
Simon C. Hallett, Fund Manager. Mr. Hallett is also Fund Manager of
Schroder Ltd.
Nicholas J. A. Melhuish, Fund Manager. Mr. Melhuish is also Fund Manager
of Schroder Ltd.
Laurette J. Oat, First Vice President. Within the last two years, Ms. Oat
was a Senior Vice President of NatWest Investment Bank, 65 East 55th
Street, New York, New York 10002.
John Stainsby, First Vice President. Mr. Stainsby is also First Vice
President of Schroder Ltd.
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Fariba Talebi, First Vice President. Mr. Talebi is also an officer of
various open end investment companies for which Schroder and/or its
affiliates provide investment services.
Jan Kees van Heusde, First Vice President. Mr. van Heusde is also First
Vice President of Schroder Ltd.
Patrick Vermeulen, Vice First President. Mr. Vermeulen is also Vice First
President of Schroder Ltd.
Susan M. Belson, Vice President.
Alan Gilston, Vice President.
Abdallah Nauphal, First Vice President.
Ellen B. Sullivan, First Vice President.
Ira L. Unschuld, Vice President.
Catherine A. Mazza, Vice President. Ms. Mazza is also Senior Vice President
of Schroder Advisors.
Robert Jackowitz, Vice President. Mr. Jackowitz is also Vice President and
Treasurer of Schroder Wertheim Investment Services, Inc., Treasurer of
Schroder Advisors and Assistant Treasurer of Schroders Incorporated.
FORUM ADVISORS, INC.
The description of Forum Advisors, Inc. ("Forum Advisors") in Parts A and B
of the Registration Statement are incorporated by reference herein.
The following are the directors and principal officers of Forum Advisors, Two
Portland Square, Portland, Maine 04101, including their business connections
which are of a substantial nature..
John Y. Keffer, Director, President and Secretary.
Chairman and President of the Registrant; President and Secretary of
Forum Financial Services, Inc. and of Forum Financial Corp. Mr.
Keffer is a director and/or officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor.
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David R. Keffer, Vice President and Treasurer.
Vice President, Assistant Secretary and Assistant Treasurer of the
Registrant; Vice President and Treasurer of Forum Financial Services,
Inc. and of Forum Financial Corp. Mr. Keffer is an officer of various
registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor.
LINDEN ASSET MANAGEMENT, INC.
The description of Linden Asset Management, Inc. ("Linden") in Parts A and B
of the Registration Statement are incorporated by reference herein.
The following are the directors and principal officers of Linden, 812 N.
Linden Street, Beverly Hills, California 90212, including their business
connections which are of a substantial nature..
Anthony R. Fischer, Jr., Director, President and Secretary.
President and Secretary of Linden Asset Management, Inc. since its
incorporation. Since September 1989 Mr. Fischer has managed his own
personal investments and performed independent research. Prior
thereto, he was Senior Vice President and Treasurer of United
California Savings Bank, Santa Ana, California.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Not applicable.
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Act and the Rules thereunder are
maintained at the offices of Forum Financial Services, Inc. and Forum
Financial Corp., Two Portland Square, Portland, Maine 04101. The records
required to be maintained under Rule 31a-1(b)(1) with respect to journals of
receipts and deliveries of securities and receipts and disbursements of cash
are maintained at the offices of the Registrant's custodians, 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 Registrant's investment advisers, as listed in Item 28 hereof.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
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ITEM 32. UNDERTAKINGS.
Registrant undertakes to contain in its Trust Instrument provisions for
assisting shareholder communications and for the removal of trustees
substantially similar to those provided for in Section 16(c) of the Act,
except to the extent such provisions are mandatory or prohibited under
applicable Delaware law.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Core Trust (Delaware) has duly caused
this amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Portland and the
State of Maine on the 4th day of October, 1996.
CORE TRUST (DELAWARE)
By: /s/ John Y. Keffer
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the
following persons in the capacities indicated on the 4th day of October, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ John Y. Keffer Chairman
------------------ and President
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Richard C. Butt Treasurer
------------------
Richard C. Butt
(c) A majority of the Trustees
/s/ John Y. Keffer Trustee
------------------
John Y. Keffer
------------------
Costas Azariadis* Trustee
------------------
J. Michael Parish* Trustee
------------------
James C. Cheng* Trustee
By: /s/ John Y. Keffer
------------------
John Y. Keffer
Attorney in Fact*
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Core Trust (Delaware) has duly caused
this amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Portland and the
State of Maine on the 4th day of October, 1996.
CORE TRUST (DELAWARE)
By:
------------------------
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the
following persons in the capacities indicated on the 4th day of October, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
--------------------------- Chairman
John Y. Keffer and President
(b) Principal Financial and Accounting Officer
--------------------------- Treasurer
Richard C. Butt
(c) A majority of the Trustees
--------------------------- Trustee
John Y. Keffer
------------------
Costas Azariadis* Trustee
------------------
J. Michael Parish* Trustee
------------------
James C. Cheng* Trustee
By: /s/ John Y. Keffer
------------------
John Y. Keffer
Attorney in Fact*
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