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As filed with the Securities and Exchange Commission on September 30, 1997
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. 10
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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, LLP
1800 Massachusetts Ave., N.W. 2nd Floor
Washington, D.C. 20036-1800
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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. 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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PART A
CORE TRUST (DELAWARE)
Treasury Cash Portfolio
Government Cash Portfolio
Cash Portfolio
Treasury Portfolio
No changes are effected by this Amendment No. 10 to the Part A regarding the
above listed Portfolios included in previous Amendments to Registrant's
Registration Statement.
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PART B
CORE TRUST (DELAWARE)
Treasury Cash Portfolio
Government Cash Portfolio
Cash Portfolio
Treasury Portfolio
No changes are effected by this Amendment No. 10 to the Part B regarding the
above listed Portfolios included in previous Amendments to Registrant's
Registration Statement.
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PART A
CORE TRUST (DELAWARE)
PRIME MONEY MARKET PORTFOLIO SMALL COMPANY STOCK PORTFOLIO
MONEY MARKET PORTFOLIO SMALL COMPANY GROWTH PORTFOLIO
POSITIVE RETURN BOND PORTFOLIO SMALL COMPANY VALUE PORTFOLIO
STABLE INCOME PORTFOLIO INTERNATIONAL PORTFOLIO
MANAGED FIXED INCOME PORTFOLIO STRATEGIC VALUE BOND PORTFOLIO
TOTAL RETURN BOND PORTFOLIO DISCIPLINED GROWTH PORTFOLIO
INDEX PORTFOLIO SMALL CAP VALUE PORTFOLIO
INCOME EQUITY PORTFOLIO SMALL CAP INDEX PORTFOLIO
LARGE COMPANY GROWTH PORTFOLIO
Part A of this Registration Statement on Form N-1A, as amended through the
date hereof, relating to the above listed portfolios 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.
Responses to certain items reguired to be included in Part A of this
Registration Statement are incorporated herein by reference from
Post-Effective Amendment No. 46 of Norwest Advantage Funds registration
statement (1940 Act File No. 811-4881), as filed with the Securities and
Exchange Commission on September 30, 1997 (Registration Statement of certain
feeder funds).
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PRIVATE PLACEMENT MEMORANDUM
OCTOBER 1, 1997
PART A
This Private Placement Memorandum relates to beneficial interests in Prime Money
Market Portfolio, Money Market Portfolio, Positive Return Bond Portfolio, Stable
Income Portfolio, Managed Fixed Income Portfolio, Total Return Bond Portfolio,
Index Portfolio, Income Equity Portfolio, Large Company Growth Portfolio, Small
Company Stock Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, International Portfolio, Strategic Value Bond Portfolio,
Disciplined Growth Portfolio, Small Cap Value Portfolio and Small Cap Index
Portfolio (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 ("1933
Act").
The Trust has filed with the Securities and Exchange Commission ("SEC") a Part B
to this Private Placement Memorandum (the "Statement of Additional Information"
or "SAI") with respect 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. ("Forum"), 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.
TABLE OF CONTENTS
Page
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General Description of Registrant . . . . . . . . . . .
Management of the Portfolios. . . . . . . . . . . . . .
Capital Stock and Other Securities. . . . . . . . . . .
Purchase of Securities. . . . . . . . . . . . . . . . .
Redemption or Repurchase. . . . . . . . . . . . . . . .
Pending Legal Proceedings . . . . . . . . . . . . . . .
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 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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NOTE
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 units of beneficial interest
without any sales charge and units may be redeemed without charge.
Beneficial interests in the Trust are divided into 21 separate diversified
subtrusts or "series," each having a distinct investment objective and distinct
investment policies. The Portfolios are 17 of those series. The Trust is
empowered to establish, without investor approval, additional series which may
have different investment objectives and policies.
Index Portfolio and International Portfolio commenced operations on November 10,
1994. Positive Return Bond Portfolio, Stable Income Portfolio, Managed Fixed
Income Portfolio, Total Return Bond Portfolio, Income Equity Portfolio, Large
Company Growth Portfolio, Small Company Stock Portfolio, Small Company Growth
Portfolio and Small Company Value Portfolio commenced operations on June 1,
1997. Prime Money Market Portfolio and Money Market Portfolio commenced
operations on August 22, 1997. Strategic Value Bond Portfolio,
Disciplined Growth Portfolio, Small Cap Value Portfolio and Small Cap Index
Portfolio are expected to commence operations on October 1, 1997. 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.
Effective June 1, 1997 Small Company Portfolio, a former series of the Trust,
divided to form three of the Portfolios -- Small Company Stock Portfolio, Small
Company Growth Portfolio and Small Company Value Portfolio. Small Company
Portfolio was managed by three portfolio managers, each of whom now serves as
the portfolio manager for one of the three new Portfolios. The division was
accomplished by Small Company Portfolio transferring the assets managed by each
portfolio manager to the corresponding new Portfolio. Also effective June 1,
1997, International Portfolio II changed its name to International Portfolio and
acquired the assets of a former series of the Trust which itself was named
International Portfolio.
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 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, Inc. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), serves as the investment adviser of each
Portfolio except International Portfolio, for which Schroder Capital Management
International Inc. ("Schroder") serves as the investment adviser.
United Capital Management ("UCM"), a part of Norwest Bank Colorado, N.A., is
the investment subadviser of Total Return Bond Portfolio. Galliard Capital
Management, Inc. ("Galliard") is the investment subadviser of Stable Income
Portfolio, Managed Fixed Income Portfolio and Strategic Value Bond Portfolio.
Crestone Capital Management, Inc. ("Crestone") is the investment subadviser
of Small Company Stock Portfolio. Peregrine Capital Management, Inc.
("Peregrine") is the investment subadviser of Positive Return Bond Portfolio,
Large Company Growth Portfolio, Small Company Growth Portfolio and Small
Company Value Portfolio. Smith Asset Management Group, LP ("Smith Group"),
is the investment subadviser of Disciplined Growth Portfolio and Small Cap
Value Portfolio. Galliard, Crestone and Peregrine are each investment
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advisory subsidiaries of Norwest Bank and, with UCM and Smith are referred to
as the "Subadvisers." Norwest, Schroder, UCM, Galliard, Crestone, Peregrine
and Smith (or Norwest and a Subadviser) are collectively referred to as the
"Advisers" or as applicable, individually, as the "Adviser."
INVESTMENT OBJECTIVES
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.
PRIME MONEY MARKET PORTFOLIO'S investment objective is to seek to provide high
current income to the extent consistent with the preservation of capital and the
maintenance of liquidity.
MONEY MARKET PORTFOLIO'S investment objective is to seek to provide high current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity.
POSITIVE RETURN BOND PORTFOLIO'S investment objective is to seek positive total
return each calendar year regardless of the bond market.
STABLE INCOME PORTFOLIO'S investment objective is to maintain safety of
principal while providing low-volatility total return.
MANAGED FIXED INCOME PORTFOLIO'S investment objective is to seek consistent
fixed income returns by investing primarily in investment grade
intermediate-term obligations.
TOTAL RETURN BOND PORTFOLIO'S investment objective is to seek total return.
INDEX PORTFOLIO'S investment objective is to duplicate the return of the
Standard & Poor's 500 Composite Stock Price Index (the "Index").
INCOME EQUITY PORTFOLIO'S investment objective is to provide long-term capital
appreciation consistent with above-average dividend income.
LARGE COMPANY GROWTH PORTFOLIO'S investment objective is to provide long-term
capital appreciation by investing primarily in large, high-quality domestic
companies that the investment adviser believes have superior growth potential
SMALL COMPANY STOCK PORTFOLIO'S investment objective is long-term capital
appreciation.
SMALL COMPANY GROWTH PORTFOLIO'S investment objective is to provide long-term
capital appreciation by investing in smaller sized domestic companies.
SMALL COMPANY VALUE PORTFOLIO'S investment objective is to seek to provide
long-term capital appreciation.
INTERNATIONAL PORTFOLIO'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").
STRATEGIC VALUE BOND PORTFOLIO'S investment objective is to seek total return by
investing primarily in income producing securities.
DISCIPLINED GROWTH PORTFOLIO'S investment objective is to seek capital
appreciation by investing primarily in common stocks of larger companies.
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SMALL CAP VALUE PORTFOLIO'S investment objective is to seek capital appreciation
by investing primarily in common stocks of smaller companies.
SMALL CAP INDEX PORTFOLIO'S investment objective is to replicate the return of
the Standard & Poor's Small Cap 600 Composite Stock Price Index.
INVESTMENT POLICIES
The 17 Portfolios described in this Private Placement Memorandum each have
distinct investment objectives and policies. There can be no assurance that
any Portfolio will achieve its investment objective or that Prime Money
Market Portfolio ("Prime Portfolio") or Money Market Portfolio
(collectively, the "Money Market Portfolios") will maintain a stable net
asset value. Each Portfolio's (other than Money Market Portfolios) net
asset value and total return will fluctuate based upon changes in the value
of its portfolio securities. Upon redemption, an investment in a Portfolio
may be worth more or less than its original value. Certain of the Portfolios
are designed for investment of that portion of an investor's funds which can
appropriately bear the special risks associated with certain types of
investments (i.e., investment in small capitalization companies).
PRIME MONEY MARKET PORTFOLIO AND MONEY MARKET PORTFOLIO
The Money Market Portfolios each have the same investment policies, except
that the Prime Portfolio seeks to maintain a rating from at least one
nationally recognized statistical rating organization (an "NRSRO").
Accordingly, Prime Portfolio is limited in the type and amount of
permissible securities (as described below) which it may purchase. The Money
Market Portfolios pursue their objectives by investing in a broad spectrum of
high-quality money market instruments of U.S. and foreign issuers.
The Money Market Portfolios may invest in obligations of financial institutions.
Each Money Market Portfolio normally will invest more than 25% of its total
assets in the obligations of domestic and foreign financial institutions, their
holding companies and their subsidiaries. This concentration may result in
increased exposure to risks pertaining to the banking industry. These risks
include a sustained increase in interest rates, which can adversely affect the
availability and cost of a bank's lending activities; exposure to credit losses
during times of economic decline; concentration of loan portfolios in certain
industries; regulatory developments; and competition among financial
institutions. Each Portfolio may not invest more than 25% of its total assets
in any other single industry.
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Although the Money Market Portfolios invest in dollar-denominated
obligations, the foreign securities in which the Portfolios invest also
involve certain risks. The Portfolios may invest in corporate debt
securities, including commercial paper and privately issued instruments (see
"Appendix A--Corporate Debt Securities and Commercial Paper"), and may invest
in participation interests. A Portfolio will not invest more than 10% of its
total assets in participation interests in which the Portfolio does not have
demand rights. The Portfolios may invest without limit in the debt
obligations issued by or on behalf of the states, territories and possessions
of the United States, the District of Columbia and their subdivisions,
authorities, instrumentalities and corporations, the interest on which is
exempt from federal income tax ("municipal securities"). The municipal
securities in which the Portfolios may invest include short-term municipal
bonds and municipal notes and leases. These municipal securities may have
fixed, variable or floating rates of interest and may be zero-coupon
securities.
U.S. GOVERNMENT SECURITIES. The Money Market Portfolios may invest without
limit in obligations issued or guaranteed as to principal and interest by the
U.S. Government or by any of its agencies and instrumentalities ("U.S.
Government Securities"). The Portfolios may also invest in repurchase
agreements and certain zero-coupon securities secured by U.S. Government
Securities. The U.S. Government Securities in which the Portfolios may invest
include: (i) U.S. Treasury bills, bonds and notes ("U.S. Treasury Securities");
(ii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are backed by the full faith and credit of the U.S.
Government; and (iii) securities supported primarily or solely by the
creditworthiness of the issuer.
The Money Market Portfolios may invest in separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury
under the Treasury's Separate Trading of Registered Interest and Principal of
Securities program. In addition, the Portfolios may invest in other types of
related zero-coupon securities.
FIXED INCOME PORTFOLIOS
The Fixed Income Portfolios invest primarily in fixed
income investments pursuant to the investment policies described below. Each
Fixed Income Portfolio may invest in foreign issuers. These investments may
involve certain risks.
POSITIVE RETURN BOND PORTFOLIO
The Portfolio invests in a portfolio of U.S. Government Securities and
corporate fixed income investments. The Portfolio's assets are divided into
two components, short bonds with maturities of 2 years or less and long bonds
with maturities of 25 years or more. Shifts between short bonds and long
bonds are made based on movement in the prices of bonds rather than on the
Advisers' forecast of interest rates. During periods of falling prices
(generally, increasing interest rate environments) long bonds are sold to
protect capital and limit losses. Conversely, when bond prices rise, long
bonds are purchased. Accordingly, the average maturity of the Portfolio will
vary. It is anticipated that under normal circumstances the Portfolio will
have an average dollar-weighted maturity of between 1 and 30 years.
Under normal circumstances, at least 50% of the net assets of the Positive
Return Bond Portfolio will be invested in U.S. Government Securities, including
U.S. Treasury Securities. All securities will be, at the time of purchase: (i)
rated in one of the two highest long-term rating categories assigned by an NRSRO
such as Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings
Group ("Standard & Poor's") or Fitch Investors Services, L.P. ("Fitch"); or (ii)
unrated and determined by the Advisers to be of comparable quality. No more
than
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25% of those securities may be in the second highest rating category.
Investments may include zero-coupon securities, securities with variable or
floating rates of interest and asset-backed securities, but only 25% of the
net assets allocated to this investment style may be invested in each of
these types of securities. The Portfolio may not invest in convertible
securities, mortgage pass-through securities or private placement securities.
Within these constraints, the Adviser purchases securities that they believe
have above-average yields.
STABLE INCOME PORTFOLIO
Stable Income Portfolio invests in a diversified portfolio of fixed and
variable rate U.S. dollar denominated fixed income securities of a broad
spectrum of U.S. and foreign issuers, including U.S. Government Securities
and the debt securities of financial institutions, corporations and others.
The securities in which the Portfolio invests include mortgage-backed and
other asset-backed securities, although the Portfolio limits these
investments to not more than 60% and 25%, respectively, of its total assets.
In addition, the Portfolio limits its holdings of mortgage-backed securities
that are not U.S. Government Securities to 25% of its total assets. The
Portfolio may invest any amount of its assets in U.S. Government Securities,
but under normal circumstances less than 50% of the Portfolio's total assets
are so invested. The Portfolio may invest in securities that are restricted
as to disposition under the federal securities laws (sometimes referred to as
"private placements" or "restricted securities"). In addition, the Portfolio
may not invest more than 25% of its total assets in the securities issued or
guaranteed by any single agency or instrumentality of the U.S. Government,
except U.S. Treasury Securities, and may not invest more than 10% of its
total assets in the securities of any other issuer.
Stable Income Portfolio only purchases those securities that are rated, at
the time of purchase, within the three highest long-term or two highest
short-term rating categories assigned by an NRSRO, such as Moody's, Standard
& Poor's or Fitch, or which are unrated and determined by the Advisers to be
of comparable quality.
Stable Income Portfolio invests in debt obligations with maturities (or
average life in the case of mortgage-backed and similar securities) ranging
from short-term (including overnight) to 12 years and seeks to maintain an
average dollar-weighted portfolio maturity of between 2 and 5 years.
In order to manage its exposure to different types of investments, the Stable
Income Portfolio may enter into interest rate and mortgage swap agreements
and may purchase and sell interest rate caps, floors and collars. The
Portfolio may also engage in certain strategies involving options (both
exchange-traded and over-the-counter) to attempt to enhance the Portfolio's
income and may attempt to reduce the overall risk of the Portfolio's
investments or limit the uncertainty in the level of future foreign exchange
rates ("hedge") by using options and futures contracts and foreign currency
forward contracts. The Advisers' ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations.
The Portfolio may write covered call and put options, buy put and call
options, buy and sell interest rate and foreign currency futures contracts
and buy options and write covered options on those futures contracts. An
option is covered if, so long as the Portfolio is obligated under the option,
it owns an offsetting position in the underlying security or futures contract
or maintains a segregated account of liquid debt instruments with a value at
all times sufficient to cover the Portfolio's obligations under the option.
MANAGED FIXED INCOME PORTFOLIO
Managed Fixed Income Portfolio pursues its objective by investing in a
diversified portfolio of fixed and variable rate U.S. dollar denominated,
fixed income securities of a broad spectrum of U.S. and foreign issuers,
including U.S. Government Securities and the debt securities of financial
institutions, corporations and others. The Adviser emphasizes the use of
intermediate maturity securities to lessen duration risk (as described
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below), while employing low risk yield enhancement techniques to enhance return
over a complete economic or interest rate cycle. Intermediate-term obligations
comprise securities with maturities of between 2 and 20 years.
Managed Fixed Income Portfolio may invest in mortgage-backed securities and
other asset-backed securities, although these investments are limited to not
more than 50% and 25%, respectively, of the Portfolio's total assets. As part of
its asset-backed securities investments, the Portfolio may enter into "dollar
roll" transactions and may purchase stripped mortgage-backed securities. The
Advisers may invest any amount of the Portfolio's assets in U.S. Government
Securities, or in the securities of financial institutions, corporations and
others. The Portfolio may invest in private placements and restricted
securities. In addition, the Portfolio may not invest more than 30% of its
total assets in the securities issued or guaranteed by any single agency or
instrumentality of the U.S. Government, except U.S. Treasury Securities.
Managed Fixed Income Portfolio may invest up to 10% of its total assets
invested in this style in participations purchased from financial institutions
in loans or securities in which the Portfolio may invest directly. The Portfolio
may also invest up to 10% of its total assets in each of: (i) obligations issued
or guaranteed by the governments of countries which the Advisers believe do not
present undue risk or by those countries' political subdivisions, agencies or
instrumentalities; (ii) obligations of supranational organizations; and (iii)
municipal securities.
Managed Fixed Income Portfolio only purchases securities that are rated,
at the time of purchase, within the four highest long-term or two highest
short-term rating categories assigned by an NRSRO, such as Moody's, Standard
& Poor's or Fitch, or which are unrated and determined by the Advisers to be
of comparable quality.
Managed Fixed Income Portfolio invests in debt obligations with maturities
(or average life in the case of mortgage-backed and similar securities) ranging
from short-term (including overnight) to 30 years. Under normal circumstances,
the Portfolio will have an average dollar-weighted portfolio maturity of between
3 and 12 years and a duration of between 2 and 6 years. Duration is a measure of
a debt security's average life that reflects the present value of the security's
cash flow and, accordingly, is a measure of price sensitivity to interest rate
changes ("duration risk"). Because earlier payments on a debt security have a
higher present value, duration of a security, except a zero-coupon security, is
less than the security's stated maturity.
In order to manage the Managed Fixed Income Portfolio's exposure to different
types of investments, the Advisers may enter into interest rate and mortgage
swap agreements and may purchase and sell interest rate caps, floors and
collars. The Portfolio may also engage in certain strategies involving options
(both exchange-traded and over-the-counter) to attempt to enhance the
Portfolio's return and may attempt to hedge the overall risk of the Portfolio's
investments by using options and futures contracts. The Advisers' ability to use
these strategies may be limited by market considerations, regulatory limits and
tax considerations. The Portfolio may write covered call and put options, buy
put and call options, buy and sell interest rate futures contracts and buy
options and write covered options on those futures contracts.
TOTAL RETURN BOND PORTFOLIO
Total Return Bond Portfolio pursues its objective by investing primarily in
U.S. Government Securities, including mortgage-backed securities and
investment grade corporate fixed income securities. The Adviser's investment
decisions are based on their analysis of major changes in the direction of
interest rates rather than an attempt by the Adviser to predict short-term
interest rate fluctuations. The Adviser also apply their contrarian
perspective by looking for undervalued segments of the fixed income market
which the Adviser believe offer opportunities for increased returns.
In making their investment decisions for Total Return Bond Portfolio, the
Adviser focuses on the maturity structure and quality structure of the
Portfolio's investment portfolio. When the Adviser's outlook is for rising
interest rates and falling bond values, the majority of the Portfolio's
investment portfolio will be invested in securities with short-term maturities
in an effort to ride interest rates up while minimizing the negative effect of
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falling bond prices. When the Adviser anticipates interest rates to fall and
bond prices to increase, the Portfolio generally will be invested in
securities with long-term maturities in an attempt to lock in high interest
rates and capitalize on bond price appreciation. Accordingly, the average
maturity of the Portfolio's investment portfolio will vary from 1 to 30 years.
Total Return Bond Portfolio may invest an unlimited amount of its assets in
either corporate securities, including corporate bonds, debentures and notes, or
U.S. Government Securities. The Portfolio will be invested to a greater degree
in corporate securities, however, as the spread between corporate issues and
U.S. Government Securities offers potential for incremental returns. The
Portfolio limits its investments in variable or floating rate securities to 5%
of its net assets. The Portfolio does not currently invest in mortgage-backed
securities or enter "dollar roll" transactions, but reserves the right to do so
in the future.
Total Return Bond Portfolio may also invest in preferred stocks and
securities convertible into common stock, but may not own the common stock into
which a convertible security converts. The Portfolio will only purchase
securities (including convertible securities) that are rated, at the time of
purchase, within the four highest rating categories assigned by an NRSRO, such
as Moody's, Standard & Poor's or Fitch, or which are unrated and determined by
the Advisers to be of comparable quality.
STRATEGIC VALUE BOND PORTFOLIO
Strategic Value Bond Portfolio pursues its objective by investing primarily
in a broad range of fixed income instruments including corporate bonds,
asset-backed securities, mortgage related securities, U.S. Government
Securities, preferred stock, convertible bonds and foreign bonds in order to
create a strategically diversified portfolio of high quality fixed income
investments.
In making investment decisions, the investment adviser focuses on relative value
as opposed to the prediction of the direction of interest rates. In general,
particular emphasis is placed on higher current income instruments such as
corporate bonds and mortgage/asset backed securities in order to enhance
returns. The investment adviser believes that this exposure enhances
performance in varying economic and interest rate cycles while avoiding
excessive risk concentrations. The investment adviser's investment process
involves rigorous evaluation of each security. This includes identifying and
valuing cash flows, embedded options, credit quality, structure, liquidity,
marketability, current versus historical trading relationships, supply and
demand for the instrument and expected returns in varying economic/interest rate
environments. This process seeks to identify securities which represent the
best relative economic value. The results of the investment process are then
evaluated against the Portfolio's objective and the Portfolio purchases those
securities which will enhance its positioning. The Portfolio will be
repositioned based on market changes and shifts in relative value of the
instruments held by the Portfolio.
The Portfolio's investments are subject to the various risks of investing in
fixed-income securities. To limit the Portfolio's "credit risk," at least 65% of
the Portfolio's assets will be invested in fixed income securities rated in one
of the three highest rating categories by at least one Nationally Recognized
Statistical Rating Organization ("NRSRO"), such as Moody's Investors Service,
Standard & Poor's, Fitch Investors Service, L.P. or Duff & Phelps Credit Rating
Co., or which are unrated and determined by the investment adviser to be of
comparable quality. In addition, the Portfolio will limit its investment in
securities with a less than an investment grade rating to 20% of the Portfolio's
assets. While the average quality of the Portfolio will vary over an economic
cycle, the average rating of the Portfolio's investments will be "A" or better.
Investment grade instruments include those that are rated in one of four highest
long-term rating categories by an NRSRO or are unrated and determined by the
investment adviser to be of comparable quality.
The average maturity of the Portfolio will vary between five and fifteen years.
In the case of mortgage-related, asset backed and similar securities, the
Portfolio uses the security's average life in calculating the Portfolio's
average maturity. The Portfolio's effective duration normally will vary between
three and eight years.
<PAGE>
The Portfolio may enter into derivative transactions to receive favorable
financing or diversify portfolio risk.
RISKS OF NON-INVESTMENT GRADE SECURITIES. The Portfolio may invest up to 20% of
its assets in non-investment grade securities (commonly referred to as "junk
bonds"). These securities have speculative or predominantly speculative
characteristics and provide poor protection for payment of principal and
interest, but may have greater potential for capital appreciation than do higher
quality securities. Non-investment grade securities involve greater risk of
default or price changes due to changes in the issuers' creditworthiness than do
investment grade securities. The market for these securities may be thinner and
less active than that for higher quality securities, which may affect the price
at which the lower rated securities can be sold. In addition, the market prices
of lower rated securities may fluctuate more than the market prices of higher
quality securities and may decline significantly in periods of general economic
difficulty.
EQUITY PORTFOLIOS To achieve their investment objectives, the Equity
Portfolios invest primarily in common stocks and other equity securities. The
domestic securities in which an Equity Portfolio invests are generally listed
on a securities exchange or included in the National Association of
Securities Dealers Automated Quotation ("NASDAQ") National Market System but
may be traded in the over-the-counter securities market. Each Equity
Portfolio, other than Index Portfolio and Small Cap Index Portfolio, may
invest in foreign issuers. These investments may involve certain risks. Under
normal circumstances, each of the Equity Portfolios will invest substantially
all of its assets, but not less than 65% of its total assets, in equity
securities.
INDEX PORTFOLIO
<PAGE>
Index Portfolio is designed to duplicate the return of the Index with minimum
tracking error, while also minimizing transaction costs. Under normal
circumstances, the Portfolio will hold stocks representing 100% 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
investments in the Portfolio, and to raise cash to fund redemptions. The
Portfolio may hold cash or cash equivalents for the purpose of facilitating
payment of the Portfolio's expenses or redemptions. For these and other
reasons, the Portfolio's performance can be expected to approximate but not
be equal to that of the Index.
Index Portfolio may utilize index futures contracts to a limited extent.
Index futures contracts are bilateral agreements pursuant to which 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 portfolio management
purposes; to facilitate trading; or to reduce transaction costs. The Portfolio
does not invest in futures contracts for speculative reasons or to leverage the
Portfolio.
The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion in the Index 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 weighting, 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.
Index 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
investors in the Portfolio or any member of the public regarding the
advisability 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 Index Portfolio, by the investors in the Portfolio, or by any other person
or any entity from the use of the Index or any data included therein. S&P makes
no express or implied warranties and hereby 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.
INDEX FUTURES CONTRACTS. Index Portfolio may invest in index futures contracts
to a limited extent. Index futures contracts are bilateral agreements pursuant
to which 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. No physical delivery of the securities comprising the index
is made. Generally, these futures contracts are closed out prior to the
expiration date of the contract.
The use of index futures contracts entails certain investment risks and
transaction costs, including: (1) imperfect correlations between movements in
the prices of futures contracts and movements in the price of the securities
hedged which may cause a given hedge not to achieve its objective; (2) the fact
that the skills and techniques needed to trade futures are different from those
needed to select the other securities in which the Portfolio invests; (3) lack
of assurance that a liquid secondary market will exist for any particular
instrument at any particular time, which, among other things, may hinder the
Portfolio's ability to limit exposures by closing its positions; and (4) the
possible need to defer closing out of certain futures contracts to avoid adverse
tax consequences.
INCOME EQUITY PORTFOLIO
The investment objective of the Income Equity Portfolio is to seek to provide
long-term capital appreciation consistent with above-average dividend income.
Income Equity Portfolio invests primarily in the common stock of large,
high-quality domestic companies that have above-average return potential
based on current market valuations. Primary emphasis is placed on investing
in securities of companies with above-average dividend income. In selecting
securities for the Portfolio, Norwest uses various valuation measures,
including above-average dividend yields and below industry average price to
earnings, price to book and price to sales ratios. The Portfolio considers
large companies to be those whose market capitalization is at least $600
million at the time of purchase. Market capitalization refers to the total
market value of a company's outstanding shares of common stock. The
Portfolio also may invest in preferred stock and securities convertible into
common stock and may purchase American Depository Receipts, European
Depository Receipts and other similar securities of foreign issuers. Under
normal circumstances, the Portfolio will not invest more than 10% of its
total assets in the securities of a single issuer.
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
Large Company Growth Portfolio considers large companies to be those
companies whose market capitalization is greater than the median of the
Russell 1,000 Index. In selecting securities for the Portfolio, the Advisers
seek issuers whose stock is attractively valued and whose fundamental
characteristics both are significantly better than the market average and
which support internal earnings growth capability. The Portfolio's assets
may be invested in the securities of companies whose growth potential is, in
the Advisers' opinion, generally unrecognized or misperceived by the market.
In addition, up to 20% of the total assets of the Portfolio may be invested
in American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers, and the Advisers may attempt to reduce
the overall risk of foreign investments by using foreign currency forward
contracts. Although such contracts may reduce the risk of loss to the
Portfolio from adverse movements in currency values, the contracts also limit
possible gains from favorable movements. Under normal circumstances, no more
than 10% of the assets of the Portfolio will be invested 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.
DISCIPLINED GROWTH PORTFOLIO
Disciplined Growth Portfolio pursues its objective by investing primarily in
the common stock of companies that, in the view of the investment adviser,
possess above average potential for growth. The average market
capitalization of the companies in which the Portfolio invests will be
greater than $5 billion.
The Portfolio seeks to identify growth companies that will report a level of
corporate earnings that exceeds the level expected by investors. In seeking
these companies, the investment adviser uses both quantitative and fundamental
analysis. Among the factors that the investment adviser considers are changes
of earnings estimates by investment analysts, the recent trend of company
earnings reports, and an analysis of the fundamental business outlook for the
company. The investment adviser uses a variety of valuation measures to
determine whether the share price already reflects any positive fundamentals
identified by the investment adviser. The investment adviser attempts to
constrain the variability of the investment returns by employing risk control
screens for price volatility, financial quality and valuation and, to the extent
possible, gives equal weighting to portfolio securities.
SMALL COMPANY STOCK PORTFOLIO
The Small Company Stock Portfolio invests primarily in the common stock of
small- and medium-size domestic companies that have a market capitalization
well below that of the average company in the Index. Small companies are
those companies whose market capitalization is less than the largest stock in
the Russell 2,000 Index. Medium companies are those companies whose market
capitalization is in the range of $500 million to $8 billion.
In selecting securities for Small Company Stock Portfolio, the Advisers seek
securities with significant price appreciation potential, and attempt to
identify companies that show above-average growth, as compared to long-term
overall market growth. The companies in which the Portfolio invests may be in a
relatively early stage of development or may produce goods and services that
have favorable prospects for growth due to increasing demand
<PAGE>
or developing markets. Frequently, such companies have a small management
group and single product or product line expertise, which, in the view of the
Advisers, may result in an enhanced entrepreneurial spirit and greater focus,
thereby allowing such companies to be successful. The Advisers believe 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.
Securities owned by Small Company Stock Portfolio that are traded in the
over-the-counter market or on a regional securities exchange may not be traded
every day or in the volume typical of securities trading on a national
securities exchange. As a result, disposition by the Portfolio of a portfolio
security, to meet redemption requests by investors 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.
Small Company Stock Portfolio also may invest up to 20% of its assets in
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers.
SMALL COMPANY GROWTH PORTFOLIO
INVESTMENT POLICIES Small Company Growth Portfolio invests primarily in the
common stock of smaller domestic companies. Small companies are those
companies whose market capitalization is less than the largest stock in the
Russell 2,000 Index. The Portfolio considers smaller companies to be those
whose market capitalization is less than $1 billion at the time of the
Portfolio's purchase.
In selecting securities for Small Company Growth Portfolio, the Advisers
seek 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 management or measures taken to close
the gap between the company's share price and takeover/asset value. The
Portfolio may invest up to 10% of its total assets in foreign securities and
in American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers. The Portfolio may 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 the Portfolio from adverse movements
in currency values, the contracts also limit possible gains from favorable
movements. The Portfolio may 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 and securities convertible into common stock, but reserves
the right to do so in the future.
SMALL COMPANY VALUE PORTFOLIO
The Adviser focuses on 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. The Adviser seeks 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
<PAGE>
investors and its stock price rises. Investing in the securities of small
companies entails certain risks.
SMALL CAP VALUE PORTFOLIO
Small Cap Value Portfolio seeks higher growth rates and greater long-term
returns by investing primarily in the common stock of smaller companies that,
in the view of the investment adviser, are undervalued. Under normal
circumstances, the Portfolio will invest substantially all of its assets, but
not less than 65% of its net assets, in securities of companies with a market
capitalization which reflects the market capitalization of companies included
in the Russell 2000 Index.
The Portfolio invests in those smaller companies that the investment adviser
believes to be undervalued and which will report a level of corporate earnings
exceeding the level expected by investors. The determination of value is based
upon both the price to earnings ratio of the company and a comparison of the
public market value of the company to a proprietary model that values the
company in the private market. In seeking companies that will report a level of
earnings exceeding that expected by investors, the investment adviser uses both
quantitative and fundamental analysis. Among the factors that the investment
adviser considers are changes of earnings estimates by investment analysts, the
recent trend of company earnings reports, and the fundamental business outlook
for the company.
SMALL CAP INDEX PORTFOLIO Small Cap Index Portfolio is designed to replicate
the return of the Standard & Poor's SmallCap 600 Composite Stock Price Index
(The "Small Cap Index") with minimum tracking error, while also minimizing
transaction costs. Under normal circumstances, the Portfolio will hold stocks
representing 100% of the capitalization-weighted market values of the Small
Cap Index. Portfolio transactions for the Portfolio generally are executed
only to duplicate the composition of the Small Cap Index, to invest cash
received from portfolio security dividends or investments in the Portfolio,
and to raise cash to fund redemptions. The Portfolio may hold cash or cash
equivalents for the purpose of facilitating payment of the Portfolio's
expenses or redemptions. Cash positions may be invested in short-term money
market instruments, hedged with S&P 500 Index futures. For these and other
reasons, the Portfolio's performance can be expected to approximate but not
be equal to that of the Index.
Small Cap Index Portfolio may utilize index futures contracts to a limited
extent. Index futures contracts are bilateral agreements pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a
<PAGE>
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 portfolio management purposes; to facilitate trading; or to
reduce transaction costs. The Portfolio does not invest in futures contracts
for speculative reasons or to leverage the Portfolio. For a description of
futures contracts and their risks, see "Investment Policies - Index Fund."
The Small Cap Index tracks the total return performance of 600 common stocks
which are chosen for inclusion in the Small Cap Index 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 600 securities, most of which trade on the New York Stock
Exchange, represent approximately 4% of the total market value of all U.S.
common stocks. The Small Cap Index is comprised of industrials, utilities,
financials and transportation and is a market-value weighted index, with each
stocks weight in the Index proportionate to its market value.
Small Cap Index 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 investors in the Portfolio or any member of the public regarding the
advisability of investing in index funds or the ability of the Small Cap
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 Small Cap Index Portfolio, by the investors in the Portfolio, or by any
other person or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and hereby 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.
SMALL COMPANY INVESTMENT CONSIDERATIONS AND RISK FACTORS. The investments of
Small Cap Index Portfolio, Small Company Stock Portfolio, Small Company
Growth Portfolio and Small Company Value Portfolio are subject to the risks
of investing in smaller capitalization companies. Investment in smaller
capitalization companies carries greater risk than investment in larger
capitalization companies. Smaller capitalization companies generally
experience higher growth rates and higher failure rates than do larger
capitalization companies. The trading volume of smaller capitalization
companies' securities is normally lower than that of larger capitalization
companies. Heavy trading generally has a disproportionate effect on market
price (tending to make prices rise more in response to buying demand and fall
more in response to selling pressure). Accordingly, the net asset value of
the Fund can be expected to fluctuate more that that of other funds that
invest in larger capitalization companies.
Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Smaller companies
often have products and management personnel that have not been tested by time
or the marketplace and their financial resources may not be as substantial as
those of more established companies.. Their securities (which Small Cap Index
Portfolio, Small Company Stock Portfolio, Small Company Growth Portfolio and
Small Company Value may purchase when they are offered to the public for the
first time) may have a limited trading market which can adversely affect their
sale by the Portfolios and can result in such securities being priced lower than
otherwise might be the case. If other institutional investors trade in the
securities of a smaller company in which the Portfolio holds an interest, the
Portfolio may be forced to dispose of its holdings at prices lower than might
otherwise be obtained.
INTERNATIONAL PORTFOLIO
International Portfolio is designed for investors who desire to achieve
international diversification of their investments by participating in foreign
securities markets. Because foreign investments generally involve risks in
addition to those risks associated with investments in the United States, the
Portfolio should be considered only as a vehicle for international
diversification and not as a complete investment program.
<PAGE>
Under normal circumstances, International Portfolio will invest substantially
all of its assets, but not less than 65% of its net assets, in equity
securities of companies domiciled outside the United States. The Portfolio
selects its investments on the basis of their potential for capital
appreciation without regard to current income. The Portfolio also may invest
in the securities of domestic 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. The Portfolio's
investments will be diversified among securities of issuers in foreign
countries including, but not limited to, Japan, Germany, the United Kingdom,
France, The Netherlands, Hong Kong, Singapore and Australia. In general, the
Portfolio will invest only in securities of companies and governments in
countries that Schroder, in its judgment, considers both politically and
economically stable. The Portfolio has no limit on the amount of its assets
that may be invested in any one type of foreign instrument or in any foreign
country; however, to the extent the Portfolio concentrates its assets in a
foreign country, it will incur greater risks.
International Portfolio may purchase preferred stock and convertible debt
securities, including convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio also may 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 the Portfolio from adverse movements in currency values, the
contracts also limit possible gains from favorable movements.
FOREIGN INVESTMENT CONSIDERATIONS AND RISK FACTORS. 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
investors in the International Portfolio; 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 U.S. securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by the International Portfolio.
Exchange rates are influenced generally by the forces of supply and demand in
the foreign currency markets and by numerous other political and economic events
occurring outside the United States, many of which may be difficult, if not
impossible, to predict.
Income from foreign securities will be received and realized in foreign
currencies, and the International Portfolio is required to compute and
distribute income in U.S. dollars. Accordingly, a decline in the value of a
particular foreign currency against the U.S. dollar occurring after the
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 the 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.
ADDITIONAL INVESTMENT POLICIES
A description of additional investment policies and risk considerations with
respect to each Portfolio is incorporated by reference from the sections
entitled "Additional Investment Policies and Risk Considerations (other than
the subsection entitled "Portfolio Transactions") and "Appendix A" of that
certain prospectus of Norwest Advantage Funds offering, among other shares, "I
Shares", a copy of which is delivered along with this Part A.
<PAGE>
PORTFOLIO TRANSACTIONS
The frequency of portfolio transactions ("portfolio turnover rate") for each
of the Portfolios (to the extent they had commenced operations by May 31,
1997) is contained in the annual report for those Portfolios included in
the SAI. 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). Norwest does not anticipate that the
portfolio turnover rate of any other Portfolio will exceed 100%.
Commission rates for brokerage transactions are fixed on many foreign securities
exchanges, and this may cause higher brokerage expenses to accrue to
International Portfolio 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, Norwest, Schroder and a Subadviser may
employ Norwest Investment Services, Inc., Schroder Securities Limited and other
broker-dealer affiliates of Norwest 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.
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 Administrative Services, LLC ("FAS"), the Portfolios'
administrator, 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
Norwest serves as investment adviser of each Portfolio other than International
Portfolio pursuant to investment advisory agreements between Norwest and the
Trust. Norwest, which is located at Norwest Center, Sixth Street and Marquette,
Minneapolis, Minnesota 55479, is an indirect subsidiary of Norwest Corporation,
a multi-bank holding company that was incorporated under the laws of Delaware in
1929. As of June 30, 1997, Norwest Corporation had assets of $83.6
billion, which made it the 11th largest bank holding company in the United
States. As of June 30, 1997, Norwest and its affiliates managed
assets with a value of approximately $52.9 billion.
Schroder acts as investment adviser to International Portfolio pursuant to an
investment advisory agreement 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 (doing business in New York
State as Schroders Holdings), the wholly owned U.S. holding company subsidiary
of Schroders plc. Schroders plc is the holding company parent of a large
worldwide group of 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 has assets under management in
excess of $175 billion.
<PAGE>
SUBADVISERS
To assist Norwest in carrying out its obligations, certain of the Portfolios and
Norwest have retained the services of the Subadvisers as follows:
PORTFOLIO SUBADVISER
--------- ----------
Positive Return Bond Portfolio Peregrine
Stable Income Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Strategic Value Bond Portfolio Galliard
Total Return Bond Portfolio UCM
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
UCM, Galliard, Crestone, and Peregrine and Smith make investment decisions for
Core Portfolios to which they act as investment subadviser and continuously
review, supervise and administer those Portfolios' investment programs with
respect to that portion, if any, of the Portfolios assets that Norwest believes
should be managed by the Subadviser. Currently, each Subadviser manages all of
the assets of each Portfolio that they subadvise. Norwest supervises the
performance of each Subadviser, including their adherence to Portfolios'
investment objectives and policies.
UCM, which is located at 1700 Lincoln Street, Suite 3301, Denver, Colorado
80274, is a division of Norwest Bank Colorado, N.A., a subsidiary of Norwest
Corporation. UCM provides specialized investment advisory services to various
institutional pension accounts. As of June 30, 1997 UCM managed over $2
billion in assets.
Galliard, which is located at 800 LaSalle Avenue, Suite 2060, Minneapolis,
Minnesota 55479, is an investment advisory subsidiary of Norwest Bank.
Galliard provides investment advisory services to bank and thrift institutions,
pension and profit sharing plans, trusts and charitable organizations and
corporate and other business entities. As of June 30, 1997 Galliard
managed over $3.1 billion in assets.
Crestone, which is located at 7720 East Belleview Avenue, Suite 220, Englewood
Colorado 80111, is an investment adviser subsidiary of Norwest Bank. Crestone
provides investment advice regarding companies with small market capitalization
to various clients, including institutional investors. As of June 30,
1996, Crestone managed assets with a value of approximately $534 million.
Peregrine, which is located at LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402, is an investment adviser subsidiary of Norwest
Bank. Peregrine provides investment advisory services to corporate and public
pension plans, profit sharing plans, savings-investment plans and 401(k) plans.
As of June 30, 1997 Peregrine managed over $5 billion in assets.
Smith Asset Management Group, L.P. Smith Group, whose principal business
address is 500 Crescent Court, Suite 250, Dallas, Texas 75201 is a registered
investment adviser. Smith Group provides investment management services to
company retirement plans, foundations, endowments, trust companies, and high
net worth individuals using a disciplined equity style. As of June 13, 1997,
the Smith Group managed over $200 million in assets.
PORTFOLIO MANAGERS
Each Adviser is required to furnish at its expense all services, facilities and
personnel necessary in connection with managing the respective Portfolio's
investments and effecting portfolio transactions for the Portfolios. The
following persons, however, are primarily responsible for day-to-day management
and, unless otherwise noted, have been since the inception of the Portfolio.
For periods prior to June 1, 1997, all persons associated with Norwest served in
their current positions with Norwest Bank. Prior to that date Norwest Bank was
the investment adviser of Index Portfolio and the predecessor portfolio of Small
Company Stock Portfolio, Small Company Growth Portfolio and Small Company Value
Portfolio. In addition to their responsibilities as listed below, each of the
portfolio managers associated with Norwest may perform other portfolio
management duties for Norwest Bank.
<PAGE>
MONEY MARKET PORTFOLIO/PRIME MONEY MARKET PORTFOLIO/SMALL CAP
INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. Mr.
Sylvester has been associated with Norwest for 16 years, the last
8 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.
POSITIVE RETURN PORTFOLIO - William D. Giese. Mr. Giese is a
Senior Vice President of Peregrine. Mr. Giese has been a
portfolio manager of Peregrine for over ten years and has over 20
years experience in fixed income securities management.
STABLE INCOME PORTFOLIO - Karl P. Tourville. Mr. Tourville has
been a principal of Galliard since 1995. He has been associated
with Norwest and its affiliates since 1986, most recently as Vice
President and Senior Portfolio Manager.
STRATEGIC VALUE BOND PORTFOLIO - Richard Merriam. Senior
Portfolio Manager/Principal of Galliard since 1995. Mr. Merriam
directs the management of fixed income portfolios and oversees
the trading and research functions at Galliard. Prior to joining
Galliard, Mr. Merriam was Chief Investment Officer of Insight
Investment Management. Before that, he served as a Senior Vice
President at Washington Square Capital, where he oversaw
management of nearly $5.0 billion in assets. Mr. Merriam has
over 13 years investment management experience. He obtained a BA
from the University of Michigan and a MBA from the University of
Minnesota.
MANAGED FIXED INCOME PORTFOLIO - Richard Merriam. Mr. Merriam has
been a principal of Galliard since 1995. Prior thereto, he was
the Chief Investment Officer of Insight Investment Management and
prior thereto was associated with Washington Square Capital.
TOTAL RETURN BOND PORTFOLIO - Mr. David B. Kinney. Mr. Kinney is
a Vice President of UCM. He has been associated with Norwest and
its affiliates since 1981.
INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. Mr.
Sylvester and Ms. White began serving as portfolio managers of
the Index Portfolio on January 1, 1996. For a description of Mr.
Sylvester and Ms. White see "Money Market Portfolio/Rated Money
Market Portfolio" above.
INCOME EQUITY PORTFOLIO - David L. Roberts. Mr. Roberts has been
a Senior Vice President of Norwest since 1991. Mr. Roberts has
been associated with Norwest and its affiliates for over 20 years
in various investment related capacities.
LARGE COMPANY GROWTH PORTFOLIO - John S. Dale. Mr. Dale is a
Senior Vice President of Peregrine. Mr. Dale has held various
investment management positions with Norwest, Peregrine and their
affiliates since 1968.
DISCIPLINED GROWTH PORTFOLIO/SMALL CAP VALUE PORTFOLIO - Stephen
S. Smith, CFA. Mr. Smith is the Chief Investment Officer for
Smith Group and is a principal in the firm. He has held this
position since November, 1995. Prior thereto, Mr. Smith served as
senior portfolio manger with NationsBank where he managed
approximately $1 billion of client assets. At NationsBank, Mr.
Smith held a variety of management positions including manager of
the institutional asset management group, manager of the disciplined
equity style used in a mutual fund and member of the Investment Policy
Committee. At NationsBank he also served as sub-adviser for
an identified segment in the disciplined equity style for an
unaffiliated mutual fund. His educational background includes a B.S.
in Industrial Engineering and an M.B.A., both received from the
University of Alabama. He was awarded the Chartered Financial Analyst
(CFA) designation in 1981.
SMALL COMPANY STOCK PORTFOLIO - Kirk McCown, CFA. Mr. McCown is
founder, President and a Director of Crestone, which was
incorporated in 1990.
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO - Robert B. Mersky. Mr. Mersky is
the President of Peregrine Capital Management, Inc. Mr. Mersky
has held various investment management positions with Norwest,
Peregrine and their affiliates since 1977. From 1980 to 1984 he
was head of investments for Norwest Bank.
SMALL COMPANY VALUE PORTFOLIO - Tasso H. Coin, Jr. Mr. Coin has
been a Senior Vice President of Peregrine since 1995. From 1992
to 1995 he was a research officer at Lord Asset Management, an
investment adviser and prior thereto was associated with Morgan
Stanley Asset Management.
INTERNATIONAL PORTFOLIO - Mark J. Smith, a Director and First
Vice President of Schroder along with Michael Perelstein, a
Senior Vice President of Schroder, with the assistance of a
Schroder investment committee, are primarily responsible for the
day-to-day management of the Portfolio's investment portfolio.
Mr. Smith has been a First Vice President of Schroder since April
1990 and a Director thereof since April 1993. He has been
employed by various Schroder Group companies in the investment
research and portfolio management areas since 1983. Mr.
Perelstein has been a Senior Vice President of Schroder since
January 2, 1997. Prior thereto, Mr. Perelstein was a Managing
Director at MacKay Shields. Mr. Perelstein has more than twelve
years of international and global investment experience. Since
January 1997, Messrs. Smith and Perelstein have served as
portfolio managers of International Portfolio.
ADVISORY FEES
For their services, Norwest and Schroder receive investment advisory fees
from the Portfolios at the following annual rates of the Portfolio's average
daily net assets.
PORTFOLIO INVESTMENT ADVISORY FEE
--------- -----------------------
Prime Money Market Portfolio 0.40% (first $300 million of assets)
0.36% (next $400 million of assets)
0.32% (remaining assets)
Money Market Portfolio 0.20% (first $300 million of assets)
0.16% (next $400 million of assets)
0.12% (remaining assets)
Stable Income Portfolio 0.30%
Positive Return Bond Portfolio 0.35%
Strategic Value Bond Portfolio 0.50%
Managed Fixed Income Portfolio 0.35%
Total Return Bond Portfolio 0.35%
Index Portfolio 0.15%
Income Equity Portfolio 0.50%
Large Company Growth Portfolio 0.65%
Disciplined Growth Portfolio 0.90%
Small Company Stock Portfolio 0.90%
Small Company Growth Portfolio 0.90%
Small Company Value Portfolio 0.90%
Small Cap Value Portfolio 0.95%
Small Cap Index Portfolio 0.15%
International Portfolio 0.45%
Norwest (and not Portfolios) pays each Subadviser a fee for their investment
subadvisory services. This compensation does not increase the amount paid by
Core Portfolios to Norwest for investment advisory services.
Each Adviser places orders for the purchase and sale of assets they manage with
brokers and dealers selected by and in the discretion of the respective Adviser.
Each Adviser seeks "best execution" for all portfolio transactions, but a
<PAGE>
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.
CUSTODIAN
Norwest Bank serves as the custodian for each Portfolio and may appoint
subcustodians to custody foreign securities and other assets held in foreign
countries. For its custodial services, Norwest Bank receives a fee with
respect to each Portfolio (other than International Portfolio) at an annual
rate of 0.02% of the first $100 million of the Portfolio's average daily net
assets, 0.015% of the next $100 million of the Portfolio's average daily net
assets and 0.01% of the Portfolio's remaining average daily net assets. With
respect to International Portfolio, Norwest receives a fee at an annual rate
of 0.075% of the Portfolio's average daily net assets. Norwest has appointed
Morgan Stanley as the sub-custodian for International Portfolio, which
employs foreign subcustodians to maintain International Portfolios' foreign
assets outside the United States.
ADMINISTRATOR, INTERESTHOLDER RECORDKEEPER AND FUND ACCOUNTANT
FAS supervises the overall management of the Portfolios, including the
Portfolios' receipt of services for which the Trust is obligated to pay, and
provides the Trust and Portfolios' with general office facilities pursuant to
an Administration Agreement with the Trust. As of June 1, 1997, FAS and its
affiliates provided management and administrative services to registered
investment companies and collective investment funds with assets of
approximately $25.5 billion. For its services FAS receives a fee with
respect to each Portfolio (other than International Portfolio) at an annual
rate of 0.05% of the Portfolio's average daily net assets. With respect to
International Portfolio, FAS receives a fee at an annual rate of 0.15% of the
Portfolio's average daily net assets.
Forum Accounting Services, LLC ("Forum Accounting"), Two Portland Square,
Portland, Maine 04101, is the Trust's interestholder recordkeeper and fund
accountant. Forum Accounting is an affiliate of Forum. For its services,
Forum Accounting receives a base fee of $48,000 per year for each Portfolio
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.
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 21 series; 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").
<PAGE>
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.
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 and Christmas ("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.
<PAGE>
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 SEC.
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.
<PAGE>
PART B
CORE TRUST (DELAWARE)
PRIME MONEY MARKET PORTFOLIO SMALL COMPANY STOCK PORTFOLIO
MONEY MARKET PORTFOLIO SMALL COMPANY GROWTH PORTFOLIO
POSITIVE RETURN BOND PORTFOLIO SMALL COMPANY VALUE PORTFOLIO
STABLE INCOME PORTFOLIO INTERNATIONAL PORTFOLIO
MANAGED FIXED INCOME PORTFOLIO STRATEGIC VALUE BOND PORTFOLIO
TOTAL RETURN BOND PORTFOLIO DISCIPLINED GROWTH PORTFOLIO
INDEX PORTFOLIO SMALL CAP VALUE PORTFOLIO
INCOME EQUITY PORTFOLIO SMALL CAP INDEX PORTFOLIO
LARGE COMPANY GROWTH PORTFOLIO
Part B of this Registration Statement on Form N-1A, as amended through the date
hereof, relating to the above listed portfolios of Core Trust (Delaware),
consists of the following Private Placement Memorandum -- Statement of
Additional Information.
<PAGE>
PRIVATE PLACEMENT MEMORANDUM
October 1, 1997
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Part B to the Private Placement Memorandum (the "Statement of Additional
Information" or "SAI") relates to beneficial interests in the PRIME MONEY
MARKET PORTFOLIO, MONEY MARKET PORTFOLIO, POSITIVE RETURN BOND PORTFOLIO, STABLE
INCOME PORTFOLIO, MANAGED FIXED INCOME PORTFOLIO, TOTAL RETURN BOND PORTFOLIO,
INDEX PORTFOLIO, INCOME EQUITY PORTFOLIO, LARGE COMPANY GROWTH PORTFOLIO, SMALL
COMPANY STOCK PORTFOLIO, SMALL COMPANY GROWTH PORTFOLIO, SMALL COMPANY VALUE
PORTFOLIO, and INTERNATIONAL PORTFOLIO, STRATEGIC VALUE BOND PORTFOLIO,
DISCIPLINED GROWTH PORTFOLIO, SMALL CAP VALUE PORTFOLIO and SMALL CAP INDEX
PORTFOLIO (each a "Portfolio" and collectively, the "Portfolios") of Core Trust
(Delaware) (the "Trust"), a registered, open-end management investment company.
This SAI and supplements Part A of the Private Placement Memorandum (the "Part
A") dated October 1, 1997, relating to the Portfolios.
This SAI 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.
("Forum"), 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.
_______________________________________________________________________________
TABLE OF CONTENTS
Page
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. . . . . . . . . . . . . . . . . .
______________________________________________________________________________
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 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.
<PAGE>
GENERAL INFORMATION AND HISTORY (ITEM 12 OF FORM N-1A)
Since its creation on September 1, 1994, the trust has solely conducted business
as an investment company under the name Core Trust (Delaware).
INVESTMENT OBJECTIVES AND POLICIES (ITEM 13 OF FORM N-1A)
INVESTMENT POLICIES
Part A contains information about the investment objectives, policies and
restrictions of each Portfolio. 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:
"Advisers" shall mean, collectively, Norwest, Schroder, UCM, Galliard,
Crestone, Peregrine and Smith, or, Norwest and any Subadviser.
"Board" shall mean the Board of Trustees of the Trust.
"CFTC" shall mean the U.S. Commodities Futures Trading Commission.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Crestone" shall mean Crestone Capital Management, Inc.
"Custodian" shall mean Norwest Bank acting in its capacity as custodian of
a Fund.
"Forum Accounting" shall mean Forum Accounting Services, LLC, the Trust's
interestholder recordkeeper and fund accountant.
"Fitch" shall mean Fitch Investors Service, L.P.
"Forum" shall mean Forum Financial Services, Inc., the Trust's placement
agent.
"Forum Administrative" shall mean Forum Administrative Services, LLC, the
Portfolios' administrator.
"Galliard" shall mean Galliard Capital Management, Inc.
"Moody's" shall mean Moody's Investors Service, Inc.
"Norwest" shall mean Norwest Investment Management, Inc., a subsidiary of
Norwest Bank Minnesota, N.A.
"Norwest Bank" shall mean Norwest Bank Minnesota, N.A., the
Portfolio's custodian.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"Peregrine" shall mean Peregrine Capital Management, Inc.
<PAGE>
"Portfolio" shall mean Prime Money Market Portfolio, Money Market
Portfolio, Positive Return Bond Portfolio, Stable Income Portfolio, Managed
Fixed Income Portfolio, Total Return Bond Portfolio, Index Portfolio,
Income Equity Portfolio, Large Company Growth Portfolio, Small Company
Stock Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, International Portfolio, Strategic Value Bond Portfolio,
Disciplined Growth Portfolio, Small Cap Value Portfolio and Small Cap Index
Portfolio, seventeen separate portfolios of the Trust.
"Schroder" shall mean Schroder Capital Management Inc..
"Smith" shall mean Smith Asset Management Group, LP.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's Rating Group.
"Subadvisers" shall mean, collectively, UCM, Galliard, Crestone,
Peregrine and Smith.
"UCM" shall mean United Capital Management, a part of Norwest Bank
Colorado, N.A.
"U.S. Government Securities" shall mean obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
INCORPORATED ITEMS
A description of additional envestment policies and risk considerations with
respect to each Portfolio is incoporated by reference from the sections
entitled "Investment Policies" and "Appendix A" of the statement of
additional information of Norwest Advantage Funds offering among other
shares, "I Shares," a copy of which is delivered with this SAI.
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.
Whenever reference is made throughout this SAI or the applicable prospectus to
the limitations of the 1940 Act, to "the extent permitted by the 1940 Act" or to
similar language, the reference shall be deemed to include reference to any
exemptive order obtained by the Trust or which may be relied upon by the Trust.
(1) DIVERSIFICATION
Each of INDEX PORTFOLIO, SMALL COMPANY STOCK PORTFOLIO, SMALL COMPANY
GROWTH PORTFOLIO, SMALL COMPANY VALUE PORTFOLIO, INTERNATIONAL
PORTFOLIO, STRATEGIC VALUE BOND PORTFOLIO, DISCIPLINED GROWTH
PORTFOLIO, SMALL CAP VALUE PORTFOLIO and SMALL CAP INDEX PORTFOLIO
may not, with respect to 75% of its assets, purchase a security
(other than a U.S. Government Security or a security of an investment
company) if, as a result (i) more than 5% of the Portfolio's total
assets would be invested in
<PAGE>
the securities of a single issuer, or (ii) the Portfolio would own
more than 10% of the outstanding voting securities of any single
issuer.
EACH OTHER PORTFOLIO may not, with respect to 75% of its assets,
purchase a security (other than a U.S. Government Security or a
security of an investment company) 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
(2) CONCENTRATION
Each of INDEX PORTFOLIO, SMALL COMPANY STOCK PORTFOLIO, SMALL
COMPANY GROWTH PORTFOLIO, SMALL COMPANY VALUE PORTFOLIO and
INTERNATIONAL 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).
PRIME MONEY MARKET PORTFOLIO and MONEY MARKET PORTFOLIO may not
purchase a security if, as a result, more than 25% of the
Portfolio's total assets would be invested in securities of issuers
conducting their principal business activities in the same
industry; provided, (i) there is no limit on investments in U.S.
Government Securities, in repurchase agreements covering U.S.
Government Securities or in foreign government securities, (ii)
municipal securities are not treated as involving a single
industry, (iii) there is no limit on investment in issuers
domiciled in a single country, (iv) financial service companies are
classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance)
and (v) utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone); and provided the Portfolio will invest
more than 25% of the value of the Portfolio's total assets in
obligations of domestic and foreign financial institutions and
their holding companies. Notwithstanding anything to the contrary,
to the extent permitted by the 1940 Act, the Portfolio may invest
in one or more investment companies; provided that, except to the
extent the Portfolio invests in other investment companies pursuant
to Section 12(d)(1)(A) of the 1940 Act, the Portfolio treats the
assets of the investment companies in which it invests as its own
for purposes of this policy.
TOTAL RETURN BOND PORTFOLIO may not purchase a security if, as a
result, more than 25% of the Portfolio's total assets would be
invested in securities of issuers conducting their principal
business activities in the same industry; provided, (i) there is no
limit on investments in U.S. Government Securities, or in
repurchase agreements covering U.S. Government Securities, (ii)
mortgage-related or housing-related securities (including
mortgage-related or housing-related U.S. Government Securities) and
municipal securities are not treated as involving a single
industry, (iii) financial service companies are classified
according to the end users of their services (for example,
automobile finance, bank finance and diversified finance), (iv)
utility companies are classified according to their services (for
example, gas, gas transmission, electric and gas, electric and
telephone). Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Portfolio may invest in one or more
investment companies; provided that, except to the extent the
Portfolio invests in other investment companies pursuant to Section
12(d)(1)(A) of the 1940 Act, the Portfolio treats the assets of the
investment companies in which it invests as its own for purposes of
this policy.
POSITIVE RETURN PORTFOLIO, STABLE INCOME PORTFOLIO, MANAGED FIXED
INCOME PORTFOLIO, INCOME EQUITY PORTFOLIO and LARGE COMPANY GROWTH
PORTFOLIO may not purchase a security if, as a result, more than 25%
of the Portfolio's total assets would be invested in securities of
issuers conducting their principal business activities in the same
industry; provided, however, that there is no limit on investments
in U.S.
<PAGE>
Government Securities, repurchase agreements covering U.S.
Government Securities, foreign government securities,
mortgage-related or housing-related securities, municipal
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); that utility companies are
classified according to their services (for example, gas, gas
transmission, electric and gas, electric and telephone.
Notwithstanding anything to the contrary, to the extent permitted
by the 1940 Act, the Portfolio may invest in one or more
investment companies; provided that, except to the extent the
Portfolio invests in other investment companies pursuant to
Section 12(d)(1)(A) of the 1940 Act, the Portfolio treats the
assets of the investment companies in which it invests as its own
for purposes of this policy.
Each of STRATEGIC VALUE BOND PORTFOLIO, DISCIPLINED
GROWTH PORTFOLIO, SMALL CAP VALUE PORTFOLIO and SMALL CAP INDEX
PORTFOLIO may not purchase securities if, as a result,
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 or repurchase
agreements covering U.S. Government Securities. Notwithstanding
anything to the contrary, to the extent permitted by the 1940 Act, the
Portfolio may invest in one or more investment companies; provided
that, except to the extent the Portfolio invests in other investment
companies pursuant to Section 12(d)(1)(A) of the 1940 Act, the
Portfolio treats the assets of the investment companies in which it
invests as its own for purposes of this policy.
(3) BORROWING
Each of INDEX PORTFOLIO, SMALL COMPANY STOCK PORTFOLIO,
SMALL COMPANY GROWTH PORTFOLIO, SMALL COMPANY VALUE PORTFOLIO,
INTERNATIONAL PORTFOLIO, STRATEGIC VALUE BOND PORTFOLIO,
DISCIPLINED GROWTH PORTFOLIO, SMALL CAP VALUE PORTFOLIO and SMALL
CAP INDEX 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).
EACH OTHER PORTFOLIO may not borrow money if, as a result,
outstanding borrowings would exceed an amount equal to 33 1/3% of
the Portfolio's total assets.
(4) ISSUANCE OF SENIOR SECURITIES
EACH PORTFOLIO may not issue senior securities except to the extent
permitted by the 1940 Act.
(5) UNDERWRITING ACTIVITIES
EACH 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
EACH 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
EACH PORTFOLIO may not purchase or sell real estate, any interest
thereinor 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
EACH 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.
<PAGE>
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
MONEY MARKET PORTFOLIO and PRIME MONEY MARKET PORTFOLIO may not
acquire securities or invest in repurchase agreements with
respect to any securities if, as a result, more than 10% of the
Portfolio'sPorfolio's net assets (taken at current value) would
be invested in repurchase agreements not entitling the holder to
payment of principal within seven days and in securities which
are not readily marketable, including securities that are not
readily marketable by virtue of restrictions on the sale of such
securities to the public without registration under the 1933 Act
("Restricted Securities").
EACH OTHER PORTFOLIO may not acquire securities or invest in
repurchase agreements with respect to any securities if, as
result, more than 15% of the Portfolio's net assets (taken at
current value) would be invested in repurchase agreements not
entitling the holder to payment of principal within seven days
and in securities which are not readily marketable, including
securities that are not readily marketable by virtue of
restrictions on the sale of such securities to the public without
registration under the 1933 Act ("Restricted Securities").
(3) OTHER INVESTMENT COMPANIES
Each Portfolio may not invest in securities of another investment
company, except to the extent permitted by the 1940 Act.
(4) MARGIN AND SHORT SALES
Each 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. Each Portfolio may
make margin deposits in connection with permitted transactions in
options and futures contracts.
EACH PORTFOLIO may not enter short sales if, as a result, more that
25% of the value of the Portfolio's total assets would be so
invested, or such a position would represent more than 2% of the
outstanding voting securities of any single issuer or class of an
issuer.
(5) UNSEASONED ISSUERS
Each 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.
<PAGE>
(6) PLEDGING
Each Portfolio may not pledge, mortgage, hypothecate or encumber
any of its assets except to secure permitted borrowings.
(7) SECURITIES WITH VOTING RIGHTS
MONEY MARKET PORTFOLIO, PRIME MONEY MARKET PORTFOLIO, POSITIVE RETURN
PORTFOLIO, STABLE INCOME PORTFOLIO, MANAGED FIXED INCOME
PORTFOLIO and TOTAL RETURN BOND PORTFOLIO may not purchase
securities having voting rights except securities of other
investment companies; provided that the Portfolios may hold
securities with voting rights obtained through a conversion or
other corporate transaction of the issuer of the securities,
whether or not the Portfolio was permitted to exercise any rights
with respect to the conversion or other transaction.
(8) LENDING OF PORTFOLIO SECURITIES
EACH PORTFOLIO may not lend portfolio securities if the total value
of all loaned securities would exceed 33 1/3% of the Fund's total
assets.
(9) OPTIONS AND FUTURES CONTRACTS
MONEY MARKET PORTFOLIO and PRIME MONEY MARKET PORTFOLIO may not
invest in options, futures contracts or options on futures contracts.
NO OTHER PORTFOLIO may purchase an option if, as a result, more that
5% of the value of the Portfolio's total assets would be so invested.
(10) WARRANTS
EACH PORTFOLIO may not invest in warrants if (i) more than 5% of the
value of the Portfolio's net assets would will be invested in
warrants (valued at the lower of cost or market) or (ii) more
than 2% of the value of the Portfolio's net assets would be
invested in warrants which are not listed on the New York Stock
Exchange or the American Stock Exchange; provided, that warrants
acquired by a Portfolio attached to securities are deemed to have
no value.
(11) PURCHASES AND SALES OF COMMODITIES
MONEY MARKET PORTFOLIO and PRIME MONEY MARKET 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 be deemed to be physical commodities.
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
<PAGE>
Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine
04101.
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. Morris, 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).
General 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.
Renee A. Walker, Assistant Secretary (age 27).
<PAGE>
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,
1997, 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)
As of the date hereof Forum and its affiliates owned all of the interests in
Strategic Value Bond Portfolio, Disciplined Growth Portfolio, Small Cap Value
Portfolio and Small Cap Index Portfolio. It is expected that shortly after
each of Strategic Value Bond Portfolio, Disciplined Growth Portfolio, Small
Cap Value Portfolio and Small Cap Index Portfolio commences operations
substantially all of the interest in those Portfolos, will be owned by
various series of Norwest Advantage Funds, a Delaware business trust
registered with the SEC as an open-end, management investment company.
Norwest Advantage Funds has informed the Trust that whenever a series of
Norwest Advantage Funds that invests all of its investable assets in a
Portfolio is requested to vote on matters pertaining to a Portfolio, that
series will hold a meeting of its shareholders and will cast its vote as
instructed by its shareholders. In addition, Norwest Advantage Funds has
informed the Trust that it will similarly hold a meeting of its shareholders
whenever it is requested to vote on matters pertaining to a Portfolio if
required by law to do so. It is anticipated that any other registered
investment company (or series thereof) that may in the future invest in a
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, Inc., a subsidiary of Norwest Bank Minnesota,
N.A., acts as investment adviser to the Portfolios (except International
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.
Schroder acts as investment adviser to International 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.
<PAGE>
Crestone Capital Management, Inc. ("Crestone"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Small Company
Stock Portfolio and is an investment subadviser of Diversified Equity Fund
and Growth Equity Fund. Crestone provides investment advice regarding
companies with small capitalization to various clients, including
institutional investors."
Galliard Capital Management, Inc. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Stable Income
Portfolio, Managed Fixed Income Portfolio and Strategic Value Bond
Portfolio. Galliard provides investment advice regarding advisory services
to bank and thrift institutions, pension and profit sharing plans, trusts and
charitable organizations and corporate and other business entities
Peregrine Capital Management, Inc. ("Peregrine"), an investment advisory
subsidiary of Norwest, is the investment subadviser of Small Company Growth
Portfolio, Large Company Growth Portfolio and Small Company Value Portfolio.
Peregrine provides investment advisory services to corporate and public
pension plans, profit sharing plans, savings-investment plans and 401(k)
plans.
United Capital Management, Inc. ("UCM"), a part of Norwest Bank Colorado,
N.A. is the investment subadviser of Total Return Bond Portfolio. UCM
provides specialized investment advisory services to various institutional
clients.
Smith Asset Management Group, L.P. ("Smith"), a registered investment
adviser, is the investment subadviser of Disciplined Growth Portfolio and
Small Cap Value Portfolio. Smith group provides investment management
services to company retirement plans, foundations, endowments, trust
companies, and high net worth individuals.
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.
Each Investment Subadvisory Agreement is terminable without penalty by the Fund
on 60 days' written notice when authorized either by vote of the Fund's
shareholders or by a vote of a majority of the Board, or by an Adviser on not
more than 60 days' nor less than 30 days' written notice, and will
automatically terminate in the event of its assignment. The Investment
Subadvisory Agreement also provides that neither an Advisor nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the performance of its or their duties to the Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their
obligations and duties under the Investment Subadvisory Agreement. The
Investment Subadvisory Agreement provides that an Advisor may render services
to others.
The advisory fees, as described in Part A, are accrued daily and paid
monthly. An Adviser in its sole discretion, may waive all or any portion
of its advisory fee with respect to each Portfolio. Each Advisory Agreement
provides that the Advisers may render service to others.
The following table shows the dollar amount of fees payable under the
Advisory Agreements between the Advisers and the Trust with respect to Index
Portfolio, Small Company Portfolio and International 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 three
fiscal years.
<PAGE>
<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, 1997 592,067 592,067 0 N/A
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
(the predecessor to each of Small Company Stock Portfolio, Small Company
Growth Portfolio and Small Company Value Portfolio)
Year ended May 31, 1997 3,920,805 3,920,805 0 N/A
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, 1997 812,485 N/A N/A 812,485
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, FAS supervises the
overall administration of the Portfolios 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.
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 three fiscal
years ended. Forum's fees are accrued daily and paid monthly.
Fee Fee Fee
Payable Waived Retained
--------- -------- --------
Index Portfolio
Year ended May 31, 1997 $394,711 $163,837 $230,874
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
(the predecessor to each of Small Company Stock Portfolio, Small Company
Growth Portfolio and Small Company Value Portfolio)
Year ended May 31, 1997 $435,635 $150,977 $284,658
<PAGE>
Year ended May 31, 1996 $204,956 $1,250 $203,706
Year ended October 31, 1995 $251,149 $0 $251,149
International Portfolio II
Year ended May 31, 1997 $270,828 $141,294 $129,534
Year ended May 31, 1996 $223,539 $0 $223,539
Year ended October 31, 1995 $273,675 $605 $273,070
CUSTODIAN
Norwest Bank, 733 Marquette Avenue, Minneapolis, Minnesota 55479-0040, is the
custodian of the Portfolio's assets. Morgan Stanley acts as sub-custodian of
International Portfolio'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. Morgan
Stanley employs qualified foreign subcustodians to provide custody of
International Portfolio's assets in accordance with applicable regulations.
PORTFOLIO ACCOUNTING
Forum Accounting, 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.
Under its agreement, Forum Accounting preparesprepares 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, Forum Accounting 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, Forum
Accounting is paid $12,000 for each Portfolio.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, has served as independent auditors for the Index Portfolio, Small
Company Stock Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio and International Portfolio since the inception of those Portfolios
and has been appointed indpendent auditors also of Small Cap Index
Portfolio and Small Cap Value Portfolio. The Board has elected KPMG Peat
Marwick LLP, 99 High Street, Boston, MA 02110, independent auditors, to serve
as the independent auditors for the other Portfolios for the fiscal year
ending May 31, 1998.
<PAGE>
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 an Adviser or their 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 an
Adviser's opinion, is equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when purchases or sales of
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 an Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
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 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, an Adviser 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 the Advisers 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 an Adviser, 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
<PAGE>
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 and 1997, the
aggregate brokerage commissions incurred by the Portfolios were as follows:
Index Portfolio, $84,456.51, and $74,898.21 and $________, Small Company
Portfolio $758,509.92, and $784,781.71 and $__________, International
Portfolio $212,757.45, and $188,843.90, and $________and International
Portfolio II $730,490.67, and $434,449.57 and $__________, of which 0.004%
($828.05), and 0% ($0.00) and __% ($___) was paid for the years ended October
31, 1995, and May 31, 1996 and 1997, respectively, to Muenchmeyer with
respect to International Portfolio, and of which 0.001%, ($966.05), and 0%
($0.00) and ___% ($___) was paid for the years ended October 31, 1995, and
May 31, 1996 and 1997, respectively, to Muenchmeyer with respect to
International Portfolio II. During those periods, approximately 0.002%, and
0% and ___% of the total dollar amount of transactions by International
Portfolio, and 0.002%, and 0% and ___% 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 and 1997, 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.
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.
<PAGE>
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)
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 (if
applicable). 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
<PAGE>
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 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.
<PAGE>
UNDERWRITERS (ITEM 21 OF FORM N-1A)
FAS, Two Portland Square, Portland, Maine 04101, serves as the Portfolios'
administrator and Forum, Two Portland Square, Portland, Maine 04101 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 annual report of Index Portfolio, Small Company Portfolio (the
predecessor to Small Company Stock Portfolio, Small Company Growth
Portfolio and Small Company Value Portfolio), and International Portfolio
(formerly called International Portfolio II) for the fiscal year ended May
31, 1997, including statements of assets and liabilities, statements of
operations and statements of changes in net assets for each Portfolio, and
the notes thereto, and the report of the independent accountants, Coopers &
Lybrand L.L.P., thereon, which are delivered herein are incorporated herein
by reference.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) FINANCIAL STATEMENTS.
INCLUDED IN PART A
Not Applicable.
INCLUDED IN PART B
For all Portfolios:
Audited financial statements for the fiscal year ended
May 31, 1997, including: statements of assets and
liabilities, statements of operations, statements of changes
in net assets, notes to financial statements, portfolios of
investments and independent auditor's report thereon.
(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).
(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).
<PAGE>
(f) Copy of the Investment Advisory Agreement among Registrant,
Forum Advisors, Inc., and Linden Asset Management, Inc.
relating to the Treasury Portfolio of Registrant
(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).
(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).
<PAGE>
(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.
(17) Financial Data Schedule.
(18) 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, 1997 substantially all of the interests in Index Portfolio,
Small Company Portfolio, International Portfolio, Prime Money Market Portfolio,
Money Market Portfolio, Stable Income Portfolio, Positive Return Bond Portfolio,
Managed Fixed Income Portfolio, Total Return Bond Portfolio, Income Equity
Portfolio, Large Company Growth Portfolio, Small Company Stock Portfolio, Small
Company Growth Portfolio and Small Company Value Portfolio were owned by various
series of Norwest Funds, a registered open-end management investment company.
As of September 30, 1997 substantially all of the interests in Treasury Cash
Portfolio, Government Cash Portfolio and Cash Portfolio were owned by various
series of Monarch Funds, a registered open-end management investment company.
As of September 30, 1997 substantially all of the interests in Treasury
Portfolio were owned by Daily Assets Treasury Fund, a series of Forum Funds, a
registered open-end management investment company.
<PAGE>
As of September 30, 1997 substantially all of the interests in Strategic Value
Bond Portfolio, Disciplined Growth Portfolio, Small Cap Value Portfolio and
Small Cap Index Portfolio were owned by Forum Financial Services, Inc. and its
affiliates, which are controlled by John Y. Keffer.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF AUGUST 30, 1997
-----------------------------------------------------
Title of Class of Shares
of Beneficial Interest Number of Holders
------------------------ -----------------
Treasury Cash Portfolio 2
Government Cash Portfolio 2
Cash Portfolio 3
Treasury Portfolio 2
Prime Money Market Portfolio 2
Money Market Portfolio 2
Stable Income Portfolio 2
Positive Return Bond Portfolio 2
Managed Fixed Income Portfolio 2
Total Return Bond Portfolio 2
Index Portfolio 5
Income Equity Portfolio 2
Large Company Growth Portfolio 2
Small Company Portfolio 6
Small Company Stock Portfolio 2
Small Company Growth Portfolio 2
Small Company Value Portfolio 2
International Portfolio 2
International Portfolio II 6
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").
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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 (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 Investment Management, Inc.
- -----------------------------------
The description of Norwest Investment Management, Inc. ("NIM") in Parts A and B
of this Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of NIM,
including their business connections which are of a substantial nature. The
address of Norwest Corporation, the parent of
<PAGE>
Norwest Bank Minnesota, N.A. ("Norwest Bank"), which is the parent of NIM, 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.
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.
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.
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.
<PAGE>
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.
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.
Crestone Capital Management, Inc.
- ---------------------------------
The description of Crestone Capital Management, Inc. ("Crestone") in Parts A and
B of this Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of Crestone,
including their business connections which are of a substantial nature. The
address of Crestone is 7720 East Belleview Avenue, Suite 220, Englewood Colorado
80111 and, unless otherwise indicated below, that address is the principal
business address of any company with which the directors and principal executive
officers are connected.
Kirk McCown, President and Director.
Mark Steven Sunderhuse, Senior Vice President and Director.
P. Jay Kiedrowski, Director. Mr. Kiedrowski is also President
and Chairman of the Board of Norwest and an Executive Vice
President of Norwest Bank. His address is Sixth and Marquette
Avenue, Minneapolis, Minnesota 55479.
Steven P. Gianoli, Director. Mr. Gianoli is a Vice President of
Norwest and Norwest Bank. His address is Sixth and Marquette
Avenue, Minneapolis, Minnesota 55479.
Susan Koonsman, Director. Ms. Koonsman is President of Norwest
Investments & Trust. Her address is 1740 Broadway, Denver,
Colorado 80274.
Peregrine Capital Management, Inc.
- ----------------------------------
The description of Peregrine Capital Management, Inc. ("Peregrine") in Parts A
and B of this Registration Statement are incorporated by reference herein.
<PAGE>
The following are the directors and principal executive officers of Peregrine,
including their business connections which are of a substantial nature. The
address of Peregrine is LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402 and, unless otherwise indicated below, that address
is the principal business address of any company with which the directors and
principal executive officers are connected.
James R. Campbell, Director. Mr. Campbell is President, Chief
Executive Officer and a Director of Norwest Bank. His address is
Sixth and Marquette Avenue, Minneapolis, Minnesota 55479-0116
Patricia D. Burns, Senior Vice President.
Tasso H. Coin, Senior Vice President.
John S. Dale, Senior Vice President.
Julie M. Gerend, Senior Vice President. Prior to September,
1995, Ms. Gerend was Manager, Account Executive at Fidelity
Institutional Retirement Services, Co.
William D. Diese, Senior Vice President.
Daniel J. Hagen, Vice President. Prior to May, 1996, Mr. Hagen was
Managing Director of Piper Jaffray, Inc.
Ronald G. Hoffman, Senior Vice President and Secretary.
Frank T. Matthews, Vice President.
Jeannine McCormick, Senior Vice President.
Barbara K. McFadden, Senior Vice President.
Robert B. Mersky, Chairman, President and Chief Executive Officer.
Gary E. Nussbaum, Senior Vice President.
James P. Ross, Vice President. Prior to November, 1996, Mr. Ross
was Vice President of Norwest Bank.
Jonathan L. Scharlau, Assistant Vice President.
Jay H. Strohmaier, Senior Vice President. Prior to September, 1996,
Mr. Strohmaier was Senior Vice President/Managed Accounts for
Voyageur Asset Management.
<PAGE>
Paul E. von Kuster, Senior Vice President.
Janelle M. Walter, Assistant Vice President.
Paul R. Wurm, Senior Vice President.
J. Daniel Vandermark, Vice President. His address is Sixth and
Marquette Avenue, Minneapolis, Minnesota 55479-1013
Galliard Capital Management, Inc.
- ---------------------------------
The description of Galliard Capital Management, Inc. ("Galliard") in Parts A and
B of this Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of Galliard,
including their business connections which are of a substantial nature. The
address of Galliard is LaSalle Plaza, Suite 2060, 800 LaSalle Avenue,
Minneapolis, Minnesota 55479 and, unless otherwise indicated below, that address
is the principal business address of any company with which the directors and
principal executive officers are connected.
Peter Jay Kiedrowski, Chairman. Mr. Kiedrowski is President and
Chief Executive Officer of NIM; Chairman of Crestone and
Executive Vice President of Norwest Bank.
Richard Merriam, Principal. Mr. Merriam is Chief Investment
Officer of Insight Investment Management.
John Caswell, Principal. Mr. Caswell is Chief Investment Officer
of Norwest Bank, N.A.
Karl Tourville, Principal. Mr. Tourville is Vice President/Head
of Fixed Income of Norwest Bank.
Laura Gideon, Senior Vice President of Marketing. Ms. Gideon is
Vice President of Marketing for American Express.
Leela Scattum, Vice President of Operations. Ms. Scattum is a
Fund Accountant for Norwest Bank.
United Capital Management
- -------------------------
The description of United Capital Management ("UCM") in Parts A and B of this
Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of UCM,
including their business connections which are of a substantial nature. The
address of UCM is 1700 Lincoln Street, Suite 3301, Denver, Colorado 80274 and,
unless otherwise indicated below, that address is the
<PAGE>
principal business address of any company with which the directors and
principal executive officers are connected.
W. Lon Schreur, President. Mr. Schreur is Senior Vice President
of Norwest Bank Colorado, N.A..
John T. Groton, Vice President. Mr. Groton is Vice President of
Norwest Bank Colorado, N.A.
David B. Kinney, Vice President. Mr. Kinney is Vice President of
Norwest Bank Colorado, N.A.
James C. Peery, Senior Vice President. Mr. Peery is Vice
President of Norwest Bank Colorado, N.A.
Leona F. Bennett, Vice President. Ms. Bennett is Vice President
of Norwest Bank Colorado, N.A.
Denise B. Johnson, Vice President. Mr. Johnson is Vice President
of Norwest Bank Colorado, N.A.
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.
David M. Salisbury. Chief Executive Officer, Director and
Chairman of Schroder Capital; Joint Chief Executive and Director
of Schroder.
Richard R. Foulkes. Senior Vice President and Managing Director
of Schroder Capital.
John A. Troiano. Managing Director and Senior Vice President. Mr.
Troiano is also a Director of Schroder Ltd.
David Gibson. Senior Vice President and Director of Schroder
Capital. Director of Schroder Wertheim Investment Services Inc.
John S. Ager. Senior Vice President and Director of Schroder
Capital.
<PAGE>
Sharon L. Haugh. Senior Vice President and Director of Schroder
Capital, Director and Chairman of Schroder Advisors Inc.
Gavin D.L. Ralston. Senior Vice President and Director of
Schroder Capital.
Mark J. Smith. Senior Vice President and Director of Schroder
Capital.
Robert G. Davy. Senior Vice President. Mr. Davy is also a
Director of Schroder Ltd. and an officer of open end investment
companies for which SCMI and/or its affiliates provide investment
services.
Jane P. Lucas. Senior Vice President and Director of Schroder
Capital; Director of Schroder Advisors Inc.; Director of Schroder
Wertheim Investment Services, Inc.
C. John Govett. Director of Schroder Capital; Group Managing
Director of Schroder Investment Management Ltd. And Director of
Schroders plc.
Phillipa J. Gould. Senior Vice President and Director of Schroder
Capital.
Louise Croset. First Vice President and Director of Schroder
Capital.
Abdallah Nauphal, Group Vice President and Director.
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 executive officers of Forum
Advisors, including their business connections which are of a substantial
nature. The address of Forum Advisors is Two Portland Square, Portland, Maine
04101 and, unless otherwise indicated below, that address is the principal
business address of any company with which the directors and principal executive
officers are connected.
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.
<PAGE>
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 executive officers of Linden,
including their business connections which are of a substantial nature. The
address of Linden is 812 N. Linden Street, Beverly Hills, California 90212 and,
unless otherwise indicated below, that address is the principal business address
of any company with which the directors and principal executive officers are
connected.
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.
Smith Asset Management Group
- ----------------------------
The description of Smith Asset Management Group ("Smith") ") in Parts A and B of
the Registration Statement are incorporated by reference herein.
The following are the directors and principal executive officers of Smith,
including their business connections which are of a substantial nature. The
address of Smith is 500 Crescent Court, Suite 250, Dallas, Texas 75201 and,
unless otherwise indicated below, that address is the principal business address
of any company with which the directors and principal executive officers are
connected.
Stephen S. Smith, President. Mr. Smith is President and Chief
Executive Officer. Mr. Smith is also a partner of Discovery
Management.
Stephen J. Summers, Chief Operating Officer. Mr. Summers is also
a partner of Discovery Management.
<PAGE>
Sarah C. Castleman, Vice President. Ms. Castleman is also a partner
of Discovery Management and prior thereto was an Assistant Vice
President at NationsBank, 901 Main Street, 16th Floor, Dallas, Texas
75201.
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., Forum Financial
Corp. and Forum Accounting Services, Limited Liability Company, Two Portland
Square, Portland, Maine 04104. 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.
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of 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 29th
day of September, 1997.
CORE TRUST (DELAWARE)
By: /s/ John Y. Keffer
----------------------------------
John Y. Keffer
President
<PAGE>
CORE TRUST (DELAWARE)
PORTFOLIO AND UNITHOLDER
ACCOUNTING AGREEMENT
AGREEMENT made as of the 1st day of June, 1997, by and between Core Trust
(Delaware), a business trust organized under the laws of the State of Delaware,
with its principal office and place of business at Two Portland Square,
Portland, Maine 04101 (the "Trust"), and Forum Accounting Services, Limited
Liability Company, a Delaware limited liability company with its principal
office and place of business at Two Portland Square, Portland, Maine 04101
("Forum").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and may issue units (as defined in the Trust's Trust Instrument) (the "Units")
in separate series; and
WHEREAS, the Trust offers Units in various series as listed in Appendix A
hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 6, being herein referred to as a "Portfolio," and collectively as the
"Portfolios"); and
WHEREAS, the Trust desires that Forum perform certain portfolio
accounting and unitholder recordkeeping services for each Portfolio and Forum is
willing to provide those services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints Forum, and Forum hereby agrees, to act
as portfolio accountant and unitholder recordkeeper for the Units of the
Portfolios for the period and on the terms set forth in this Agreement.
(b) In connection therewith, the Trust has delivered to Forum copies
of (i) the Trust's Trust Instrument and, if applicable, Bylaws (collectively, as
amended from time to time, "Organic Documents"), (ii) the Trust's Registration
Statement and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant the 1940 Act (the "Registration Statement"), (iii)
the current Part A and Part B of the Trust's Registration Statement
(collectively, as currently in effect and as amended or supplemented, the
"Offering Document") and (iv) all procedures adopted by the Trust with respect
to the Portfolios (i.e., repurchase agreement procedures), and shall promptly
furnish Forum with all amendments of or supplements to the foregoing. The Trust
shall deliver to Forum a certified copy of the resolution
<PAGE>
of the Board of Trustees of the Trust (the "Board") appointing Forum and
authorizing the execution and delivery of this Agreement.
SECTION 2A. PORTFOLIO ACCOUNTING DUTIES
With respect to each Portfolio, Forum shall perform the following
services:
(i) calculate the net asset value per unit with the frequency
prescribed in each Portfolio's then current Offering Document;
(ii) calculate each item of income, expense, deduction, credit, gain
and loss, if any, as required by the Trust and in conformance with
generally accepted accounting principles ("GAAP"), the SEC's Regulation
S-X (or any successor regulation) and the Internal Revenue Code of 1986,
as amended (or any successor laws)(the "Code");
(iii) maintain each Portfolio's general ledger and record all income,
expenses, capital share activity and security transactions of each
Portfolio;
(iv) calculate the yield, effective yield, tax equivalent yield and
total return for each Portfolio as applicable, and such other measure of
performance as may be agreed upon between the parties hereto;
(v) provide the Trust and such other persons as the Administrator may
direct with the following reports (A) a current security position report,
(B) a summary report of transactions and pending maturities (including
the principal, cost, and accrued interest on each portfolio security in
maturity date order), and (C) a current cash position and projection
report;
(vi) prepare and record, as of each time when the net asset value of a
Portfolio is calculated or as otherwise directed by the Trust, either (A)
a valuation of the assets of the Portfolio (in accordance with the
Trust's valuation procedures) or (B) a calculation confirming that the
market value of the Portfolio's assets does not deviate from the
amortized cost value of those assets by more than a specified percentage;
(vii) make such adjustments over such periods as Forum deems necessary
to reflect over-accruals or under-accruals of estimated expenses or
income;
(viii) request any necessary information from the Administrator and the
Trust's placement agent in order to prepare, and prepare, the Trust's
Form N-SAR;
(ix) provide appropriate records to the Trust's independent
accountants and, upon approval of the Trust or the Administrator, any
regulatory body in any requested review of the Trust's books and records
maintained by Forum;
-2-
<PAGE>
(x) prepare semi-annual financial statements and oversee the
production of the semi-annual financial statements and any related report
to the Trust's shareholders prepared by the Trust or its investment
advisers;
(xi) file the Portfolios' semi-annual financial statements with the
SEC or ensure that the Portfolios' semi-annual financial statements are
filed with the SEC;
(xii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information with respect to investment companies;
(xiii) provide the Trust or the Administrator with the data requested by
the Administrator that is required to update the Registration Statement;
(xiv) provide the Trust or independent accountants with all information
requested with respect to the preparation of the Trust's income and other
tax returns;
(xv) prepare or prepare, execute and file all Federal income tax
returns and state income and other tax returns, including any extensions
or amendments, each as agreed between the Trust and Forum;
(xvi) produce quarterly compliance reports for investment advisers to
the Trust and the Board and provide information to the Administrator,
investment advisers to the Trust and other appropriate persons with
respect to questions of Portfolio compliance;
(xvii) provide tax attribute information to the appropriate agents of
each investor in the Portfolio that seeks to qualify as a regulated
investment company under the Code;
(xviii) daily reconcile Units outstanding and other data with the records
of the holders of Units ("Unitholders");
(xiv) periodically reconcile all appropriate data with each Portfolio's
custodian;
(xv) verify investment trade tickets when received from an investment
adviser and maintain individual ledgers and historical tax lots for each
security; and
(xvi) perform such other recordkeeping, reporting and other tasks as
may be specified from time to time in the procedures adopted by the
Board; provided, that Forum need not begin performing any such task
except upon 65 days' notice and pursuant to mutually acceptable
compensation agreements.
-3-
<PAGE>
SECTION 2B. UNITHOLDER RECORDKEEPING DUTIES
(a) In accordance with procedures established from time to time by
agreement between the Trust and Forum, with respect to each Portfolio Forum
shall perform the following services:
(i) provide the services of a transfer agent and, as relevant, agent
in connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program) that are customary for open-end management investment companies
including: (A) maintaining all accounts for Unitholders, (B) preparing
Unitholder meeting lists, (C) mailing proxies to Unitholders, (D) mailing
Unitholder reports and prospectuses to current Unitholders, (E)
withholding taxes on U.S. resident and non-resident alien accounts, (F)
preparing and mailing statements of account to Unitholders for all
purchases and redemptions of Units and other transactions in Unitholder
accounts, (G) preparing and mailing activity statements for Unitholders,
and (H) providing Unitholder account information;
(ii) receive for acceptance orders for the purchase of Units and
promptly deliver payment and appropriate documentation therefor to the
custodian of the applicable Portfolio (the "Custodian");
(iii) pursuant to purchase orders, issue the appropriate number of
Units and hold such Units in the appropriate Unitholder account;
(iv) receive for acceptance redemption requests and deliver the
appropriate documentation therefor to the Custodian;
(v) as and when it receives monies paid to it by the Custodian with
respect to any redemption, pay the redemption proceeds as required by the
prospectus pursuant to which the redeemed Units were offered and as
instructed by the redeeming Unitholders;
(vi) effect transfers of Units upon receipt of appropriate
instructions from Unitholders and instructions from the Trust;
(vii) receive from Unitholders or debit Unitholder accounts for sales
commissions, including contingent deferred, deferred and other sales
charges, and service fees (i.e., wire redemption charges) and prepare and
transmit payments to underwriters, selected dealers and others for
commissions and service fees received;
(xiii) prepare and transmit payments to underwriters, selected dealers
and others for trail commissions, Rule 12b-1 fees, shareholder service
fees and other payments based on the amount of assets in Unitholder
accounts;
(ix) maintain records of account for and provide reports and
statements to the Trust and Unitholders as to the foregoing;
-4-
<PAGE>
(x) record the issuance of Units of the Trust and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934, as amended
("1934 Act") a record of the total number of Units of the Trust and each
Portfolio that are authorized, based upon data provided to it by the
Trust, and are issued and outstanding and provide the Trust on a regular
basis a report of the total number of Units that are authorized and the
total number of Units that are issued and outstanding; and
(xi) provide a system which will enable the Trust to monitor the total
number of Units of each Portfolio sold in each State.
(b) Forum shall provide the following additional services on behalf
of the Trust and such other services agreed to in writing by the Trust and
Forum:
(i) monitor and make appropriate filings with respect to the
escheatment laws of the various states and territories of the United
States;
(ii) receive and tabulate proxy votes; and
(iii) solicit Unitholders with respect to Unitholder meetings.
(c) The Trust or the Administrator or other agent (i) shall identify
to Forum in writing those transactions and assets to be treated as exempt from
reporting for each state and territory of the United States and for each foreign
jurisdiction (collectively "States") and (ii) shall monitor the sales activity
with respect to Unitholders domiciled or resident in each State. The
responsibility of Forum for the Trust's State registration status is solely
limited to the reporting of transactions to the Trust, and Forum shall have no
obligation, when recording the issuance of Units, to monitor the issuance of
such Units or to take cognizance of any laws relating to the issue or sale of
such Units, which functions shall be the sole responsibility of the Trust.
(d) Forum shall establish and maintain facilities and procedures
reasonably acceptable to the Trust for the safekeeping, control, preparation and
use of share certificates (if authorized to be issued by the Trust), check
forms, and facsimile signature imprinting devices. Forum shall establish and
maintain facilities and procedures reasonably acceptable to the Trust for
safekeeping of all records maintained by Forum pursuant to this Agreement.
(e) Forum shall procure, at its cost, the services of an affiliate
that is registered as a transfer agent under the 1934 Act to perform those
services hereunder that must be performed by a registered transfer agent, if
any.
SECTION 2C. OTHER DUTIES
(a) Forum shall prepare and maintain on behalf of the Trust the
following books and records of each Portfolio pursuant to Rule 31a-1 under the
1940 Act (the "Rule"):
-5-
<PAGE>
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, purchase and redemption of Units by
the Portfolios, all receipts and disbursements of cash and all other
debits and credits, as required by subsection (b)(1) of the Rule;
(ii) Journals and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, as required by subsection
(b)(2) of the Rule (including the Unitholder ledgers required by
subsection (b)(2)(iv);
(iii) A record of each brokerage order given by or on behalf of the
Trust for, or in connection with, the purchase or sale of securities, and
all other portfolio purchases or sales, as required by subsections (b)(5)
and (b)(6) of the Rule;
(iv) A record of all options, if any, in which the Trust has any
direct or indirect interest or which the Trust has granted or guaranteed
and a record of any contractual commitments to purchase, sell, receive or
deliver any property as required by subsection (b)(7) of the Rule;
(v) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the Rule;
(vi) The applicable books and records required to be maintained under
Section 17A(d) of the 1934 Act and the rules and regulations thereunder;
and
(vi) Other records required by the Rule or any successor rule or
pursuant to interpretations thereof to be kept by open-end management
investment companies, but limited to those provisions of the Rule
applicable to portfolio transactions and as agreed upon between the
parties hereto.
(b) The books and records maintained pursuant to Section 2C(a) shall
be prepared and maintained in such form, for such periods and in such locations
as may be required by the 1940 Act and the 1934 Act. The books and records
pertaining to the Trust required to be maintained by and that are in possession
of Forum shall be the property of the Trust. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at all
times during Forum's normal business hours. Upon the reasonable request of the
Trust or the Administrator, copies of any such books and records shall be
provided promptly by Forum to the Trust or the Trust's authorized
representatives at the Trust's expense. In the event the Trust designates a
successor that shall assume any of Forum's obligations hereunder, Forum shall,
at the expense and direction of the Trust, transfer to such successor all
relevant books, records and other data established or maintained by Forum under
this Agreement.
(c) In case of any requests or demands for the inspection of the
records of the Trust maintained by Forum, Forum will endeavor to notify the
Trust and to secure instructions from an authorized officer of the Trust as to
such inspection. Forum shall abide by the Trust's instructions for granting or
denying the inspection; provided, however, that Forum may grant the
-6-
<PAGE>
inspection without instructions if Forum is advised by counsel to Forum that
failure to do so will result in liability to Forum.
SECTION 3. STANDARD OF CARE; RELIANCE
(a) Forum shall be under no duty to take any action except as
specifically set forth herein or as may be specifically agreed to by Forum in
writing. Forum shall use its best judgment and efforts in rendering the
services described in this Agreement. Forum shall not be liable to the Trust or
any of the Trust's shareholders for any action or inaction of Forum relating to
any event whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of Forum's duties or obligations under this
Agreement or by reason of Forum's reckless disregard of its duties and
obligations under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Forum, its
employees, agents, directors, officers and managers and any person who controls
Forum within the meaning of section 15 of the Securities Act or section 20 of
the Securities Exchange Act of 1934, as amended, ("Forum Indemnitees") against
and from any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses of
every nature and character arising out of or in any way related to Forum's
actions taken or failures to act with respect to a Portfolio that are consistent
with the standard of care set forth in Section 3(a) or based, if applicable, on
good faith reliance upon an item described in Section 3(d)(a "Forum Claim").
The Trust shall not be required to indemnify any Forum Indemnitee if, prior to
confessing any Forum Claim against the Forum Indemnitee, Forum or the Forum
Indemnitee does not give the Trust written notice of and reasonable opportunity
to defend against the Forum Claim in its own name or in the name of the Forum
Indemnitee.
(c) Forum agrees to indemnify and hold harmless the Trust, its
employees, agents, directors, officers and managers ("Trust Indemnitees")
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way related to
Forum's actions taken or failures to act with respect to a Portfolio that are
not consistent with the standard of care set forth in Section 3(a)("Trust
Claim"). Forum shall not be required to indemnify any Trust Indemnitee if,
prior to confessing any Trust Claim against the Trust Indemnitee, the Trust or
the Trust Indemnitee does not give Forum written notice of and reasonable
opportunity to defend against the Trust Claim in its own name or in the name of
the Trust Indemnitee.
(d) A Forum Indemnitee shall not be liable for any action taken or
failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel to the
Trust or counsel to Forum;
(ii) any oral instruction which it receives and which it reasonably
believes in good faith was transmitted by the person or persons
authorized by the Board to give such oral
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<PAGE>
instruction (Forum shall have no duty or obligation to make any inquiry
or effort of certification of such oral instruction.);
(iii) any written instruction or certified copy of any resolution of
the Board, and Forum may rely upon the genuineness of any such document
or copy thereof reasonably believed in good faith by Forum to have been
validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
Forum to be genuine and to have been signed or presented by the Trust or
other proper party or parties;
and no Forum Indemnitee shall be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which Forum reasonably believes in good faith
to be genuine.
(e) Except to the extent it has breached the provisions of this
Agreement, Forum shall not be liable for the errors of other service providers
to the Trust, including the errors of pricing services (other than to pursue all
reasonable claims against the pricing service based on the pricing services'
standard contracts entered into by Forum) and errors in information provided by
an investment adviser (including prices and pricing formulas and the untimely
transmission of trade information), custodian or transfer agent to the Trust.
(f) With respect to Portfolios which do not value their assets in
accordance with Rule 2a-7 under the 1940 Act, notwithstanding anything to the
contrary in this Agreement, Forum shall not be liable to the Trust or any
shareholder of the Trust for (i) any loss to the Trust if an NAV Difference for
which Forum would otherwise be liable under this Agreement is less than or equal
to 0.001 (1/10 of 1%) or (ii) any loss to a shareholder of the Trust if the NAV
Difference for which Forum would otherwise be liable under this Agreement is
less than or equal to 0.005 (1/2 of 1%) or if the loss in the shareholder's
account with the Trust is less than or equal to $10. Any loss for which Forum
is determined to be liable hereunder shall be reduced by the amount of gain
which inures to shareholders, whether to be collected by the Trust or not.
(g) For purposes of this Agreement, (i) the NAV Difference shall mean
the difference between the NAV at which a shareholder purchase or redemption
should have been effected ("Recalculated NAV") and the NAV at which the purchase
or redemption is effected, divided by the Recalculated NAV, (ii) NAV Differences
and any Forum liability therefrom are to be calculated each time a Portfolio's
NAV is calculated, (iii) in calculating any NAV Difference for which Forum would
otherwise be liable under this Agreement for a particular NAV error, Portfolio
losses and gains shall be netted and (iv) in calculating any NAV Difference for
which Forum would otherwise be liable under this Agreement for a particular NAV
error that continues for a period covering more than one NAV determination,
Portfolio losses and gains for the period shall be netted.
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<PAGE>
(h) Nothing contained herein shall be construed to require Forum to
perform any service that could cause Forum to be deemed an investment adviser
for purposes of the 1940 Act or the Investment Advisers Act of 1940, as amended,
or that could cause a Portfolio to act in contravention of a Portfolio's
Prospectus or any provision of the 1940 Act. Except as otherwise specifically
provided herein, the Trust assumes all responsibility for ensuring that the
Trust complies with all applicable requirements of the Securities Act, the 1940
Act and any laws, rules and regulations of governmental authorities with
jurisdiction over the Trust. All references to any law in this Agreement shall
be deemed to include reference to the applicable rules and regulations
promulgated under authority of the law and all official interpretations of such
law or rules or regulations.
SECTION 4. COMPENSATION AND EXPENSES
(a) In consideration of the services provided by Forum pursuant to
this Agreement, the Trust shall pay Forum, with respect to each Portfolio, the
fees set forth in Clause (i) of Appendix B hereto. In consideration of the
services provided by Forum to begin the operations of a new Portfolio, the Trust
shall pay Forum, with respect to each Portfolio, the fees set forth in clause
(ii) of Appendix B hereto. In consideration of additional services provided by
Forum to perform certain functions, the Trust shall pay Forum, with respect to
each Portfolio the fees set forth in clause (iii) of Appendix B hereto. Nothing
in this Agreement shall require Forum to perform any of the services listed in
clause (iii) of Appendix B hereto, as such services may be performed by the
Portfolio's independent accountant if appropriate.
All fees payable hereunder shall be accrued daily by the Trust. The fees
payable for the services listed in clauses (i) and (iii) of Appendix B hereto
shall be payable monthly in advance on the first day of each calendar month for
services to be performed during the following calendar month. The fees payable
for the services listed in clause (ii) and for all reimbursements as described
in Section 4(b) shall be payable monthly in arrears on the first day of each
calendar month (the first day of the calendar month after the Portfolio
commences operations in the case of the fees listed in clause (ii) of Appendix B
hereto) for services performed during the prior calendar month. If fees payable
for the services listed in clause (i) begin to accrue in the middle of a month
or if this Agreement terminates before the end of any month, all fees for the
period from that date to the end of that month or from the beginning of that
month to the date of termination, as the case may be, shall be prorated
according to the proportion that the period bears to the full month in which the
effectiveness or termination occurs. Upon the termination of this Agreement
with respect to a Portfolio, the Trust shall pay to Forum such compensation as
shall be payable prior to the effective date of termination.
(b) In connection with the services provided by Forum pursuant to
this Agreement, the Trust, on behalf of each Portfolio, agrees to reimburse
Forum for the expenses set forth in Clause (iv) of Appendix B hereto. In
addition, the Trust, on behalf of the applicable Portfolio, shall reimburse
Forum for all expenses and employee time (at 150% of salary) attributable to any
review of the Trust's accounts and records by the Trust's independent
accountants or any regulatory body outside of routine and normal periodic
reviews. Should the Trust exercise its
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<PAGE>
right to terminate this Agreement, the Trust, on behalf of the applicable
Portfolio, shall reimburse Forum for all out-of-pocket expenses and employee
time (at 150% of salary) associated with the copying and movement of records and
material to any successor person and providing assistance to any successor
person in the establishment of the accounts and records necessary to carry out
the successor's responsibilities.
(d) Forum may, with respect to questions of law relating to its
services hereunder, apply to and obtain the advice and opinion of counsel to the
Trust or counsel to Forum. The costs of any such advice or opinion shall be
borne by the Trust.
SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
(a) This Agreement shall become effective with respect to each
Portfolio on June 1, 1997 and shall become effective with respect to Portfolios
created after that date on the later of the date on which the Trust's
Registration Statement relating to the Units of the Portfolio becomes effective
or the date of the commencement of operations of the Portfolio . Upon
effectiveness of this Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter hereof insofar as such
Agreement may have been deemed to relate to the Portfolios.
(b) This Agreement shall continue in effect with respect to a
Portfolio until terminated; provided, that continuance is specifically approved
at least annually by the Board.
(c) This Agreement may be terminated with respect to a Portfolio at
any time, without the payment of any penalty (i) by the Board on 60 days'
written notice to Forum or (ii) by Forum on 60 days' written notice to the
Trust. The obligations of Sections 3 and 4 shall survive any termination of
this Agreement.
(d) This Agreement and the rights and duties under this Agreement
otherwise shall not be assignable by either Forum or the Trust except by the
specific written consent of the other party. All terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
SECTION 6. ADDITIONAL PORTFOLIOS
In the event that the Trust establishes one or more series of Units after
the effectiveness of this Agreement, such series of Units shall become a
Portfolio under this Agreement. Forum or the Trust may elect not to make any
such series subject to this Agreement.
SECTION 7. PROPRIETARY INFORMATION; CONFIDENTIALITY
(a) The Trust acknowledges that the databases, computer programs,
screen formats, report formats, interactive design techniques, and documentation
manuals maintained by Forum on databases under the control and ownership of
Forum or a third party constitute copyrighted,
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<PAGE>
trade secret, or other proprietary information (collectively, "Proprietary
Information") of substantial value to Forum or the third party. The Trust
agrees to treat all Proprietary Information as proprietary to Forum and further
agrees that it shall not divulge any Proprietary Information to any person or
organization except as may be provided under this Agreement.
(b) Forum acknowledges that the Unitholder list and all information
related to Unitholders furnished to Forum by the Trust or by a Unitholder in
connection with this Agreement constitute proprietary information (collectively,
"Customer Data") of substantial value to the Trust. In no event shall
Proprietary Information be deemed Customer Data. Forum agrees to treat all
Customer Data as proprietary to the Trust and further agrees that it shall not
divulge any Customer Data to any person or organization except as may be
provided under this Agreement or as may be directed by the Trust.
(c) Forum agrees to treat all records and other information related
to the Trust as proprietary information of the Trust and, on behalf of itself
and its employees, to keep confidential all such information, except that Forum
may
(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(iii) release such other information as approved in writing by the
Trust, which approval shall not be unreasonably withheld and may not be
withheld where Forum may be exposed to civil or criminal contempt
proceedings for failure to release the information, when requested to
divulge such information by duly constituted authorities or when so
requested by the Trust.
SECTION 8. FORCE MAJEURE
Forum shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots, failure of the mails,
transportation, communication or power supply or equipment failures; provided,
that Forum shall, at no additional expense to the Trust, take reasonable steps
to minimize service interruptions.
SECTION 9. ACTIVITIES OF FORUM
(a) Except to the extent necessary to perform Forum's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict
Forum's right, or the right of any of Forum's managers, officers or employees
who also may be a trustee, officer or employee of
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<PAGE>
the Trust, or persons who are otherwise affiliated persons of the Trust to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, trust, firm,
individual or association.
(b) Forum may subcontract any or all of its responsibilities pursuant
to this Agreement to one or more corporations, trusts, firms, individuals or
associations, which may be affiliated persons of Forum, who agree to comply with
the terms of this Agreement; provided, that any such subcontracting shall not
relieve Forum of its responsibilities hereunder. Forum may pay those persons
for their services, but no such payment will increase Forum's compensation from
the Trust.
SECTION 10. COOPERATION WITH INDEPENDENT ACCOUNTANTS
Forum shall cooperate, if applicable, with each Portfolio's independent
public accountants and shall take reasonable action to make all necessary
information available to the accountants for the performance of the accountants'
duties.
SECTION 11. SERVICE DAYS
Nothing contained in this Agreement is intended to or shall require
Forum, in any capacity under this Agreement, to perform any functions or duties
on any day other than a business day of the Trust or of a Portfolio. Functions
or duties normally scheduled to be performed on any day which is not a business
day of the Trust or of a Portfolio shall be performed on, and as of, the next
business day, unless otherwise required by law.
SECTION 12. ISSUANCE AND TRANSFER OF UNITS; CERTIFICATES
(a) Forum shall make original issues of Units of each Portfolio in
accordance with the Offering Document only upon receipt of (i) instructions
requesting the issuance, (ii) a certified copy of a resolution of the Board
authorizing the issuance and (iii) necessary funds for the payment of any
original issue tax applicable to such Units.
(b) Transfers of Units of each Portfolio shall be registered on the
Unitholder records maintained by Forum. In registering transfers of Units,
Forum may rely upon the Uniform Commercial Code as in effect in the State of
Delaware or any other statutes that, in the opinion of Forum's counsel, protect
Forum and the Trust from liability arising from (i) not requiring complete
documentation, (ii) registering a transfer without an adverse claim inquiry,
(iii) delaying registration for purposes of such inquiry or (iv) refusing
registration whenever an adverse claim requires such refusal. As Unitholder
recordkeeper, Forum will be responsible for delivery to the transferor and
transferee of such documentation as is required by the Uniform Commercial Code.
(c) Units shall be issued to investors in a Portfolio at the net
asset value per unit next determined after Forum receives a completed purchase
order. A purchase order shall be
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<PAGE>
complete at the time specified in the Prospectus pursuant to which the Units are
offered and when Forum or its agent receives (i) an instruction directing
investment in a Portfolio, (ii) a wire or other electronic payment in the amount
designated in the instruction and (iii) in the case of an initial purchase, a
completed account application.
(d) The Trust shall not issue Unit certificates.
SECTION 13. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The trustees of the Trust and the shareholders of each Portfolio shall
not be liable for any obligations of the Trust or of the Portfolios under this
Agreement, and Forum agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Portfolio to which Forum's rights or claims relate in settlement of such rights
or claims, and not to the trustees of the Trust or the shareholders of the
Portfolios.
SECTION 14. REPRESENTATIONS AND WARRANTIES
(a) Forum represents and warrants to the Trust that:
(i) It is a limited liability company duly organized and existing and
in good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(iii) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement; and
(iv) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of Forum, enforceable against Forum
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
(b) The Trust represents and warrants to Forum that:
(i) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware;
(ii) It is empowered under applicable laws and by its Organic
Documents to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have been taken
to authorize it to enter into and perform this Agreement;
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<PAGE>
(iv) It is an open-end management investment company registered under
the 1940 Act;
(v) All units of the Portfolios, when issued, shall be validly
issued, fully paid and non-assessable; and
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the
Trust in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
SECTION 15. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement.
(b) Except for Appendix A to add new Portfolios in accordance with
Section 6, no provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Delaware.
(d) This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any
number of counterparts, and all of the counterparts taken together shall be
deemed to constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(h) Notices, requests, instructions and communications received by
the parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(i) Notwithstanding any other provision of this Agreement, the
parties agree that the assets and liabilities of each Portfolio of the Trust are
separate and distinct from the assets and liabilities of each other Portfolio
and that no Portfolio shall be liable or shall be charged for any
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debt, obligation or liability of any other Portfolio, whether arising under this
Agreement or otherwise.
(j) No affiliated person, employee, agent, director, officer or
manager of Forum shall be liable at law or in equity for Forum's obligations
under this Agreement.
(k) Each of the undersigned warrants and represents that they have
full power and authority to sign this Agreement on behalf of the party indicated
and that their signature will bind the party indicated to the terms hereof and
each party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
(l) The terms "vote of a majority of the outstanding voting
securities," "interested person" and "affiliated person" shall have the meanings
ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
CORE TRUST (DELAWARE)
By:
---------------------------------
David I. Goldstein
Vice President
FORUM ACCOUNTING SERVICES,
LIMITED LIABILITY COMPANY
By: Forum Advisors, Inc., as Manager
By:
---------------------------------
John Y. Keffer
President
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CORE TRUST (DELAWARE)
FUND ACCOUNTING AGREEMENT
APPENDIX A
PORTFOLIOS OF THE TRUST
AS OF JUNE 1, 1997
International Portfolio
Index Portfolio
Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Large Company Portfolio
Income Equity Portfolio
Managed Fixed Income Portfolio
Total Return Bond Portfolio
Positive Return Bond Portfolio
Stable Income Portfolio
Prime Money Market Portfolio
Money Market Portfolio
Cash Portfolio
Government Cash Portfolio
Treasury Cash Portfolio
Treasury Portfolio
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CORE TRUST (DELAWARE)
FUND ACCOUNTING AGREEMENT
APPENDIX B
FEES AND EXPENSES
(i) BASE FEE
Standard Fee per Portfolio with up to five Unitholders
(other than nominal interests of any initial Unitholders
and Unitholders that are affiliated persons of Forum). . . $4,000/month
Fee for each additional five Unitholders . . . . . . . . . $500/month
Plus Additional Surcharges for each of:
(1) Tax-Free Money Market Portfolios . . . . . . . . . $1,000/month
(2) Global or International Portfolios . . . . . . . . $2,000/month
(3) Portfolios with more than 25% of their total
assets invested in asset backed securities . . . . $1,000/month
(4) Portfolios with more than 50% of their total
assets invested in asset backed securities . . . . $1,000/month
(5) Portfolios with more than 100 security positions
For each 100 positions (or portion thereof)
above 100. . . . . . . . . . . . . . . . . . . $1,000/month
(6) Portfolios with a monthly portfolio
turnover rate of 10% or greater. . . . . . . . . . $1,000/month
(7) Money Market Portfolios with asset levels
exceeding:
$500 million . . . . . . . . . . . . . . . . . $500/month
$1 billion . . . . . . . . . . . . . . . . . . $500/month
$2 billion . . . . . . . . . . . . . . . . . . $500/month
(8) Non-Money Market Portfolios with asset levels
exceeding:
$100 million . . . . . . . . . . . . . . . . . $500/month
$250 million . . . . . . . . . . . . . . . . . $500/month
$500 million . . . . . . . . . . . . . . . . . $500/month
$1 billion . . . . . . . . . . . . . . . . . . $500/month
$2 billion . . . . . . . . . . . . . . . . . . $500/month
(9) Portfolios holding futures or options contracts. . $1,000/month
(10) Portfolios (other than those subject to (2) above)
holding forward currency contracts or more than
10 international positions . . . . . . . . . . . . $1,000/month
Portfolios (other than those subject to (2) above)
holding forward currency contracts or more than
30 international positions . . . . . . . . . . . . $1,000/month
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Note 1: Surcharges are determined based upon the total assets, security
positions or other factors as of the end of the prior month and on the
portfolio turnover rate for the prior month. Portfolio turnover rate
shall have the meaning ascribed thereto in SEC Form N-1A.
Note 2: The rates set forth above shall remain fixed through December
31, 1997. On January 1, 1998, and on each successive January 1, the
rates may be adjusted automatically by Forum without action of the Trust
to reflect changes in the Consumer Price Index for the preceding calendar
year, as published by the U.S. Department of Labor, Bureau of Labor
Statistics. Forum shall notify the Trust each year of the new rates, if
applicable.
Note 3. Cash Portfolio, Government Cash Portfolio and Treasury Cash
Portfolio's standard fee with up to five Unitholders is the lesser of
$4,000/month or 0.05% of the Portfolio's average annual daily net assets.
(ii) START-UP FEE
Portfolio Start-Up Fee . . . . . . . . . . . . . . . . . . $2,000
(iii) OTHER SERVICES (payable in equal installments monthly)
TAX SERVICES. Preparation of Federal income and excise tax
returns and preparation, execution and filing of state
income tax returns, including any extensions or
amendments . . . . . . . . . . . . . . . . . . . . $3,500/fiscal period
(iv) OUT-OF-POCKET AND RELATED EXPENSES
The Trust, on behalf of the applicable Portfolio, shall reimburse Forum
for all out-of-pocket and ancillary expenses in providing the services described
in this Agreement, including but not limited to the cost of (or appropriate
share of the cost of): (i) pricing, paydown, corporate action, credit and other
reporting services, (ii) taxes, (iii) postage and delivery services, (iv)
telephone services, (v) electronic or facsimile transmission services, (vi)
reproduction, (vii) printing and distributing financial statements, (xiii)
microfilm and microfiche and (ix) Trust record storage and retention fees. In
addition, any other expenses incurred by Forum at the request or with the
consent of the Trust, will be reimbursed by the Trust on behalf of the
applicable Portfolio.
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