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As filed with the Securities and Exchange Commission on September 30, 1999
File No. 811-8858
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
CORE TRUST (DELAWARE)
Two Portland Square
Portland, Maine 04101
207-879-1900
David I. Goldstein, Esq.
Forum Administrative Services LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue NW 2nd Floor
Washington, DC 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 (excluding individuals, S corporations, partnerships, and
grantor trusts beneficially owned by any individuals, S corporations or
partnerships). This Registration Statement does not constitute an offer to sell,
or the solicitation of an offer to buy any beneficial interests in any series of
Registrant.
PART A
Prime Money Market Portfolio, Money Market Portfolio, Positive Return Bond
Portfolio, Stable Income Portfolio, Strategic Value Bond Portfolio, Managed
Fixed Income Portfolio, Index Portfolio, Income Equity Portfolio, Large Company
Growth Portfolio, Disciplined Growth Portfolio, Small Cap Index Portfolio, Small
Company Stock Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, Small Cap Value Portfolio, International Portfolio and International
Equity Portfolio.
<PAGE>
PART B
Prime Money Market Portfolio, Money Market Portfolio, Positive Return Bond
Portfolio, Stable Income Portfolio, Strategic Value Bond Portfolio, Managed
Fixed Income Portfolio, Index Portfolio, Income Equity Portfolio, Large Company
Growth Portfolio, Disciplined Growth Portfolio, Small Cap Index Portfolio, Small
Company Growth Portfolio, Small Company Value Portfolio, Small Cap Value
Portfolio, International Portfolio and International Equity Portfolio.
<PAGE>
PART A
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
OCTOBER 1, 1999
This Private Placement Memorandum relates to beneficial interests ("Interests")
in Prime Money Market Portfolio, Money Market Portfolio, Positive Return Bond
Portfolio, Stable Income Portfolio, Managed Fixed Income Portfolio, Strategic
Value Bond Portfolio, Index Portfolio, Income Equity Portfolio, Large Company
Growth Portfolio, Disciplined Growth Portfolio, Small Company Value Portfolio,
Small Cap Value Portfolio, Small Cap Index Portfolio, and International
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 a Portfolio may only be made by certain institutional investors,
whether organized within or outside the United States (excluding individuals, S
corporations, partnerships, and grantor trusts beneficially owned by any
individuals, S corporations, or partnerships). An investor in a Portfolio must
also be an "accredited investor," as that term is defined under Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended ("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") for the Portfolios dated the same date as this Private Placement
Memorandum. The SAI may be amended from time to time and contains additional
information about the Trust and each Portfolio and is incorporated into this
Private Placement Memorandum by reference. You may obtain a copy of the SAI
without charge by contacting Forum Financial Services, Inc. ("FFSI"), 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 Interests in any Portfolio. You may subscribe
for Interests in a Portfolio and you may obtain a complete subscription package,
including a subscription agreement, by contacting the Placement Agent at Two
Portland Square, Portland, Maine 04101, (207) 879-1900. The Trust and the
Placement Agent reserve the right to refuse to accept any subscription for any
reason.
TABLE OF CONTENTS PAGE
Glossary 1
Investment Objectives 3
Principal Investment Strategies 4
Risk Considerations 10
Other Considerations 11
Management of the Portfolios 12
Description of Beneficial Interests 16
Purchase of Interests 16
Redemption or Repurchase of Interests 17
Information Regarding Net Income and Taxes 18
Pending Legal Proceedings 18
Other Information 18
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THE SECURITIES OF THE TRUST DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER (1) THE TERMS OF THE TRUST 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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GLOSSARY
This Glossary of frequently used terms will help in understanding the discussion
of the Portfolios' objectives, policies, risks and operations. Defined terms are
capitalized when used in this Part A.
Term Definition
Adviser Each of Galliard, Norwest,Peregrine,
Schroder and Smith.
Board The Board of Trustees of Core Trust.
Core Trust Core Trust (Delaware).
Forum Forum Financial Group LLC. Subsidiaries
of Forum provide administrative, placement
agency and unitholder and portfolio
accounting services to each Portfolio.
Galliard Galliard Capital Management, Inc., the
investment subadviser to Stable Income
Portfolio, Managed Fixed Income Portfolio,
and Strategic Value Portfolio.
Investment Grade Rated at the time of purchase in 1 of
the 4 highest long-term or 2 highest
short-term ratings categories by an NRSRO
or unrated and determined by the Adviser to
be of comparable quality.
Interest Beneficial interest in a Portfolio.
Market Capitalization The total market value of a company's
outstanding common stock.
Municipal Security A debt security issued by or on behalf of
the states, territories, or possessions of
the United States,the District of Columbia
and their subdivisions, authorities,
instrumentalities, and corporations, with
interest exempt from federal income tax.
NRSRO A nationally recognized statistical rating
organization, such as S&P, that rates
fixed-income securities and preferred stock
by relative credit risk. NRSROs also rate
money market mutual funds.
Non-Investment Grade Neither rated at the time of purchase
in 1 of the 4 highest long--term or 2
highest short-term ratings categories by an
NRSRO nor unrated and determined by the
Adviser to be of comparable quality.
Norwest Bank Norwest Bank Minnesota, N.A.
Norwest Investment Management, Inc. Investment adviser to each Portfolio except
International Portfolio.
Peregrine Peregrine Capital Management, Inc., the
investment subadviser to Positive Return
Bond Portfolio, Large Company Growth
Portfolio, Small Company Growth Portfolio
and Small Company Value Portfolio.
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Term Definition
Portfolio Each of Prime Money Market Portfolio,
Money Market Portfolio, Positive Return
Bond Portfolio, Stable Income Portfolio,
Managed Fixed Income Portfolio,
Strategic Value Bond Portfolio, Index
Portfolio, Income Equity Portfolio,Large
Company Growth Portfolio, Disciplined
Growth Portfolio, Small Company Stock
Portfolio, Small Company Value Portfolio,
Small Cap Value Portfolio, Small Cap
Index Portfolio and International Equity
Portfolio.
Russell 1000(R) Index An index of large- and medium-
capitalization companies.
Russell 2000(R) Index An index of smaller capitalization
companies with a broader base of
companies than the S&P 600 Small Cap
Index.
Schroder Schroder Investment Management North
America Inc. - Investment adviser to
International Portfolio.
Smith Smith Asset Management Group, LP, the
investment subadviser to Disciplined
Growth Portfolio and Small Cap Value
Portfolio.
S&P Standard & Poor's Corporation
S&P 500 Index Standard & Poor's 500 Composite Stock
Price Index, an index of large
capitalization companies.
S&P 600 Small Cap Index Standard & Poor's Small Cap 600 Composite
Stock Price Index, an index of small
capitalization companies.
SAI Statement of Additional Information.
SEC The U.S. Securities and Exchange
Commission.
Subadviser Each of Galliard, Peregrine and Smith.
Trust Core Trust
U.S. Government Security A security issued or guaranteed as to
principal and interest by the U.S.
Government, its agencies, or its
instrumentalities.
U.S. Treasury Security A security issued or guaranteed by the
U.S. Treasury.
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INVESTMENT OBJECTIVES
The investment objective of each Portfolio is fundamental and may not be changed
without investor approval.
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.
STRATEGIC VALUE BOND PORTFOLIO'S investment objective is to seek total return by
investing primarily in income producing securities.
INDEX PORTFOLIO'S investment objective is to duplicate the return of the S&P 500
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.
DISCIPLINED GROWTH PORTFOLIO'S investment objective is to seek capital
appreciation by investing primarily in common stocks of larger companies.
SMALL COMPANY STOCK PORTFOLIO'S investment objective is long-term capital
appreciation.
SMALL COMPANY VALUE PORTFOLIO'S investment objective is to seek to provide
long-term capital appreciation.
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 S&P 600 Small Cap Index.
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.
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PRINCIPAL INVESTMENT STRATEGIES
MONEY MARKET PORTFOLIOS
The investments of Prime Money Market Portfolio and Money Market Portfolio (each
a "Money Market Portfolio," collectively, the "Money Market Portfolios") are
made under the requirements of a SEC rule governing money market funds. Each
Portfolio invests only in high-quality, U.S. dollar-denominated short-term money
market instruments that are determined by the Adviser, under procedures adopted
by the Board, to be eligible for purchase and to present minimal credit risks.
Each Portfolio may invest in securities with fixed, variable or floating rates
of interest.
High-quality instruments include those that: (1) are rated (or, if unrated, are
issued by an issuer with comparable outstanding short-term debt that is rated)
in 1 of 2 two highest rating categories by 2 NRSROs or, if only 1 NRSRO has
issued a rating, by that NRSRO; or (2) are otherwise unrated and determined by
the Adviser to be of comparable quality. Each Portfolio invests at least 95% of
its total assets in securities in the highest rating category.
The Money Market Portfolios generally have the same investment objective and
investment policies. Because Prime Money Market Portfolio seeks to maintain a
rating within the 2 highest short-term categories assigned by at least 1 NRSRO,
it is more limited in the type and amount of securities it may purchase.
The Money Market Portfolios invest in a broad spectrum of high-quality money
market instruments of U.S. and foreign issuers, including U.S. Government
Securities, Municipal Securities and corporate debt securities.
The Money Market Portfolios may invest in obligations of financial institutions.
These include negotiable certificates of deposit, bank notes, bankers'
acceptances and time deposits of U.S. banks (including savings banks and savings
associations), foreign branches of U.S. banks, foreign banks and their non-U.S.
branches, U.S. branches and agencies of foreign banks and wholly-owned
banking-related subsidiaries of foreign banks. The Money Market Portfolios limit
their investments in obligations of financial institutions to institutions that
at the time of investment have total assets in excess of $1 billion, or the
equivalent in other currencies.
Each 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. Neither Portfolio may invest more than 25% of
its total assets in any other single industry.
The principal risks associated with the Money Market Portfolios are credit risk
interest rate risk and foreign investment risk. See "Risk Considerations."
Because the Portfolios invest in short-term securities with short maturities and
seek to maintain a stable net asset value of $1.00 per share, it is possible,
though unlikely, that an increase in interest rates would change the value of
your investment. The Portfolios also invest in highly rated securities to
minimize credit risk.
FIXED INCOME PORTFOLIOS
POSITIVE RETURN BOND PORTFOLIO
The Portfolio seeks to produce a positive return each calendar year regardless
of general bond market performance by investing in a portfolio of U.S.
Government Securities and corporate fixed-income securities. The Portfolio's
assets are divided into 2 components: short bonds with maturities (or average
life) 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 Adviser's 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. The average dollar-weighted portfolio
maturity of will vary between 1 and 30 years.
Under normal circumstances, the Portfolio invests at least 50% of its net assets
in U.S. Government Securities, including U.S. Treasury Securities. The Portfolio
only purchases securities that are rated, at the time of purchase, within 1 of
the 2 highest long-term rating categories assigned by an NRSRO or that are
unrated and determined by
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the Adviser to be of comparable quality. The Portfolio may invest up to 25% of
its assets in securities rated in the second highest rating category. The
Portfolio does not invest more than 25% of its total assets in zero-coupon
securities, securities with variable or floating rates of interest or
asset-backed securities.
The principal risk factors associated with the Portfolio are credit risk, market
risk, interest rate risk,and prepayment risk. See "Risk Considerations."
STABLE INCOME PORTFOLIO
The Portfolio invests in a diversified portfolio of primarily, short-term
investment-grade securities (rated in the 2 highest short-term rating categories
or of comparable quality). The Fund invests in fixed and variable rate U.S.
dollar-denominated fixed income securities of a broad spectrum of U.S. issuers ,
including U.S. Government Securities and the debt securities of financial
institutions, corporations and others.
The Portfolio's investments include:
o up to 65% of its total assets in mortgage-backed securities;
o up to 25% of its total assets in other types of asset-backed
securities;
o up to 25% of its total assets in mortgage-backed securities that are
not U.S. Government Securities; and
o up to 50% of its total assets in U.S. Government Securities
The Portfolio limits its investments in the securities issued or guaranteed by
any single agency or instrumentality of the U.S. Government, except the U.S.
Treasury, to 30% of its total assets and does not invest more than 10% of its
total assets in the securities of any other issuer.
The Portfolio invests in debt obligations with maturities (or average life in
the case of mortgage-backed and similar securities) ranging from overnight to 12
years and seeks to maintain an average dollar-weighted portfolio maturity of
between 2 and 5 years. The Portfolio's duration (measure of current value of
cash flows however, is short-term and will be maintained at 80% to 120% of that
of a 1-year U.S. Treasury Bill. Duration is an indication of a debt security's
average life that reflects the present value of the securities cash flow and is
a measure of the security's sensitivity to changes in interest rates.
The principal risk factors of investing in the Portfolio are credit risk,
interest rate risk and prepayment risk. See "Risk Considerations."
MANAGED FIXED INCOME PORTFOLIO
The Portfolio seeks consistent fixed income returns by investing primarily in
Investment Grade intermediate-term securities. The 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 Adviser emphasizes the use of intermediate maturity
securities to lessen duration and employs low risk yield enhancement techniques
to enhance return over a complete economic or interest rate cycle. Duration is
an indication of a debt security's averagw life that reflects the present value
of the security's cash flow and is a measure of the security's sensitivity to
changes in interest rates. The Adviser considers intermediate-term securities to
be those with maturities of between 2 and 20 years.
The Portfolio will limit its investment in mortgage-backed securities to not
more than 65% of its total assets and its investment in other asset-backed
securities to not more than 25% of its net assets. In addition, the Portfolio
may not invest more than 30% of its total assets in securities issued or
guaranteed by any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury.
The Portfolio invests in debt securities with maturities (or average life in the
case of mortgage-backed and similar securities) ranging from overnight to 30
years. The Portfolio normally will have an average dollar-weighted portfolio
maturity of between 3 and 12 years and duration of between 2 and 6 years.
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While not a principal strategy, the Portfolio also may invest up to 10% of its
total assets in securities issued or guaranteed by foreign governments that the
Adviser deems stable, or their subdivisions, agencies or instrumentalities; loan
or security participations; securities of supranational organizations and
Municipal Securities.
The principal risk of investing in the Portfolio are credit risk, interest rate
risk and prepayment risk. See "Risk Considerations."
STRATEGIC VALUE BOND PORTFOLIO
The Portfolio's principal strategy is to invest in a broad range of fixed-income
instruments in order to create a strategically diversified portfolio of
fixed-income investments. These investments include corporate bonds, mortgage-
and asset-backed securities, U.S. Government Securities, preferred stock,
convertible bonds and foreign bonds.
In selecting investments, the Adviser focuses on relative value as opposed to
predicting the direction of interest rates. In general, the Portfolio seeks
higher current income instruments such as corporate bonds and mortgage- and
asset-backed securities, in order to enhance returns. The Adviser believes that
this exposure enhances performance in varying economic and interest rate cycles
and avoids excessive risk concentrations. The Adviser's investment process
involves rigorous evaluation of each security, including 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. The Adviser uses this process to seek to identify securities that
represent the best relative economic value. The Adviser then evaluates the
results of the investment process against the Portfolio's objective and
purchases those securities that are consistent with the Portfolio's investment
objective.
The Portfolio particularly seeks strategic diversification. The Portfolio's
investments include:
o up to 75% of its total assets in corporate bonds;
o up to 65% of its total assets in mortgage-backed securities; and
o up to 50% of its total assets in asset-backed securities.
The Portfolio may invest in U.S. Government Securities without restriction.
The Portfolio will invest 65% of its total assets in fixed-income securities
rated, at the time of purchase, within the 3 highest rating categories by at
least 1 NRSRO, or which are unrated and determined by the Adviser to be of
comparable quality. The Portfolio may invest up to 20% of its total assets in
non-Investment Grade securities.
The Portfolio expects to maintain an average dollar-weighted maturity of between
5 and 15 years. The Portfolio's duration normally will vary between 3 and 8
years. Duration is an indication of a debt security's average life that reflects
present value of the security's cash flow and is a measure of the security's
sensitivity to changes in interest rates.
The principal risk factors of investing in Portfolio are credit risk,
interest rate risk, foreign risk and prepayment risk. See "Risk Considerations."
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EQUITY PORTFOLIOS
INDEX PORTFOLIO
The Portfolio seeks to replicate the return of the S&P 500 Index with
minimal tracking error and transaction costs. Under normal circumstances, the
Portfolio holds stocks representing 100% of the capitalization-weighted market
values of the S&P 500 Index. The Adviser generally executes portfolio
transactions for the Portfolio only to replicate the composition of the S&P 500
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 to facilitate payment of the Portfolio's expenses or
redemptions and may invest in index futures contracts to a limited extent. For
these and other reasons, the Portfolio's performance can be expected to
approximate but not equal that of the S&P 500 Index.
The principal risk factor of investing in the Portfolio is market risk. See
"Risk Considerations."
INCOME EQUITY PORTFOLIO
The Portfolio's primary strategy is to invest in the common stock of large,
high-quality domestic companies that have above-average return potential based
on current market valuations. The Portfolio primarily emphasizes investments in
securities of companies with above-average dividend income. In selecting
securities, the Adviser uses various valuation measures, including above-average
dividend yields and below industry average price-to-earnings, price-to-book and
price-to-sales ratios. Large companies are those with Market Capitalizations
greater than the median of the Russell 1000 Index.
The Portfolio may also invest in preferred stock, convertible securities and
securities of foreign companies.
The principal risk factors of investing in the Portfolio are currency risk,
foreign risk and market risk. See "Risk Considerations."
LARGE COMPANY GROWTH PORTFOLIO
The Portfolio invests primarily in large, high-quality domestic companies that
have superior growth potential. For purposes of its investments, large companies
are those with Market Capitalizations greater than the median of the Russell
1000 Index. In selecting securities, the Adviser seeks issuers whose stock is
attractively valued with fundamental characteristics that are significantly
better than the market average and support internal earnings growth capability.
The Portfolio may invest in the securities of companies whose growth potential
is generally unrecognized or misperceived by the market.
The Portfolio may invest up to 20% of its total assets in the securities of
foreign companies and may hedge against currency risk by using foreign currency
forward contracts.
The principal risk factors of investing in the Portfolio are currency risk,
foreign risk, and market risk. See "Risk Considerations."
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DISCIPLINED GROWTH PORTFOLIO
The Portfolio seeks capital appreciation by investing in common stocks of larger
companies. The Portfolio seeks higher long-term returns by investing primarily
in the common stock of companies that, in the view of the Adviser, possess above
average potential for growth. The Portfolio invests in companies with average
Market Capitalizations greater than $5 billion.
The Adviser 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 Adviser uses both quantitative and fundamental analysis.
The Adviser may consider, among other factors, 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 Adviser uses a
variety of valuation measures to determine whether the share price already
reflects any positive fundamentals identified by the Adviser. In addition to
approximately equal weighting of portfolio securities, the Adviser attempts to
constrain the variability of the investment returns by employing risk control
screens for price volatility, financial quality and valuation.
The principal risk factor of investing in the Portfolio is market risk. See
"Risk Considerations."
SMALL COMPANY GROWTH PORTFOLIO
The Portfolio invests at least 65% of its assets in the common stock of small
domestic companies that are either growing rapidly or completing a period of
significant change. Small companies are those companies with Market
Capitalizations of less than the largest stock in the Russell 2000 Index.
In selecting securities for the Portfolio, the Adviser seeks to identify
companies that are rapidly growing (usually with relatively short operating
histories) or that are emerging from a period of investor neglect by undergoing
a dramatic change. These changes may involve a sharp increase in earnings, the
hiring of new management or measures taken to close the gap between the
company's share price and takeover/asset value.
While not a principal strategy, the Portfolio may invest up to 10% of its total
assets in securities of foreign companies.
The principal risk factors of investing in the Portfolio are currency risk,
small company risk, foreign risk and market risk. See "Risk Considerations."
SMALL COMPANY VALUE PORTFOLIO
The Portfolio seeks to provide long-term capitalization by investing primarily
in smaller companies whose Market Capitalization is less than the largest stock
in the Russell 2000 Index. The Adviser focuses on securities that are
conservatively valued in the marketplace relative to the stock of comparable
companies determined by price/earnings ratios, cash flows or other measures.
Value investing provides investors with a less aggressive way to take advantage
of growth opportunities of small companies. Value investing may reduce downside
risk and offer potential for capital appreciation as a stock gains favor among
other investors and its stock price rises.
The principal risk factors of investing in the Portfolio are market risk and
small company risk. See "Risk Considerations."
SMALL CAP VALUE PORTFOLIO
The Portfolio seeks capital appreciation by investing in common stocks of
smaller companies. The Portfolio will normally invest substantially all of its
assets in securities of companies with market capitalizations that reflect the
Market Capitalizations of companies included in the Russell 2000 Index. The
Portfolio seeks higher growth rates and greater long-term returns by investing
primarily in the common stock of smaller companies that the Adviser
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believes to be undervalued and likely to report a level of corporate earnings
exceeding the level expected by investors.
The Adviser values companies 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 Adviser uses both quantitative and fundamental analysis. Among
other factors, the Adviser considers changes of earnings estimates by investment
analysts, the recent trend of company earnings reports and the fundamental
business outlook for the company.
The principal risk factors of investing in the Portfolio are market risk and
small company risk. See "Risk Considerations."
SMALL CAP INDEX PORTFOLIO
The Portfolio seeks to replicate the return of the S&P 600 Small Cap
Index with minimum tracking error and to minimize transaction costs. Under
normal circumstances, the Portfolio will hold stocks representing 100% of the
capitalization-weighted market values of the S&P 600 Small Cap Index. The
Adviser generally executes portfolio transactions only to replicate the
composition of the S&P 600 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 to
facilitate payment of the Portfolio's expenses or redemptions and may invest in
index futures contracts. For these and other reasons, the Portfolio's
performance can be expected to approximate but not equal that of the S&P 600
Small Cap Index.
The principal investment risks of investing in the Portfolio are market risk and
small company risk. See "Risk Considerations."
INTERNATIONAL PORTFOLIO
The Portfolio seeks to provide long-term capital appreciation by
investing , directly or indirectly in equity securities of
high-quality companies based outside the United States. The Adviser selects
investments on the basis of their potential for capital appreciation without
regard to current income. The Portfolio may also invest in the securities of
domestic closed-end investment companies that invest 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 are
generally 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 the
Adviser, 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.
The Portfolio may purchase preferred stock and convertible debt securities,
including convertible preferred stock. 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.
The principal risks of investing in the Portfolio are credit risk, geographic
concentration risk, market risk, currency risk, interest rate risk, prepayment
risk and foreign risk. See "Risk Considerations."
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RISK CONSIDERATIONS
GENERAL
This section describes the principal risks that may apply to a Portfolio. Each
Portfolio's exposure to these risks depends upon its specific investment
profile. See "Investment Objectives" and "Investment Policies."
CREDIT RISK
The risk that a security's credit rating will be downgraded or that the issuer
of a security will be unable to make timely payments of interest or principal or
to otherwise honor its obligations.
CURRENCY RISK
The risk that fluctuations in the exchange rates between the U.S. dollar and
foreign currencies may negatively affect a Portfolio's investments.
FOREIGN RISK
The risk that investments in issuers located in foreign countries may have
greater price volatility and less liquidity. Investments in foreign securities
also are subject to political, regulatory and diplomatic risks.
GEOGRAPHIC CONCENTRATION RISK
The risk that factors adversely affecting a Portfolio's investments in issuers
located in a state, country or region will affect the Portfolio's net asset
value more than would be the case if the Portfolio had made more geographically
diverse investments.
INTEREST RATE RISK
The risk that changes in interest rates will affect the value of a Portfolio's
investments, particularly those investments in debt or income-producing
securities. Increases in interest rates may cause the value of a Portfolio's
investments to decline. For Portfolios that invest in short-term securities, a
decline in interest rates will affect the Portfolios' yields as these securities
mature or are sold and the Portfolios purchase new short-term securities with
lower yields. The change in value for short-term securities is usually smaller
than for securities with longer maturities.
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MANAGEMENT RISK
The risk that a Portfolio's Adviser will make poor choices in selecting
securities. All actively managed Portfolios have management risk.
MARKET RISK
The risk that the value of a Portfolio's investments will fluctuate as the stock
and bond markets fluctuate and that prices overall will decline over short or
longer-term periods.
PREPAYMENT RISK
The risk that the value of mortgage-related and asset-backed securities will
decrease when mortgage loans or other obligations are prepaid due to a decline
in interest rates. These activities may force a Portfolio to invest in
securities with lower interest rates. For this and other reasons
mortgage-related and asset-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
SMALL COMPANY RISK
The risk that investments in smaller companies tend to be more volatile than
investments in large capitalization companies. In addition, smaller
capitalization companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for the sale of
small-cap stocks may be less liquid.
OTHER CONSIDERATIONS
DERIVATIVES
The Portfolios may use certain derivative instruments, such as options, swap
agreements, interest rate caps, collars, and floors, and futures contracts to
manage risk. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying assets, reference rate, or index. In
addition to other risks, derivatives involve the risk of difficulties in pricing
and valuation and the risk that changes in the value of a derivative may not
correlate perfectly with relevant assets, rates, or indices.
TEMPORARY DEFENSIVE POSITION
To respond to adverse market, economic, political, or other conditions, each
Portfolio may assume a temporary defensive position and invest without limit in
cash and cash equivalents. When a Portfolio makes temporary defensive
investments, it may not be invested so as to achieve its investment objective.
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PORTFOLIO TURNOVER
From time to time, a Portfolio may engage in active short-term trading to take
advantage of price movements affecting individual issues, groups of issues or
markets. Higher portfolio turnover rates may result in increased brokerage
costs, may negatively impact a Portfolio's performance and may result in a
possible increase in short-term capital gains or losses. Distribution of these
capital gains may have adverse tax consequences. The frequency of portfolio
transactions for each Portfolio is contained in the Portfolios' annual report
which is attached to the SAI.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1. 2000. The Advisers are addressing this matter for their
systems. The Portfolios' other service providers have informed the Trust that
they are taking similar measures. Investments in foreign companies are
particularly vulnerable to Year 2000 risk because these companies may not have
the financial resources, technology, or personnel needed to address Year 2000
readiness concerns. This matter, if not corrected, could adversely affect the
services provided to the Portfolios and could therefore, lower the value of your
Portfolio interests.
MANAGEMENT OF THE PORTFOLIOS
TRUSTEES AND OFFICERS
The business of the Trust is managed under the direction of the Board. Forum
Administrative Services, LLC ("FAdS"), each Portfolio's administrator, provides
persons satisfactory to the Board to serve as officers of the Trust. The SAI
contains general background information about each Trustee and officer of the
Trust.
INVESTMENT ADVISERS
Norwest is the Adviser of each Portfolio except International Portfolio and
International Equity Portfolio. In this capacity, Norwest makes investment
decisions for and administers each Portfolio's investment programs. Norwest is
located at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota
55479. Norwest is a subsidiary of Norwest Bank, a multi-bank holding company
that was incorporated under the laws of Delaware in 1929. Norwest Bank is a
subsidiary of Wells Fargo & Company, a national bank holding company. Norwest
provides investment advice to institutions, pension plans, and other accounts.
As of June 30, 1999, Norwest provided advisory services for over $24 billion in
assets.
Schroder is the Adviser for International Portfolio. In this capacity, Schroder
makes investment decisions for and administers the Portfolio's investment
programs. Schroder is located at 787 Seventh Avenue, New York, New York 10019.
Schroder is a wholly owned U.S. subsidiary of Schroders Incorporated, the wholly
owned U.S. subsidiary of Schroder plc, a publicly owned company arranged under
the laws of England. Schroder plc is the holding company parent of a large
worldwide group of banks and financial services companies , with associated
companies and branch and representative offices located in eighteen countries
worldwide. Schroder specializes in international investment advice. As of June
30, 1999. Schroder provided advisory services for over $36.5 billion in assets.
SUBADVISERS
Norwest and certain Portfolios have retained Subadvisers to make investment
decisions for and administer the investment programs of those Portfolios.
Norwest decides which portion of the assets of a Portfolio the Subadviser should
manage and supervises the subadvisers' performance of their duties. The
Subadvisers are:
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PORTFOLIO SUBADVISER
Positive Return Bond Portfolio Peregrine
Stable Income Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Strategic Value Bond Portfolio Galliard
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Galliard, Peregrine and Smith make investment decisions for the Portfolios
to which they act as 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.
Galliard, which is located at 800 LaSalle Avenue, Suite 2060, Minneapolis,
Minnesota 55479, is an investment advisory subsidiary of Norwest Bank and
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, 1999, Galliard provided advisory
services for over $5.4 billion in assets. Peregrine, which is located at LaSalle
Plaza, 800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55402, is an
investment adviser subsidiary of Norwest Bank and provides investment advisory
services to corporate and public pension plans, profit sharing plans,
savings-investment plans and 401(k) plans. As of June 30, 1999, Peregrine
provided advisory services for over $6.9 billion in assets. Smith, which is
located at 300 Crescent Court, Suite 750, Dallas, Texas 75201, is an investment
advisory affiliate of Norwest Bank and 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 30, 1999,
Smith provided advisory services for over $895.46 million in assets.
PORTFOLIO MANAGERS
The following persons are primarily responsible for day-to-day management of
each Portfolio. The year a portfolio manager began managing a Portfolio follows
the manager's name in parentheses.
MONEY MARKET PORTFOLIO/PRIME MONEY MARKET PORTFOLIO - David D. Sylvester (1987),
Laurie R. White (1991), Robert G. Leuty (1998). Mr. Sylvester has been
associated with Norwest or its affiliates since 1979 and is currently a Managing
Director - Reserve Asset Management. Ms. White has been associated with Norwest
or its affiliates since 1991 and is a Director - Reserve Asset Management. Mr.
Leuty has been associated with Norwest or its affiliates since 1992 and is
Senior Portfolio Manager of Norwest.
POSITIVE RETURN BOND PORTFOLIO - William D. Giese, CFA (1994)and Patricia Burns
(1998). Mr. Giese has been associated with Norwest or its affiliates since 1982.
Mr. Giese is a Senior Vice President of Peregrine, has been a portfolio manager
at Peregrine for more than ten years and has over 20 years experience in fixed
income securities management. Ms. Burns has been associated with Norwest or its
affiliates since 1983. She is a Senior Vice President of Peregrine and has been
a portfolio manager at Peregrine for more than ten years.
STABLE INCOME PORTFOLIO - John Huber (1998). Mr. Huber has been associated with
Norwest or its affiliates since 1991. Mr. Huber has been a portfolio manager and
Corporate Trading Specialist at Galliard since 1995 and has been in investment
management since 1991.
STRATEGIC VALUE BOND PORTFOLIO - Richard Merriam, CFA (1997), John Huber (1998)
and David Yim (1998). Mr. Merriam has been associated with Norwest or its
affiliates since 1995. Mr. Merriam has been a managing partner of Galliard since
1995 and is responsible for investment process and strategy. Mr. Merriam was
previously chief investment officer of Insight Investment Management. For a
description of Mr. Huber, see "Stable Income
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Portfolio." Mr. Yim has been associated with Norwest or its affiliates since
1995. Mr. Yim has been a Portfolio Manager and Director of Investment Research
at Galliard since 1995 and previously worked for American Express Financial
Advisors as a research analyst.
MANAGED FIXED INCOME PORTFOLIO - Richard Merriam, CFA (1995) and Ajay Mirza
(1998). For a description of Mr. Merriam, see "Strategic Value Bond Portfolio."
Mr. Mirza has been associated with Norwest or its affiliates since 1995. Mr.
Mirza has been a Portfolio Manager and Mortgage Specialist with Galliard since
1995. Before joining Galliard, Mr. Mirza was a research analyst at Insight
Investment Management and at Lehman Brothers.
SMALL CAP INDEX PORTFOLIO - David D. Sylvester (1998) and Laurie R. White
(1998). For a description of Mr. Sylvester and Ms. White, see "Money Market
Portfolio/Prime Money Market Portfolio."
INDEX PORTFOLIO - David D. Sylvester (1996) and Laurie R. White (1996). For a
description of Mr. Sylvester and Ms. White, see "Money Market Portfolio/Prime
Money Market Portfolio."
INCOME EQUITY PORTFOLIO - David L. Roberts, CFA (1994) and Gary J. Dunn (1994).
Mr. Roberts has been associated with Norwest or its affiliates since 1972. Mr.
Roberts is a Managing Director, Equities of Norwest. Mr. Dunn has been
associated with Norwest or its affiliates since 1979. Mr. Dunn is a Director of
Institutional Investments of Norwest.
LARGE COMPANY GROWTH PORTFOLIO - John S. Dale, CFA (1994) and Gary E. Nussbaum,
CFA (1998). Mr. Dale has been associated with Norwest or its affiliates since
1968. Mr. Dale is a Senior Vice President of Peregrine since 1968. Mr. Nussbaum
has been associated with Norwest since 1990. Mr. Nussbaum is a Senior Vice
President of
Peregrine.
DISCIPLINED GROWTH PORTFOLIO/SMALL CAP VALUE PORTFOLIO - Stephen S. Smith, CFA.
Mr. Smith has been associated with Norwest since 1997. Mr. Smith has been a
Chief Investment Officer and principal of Smith Group since 1995. Mr. Smith
previously served as senior portfolio manger with NationsBank and in several
capacities with AIM Management Company's Summit Fund.
SMALL COMPANY GROWTH PORTFOLIO - Robert B. Mersky, CFA (1994) and Paul E. von
Kuster, CFA (1998). Mr. Mersky has been associated with Norwest or its
affiliates since 1968. Mr. Mersky is the President of Peregrine. Mr. von Kuster
has been associated with Norwest or its affiliates since 1972. Mr. von Kuster is
a Senior Vice President of Peregrine.
SMALL COMPANY VALUE PORTFOLIO - Tasso H. Coin, Jr. (1995) and Douglas G. Pugh,
CFA (1997). Mr. Coin has been associated with Norwest or its affiliates since
1995. 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. Mr. Pugh has
been associated with Norwest or its affiliates since 1997. Mr. Pugh is a Senior
Vice President of Peregrine. Before joining Peregrine, Mr. Pugh was a senior
equity analyst and portfolio manager for Advantus Capital Management and an
analyst with Kemper Corporation.
INTERNATIONAL PORTFOLIO - Michael Perelstein (1997). Mr. Perelstein has been
associated with Schroder or its affiliates since 1997. Mr. Perelstein has been a
Senior Vice President of Schroder since January 1997. Previously, Mr. Perelstein
was a Managing Director at MacKay Shields.
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ADVISORY FEES
Schroder receives an advisory fee from International Portfolio and Norwest
receives an advisory fee from each other Portfolio in the following amounts:
<TABLE>
<S> <C>
PORTFOLIO INVESTMENT ADVISORY FEE
(% OF AVERAGE DAILY NET ASSETS)
Prime Money Market Portfolio 0.40% of the first $300 million of assets;
0.36% for next $400 million;
0.32% of remaining assets
Money Market Portfolio 0.20% of the first $300 million of assets;
0.16% for next $400 million;
0.12% of remaining assets
Stable Income Portfolio 0.30%
Managed Fixed Income Portfolio 0.35%
Positive Return Bond Portfolio 0.35%
Strategic Value Bond Fund 0.50%
Index Portfolio 0.15%
Income Equity Portfolio 0.50%
Large Company Growth Portfolio 0.65%
Disciplined Growth 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 0.25%
International Portfolio 0.45%
</TABLE>
For the fiscal year ended May 31, 1999, Norwest received the full fee from each
Portfolio except Money Market Portfolio. Due to fee waivers, Norwest received
0.10% of the average daily net assets of Money Market Portfolio and Schroder
received 0.37% of the average daily net assets of International Portfolio for
the fiscal year ended May 31, 1999. For the fiscal year ended May 31, 1999,
Norwest also received a total advisory fee of 0.44% of the average daily net
assets of Prime Money Market Portfolio.
Norwest (and not the Portfolios) pays each Subadviser a fee for their investment
subadvisory services. This compensation does not increase the amount paid by a
Portfolio to Norwest for investment advisory services.
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 (except 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 and International Equity Portfolio, Norwest receives a
fee at an annual rate of 0.07% of the Portfolio's average daily net assets.
Norwest has appointed Bank of New York as the sub-custodian for International
Portfolio, which employs foreign subcustodians to maintain International
Portfolio's foreign assets outside the United States.
OTHER SERVICE PROVIDERS
Forum companies provide services to each Portfolio. As of June 30, 1999, Forum
provided administrative and distribution services to investment companies and
collective investment funds with assets of approximately $73 billion.
Forum Financial Services, Inc., a registered broker-dealer and member of the
National Association of Securities Dealers, Inc., is the placement agent of each
Portfolio's Interests. The placement agent sells interests of each Portfolio on
behalf of the Trust.
Forum Administrative Services, LLC provides administrative services to each
Portfolio and Forum Accounting Services, LLC is each Portfolio's unitholder and
portfolio accountant.
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EXPENSES
Each Portfolio pays for all of its expenses. Each Portfolio's expenses are
comprised of its own expenses as well as Trust expenses that are allocated among
the Portfolios of the Trust in proportion to their average net assets or as
otherwise determined by the Board.
DESCRIPTION OF BENEFICIAL INTERESTS
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 November 1, 1994, as amended May 21, 1999. The Trust offers
units of Interest without any sales charge and units may be redeemed without
charge.
Interests in the Trust are divided into 21 separate diversified series, each
having a distinct investment objective and distinct investment policies. The
Portfolios are 16 of those series. The Trust is empowered to establish, without
investor approval, additional series that may have different investment
objectives and policies.
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.
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. Interests in a Portfolio may not be transferred,
but you may withdraw all or any portion of your investment at any time at net
asset value ("NAV"). In determining the outcome of interestholder votes, the
Trust normally counts votes on an Interest by Interest basis. This means that
interestholders of a Portfolio with a comparatively high net asset valueswill
have a comparatively smaller impact on the outcome of votes by all of the
Portfolios than do shareholders of a Portfolio with a comparatively low net
asset value.
From time to time, an investor may own a large percentage of Interests of a
Portfolio and accordingly, may be able to greatly affect (if not determine) the
outcome of an interestholder vote.
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 to
hold and has no current intention of holding 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.
PURCHASE OF INTERESTS
Interests in a Portfolio 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. You may purchase an Interest in a Portfolio without a sales charge
at the net asset value ("NAV") next calculated after the Portfolio receives your
order in proper form. A Portfolio can not accept orders that request a
particular day or price for the transaction or any other special condition.
The Portfolios do not issue certificates of Interest.
The NAV of each non-money market Portfolio is determined as of 4:00 P.M.,
Eastern Time ("Valuation Time"), on all weekdays except when the New York Stock
Exchange is closed ("Business Day"). A Money Market Portfolio
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determines its net asset value as of 3:00 P.M., Eastern Time, on each Business
Day. The time at which NAV is calculated may change in case of an emergency. A
Portfolio's NAV per Interest is calculated by taking the market value of all
securities owned by the Portfolio (plus all other assets such as cash),
subtracting the liabilities, and dividing the results (net assets ) by the
number of Interests outstanding. Each Portfolio, except the Money Market
Portfolios, value portfolio securities at current market value if market
quotations are readily available. If market quotations are not readily
available, a Portfolio values those securities at fair value as determined by or
pursuant to procedures adopted by the Board.
In order to maintain net asset value per Interest at $1.00, the Money Market
Portfolios value their portfolio securities at amortized cost. Amortized cost
valuation involves valuing an instruments at its cost and then assuming a
constant amortization to maturity of any discount or premium. If the market
value of a Money Market Portfolio deviates more than 1/2 of 1% from the value
determined on the basis of amortized cost, the Board will consider whether to
take any action to prevent any material affect on Interest holders.
You may add to or reduce you investment in a Portfolio. At the Valuation Time on
each Business Day, the value of your Interest in a Portfolio will be determined
by multiplying the Portfolio's NAV by the percentage, effective for that day,
that represents your share of the aggregate Interests in the Portfolio. Any
additions to or withdrawals of those interests that are to be effected on that
day will then be effected. Your share of the aggregate Interests in a Portfolio
then will be recomputed by dividing the value of your 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 by 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
your respective interest in the Portfolio as of the Valuation Time on the
following Business Day.
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. Trading in foreign
securities, however, may not take place on all Business Days or may take place
on days other than Business Days. Accordingly, the NAV of a Portfolio's
Interests may change on days when you will be unable to purchase or redeem
Interests. The determination of the prices of foreign securities may be based on
the latest market quotations for the securities markets. If events occur that
affect the securities' value after the close of the markets on which they trade,
the Portfolios may make adjustments to the value of the securities for purposes
of determining NAV.
For purposes of determining NAV, the Portfolios convert all assets and
liabilities denominated in foreign currencies 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 amount 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 exclusive placement agent for the Trust is FFSI. Please contact FFSI at Two
Portland Square, Portland, Maine 04101, (207) 879-1900, for a complete
subscription package. The Trust reserves the right to refuse any subscription
for any reason. Forum receives no compensation for serving as the exclusive
placement agent for the Trust.
REDEMPTION OR REPURCHASE OF INTERESTS
You may withdraw all or any portion of your investment in the Portfolio at the
NAV next determined after a withdrawal request in proper form is received by a
Portfolio. Normally, a Portfolio will send proceeds of a withdrawal in federal
funds on the business day after the withdrawal is effected, but in any event
within a week. Delays may occur in case of a very large redemption, excessive
trading or during unusual market conditions. A
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<PAGE>
Portfolio may delay sending redemption proceeds until it has collected payment
for the interests you are selling, which may take up to 15 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.
Each Portfolio reserves the right to pay redemption securities proceeds in
portfolio securities rather than cash. These redemptions "in kind" normally
occur if the amount to be redeemed is large enough to affect a Portfolio's
operations (for example, if it represents more than 1% of the Portfolio's
assets).
INFORMATION REGARDING NET INCOME AND TAXES
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 Interests in the Portfolio.
Each Portfolio operates so that it should 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. Your share of a
Portfolio's distribution of capital gain is taxable to you as long-term capital
gain regardless of how long you have held your Portfolio Interests. 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.
The sale of Portfolio Interests is a taxable event for federal income tax
purposes.
Investor inquiries may be directed to FFSI.
PENDING LEGAL PROCEEDINGS
None.
OTHER INFORMATION
PORTFOLIO REORGANIZATIONS
On April 21, 1999, the Board approved an Agreement and Plan of Reorganization
whereby each of Positive Return Bond Portfolio, Stable Income Portfolio, Managed
Fixed Income Portfolio, Strategic Value Bond Portfolio, Index Portfolio, Income
Equity Portfolio, Large Company Growth Portfolio, Disciplined Growth Portfolio,
Small Company Growth Portfolio, Small Company Value Portfolio, Small Cap Value
Portfolio, Small Cap Index Portfolio and International Portfolio will reorganize
into a separate series of Wells Fargo Core Trust, another open-end management
investment company, that has substantially similar investment objectives and
policies. The reorganization is part of a plan to consolidate the mutual fund
families of Wells Fargo & Company and Norwest Corporation following last
November's merger and to centralize their management as well as the management
of the related current portfolios of Core Trust under one Board of Directors.
Pursuant to the Trust's Trust Instrument, the reorganization does not require
the approval of the Portfolios' interestholders
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On August 13, 1999, the Board approved the closing of Money Market Portfolio and
Prime Money Market Portfolio after the redemption of the interests of all
interestholders.
It is anticipated that the closing of Money Market Portfolio and Prime Money
Market Portfolio as well as the reorganization of each remaining Portfolio will
occur within the next few months. You will not be able to purchase interests of
the Wells Fargo Core Trust portfolios until after the completion of the
reorganization.
You should be aware that the expense ratios for Income Equity Portfolio,
International Portfolio, Large Company Growth Portfolio, Managed Fixed Income
Portfolio, Positive Return Portfolio, and Stable Income Portfolio are expected
to increase by approximately 0.21%, 0.31%, 0.06%,0.09%, 0.09%and 0.13%,
respectively. THE REORGANIZATION IS EXPECTED TO BE A TAX-FREE TRANSACTION.
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PART B
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1999
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, INDEX PORTFOLIO, INCOME EQUITY
PORTFOLIO, LARGE COMPANY GROWTH 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") of Core
Trust (Delaware) (the "Trust"), a registered, open-end management investment
company. This SAI supplements Part A of the Private Placement Memorandum ("Part
A") dated October 1, 1999, 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 Part A 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
Introduction..................................................................2
Additional Information Regarding Investments and Strategies..........4
Risk Considerations.................................................18
Investment Limitations..............................................23
Management of the Trust.............................................27
Control Persons and Principal Holders of Securities.................30
Investment Advisory and Other Services..............................30
Brokerage Allocation and Other Practices............................33
Capital Stock and Other Securities..................................35
Purchase, Redemption and Pricing of Securities......................35
Tax Status..........................................................36
Underwriters........................................................37
Financial Statements................................................37
Appendix A: Descriptions of Securities Ratings....................A-1
Appendix B: Miscellaneous Tables..................................B-1
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THE SECURITIES OF THE TRUST DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER (1) THE TERMS OF THE TRUST 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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INTRODUCTION
THE PORTFOLIOS
Index Portfolio and International Portfolio commenced operations on November 10,
1994. Positive Return Bond Portfolio, Stable Income Portfolio, Managed Fixed
Income Portfolio, Income Equity Portfolio, Large Company Growth 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, and Small Cap Value Portfolio commenced operations
on October 1, 1997 while Small Cap Index Portfolio commenced operations on April
9, 1998. 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.
DEFINITIONS
"Advisers" or "Investment Advisers" shall mean, collectively, Norwest, Schroder
and Subadvisers.
"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.
"Custodian" shall mean Norwest acting in its capacity as custodian of a
Portfolio.
"Equity Portfolios" shall mean Disciplined Growth Portfolio, Income Equity
Portfolio, Index Portfolio, Large Company Growth Portfolio, Small Cap Value
Portfolio, Small Company Stock Portfolio, Small Company Growth Portfolio and
International Portfolio.
"FAdS" shall mean Forum Administrative Services, Limited Liability Company, the
Trust's administrator.
"Fitch" shall mean Fitch Investors Service, L.P.
"Fixed Income Portfolios" shall mean Managed Fixed Income Portfolio, Positive
Return Bond Portfolio, Stable Income Portfolio, Strategic Value Bond Portfolio
and Total Return Bond Portfolio.
"FFSI" shall mean Forum Financial Services, LLC, a registered broker-dealer and
placement agent of the Trust.
"Forum Accounting" shall mean Forum Accounting Services, Limited Liability
Company, the Trust's fund accountant.
"Galliard" shall mean Galliard Capital Management, Inc.
"Index" shall mean the Standard & Poor's 500 Composite Stock Index.(R)
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"Index Futures" shall mean futures contracts that relate to broadly-based stock
indices.
"Money Market Portfolios" shall mean Prime Money Market Portfolio and Money
Market Portfolio.
"Moody's" shall mean Moody's Investors Service, Inc.
"Norwest" shall mean Norwest Investment Management, Inc., a subsidiary of
Norwest Bank.
"Norwest Bank" shall mean Norwest Bank Minnesota, N.A., a subsidiary of Norwest
Corporation.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"Peregrine" shall mean Peregrine Capital Management, Inc.
"Portfolio" shall mean each of the following sixteen separate portfolios of the
Trust to which this Private Placement Memorandum relates: Prime Money Market
Portfolio, Money Market Portfolio, Positive Return Bond Portfolio, Stable Income
Portfolio, Managed Fixed Income Portfolio, Strategic Value Bond Portfolio, Total
Return Bond Portfolio, Disciplined Growth Portfolio, Index Portfolio, Income
Equity Portfolio, Large Company Growth Portfolio, SmallCap Value Portfolio,
Small Company Stock Portfolio, Small Company Value Portfolio and International
Portfolio.
"Schroder" shall mean Schroder Investment Management North America, Inc.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's , A Division of The McGraw Hill Companies.
"Smith" shall mean Smith Asset Management Group, L.P.
"Subadvisers" or "Investment Subadvisers" shall mean, collectively, Galliard,
Peregrine, and Smith.
"Trust" shall mean Core Trust (Delaware), an open-end, management investment
company registered under the 1940 Act.
"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.
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ADDITIONAL INFORMATION REGARDING INVESTMENTS AND STRATEGIES
GENERAL INFORMATION
This section discusses in greater detail than the Part A certain of the
investments the Portfolios may make. A Portfolio will make only those
investments described below that are in accordance with its investment
objectives and policies.
Each Portfolio's investment objective and all investment policies of the
Portfolio that are designated as fundamental may not be changed without approval
by the lesser of: (i) more than 50% of the outstanding interests of the
Portfolio, or (ii) 67% or more of the interests present or represented at an
investors' meeting, if more than 50% of the outstanding interests of the
Portfolio are present or represented at the meeting in person or by proxy. A
portfolio may change any other investment policy upon appropriate notice to
investors.
EQUITY SECURITIES
Equity securities include common stock, preferred stock, convertible securities,
warrants, depositary receipts, shares of closed-end investment companies and
equity-related securities. The market value of all securities, particularly
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth. Overall economic and market conditions also impact an equity
security's price. The market value of an equity security also may fluctuate
based on changes in a company's financial condition. It is possible that a
Portfolio may experience a substantial or complete loss on an individual equity
investment.
Equity securities owned by a Portfolio may be traded on a securities exchange or
in the over-the-counter market and may not be traded every day or in the volume
typical of securities traded on a major national securities exchange. As a
result, disposition by a Portfolio of equity securities to meet redemptions 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 an extended period of time.
COMMON STOCK. Common stock represents an equity (ownership) interest in a
company, and usually possesses voting rights and earns dividends. Common
stockholders are not creditors of the company, but rather, upon liquidation of
the company are entitled to their pro rata share of the company's assets after
creditors and, if applicable, preferred stockholders are paid. Dividends on
common stock are not fixed but are declared at the discretion of the issuer.
Common stock generally represents the riskiest investment in a company. In
addition, common stock generally has the greatest appreciation and depreciation
potential because increases and decreases in earnings are usually reflected in a
company's stock price.
PREFERRED STOCK. Preferred stock is a class of stock having a preference over
common stock as to the payment of dividends and the recovery of investment
should a company be liquidated. Preferred stock, however, is usually junior to
the debt securities of the issuer. Preferred stock typically does not possess
voting rights and its market value may change based on changes in interest
rates.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities,
preferred stock or other securities that may be converted into or exchanged for
a given amount of common stock of the same or a different issuer during a
specified period of time at a specified price or formula. A convertible security
entitles the holder to receive interest on debt or the dividend on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities ordinarily provide a stream
of income with generally higher yields than those of common stock of the same or
similar issuers, but lower than the yield of nonconvertible debt. Convertible
securities rank senior to common stock in a company's capital structure but are
usually subordinated to comparable nonconvertible securities. By investing in
convertible securities, a Portfolio obtains the right to benefit from the
capital
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appreciation potential in the underlying common stock upon the exercise of the
conversion right, while earning higher current income than could be available if
the stock was purchased directly.
In general, the value of a convertible security is the higher of its investment
value (its value as a fixed income security) and its conversion value (the value
of the underlying shares of common stock if the security is converted). As a
fixed income security, the value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The credit standing of the issuer and other factors also may have an effect on
the convertible security's investment value. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. Generally, a convertible security's conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price of
the convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security generally will sell at a premium over
its conversion value determined by the extent to which investors place value on
the right to acquire the underlying common stock while holding a fixed income
security.
Because convertible securities are typically issued by smaller capitalized
companies whose stock price may be volatile, the price of a convertible security
may reflect variations in the price of the underlying common stock in a way that
nonconvertible debt does not. Also, while convertible securities generally have
higher yields than common stock, they have lower yields than comparable
nonconvertible securities and are subject to less fluctuations in value than
underlying stock since they have fixed income characteristics. A convertible
security may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. If a convertible
security is called for redemption, the Portfolio will be required to permit the
issuer to redeem the security, convert it into the underlying common stock or
sell it to a third party.
WARRANTS. Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to purchase a given number of shares of
common stock at a specified price, usually during a specified period of time.
The price usually represents a premium over the applicable market value of the
common stock at the time of the warrant's issuance. Warrants have no voting
rights with respect to the common stock, receive no dividends and have no rights
with respect to the assets of the issuer. Warrants do not pay a fixed dividend.
Investments in warrants involve certain risks, including the possible lack of a
liquid market for the resale of the warrants, potential price fluctuations as a
result of speculation or other factors and failure of the price of the common
stock to rise. A warrant becomes worthless if it is not exercised within the
specified time period.
EQUITY-RELATED SECURITIES. Equity-related securities are securities whose
interest and/or principal payment obligations are linked to a specified index of
equity securities, or determined pursuant to specific formulas. A Portfolio may
invest in these instruments when the securities provide a higher amount of
dividend income than is available from a company's common stock. The amount
received by an investor at maturity of these securities is not fixed but is
based on the price of the underlying common stock, which may rise or fall.
Adverse changes in the securities markets may reduce interest payments made
under, and/or the principal of, equity-linked securities held by a Portfolio. In
addition, it is not possible to predict how equity-related securities will trade
in the secondary market or whether the market for the securities will be liquid.
DEPOSITARY RECEIPTS. A depositary receipt is a receipt for shares of a
foreign-based company that entitles the holder to distributions on the
underlying security. Depositary receipts include sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other similar global instruments. ADRs typically are issued by a U.S. bank or
trust company, evidence ownership of underlying securities issued by a foreign
company, and are designed for use in U.S. securities markets. EDRs (sometimes
called Continental Depositary Receipts) are receipts issued by a European
financial institution evidencing an arrangement similar to that of ADRs, and are
designed for use in
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European securities markets. The Portfolios invest in depositary receipts in
order to obtain exposure to foreign securities markets.
Unsponsored depositary receipts may be created without the participation of the
foreign issuer. Holders of these receipts generally bear all the costs of the
depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depositary receipt. The bank or trust company depositary of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
CLOSED-END INVESTMENT COMPANIES. International Portfolio may invest in the
securities of closed-end investment companies that invest primarily in foreign
securities. Because of restrictions on direct investment by U.S. entities in
certain countries, other investment companies may provide the most practical or
only way for the Portfolio to invest in certain markets. The Portfolio will
invest in such companies when, in the Adviser's judgment, the potential benefits
of the investment justify the payment of any applicable premium or sales charge.
Other investment companies incur their own fees and expenses.
FIXED INCOME SECURITIES
Fixed income securities include corporate debt obligations, U.S. Government
Securities, municipal securities, mortgage-related securities, asset-backed
securities, guaranteed investment contracts, zero coupon securities, variable
and floating rate securities, financial institution obligations, commercial
paper, and participation interests.
CORPORATE DEBT OBLIGATIONS. Corporate debt obligations include corporate bonds,
debentures, notes, commercial paper and other similar corporate debt
instruments. Companies use these instruments to borrow money from investors. The
issuer pays the investor a fixed or variable rate of interest and must repay the
amount borrowed at maturity. Companies issue commercial paper (short-term
unsecured promissory notes) to finance their current obligations. Commercial
paper normally has a maturity of less than 9 months.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities include securities issued
by the U.S. Treasury and by U.S. Government agencies and instrumentalities. U.S.
Government Securities may be supported by the full faith and credit of the
United States (e.g., mortgage-related securities and certificates of the
Government National Mortgage Association and securities of the Small Business
Administration); by the right of the issuer to borrow from the U.S. Treasury
(e.g., Federal Home Loan Bank securities); by the discretionary authority of the
U.S. Treasury to lend to the issuer (e.g., Fannie Mae (formerly the Federal
National Mortgage Association) securities); or solely by the creditworthiness of
the issuer (e.g., Federal Home Loan Mortgage Corporation securities).
Holders of U.S. Government Securities not backed by the full faith and credit of
the United States must look principally to the agency or instrumentality issuing
the obligation for repayment and may not be able to assert a claim against the
United States in the event that the agency or instrumentality does not meet its
commitment. There is no assurance that the U.S. Government will support
securities not backed by its full faith and credit. Neither the U.S. Government
nor any of its agencies or instrumentalities guarantees the market value of the
securities they issue.
MUNICIPAL SECURITIES. The states, territories and possessions of the United
States, their political subdivisions (such as cities, counties and towns) and
various authorities (such as public housing or redevelopment authorities),
instrumentalities, public corporations and special districts (such as water,
sewer or sanitation districts) issue municipal securities. In addition,
municipal securities include securities issued by or on behalf of public
authorities to finance various privately operated facilities, such as industrial
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development bonds, that are backed only by the assets and revenues of the
non-governmental user (such as hospitals and airports).
Municipal securities are issued to obtain funds for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities are
generally classified as bonds, notes and leases. Municipal securities may be
zero-coupon securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable from revenue derived from a particular facility,
class of facilities or the proceeds of a special excise tax or other specific
revenue source but not from the issuer's general taxing power. Many of these
bonds are additionally secured by a debt service reserve fund which can be used
to make a limited number of principal and interest payments should the pledged
revenues be insufficient. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Private activity bonds and industrial revenue bonds do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Municipal
bonds may also be moral obligation bonds, which are normally issued by special
purpose public authorities. If the issuer is unable to meet its obligations
under the bonds from current revenues, it may draw on a reserve fund that is
backed by the moral commitment (but not the legal obligation) of the state or
municipality that created the issuer.
Municipal bonds meet longer term capital needs of a municipal issuer and
generally have maturities of more than one year when issued. Municipal notes are
intended to fulfill the short-term capital needs of the issuer and generally
have maturities not exceeding one year. They include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, construction loan notes and
tax-exempt commercial paper. Municipal notes also include longer term issues
that are remarketed to investors periodically, usually at one year intervals or
less. Municipal leases generally take the form of a lease or an installment
purchase or conditional sale contract. Municipal leases are entered into by
state and local governments and authorities to acquire equipment and facilities
such as fire and sanitation vehicles, telecommunications equipment and other
capital assets. Leases and installment purchase or conditional sale contracts
(which normally provide for title to the leased asset to pass eventually to the
government issuer) have evolved as a means for governmental issuers to acquire
property and equipment without being required to meet the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Generally, a
Portfolio will invest in municipal lease obligations through certificates of
participation.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities represent interests in
a pool of mortgage loans originated by lenders such as commercial banks, savings
associations and mortgage bankers and brokers. Mortgage-related securities may
be issued by governmental or government-related entities or by non-governmental
entities such as special purpose trusts created by commercial lenders.
Pools of mortgages consist of whole mortgage loans or participations in mortgage
loans. The majority of these loans are made to purchasers of 1-4 family homes.
The terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, the Portfolios may purchase pools of adjustable-rate
mortgages, growing equity mortgages, graduated payment mortgages and other
types. Mortgage poolers apply qualification standards to lending institutions
which originate mortgages for the pools as well as credit standards and
underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.
Mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or on specified call dates. Most
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mortgage-related securities, however, are pass-through securities, which means
that investors receive payments consisting of a pro-rata share of both principal
and interest (less servicing and other fees), as well as unscheduled
prepayments, as loans in the underlying mortgage pool are paid off by the
borrowers. Additional prepayments to holders of these securities are caused by
prepayments resulting from the sale or foreclosure of the underlying property or
refinancing of the underlying loans. As prepayment rates of individual pools of
mortgage loans vary widely, it is not possible to predict accurately the average
life of a particular mortgage-related security. Although mortgage-related
securities are issued with stated maturities of up to forty years, unscheduled
or early payments of principal and interest on the mortgages may shorten
considerably the securities' effective maturities. See "Risk Considerations."
GOVERNMENT AND AGENCY MORTGAGE-RELATED SECURITIES. The principal issuers or
guarantors of mortgage-related securities are the Government National Mortgage
Association ("GNMA"), Fannie Mae ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). GNMA, a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development ("HUD"), creates pass-through
securities from pools of government guaranteed (Federal Housing Authority or
Veterans Administration) mortgages. The principal and interest on GNMA
pass-through securities are backed by the full faith and credit of the U.S.
Government.
FNMA, which is a U.S. Government-sponsored corporation owned entirely by private
stockholders that is subject to regulation by the Secretary of HUD, and FHLMC, a
corporate instrumentality of the U.S. Government, issue pass-through securities
from pools of conventional and federally insured and/or guaranteed residential
mortgages. FNMA guarantees full and timely payment of all interest and
principal, and FHMLC guarantees timely payment of interest and ultimate
collection of principal of its pass-through securities. Mortgage-related
securities from FNMA and FHLMC are not backed by the full faith and credit of
the U.S. Government.
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES. Mortgage-related securities
offered by private issuers include pass-through securities comprised of pools of
conventional residential mortgage loans; mortgage-backed bonds, which are
considered to be debt obligations of the institution issuing the bonds and are
collateralized by mortgage loans; and bonds and collateralized mortgage
obligations that are collateralized by mortgage-related securities issued by
GNMA, FNMA or FHLMC or by pools of conventional mortgages of multi-family or of
commercial mortgage loans.
Privately-issued mortgage-related securities generally offer a higher rate of
interest (but greater credit and interest rate risk) than securities issued by
U.S. Government issuers because there are no direct or indirect governmental
guarantees of payment. Many non-governmental issuers or servicers of
mortgage-related securities guarantee or provide insurance for timely payment of
interest and principal on the securities. The market for privately-issued
mortgage-related securities is smaller and less liquid than the market for
mortgage-related securities issued by U.S. government issuers.
STRIPPED MORTGAGE-RELATED SECURITIES. Stripped mortgage-related securities are
multi-class mortgage-related securities that are created by separating the
securities into their principal and interest components and selling each piece
separately. Stripped mortgage-related securities are usually structured with two
classes that receive different proportions of the interest and principal
distributions in a pool of mortgage assets. The market values of these
securities are extremely sensitive to prepayment rates.
ADJUSTABLE RATE MORTGAGE SECURITIES. Adjustable rate mortgage securities
("ARMs") are pass-through securities representing interests in pools of mortgage
loans with adjustable interest rates that are reset at periodic intervals,
usually by reference to some interest rate index or market interest rate, and
that may be subject to certain limits. Although the rate adjustment feature may
reduce sharp changes in the value of adjustable rate securities, these
securities can change in value based on changes in market interest rates or
changes in the issuer's creditworthiness. Changes in the interest rates on ARMs
may lag behind changes in prevailing market interest rates. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value
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when market interest rates fall. A Portfolio could suffer some principal loss if
the Portfolio sold the securities before the interest rates on the underlying
mortgages were adjusted to reflect current market rates. Some adjustable rate
securities (or the underlying mortgages) are subject to caps or floors, that
limit the maximum change in interest rates during a specified period or over the
life of the security.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are multiple-class debt obligations that are fully collateralized by
mortgage-related pass-through securities or by pools of mortgages ("Mortgage
Assets"). Payments of principal and interest on the Mortgage Assets are passed
through to the holders of the CMOs as they are received, although certain
classes (often referred to as "tranches") of CMOs have priority over other
classes with respect to the receipt of mortgage prepayments.
Multi-class mortgage pass-through securities are interests in trusts that hold
Mortgage Assets and that have multiple classes similar to those of CMOs.
Payments of principal of and interest on the underlying Mortgage Assets (and in
the case of CMOs, any reinvestment income thereon) provide funds to pay debt
service on the CMOs or to make scheduled distributions on the multi-class
mortgage pass-through securities. Parallel pay CMOs are structured to provide
payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. Planned amortization class mortgage-related
securities ("PAC Bonds") are a form of parallel pay CMO. PAC Bonds are designed
to provide relatively predictable payments of principal provided that, among
other things, the actual prepayment experience on the underlying mortgage loans
falls within a contemplated range. CMOs may have complicated structures and
generally involve more risks than simpler forms of mortgage-related securities.
Delinquency or loss in excess of that covered by credit enhancement protection
could adversely affect the return on an investment in such a security.
The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a "Z-tranche"). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increases the face amount of the security at a
compounded rate, but is not paid to the bond holder. After all previous tranches
are retired, accrual bond holders start receiving cash payments that include
both principal and continuing interest. The market value of accrual bonds can
fluctuate widely and their average life depends on the other aspects of the CMO
offering. Interest on accrual bonds is taxable when accrued even though the
holders receive no accrual payment. The Funds distribute all of their net
investment income, and may have to sell portfolio securities to distribute
imputed income, which may occur at a time when an Adviser would not have chosen
to sell such securities and which may result in a taxable gain or loss.
CREDIT ENHANCEMENTS. To lessen the effect of the failures by obligors on
Mortgage Assets to make payments, CMOs and other mortgage-related securities may
contain elements of credit enhancement, consisting of either (1) liquidity
protection or (2) protection against losses resulting after default by an
obligor on the underlying assets and allocation of all amounts recoverable
directly from the obligor and through liquidation of the collateral. This
protection may be provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties, through various
means of structuring the transaction or through a combination of these methods.
The Funds will not pay any additional fees for credit enhancements for
mortgage-related securities, although the credit enhancement may increase the
costs of the mortgage-related securities. Delinquency or loss in excess of that
covered by credit enhancement protection could adversely affect the return on an
investment in such a security.
ASSET-BACKED SECURITIES. Asset-backed securities have structural characteristics
similar to mortgage-related securities but have underlying assets that are not
mortgage loans or interests in mortgage loans. Asset-backed securities represent
fractional interests in, or are secured by and payable from, pools of assets
such as motor vehicle installment sales contracts, installment loan contracts,
leases of various types of real and personal property and receivables from
revolving credit (e.g., credit card) agreements. Assets are securitized through
the use of trusts and special purpose corporations that issue securities that
are often
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backed by a pool of assets representing the obligations of a number of different
parties. Asset-backed securities have structures and characteristics similar to
those of mortgage-related securities and, accordingly, are subject to many of
the same risks, although often, to a greater extent. See "Risk Considerations."
No Portfolio may invest more than 10% of its net assets in asset-backed
securities that are backed by a particular type of credit, (e.g., credit card
receivables).
FOREIGN GOVERNMENT AND SUPRANATIONAL ORGANIZATIONS DEBT SECURITIES. A Fund may
invest in fixed income securities issued by the governments of foreign countries
or by those countries' political subdivisions, agencies or instrumentalities as
well as by supranational organizations such as the International Bank for
Reconstruction and Development and the Inter-American Development Bank if the
Adviser believes that the securities do not present risks inconsistent with the
Fund's investment objective.
GUARANTEED INVESTMENT CONTRACTS. Guaranteed investment contracts ("GICs") are
issued by insurance companies. In purchasing a GIC, a Portfolio contributes cash
to the insurance company's general account and the insurance company then
credits to the Portfolio's deposit fund on a monthly basis guaranteed interest
at a specified rate. The GIC provides that this guaranteed interest will not be
less than a certain minimum rate. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it. There is no
secondary market for GICs and, accordingly, GICs are generally treated as
illiquid investments. GICs are typically unrated.
ZERO-COUPON SECURITIES. Zero-coupon securities are debt obligations that are
issued or sold at a significant discount from their face value and do not pay
current interest to holders prior to maturity, a specified redemption date or
cash payment date. The discount approximates the total interest the securities
will accrue and compound over the period to maturity or the first interest
payment date at a rate of interest reflecting the market rate of interest at the
time of issuance. The original issue discount on the zero-coupon securities must
be included ratably in the income of a Portfolio (and thus an investor's) as the
income accrues, even though payment has not been received. The Funds distribute
all of their net investment income, and may have to sell portfolio securities to
distribute imputed income, which may occur at a time when an Adviser would not
have chosen to sell such securities and which may result in a taxable gain or
loss. Because interest on zero-coupon securities is not paid on a current basis
but is in effect compounded, the value of these securities is subject to greater
fluctuations in response to changing interest rates, and may involve greater
credit risks, than the value of debt obligations which distribute income
regularly.
Zero-coupon securities may be securities that have been stripped of their
unmatured interest stream. Zero-coupon securities may be custodial receipts or
certificates, underwritten by securities dealers or banks, that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Government securities. The underwriters of these certificates or receipts
generally purchase a U.S. Government security and deposit the security in an
irrevocable trust or custodial account with a custodian bank, which then issues
receipts or certificates that evidence ownership of the purchased unmatured
coupon payments and the final principal payment of the U.S. Government Security.
These certificates or receipts have the same general attributes as zero-coupon
stripped U.S. Treasury securities but are not supported by the issuer of the
U.S. Government Security. The risks associated with stripped securities are
similar to those of other zero-coupon securities, although stripped securities
may be more volatile, and the value of certain types of stripped securities may
move in the same direction as interest rates.
VARIABLE AND FLOATING RATE SECURITIES. Certain debt securities have variable or
floating rates of interest and, under certain limited circumstances, may have
varying principal amounts. These securities pay interest at rates that are
adjusted periodically according to a specified formula, usually with reference
to one or more interest rate indices or market interest rates (the "underlying
index"). The interest paid on these securities is a function primarily of the
underlying index upon which the interest rate adjustments are based. These
adjustments minimize changes in the market value of the obligation. Similar to
fixed rate debt instruments, variable and floating rate instruments are subject
to changes in value based on changes in market interest rates or changes in the
issuer's creditworthiness. The rate of interest on securities purchased by a
Portfolio may be tied to U.S. Government Securities or indices on those
securities as well as any other
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rate of interest or index. Certain variable rate securities pay interest at a
rate that varies inversely to prevailing short-term interest rates (sometimes
referred to as "inverse floaters"). Certain inverse floaters may have an
interest rate reset mechanism that multiplies the effects of changes in the
underlying index. This mechanism may increase the volatility of the security's
market value while increasing the security's yield. The Money Market Portfolios
may not invest in inverse floaters.
Many variable rate instruments include the right of the holder to demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior to
maturity.
Variable and floating rate demand notes of corporations include master demand
notes that permit investment of fluctuating amounts at varying interest rates
under direct arrangements with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days' notice.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, the Fund may demand payment of principal and accrued interest at
any time upon a specified period of notice.
Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, a Portfolio might be entitled
to less than the initial principal amount of the security upon the security's
maturity. A Portfolio will purchase these securities only when its Adviser
believes the interest income from the instrument justifies any principal risks
associated with the instrument. The Advisers may attempt to limit any potential
loss of principal by purchasing similar instruments that are intended to provide
an offsetting increase in principal. There can be no assurance that the Advisers
will be able to limit the effects of principal fluctuations and, accordingly, a
Portfolio may incur losses on those securities even if held to maturity without
issuer default.
There may not be an active secondary market for any particular floating or
variable rate instruments, which could make it difficult for a Portfolio to
dispose of the instrument during periods that the Portfolio is not entitled to
exercise any demand rights it may have. A Portfolio could, for this or other
reasons, suffer a loss with respect to those instruments. The Advisers monitor
the liquidity of each Portfolio's investment in variable and floating rate
instruments, but there can be no guarantee that an active secondary market will
exist.
FINANCIAL INSTITUTION OBLIGATIONS. Obligations of financial institutions include
certificates of deposit, bankers' acceptances, time deposits and other
short-term debt obligations. Certificates of deposit represent an institution's
obligation to repay funds deposited with it that earn a specified interest rate
over a given period. Bankers' acceptances are negotiable obligations of a bank
to pay a draft which has been drawn by a customer and are usually backed by
goods in international trade. Time deposits are non-negotiable deposits with a
banking institution that earn a specified interest rate over a given period.
Certificates of deposit and fixed time deposits, which are payable at the stated
maturity date and bear a fixed rate of interest, generally may be withdrawn on
demand by a Portfolio but may be subject to early withdrawal penalties which
could reduce a Portfolio's performance. Although fixed time deposits do not in
all cases have a secondary market, there are no contractual restrictions on a
Portfolio's right to transfer a beneficial interest in the deposits to third
parties.
Portfolios that invest in foreign securities may invest in Eurodollar
certificates of deposit, which are issued by offices of foreign and domestic
banks located outside the United States; Yankee certificates of deposit, which
are issued by a U.S. branch of a foreign bank and held in the United States;
Eurodollar time deposits, which are deposits in a foreign branch of a U.S. bank
or a foreign bank; and Canadian time deposits, which are issued by Canadian
offices of major Canadian banks. Each of these instruments is U.S. dollar
denominated.
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PARTICIPATION INTERESTS. A participation interest gives a Portfolio an undivided
proportionate interest in a loan or security owned by banks or other
institutions. Participation interests may carry a demand feature permitting the
holder to tender the interests back to the bank or other institution.
Participation interests, however, do not provide a Portfolio with any right to
enforce compliance by the borrower, nor any rights of set-off against the
borrower and the Portfolio may not directly benefit from any collateral
supporting the loan in which it purchased a participation interest. As a result,
a Portfolio will assume the credit risk of both the borrower and the lender that
is selling the participation interest. A Portfolio will not invest more than 10%
of its total assets in participation interests in which the Portfolio does not
have demand rights.
GENERAL MONEY MARKET PORTFOLIO GUIDELINES
Each Money Market Portfolio will invest only in high-quality, U.S.
dollar-denominated instruments. As used herein, high-quality instruments include
those that (1) are rated (or, if unrated, are issued by an issuer with
comparable outstanding short-term debt that is rated) in one of the two highest
rating categories by two NRSROs or, if only one NRSRO has issued a rating, by
that NRSRO; or (2) are otherwise unrated and determined by the Adviser, pursuant
to procedures adopted by the Board, to be of comparable quality. A Money Market
Portfolio will not invest in a security that has received, or is deemed
comparable in quality to a security that has received, the second highest rating
by an NRSRO (a "second tier security") if, immediately after the acquisition,
the Portfolio would have invested more than (1) the greater of 1% of its total
assets in any single second tier security; or (2) 5% of its total assets in
second tier securities. A description of the rating categories of Standard &
Poor's, Moody's and certain other NRSROs is contained in Appendix A to this Part
B.
In addition, each Money Market Portfolio (1) will invest only in instruments
that have a remaining maturity of 397 days or less (as calculated in accordance
with Rule 2a-7 under the 1940 Act); (2) will maintain a dollar-weighted average
maturity of 90 days or less; (3) will not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. Government Securities
and to the extent permitted by Rule 2a-7); and (4) will not purchase a security
if the value of all securities held by the Portfolio and issued or guaranteed by
the same issuer (including letters of credit in support of a security) would
exceed 10% of the Portfolio's total assets.
BORROWING
Each Portfolio may borrow money in accordance with its investment policies set
forth under "Investment Limitations." Interest costs on borrowings may offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Portfolio might have to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales. A Portfolio's use of borrowed proceeds to make investments
would subject the Portfolio to the risks of leveraging. Reverse repurchase
agreements, dollar roll transactions and other similar investments that involve
a form of leverage have characteristics similar to borrowings but are not
considered borrowings if the Portfolio maintains a segregated account.
DOLLAR ROLL TRANSACTIONS
Dollar roll transactions are transactions in which a Portfolio sells securities
to a bank or securities dealer, and makes a commitment to purchase similar, but
not identical, securities at a later date from the same party. During the period
between the commitment and settlement, no payment is made for the securities
purchased and no interest or principal payments on the securities accrue to the
purchaser, but the Portfolio assumes the risk of ownership. A Portfolio is
compensated for entering into dollar roll transactions by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale. The
Portfolios will engage in dollar roll transactions for the purpose of acquiring
securities for their investment portfolios. Each Portfolio will limit its
obligations on dollar roll transactions to 35% of the Portfolio's net assets.
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REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Portfolio purchases securities
from a bank or securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date and at a price
reflecting a market rate of interest unrelated to the purchased security. During
the term of a repurchase agreement, each Portfolio's custodian maintains
possession of the purchased securities and any underlying collateral, which is
maintained at not less than 100% of the repurchase price. Repurchase agreements
allow a Portfolio to earn income on its uninvested cash for periods as short as
overnight, while retaining the flexibility to pursue longer-term investments. A
Money Market Portfolio will only enter into a repurchase agreement with a
primary dealer that reports to the Federal Reserve Bank of New York ("primary
dealers") or one of the largest 100 commercial banks in the United States.
International Portfolio may enter into repurchase agreements with foreign
entities.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Portfolio sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate.
LENDING PORTFOLIO SECURITIES
Each Portfolio may lend portfolio securities in an amount up to 33-1/3% of its
total assets to brokers, dealers and other financial institutions. Securities
loans must be continuously collateralized and the collateral must have market
value at least equal to value of the Portfolio's loaned securities, plus accrued
interest. In a portfolio securities lending transaction, the Portfolio receives
from the borrower an amount equal to the interest paid or the dividends declared
on the loaned securities during the term of the loan as well as the interest on
the collateral securities, less any fees (such as finders or administrative
fees) the Portfolio pays in arranging the loan. The Portfolio may share the
interest it receives on the collateral securities with the borrower. The terms
of a Portfolio's loans permit the Portfolio to reacquire loaned securities on
five business days' notice or in time to vote on any important matter. Loans are
subject to termination at the option of a Portfolio or the borrower at any time,
and the borrowed securities must be returned when the loan is terminated.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
Each Portfolio may purchase or sell portfolio securities on a "when-issued,"
"delayed delivery" or "Forward commitment" basis. When-issued securities may be
purchased on a "when, as and if issued" basis under which the issuance of the
securities depends upon the occurrence of a subsequent event. When these
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Portfolios enter into these transactions only with the
intention of actually receiving securities or delivering them, as appropriate.
The Portfolios may dispose of the right to acquire these securities before the
settlement date if deemed advisable. During the period between the time of
commitment and settlement, no payment is made for the securities purchased and
no interest or dividends on the securities accrue to the purchaser. At the time
a Portfolio makes a commitment to purchase securities in this manner, the
Portfolio immediately assumes the risk of ownership, including price
fluctuation. The use of when-issued transactions and forward commitments enables
a Portfolio to protect against anticipated changes in interest rates and prices,
but also tends to increase the volatility of the Portfolio's asset value per
unit. Except for dollar-roll transactions, a Portfolio will not purchase
securities
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on a when-issued, delayed delivery or forward commitment basis if, as a result,
more than 15% of the value of the Portfolio's total assets would be committed to
such transactions.
The use of when-issued transactions and forward commitments enables a Portfolio
to hedge against anticipated changes in interest rates and prices. If an Adviser
were to forecast incorrectly the direction of interest rate movements, however,
a Portfolio might be required to complete when-issued or forward transactions at
prices inferior to the current market values.
At the time a Portfolio makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Portfolio will record the transaction
as a purchase and thereafter reflect the value each day of such securities in
determining its net asset value.
ILLIQUID INVESTMENTS
No Portfolio may knowingly invest more than 15% (10% in the case of the Money
Market Portfolios) of the Portfolio's net assets in illiquid investments.
Illiquid investments are investments that cannot be disposed of within seven
days in the ordinary course of business at approximately the amount at which the
Portfolio has valued the investment and include, among other instruments,
repurchase agreements not entitling the Portfolio to payment of principal within
seven days.
An institutional market has developed for certain securities that are not
registered under the 1933 Act. Institutional investors usually will not seek to
sell these instruments to the general public, but instead will often depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on an issuer's ability to honor a demand for repayment of
the unregistered security. A security's contractual or legal restrictions on
resale to the general public or to certain institutions therefore may not be
determinative of the liquidity of such investments.
If unregistered securities are eligible for purchase by institutional buyers in
accordance with applicable exemptions under guidelines adopted by the Board, an
Adviser may determine that the securities are liquid. Under these guidelines,
the Advisers are required to take into account: (1) the frequency of trades and
quotations for the investment; (2) the number of dealers willing to purchase or
sell the investment; (3) the number of dealers that have undertaken to make a
market in the investment; (4) the number other potential purchasers; and (5) the
nature of the marketplace trades, including the time needed to dispose of the
investment, the method of soliciting offers and the mechanics of the transfer.
Illiquid investments may be more difficult to value than liquid investments and
the sale of illiquid investments generally may require more time and result in
higher selling expenses than the sale of liquid investments. A Portfolio might
not be able to dispose of restricted or other securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions. Restrictions on resale may have an adverse effect on the
marketability of illiquid investments and a Portfolio might also have to
register certain investments in order to dispose of them, resulting in expense
and delay.
SHORT SALES "AGAINST THE BOX"
Each Portfolio may engage in short sales "against the box." A short sale is
"against the box" to the extent that while the short position is open, the
Portfolio must own an equal amount of the securities sold short, or by virtue of
ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may in certain cases be made to defer, for Federal income
tax purposes, recognition of gain or loss on the sale of securities "in the box"
until the short position is closed out. If a Portfolio has unrealized gain with
respect to a long position and enters into a short sale against-the-box, the
Portfolio generally will be deemed to have sold the long position for tax
purposes and thus will recognize gain. Prohibitions on entering short sales
other than against the box does not restrict a Portfolio's ability to use
short-term credits necessary for the clearance of portfolio transactions and to
make margin deposits in connection with permitted transactions in options and
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futures contracts. No Portfolio may make short sales if, as a result, more than
25% 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.
OPTIONS AND FUTURES CONTRACTS
A Portfolio may (1) purchase or sell (write) put and call options on securities
to enhance the Portfolio's performance and (2) seek to hedge against a decline
in the value of securities owned by the Portfolio or an increase in the price of
securities that the Portfolio plans to purchase through the writing and purchase
of exchange-traded and over-the-counter options on individual securities or
securities or financial indices and through the purchase and sale of
interest-rate futures contracts and options on those futures contracts. A
Portfolio may only write options that are covered. To the extent a Portfolio
invests in foreign securities, it may in the future invest in options on foreign
currencies, foreign currency futures contracts and options on those futures
contracts. These instruments are considered to be derivatives. Use of these
instruments is subject to regulation by the SEC, the several options and futures
exchanges on which futures and options are traded or the CFTC. No assurance can
be given that any hedging or option income strategy will achieve its intended
result. A Portfolio may enter into futures contracts only if the aggregate of
initial margin deposits for open futures contract positions does not exceed 5%
of the Portfolio's total assets.
COVER FOR OPTIONS AND FUTURES CONTRACTS. When engaging in hedging transactions,
a Portfolio will hold securities, currencies, or other options or futures
positions whose values are expected to offset ("cover") its obligations under
the transactions. A Portfolio will enter into a hedging strategy that exposes it
to an obligation to another party only if the Portfolio owns either (1) an
offsetting ("covered") position in the underlying security, currency or options
or futures contract, or (2) cash, receivables and liquid debt securities with a
value sufficient at all times to cover its potential obligations. Each Portfolio
will comply with SEC guidelines with respect to coverage of these strategies
and, if the guidelines require, will set aside cash, liquid debt securities and
other permissible assets ("Segregated Assets") in a segregated account with the
Custodian in the prescribed amount. Segregated Assets cannot be sold or closed
out while the hedging or option income strategy is outstanding, unless the
Segregated Assets are replaced with similar assets. As a result, there is a
possibility that the use of cover or segregation involving a large percentage of
a Portfolio's assets could impede portfolio management or a Portfolio's ability
to meet redemption requests or other current obligations.
The Portfolios have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. No Portfolio may purchase any
call or put option on a futures contract if the premiums associated with all
such options held by the Portfolio would exceed 5% of the Portfolio's total
assets as of the date the option is purchased. No Portfolio may sell a put
option if the exercise value of all put options written by the Portfolio would
exceed 50% of the Portfolio's total assets or sell a call option if the exercise
value of all call options written by the Portfolio would exceed the value of the
Portfolio's assets. In addition, the current market value of all open futures
positions held by a Portfolio will not exceed 50% of its total assets.
OPTIONS ON SECURITIES. A call option is a contract under which the purchaser of
the call option, in return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. A put option
gives its purchaser, in return for a premium, the right to sell the underlying
security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying security
upon exercise at the exercise price during the option period. The amount of
premium received or paid is based upon certain factors, including the market
price of the underlying assets, the relationship of the exercise price to the
market price, the historical price volatility of the underlying assets, the
option period, supply and demand and interest rates.
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OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional options on securities except that exercises of
stock index options are effected with cash payments and do not involve delivery
of securities (i.e., stock index options are settled exclusively in cash). Thus,
upon exercise of stock index options, the purchaser will realize and the writer
will pay an amount based on the differences between the exercise price and the
closing price of the stock index.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to
options on securities except that an option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract rather than to purchase or sell stock, at a specified exercise
price at any time during the period of the option. Upon exercise of the option,
the delivery of the futures position to the holder of the option will be
accompanied by transfer to the holder of an accumulated balance representing the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future.
FUTURES CONTRACTS AND INDEX FUTURES CONTRACTS. A futures contract is a bilateral
agreement where one party agrees to accept, and the other party agrees to make,
delivery of cash, an underlying debt security or a currency, as called for in
the contract, at a specified date and at an agreed-upon price. A bond or stock
index futures contract involves the delivery of an amount of cash equal to a
specified dollar amount times the difference between the bond or stock index
value at the close of trading of the contract and 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 contracts.
FOREIGN CURRENCY TRANSACTIONS
Portfolios that make foreign investments may conduct foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market or by entering into a forward foreign currency
contract. A forward foreign currency contract ("forward contract") involves an
obligation to purchase or sell a specific amount of a specific currency at a
future date, which may be any fixed number of days (usually less than one year)
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. Forward contracts are considered to be derivatives. A
Portfolio enters into forward contracts in order to "lock in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. In addition, a Portfolio may enter into forward
contracts to hedge against risks arising from securities the Portfolio owns or
anticipates purchasing, or the U.S. dollar value of interest and dividends paid
on those securities. A Portfolio will not enter into forward contracts for
speculative purposes. A Portfolio will not have more than 25% of its total
assets committed to forward contracts, or maintain a net exposure to forward
contracts that would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's investment securities or
other assets denominated in that currency.
If a Portfolio makes delivery of the foreign currency at or before the
settlement of a forward contract, it may be required to obtain the currency
through the conversion of assets of the Portfolio into the currency. The
Portfolio may close out a forward contract obligating it to purchase a foreign
currency by selling an offsetting contract, in which case it will realize a gain
or a loss.
Foreign currency transactions involve certain costs and risks. The Portfolio
incurs foreign exchange expenses in converting assets from one currency to
another. Forward contracts involve a risk of loss if the Adviser is inaccurate
in its prediction of currency movements. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. The precise matching of forward
contract amounts and the value of the securities involved is generally not
possible. Accordingly, it may be necessary for the Portfolio to purchase
additional foreign currency if the market value of the security is less than the
amount of the foreign currency the Portfolio is obligated to deliver under the
forward contract and the decision is made to sell the
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security and make delivery of the foreign currency. The use of forward contracts
as a hedging technique does not eliminate fluctuations in the prices of the
underlying securities the Portfolio owns or intends to acquire, but it does fix
a rate of exchange in advance. Although forward contracts can reduce the risk of
loss due to a decline in the value of the hedged currencies, they also limit any
potential gain that might result from an increase in the value of the
currencies.
In addition, there is no systematic reporting of last sale information for
foreign currencies, and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a timely
basis. Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign currencies
is a global around-the-clock market. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, a Portfolio
may be disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
The Portfolios have no present intention to enter into currency futures or
options contracts, but may do so in the future. A Portfolio might take positions
in options on foreign currencies in order to hedge against the risk of foreign
exchange fluctuation on foreign securities the Portfolio holds in its portfolio
or which it intends to purchase.
SWAPS, CAPS, FLOORS AND COLLARS
A Portfolio may enter into interest rate, currency and mortgage (or other asset)
swaps, and may purchase and sell interest rate "caps," "floors" and "collars."
Interest rate swaps involve the exchange by a Portfolio and a counterparty of
their respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments). Mortgage swaps are similar to
interest rate swap agreements, except that the contractually-based principal
amount (the "notional principal amount") is tied to a reference pool of
mortgages. Currency swaps' notional principal amount is tied to one or more
currencies, and the exchange commitments can involve payments in the same or
different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on the notional principal amount from the
party selling the cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
value, to receive payments on a notional principal amount from the party selling
such floor. A collar entitles the purchaser to receive payments to the extent a
specified interest rate falls outside an agreed range.
A Portfolio will enter into these transactions primarily to preserve a return or
a spread on a particular investment or portion of its portfolio or to protect
against any interest rate fluctuations or increase in the price of securities it
anticipates purchasing at a later date. The Portfolios intend to use these
transactions as a hedge and not as a speculative investment, and will enter into
the transactions in order to shift a Portfolio's investment exposure from one
type of investment to another.
A Portfolio may enter into interest rate protection transactions on an
asset-based basis, depending on whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps on a net basis,
i.e., the two payment streams are netted out, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments.
The use of interest rate protection transactions is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If an Adviser
incorrectly forecasts market values, interest rates and other applicable
factors, there may be considerable impact on a Portfolio's performance. Even if
the Advisers are correct in their forecasts, there is a risk that the
transaction may correlate imperfectly with the price of the asset or liability
being hedged.
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TEMPORARY DEFENSIVE POSITION
When, in the judgment of an Adviser, market or economic conditions warrant, each
Portfolio, other than a Money Market Portfolio, may assume a defensive position
and temporarily hold cash or invest without limit in cash equivalents to retain
flexibility in meeting redemptions, paying expenses and timing of new
investments. These investments will be rated in one of the two highest
short-term rating categories by an NRSRO or, if not rated, determined by the
Adviser to be of comparable quality, including: (1) short-term U.S. Government
Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States that have, at the time of investment, except in the case of
International Portfolio, total assets in excess of one billion dollars and that
are insured by the Federal Deposit Insurance Corporation; (3) commercial paper;
(4) repurchase agreements covering any of the securities in which the Portfolio
may invest directly; and (5) shares of money market funds registered under the
1940 Act within the limits specified therein. To the extent that a Portfolio
assumes a temporary defensive position, it may not be invested to pursue its
investment objective. International Portfolio may hold cash and invest in bank
instruments denominated in any major foreign currency.
Apart from temporary defensive purposes, a Portfolio may at any time invest a
portion of its assets in cash and cash equivalents as described above.
RISK CONSIDERATIONS
COUNTERPARTY RISK
The Portfolios may be exposed to the risks of financial failure or insolvency of
another party. To help reduce those risks, the Advisers, subject to the Board's
supervision, monitor and evaluate the creditworthiness of counterparties to the
Portfolios' transactions and intend to enter into a transaction only when they
believe that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks.
The use of repurchase agreements, securities lending, reverse repurchase
agreements, interest rate protection transactions (such as caps, collars and
floors), forward commitments (including dollar roll transactions) and forward
contracts involving currencies present particular counterparty risk. In the
event that bankruptcy, insolvency or similar proceedings were commenced against
a counterparty while these transactions remained open or a counterparty
defaulted on its obligations, a Portfolio may have difficulties in exercising
its rights to the underlying securities or currencies, as applicable, it may
incur costs and expensive time delays in disposing of the underlying securities
and it may suffer a loss. Failure by the other party to deliver a security or
currency purchased by a Portfolio may result in a missed opportunity to make an
alternative investment. Counterparty insolvency risk with respect to repurchase
agreements is reduced by favorable insolvency laws that allow a Portfolio, among
other things, to liquidate the collateral held in the event of the bankruptcy of
the counterparty. Those laws do not apply to securities lending, reverse
repurchase agreements and dollar roll transactions, and therefore, those
transactions involve more risk than repurchase agreements. For example, in the
event the purchaser of securities in a dollar roll transaction files for
bankruptcy or becomes insolvent, a Portfolio's use of the proceeds of the
transaction may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Portfolio's obligation to repurchase
the securities. As a result of entering into forward commitments and reverse
repurchase agreements, as well as lending its securities, a Portfolio may be
exposed to greater potential fluctuations in the value of its assets and net
asset value per unit.
EMERGING MARKETS SECURITIES
Internaltional Fund may invest up to 20% of its total assets in emerging equity
and debt securities, including convertible securities and stock rights and
warrants. The Adviser considers "emerging market" countries as those not
included in the Morgan Stanley Capital International World Index ("MSCI World")
of major world economies. If the Adviser determines that the economy of a MSCI
World-listed country is an emerging market economy, the Adviser may include such
country in the emerging market category. The portfolio will not necessarily seek
to diversify investments on a geographic basis.
FIXED INCOME SECURITIES
GENERAL. The market value of the interest-bearing fixed income securities held
by the Portfolios will be affected by changes in interest rates. There is
normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates. The
longer the remaining
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maturity (and duration) of a security, the more sensitive the security is to
changes in interest rates. All fixed income securities, including U.S.
Government Securities, can change in value when there is a change in interest
rates. Changes in the ability of an issuer to make payments of interest and
principal and in the markets' perception of an issuer's creditworthiness will
also affect the market value of that issuer's debt securities. As a result, an
investment in a Portfolio is subject to risk even if all fixed income securities
in the Portfolio's investment portfolio are paid in full at maturity. In
addition, certain fixed income securities may be subject to extension risk,
which refers to the change in total return on a security resulting from an
extension or abbreviation of the security's maturity.
Yields on fixed income securities, including municipal securities, are dependent
on a variety of factors, including the general conditions of the fixed income
securities markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. Fixed income securities with longer
maturities tend to produce higher yields and are generally subject to greater
price movements than obligations with shorter maturities. A portion of the
municipal securities held by the Portfolios may be supported by credit and
liquidity enhancements, such as letters of credit (which are not covered by
federal deposit insurance) or puts or demand features of third party financial
institutions, generally domestic and foreign banks.
The issuers of fixed income securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors that may restrict the ability of the issuer to pay, when due, the
principal of and interest on its debt securities. The possibility exists
therefore, that, as a result of bankruptcy, litigation or other conditions, the
ability of an issuer to pay, when due, the principal of and interest on its debt
securities may become impaired.
CREDIT RISK. The Portfolios' investments in fixed income securities are subject
to credit risk relating to the financial condition of the issuers of the
securities that each Portfolio holds. To limit credit risk, each Portfolio will
generally buy debt securities that are rated in the top four long-term rating
categories by an NRSRO or in the top two short-term rating categories by an
NRSRO (although certain Portfolios have greater restrictions). Moody's, Standard
& Poor's and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of securities by
several NRSROs is included in Appendix A. The Advisers may use these ratings to
determine whether to purchase, sell or hold a security. Ratings are not,
however, absolute standards of quality. Credit ratings attempt to evaluate the
safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Consequently, similar securities with the same
rating may have different market prices. In addition, rating agencies may fail
to make timely changes in credit ratings and the issuer's current financial
condition may be better or worse than a rating indicates.
Each Portfolio may retain a security that ceases to be rated or whose rating has
been lowered below the Portfolio's lowest permissible rating category (except in
certain cases with respect to the Money Market Portfolios) if the Adviser
determines that retaining the security is in the best interests of the
Portfolio. Because a downgrade often results in a reduction in the market price
of the security, sale of a downgraded security may result in a loss.
Each Portfolio may purchase unrated securities if the Adviser determines that
the security is of comparable quality to a rated security that the Portfolio may
purchase. Unrated securities may not be as actively traded as rated securities.
MORTGAGE-RELATED SECURITIES. The value of mortgage-related securities may be
significantly affected by changes in interest rates, the markets' perception of
issuers, the structure of the securities and the creditworthiness of the parties
involved. The ability of the Portfolios to successfully utilize mortgage-related
securities depends in part upon the ability of the Advisers to forecast interest
rates and other economic factors correctly. Some mortgage-related securities
have structures that make their reaction to interest rate changes and other
factors difficult to predict.
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Prepayments of principal of mortgage-related securities by mortgagors or
mortgage foreclosures affect the average life of the mortgage-related
securities. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location and age of the mortgages and other social and demographic conditions.
In periods of rising interest rates, the prepayment rate tends to decrease,
lengthening the average life of a pool of mortgage-related securities. In
periods of falling interest rates, the prepayment rate tends to increase,
shortening the average life of a pool. The volume of prepayments of principal on
the mortgages underlying a particular mortgage-related security will influence
the yield of that security, affecting the Portfolio's yield. Because prepayments
of principal generally occur when interest rates are declining, it is likely
that the Portfolios, to the extent they retain the same percentage of debt
securities, may have to reinvest the proceeds of prepayments at lower interest
rates then those of their previous investments. If this occurs, a Portfolio's
yield will correspondingly decline. Thus, mortgage-related securities may have
less potential for capital appreciation in periods of falling interest rates
(when prepayment of principal is more likely) than other fixed income securities
of comparable duration, although they may have a comparable risk of decline in
market value in periods of rising interest rates. A decrease in the rate of
prepayments may extend the effective maturities of mortgage-related securities,
increasing their sensitivity to changes in market interest rates. To the extent
that the Portfolios purchase mortgage-related securities at a premium,
unscheduled prepayments, which are made at par, result in a loss equal to any
unamortized premium.
ASSET-BACKED SECURITIES. Like mortgages underlying mortgage-related securities,
the collateral underlying assets are subject to prepayment, which may reduce the
overall return to holders of asset-backed securities. Asset-backed securities
present certain additional and unique risks. Primarily, these securities do not
always have the benefit of a security interest in collateral comparable to the
security interests associated with mortgage-related securities. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set-off certain amounts owed on the credit cards,
thereby reducing the balance due. Automobile receivables generally are secured
by automobiles. Most issuers of automobile receivables permit the loan servicers
to retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the asset-backed
securities. In addition, because of the large number of vehicles involved in a
typical issuance and the technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have a proper security
interest in the underlying automobiles. As a result, the risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments on
asset-backed securities is greater for asset-backed securities than for
mortgage-related securities. In addition, because asset-backed securities are
relatively new, the market experience in these securities is limited and the
market's ability to sustain liquidity through all phases of an interest rate or
economic cycle has not been tested.
NON-INVESTMENT GRADE SECURITIES. Non-investment grade securities are securities
rated the fourth highest rating category by an NRSRO or which are unrated and
judged by the Adviser to be of comparable quality. Such high risk securities
(commonly referred to as "junk bonds") are not considered to be investment grade
and have speculative or predominantly speculative characteristics.
Non-investment grade, high risk securities provide poor protection for payment
of principal and interest but may have greater potential for capital
appreciation than do higher quality securities. These lower rated securities
involve greater risk of default or price changes due to changes in the issuers'
creditworthiness than do higher quality 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 or rising interest
rates. Under such conditions, a Portfolio may have to use subjective rather than
objective criteria to value its high yield/high risk securities investments
accurately and rely more heavily on the judgment of the Portfolio's Adviser.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, a Portfolio's
Adviser may have to replace the security with a lower yielding
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security, resulting in a decreased return for investors. If a Portfolio
experiences unexpected net redemptions, the Portfolio's Adviser may be forced to
sell the Portfolio's higher rated securities, resulting in a decline in the
overall credit quality of the Portfolio's portfolio and increasing the exposure
of the Portfolio to the risks of high yield/high risk securities.
FOREIGN SECURITIES
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 a
Portfolio's shareholders; commission rates payable on foreign transactions are
generally higher than in the United States; foreign accounting, auditing and
financial reporting standards differ from those in the United States and,
accordingly, less information may be available about foreign companies than is
available about issuers of comparable securities in the United States; and
foreign securities may trade less frequently and with lower volume and may
exhibit greater price volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by a 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 a 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 a Portfolio incurs expenses in
U.S. dollars and the time such expenses are paid, the Portfolio may be required
to liquidate additional foreign securities to purchase the U.S. dollars required
to meet such expenses.
The Portfolios may purchase foreign bank obligations. In addition to the risks
described above that are generally applicable to foreign investments, the
investments that the Portfolios make in obligations of foreign banks, branches
or subsidiaries may involve further risks, including differences between foreign
banks and U.S. banks in applicable accounting, auditing and financial reporting
standards, and the possible establishment of exchange controls or other foreign
government laws or restrictions applicable to the payment of certificates of
deposit or time deposits that may affect adversely the payment of principal and
interest on the securities held by the Portfolios.
LEVERAGE
The Portfolios may use leverage in an effort to increase their returns. Leverage
involves special risks and may involve speculative investment techniques.
Leverage exists when cash made available to a Portfolio through an investment
technique is used to make additional Portfolio investments. Borrowing for other
than temporary or emergency purposes, lending portfolio securities, entering
into reverse repurchase agreements, purchasing securities on a when-issued,
delayed delivery or forward commitment basis (including dollar roll
transactions) and the use of swaps and related agreements are transactions that
result in leverage. The Portfolios use these investment techniques only when the
Advisers believe that the
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leveraging and the returns available to the Portfolios from investing the cash
will provide investors a potentially higher return.
Leverage creates the risk of magnified capital losses which occur when losses
affect an asset base, enlarged by borrowings or the creation of liabilities,
that exceeds the equity base of the Portfolio. Leverage may involve the creation
of a liability that requires a Portfolio to pay interest (for instance, reverse
repurchase agreements) or the creation of a liability that does not entail any
interest costs (for instance, forward commitment costs). The risks of leverage
include a higher volatility of the net asset value of the Portfolio's interests
and the relatively greater effect on the net asset value of the interests caused
by favorable or adverse market movements or changes in the cost of cash obtained
by leveraging and the yield from invested cash. So long as a Portfolio is able
to realize a net return on its investment portfolio that is higher than interest
expense incurred, if any, leverage will result in higher current net investment
income for the Portfolio than if a Portfolio were not leveraged. Changes in
interest rates and related economic factors could cause the relationship between
the cost of leveraging and the yield to change so that rates involved in the
leveraging arrangement may substantially increase relative to the yield on the
obligations in which the proceeds of the leveraging have been invested. To the
extent that the interest expense involved in leveraging approaches the net
return on the Portfolio's investment portfolio, the benefit of leveraging will
be reduced, and, if the interest expense on borrowings were to exceed the net
return to investors, the Portfolio's use of leverage would result in a lower
rate of return than if the Portfolio were not leveraged. In an extreme case, if
the Portfolio's current investment income were not sufficient to meet the
interest expense of leveraging, it could be necessary for the Portfolio to
liquidate certain of its investments at an inappropriate time.
SEGREGATED ACCOUNTS. In order to attempt to reduce the risks involved in various
transactions involving leverage, each Portfolio's custodian will set aside and
maintain, in a segregated account, cash and liquid securities. The account's
value, which is marked to market daily, will be at least equal to the
Portfolio's commitments under these transactions. The use of a segregated
account in connection with leveraged transactions may result in a Portfolio's
investment portfolio being 100% leveraged.
OPTIONS AND FUTURES CONTRACTS
A Portfolio's use of options and futures contracts subjects the Portfolio to
certain unique investment risks. These risks include: (1) dependence on an
Adviser's ability to correctly predict movements in the prices of individual
securities and fluctuations in interest rates, the general securities markets
and other economic factors; (2) imperfect correlations between movements in the
prices of options or futures contracts and movements in the price of the
securities hedged or used for cover which may cause a given hedge not to achieve
its objective; (3) the fact that the skills and techniques needed to trade these
instruments are different from those needed to select the other securities in
which a Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular instrument at any particular time, which, among
other things, may hinder a Portfolio's ability to limit exposures by closing its
positions; (5) the possible need to defer closing out certain options, futures
contracts and related options to avoid adverse tax consequences; and (6) the
potential for unlimited losses when investing in futures contracts or writing
options for which an offsetting position is not held.
Other risks include the inability of a Portfolio, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Portfolio. In addition, the futures exchanges may limit the
amount of fluctuation permitted in certain futures contract prices on related
options during a single trading day. A Portfolio may be forced, therefore, to
liquidate or close out a futures contract position at a disadvantageous price.
There is no assurance that a counterparty in an over-the-counter option
transaction will be able to perform its obligations. There are a limited number
of options on interest rate futures contracts and exchange-traded options
contracts on fixed income securities. The Portfolios may use various futures
contracts that are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
in those contracts will develop or continue to exist. A
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Portfolio's activities in the futures and options markets may result in higher
portfolio turnover rates and additional brokerage costs, which could reduce a
Portfolio's yield.
SMALL CAPITALIZATION STOCKS
Investments in smaller capitalization companies carry greater risk than
investments in larger capitalization companies. Smaller capitalization companies
generally experience higher growth rates and higher failure rates than do larger
capitalization companies; and the trading volume of smaller capitalization
companies' securities is normally lower than that of larger capitalization
companies and, consequently, generally has a disproportionate effect on market
price (tending to make prices rises more in response to buying demand and fall
more in response to selling pressure).
Securities owned by a 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 a 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.
Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Such issuers 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 a Portfolio 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 Portfolio and can
result in such securities being priced lower than otherwise might be the case.
If other institutional investors engage in trading this type of security, a
Portfolio may be forced to dispose of its holdings at prices lower than might
otherwise be obtained.
INVESTMENT LIMITATIONS
For purposes of all fundamental and non-fundamental investment policies of the
Portfolio: (1) the term 1940 Act includes the rules thereunder, SEC
interpretations and any exemptive order upon which the Portfolio may rely and
(2) the term Code includes the rules thereunder, IRS interpretations and any
private letter ruling or similar authority upon which the Portfolio may rely.
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.
(1) DIVERSIFICATION
EACH 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.
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(2) CONCENTRATION
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, (1)
there is no limit on investments in U.S. Government Securities, in
repurchase agreements covering U.S. Government Securities or in foreign
government securities, (2) municipal securities are not treated as
involving a single industry, (3) there is no limit on investment in
issuers domiciled in a single country, (4) financial service companies
are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance) and
(5) 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.
Each of INDEX PORTFOLIO, SMALL COMPANY STOCK PORTFOLIO, SMALL COMPANY
GROWTH PORTFOLIO, SMALL COMPANY VALUE PORTFOLIO, and INTERNATIONAL
PORTFOLIO may not, 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).
POSITIVE RETURN PORTFOLIO, STABLE INCOME PORTFOLIO, MANAGED FIXED
INCOME PORTFOLIO, INCOME EQUITY PORTFOLIO, DISCIPLINED GROWTH
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. 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,
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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
therein or real estate limited partnership interests, except that the
Portfolio may invest in debt obligations secured by real estate or
interests therein or securities issued by companies that invest in real
estate or interests therein.
(8) PURCHASES AND SALES OF COMMODITIES
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.
NONFUNDAMENTAL LIMITATIONS
Each Portfolio has adopted the following investment limitations which are not
fundamental policies of the Portfolio and may be changed without interestholder
action.
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(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
PRIME MONEY MARKET PORTFOLIO and 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'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.
(6) PLEDGING
EACH PORTFOLIO may not pledge, mortgage, hypothecate or encumber any of
its assets except to secure permitted borrowings.
26
<PAGE>
(7) SECURITIES WITH VOTING RIGHTS
MONEY MARKET PORTFOLIO, PRIME MONEY MARKET PORTFOLIO POSITIVE RETURN
PORTFOLIO, STABLE INCOME PORTFOLIO AND MANAGED FIXED INCOME 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 Portfolio'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
The business and affairs of the Trust are managed under the direction of the
Board is responsible for overseeing the management of the Trust. The Board
formulates the general policies of the Portfolios and generally meets quarterly
to review the results of the Portfolios, monitor investment activities and
practices and discuss other matters affecting the Portfolios and the Trust. 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.
27
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------- ----------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
John Y. Keffer*,Chairman & President President, Forum Financial Group (a mutual
Born: July 15, 1942 fund services holding company)
Two Portland Square President, Forum Financial Services, Inc.
Portland, Maine 04101 (Trust's underwriter)
Trustee, Chairman & President*, Forum Funds,
Monarch Funds and Norwest Advantage Funds
(registered investment companies)
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Costas Azariadas, Trustee Professor of Economics, University of
Born: February 15, 1943 California-Los Angeles
Department of Economics Trustee, Forum Funds
University of California
Los Angeles, CA 90024
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
James C. Cheng, Trustee President, Technology Marketing Associates
Born: July 26, 1942 (marketing company for small and medium size
27 Temple Street businesses in New England)
Belmont, MA 02718 Trustee, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
J. Michael Parish, Trustee Partner-Reid & Priest LLP (law firm) since
Born: November 9, 1943 1995
40 West 57th Street Partner-Winthrop, Stimson, Putnam & Roberts
New York, NY 10019 (law firm) from 1989-1995
Trustee, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Thomas G. Sheehan, Vice President Managing Director-Forum Financial Group
Born: July 15, 1954 Vice President/Asst. Secretary, Norwest
Two Portland Square Advantage Funds
Portland, Maine 04101
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Stacey Hong, Treasurer Director, Fund Accounting, Forum Financial
Born: May 10, 1966 Group
Two Portland Square Treasurer, Forum Funds and Monarch Funds
Portland, Maine 04101
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Dawn Taylor, Asst. Treasurer Manager/Senior Tax Specialist, Tax
Born: May 14, 1964 Department, Forum Financial Group, LLC since
Two Portland Square 1997
Portland, Maine 04101 Senior Tax Accountant, Pardy Bingham &
Burrell (accounting firm) during 1997
Senior Tax Specialist, Forum Financial
Group, LLC from 1994 to 1997
Assistant Treasurer, Forum Funds and Monarch
Funds
- --------------------------------------------------- ----------------------------------------------
28
<PAGE>
- --------------------------------------------------- ----------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
David I. Goldstein, Secretary Managing Director and General Counsel, Forum
Born: August 3, 1961 Financial Group since 1991
Two Portland Square Vice President, Forum Funds
Portland, Maine 04101 Vice President & Secretary, Monarch Funds
and Norwest Advantage Funds
Secretary, Forum Financial Services, Inc.
(Trust's underwriter)
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Don Evans, Asst. Secretary Counsel, Forum Financial Group, since 1995
Born: August 12, 1948 Associate, Bisk & Lutz during 1995
Two Portland Square Associate, Weiner & Strother from 1990 to
Portland, Maine 04101 1995.
Assistant Secretary, Norwest Advantage
Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Heidi A. Hoefler, Asst. Secretary Staff Attorney, Forum Financial Group since
Born: October 10, 1963 1998
Two Portland Square Legal Assistant, Preti Flaherty Beliveau &
Portland, Maine 04101 Pachios (law firm) from 1997-1998
Legal Intern, Unum from 1996-1997
Law Student, University of Maine School of
Law from 1994-1997
Asst. Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Leslie K. Klenk, Asst. Secretary Counsel, Forum Financial Group since 1998
Born: August 24, 1964 Vice President/Associate General Counsel,
Two Portland Square Smith Barney Inc. from 1993 through 1998
Portland, Maine 04101 Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Pamela Stutch, Asst. Secretary Senior Fund Specialist, Forum Financial
Born: June 29, 1967 Group since 1998
Two Portland Square Law Student, Temple University from 1994-1997
Portland, Maine 04101 Assistant Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
</TABLE>
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,
1999, the Portfolios' fiscal year end.
29
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
Compensation Total Compensation from the
Trustee from the Benefits Retirement Portfolios
Portfolios and Fund Complex(1)
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
John Y. Keffer $0.00 None None $0.00
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
Costas Azariadis $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
James C. Cheng $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
J. Michael Parish $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
</TABLE>
(1) These figures include fees paid to the Trustees by Equity Index Fund of
Forum Funds, another open-end investment management company. Equity
Index Fund invests substantially all of its investable assets in Index
Portfolio.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 1, 1999, the Trust's Trustees and officers collectively owned
less than 1% of the Interests of each Portfolio.
From time to time, certain interestholders may own a large percentage of the
shares of a Portfolio. Accordingly, those interestholders may be able to greatly
affect (if not determine) the outcome of a imterestholder vote. Table 1 in
Appendix B all interestholders who owned of record 5% or more of the outstanding
shares of any of Portfolio as of September 1, 1999.
Norwest Advantage Funds have 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
INVESTMENT ADVISORY SERVICES
Norwest, a subsidiary of Norwest Bank, is the investment adviser to each
Portfolio (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, each
Portfolio.
Schroder is the 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.
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, an investment advisory subsidiary of Norwest, is the investment
subadviser of Positive Return Bond Portfolio, Small Company Stock Portfolio,
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.
30
<PAGE>
Smith, an investment advisory affiliate of Norwest Bank, is the investment
subadviser of Disciplined Growth Portfolio and Small Cap Value Portfolio. Smith
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
remain in effect for a period of two years from the date of its effectiveness
and thereafter shall continue for successive one-year periods provided 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 (other than as trustees of the Trust).
The Advisory Agreement with respect to a Portfolio is terminable without the
payment of penalty, (1) 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 (2) by Norwest or
Schroder on 60 days' written notice to the Trust. Each Advisory Agreement
terminates automatically upon its assignment. The Advisory Agreement with
respect to each Portfolio also provides that, with respect to the Portfolio, the
Adviser shall not be liable for any mistake of judgment or in any event
whatsoever except for willful misfeasance, reckless disregard. bad faith or
gross negligence in the performance of its duties under the Advisory Agreement.
An Investment Subadvisory Agreement (the "Subadvisory Agreement") for a
Portfolio will remain in effect for a period of two years from the date of its
effectiveness and thereafter shall continue for successive one-year periods
provided 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 (other than as trustees of the Trust). A
Portfolio's Subadvisory Agreement is terminable without penalty by the Board or
a majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Subadviser or by the Subadviser on 60 days' written notice
to the Trust when authorized either by vote of a Portfolio's shareholders or by
a vote of a majority of the Board, or by the Subadvisor on not more than 60
days' nor less than 30 days' written notice, and will automatically terminate in
the event of its assignment. The Subadvisory Agreement for a Portfolio also
provides that neither the Subadvisor will not be liable for any mistake of
judgment or in any event except for willful misfeasance, reckless disregard, bad
faith or gross negligence in the performance of its or their obligations and
duties under the Subadvisory Advisory Agreement. A Portfolio's Subadvisory
Advisory Agreement provides that the Subadviser may render services to others.
The advisory fees, as described in Part A, are accrued daily and paid monthly.
Norwest, Schroder or a Subadviser may, in its sole discretion, waive all or any
portion of its advisory fee with respect to a Portfolio. Each Advisory Agreement
provides that the Advisers may render service to others.
Table 2 in Appendix B shows the dollar amount of the fees payable by each
Portfolio to Norwest or Schroder, the amount of fees waived by Norwest or
Schroder, and the actual fees received by Norwest or Schroder. The data are for
the past three fiscal years (or shorter period depending on a Portfolio's
commencement of operations).
ADMINISTRATIVE SERVICES
Pursuant to an Administration Agreement with the Trust, FAdS 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 Portfolio 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.
31
<PAGE>
The Administration Agreement between FAdS 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 a majority of the outstanding voting
securities of the Portfolio the interestholders of that Portfolio and, in either
case, by a majority of the Trustees who are not parties to the Administration
Agreement or interested persons of any such party (other than as Trustees of the
Trust).
The Administration Agreement may be terminated with respect to each Portfolio
without penalty by the Board on 60 days' written notice to FAdS or by FAdS on 60
days' written notice to the Trust. The Administration Agreement also provides
that FAdS shall not be liable for any action or inaction except for bad faith,
willful misfeasance, gross negligence or reckless disregard in the performance
of its duties and obligations under the Administration Agreement.
Table 3 in Appendix B shows the dollar amount of the fees payable by each
Portfolio to FAdS, the amount of fees waived by FAdS, and the actual fees
received by FAdS. The data are for the past three fiscal years (or shorter
period depending on a Portfolio's commencement of operations).
PORTFOLIO ACCOUNTING
Pursuant to a Portfolio and Unitholder Accounting Agreement (the "Accounting
Agreement") with the Trust FAcS, an affiliate of FAdS, performs portfolio
accounting services for each Portfolio. Under the Accounting Agreement, FAcS
prepares and maintains books and records of each Portfolio on behalf of the
Trust that are required to be maintained under the 1940 Act, calculates the net
asset value per share of each Portfolio (and class thereof) and dividends and
capital gain distributions and prepares periodic reports to interestholders and
the SEC.
The Accounting Agreement will continue in effect with respect to a Portfolio
only if such continuance is specifically approved at least annually by the
Board. The Accounting Agreement may be terminated with respect to a Portfolio at
any time, without penalty, by the Board on 60 days' written notice to FAcS or by
FAcS on 60 days' written notice to the Board. The Accounting Agreement provides
that FAcS shall not be liable for any action or inaction except for bad faith,
willful misfeasance, gross negligence or reckless disregard in the performance
of its duties and obligations under the Accounting Agreement.
For its accounting services, FAcS receives from the Trust with respect to each
Portfolio a fee of $48,000 per year plus certain amounts based upon the number
of interestholders, the type of Portfolio, and number and types of portfolio
transactions within each Portfolio.
FAcS whose principal business address is Two Portland Square, Portland, Maine
04101 also acts as dividend disbursing agent for the Trust.
Table 4 in Appendix B shows the dollar amount of the fees payable by each
Portfolio to FAcS, the amount of fees waived by FAcS, and the actual fees
received by FAcS. The data are for the past three fiscal years (or shorter
period depending on a Portfolio's commencement of operations).
INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, MA 02110 is the independent
auditor for the Portfolios.
CUSTODIAN
Norwest Bank, 733 Marquette Avenue, Minneapolis, Minnesota 55479-0040, provides
custody for each Portfolio's assets. Bank of New York acts as global
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.
32
<PAGE>
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. Bank of New
York employs qualified foreign subcustodians to provide custody of International
Portfolio's assets in accordance with applicable regulations. Neither Norwest
Bank nor Bank of New York makes investment decisions on behalf of a Portfolio.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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 (1) to the Portfolio or (2) 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.
33
<PAGE>
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. Research products
and/or services include proprietary research publications, rating service
reports and trading quotation systems and services such as Bloomberg, ILX and
Telerate. In instances where a product or a service is of "mixed-use" (or
includes a research and a non-research component), the Adviser makes a good
faith effort to determine the amount attributable to research and pays the
non-research portion in hard dollars.
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 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 (1) at least as favorable as commissions contemporaneously charged
by the affiliate on comparable transactions for its most favored unaffiliated
customers and (2) 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 the 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.
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.
Table 5 in Appendix B shows the dollar amount of brokerage commissions paid by
each Portfolio for the past three years (or shorter period depending on a Fund's
commencement of operations). In addition, the table also indicates the dollar
amount of brokerage commissions, percentage of brokerage commissions and
percentage of commission transactions executed through broker/dealer affiliates
of a Portfolio, Norwest or Schroder.
As of May 31, 1999, several Portfolios maintained equity investments in
brokers/dealers (or their parent companies) used to regularly affect portfolio
transactions. Table 6 of Appendix B provides details of these investments.
34
<PAGE>
CAPITAL STOCK AND OTHER SECURITIES
Under the Trust Instrument, the Trustees are authorized to issue beneficial
interest in one or more separate and distinct series. Investments in each
Portfolio have no preference, preemptive, conversion or similar rights and are
fully paid and nonassessable, except as set forth below. Each investor in a
Portfolio is entitled to a vote in proportion to the amount of its investment
therein. Investors in the Portfolios will all vote together in certain
circumstances (e.g., election of the Trustees and ratification of auditors, as
required by the 1940 Act and the rules thereunder). One or more Portfolios could
control the outcome of these votes. Investors do not have cumulative voting
rights, and investors holding more than 50% of the aggregate interests in the
Trust or in a Portfolio, as the case may be, may control the outcome of votes.
The Trust is not required and has no current intention to hold annual meetings
of investors, but the Trust will hold special meetings of investors when (1) a
majority of the Trustees determines to do so or (2) investors holding at least
10% of the interests in the Trust (or a Portfolio) request in writing a meeting
of investors in the Trust (or Portfolio). Except for certain matters
specifically described in the Trust Instrument, the Trustees may amend the
Trust's Trust Instrument without the vote of investors.
The Trust, with respect to a Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Trust's Board. A Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2) by
the Trustees on written notice to the Portfolio's investors. Upon liquidation or
dissolution of any Portfolio, the investors therein would be entitled to share
pro rate in its net assets available for distribution to investors.
The Trust is organized as a business trust under the laws of the State of
Delaware. The Trust's interestholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
provides that an interestholder of a Delaware business trust shall be entitled
to the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust interestholder liability exists in many other states,
including Texas. As a result, to the extent that the Trust or an interestholder
is subject to the jurisdiction of courts in those states, the courts may not
apply Delaware law, and may thereby subject the Trust to liability. To guard
against this risk, the Trust Instrument of the Trust disclaims liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation and instrument entered into by the Trust or
its Trustees, and provides for indemnification out of Trust property of any
interestholder held personally liable for the obligations of the Trust. Thus,
the risk of an interestholder incurring financial loss beyond his investment
because of shareholder liability is limited to circumstances in which (1) a
court refuses to apply Delaware law, (2) no contractual limitation of liability
is in effect, and (3) the Trust itself is unable to meet its obligations.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
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 annual report for the Portfolios
which is included along with this Part B provides the net asset values for each
Portfolio as of May 31, 1999.
Pursuant to an amended exemptive order effective August 6, 1996, Norwest
Advantage Funds are permitted to invest all or a portion of its assets in a
Portfolio of the Trust, irrespective of investment style. The amended exemptive
order removed certain restrictions imposed on the Trust thereby permitting the
Trust to accept investments from persons other than Norwest Advantage Funds.
35
<PAGE>
TAX STATUS
Each Portfolio is classified for federal income tax purposes as a separate
partnership that is not a "publicly traded partnership." As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio is required to take into account in determining its federal income tax
liability its share of the Portfolio's income, gains, losses, deductions, and
credits, without regard to whether it has received any cash distributions from
the Portfolio. Each Portfolio also is not subject to Delaware income or
franchise tax.
Each investor in a Portfolio is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether the investor satisfies the requirements to
qualify as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended. Accordingly, each Portfolio intends
to conduct its operations so that its investors that intend to qualify as RICs
("RIC investors") will be able to satisfy all those requirements.
Distributions to an investor from a Portfolio (whether pursuant to a partial or
complete withdrawal or otherwise) will not result in the investor's recognition
of any gain or loss for federal income tax purposes, except that (1) gain will
be recognized to the extent any cash that is distributed exceeds the investor's
basis for its interest in the Portfolio before the distribution, (2) income or
gain will be recognized if the distribution is in liquidation of the investor's
entire interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized receivables,
and (4) gain or loss may be recognized on a distribution to an investor that
contributed property to the Portfolio. An investor's basis for its interest in a
Portfolio generally will equal the amount of cash and the basis of any property
it invests in the Portfolio, increased by the investor's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the investor and (b) the
investor's share of the Portfolio's losses.
Dividends and interest received by a Portfolio may be subject to income,
withholding, or other taxes imposed by foreign countries and; U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Each Portfolio (except Index Portfolio) may invest in the stock of "passive
foreign investment companies" ("PFICs"). A PFIC is a foreign corporation that,
in general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, a
RIC that holds stock of a PFIC indirectly through its interest in a Portfolio
will be subject to federal income tax on its proportionate share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the RIC distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the RIC's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund," then in lieu of the foregoing tax and interest obligation, each
RIC investor in the Portfolio would be required to include in income each year
its proportionate share of the Portfolio's pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the RIC investor to satisfy the distribution
requirements applicable to it -- even if those earnings and gain were not
received by it. In most instances it will be very difficult, if not impossible,
to make this election because of certain requirements thereof.
Proposed regulations have been published pursuant to which certain RICs would be
entitled to elect to "mark to market" their stock in certain PFICs. "Marking to
market," in this context, means recognizing as gain for each taxable year the
excess, as of the end of that year, of the fair market value of each such PFIC's
stock over the adjusted basis in that stock (including mark-to-market gain for
each prior year for which an election was in effect).
36
<PAGE>
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. However,
income from the disposition by a Portfolio of hedging instruments (other than
those on foreign currencies) held for less than three months will be subject to
the requirement applicable to its RIC investors that less than 30% of a RIC's
gross income each taxable year consist of certain short-term gains ("Short-Short
Limitation"). Income from the disposition of foreign currencies, and hedging
instruments on foreign currencies, that are not directly related to a
Portfolio's principal business of investing in securities (or options and
futures with respect thereto) also will be subject to the Short-Short Limitation
for its RIC investors if they are held for less than three months.
If a Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether its RIC investors
satisfy the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. Each Portfolio will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent a Portfolio does not
so qualify, it may be forced to defer the closing out of certain hedging
instruments beyond the time when it otherwise would be advantageous to do so, in
order for its RIC investors to qualify or continue to qualify as RICs.
UNDERWRITERS
FFSI, Two Portland Square, Portland, Maine 04101, serves as each Portfolio's
placement agent. FFSI receives no compensation for such placement agent
services.
FINANCIAL STATEMENTS
The annual report for the Portfolios for the year ended May 31, 1999, including
the independent auditors' reports thereon, are included along with this Part B.
37
<PAGE>
PART B
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
DESCRIPTIONS OF SECURITIES RATINGS
MUNICIPAL AND CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's rates municipal and corporate bond issues, including convertible issues,
as follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Bonds which are rated Baa are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
A-1
<PAGE>
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's ranks in the
higher end of its generic rating category are designated by the symbols Aa1, A1,
Baa1, Ba1 and B1.
STANDARD & POOR'S, A DIVISION OF THE MCGRAW HILL COMPANIES ("S&P") S&P rates
corporate bond issues, including convertible debt issues, as follows:
Bonds rated AAA have the highest rating assigned by S&P. The capacity to meet
the financial commitment on the obligation is extremely strong.
Bonds rated AA have a very strong capacity to meet the financial commitment on
the obligation and differ from the highest-rated issues only in small degree.
Bonds rated A have a strong capacity to meet the financial commitment on the
obligation, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations rated in
higher-rated categories.
Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet the financial commitment on the obligation than in
higher-rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions. Bonds rated BB have less vulnerability to
nonpayment than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet the financial commitment on the
obligation.
Bonds rated B are more vulnerable to nonpayment then bonds rated BB, but
currently have the capacity to meet the financial commitment on the obligation.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to meet the financial commitment on the obligation.
Bonds rated CCC are currently vulnerable to nonpayment, and are dependent upon
favorable business, financial, and economic conditions to meet the financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, they are not likely to have the capacity to meet the
financial commitment on the obligation.
Bonds rated CC are currently highly vulnerable to nonpayment.
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action taken, but payments are being continued.
Bonds are rated D when the issue is in payment default. The D rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will made during such grace period. The D rating will also be used upon the
filing of the bankruptcy petition or the taking of a similar action if payments
on the obligation are jeopardized.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the major rating
categories.
A-2
<PAGE>
FITCH IOCA, INC. ("FITCH")
Fitch rates corporate bond issues, including convertible debt issues, as
follows:
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and/or
dividends and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and/or dividends and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and/or dividends and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest or dividends and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest or
dividends and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements or paying dividends, the probability
of continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics that if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD or D categories.
A-3
<PAGE>
PREFERRED STOCK
MOODY'S
Moody's rates preferred stock as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
within the universe of preferred stock.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance the earnings and asset protection
will remain relatively well-maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue rated baa is considered to be a medium-grade preferred stock, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.
An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.
An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issuer ranks in the lower end of its
generic rating category.
S&P
S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality, fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
A-4
<PAGE>
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
FITCH
Fitch utilizes the same ratings criteria in rating preferred stock as it does in
rating corporate bond issues, as described earlier in this Appendix.
SHORT TERM MUNICIPAL LOANS
MOODY'S. Moody's highest rating for short-term municipal loans is MIG 1/VMIG 1.
A rating of MIG 1/VMIG 1 denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Loans bearing the MIG 2/VMIG 2
designation are of high quality. Margins of protection are ample although not so
large as in the MIG 1/VMIG 1 group. A rating of MIG 3/VMIG 3 denotes favorable
quality. All security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is likely to be less well
established. A rating of MIG 4/VMIG 4 denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
S&P. S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those issues rated SP-1
which are determined to possess overwhelming safety characteristics will be
given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to
pay principal and interest. Issues rated SP-3 have speculative capacity to pay
principal and interest.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Short-term issues rated F-1+ are regarded as having the strongest degree of
assurance for timely payment. Issues assigned a rating of F-1 reflect an
assurance of timely payment only slightly less in degree than
A-5
<PAGE>
issues rated F-1+. Issues assigned a rating of F-2 have a satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1.
SHORT TERM DEBT (INCLUDING COMMERCIAL PAPER)
MOODY'S
Moody's two highest ratings for short-term debt, including commercial paper, are
PRIME-1 and PRIME-2. Both are judged investment grade, to indicate the relative
repayment capacity of rated issuers.
Issuers rated PRIME-1 have a superior capacity for repayment of short-term
promissory obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics: Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated PRIME-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
S&P
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. An A-1
designation indicates the highest category and that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation. The
capacity for timely payment on issues with an A-2 designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1. Issues carrying an A-3 designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+. Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2. Good credit quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 rating.
A-6
<PAGE>
F-3. Fair credit quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate; however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-5. Weak credit quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D. Default. Issues assigned this rating are in actual or imminent payment
default.
LOC. The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
A-7
<PAGE>
PART B
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX B
MISCELLANEOUS TABLES
TABLE 1: CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
All entities referenced in the Table are series of Norwest Advantage Funds, an
open-end management company. Norwest is the Adviser for the Norwest Advantage
Funds and is located at Norwest Center, Sixth Street and Marquette, Minneapolis,
Minnesota 55479.
<TABLE>
<S> <C> <C>
PERCENTAGE OF
PORTFOLIOS INTEREST
PORTFOLIO CONTROL PERSON AS OF SEPTEMBER 1, 1999
Prime Money Market Portfolio Cash Investment Fund 75.24%
Ready Cash Fund 24.76%
Money Market Portfolio Cash Investment Fund 100.00%
Positive Return Bond Portfolio Growth Balanced Fund 33.22%
Moderate Balanced Fund 28.00%
Diversified Bond Fund 20.59%
Strategic Income Fund 16.69%
Stable Income Portfolio Stable Income Fund 56.64%
Moderate Balanced Fund 23.94%
Strategic Income Portfolio 19.42%
Managed Fixed Income Portfolio Growth Balanced Fund 33.21%
Moderate Balanced Fund 28.00%
Diversified Bond Fund 20.62%
Strategic Income Fund 16.68%
B-1
<PAGE>
PERCENTAGE OF
PORTFOLIOS INTEREST
PORTFOLIO CONTROL PERSON AS OF SEPTEMBER 1, 1999
Strategic Value Bond Portfolio Total Return Bond Fund 35.85%
Growth Balanced Fund 20.09%
Moderate Balanced Fund 16.91%
Diversified Bond Fund 12.46%
Strategic Income Fund 10.07%
Index Portfolio Index Fund 51.33%
Diversified Equity Fund 33.44%
Growth Balanced Fund 9.47%
Income Equity Portfolio Income Equity Fund 69.37%
Diversified Equity Fund 21.15%
Growth Balanced 6.04%
Large Company Growth Portfolio Large Company Growth Fund 58.03%
Growth Equity Fund 11.56%
Diversified Equity Fund 20.93%
Growth Balanced Fund 5.90%
Disciplined Growth Portfolio Diversified Equity Fund 52.16%
Performa Disciplined Growth Fund 25.21%
Growth Balanced Fund 14.79%
Moderate Balanced Fund 5.29%
Small Company Value Portfolio Growth Equity Fund 38.93%
Diversified Equity Fund 34.76%
Growth Balanced Fund 9.95%
Diversified Small Cap Fund 11.10%
Small Cap Value Portfolio Growth Equity Fund 35.13%
Diversified Equity Fund 31.23%
Performa Small Cap Value Fund 9.87%
Growth Balanced Fund 8.98%
Diversified Small Cap Fund 10.04%
Small Cap Index Portfolio Growth Equity Fund 38.97%
Diversified Equity Fund 34.67%
Growth Balanced Fund 9.95%
Diversified Small Cap Fund 11.13%
International Portfolio Growth Equity Fund 19.85%
International Fund 34.62%
Diversified Equity Fund 31.67%
Growth Balanced Fund 08.92%
B-2
<PAGE>
</TABLE>
<PAGE>
TABLE 2: ADVISORY FEES
<TABLE>
<S> <C> <C> <C>
FEE WAIVED OR FEE
FEE REIMBURSED RETAINED BY
PAYABLE BY NORWEST ADVISER
Index Portfolio
Year ended May 31, 1999 $2,351,029 $0 $2,351,029
Year ended May 31, 1998 $1,709,358 $0 $1,709,358
Year ended May 31, 1997 $592,067 $592,067 $0
Small Company Growth Portfolio
Year ended May 31, 1999 $6,579,692 $0 $6,579,692
Year ended May 31, 1998 $7,752,366 $0 $7,752,366
Small Company Value Portfolio
Year ended May 31, 1999 $1,297,868 $0 $1,297,868
Year ended May 31, 1998 $1,558,410 $0 $1,558,410
Large Company Growth
Year ended May 31, 1999 $9,043,943 $0 $9,043,943
Year ended May 31, 1998 $6,448,644 $0 $6,448,644
Income Equity Portfolio
Year ended May 31, 1999 $10,582,022 $0 $10,582,022
Year ended May 31, 1998 $7,756,155 $0 $7,756,155
Small Cap Index Portfolio
Year ended May 31, 1999 $303,388 $0 $303,388
Year ended May 31, 1998 $45,748 $0 $45,748
Managed Fixed Income Portfolio
Year ended May 31, 1999 $1,307,275 $0 $1,307,275
Year ended May 31, 1998 $975,529 $0 $975,529
Positive Return Bond Fund
Year ended May 31, 1999 $871,345 $0 $871,345
Year ended May 31, 1998 727,322 0 727,322
Stable Income Portfolio
Year ended May 31, 1999 $864,254 $0 $864,254
Year ended May 31, 1998 $682,043 $0 $682,043
Money Market Portfolio
Year ended May 31, 1999 $3,761,486 $960,248 $2,801,238
Year ended May 31, 1998 $2,332,191 $646,233 $1,685,958
Prime Money Market Portfolio
Year ended May 31, 1999 $12,130,849 $0 $12,130,849
Year ended May 31, 1998 $7,337,295 $0 $7,337,295
Disciplined Growth Portfolio
Year ended May 31, 1999 $1,481,103 $0 $1,481,103
Year ended May 31, 1998 $679,865 $0 $679,865
Small Cap Value Portfolio
Year ended May 31, 1999 $1,021,928 $0 $1,021,928
Year ended May 31, 1998 $580,454 $0 $580,454
Strategic Value Bond Portfolio
Year ended May 31, 1999 $1,203,467 $0 $1,203,467
Year ended May 31, 1998 $601,240 $0 $601,240
B-3
<PAGE>
FEE WAIVED OR FEE
FEE REIMBURSED RETAINED BY
PAYABLE BY SCHRODER SCHRODER
International Portfolio
Year ended May 31, 1999 $3,937,758 $717,860 $3,219,898
Year ended May 31, 1998 $3,832,528 $117,141 $3,715,387
Year ended May 31, 1997 $812,485 $0 $812,485
B-4
<PAGE>
TABLE 3: ADMINISTRATIVE FEES
FEE FEE FEE
PAYABLE WAIVED RETAINED
Index Portfolio
Year ended May 31, 1999 $783,676 $779,240 $4,436
Year ended May 31, 1998 $652,010 $648,264 $3,746
Year ended May 31, 1997 $394,711 $121,837 $272,874
Small Company Growth Portfolio
Year ended May 31, 1999 $365,538 $1,559 $363,979
Year ended May 31, 1998 $486,767 $479,752 $7,015
Small Company Value Portfolio
Year ended May 31, 1999 $72,104 $68,547 $3,557
Year ended May 31, 1998 $101,259 $96,092 $5,167
Large Company Growth Portfolio
Year ended May 31, 1999 $695,688 $137,320 $558,368
Year ended May 31, 1998 $576,912 $572,067 $4,845
Income Equity Portfolio
Year ended May 31, 1999 $1,058,202 $425,107 $633,095
Year ended May 31, 1998 $860,981 $856,592 $4,389
Small Cap Index Portfolio
Year ended May 31, 1999 $60,678 $54,976 $5,702
Year ended May 31, 1998 $9,150 $3,594 $5,556
Managed Fixed Income Portfolio
Year ended May 31, 1999 $186,754 $184,012 $2,742
Year ended May 31, 1998 $155,633 $153,576 $2,057
Positive Return Portfolio
Year ended May 31, 1999 $124,478 $122,006 $2,472
Year ended May 31, 1998 $120,200 $117,575 $2,625
Stable Income Portfolio
Year ended May 31, 1999 $144,042 $142,032 $2,010
Year ended May 31, 1998 $131,001 $127,246 $3,755
Money Market Portfolio
Year Ended May 31, 1999 $1,400,619 $1,400,341 $278
Year ended May 31, 1998 $842,979 $838,386 $4,593
Prime Money Market Portfolio
Year Ended May 31, 1999 $1,832,945 $1,419 $1,831,526
Year Ended May 31, 1998 1,098,165 $0 $1,098,165
Disciplined Growth Portfolio
Year Ended May 31, 1999 $82,284 $79,837 $2,447
Year Ended May 31, 1998 37,770 $34,231 $3,539
Small Cap Value Portfolio
Year Ended May 31, 1999 $53,786 $50,969 $2,817
Year Ended May 31, 1998 $30.550 $27,553 $2,997
Strategic Value Bond Portfolio
Year Ended May 31, 1999 $120,347 $118,013 $2,334
Year Ended May 31, 1998 $60,124 $56,068 $4,056
International Portfolio
Year ended May 31, 1999 $1,312,586 $ 0 $1,312,586
Year ended May 31, 1998 $1,209,182 $ 0 $1,209,182
Year ended May 31, 1997 $ 476,431 $128,294 $ 348,137
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<PAGE>
TABLE 4: ACCOUNTING FEES
FEE FEE FEE
PAYABLE WAIVED RETAINED
Index Portfolio
Year ended May 31, 1999 $153,500 $0 $143,500
Year ended May 31, 1998 $142,000 $0 $142,000
Year ended May 31, 1997 $106,000 $42,000 $64,000
Small Company Growth Portfolio
Year ended May 31, 1999 $88,500 $0 $88,500
Year ended May 31, 1998 $78,000 $0 $78,000
Small Company Value Portfolio
Year ended May 31, 1999 $74,500 $0 $74,500
Year ended May 31, 1998 $74,000 $0 $74,000
Large Company Growth Portfolio
Year ended May 31, 1999 $81,500 $0 $81,500
Year ended May 31, 1998 $79,500 $0 $79,500
Income Equity Portfolio
Year ended May 31, 1999 $84,500 $0 $84,500
Year ended May 31, 1998 $77,500 $0 $77,500
Small Cap Index Portfolio
Year ended May 31, 1999 $146,500 $0 $146,500
Year ended May 31, 1998 $24,067 $0 $24,067
Managed Fixed Income Portfolio
Year ended May 31, 1999 $87,500 $0 $87,500
Year ended May 31, 1998 $88,000 $0 $88,000
Positive Return Portfolio
Year ended May 31, 1999 $62,000 $0 $62,000
Year ended May 31, 1998 $60,500 $0 $60,500
Stable Income Portfolio
Year ended May 31, 1999 $93,500 $0 $93,500
Year ended May 31, 1998 $94,000 $0 $94,000
Money Market Portfolio
Year Ended May 31, 1999 $86,500 $0 $86,500
Year Ended May 31, 1998 $70,387 $0 $70,387
Prime Money Market Portfolio
Year Ended May 31, 1999 $87,500 $0 $87,500
Year Ended May 31, 1998 $71,887 $0 $71,887
Disciplined Growth Portfolio
Year Ended May 31, 1999 $67,500 $0 $67,500
Year Ended May 31, 1998 $49,500 $0 $49,500
Small Cap Value Portfolio
Year Ended May 31, 1999 $64,000 $0 $64,000
Year Ended May 31, 1998 $47,000 $0 $47,000
Strategic Value Bond Portfolio
Year Ended May 31, 1999 $83,500 $0 $83,500
Year Ended May 31, 1998 $49,500 $0 $49,500
International Portfolio
Year ended May 31, 1999 $129,500 $0 $129,500
Year ended May 31, 1998 $121,500 $0 $121,500
Year ended May 31, 1997 $85,000 $13,000 $72,000
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
TABLE 5: BROKERAGE COMMISSIONS
TOTAL BROKERAGE % OF BROKERAGE % OF
COMMISSIONS ($) PAID COMMISSIONS PAID TO TRANSACTIONS
TOTAL BROKERAGE TO AN AFFILIATE OF AN AFFILIATE OF THE EXECUTED BY AN
COMMISSIONS ($) THE PORTFOLIO OR PORTFOLIO OR ADVISER AFFILIATE OF THE
ADVISER PORTFOLIO OR
ADVISER
INTERNATIONAL PORTFOLIO
Year ended May 31, 1999 1,545,877 0 0.00% 0.00%
Year ended May 31, 1998 1,178,924 0 0.00% 0.00%
Year ended May 31, 1997 1,644,601 12,744 0.77% 0.54%
INDEX PORTFOLIO
Year ended May 31, 1999 113,415 0 0.00% 0.00%
Year ended May 31, 1998 123,226 0 0.00% 0.00%
Year Ended May 31, 1997 73,952 0 0.00% 0.00%
MANAGED FIXED INCOME PORTFOLIO
Year ended May 31, 1999 0 0 0.00% 0.00%
Year ended May 31, 1998 0 0 0.00% 0.00%
STABLE INCOME BOND PORTFOLIO
Year ended May 31, 1999 0 0 0.00% 0.00%
Year ended May 31, 1998 0 0 0.00% 0.00%
POSITIVE RETURN BOND PORTFOLIO
Year ended May 31, 1999 0 0 0.00% 0.00%
Year ended May 31, 1998 0 0 0.00% 0.00%
LARGE COMPANY GROWTH PORTFOLIO
Year ended May 31, 1999 $774,418 0 0.00% 0.00%
Year ended May 31, 1998 $275,542 0 0.00% 0.00%
INCOME EQUITY PORTFOLIO
Year ended May 31, 1999 $363,383 0 0.00% 0.00%
Year ended May 31, 1998 $410,108 0 0.00% 0.00%
SMALL COMPANY INDEX PORTFOLIO
Year ended May 31, 1999 68,571 0 0.00% 0.00%
Year ended May 31, 1998 84,525 0 0.00% 0.00%
SMALL COMPANY VALUE PORTFOLIO
Year ended May 31, 1999 744,456 0 0.00% 0.00%
Year ended May 31, 1998 584,876 0 0.00% 0.00%
SMALL COMPANY GROWTH PORTFOLIO
Year ended May 31, 1999 2,214,167 0 0.00% 0.00%
Year ended May 31, 1998 2,078,600 0 0.00% 0.00%
SMALL COMPANY STOCK PORTFOLIO
Year ended May 31, 1999 725,779 0 0.00% 0.00%
Year ended May 31, 1998 946,641 0 0.00% 0.00%
DISCIPLINED GROWTH PORTFOLIO
Year ended May 31, 1999 311,288 0 0.00% 0.00%
Year ended May 31, 1998 341,932 0 0.00% 0.00%
SMALL CAP VALUE PORTFOLIO
Year ended May 31, 1999 619,880 0 0.00% 0.00%
Year ended May 31, 1998 528,243 0 0.00% 0.00%
STRATEGIC VALUE BOND PORTFOLIO
Year ended May 31, 1999 0 0 0.00% 0.00%
Year ended May 31, 1998 0 0 0.00% 0.00%
B-7
<PAGE>
TOTAL BROKERAGE % OF BROKERAGE % OF
COMMISSIONS ($) PAID COMMISSIONS PAID TO TRANSACTIONS
TOTAL BROKERAGE TO AN AFFILIATE OF AN AFFILIATE OF THE EXECUTED BY AN
COMMISSIONS ($) THE PORTFOLIO OR PORTFOLIO OR ADVISER AFFILIATE OF THE
ADVISER PORTFOLIO OR
ADVISER
PRIME MONEY MARKET PORTFOLIO
Year ended May 31, 1999 0 0 0.00% 0.00%
Year ended May 31, 1998 0.00 0 0.00% 0.00%
MONEY MARKET PORTFOLIO
Year ended May 31, 1999 0.00 0 0.00% 0.00%
Year ended May 31, 1998 0.00 0 0.00% 0.00%
</TABLE>
TABLE 6: SECURITIES OF REGULAR BROKER/DEALERS
<TABLE>
<S> <C>
International Portfolio Nomura Securities ($2,595,000)
Index Portfolio Charles Schwab Corp. ($7,034,000)
Merrill Lynch & Co., Inc. ($4,939,000)
Morgan Stanley, Dean Witter, Discover & Co. ($9,245,000)
J.P. Morgan & Co., Inc. ($4,026,000)
Bear Stearns & Co., Inc. ($817,000)
Franklin Resources, Inc. ($1,818,000)
Positive Return Bond Portfolio Merrill Lynch & Co., Inc. ($10,646,000)
Bear Stearns & Co., Inc. ($35,247,000)
CS First Boston, Inc. ($10,000,000)
Lehman Brothers, Inc. ($10,000,000)
Salomon Smith Barney Holdings ($10,000,000)
Stable Income Portfolio Merrill Lynch & Co. ($3,411,000)
Bear Stearns & Co., Inc. ($9,626,000)
Managed Fixed Income Portfolio Charles Schwab Corp. ($4,732,000)
Lehman Brothers Holdings, Inc. ($2,429,000)
Merrill Lynch & Co. ($5,574,000)
Bear Stearns & Co., Inc. ($15,740,000)
Income Equity Portfolio Bear Stearns & Co., Inc. ($27,836,000)
Large Company Growth Portfolio Charles Schwab Corp. ($146,685,000)
Franklin Resources, Inc. ($55,619,000)
T. Rowe Price ($50,927,000)
Goldman Sachs Group, Inc. ($56,259,000)
Bear, Stearns & Co., Inc. ($63,992,000)
Small Company Stock Portfolio E*Trade Group, Inc. ($1,530,000)
Easton Vance Corp. ($717,000)
Investment Technology Group ($607,000)
Legg Mason Wood Walker, Inc. ($1,227,000)
Waddell & Reed Financial, Inc. ($305,000)
Small Company Growth Portfolio Bear, Stearns & Co., Inc. ($26,008,000)
Small Company Value Portfolio Ragen Mackenzie Group, Inc. ($1,539,000)
Bear, Stearns & Co., Inc. ($2,713,000)
Strategic Value Bond Portfolio Bear Stearns & Co., Inc. ($5,166,000)
Discipline Growth Portfolio Bear Stearns & Co., Inc. ($1,364,000)
Morgan Stanley Dean Witter & Co. ($5,172,000)
B-8
<PAGE>
Small Cap Index Portfolio Amresco, Inc. ($135,000)
Dain Rauscher Corp. ($260,000)
Eaton Vance Corp. ($441,000)
Legg Mason, Inc. ($767,000)
Pioneer Group, Inc. ($183,000)
Raymond James Financial, Inc. ($427,000)
SEI Investments Co. ($724,000)
Hambrecht & Quist, Inc. ($349,000)
Small Cap Value Portfolio Bear, Stearns & Co., Inc. ($1,565,000)
Money Market Portfolio Bear Stearns & Co., Inc. ($124,998,000)
Merrill Lynch & Co., Inc. ($66,999,000)
Morgan Stanley Group, Inc. ($30,000,000)
Societe Generale Securities Corp. ($23,600,000)
SouthTrust Bank ($25,000,000)
Prime Money Market Portfolio Bear Stearns Cos., Inc. ($164,997,000)
Morgan Stanley Group Inc. ($79,999,000)
Merrill Lynch & Co. ($22,353,000)
Societe Generale Securities Corp. ($83,595,000)
SouthTrust Bank ($175,000,000)
</TABLE>
B-9
<PAGE>
PART A
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
OCTOBER 1, 1999
This Private Placement Memorandum relates to beneficial interests ("Interests")
in International Equity Portfolio (the "Portfolio"), a diversified portfolio of
Core Trust (Delaware) (the "Trust"), a registered, open-end management
investment company.
Investments in the Portfolio may only be made by certain institutional
investors, whether organized within or outside the United States (excluding
individuals, S corporations, partnerships, and grantor trusts beneficially owned
by any individuals, S corporations, or partnerships). An investor in the
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") for the Portfolio dated the same date as this Private Placement
Memorandum. The SAI may be amended from time to time and contains additional
information about the Trust and the Portfolio and is incorporated into this
Private Placement Memorandum by reference. You may obtain a copy of the SAI
without charge by contacting Forum Financial Services, Inc. ("FFSI"), 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, Interests in the Portfolio. You may subscribe
for Interests in the Portfolio and you may obtain a complete subscription
package, including a subscription agreement, by contacting the Placement Agent
at Two Portland Square, Portland, Maine 04101, (207) 879-1900. The Trust and the
Placement Agent reserve the right to refuse to accept any subscription for any
reason.
TABLE OF CONTENTS PAGE
Glossary 2
Investment Objective 2
Principal Investment Strategies 2
Risk Considerations 3
Management of the Portfolio 4
Description of Beneficial Interests 6
Purchase of Interests 6
Redemption or Repurchase of Interests 8
Information Regarding Net Income and Taxes 8
Pending Legal Proceedings 8
Other Information 8
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>
GLOSSARY
This Glossary of frequently used terms will help in understanding the discussion
of the Portfolio's objectives, policies, risks and operation. Defined terms are
capitalized when used in this Part A.
<TABLE>
<C> <S>
Term Definition
Adviser Each of Wells Fargo and WCM.
Board The Board of Trustees of Core Trust.
Core Trust Core Trust (Delaware).
Forum Forum Financial Group LLC. Subsidiaries of Forum provided administrative,
placement agency and unitholder and portfolio accounting services to the
Portfolio.
Fundamental Requiring shareholder approval to change.
Emerging Markets Markets associated with a country that is considered by international financial
organizations, such as the International Finance Corporation and the
International Bank for Reconstruction and Development, and the international
financial community to have an "emerging" stock market. Such markets may be
under-capitalized, have less-developed legal and financial systems or may have
less stable currencies than markets in the developed world.
Interest Beneficial interest in The Portfolio.
Market Capitalization The total market value of a company's outstanding common stock.
Norwest Bank Norwest Bank Minnesota, N.A.
Portfolio International Equity Portfolio.
SAI Statement of Additional Information.
SEC The U.S. Securities and Exchange Commission.
Trust Core Trust
WCM Wells Capital Management, Inc.
Wells Fargo Wells Fargo Bank, N.A.
</TABLE>
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is Fundamental and may not be changed
without investor approval.
The Portfolio seeks to earn total return, with an emphasis on capital
appreciation, over the long-term, by investing primarily in equity securities of
non-United States companies.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio seeks to earn total return by investing at least 80% of its assets
in a diversified portfolio of common stock of companies located or operating in
developed and emerging markets of the world. It is expected that the securities
held by the Portfolio will be traded on a stock exchange or other market in the
country in which the issuer is based, but they also may be traded in other
countries, including the United States. The Portfolio must invest its assets in
the securities of at least five different countries other than the United
States. The Portfolio may also invest in American Depositary Receipts, European
Depositary Receipts, and similar instruments.
2
<PAGE>
The Adviser applies a fundamentals-driven, value-oriented analysis to identify
companies with above-average potential for long-term growth. The Adviser
examines financial data including the company's historical performances and its
projected future earnings. The Adviser also considers other key criteria such as
a company's local, regional or global franchise; history of effective management
demonstrated by expanding revenues and earnings growth; prudent financial and
accounting policies and ability to take advantage of a changing business
environment. In allocating among countries, regions and industry sectors, the
Adviser considers factors such as economic growth prospects, monetary and fiscal
policies, political stability, currency trends, market liquidity and investor
sentiment.
TEMPORARY DEFENSIVE MEASURES
The Portfolio may temporarily hold assets in cash or in money market
instruments, including U.S. Government obligations, shares of other mutual funds
and repurchase agreements, or make other short-term investments, either to
maintain liquidity or for temporary defensive purposes in response to adverse
market, economic, political or other conditions, When the Portfolio assumes a
temporary defensive strategy, it may not be investing to achieve its investment
objective.
RISK CONSIDERATIONS
GENERAL
The Portfolio's net asset value and total return will fluctuate based upon
changes in the value of its portfolio securities. The market value of securities
in which the Portfolio invests is based upon the market's perception of value
and its not necessarily an objective measure of the securities' value. There is
no assurance that the Portfolio will achieve its investment objective. The
Portfolio is designed for investment of that portion of an investor's funds that
can appropriately bear the special risks associated with investments in
securities of foreign companies. An investment in the Portfolio is not by itself
a complete or balanced investment program. Finally, your investment in the
Portfolio is subject to the risk that the Adviser may make poor investment
decisions.
The following describes additional principal risks that may apply to the
Portfolio.
CURRENCY RISK
The risk that a change in the exchange rate between U.S. dollars and a foreign
currency may reduce the value of an investment made in a security denominated in
that foreign currency.
EMERGING MARKET RISK
The risk that the emerging market, as defined in the glossary, may be more
sensitive to certain economic changes. For example, emerging market countries
are often dependent on international trade and are therefore often vulnerable to
recessions in other countries. They may have obsolete financial systems, have
volatile currencies and may be more sensitive than more mature markets to a
variety of economic factors. Emerging market securities may also be less liquid
than securities of more developed countries and could be difficult to sell,
particularly during a market downturn.
3
<PAGE>
FOREIGN RISK
The risk that foreign investments may be subject to political and economic
instability, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital, or nationalization, increased
taxation or confiscation of investors' assets. Also, the risk that the price of
a foreign issuer's securities may not reflect the issuer's condition because
there is not sufficient publicly available information about the issues. This
risk may be greater for investments in issuers in emerging or developing
markets.
MARKET RISK
The risk that the market value of the Portfolio's investments will fluctuate as
the stock and bond markets fluctuate generally. Market risk may affect a single
issuer, industry or section of the economy or may affect the market as a whole.
REGULATORY RISK
The risk that changes in government regulations will adversely affect the value
of a security. Also the risk that an insufficiently regulated market might
permit inappropriate trading practices.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1. 2000. The Advisers are addressing this matter for their
systems. The Portfolios' other service providers have informed the Trust that
they are taking similar measures. Investments in foreign companies are
particularly vulnerable to Year 2000 risk because these companies may not have
the financial resources, technology, or personnel needed to address Year 2000
readiness concerns. This matter, if not corrected, could adversely affect the
services provided to the Portfolios and could therefore, lower the value of your
Portfolio interests.
MANAGEMENT OF THE PORTFOLIO
TRUSTEES AND OFFICERS
The business of the Trust is managed under the direction of the Board. Forum
Administrative Services, LLC, the Portfolio's administrator, provides persons
satisfactory to the Board to serve as officers of the Trust. The SAI contains
general background information about each Trustee and officer of the Trust.
INVESTMENT ADVISER
Wells Fargo is the Portfolio's investment adviser. In this capacity, Wells Fargo
makes investment decisions for and administers the Portfolio's investment
program. Wells Fargo Bank is located at 525 Market Street, San Francisco,
California 94163. Wells Fargo is a subsidiary of Wells Fargo & Company, a
national bank holding company. Wells Fargo was founded in 1852, is the oldest
bank in the western United States and is one of the largest banks in the United
States. As of June 30, 1999, Wells Fargo and its subsidiaries provided advisory
services for over $131 billion in assets.
For its investment advisory services, Wells Fargo is entitled to receive a
monthly fee from the Portfolio at an annual rate of 1.20% of the Portfolio's
average daily net assets.
4
<PAGE>
SUBADVISER
Wells Fargo and the Portfolio have retained WCM as a subadviser to make
investment decisions for and administer the investment program of the Portfolio.
Wells Fargo decides which portion of the assets of the Portfolio the subadviser
should manage and supervises the subadviser's performance of its duties.
Currently, WCM manages all of the assets of the Portfolio. WCM, which is located
at 525 Market Street, San Francisco, California 94163, is a wholly owned
subsidiary of Wells Fargo. WCM provides investment advisory services to various
open-end management investment companies. As of June 30, 1999, WCM provided
advisory services for over $39 billion in assets.
For its services, WCM receives investment subadvisory fees at an annual rate of
0.25% of the first $200 million of the Portfolio's average daily net assets,
0.20% of the next $200 million of the Portfolio's average daily net assets, and
0.15% of the Portfolio's average daily net assets over $400 million. Wells
Fargo, not the Portfolio, pays WCM for its sub-advisory services. This
compensation does not increase the amount paid by the Portfolio to Wells Fargo
Bank for investment advisory services.
PORTFOLIO MANAGERS
Katherine Schapiro, CFA and Stacey Ho, CFA are responsible for day-to-day
management of the Portfolio. Ms. Schapiro has been associated with Wells Fargo
Bank since 1992. Ms. Schapiro directs the international equity strategy for WCM
and manages international equity funds and institutional accounts. Prior thereto
she was a vice president and fund manager for Newport Pacific Management, an
international investment advisory firm based in San Francisco. Currently, Ms.
Schapiro is President of the Security Analysts of San Francisco. Ms. Ho has been
associated with WCM since 1997 and is co-manager for the international equity
portfolios and funds. Prior thereto, she was a senior portfolio manager at
Clemente Capital Management, an international investment advisory firm based in
New York (1995-1996). Prior thereto, Ms. Ho managed Japanese and U.S. equity
portfolios at Edison International (1990-1995).
CUSTODIAN
Norwest Bank serves as the custodian for the 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 the Portfolio at an annual rate of 0.07% of the Portfolio's average daily net
assets.
OTHER SERVICE PROVIDERS
Forum companies provides services to the Portfolio. As of June 30, 1999, Forum
provided administrative and distribution services to investment companies and
collective investment funds with assets of approximately $73 billion.
Forum Financial Services, Inc., a registered broker-dealer and member of the
National Association of Securities Dealers, Inc., is the placement agent of the
Portfolio's shares. The placement agent sells Interests of the Portfolio on
behalf of the Trust.
Forum Administrative Services, LLC provides administrative services to the
Portfolio and Forum Accounting Services, LLC is the Portfolio's unitholder and
porftolio accountant.
EXPENSES
The Portfolio pays for all of its expenses. The Portfolio's expenses are
comprised of its own expenses as well as Trust expenses that are allocated among
the portfolios and other series of the Trust in proportion to its average net
assets or as otherwise determined by the Board.
5
<PAGE>
DESCRIPTION OF BENEFICIAL INTERESTS
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 November 1, 1994, as amended May 21, 1999. The Trust offers
units of Interest without any sales charge and units may be redeemed without
charge.
Interests in the Trust are divided into 21 separate diversified series, each
having a distinct investment objective and distinct investment policies. The
Portfolio is one of those series. The Trust is empowered to establish, without
investor approval, additional series that may have different investment
objectives and policies.
Interests in the Portfolio 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 the 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.
Each investor in the 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. Interests in the Portfolio may not be transferred,
but you may withdraw all or any portion of your investment at any time at net
asset value ("NAV"). In determining the outcome of interestholder votes, the
Trust normally counts votes on an Interest by Interest basis. This means that
interestholders of Portfolios with comparatively high net assets values will
have a comparatively smaller impact on the outcome of votes by all of the
Portfolios than do shareholders of Portfolios with comparatively low net asset
values.
From time to time, an investor may own a large percentage of Interests of the
Portfolio and accordingly, may be able to greatly affect (if not determine) the
outcome of an interestholder vote.
Investments in the 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 particular
Portfolios, 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
the Portfolio, investors will be entitled to share pro rata in the Portfolio's
net assets available for distribution to investors.
PURCHASE OF INTERESTS
You may purchase Interests in the Portfolio without a sales charge at the net
asset value of an Interest ("NAV") next calculated after the placement agent
received your request in proper form. The Portfolio cannot accept orders that
request a particular day or price for the transaction or any other special
conditions.
The Portfolio does not issue certificates of Interest.
The Portfolio calculates its NAV as of the close of the New York Stock Exchange
(normally 4:00 P.M., Eastern Time) ("Valuation Time") on each weekday except
when the New York Stock Exchange is closed. The time at which NAV is calculated
may change in case of an emergency. The Portfolio's NAV per Interest is
determined by taking the market value of all securities owned by the Portfolio
(plus all other assets such as cash), subtracting the liabilities and then
dividing the result (net assets) by the number of Interests outstanding. The
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Portfolio values securities for which market quotations are readily available at
current market value. If market quotations are not readily available, the
Portfolio values those securities at fair value as determined by or pursuant to
procedures adopted by the Board.
You may add to or reduce your investment in the Portfolio. At the Valuation Time
on each business day, the value your Interest in the Portfolio will be
determined by multiplying the Portfolio's NAV by the percentage, effective for
that day, that represents your share of the aggregate Interests in the
Portfolio. Any additions to or withdrawals of those interests that are to be
effected on that day will then be effected. Your share of the aggregate
Interests in the Portfolio then will be recomputed by dividing the value of your
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 by 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 your respective interest in the Portfolio as of the
Valuation Time on the following business day.
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. Trading in foreign
securities, however, may not take place on all business days or may take place
on days other than business days. Accordingly, the NAV of the Portfolio's
Interests may change on days when you will be unable to purchase or redeem
Interests. The determination of the prices of foreign securities may be based on
the latest market quotations for the securities markets. If events occur that
affect the securities' value after the close of the markets on which they trade,
the Portfolio may make adjustments to the value of the securities for purposes
of determining NAV.
For purposes of determining NAV, the Portfolio converts all assets and
liabilities denominated in foreign currencies 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 amount in the Portfolio.
However, since the 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 exclusive placement agent for the Trust is FFSI. Please contact FFSI at Two
Portland Square, Portland, Maine 04101, (207) 879-1900, for a complete
subscription package. The Trust reserves the right to refuse any subscription
for any reason. Forum receives no compensation for serving as the exclusive
placement agent for the Trust.
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REDEMPTION OR REPURCHASE OF INTERESTS
You 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. Normally, the Portfolio will send proceeds of
withdrawal in federal funds on the business day after the withdrawal is
effected, but in any event within a week. Delays may occur in cases of very
large redemptions, excessive trading or during unusual market conditions. The
Portfolio may delay sending redemption proceeds until it has collected payment
for the Interests you are selling, which may take up to 15 days.
Investments in the 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.
The Portfolio reserves the rights to pay redemption proceeds in portfolio
securities rather than cash. These redemptions "in kind" normally occur if the
amount to be redeemed is large enough to affect the Portfolio's operations (for
example, if it represents more than 1% of the Portfolio's assets.)
INFORMATION REGARDING NET INCOME AND TAXES
The 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 the Portfolio's net income
is allocated pro rata among the investors in the Portfolio. The Portfolio's net
income generally is not distributed to the investors in the Portfolio, except as
determined by the Board from time to time, but instead is included in the NAV of
the investors' respective Interests in the Portfolio.
The Portfolio operates so that it should not be subject to any income tax.
However, each investor in the 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.
Your share of the Portfolio's capital gain is taxable as long-term capital gain
regardless of how long you have held your portfolio Interests. It is intended
that the 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. The sale of Portfolio Interests is a taxable event for federal tax
purposes. Investor inquiries may be directed to FFSI.
PENDING LEGAL PROCEEDINGS
None.
OTHER INFORMATION
PORTFOLIO REORGANIZATION
On April 21, 1999, the Board approved an Agreement and Plan of Reorganization
whereby the Portfolio will reorganize into International Equity Portfolio of
Wells Fargo Core Trust ("Wells Core Trust"), another registered, open-end
management investment company, that has substantially similar investment
objectives and policies. It is anticipated that the total expense ratio of
International Equity Portfolio of Wells Core Trust will be lower than that of
the Portfolio.
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The reorganization is part of a plan to consolidate the mutual fund families of
Wells Fargo & Company and Norwest Corporation and to centralize their management
as well as the management of the related current portfolios of Core Trust under
one Board of Trustees. Pursuant to the Trust's Trust Instrument, the
reorganization does not require the approval of the Portfolio's interestholders.
It is anticipated that the reorganization will occur within the next few months.
You will not be able to purchase interests in the Wells Fargo Core Trust
portfolios until after the completion of the reorganization.
THE REORGANIZATION IS EXPECTED TO BE A TAX-FREE TRANSACTION.
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PART B
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1999
This Part B to the Private Placement Memorandum (the "Statement of Additional
Information" or "SAI") relates to beneficial interests in the INTERNATIONAL
EQUITY PORTFOLIO (the "Portfolio") of Core Trust (Delaware) (the "Trust"), a
registered, open-end management investment company. This SAI supplements Part A
of the Private Placement Memorandum ("Part A") dated October 1, 1999, relating
to the Portfolio.
This SAI does not constitute an offer to sell, or the solicitation of an offer
to buy, beneficial interests in the Portfolio. An investor may subscribe for a
beneficial interest in the 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 Part A 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
Introduction..................................................................1
Additional Information Regarding Investments and Strategies..........3
Risk Considerations.................................................13
Investment Limitations..............................................15
Management of the Trust.............................................17
Control Persons and Principal Holders of Securities.................18
Investment Advisory and Other Services..............................20
Brokerage Allocation and Other Practices............................22
Capital Stock and Other Securities..................................24
Purchase, Redemption and Pricing of Securities......................24
Tax Status..........................................................25
Underwriters........................................................26
Financial Statements................................................26
Appendix A: Descriptions of Securities Ratings.....................A-1
Appendix B: Miscellaneous Table...................................B-1
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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INTRODUCTION
THE PORTFOLIO
International Equity Portfolio commenced operations on February 16, 1999. The
assets of the Portfolio belong only to the Portfolio, and its assets are charged
with the liabilities of the Portfolio and all expenses, costs, charges and
reserves attributable to the Portfolio.
DEFINITIONS
"Advisers" or "Investment Advisers" shall mean, collectively, Wells Fargo Bank,
N.A. ("Wells Fargo Bank") and Wells Capital Management Incorporated ("WCM").
"Board" shall mean the Board of Trustees of the Trust.
"Capitalization" shall mean the total number of a company's outstanding shares
of stock multiplied by the price per share. This is an accepted method of
determining a company's size.
"CFTC" shall mean the U.S. Commodities Futures Trading Commission.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Custodian" shall mean Norwest acting in its capacity as custodian of the
Portfolio.
FAcS shall mean Forum Accounting Services, Limited Liability Company, the
Trust's fund accountant.
"FAdS" shall mean Forum Administrative Services, Limited Liability Company, the
Trust's administrator.
"Fitch" shall mean Fitch IBCA, Inc.
"FFSI" shall mean Forum Financial Services, LLC, a registered broker-dealer and
placement agent of the Trust.
"Index Futures" shall mean futures contracts that relate to broadly based stock
indices.
"Moody's" shall mean Moody's Investors Service, Inc.
"Norwest Bank" shall mean Norwest Bank Minnesota, N.A., a subsidiary of Norwest
Corporation.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"Portfolio" shall mean the International Equity Portfolio of the Trust to which
this Private Placement Memorandum relates.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's, A Division of The McGraw Hill Companies.
"Subadviser" or "Investment Subadviser" shall mean WCM.
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"Trust" shall mean Core Trust (Delaware), an open-end, management investment
company registered under the 1940 Act.
"U.S. Government Securities" shall mean obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
"WCM" shall mean Wells Capital Management Incorporated, a wholly owned
subsidiary of Wells Fargo Bank, N.A.
"Wells Fargo Bank" shall mean Wells Fargo Bank, N.A., a wholly owned subsidiary
of Wells Fargo & Company, a national bank holding company.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
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ADDITIONAL INFORMATION REGARDING INVESTMENTS AND STRATEGIES
GENERAL INFORMATION
This section discusses in greater detail than the Part A certain of the
investments the Portfolio may make. The Portfolio will make only those
investments described below that are in accordance with its investment
objectives and policies.
The Portfolio's investment objective and all investment policies of the
Portfolio that are designated as fundamental may not be changed without approval
by the lesser of: (i) more than 50% of the outstanding interests of the
Portfolio, or (ii) 67% or more of the interests present or represented at an
investors' meeting, if more than 50% of the outstanding interests of the
Portfolio are present or represented at the meeting in person or by proxy. All
other investment policies of the Portfolio may be changed by the Trust's Board
of Trustees (the "Board" or the "Trustees") upon appropriate notice to
investors.
EMERGING MARKET SECURITIES
The Portfolio may invest up to 25% of its assets in equity securities of
companies in "emerging markets." The Portfolio considers countries with emerging
markets to include the following: (i) countries with an emerging stock market as
defined by the International Finance Corporation; (ii) countries with low- to
middle-income economies according to the International Bank for Reconstruction
and Development (more commonly referred to as the World Bank); and (iii)
countries listed in World Bank publications as developing. The advisor may
invest in those emerging markets that have a relatively low gross national
product per capita, compared to the world's major economies, and which exhibit
potential for rapid economic growth. The advisor believes that investment in
equity securities of emerging market issuers offers significant potential for
long-term capital appreciation.
Equity securities of emerging market issuers may include common stock, preferred
stocks (including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
The Portfolio may invest in American Depositary Receipts ("ADRs"), Canadian
Depositary Receipts ("CDRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and International Depositary Receipts ("IDRs") of
such issuers.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Colombia, Ecuador, Greece, Hong Kong,
Indonesia, India, Korea, Malaysia, Mexico, the Philippines, Poland, Portugal,
Peru, Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its revenues or profits from goods produced or sold, investments made, or
services performed therein or has at least 50% of its assets situated in such
country, market or region.
There are special risks involved in investing in emerging-market countries. Many
investments in emerging markets can be considered speculative, and their prices
can be much more volatile than in the more developed nations of the world. This
difference reflects the greater uncertainties of investing in less established
markets and economies. The financial markets of emerging markets countries are
generally less well capitalized and thus securities of issuers based in such
countries may be less liquid. Most are heavily dependent on international trade,
and some are especially vulnerable to recessions in other countries. Many of
these countries are also sensitive to world commodity prices. Some countries may
still have obsolete financial systems, economic problems or archaic legal
systems. The currencies of certain emerging market countries, and therefore the
value of securities denominated in such currencies, may be more volatile than
currencies of developed countries. In addition, many of these nations are
experiencing political and social uncertainties.
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FOREIGN OBLIGATIONS AND SECURITIES
The foreign securities in which the Portfolio may invest include common stocks,
preferred stocks, warrants, convertible securities and other securities of
issuers organized under the laws of countries other than the United States. Such
securities also include equity interests in foreign investment funds or trusts,
real estate investment trust securities and any other equity or equity-related
investment whether denominated in foreign currencies or U.S. dollars.
The Portfolio may invest in foreign securities through American Depositary
Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"), European Depositary
Receipts ("EDRs"), International Depositary Receipts ("IDRs") and Global
Depositary Receipts ("GDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs (sponsored or unsponsored) are receipts typically issued by a
U.S. bank or trust company and traded on a U.S. stock exchange, and CDRs are
receipts typically issued by a Canadian bank or trust company that evidence
ownership of underlying foreign securities. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored ADR. EDRs and IDRs are receipts typically issued by European banks
and trust companies, and GDRs are receipts issued by either a U.S. or non-U.S.
banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe.
For temporary defensive purposes, the Portfolio may invest in fixed income
securities of non-U.S. governmental and private issuers. Such investments may
include bonds, notes, debentures and other similar debt securities, including
convertible securities.
Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign tax laws, and there is a possibility
of expropriation or confiscatory taxation, political, social and monetary
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
From time to time, investments in other investment companies may be the most
effective available means by which the Portfolio may invest in securities of
issuers in certain countries. Investment in such investment companies may
involve the payment of management expenses and, in connection with some
purchases, sales loads, and payment of substantial premiums above the value of
such companies' portfolio securities. At the same time, the Portfolio would
continue to pay its own management fees and other expenses. The Portfolio may
invest in these investment funds and in registered investment companies subject
to the provisions of the Investment Company Act of 1940 ("1940 Act"). Such
investment funds or investment companies may be "passive foreign investment
companies" (as described in "Federal Income Taxes" in this SAI) and may result
in special federal income tax consequences.
Investment income on certain foreign securities in which the Portfolio may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which the Portfolio would be subject.
The Portfolio's investments in foreign securities involve currency risks. The
U.S. dollar value of a foreign security tends to decrease when the value of the
U.S. dollar rises against the foreign currency in which the security is
denominated, and tends to increase when the value of the U.S. dollar falls
against such currency. To attempt to minimize risks to the Portfolio from
adverse changes in the relationship between the U.S.
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dollar and foreign currencies, the Portfolio may engage in foreign currency
transactions on a spot (I.E., cash) basis and may purchase or sell forward
foreign currency exchange contracts ("forward contracts"). The Portfolio may
also purchase and sell foreign currency futures contracts (see "Purchase and
Sale of Currency Futures Contracts"). A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date that
is individually negotiated and privately traded by currency traders and their
customers.
Forward contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and is traded at a net price without
commission. The Portfolio will direct its custodian, to the extent required by
applicable regulations, to segregate high-grade liquid assets in an amount at
least equal to its obligations under each forward contract. Neither spot
transactions nor forward contracts eliminate fluctuations in the prices of the
Portfolio's investment portfolio securities or in foreign exchange rates, or
prevent loss if the prices of these securities should decline.
The Portfolio may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security (a
"transaction hedge"). In addition, when the Adviser believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Portfolio's securities denominated
in such foreign currency, or when the Adviser believes that the U.S. dollar may
suffer a substantial decline against the foreign currency, it may enter into a
forward purchase contract to buy that foreign currency for a fixed dollar amount
(a "position hedge").
The Portfolio may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Adviser
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which the portfolio securities are denominated (a
"cross-hedge").
Foreign currency hedging transactions are an attempt to protect the Portfolio
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and date it matures.
The Portfolio's custodian will, to the extent required by applicable
regulations, segregate cash, U.S. Government securities or other high-quality
debt securities having a value equal to the aggregate amount of the Portfolio's
commitments under forward contracts entered into with respect to position hedges
and cross-hedges. If the value of the segregated securities declines, additional
cash or securities will be segregated on a daily basis so that the value of the
segregated securities will equal the amount of the Portfolio's commitments with
respect to such contracts.
The cost to the Portfolio of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange
usually are conducted on a principal basis, no fees or commissions are involved.
The Adviser considers on an ongoing basis the creditworthiness of the
institutions with which the Portfolio enters into foreign currency transactions.
The use of forward currency exchange contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
exchange that can be
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achieved in the future. If devaluation generally is anticipated, the Portfolio
may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.
FOREIGN CURRENCY FUTURES CONTRACTS
IN GENERAL. A foreign currency futures contract is an agreement between two
parties for the future delivery of a specified currency at a specified time and
at a specified price. A "sale" of a futures contract means the contractual
obligation to deliver the currency at a specified price on a specified date, or
to make the cash settlement called for by the contract. Futures contracts have
been designed by exchanges which have been designated "contract markets" by the
CFTC and must be executed through a brokerage firm, known as a futures
commission merchant, which is a member of the relevant contract market. Futures
contracts trade on these markets, and the exchanges, through their clearing
organizations, guarantee that the contracts will be performed as between the
clearing members of the exchange.
While futures contracts based on currencies do provide for the delivery and
acceptance of a particular currency, such deliveries and acceptances are very
seldom made. Generally, entering into an offsetting transaction terminates a
futures contract. The Portfolio will incur brokerage fees when it purchases and
sells futures contracts. At the time such a purchase or sale is made, the
Portfolio must provide cash or money market securities as a deposit known as
"margin." The initial deposit required will vary, but may be as low as 2% or
less of a contract's face value. Daily thereafter, the futures contract is
valued through a process known as "marking to market," and the Portfolio may
receive or be required to pay "variation margin" as the futures contract becomes
more or less valuable.
PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS. In order to hedge its
investment portfolio and to protect it against possible variations in foreign
exchange rates pending the settlement of securities transactions, the Portfolio
may buy or sell currency futures contracts. If a fall in exchange rates for a
particular currency is anticipated, the Portfolio may sell a currency futures
contract as a hedge. If it is anticipated that exchange rates will rise, the
Portfolio may purchase a currency futures contract to protect against an
increase in the price of securities denominated in a particular currency the
Portfolio intends to purchase. These futures contracts will be used only as a
hedge against anticipated currency rate changes.
A currency futures contract sale creates an obligation by the Portfolio, as
seller, to deliver the amount of currency called for in the contract at a
specified futures time for a special price. A currency futures contract purchase
creates an obligation by the Portfolio, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although the
terms of currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without the
making or taking of delivery of the currency. Closing out of a currency futures
contract is effected by entering into an offsetting purchase or sale
transaction.
In connection with transactions in foreign currency futures, the Portfolio will
be required to deposit as "initial margin" an amount of cash or short-term
government securities equal to from 5% to 8% of the contract amount. Thereafter,
subsequent payments (referred to as "variation margin") are made to and from the
broker to reflect changes in the value of the futures contract.
RISK FACTORS ASSOCIATED WITH FUTURES TRANSACTIONS. The effective use of futures
strategies depends on, among other things, the Portfolio's ability to terminate
futures positions at times when the Adviser deems it desirable to do so.
Although the Portfolio will not enter into a futures position unless the Adviser
believes that a liquid secondary market exists for such future, there is no
assurance that the Portfolio will be able to effect closing transactions at any
particular time or at an acceptable price. The Portfolio generally expects that
its futures transactions will be conducted on recognized U.S. and foreign
securities and commodity exchanges.
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Futures markets can be highly volatile and transactions of this type carry a
high risk of loss. Moreover, a relatively small adverse market movement with
respect to these transactions may result not only in loss of the original
investment but also in unquantifiable further loss exceeding any margin
deposited.
The use of futures involves the risk of imperfect correlation between movements
in futures prices and movements in the price of currencies, which are the
subject of the hedge. The successful use of futures strategies also depends on
the ability of the adviser to correctly forecast interest rate movements,
currency rate movements and general stock market price movements.
In addition to the foregoing risk factors, the following sets forth certain
information regarding the potential risks associated with the Portfolio's
futures transactions.
RISK OF IMPERFECT CORRELATION. The Portfolio's ability effectively to hedge
currency risk through transactions in foreign currency futures depends on the
degree to which movements in the value of the currency underlying such hedging
instrument correlate with movements in the value of the relevant securities held
by the Portfolio. If the values of the securities being hedged do not move in
the same amount or direction as the underlying currency, the hedging strategy
for the Portfolio might not be successful and the Portfolio could sustain losses
on its hedging transactions which would not be offset by gains on its portfolio.
It is also possible that there may be a negative correlation between the
currency underlying a futures contract and the portfolio securities being
hedged, which could result in losses both on the hedging transaction and the
portfolio securities. In such instances, the Portfolio's overall return could be
less than if the hedging transactions had not been undertaken.
Under certain extreme market conditions, it is possible that the Portfolio will
not be able to establish hedging positions, or that any hedging strategy adopted
will be insufficient to completely protect the Portfolio.
The Portfolio will purchase or sell futures contracts only if, in the Adviser's
judgment, there is expected to be a sufficient degree of correlation between
movements in the value of such instruments and changes in the value of the
relevant portion of the Portfolio's investment portfolio for the hedge to be
effective. There can be no assurance that the Adviser's judgment will be
accurate.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET. The ordinary spreads between prices
in the cash and futures markets, due to differences in the natures of those
markets, are subject to distortions. First, all participants in the futures
market are subject to initial deposit and variation margin requirements. This
could require the Portfolio to post additional cash or cash equivalents as the
value of the position fluctuates. Further, rather than meeting additional
variation margin requirements, investors may close futures contracts through
offsetting transactions that could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures market may be
lacking. Prior to exercise or expiration, a futures position may be terminated
only by entering into a closing purchase or sale transaction, which requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio will establish a futures position only if there
appears to be a liquid secondary market therefor, there can be no assurance that
such a market will exist for any particular futures contract at any specific
time. In such event, it may not be possible to close out a position held by the
Portfolio, which could require the Portfolio to purchase or sell the instrument
underlying the position, make or receive a cash settlement, or meet ongoing
variation margin requirements. The inability to close out futures positions also
could have an adverse impact on the Portfolio's ability effectively to hedge its
securities, or the relevant portion thereof.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges, which
limit the amount of fluctuation in the price of a contract during a single
trading day and prohibit trading beyond such limits once they have been reached.
The trading of futures contracts also is subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of the brokerage firm or clearing
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house or other disruptions of normal trading activity, which could at times make
it difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
TRADING AND POSITION LIMITS. Each contract market on which futures contracts are
traded has established a number of limitations governing the maximum number of
positions that may be held by a trader, whether acting alone or in concert with
others. The Adviser does not believe that these trading and position limits will
have an adverse impact on the hedging strategies regarding the Portfolio's
investments.
REGULATIONS ON THE USE OF FUTURES CONTRACTS. Regulations of the CFTC require
that the Portfolio enter into transactions in futures contracts for hedging
purposes only, in order to assure that it is not deemed to be a "commodity pool"
under such regulations. In particular, CFTC regulations require that all short
futures positions be entered into for the purpose of hedging the value of
investment securities held by the Portfolio, and that all long futures positions
either constitute bona fide hedging transactions, as defined in such
regulations, or have a total value not in excess of an amount determined by
reference to certain cash and securities positions maintained for the Portfolio,
and accrued profits on such positions. In addition, the Portfolio may not
purchase or sell such instruments if, immediately thereafter, the sum of the
amount of initial margin deposits on its existing futures positions and premiums
paid for options on futures contracts would exceed 5% of the market value of the
Portfolio's total assets.
When the Portfolio purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be segregated with the
Portfolio's custodian so that the amount so segregated, plus the initial deposit
and variation margin held in the account of its broker, will at all times equal
the value of the futures contract, thereby insuring that the use of such futures
is unleveraged.
The Portfolio's ability to engage in the hedging transactions described herein
may be limited by the policies and concerns of various Federal and state
regulatory agencies. Such policies may be changed by vote of the Board of
Trustees.
The Adviser uses a variety of internal risk management procedures to ensure that
derivatives use is consistent with the Portfolio's investment objective, does
not expose the Portfolio to undue risk and is closely monitored. These
procedures include providing periodic reports to the Board of Trustees
concerning the use of derivatives.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Portfolio may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although the Portfolio will generally purchase securities with the intention of
acquiring them, the Portfolio may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the Adviser. Securities purchased on a when-issued or
forward commitment basis may expose the Portfolio to risk because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued or forward commitment basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
The Portfolio will segregate cash, U.S. Government obligations or other
high-quality debt instruments in an amount at least equal in value to the
Portfolio's commitments to purchase when-issued securities. If the value of
these assets declines, the Portfolio will segregate additional liquid assets on
a daily basis so that the value of the segregated assets is equal to the amount
of such commitments.
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FOREIGN FIXED INCOME SECURITIES
The Portfolio may invest in foreign fixed income securities, including:
FOREIGN PRIVATE DEBT. The Portfolio may invest in fixed income securities of
private issuers, provided that they are rated, at the time of investment, within
the top four rating categories by an NRSRO or determined to be of equivalent
quality by the Adviser. Fixed income securities in which the Portfolio may
invest include, without limitation, corporate bonds, notes, debentures and other
similar corporate debt securities, including convertible securities. In
addition, such securities may or may not have warrants attached. For a
discussion of the risks associated with investing in foreign securities, see
"Risk Factors" in the Prospectus.
FOREIGN SOVEREIGN DEBT. The Portfolio may invest in debt securities or
obligations of foreign governments and their political subdivisions or agencies
("Sovereign Debt") provided that they are rated, at the time of investment,
within the top four rating categories by a NRSRO or determined to be of
equivalent quality by the Adviser. Investments in Sovereign Debt involve special
risks. The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and/or
interest when due in accordance with the terms of such debt, and the Portfolio
may have limited legal recourse in the event of a default.
Sovereign Debt differs from debt obligations issued by private entities in that,
generally, remedies for defaults must be pursued in the courts of the defaulting
party. Legal recourse is therefore somewhat diminished. Political conditions,
especially a sovereign entity's willingness to meet the terms of its debt
obligations, are of considerable significance. Also, there can be no assurance
that the holders of commercial bank debt issued by the same sovereign entity may
not contest payments to the holders of Sovereign Debt in the event of default
under commercial bank loan agreements.
A sovereign debtor's willingness or ability to repay principal and interest due
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Portfolio's
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Adviser manages the Portfolio's investment
portfolio in a manner that is intended to minimize the exposure to such risks,
there can be no assurance that adverse political changes will not cause the
Portfolio to suffer a loss of interest or principal on any of its holdings.
BRADY BONDS. The Portfolio may invest a portion of its assets in Brady Bonds,
which are securities created through the exchange of existing commercial bank
loans to sovereign entities for new obligations in connection with debt
restructurings. Brady Bonds may be collateralized or uncollateralized and are
issued in various currencies (primarily the U.S. dollar). Brady bonds are not
considered U.S. government securities.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds having the same maturity as the
Brady Bonds. Interest payments on these Brady Bonds generally are collateralized
on a one-year or longer rolling-forward basis by cash or securities in an amount
that, in the case of fixed rate bonds, is equal to at least one year of interest
payments or, in the case of floating rate
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bonds, initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest payments
but generally are not collateralized. Brady Bonds are often viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk").
Brady Bonds involve various risk factors including the history of defaults with
respect to commercial bank loans by public and private entities of countries
issuing Brady Bonds. There can be no assurance that Brady Bonds in which the
Portfolio may invest will not be subject to restructuring arrangements or to
requests for new credit, which may cause the Portfolio to suffer a loss of
interest or principal on any of its holdings.
HEDGING AND RELATED STRATEGIES
The Portfolio may attempt to protect the U.S. dollar equivalent value of one or
more of its investments (hedge) by purchasing and selling foreign currency
futures contracts and by purchasing and selling currencies on a spot (I.E.,
cash) or forward basis. Foreign currency futures contracts are bilateral
agreements pursuant to which one party agrees to make, and the other party
agrees to accept, delivery of a specified type of currency at a specified future
time and at a specified price. Although such futures contracts by their terms
call for actual delivery or acceptance of currency, in most cases the contracts
are closed out before the settlement date without the making or taking of
delivery. A forward currency contract involves an obligation to purchase or sell
a specific currency at a specified future date, which may be any fixed number of
days from the contract date agreed upon by the parties, at a price set at the
time the contract is entered into.
The Portfolio may enter into forward currency contracts for the purchase or sale
of a specified currency at a specified future date either with respect to
specific transactions or with respect to portfolio positions. For example, the
Portfolio may enter into a forward currency contract to sell an amount of a
foreign currency approximating the value of some or all of the Portfolio's
securities denominated in such currency. The Portfolio may use forward contracts
in one currency or a basket of currencies to hedge against fluctuations in the
value of another currency when the Adviser anticipates there will be a
correlation between the two and may use forward currency contracts to shift the
Portfolio's exposure to foreign currency fluctuations from one country to
another. The purpose of entering into these contracts is to minimize the risk to
the Portfolio from adverse changes in the relationship between the U.S. dollar
and foreign currencies.
The Adviser might not employ any of the strategies described above, and there
can be no assurance that any strategy used will succeed. If the Adviser
incorrectly forecasts exchange rates, market values or other economic factors in
utilizing a strategy for the Portfolio, the Portfolio might have been in a
better position had it not hedged at all. The use of these strategies involves
certain special risks, including (1) the fact that skills needed to use hedging
instruments are different from those needed to select the Portfolio's
securities, (2) possible imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the investments
being hedged, (3) the fact that, while hedging strategies can reduce the risk of
loss, they can also reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments and (4) the
possible inability of the Portfolio to purchase or sell a portfolio security at
a time that otherwise would be favorable for it to do so, or the possible need
for the Portfolio to sell a portfolio security at a disadvantageous time, due to
the need for the Portfolio to maintain "cover" or to segregate securities in
connection with hedging transactions and the possible inability of the Portfolio
to close out or to liquidate its hedged position.
New financial products and risk management techniques continue to be developed.
The Portfolio may use these instruments and techniques to the extent consistent
with its investment objectives and regulatory and tax considerations.
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MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENTS
The Portfolio may invest in the following types of high quality money market
instruments that have remaining maturities not exceeding one year: (i) U.S.
Government obligations; (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by the
FDIC; (iii) commercial paper rated at the date of purchase "Prime-1" by Moody's
or "A-1" or "A-1--" by S&P, or, if unrated, of comparable quality as determined
by The Adviser, as investment advisor; and (iv) repurchase agreements. The
Portfolio also may invest in short-term U.S. dollar-denominated obligations of
foreign banks (including U.S. branches) that at the time of investment: (i) have
more than $10 billion, or the equivalent in other currencies, in total assets;
(ii) are among the 75 largest foreign banks in the world as determined on the
basis of assets; (iii) have branches or agencies in the United States; and (iv)
in the opinion of the Adviser, are of comparable quality to obligations of U.S.
banks which may be purchased by the Portfolio.
LETTERS OF CREDIT. Certain of the debt obligations (including certificates of
participation, commercial paper and other short-term obligations) which the
Portfolio may purchase may be backed by an unconditional and irrevocable letter
of credit of a bank, savings and loan association or insurance company which
assumes the obligation for payment of principal and interest in the event of
default by the issuer. Only banks, savings and loan associations and insurance
companies which, in the opinion of the Adviser, are of comparable quality to
issuers of other permitted investments of the Portfolio may be used for letter
of credit-backed investments.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements,
wherein the seller of a security to the Portfolio agrees to repurchase that
security from the Portfolio at a mutually agreed upon time and price. The
Portfolio may enter into repurchase agreements only with respect to securities
that could otherwise be purchased by the Portfolio. All repurchase agreements
will be fully collateralized at 102% based on values that are marked to market
daily. The maturities of the underlying securities in a repurchase agreement
transaction may be greater than twelve months, although the maximum term of a
repurchase agreement will always be less than twelve months. If the seller
defaults and the value of the underlying securities has declined, the Portfolio
may incur a loss. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Portfolio's disposition of the
security may be delayed or limited.
The Portfolio may not enter into a repurchase agreement with a maturity of more
than seven days, if, as a result, more than 15% of the market value of the
Portfolio's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. The Portfolio will only enter into repurchase agreements with
primary broker/dealers and commercial banks that meet guidelines established by
the Board of Trustees and that are not affiliated with the investment advisor.
The Portfolio may participate in pooled repurchase agreement transactions with
other funds advised by the Adviser.
OTHER INVESTMENT COMPANIES
The Portfolio may invest in shares of other open-end management investment
companies, up to the limits prescribed in Section 12(d) of the 1940 Act. Under
the 1940 Act, the Portfolio's investment in such securities currently is limited
to, subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Portfolio's net assets with respect to any
one investment company and (iii) 10% of such Portfolio's net assets in
aggregate. Other investment companies in which the Portfolio may invest can be
expected to charge fees for operating expenses such as investment advisory and
administration fees that would be in addition to those charged by the Portfolio.
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PRIVATELY ISSUED SECURITIES
The Portfolio may invest in privately issued securities, including those which
may be resold only in accordance with Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). Rule 144A Securities are restricted securities that
are not publicly traded. Accordingly, the liquidity of the market for specific
Rule 144A Securities may vary. Delay or difficulty in selling such securities
may result in a loss to the Portfolio. Privately issued or Rule 144A securities
that are determined by the investment advisor to be "illiquid" are subject to
the Portfolio's policy of not investing more than 15% of its net assets in
illiquid securities. The investment advisor, under guidelines approved by Board
of Trustees, will evaluate the liquidity characteristics of each Rule 144A
Security proposed for purchase by the Portfolio on a case-by-case basis and will
consider the following factors, among others, in their evaluation: (1) the
frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the Rule
144A Security; and (4) the nature of the Rule 144A Security and the nature of
the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer).
UNRATED INVESTMENTS
The Portfolio may purchase instruments that are not rated if, in the opinion of
the Adviser, such obligations are of investment quality comparable to other
rated investments that are permitted to be purchased by the Portfolio. After
purchase by the Portfolio, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Portfolio. Neither event
will require a sale of such security by the Portfolio. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, the Portfolio will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in its Prospectus and in this SAI. The ratings of Moody's and S&P are more fully
described in the SAI.
U.S. GOVERNMENT OBLIGATIONS
The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government obligations").
Payment of principal and interest on U.S. Government obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
WARRANTS
The Portfolio may invest up to 5% of its net assets at the time of purchase in
warrants (other than those that have been acquired in units or attached to other
securities), and not more than 2% of its net assets in warrants which are not
listed on the New York or American Stock Exchange. Warrants represent rights to
purchase securities at a specific price valid for a specific period of time. The
prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Portfolio may only purchase warrants on securities in
which the Portfolio may invest directly.
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ZERO COUPON BONDS
The Portfolio may invest in zero coupon bonds. Zero coupon bonds are securities
that make no periodic interest payments, but are instead sold at discounts from
face value. The buyer of such a bond receives the rate of return by the gradual
appreciation of the security, which is redeemed at face value on a specified
maturity date. Because zero coupon bonds bear no interest, they are more
sensitive to interest-rate changes and are therefore more volatile. When
interest rates rise, the discount to face value of the security deepens and the
securities decrease more rapidly in value, when interest rates fall, zero coupon
securities rise more rapidly in value because the bonds carry fixed interest
rates that become more attractive in a falling interest rate environment.
NATIONALLY RECOGNIZED STATISTICAL RATINGS ORGANIZATIONS
The ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings Group,
Division of McGraw Hill, Duff & Phelps Credit Rating Co., Fitch Investors
Service, Inc. Thomson Bank Watch and IBCA Inc. represent their opinions as to
the quality of debt securities. It should be emphasized, however, that ratings
are general and not absolute standards of quality, and debt securities with the
same maturity, interest rate and rating may have different yields while debt
securities of the same maturity and interest rate with different ratings may
have the same yield. Subsequent to purchase by the Portfolio, an issue of debt
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Portfolio. The advisor will consider such an
event in determining whether the Portfolio should continue to hold the
obligation.
RISK CONSIDERATIONS
The following supplements the risk disclosure information provided in the
Private Placement Memorandum.
CREDIT RISK
The Portfolio's investment in debt instruments is subject to credit rate risk.
Credit risk is the risk that issuers of the debt instruments in which the
Portfolio invests will be unable to make interest payments or repay principal on
schedule. If an issuer does default, the affected security could lose all of its
value, or be renegotiated at a lower rate or principal amount. Affected
securities might also lose liquidity or, in other words, the ability to readily
sell a security at fair price. Credit risk also includes the risk that a party
in a transaction may not be able to complete the transaction as agreed.
INTEREST RATE RISK
The Portfolio's investment in debt instruments is subject to interest rate risk.
Interest-rate risk is the risk that fluctuations in interest rates can affect
the value of an existing security. Generally, when interest rates increase, the
value of debt securities decreases. The effect is usually more pronounced for
securities with longer maturity dates. Debt securities with longer maturities,
which tend to produce higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities can be reduced, but
not eliminated, by variable and floating-rate features.
COUNTER-PARTY RISK
The Portfolio's investment in repurchase agreements, debt securities, forward
commitments, when-issued purchases and delayed-delivery transactions are subject
to counter-party risk. Counter-party risk is the risk that the other party to a
repurchase agreement or other transaction will not fulfill its contract
obligation.
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GEOGRAPHIC CONCENTRATION RISK
The Portfolio's ability to invest up to 50% of its assets in securities of
issuers located in one country may subject the Portfolio to geographic
concentration risk. Geographic concentration risk is the risk that factors
adversely affecting the Portfolio's investments in issuers located in a country
or region will affect the Portfolio's net asset value more than if the Portfolio
made more geographically diverse investments.
NON-INVESTMENT GRADE SECURITIES.
Securities rated in the fourth highest rating category are regarded by S&P as
having an adequate capacity to pay interest and repay principal, but changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make such repayments. Moody's considers such securities as having
speculative characteristics. Subsequent to its purchase by the Portfolio, an
issue of securities may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Portfolio. The advisor will consider
such an event in determining whether the Portfolio should continue to hold the
obligation. Securities rated below the fourth highest rating category (sometimes
called "junk bonds") are often considered to be speculative and involve greater
risk of default or price changes due to changes in the issuer's
credit-worthiness. The market prices of these securities may fluctuate more than
higher quality securities and may decline significantly in periods of general
economic difficulty.
FOREIGN SECURITIES
Investing in the securities of issuers in any foreign country, including
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs")
and similar securities, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
or diplomatic developments that could affect U.S. investments in foreign
countries. Additionally, dispositions of foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
withholding taxes. Foreign securities often trade with less frequency and volume
than domestic securities and, therefore, may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. The Portfolio's performance may be
affected either unfavorably or favorably by fluctuations in the relative rates
of exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments.
EMERGING MARKETS
There are special risks involved in investing in emerging-market countries. Many
investments in emerging markets can be considered speculative, and their prices
can be much more volatile than in the more developed nations of the world. This
difference reflects the greater uncertainties of investing in less established
markets and economies. In addition, the financial markets of emerging markets
countries are generally less well capitalized and thus securities of issuers
based in such countries may be less liquid. Further, such markets may be
vulnerable to high inflation and interest rates. Most are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Some of these countries are also sensitive to world commodity prices
and may be subject to political and social uncertainties.
SMALL CAPITALIZATION STOCKS
Although the Portfolio will normally invest in issuers with an average market
Capitalization of $10 billion or more, it may invest in equity securities of
issuers with market Capitalization as low as $250 million.
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Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Smaller companies
may have higher failure rates than larger companies and their securities may be
more difficult to sell because the trading volume of the securities is normally
lower than that of larger companies. It is also more difficult to forecast how a
small or unseasoned issuer might react to various economic conditions.
Shares of small and new companies are generally more sensitive to purchase and
sale transactions, changes in demand, and changes in the issuer's financial
condition and, therefore, the prices of such stocks may be more volatile than
those of larger company stocks and may be subject to more abrupt price movements
than securities of larger companies.
ILLIQUID SECURITIES
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to the Portfolio.
DERIVATIVE INVESTMENTS
The adviser may use certain derivative investments or techniques, such as
entering into currency exchange contracts or swap agreements, to adjust the risk
and return characteristics of the Portfolio's investment portfolio. Derivatives
are financial instruments whose value is derived, at least in part, from the
price of another security or a specified asset, index or rate. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to fluctuations in
yield or value due to their structure or contract terms. If the Portfolio's
adviser judges market conditions incorrectly, the use of certain derivatives
could result in a loss, regardless of the adviser's intent in using the
derivatives.
PORTFOLIO TURNOVER RATE
Portfolio turnover rate is the percentage of the securities held by the
Portfolio, other than short-term securities, that were bought or sold within a
year. The Advisers do not anticipate that the Portfolio's turnover ratio to
exceed 100% under normal market conditions, but this target will not limit the
Adviser's discretion in buying and selling securities. Portfolio turnover
generally involves some expense to the Portfolio, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also can
generate short-term capital gains tax consequences. There is, of course, no
assurance that the Portfolio will achieve its investment objective or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of investment products.
INVESTMENT LIMITATIONS
For purposes of all fundamental and non-fundamental investment policies of the
Portfolio: (1) the term 1940 Act includes the rules thereunder, SEC
interpretations and any exemptive order upon which the Portfolio may rely and
(2) the term Code includes the rules thereunder, IRS interpretations and any
private letter ruling or similar authority upon which the Portfolio may rely.
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 the
Portfolio's assets or purchases and redemptions of interests will not be
considered a violation of the limitation.
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FUNDAMENTAL LIMITATIONS
The 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.
The Portfolio, may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Portfolio's investments in that industry would be 25%
or more of the current value of the Portfolio's total assets, provided that
there is no limitation with respect to investments in obligations of the United
States Government, its agencies or instrumentalities;
(2) issue senior securities, except as permitted by applicable law;
(3) purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities, including
government-sponsored enterprises) if, as a result, more than 5% of the value of
the Portfolio's total assets would be invested in the securities of any one
issuer or the Portfolio would hold more than 10% of the outstanding voting
securities of such issuer, except that up to 25% of the Portfolio's total assets
may be invested without regard to these limitations; nor
(4) borrow money, except as permitted by applicable law.
(5) purchase or sell real estate or real estate limited partnerships (other than
securities secured by real estate or interests therein or securities issued by
companies that invest in real estate or interests therein);
(6) underwrite securities of other issuers, except to the extent that the
purchase of securities directly from the issuer thereof or from an underwriter
for an issuer and the later disposition of such securities in accordance with
the Portfolio's investment program may be deemed to be an underwriting;
(7) make investments for the purpose of exercising control or management;
(8) make loans, except as permitted by applicable law;
(9) purchase or sell commodities or commodities contracts, except that the
Portfolio may, on such conditions as may be set forth in the Portfolio's Private
Placement Memorandum and this Statement of Additional Information, purchase,
sell or enter into futures contracts, foreign currency forward contracts,
options on futures contracts, foreign currency forward contracts, foreign
currency options, or any interest rate, securities-related or foreign
currency-related hedging instrument, subject to compliance with any applicable
provisions of the federal securities or commodities laws.
NONFUNDAMENTAL LIMITATIONS
The Portfolio has adopted the following investment limitations, which are not
fundamental policies of the Portfolio and may be changed without interestholder
action.
(1) The Portfolio may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act. Under
the 1940 Act, a Portfolio's investment in such securities currently is limited
to, subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Portfolio's net assets with respect to any
one investment company, and (iii) 10% of such Portfolio's net assets in the
aggregate. Other investment companies in which the
16
<PAGE>
Portfolio invests can be expected to charge fees for operating expenses, such as
investment advisory and administration fees, that would be in addition to those
charged by the Portfolio.
(2) The Portfolio may not invest or hold more than 15% of the Portfolio's net
assets in illiquid securities. For this purpose, illiquid securities include,
among others, (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale, (b)
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days, and (c) repurchase agreements not terminable
within seven days.
(3) The Portfolio may lend securities from its portfolio to brokers, dealers and
financial institutions, in amounts not to exceed (in the aggregate) one-third of
the Portfolio's total assets. Any such loans of portfolio securities will be
fully collateralized based on values that are marked to market daily. The
Portfolio will not enter into any portfolio security lending arrangements having
a duration of longer than one year.
The Portfolio does not invest in the following types of derivatives that
generally are considered to be potentially volatile: capped floaters, leveraged
floaters, range floaters, dual index floaters or inverse floaters. Additionally,
the Portfolio will not invest in securities whose interest rate reset provisions
materially lag short-term interest rates, such as Cost of Funds Index Floaters
or other derivative instruments the Portfolio considers to have the potential
for excessive volatility.
MANAGEMENT OF THE TRUST
The business and affairs of the Trust are managed under the direction of the
Board is responsible for overseeing the management of the Trust. The Board
formulates the general policies of the Portfolio and generally meets quarterly
to review the results of the Portfolio, monitor investment activities and
practices and discuss other matters affecting the Portfolio and the Trust. 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.
<TABLE>
<S> <C>
- --------------------------------------------------- ----------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
John Y. Keffer*,Chairman & President President, Forum Financial Group (a mutual
Born: July 15, 1942 fund services holding company)
Two Portland Square President, Forum Financial Services, Inc.
Portland, Maine 04101 (Trust's underwriter)
Trustee, Chairman & President*, Forum Funds,
Monarch Funds and Norwest Advantage Funds
(registered investment companies)
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Costas Azariadas, Trustee Professor of Economics, University of
Born: February 15, 1943 California-Los Angeles
Department of Economics Trustee, Forum Funds
University of California
Los Angeles, CA 90024
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
James C. Cheng, Trustee President, Technology Marketing Associates
Born: July 26, 1942 (marketing company for small and medium size
27 Temple Street businesses in New England)
Belmont, MA 02718 Trustee, Forum Funds
- --------------------------------------------------- ----------------------------------------------
17
<PAGE>
- --------------------------------------------------- ----------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
<PAGE>
J. Michael Parish, Trustee Partner-Reid & Priest LLP
Born: November 9, 1943 (law firm) since 1995
40 West 57th Street Partner-Winthrop, Stimson,
New York, NY 10019 Putnam & Roberts (law firm)
from 1989-1995 Trustee,
Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Thomas G. Sheehan, Vice President Managing Director-Forum Financial Group
Born: July 15, 1954 Vice President/Asst. Secretary, Norwest
Two Portland Square Advantage Funds
Portland, Maine 04101
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Stacey Hong, Treasurer Director, Fund Accounting, Forum Financial
Born: May 10, 1966 Group
Two Portland Square Treasurer, Forum Funds and Monarch Funds
Portland, Maine 04101
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Dawn Taylor, Asst. Treasurer Manager/Senior Tax Specialist, Tax
Born: May 14, 1964 Department, Forum Financial Group, LLC since
Two Portland Square 1997
Portland, Maine 04101 Senior Tax Accountant, Pardy Bingham &
Burrell (accounting firm) during 1997
Senior Tax Specialist, Forum Financial
Group, LLC from 1994 to 1997
Assistant Treasurer, Forum Funds and Monarch
Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
David I. Goldstein, Secretary Managing Director and General Counsel, Forum
Born: August 3, 1961 Financial Group since 1991
Two Portland Square Vice President, Forum Funds
Portland, Maine 04101 Vice President & Secretary, Monarch Funds
and Norwest Advantage Funds
Secretary, Forum Financial Services, Inc.
(Trust's underwriter)
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Don Evans, Asst. Secretary Counsel, Forum Financial Group, since 1995
Born: August 12, 1948 Associate, Bisk & Lutz during 1995
Two Portland Square Associate, Weiner & Strother from 1990 to
Portland, Maine 04101 1995.
Assistant Secretary, Norwest Advantage
Funds
- --------------------------------------------------- ----------------------------------------------
18
<PAGE>
- --------------------------------------------------- ----------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Heidi A. Hoefler, Asst. Secretary Staff Attorney, Forum Financial Group since
Born: October 10, 1963 1998
Two Portland Square Legal Assistant, Preti Flaherty Beliveau &
Portland, Maine 04101 Pachios (law firm) from 1997-1998
Legal Intern, Unum from 1996-1997
Law Student, University of Maine School of
Law from 1994-1997
Asst. Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Leslie K. Klenk, Asst. Secretary Counsel, Forum Financial Group since 1998
Born: August 24, 1964 Vice President/Associate General Counsel,
Two Portland Square Smith Barney Inc. from 1993 through 1998
Portland, Maine 04101 Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
- --------------------------------------------------- ----------------------------------------------
Pamela Stutch, Asst. Secretary Senior Fund Specialist, Forum Financial
Born: June 29, 1967 Group since 1998
Two Portland Square Law Student, Temple University from 1994-1997
Portland, Maine 04101 Assistant Secretary, Forum Funds
- --------------------------------------------------- ----------------------------------------------
</TABLE>
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,
1999, the Portfolios' fiscal year end.
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
Compensation Total Compensation from Trust
Trustee from Trust Benefits Retirement
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
John Y. Keffer $0.00 None None $0.00
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
Costas Azariadis $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
James C. Cheng $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
J. Michael Parish $9,489.38 $0 $0 $10,500
- ---------------------- ---------------- ------------ ----------------- -------------------------------------
</TABLE>
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<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 1, 1999, the Trust's Trustees and officers collectively owned
less than 1% of the Interests of each Portfolio.
From time to time, certain interestholders may own a large percentage of the
shares of the Portfolio. Accordingly, those interestholders may be able to
greatly affect (if not determine) the outcome of an interestholder vote. Table 1
in Appendix B all interestholders who owned of record 5% or more of the
outstanding shares of any of Portfolio as of September 1, 1999.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY SERVICES
Wells Fargo Bank acts as investment adviser to the Portfolio and furnishes
investment guidance and policy direction in connection with the daily portfolio
management of the Portfolio. Wells Fargo Bank is a wholly owned subsidiary of
Wells Fargo & Company, a national bank holding company. Wells Fargo Bank
furnishes to the Trust's Board periodic reports on the investment strategy and
performance of the Portfolio. Wells Fargo Bank provides the Portfolio with,
among other things, money market security and fixed-income research, analysis
and statistical and economic data and information concerning interest rate and
securities markets trends, portfolio composition, and credit conditions 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, the Portfolio.
WCM is the investment subadviser of the Portfolio. Subject to the direction of
the Trust's Board and the overall supervision and control of Wells Fargo Bank
and the Trust, WCM makes recommendations regarding the investment and
reinvestment of the Portfolio's assets. WCM furnishes to Wells Fargo Bank
periodic reports on the investment activity and performance of the Portfolio.
WCM and also furnishes such additional reports and information as Wells Fargo
Bank and the Trust's Board of Trustees and officers may reasonably request.
The investment advisory agreement for the Portfolio ("Advisory Agreement") will
remain in effect for a period of two years from the date of its effectiveness
and thereafter shall continue for successive one-year periods provided 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 (other than as trustees of the Trust).
The Advisory Agreement with respect to the Portfolio is terminable without the
payment of penalty, (1) 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 Wells Fargo Bank, or (2) by Wells Fargo Bank on 60 days'
written notice to the Trust. The Advisory Agreement terminates automatically
upon its assignment. The Advisory Agreement with respect to the Portfolio also
provides that, with respect to the Portfolio, the Adviser shall not be liable
for any mistake of judgment or in any event whatsoever except for willful
misfeasance, reckless disregard. bad faith or gross negligence in the
performance of its duties under the Advisory Agreement.
The Investment Subadvisory Agreement (the "Subadvisory Agreement") for the
Portfolio will remain in effect for a period of two years from the date of its
effectiveness and thereafter shall continue for successive one-year periods
provided 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 (other than as trustees of the Trust). The
Portfolio's Subadvisory Agreement is terminable without penalty by the Board or
a majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Subadviser or by the Subadviser on 60 days' written notice
to the Trust when authorized either by vote of the Portfolio's shareholders or
by a vote of a majority of the Board, or by the Subadvisor on not more than 60
days' nor less than 30 days' written notice, and will automatically terminate in
the event of its assignment. The Subadvisory Agreement for the Portfolio also
provides that the Subadvisor will not be liable for any mistake of judgment or
in any event except for willful misfeasance, reckless disregard, bad faith or
gross negligence in the performance of its obligations and duties under the
Subadvisory Advisory Agreement. The Portfolio's Subadvisory Advisory Agreement
provides that the Subadviser may render services to others.
The advisory fees, as described in Part A, are accrued daily and paid monthly.
Each Adviser in its sole discretion, may waive all or any portion of its
advisory fee with respect to the Portfolio. The Advisory Agreement provides that
the Advisers may render service to others. The investment subadvisory fees
20
<PAGE>
payable to WCM may be paid by Wells Fargo Bank or directly by the Portfolio. If
the subadvisory fee is paid directly by the Portfolio, the compensation paid to
Wells Fargo Bank for advisory fees will be reduced accordingly.
Table 2 in Appendix B shows the dollar amount of the fees payable by the
Portfolio to Wells Fargo Bank, the amount of fees waived by Wells Fargo Bank,
and the actual fees received by Wells Fargo Bank. The data are for the past
three fiscal years (or shorter period depending on a Portfolio's commencement of
operations).
ADMINISTRATIVE SERVICES
Pursuant to an Administration Agreement with the Trust, FAdS supervises the
overall administration of the Portfolio 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 Portfolio 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 FAdS and the Trust will continue in effect
with respect to the Portfolio only if such continuance is specifically approved
at least annually by the Board or by a majority of the outstanding voting
securities of the Portfolio the interestholders of the Portfolio and, in either
case, by a majority of the Trustees who are not parties to the Administration
Agreement or interested persons of any such party (other than as Trustees of the
Trust).
The Administration Agreement may be terminated without penalty by the Board on
60 days' written notice to FAdS or by FAdS on 60 days' written notice to the
Trust. The Administration Agreement also provides that FAdS shall not be liable
for any action or inaction except for bad faith, willful misfeasance, gross
negligence or reckless disregard in the performance of its duties and
obligations under the Administration Agreement.
Table 3 in Appendix B shows the dollar amount of the fees payable by the
Portfolio to FAdS, the amount of fees waived by FAdS, and the actual fees
received by FAdS. The data are for the past three fiscal years (or shorter
period depending on a Portfolio's commencement of operations).
PORTFOLIO ACCOUNTING
Pursuant to a Portfolio and Unitholder Accounting Agreement (the "Accounting
Agreement") with the Trust, FAcS, an affiliate of FAdS, performs portfolio
accounting services for the Portfolio. Under the Accounting Agreement, FAcS
prepares and maintains books and records of the Portfolio on behalf of the Trust
that are required to be maintained under the 1940 Act, calculates the net asset
value per share of the Portfolio and dividends and capital gain distributions
and prepares periodic reports to interestholders and the SEC.
The Accounting Agreement will continue in effect with respect to the Portfolio
only if such continuance is specifically approved at least annually by the
Board. The Accounting Agreement may be terminated with respect to the Portfolio
at any time without penalty, by the Board on 60 days' written notice to FAcS or
by FAcS on 60 days' written notice to the Board. The Accounting Agreement
provides that FAcS shall not be liable for any action or inaction except for bad
faith, willful misfeasance, gross negligence or reckless disregard in the
performance of its duties and obligations under the Accounting Agreement.
For its accounting services, FAcS receives from the Trust with respect to the
Portfolio a fee of $48,000 per year plus certain amounts based upon the number
of interestholders, the type of Portfolio, and number and types of portfolio
transactions within the Portfolio.
21
<PAGE>
FAcS whose principal business address is Two Portland Square, Portland, Maine
04101 also acts as dividend disbursing agent for the Trust.
Table 4 in Appendix B shows the dollar amount of the fees payable by the
Portfolio to FAcS, the amount of fees waived by FAcS, and the actual fees
received by FAcS. The data are for the past three fiscal years (or shorter
period depending on a Portfolio's commencement of operations).
INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, MA 02110 is the independent auditor for the
Portfolio.
CUSTODIAN
Norwest Bank, 733 Marquette Avenue, Minneapolis, Minnesota 55479-0040, is the
custodian of the Portfolio's assets. Bank of New York acts as global
sub-custodian of the Portfolio's assets. Pursuant to rules adopted under the
1940 Act, the 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. Bank of New York employs qualified foreign
subcustodians to provide custody of the Portfolio's assets in accordance with
applicable regulations. Neither Norwest Bank nor Bank of New York make any
investment decisions on behalf of the Portfolio.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Investment decisions for the Portfolio 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 the Adviser in its best judgment and in a manner
deemed to be in the best interest of holders of beneficial interests of the
Portfolio 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
22
<PAGE>
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.
The 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, the Adviser takes 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. The Adviser may also take into
account payments made by brokers effecting transactions for the Portfolio (1) to
the Portfolio or (2) to other persons on behalf of the Portfolio for services
provided to it for which it would be obligated to pay.
In addition, the 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 the Adviser in connection with services to clients
other than the Portfolio, and advisory fees are not reduced by reason of their
receipt of the research services. Research products and/or services include
proprietary research publications, rating service reports and trading quotation
systems and services such as Bloomberg, ILX and Telerate. In instances where a
product or a service is of "mixed-use" (or includes a research and a
non-research component), WCM makes a good faith effort to determine the amount
attributable to research and pays the non-research portion in hard dollars.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized the Adviser to employ its respective
affiliates to effect securities transactions of the Portfolio, provided certain
other conditions are satisfied. Payment of brokerage commissions to an affiliate
of the 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 brokers' commissions for such transactions. It is the
Portfolio's policy that commissions paid to affiliates of the Adviser will, in
the judgment of the adviser responsible for making portfolio decisions and
selecting brokers, be (1) at least as favorable as commissions contemporaneously
charged by the affiliate on comparable transactions for its most favored
unaffiliated customers and (2) 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 the Adviser by the Portfolio satisfy the foregoing standards.
The Trust has no understanding or arrangement to direct any specific portion of
its brokerage to an affiliate of the Adviser, and will not direct brokerage to
an affiliate of the Adviser in recognition of research services.
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 the
Adviser, 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 the Adviser 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 the Adviser or
any affiliates thereof not participate in or benefit from the sale to the Trust.
Table 5 in Appendix B shows the dollar amount of brokerage commissions paid by
the Portfolio for the past three years (or shorter period depending on a Fund's
commencement of operations). In addition, the table also indicates the dollar
amount of brokerage commissions, percentage of brokerage commissions and
23
<PAGE>
percentage of commission transactions executed through broker/dealer affiliates
of the Portfolio or the Advisers.
As of May 31, 1999, the Portfolio maintained equity investments in
broker/dealers (or their parent companies) used to regularly affect portfolio
transactions. Table 6 of Appendix B provides details of these investments.
CAPITAL STOCK AND OTHER SECURITIES
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 Portfolio will all vote together in certain
circumstances (e.g., election of the Trustees and ratification of auditors, as
required by the 1940 Act and the rules thereunder). One or more Portfolios could
control the outcome of these votes. Investors do not have cumulative voting
rights, and investors holding more than 50% of the aggregate interests in the
Trust or in a Portfolio, as the case may be, may control the outcome of votes.
The Trust is not required and has no current intention to hold annual meetings
of investors, but the Trust will hold special meetings of investors when (1) a
majority of the Trustees determines to do so or (2) investors holding at least
10% of the interests in the Trust (or a Portfolio) request in writing a meeting
of investors in the Trust (or Portfolio). Except for certain matters
specifically described in the Trust Instrument, the Trustees may amend the
Trust's Trust Instrument without the vote of investors.
The Trust, with respect to a Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Trust's Board. A Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2) by
the Trustees on written notice to the Portfolio's investors. Upon liquidation or
dissolution of any Portfolio, the investors therein would be entitled to share
pro rate in its net assets available for distribution to investors.
The Trust is organized as a business trust under the laws of the State of
Delaware. The Trust's interestholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
provides that an interestholder of a Delaware business trust shall be entitled
to the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust interestholder liability exists in many other states,
including Texas. As a result, to the extent that the Trust or an interestholder
is subject to the jurisdiction of courts in those states, the courts may not
apply Delaware law, and may thereby subject the Trust to liability. To guard
against this risk, the Trust Instrument of the Trust disclaims liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation and instrument entered into by the Trust or
its Trustees, and provides for indemnification out of Trust property of any
interestholder held personally liable for the obligations of the Trust. Thus,
the risk of an interestholder incurring financial loss beyond his investment
because of shareholder liability is limited to circumstances in which (1) a
court refuses to apply Delaware law, (2) no contractual limitation of liability
is in effect, and (3) the Trust itself is unable to meet its obligations.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
Interests in the Portfolio 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 annual report for the Portfolio,
which is included along with this Part B, provided the net asset value of the
Portfolio as of May 31, 1999.
Pursuant to an amended exemptive order effective August 6, 1996, Norwest
Advantage Funds are permitted to invest all or a portion of its assets in a
Portfolio of the Trust, irrespective of investment style. The
24
<PAGE>
amended exemptive order removed certain restrictions imposed on the Trust
thereby permitting the Trust to accept investments from persons other than
Norwest Advantage Funds.
TAX STATUS
The Portfolio is classified for federal income tax purposes as a separate
partnership that is not a "publicly traded partnership." As a result, the
Portfolio is not subject to federal income tax; instead, each investor in the
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. The Portfolio also is not subject to Delaware income or franchise
tax.
Each investor in the Portfolio is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether the investor satisfies the requirements to
qualify as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended. Accordingly, the 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 the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the investor's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
investor's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio, (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables, and (4) gain or loss may be recognized on a distribution
to an investor that contributed property to the Portfolio. An investor's basis
for its interest in the 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 the 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.
The 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 the 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 the 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.
25
<PAGE>
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 Portfolio's use of hedging strategies, such as 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 Portfolio
realizes in connection therewith. For the 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.
However, income from the disposition by the Portfolio of hedging instruments
(other than those on foreign currencies) held for less than three months will be
subject to the requirement applicable to its RIC investors that less than 30% of
a RIC's gross income each taxable year consist of certain short-term gains
("Short-Short Limitation"). Income from the disposition of foreign currencies,
and hedging instruments on foreign currencies, that are not directly related to
the Portfolio's principal business of investing in securities (or options and
futures with respect thereto) also will be subject to the Short-Short Limitation
for its RIC investors if they are held for less than three months.
If the Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether its RIC investors
satisfy the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Portfolio will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Portfolio does
not so qualify, it may be forced to defer the closing out of certain hedging
instruments beyond the time when it otherwise would be advantageous to do so, in
order for its RIC investors to qualify or continue to qualify as RICs.
UNDERWRITERS
FFSI, Two Portland Square, Portland, Maine 04101, serves as the Trust's
placement agent. FFSI receives no compensation for such placement agent
services.
FINANCIAL STATEMENTS
The annual report for the Portfolio for the year ended May 31, 1999, including
the independent auditors' reports thereon, is included along with this Part B.
26
<PAGE>
PART B
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
DESCRIPTIONS OF SECURITIES RATINGS
PREFERRED STOCK
MOODY'S
Moody's rates preferred stock as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
within the universe of preferred stock.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue rated baa is considered to be a medium-grade preferred stock, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue that is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
An issue that is rated caa is likely to be in arrears on dividend payments. This
rating designation does not purport to indicate the future status of payments.
An issue that is rated ca is speculative in a high degree and is likely to be in
arrears on dividends with little likelihood of eventual payment.
An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issuer ranks in the lower end of its
generic rating category.
A-1
<PAGE>
S&P
S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality, fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B, and CCC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
FITCH
Fitch utilizes the same ratings criteria in rating preferred stock as it does in
rating corporate bond issues, as described earlier in this Appendix.
SHORT TERM DEBT (INCLUDING COMMERCIAL PAPER)
MOODY'S
Moody's two highest ratings for short-term debt, including commercial paper, are
PRIME-1 and PRIME-2. Both are judged investment grade, to indicate the relative
repayment capacity of rated issuers.
Issuers rated PRIME-1 have a superior capacity for repayment of short-term
promissory obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics: Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.
A-2
<PAGE>
Issuers rated PRIME-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated PRIME-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
S&P
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. An A-1
designation indicates the highest category and that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation. The
capacity for timely payment on issues with an A-2 designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1. Issues carrying an A-3 designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+. Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2. Good credit quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 rating.
F-3. Fair credit quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate; however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-5. Weak credit quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D. Default. Issues assigned this rating are in actual or imminent
payment default.
LOC. The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
A-3
<PAGE>
CORE TRUST (DELAWARE)
PRIVATE PLACEMENT MEMORANDUM
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX B
MISCELLANEOUS TABLES
TABLE 1: CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
All entities referenced in the Table are series of Norwest Advantage Funds, an
open-end management company. Norwest is the Adviser for the Norwest Advantage
Funds and is located at Norwest Center, Sixth Street and Marquette, Minneapolis,
Minnesota 55479.
<TABLE>
<S> <C> <C>
PERCENTAGE OF
PORTFOLIOS INTEREST
PORTFOLIO CONTROL PERSON AS OF SEPTEMBER 1, 1999
International Equity Portfolio Diversified Equity Fund 47.66%
Growth Equity Fund 30.43%
Growth Balanced Fund 13.69%
Moderate Balanced Fund 5.50%
</TABLE>
<TABLE>
<S> <C> <S> <S> <S>
TABLE 2: ADVISORY FEES
FEE WAIVED OR FEE
FEE REIMBURSED RETAINED BY
PAYABLE BY NORWEST ADVISER
International Equity Portfolio
February 12, 1999 to May 31, 1999 $536,814 $0 $536,814
TABLE 3: ADMINISTRATIVE FEES
FEE FEE FEE
PAYABLE WAIVED RETAINED
International Equity Portfolio
February 12, 1999 to May 31, 1999 $22,367 $22,367 $0
TABLE 4: ACCOUNTING FEES
FEE FEE FEE
PAYABLE WAIVED RETAINED
International Equity Portfolio
February 12, 1999 to May 31, 1999 $29,286 $0 $22,286
</TABLE>
B-1
<PAGE>
TABLE 5: BROKERAGE COMMISSIONS
<TABLE>
<S> <C> <C> <C> <C>
TOTAL BROKERAGE % OF BROKERAGE % OF
COMMISSIONS ($) PAID COMMISSIONS PAID TO TRANSACTIONS
TOTAL BROKERAGE TO AN AFFILIATE OF AN AFFILIATE OF THE EXECUTED BY AN
COMMISSIONS ($) THE PORTFOLIO OR PORTFOLIO OR ADVISER AFFILIATE OF THE
ADVISER PORTFOLIO OR
ADVISER
INTERNATIONAL EQUITY PORTFOLIO
February 12, 1999 to May 31, 1999 425,989 0 0.00% 0.00%
</TABLE>
B-2
<PAGE>
TABLE 6: SECURITIES OF REGULAR BROKER/DEALERS
International Equity Portfolio Bear, Stearns & Co., Inc. ($8,359,000)
B-3
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant dated November 1, 1994 as amended April
4, 1995 and May 21, 1999 (filed herewith).
(b) Not applicable.
(c) Not applicable.
(d)(1) Investment Advisory Agreement between Registrant and Norwest
Investment Management, Inc. relating to Money Market Portfolio, Prime
Money Market Portfolio, Index Portfolio, Small Company Growth
Portfolio, Small Company Value Portfolio, Large Company Growth
Portfolio, Income Equity Portfolio, Managed Fixed Income Portfolio,
Positive Return Bond Portfolio, Stable Income Portfolio, Disciplined
Growth Portfolio, Small Cap Value Portfolio, Strategic Value Bond
Portfolio and Small Cap Index Portfolio dated October 1, 1997 (see
Note 1).
(2) Investment Advisory Agreement between Registrant and Schroder
Investment Management North America Inc. relating to International
Portfolio dated November 9, 1994 (see Note 2).
(3) Investment Advisory Agreement between Registrant and Forum Investment
Advisors, LLC relating to Treasury Cash Portfolio, Government
Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash
Portfolio dated December 30, 1997 (see Note 3).
(4) Form of Investment Advisory Agreement between Registrant and Wells
Fargo Bank, N.A. dated as of February 12, 1999 relating to
International Equity Portfolio (see Note 4).
(5) Investment Subadvisory Agreement between Norwest Investment Management,
Inc. and Peregrine Capital Management, Inc. relating to Small Company
Growth Portfolio, Large Company Growth Portfolio, Small Company Value
Portfolio and Positive Return Bond Portfolio dated June 1, 1997 (see
Note 3).
(6) Investment Subadvisory Agreement between Norwest Investment
Management, Inc. and Galliard Capital Management, Inc. relating to
Stable Income Portfolio and Managed Fixed Income Portfolio dated
October 1, 1997 (see Note 3).
(7) Investment Subadvisory Agreement between Norwest Investment Management,
Inc. and Smith Asset Management, LP relating to Disciplined Growth
Portfolio and Small Cap Value Portfolio dated October 1, 1997 (see Note
3).
(8) Form of Investment Subadvisory Agreement between Wells Fargo Bank, N.A.
and Wells Capital Management dated as of February 12, 1999 relating to
International Equity Portfolio (see Note 4).
(e) Not required.
(f) Not applicable.
(g)(1) Custodian Agreement between Registrant and Norwest Bank Minnesota, N.A.
relating to Money Market Portfolio, Prime Money Market Portfolio,
Index Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, Large Company Growth Portfolio, Income Equity Portfolio,
Managed Fixed Income Portfolio, Positive Return Bond Portfolio, Stable
Income Portfolio, Disciplined Growth Portfolio, Small Cap Value
Portfolio, Strategic Value Bond Portfolio and Small Cap Index
Portfolio dated as of November 9, 1994, as amended June 1, 1997 and
February 11, 1999 (see Note 4).
(2) Custodian Agreement between Registrant and Union Bank of California
dated as of May 7, 1999 regarding Treasury Cash Portfolio, Government
Portfolio, Government Cash Portfolio, Cash Portfolio, and Municipal
Cash Portfolio (filed herewith).
(h)(1) Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Prime Money Market Portfolio,
Money Market Portfolio, Positive Return Bond Portfolio, Stable Income
Portfolio, Strategic Value Bond Portfolio, Managed Fixed Income
Portfolio, Index Portfolio, Income Equity Portfolio, Large Company
Growth Portfolio, Disciplined Growth Portfolio, Small Cap Index
Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, Small Cap Value Portfolio, International Portfolio, Cash
Portfolio, Government Cash Portfolio, Treasury Cash Portfolio,
Government Portfolio and Municipal Cash Portfolio dated December 1,
1997 (see Note 3).
<PAGE>
(2) Fund Portfolio and Unitholder Accounting Agreement between
Registrant and Forum Accounting Services, LLC relating to
International Equity Portfolio, Prime Money Market Portfolio, Money
Market Portfolio, Positive Return Bond Portfolio, Stable Income
Portfolio, Strategic Value Bond Portfolio, Managed Fixed Income
Portfolio, Index Portfolio, Income Equity Portfolio, Large Company
Growth Portfolio, Disciplined Growth Portfolio, Small Cap Index
Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, Small Cap Value Portfolio, International Portfolio, Cash
Portfolio, Government Cash Portfolio, Treasury Cash Portfolio,
Government Portfolio and Municipal Cash Portfolio dated as of June 1,
1997 and amended February 11, 1999 (see Note 4).
(3) Placement Agent Agreement between Registrant and Forum Financial
Services, Inc. relating to Prime Money Market Portfolio, Money Market
Portfolio, Positive Return Bond Portfolio, Stable Income Portfolio,
Strategic Value Bond Portfolio, Managed Fixed Income Portfolio, Index
Portfolio, Income Equity Portfolio, Large Company Growth Portfolio,
Disciplined Growth Portfolio, Small Cap Index Portfolio, Small Company
Growth Portfolio, Small Company Value Portfolio, Small Cap Value
Portfolio, International Portfolio and International Equity Portfolio
dated November 9, 1994 as amended February 11, 1999 (see Note 4).
(4) Placement Agent Agreement between Registrant and Forum Fund Services,
LLC relating to Treasury Cash Portfolio, Government Cash Portfolio,
Cash Portfolio, Government Portfolio, and Municipal Cash Portfolio
dated March 1, 1999 (filed herewith).
(i) Not required.
(j) Not required
(k)(1) Independent Auditors' Report of KPMG LLP,
Statements of Assets and Liabilities, Statements of Operations,
Statements of Changes in Net Assets, Financial Highlights, Notes to
Financial Statements, Schedules of Investments and Notes to Schedules
of Investments for Stable Income Portfolio, Managed Fixed Income
Portfolio, Positive Return Bond Portfolio, Strategic Value Bond
Portfolio, Index Portfolio, Income Equity Portfolio, Disciplined
Growth Portfolio, Large Company Growth Portfolio, Small Cap Index
Portfolio, Small Company Stock Portfolio, Small Cap Value Portfolio,
Small Company Value Portfolio, Small Company Growth Portfolio,
International Portfolio and International Equity Portfolio dated May
31, 1999 (filed herewith).
(2) Independent Auditors' Report of KPMG LLP, Statements of Assets and
Liabilities, Statements of Operations, Statements of Changes in Net
Assets, Financial Highlights, Notes to Financial Statements and
Schedules of Investments for Prime Money Market Portfolio and Money
Market Portfolio dated May 31, 1999 (filed herewith).
(l) Not applicable.
(m) Not applicable.
(n) Not Required.
(o) Not applicable.
C-2
<PAGE>
- ---------------
Note 1 Exhibit incorporated by reference as filed in Amendment No. 13 via
EDGAR on September 28, 1998, accession number 0001004402-98-000524.
Note 2 Exhibit incorporated by reference as filed in Amendment No. 5 via
EDGAR on September 30, 1996 accession number 000912057-96-021568.
Note 3 Exhibit incorporated by reference as filed in Amendment No. 12 via
EDGAR on January 2, 1998 accession number 0001004402-98-000003.
Note 4 Exhibit incorporated by reference as filed in Amendment No. 17 via
EDGAR on February 12, 1999 accession number 0001004402-99-000129.
Note 5 Exhibit incorporated by referenced as filed in Amendment No. 16 via
EDGAR on December 31, 1998 accession number 0001004402-98-000674.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
The Trust currently holds a directors' and officers' errors and
omissions insurance policy jointly with Forum Funds, the terms of which are
consistent with industry standards. The policy provides generally for the
indemnification against loss by the insured in connection with a judgment of
liability in certain litigation arising from the insured's wrongful act or an
error, act or omission by a person for whom the insured becomes legally
responsible. The policy provides coverage in the amount of $6,000,000. The
policy premiums are allocated between the Trust and Forum Funds based upon the
pro rata share of assets of each insured. The Trust's trustees and officers also
are insured under the Trust's fidelity bond purchased pursuant to Rule 17j-1
under the Investment Company Act of 1940, as amended (the "Act").
The general effect of Article 5 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
the Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. This description is modified in its entirety by the provisions of
Article 5 of Registrant's Trust Instrument contained in this Registration
Statement as Exhibit 1 and incorporated herein by reference.
Provisions of each of Registrant's investment advisory agreements
provide that the respective investment adviser shall not be liable for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing shall be deemed to protect, or purport to protect, the
investment adviser against any liability to Registrant or to Registrant's
interestholders to which the investment adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of the investment adviser's duties, or by reason of the investment adviser's
reckless disregard of its obligations and duties hereunder. This description is
modified in its entirety by the provisions of Registrant's Investment Advisory
Agreements 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 and FFS (defined as
"Forum" under the agreement) and the Trust, specifically provide as follows:
C-3
<PAGE>
(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 Securities Act of 1933 ("1933 Act") or Section
20 of the Securities Exchange Act of 1934 (the "1934 Act") (for purposes of
this Section 1(f), collectively, "Covered Persons") free and harmless from
and against any and all claims, demands, liabilities and any counsel fees
incurred in connection therewith) which any Covered Person may incur under
the 1933 Act, the 1934 Act, common law or otherwise, arising out of or
based on any untrue statement of a material fact contained in any
registration statement, private placement memorandum or other offering
material ("Offering Material") or arising out of or based on any omission
to state a material fact required to be stated in any Offering Material or
necessary to make the statements in any Offering Material not misleading,
provided, however, that the Trust's agreement to indemnify Covered Persons
shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any financial and other statements as are furnished in
writing to the Trust by Forum in its capacity as Placement Agent for use in
the answers to any items of any registration statement or in any statements
made in any Offering Material, or arising out of or based on any omission
or alleged omission to state a material fact in connection with the giving
of such information required to be stated in such answers or necessary to
make the answers not misleading; and further provided that the Trust's
agreement to Section 1(e) shall not be deemed to cover any liability to the
Trust or its investors to which a Covered Person would otherwise be subject
by reason or willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of a Covered Person's reckless
disregard of its obligations and duties under this Agreement. The Trust
shall be notified of any action brought against a Covered Person, such
notification to be given by letter or by telegram addressed to the
Secretary of the Trust, promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered
Person. The failure to notify the Trust of any such action shall not
relieve the Trust from any liability except to the extent that the Trust
shall have been prejudiced by such failure, or from any liability that the
Trust may have to the Covered Person against whom such action is brought by
reason of any such untrue statement or omission, otherwise than on account
of the Trust's indemnity agreement contained in this Section 1(f). The
Trust will be entitled to assume the defense of any suit brought to enforce
any such claim, demand or liability, but in such case such defense shall be
conducted by counsel chosen by the Trust and approved by Forum, the
defendant or defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but in case the Trust does
not elect to assume the defense of any such suit, or in case Forum
reasonably does not approve of counsel chosen by the Trust, the Trust will
reimburse the Covered Person named as defendant in such suit, for the fees
and expenses of any counsel retained by Forum or such Covered Person. The
Trust's indemnification agreement contained in this Section (f) and the
Trust's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of Covered Persons, and shall survive the delivery of any
Interests. This agreement of indemnity will inure exclusively to Covered
Persons and their successors. The Trust agrees to notify Forum promptly of
the commencement of any litigation or proceedings against the Trust or any
of its officers or Trustees in connection with the issue and sale of any
Interests.
(g) Forum agrees to indemnify, defend and hold the Trust, its several
officers and trustees, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for
purposes of this Section 1(g) collectively, "Covered Persons") free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims,
demands, liabilities and any counsel fees incurred in connection therewith)
that Covered Persons may incur under the 1933 Act, the 1934 Act, or common
law or otherwise, but only to the extent that such liability or expense
incurred by a Covered Person resulting from such claims or demands shall
arise out of or be based on any untrue statement of a material fact
contained in information furnished in writing by Forum in its capacity as
Placement Agent to the Trust for use in the answers to any of the items of
any registration statement or in any statements in any Offering Material or
shall arise out of or be based on any omission to state a material fact in
connection with such information furnished in writing by Forum to the Trust
required to be stated in such answers or necessary to make such information
not misleading. Forum shall be notified of any action brought against a
Covered Person, such notification to be given by letter or telegram
addressed to Forum, Attention: Legal Department, promptly after the summons
or other first legal process shall have been duly and completely served
upon such Covered Person. Forum shall have the right of first control of
the defense of the action with counsel of its own choosing satisfactory to
the Trust if such action is based solely on such alleged misstatement or
omission on Forum's part, and in any other event each Covered Person shall
have the right to participate in the defense or preparation of the defense
of any such action. The failure to so notify Forum of any such action shall
not relieve Forum from any liability except to the extent that Forum shall
have been prejudiced by such failure, or from any liability that Forum may
have to Covered Persons by reason of any such untrue or alleged
C-4
<PAGE>
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 1933 Act 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Norwest Investment Management, Inc.
The description of Norwest Investment Management, Inc. ("NIM") in Parts A
and B of the Registration Statement is 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 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.
<TABLE>
<S> <C> <C>
----------------------------------- ------------------------------------- ----------------------------------
Name Title Business Connection
----------------------------------- ------------------------------------- ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
P. Jay Kiedrowski Chairman, Chief Executive Officer, Norwest Investment Management,
President Inc.
------------------------------------ ----------------------------------
Executive Vice President, Employee Norwest Bank Minnesota, N.A.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James W. Paulsen Senior Vice President, Chief Norwest Investment Management,
Investment Officer Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen P. Gianoli Senior Vice President, Chief Norwest Investment Management,
Executive Officer Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David S. Lunt Vice President, Senior Portfolio Norwest Investment Management,
Manager Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard C. Villars Vice President, Senior Portfolio Norwest Investment Management,
Manager Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Lee K. Chase Senior Vice President Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Andrew Owen Vice President Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
C-5
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Eileen A. Kuhry Investment Compliance Specialist Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
(b) Schroder Investment Management North America Inc.
The description of Schroder Investment Management North America Inc.
("SIMNA") in Parts A and B of the Registration Statement is incorporated by
reference herein.
The following are the directors and principal officers of SIMNA, including
their business connections of a substantial nature. The address of each
company listed, unless otherwise noted, is 787 Seventh Avenue, 34th Floor,
New York, NY 10019. Schroder Capital Management International Limited
("Schroder Ltd.") is a United Kingdom affiliate of SIMNA, which provides
investment management services to international clients, located
principally in the United States.
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David M. Salisbury Chairman, Director SIMNA
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
Director Schroders plc.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SIMNA
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John A. Troiano Chief Executive, Director SIMNA
------------------------------------
----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Sharon L. Haugh Executive Vice President, Director SIMNA
----------------------------------
------------------------------------ ----------------------------------
Director, Chairman Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman, Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gavin D. L. Ralston Senior Vice President, Managing SIMNA
Director
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
C-6
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Mark J. Smith Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director, Senior Vice President Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert G. Davy Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jane P. Lucas Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David R. Robertson Group Vice President SIMNA
------------------------------------ ----------------------------------
Senior Vice President Schroder Fund Advisors Inc.
----------------------------------
------------------------------------
Director of Institutional Business Oppenheimer Funds, Inc.
resigned 2/98
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael M. Perelstein Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Louise Croset First Vice President, Director SIMNA
------------------------------------ ----------------------------------
First Vice President Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ellen B. Sullivan Group Vice President SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Catherine A. Mazza Group Vice President SIMNA
------------------------------------ ----------------------------------
President, Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer
Certain open-end management investment
companies for which SIMNA and/or
its affiliates provide investment
services.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Heather F. Crighton First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
C-7
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Ira Unschuld Group Vice President SIMNA
------------------------------------ ----------------------------------
Officer Certain open-end management investment
companies for which SIMNA and/or
its affiliates provide investment
services.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul M. Morris Senior Vice President SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Susan B. Kenneally First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jennifer A. Bonathan First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
*Schroder Ltd. and Schroders plc. are located at 31 Gresham St., London EC2V 7QA, United Kingdom.
(c) Peregrine Capital Management, Inc.
The description of Peregrine Capital Management, Inc. ("Peregrine") in
Parts A and B of the Registration Statement is incorporated by
reference herein.
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.
------------------------------------ ------------------------------------ ----------------------------------
Name (Address if Different) Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James R. Campbell Director Peregrine Capital Management,
Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Sixth and Marquette Ave., President, Chief Executive Norwest Bank
Minneapolis, MN 55479-0116 Officer, Director
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Patricia D. Burns Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Tasso H. Coin Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John S. Dale Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Julie M. Gerend Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
William D. Giese Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Daniel J. Hagen Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ronald G. Hoffman Senior Vice President, Secretary Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
C-8
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Frank T. Matthews Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jeannine McCormick Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Barbara K. McFadden Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert B. Mersky Chairman, President, Chief Peregrine Capital Management,
Executive Officer Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gary E. Nussbaum Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James P. Ross Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jonathan L. Scharlau Assistant Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jay H. Strohmaier Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul E. von Kuster Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Janelle M. Walter Assistant Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul R. Wurm Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
J. Daniel Vendermark Vice President Peregrine Capital Management,
Sixth and Marquette Avenue Inc.
Minneapolis, MN 55479-1013
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Albert J. Edwards Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Vice President/Marketing U.S. Trust Company of California
(prior to June 9, 1997)
------------------------------------ ------------------------------------ ----------------------------------
C-9
<PAGE>
(d) Galliard Capital Management, Inc.
The description of Galliard Capital Management, Inc. ("Galliard") in
Parts A and B of the Registration Statement is 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.
------------------------------------ ------------------------------------ ----------------------------------
Name (Address if Different) Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
P. Jay Kiedrowski Chairman Galliard Capital Management, Inc.
------------------------------------ ----------------------------------
Sixth and Marquette Ave., Chairman, Chief Executive Officer, Norwest Investment Management,
Minneapolis, MN 55479 President Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Executive Vice President, Employee Norwest Bank Minnesota, N.A.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard Merriam Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John Caswell Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Karl Tourville Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Laura Gideon Senior Vice President of Marketing Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Leela Scattum Vice President of Operations Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
(e) Smith Asset Management Group, L.P.
The description of Smith Asset Management Group, L.P. ("Smith") in
Parts A and B of this Registration Statement is 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 300 Crescent Court, Suite 750, 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.
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen S. Smith President, Chief Executive Officer Smith Asset Management Group
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Partner Discovery Management
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen J. Summers Chief Operating Officer Smith Asset Management Group
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Partner Discovery Management
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Sarah C. Castleman Vice President Smith Asset Management Group
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Partner Discovery Management
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Vice President NationsBank (formerly)
------------------------------------ ------------------------------------ ----------------------------------
(f) Forum Investment Advisors, LLC
The description of Forum Investment Advisors, LLC in Parts A and B as
filed in post-effective amendment No. 15 to the Registration Statement
via EDGAR on November 16, 1998 accession number 0001004402-98-000674
is incorporated by reference herein.
The following are the members of Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101, including their business
connections, which are of a substantial nature.
Forum Holdings Corp. I., Member.
Forum Trust, LLC, Member.
C-10
<PAGE>
Both Forum Holdings Corp. I. and Forum Trust are controlled indirectly
by John Y. Keffer, Chairman and President of the Registrant. Mr.
Keffer is President of Forum Trust and Forum Financial Group, LLC. Mr.
Keffer is also a director and/or officer of various registered
investment companies for which the various Forum Financial Group's
operating subsidiaries provide services.
The following are the officers of Forum Investment Advisors, LLC,
including their business connections that are of a substantial nature.
Each officer may serve as an officer of various registered investment
companies for which the Forum Financial Group provides services.
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Sara M. Morris Treasurer Forum Investment Advisors, LLC.
------------------------------------ ----------------------------------
Chief Financial Officer Forum Financial Group, LLC.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Other Forum affiliated companies
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
David I. Goldstein Secretary Forum Investment Advisors, LLC.
------------------------------------- ----------------------------------
General Counsel Forum Financial Group, LLC.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Officer Other Forum affiliated companies
----------------------------------- ------------------------------------- ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Mark D. Kaplan Director Forum Investment Advisors, LLC.
------------------------------------ ------------------------------------ ----------------------------------
(g) Wells Fargo Bank, N.A.
The description of Wells Fargo Bank, N.A. ("Wells Fargo Bank") in
Parts A and B of this Registration Statement is incorporated by
reference herein.
The following are the directors and principal executive officers of
Wells Fargo Bank, including their business connections, which are of a
substantial nature. The address of Wells Fargo Bank is 420 Montgomery
Street, San Francisco, California 94105 and, unless otherwise indicated
below, that address is the principal business address of any company
with which the directors and principal executive officers are
connected.
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
H. Jesse Arnelle Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
455 Market Senior Partner Arnelle, Hastie, McGee, Willis &
Street San Francisco, CA 94105 Greene
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Armstrong World Industries, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Eastman Chemical Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director FPL Group, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Michael R. Bowlin Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Highway 150 Chairman of the Board of Directors, Atlantic Richfield Co. (ARCO)
Santa Paula, CA 93060 Chief Executive Officer, Chief
Operating Officer and President
----------------------------------- ------------------------------------- ----------------------------------
C-11
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Edward Carson Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
633 West Fifth Street Chairman of the Board and Chief First Interstate Bancorp
Los Angeles, CA 90071 Executive Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Aztar Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Castle & Cook, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Terra Industries, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
William S. Davilla Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
618 Michillinda Ave. President (Emeritus) and Director The Vons Companies, Inc.
Arcadia, CA 91007
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Gas & Electric Company
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Rayburn S. Dezember Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
3200 San Fernando Road Director CalMat Co.
Los Angeles, CA 90065
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Tejon Ranch Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director The Bakersfield Californian
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Trustee Whittier College
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Paul Hazen Chairman of the Board of Directors Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chairman of the Board of Directors Wells Fargo & Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Phelps Dodge Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Safeway, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Robert K. Jaedicke Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Graduate School of Business Professor (Emeritus) Graduate School of Business
Stanford University Stanford University
Stanford, CA 94305
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Bailard Biehl & Kaiser Real
Estate Investment Trust, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Boise Cascade Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Water Service Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Enron Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director GenCorp, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Homestake Mining Company
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Thomas L. Lee Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
10302 Avenue 7 1/2 Chairman and Chief Executive Officer The Newhall Land and Farming
Firebaugh, CA 93622 Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director CalMat Co.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Ellen Newman Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
323 Geary Street President Ellen Newman Associates
Suite 507
San Francisco, CA 94102
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chair (Emeritus) of the Board of University of California at San
Trustees Francisco Foundation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Chamber of Commerce
----------------------------------- ------------------------------------- ----------------------------------
C-12
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Philip J. Quigley Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
130 Kearney Street Rm. 3700 San Chairman, President and Chief Pacific Telesis Group
Francisco, CA 94108 Executive Officer
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Carl E. Reichardt Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Columbia/HCA Healthcare
Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Ford Motor Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Newhall Management Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Gas and Electric Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Chairman of the Board of Wells Fargo & Company
Directors and Chief Executive
Officer
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Donald B. Rice Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
2049 Century Park East President and Chief Executive Teledyne, Inc.
Los Angeles, CA 90067 Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Secretary The United States Air Force
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Vulcan Materials Company
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Richard J. Stegemeier Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chairman (Emeritus) Unocal Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Foundation Health Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Halliburton Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Northrop Grumman Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Outboard Marine Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Enterprises
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Susan G. Swenson Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
651 Gateway Blvd. President and Chief Executive Cellular One
San Francisco, CA 94080 Officer
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
David M. Tellep Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Chairman of the Board and Martin Lockheed Corporation
Chief Executive Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Edison International and
Southern California Edison
Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Chang-Lin Tien Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chancellor University of California at
Berkeley
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Raychem Corporation
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John A. Young Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
3000 Hanover Street President, Chief Executive Officer Hewlett-Packard Company
Palo Alto, CA 9434 and Director
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Chevron Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Lucent Technologies
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Novell, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Shaman Pharmaceuticals Inc.
----------------------------------- ------------------------------------- ----------------------------------
C-13
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
William F. Zuendt Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
President Wells Fargo & Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director 3Com Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Chamber of Commerce
----------------------------------- ------------------------------------- ----------------------------------
(h) Wells Capital Management
The description of Wells Capital Management ("WCM") in Parts A and B of
this Registration Statement is incorporated by reference herein.
The following are the directors and principal executive officers of
WCM, including their business connections, which are of a substantial
nature. The address of WCM is 525 Market Street, San Francisco,
California 94105 and, unless otherwise indicated below, that address is
the principal business address of any company with which the directors
and principal executive officers are connected.
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Allen J. Ayvazian Chief Equity Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert Willis President and Chief Investment WCM
Officer
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Brigid Breen Chief Compliance Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John Burgess Investment Portfolio Manager WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Financial Investment Adviser Independent Financial Adviser
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jose Casas Chief Operating Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Larry Fernandes Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jacqueline Anne Flippin Principal WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Vice President and Investment McMorgan & Company (until 1/98)
Portfolio Manager
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen Galiani Senior Principal WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Qualivest Capital Management,
Inc. (until 5/97)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Madeleine Gish Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Frank Greene Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Daniel Kokoska Investment Portfolio Manager WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Portfolio Manager Bradford & Marzac, Inc. (until
2/98)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David Klug Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Kelli Ann Lee Managing Director WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Group Human Resource Manager Wells Fargo Bank, N.A. (until
11/97)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Kenneth Lee Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
C-14
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Melvin Lindsey Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Clark Messman Chief Legal Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Laura Milner Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Brian Mulligan Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael Neitzke Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Thomas O'Malley Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Clyde Ostler Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Guy Rounsaville Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Katherine Schapiro Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gary Schlossberg Economist WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul Single Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Scott Smith Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Cynthia Tusan Performance Analyst/Investment WCM
Portfolio Manager
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Mary Walton Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Rex Wardlaw Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jeffrey Weaver Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Allen Wisniewski Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Thomas Zeifang Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Financial Services, Inc. and Forum Fund Services, LLC serve
as the Registrant's placement agents. Registrant has no underwriters.
(b) Not applicable.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Act and the Rules thereunder are maintained
at the offices of Forum Financial Services, Inc., Forum Fund Services, LLC and
Forum Accounting Services, LLC, Two Portland Square, Portland, Maine 04101. The
records required to be maintained under Rule 31a-1(b)(1) with respect to
journals of receipts and deliveries of securities and receipts and disbursements
of cash are maintained at the offices of the Registrant's 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 26 hereof.
C-15
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. 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.
C-16
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as amended,
the Registrant has duly caused this amendment to its registration statement to
be signed on its behalf by the undersigned, duly authorized, in the City of
Portland and the State of Maine on September 30, 1999.
CORE TRUST (DELAWARE)
By: /s/ John Y. Keffer
John Y. Keffer
President
C-17
<PAGE>
INDEX TO EXHIBITS
Exhibit (a) Trust Instument as amended May 21, 1999 1
Exhibit (g)(2) Custodian Agreement between Registrant and Union
Bank of California 21
Exhibit (h)(4) Placement Agent Agreement between Registrant and
Forum Fund Services, LLC 35
Exhibit (k) Financial Statements 40
C-18
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EXHIBIT (A)
CORE TRUST (DELAWARE)
TRUST INSTRUMENT
AS AMENDED MAY 21, 1999
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TABLE OF CONTENTS
Page
ARTICLE I -- THE TRUST
Section 1.1 Name...................................................1
Section 1.2 Definitions............................................1
ARTICLE II -- TRUSTEES AND OFFICERS
Section 2.1 Number and Qualification................................3
Section 2.2 Term and Election.......................................3
Section 2.3 Resignation and Removal.................................3
Section 2.4 Vacancies...............................................3
Section 2.5 Meetings................................................3
Section 2.6 Committees..............................................4
Section 2.7 By-Laws.................................................5
Section 2.8 Officers of the Trust...................................5
Section 2.9 Election, Tenure and Removal of Officers................5
Section 2.10 Chairman, President and Vice Presidents................5
Section 2.11 Secretary..............................................6
Section 2.12 Treasurer..............................................6
Section 2.13 Other Officers and Duties..............................6
ARTICLE III -- POWERS OF TRUSTEES
Section 3.1 General.................................................6
Section 3.2 Investments.............................................6
Section 3.3 Legal Title.............................................7
Section 3.4 Sale of Interests.......................................7
Section 3.5 Borrow Money............................................7
Section 3.6 Delegation..............................................7
Section 3.7 Collection and Payment..................................7
Section 3.8 Expenses................................................7
Section 3.9 Miscellaneous Powers....................................8
Section 3.10 Further Powers.........................................8
Section 3.11 Principal Transactions.................................8
ARTICLE IV -- INVESTMENT MANAGEMENT, CUSTODIAL AND PRIVATE
PLACEMENT ARRANGEMENTS
Section 4.1 Investment Management and Other Arrangements...........8
Section 4.2 Custodial Arrangements.................................9
Section 4.3 Parties to Contract....................................9
Section 4.4 Compliance with 1940 Act...............................9
ARTICLE V -- LIMITATIONS OF LIABILITY
Section 5.1 No Personal Liability of Trustees, Holders.............9
Section 5.2 Indemnification.......................................10
Section 5.3 No Bond Required of Trustees..........................11
Section 5.4 No Duty of Investigation; Notice in Trust Instruments,
etc...................................................11
Section 5.5 Reliance on Experts, etc..............................11
Section 5.6 Holder Offering Documents.............................12
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ARTICLE VI -- INTERESTS OF THE TRUST
Section 6.1 Interests..............................................13
Section 6.2 Rights of Holders......................................13
Section 6.3 Purchase of or Increase in Interests...................13
Section 6.4 Register of Interests..................................14
Section 6.5 Non-Transferability....................................14
Section 6.6 Notices................................................14
Section 6.7 Assent to Trust Instrument.............................14
Section 6.8 Establishment of Series................................14
Section 6.9 Assets and Liabilities of Series.......................14
ARTICLE VII -- DECREASES AND WITHDRAWALS
Section 7.1 Decreases and Withdrawals..............................15
ARTICLE VIII -- DETERMINATION OF BOOK CAPITAL ACCOUNT
BALANCES, NET ASSET VALUE, ALLOCATIONS
AND DISTRIBUTIONS
Section 8.1 Book Capital Account Balances..........................15
Section 8.2 Net Asset Value........................................16
Section 8.3 Allocation of Net Profits and Net Losses...............16
Section 8.4 Distributions..........................................17
Section 8.5 Power to Modify Foregoing Procedures...................17
ARTICLE IX -- HOLDERS
Section 9.1 Meetings of Holders....................................17
Section 9.2 Notice of Meetings.....................................17
Section 9.3 Record Date for Meetings...............................17
Section 9.4 Proxies, etc...........................................18
Section 9.5 Inspectors of Election.................................18
Section 9.6 Inspection of Records..................................18
Section 9.7 Holder Action by Written Consent.......................18
Section 9.8 Voting Powers..........................................18
ARTICLE X -- DURATION; TERMINATION; DISSOLUTION; AMENDMENT;
MERGERS; ETC.
Section 10.1 Termination of Trust or any Series....................19
Section 10.2 Dissolution...........................................19
Section 10.3 Amendment Procedure...................................20
Section 10.4 Merger or Consolidation...............................20
Section 10.5 Incorporation.........................................20
ARTICLE XI -- MISCELLANEOUS
Section 11.1 Governing Law.........................................21
Section 11.2 Counterparts..........................................21
Section 11.3 Reliance by Third Parties.............................21
Section 11.4 Provisions in Conflict with Law on Regulations........21
Section 11.5 Signatures............................................21
Section 11.6 Seal..................................................22
Section 11.7 Fiscal Year...........................................22
Section 11.8 Waivers of Notice.....................................22
Section 11.9 Reports...............................................22
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CORE TRUST (DELAWARE)
This TRUST INSTRUMENT of CORE TRUST (DELAWARE) is restated and amended
this 1st day of November, 1994 by the parties signatory hereto, as Trustees.
WHEREAS, having formed a business trust under the law of Delaware for
the investment and reinvestment of the Trust's assets the Trustees do desire to
amend and restate the Trust Instrument executed on September 1, 1994; and
WHEREAS, it is proposed that the trust assets be composed of money and
property contributed hereto by the holders of interests in the trust entitled to
ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund to manage and dispose
of the same for the benefit of the holders of interests in the trust and subject
to the provisions hereof, to wit:
ARTICLE I
THE TRUST
1.1. NAME. The name of the trust created hereby (the "Trust") shall be
"Core Trust (Delaware)," and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall
refer to the Trustees as Trustees, and not individually, and shall not refer to
the officers, agents, employees or holders of interests in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name.
1.2. DEFINITIONS. As used in this Trust Instrument, the
following terms shall have the following meanings:
The terms "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given them in the 1940 Act, as modified by any
applicable order or orders of the Commission or interpretive releases of the
Commission thereunder.
"Book Capital Account" shall mean, for any Holder of Interests in a
particular Series at any time, the Book Capital Account of the Holder with
respect to that Series for such day, determined in accordance with Article VIII
of this Instrument.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Delaware Act" shall mean Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as it may be amended from time
to time.
"Fiscal Year" shall mean, with respect to any Series, an annual period
as determined by the Trustees.
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"Holders" shall mean as of any particular time all holders of record of
Interests of a Series of the Trust at such time.
"Instrument" shall mean this Trust Instrument as amended from time to
time. References in this Instrument to "Instrument," "hereof," "herein" and
"hereunder" shall be deemed to refer to the Instrument rather than the article
or section in which such words appear.
"Interest(s)" shall mean, with respect to each Series, the interest of
a Holder in that Series, including all rights, powers and privileges accorded to
such Holders in this Instrument, which interest may be expressed as a
percentage, determined by calculating, at such times and on such basis, as the
Trustees shall from time to time determine, the ratio of each Holder's Book
Capital Account balance to the total of all Holders' Book Capital Account
balances in that Series. Reference herein to a specified percentage in, or
fraction of, Interests of the Holders in a Series means Holders whose combined
Book Capital Accounts represent such specified percentage or fraction of the
Book Capital Accounts of all Holders in that Series.
"Investment Manager" shall mean any person furnishing services to the
Trust or any Series pursuant to any investment management contract as described
in Section 4.1 hereof.
"Majority Interests Vote" shall mean, with respect to the Trust or a
Series thereof, the vote, at a meeting of the Holders of the Trust or Series, as
the case may be, of (i) 67% or more of the Interests present or represented at
such meeting, if the Holders of more than 50% of the Interests of the Trust or
Series, as the case may be, are present or represented by proxy or (ii) more
than 50% of the Interests of the Trust or Series, as the case may be, whichever
is less.
"Net Asset Value" shall have the meaning assigned to that term in
Section 8.2 hereof.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Registration Statement" shall mean the Registration Statement of the
Trust under the 1940 Act, as amended from time to time.
"Series" shall mean a series of Interests of the Trust established in
accordance with the provisions of Article VI, Section 6.8 hereof.
"Trustees" shall mean the signatories to this Instrument, so long as
they shall continue in office in accordance with the terms hereof, and all other
persons who at the time in question have been duly elected or appointed and have
qualified as trustees in accordance with the provisions hereof and are then in
office, who are herein referred to as the "Trustees," and reference in this
Instrument to a Trustee or Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or any Series, or the Trustees on
behalf of the Trust or any Series.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations thereunder.
ARTICLE II
TRUSTEES AND OFFICERS
2.1. NUMBER AND QUALIFICATION. The number of Trustees shall be fixed from time
to time by the Trustees then in office, provided, however, that the number of
Trustees shall in no event be less than three or more than twelve. Any vacancy
created by an increase in Trustees may be filled by the appointment of an
individual having the qualifications described in this Article. Any such
appointment shall not become effective, however, until the individual appointed
shall have accepted such appointment and agreed to be bound by the terms of this
Instrument. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.4
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hereof, the Trustees in office, regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by this Instrument.
2.2. TERM AND ELECTION. Each Trustee named herein, or elected or
appointed hereunder, shall (except in the event of resignations or removals or
vacancies pursuant to Section 2.3 or 2.4 hereof) hold office until the Trustee's
successor has been elected and has qualified to serve as Trustee. Beginning with
the Trustees elected at the first meeting of Holders, each Trustee shall hold
office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
2.3. RESIGNATION AND REMOVAL. Any Trustee may resign their trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered or mailed to the Chairman, if any, the President or
the Secretary and such resignation shall be effective upon such delivery, or at
a later date according to the terms of the instrument. Any of the Trustees may
be removed by the affirmative vote of the Holders of two-thirds (2/3) of the
Interests or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by such
removal, shall not be less than the number required by Section 2.1 hereof) with
cause, by the action of two-thirds of the remaining Trustees. Removal with cause
includes, but is not limited to, the removal of a Trustee due to physical or
mental incapacity. Upon the resignation or removal of a Trustee, or the
Trustee's otherwise ceasing to be a Trustee, the Trustee shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the death of any Trustee or
upon removal or resignation due to any Trustee's incapacity to serve as trustee,
the Trustee's legal representative shall execute and deliver on the Trustee's
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
2.4. VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or
removal, of a Trustee or increase in the number of Trustees. No such vacancy
shall operate to annul this Instrument or to revoke any existing agency created
pursuant to the terms of this Instrument. In the case of a vacancy, the Holders
of at least a majority of the Interests entitled to vote, acting at any meeting
of the Holders held in accordance with Section 9.1 hereof, or a majority vote of
the Trustees continuing in office, may fill such vacancy, and any Trustee so
elected by the Trustees or the Holders shall hold office as provided in this
Instrument.
2.5. MEETINGS.
(a) Meetings of the Trustees shall be held from time to time upon the
call of the Chairman, if any, the President, the Secretary, or any two Trustees.
The Trustees may act with or without a meeting. A quorum for all meetings of the
Trustees shall be a majority of the Trustees. Unless provided otherwise in this
Instrument, any action of the Trustees may be taken by vote of a majority of the
Trustees present (a quorum being present) at a meeting duly called or by
unanimous written consent of the Trustees without a meeting. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. The Trustees by majority vote may delegate to any one or more of their
number their authority to approve particular matters or take particular actions
on behalf of the Trust.
(b) Regular meetings of the Trustees may be held without call or notice
at a time and place fixed by the Trustees. Notice of any other meeting shall be
given by mail, facsimile or telegram (which term shall include a cablegram) or
delivered personally, which shall include by telephone. Notice of a meeting
designating the time, date and place of such meeting shall be mailed not less
than 72 hours or otherwise given not less than 24 hours before the meeting but
may be waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting, at the commencement of such meeting, to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent.
(c) All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting.
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(d) The Chairman, if any, shall act as chairman at all meetings of the
Trustees; in the Chairman's absence the President shall act as chairman; and, in
the absence of the Chairman and the President, the Trustees present shall elect
one of their number to act as temporary chairman. The results of all actions
taken at a meeting of the Trustees, or by unanimous written consent of the
Trustees, shall be recorded by the Secretary.
(e) With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5, or with respect to committees, Section 2.6 of this Instrument,
and shall be entitled to vote to the extent permitted by the 1940 Act.
2.6. COMMITTEES.
(a) Any committee of the Trustees may act with or without a meeting. A
quorum for all meetings of any committee shall be a majority of the members
thereof or such lesser number as determined by the Trustees. Unless provided
otherwise in this Instrument, any action of any committee may be taken by a vote
of a majority of the members present (a quorum being present) at a meeting or by
unanimous written consent of the members without a meeting or by telephone
meeting.
(b) The Trustees by vote of a majority of all the Trustees may elect
from their own number an Executive Committee to consist of not less than two (2)
to hold office at the pleasure of the Trustees, which shall have the power to
conduct the current and ordinary business of the Trust while the Trustees are
not in session, including the purchase and sale of securities and the
designation of securities to be delivered upon decrease or withdrawal of
Interests of the Trust or any Series, and such other powers of the Trustees as
the Trustees may, from time to time, delegate to them except those powers which
by law or this Instrument they are prohibited from delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a Chairman of any such Committee. In the absence of such designation,
the Committee may elect its own Chairman. Each Committee shall keep regular
minutes of its meetings and records of decisions taken without a meeting and
cause them to be recorded in a book designated for that purpose and kept in the
Office of the Trust.
(c) The Trustees may (1) provide for stated meetings of any Committee;
(2) specify the manner of calling and notice required for special meetings of
any Committee; (3) specify the number of members of a Committee required to
constitute a quorum and the number of members of a Committee required to
exercise specified powers delegated to such Committee; (4) authorize the making
of decisions to exercise specified powers by written assent of the requisite
number of members of a Committee without a meeting; and (5) authorize the
members of a Committee to meet by means of a telephone conference circuit.
2.7. BY-LAWS. The Trustees may, but need not, adopt By-Laws
for the conduct of the business of THE Trust and may from time to time amend or
repeal any By-Laws.
2.8. OFFICERS OF THE TRUST. The Trustees shall, from time to time,
elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman of the Board. The Trustees may elect or
appoint such other officers or assistant officers, including Vice Presidents, as
the business of the Trust may require. The Trustees may delegate to any officer
or committee the power to appoint any subordinate officers or agents. Any two or
more of the offices may be held by the same person, except that the same person
may not be both President and Secretary. The Trustees may designate a Vice
President as an Executive Vice President and may designate the order in which
the other Vice Presidents may act. The Chairman and the President shall be
Trustees, but no other officer of the Trust need be a Trustee. Any officer may
be required by the Trustees to be bonded for the faithful performance of the
officer's duties in such amount and with such sureties as the Trustees may
determine.
2.9. ELECTION, TENURE AND REMOVAL OF OFFICERS. At the initial
organization meeting and thereafter at each annual meeting of the Trustees, the
Trustees shall elect the Chairman, if any, President, Secretary, Treasurer. The
Trustees may from time to time elect or appoint such other officers as the
Trustees shall deem necessary or appropriate in order to carry out the business
of the Trust and such officers shall hold office until the next annual meeting
of the Trustees and until their successors have been duly elected and qualified.
The Trustees also may authorize or appoint the President to appoint such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. The Trustees may fill any vacancy in office or
add any additional
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officers at any time. Any officer may be removed at any time, with or without
cause, by action of a majority of the Trustees. This provision shall not prevent
the making of a contract of employment for a definite term with any officer and
shall have no effect upon any cause of action which any officer may have as a
result of removal in breach of a contract of employment. Any officer may resign
at any time by notice in writing signed by such officer and delivered or mailed
to the Chairman, if any, President, or Secretary, and such resignation shall
take effect immediately, or at a later date according to the terms of such
notice in writing.
2.10. CHAIRMAN, PRESIDENT, AND VICE PRESIDENTS. The Chairman, if any,
shall, if present, preside at all meetings of the Holders and of the Trustees
and shall exercise and perform such other powers and duties as may be from time
to time assigned to him by the Trustees. Subject to such supervisory powers, if
any, as may be given by the Trustees to the Chairman, if any, the President
shall be the chief executive officer of the Trust and, subject to the control of
the Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall preside
at all meetings of the Holders and the Trustees. Subject to direction of the
Trustees, the Chairman, if any, and the President shall each have power in the
name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages, and other instruments in writing, and
to employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, the Chairman, if any, and the President shall each
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust, at any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice Presidents in order of their rank or the
Vice President designated by the Trustees, shall perform all of the duties of
President, and when so acting shall have all the powers of and be subject to all
of the restrictions upon the President. Subject to the direction of the
President, each Vice President shall have the power in the name and on behalf of
the Trust to execute any and all loan documents, contracts, agreements, deeds,
mortgages and other instruments in writing, and, in addition, shall have such
other duties and powers as shall be designated from time to time by the Trustees
or by the President.
2.11. SECRETARY. The Secretary shall keep the minutes of all meetings
of, and record all votes of, Holders, Trustees and the Executive Committee, if
any. The Secretary shall be custodian of the seal of the Trust, if any, and the
Secretary (and any other person so authorized by the Trustees) shall affix the
seal or, if permitted, a facsimile thereof, to any instrument executed by the
Trust which would be sealed by a Delaware corporation executing the same or a
similar instrument and shall attest the seal and the signature or signatures of
the officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Delaware business corporation, and shall have such other authorities and
duties as the Trustees shall from time to time determine.
2.12. TREASURER. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to the President's office. The Treasurer may
endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. The Treasurer shall deposit all funds of
the Trust as may be ordered by the Trustees or the Treasurer. The Treasurer
shall deliver all funds of the Trust which may come into the Treasurer's hands
to such Custodian as the Trustees may employ pursuant to Article V of these
By-Laws. The Treasurer shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust, and which together with
all other property of the Trust in the Treasurer's possession, shall be subject
at all times to the inspection and control of the Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. The Treasurer shall have such other duties and authorities as the
Trustees or President shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize any
investment adviser, administrator or manager to maintain bank accounts and
deposit and disburse funds on behalf of the Trust.
2.13. OTHER OFFICERS AND DUTIES. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of their office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.
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ARTICLE III
POWERS OF TRUSTEES
3.1. GENERAL. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Instrument. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2. INVESTMENTS. The Trustees shall have power to:
(a) Conduct, operate and carry on the business of an investment
company;
(b) Subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of any form of property including United States and foreign
currencies and related instruments including forward contracts, and securities,
including common and preferred stocks, warrants, bonds, debentures, time notes
and all other evidences of indebtedness, negotiable or non-negotiable
instruments, obligations, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements, convertible
securities, forward contracts, options, futures contracts, and other securities,
including, without limitation, those issued, guaranteed or sponsored by any
state, territory or possession of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or by the
United States Government, any foreign government, or any agency, instrumentality
or political subdivision of the United States Government or any foreign
government, or international instrumentalities, or by any bank, savings
institution, corporation or other business entity organized under the laws of
the United States or under foreign laws; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with the respect to any
additional securities in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. LEGAL TITLE. Legal title to all the Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have the power
to cause legal title to any Trust Property to be held by or in the name of one
or more of the Trustees, or in the name of the Trust, or in the name of any
other Person on behalf of the Trust, on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each person who may hereafter become a Trustee upon
the Trustee's due election and qualification. Upon the resignation, removal or
death of a Trustee, the Trustee shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.4. SALE OF INTERESTS. Subject to the more detailed provisions set
forth in Articles VII and VIII, the Trustees shall have the power to permit
persons to purchase Interests and to add to or reduce, in whole or in part,
their Interest in the Trust or any Series thereof.
3.5. BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6. DELEGATION. The Trustees shall have power, consistent with their
continuing exclusive authority over the management of the Trust and the Trust
Property, to delegate from time to time to such of their number or to
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officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient.
3.7. COLLECTION AND PAYMENT. The Trustees shall have power to collect
all property due to the Trust; and to pay all claims, including taxes, against
the Trust Property; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. EXPENSES. The Trustees shall have power to incur and pay all
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Instrument, and to pay reasonable
compensation from the funds of the Trust or the assets of the appropriate Series
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees. The Trustees may pay themselves such
compensation for special services, including legal and brokerage services, as
they in good faith may deem reasonable, and reimbursement for expenses
reasonably incurred by themselves on behalf of the Trust or any Series thereof.
3.9. MISCELLANEOUS POWERS. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property or the assets of the appropriate Series,
insurance policies insuring the Investment Manager, placement agent, Holders,
Trustees, officers, employees, agents, or independent contractors of the Trust
against all claims arising by reason of holding any such position or by reason
of any action taken or omitted by any such Person in such capacity, whether or
not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement, incentive
and benefit plans for any Trustees, officers, employees and agents of the Trust;
(e) make donations, irrespective of benefit to the Trust, for charitable,
religious, educational, scientific, civic or similar purposes; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Manager, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of each Series of the Trust
and the method in which its accounts shall be kept; (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust; (j) establish separate and distinct
Series with separately defined investment objectives and policies and distinct
investment purposes in accordance with the provisions of Article VI hereof; (k)
subject to the provisions of Section 3804 of the Delaware Act, allocate assets,
liabilities and expenses of the Trust to a particular Series or apportion the
same between or among two or more Series, provided that any liabilities or
expenses incurred by a particular Series shall be payable solely out of the
assets belonging to that Series as provided for in Article VI hereof; (l)
establish, from time to time, a minimum investment for Holders in the Trust or
in one or more Series, and require the withdrawal of any Holder whose investment
is less than such minimum upon giving notice to such Holder and; (m) appoint, or
authorize any officer or officers to appoint, one or more registrars of the
Trust.
3.10. FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Instrument, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with Trust Property.
3.11. PRINCIPAL TRANSACTIONS. The Trustees may, on behalf of the Trust,
buy any securities from or sell any securities to, or lend any assets of the
Trust or any Series to, any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with any investment manager, placement agent or transfer agent for the
Trust or with any Interested Person of such person; and the Trust may employ any
such person, or firm or company in which such person is an Interested Person, as
broker, legal counsel, registrar, investment manager, placement agent, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
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ARTICLE IV
Investment Management, Custodial AND PLACEMENT AGENT ARRANGEMENTS
4.1. INVESTMENT MANAGEMENT AND OTHER ARRANGEMENTS. The Trustees may in
their discretion, from time to time, enter into investment management contracts
or placement agent agreements with respect to the Trust or any Series whereby
the other party to such contract or agreement shall undertake to furnish the
Trustees such investment management, placement agent and/or other services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Instrument, the Trustees may authorize
any Investment Manager (subject to such general or specific instruments as the
Trustees may, from time to time, adopt) to effect purchases, sales, loans or
exchanges of Trust Property on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of any such Investment Manager (and all without
further action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees.
4.2. CUSTODIAL ARRANGEMENTS.
(a) The Trustees shall at all times employ a bank, a company that is a
member of a national securities exchange, or a trust company, each having
capital, surplus and undivided profits of at least two million dollars
($2,000,000) as custodian with authority as the Trust's agent, but subject to
such restrictions, limitations and other requirements as the Trustees shall
determine (i) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing; (ii) to receive and
receipt for any monies due to the Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct; and (iii) to disburse such
funds upon orders or vouchers.
(b) The Trustees may direct the custodian to deposit all or any part of
the securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, as amended, or such other person as may be permitted by
the Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust or its custodians, subcustodians or other agents.
(c) The funds of the Trust shall be deposited in such depositories as
the Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any
investment adviser, administrator or manager), as the Trustees may from time to
time authorize.
4.3. PARTIES TO CONTRACT. Any contract may be entered into with any
corporation, firm, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in the Holder's and/or Trustee's capacity
as Holder and/or Trustee, nor shall any person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit realized
directly or indirectly therefrom. The same person (including a firm,
corporation, trust, or association) may be the other party to contracts entered
into pursuant to Sections 4.1 or 4.2 above or otherwise, and any person may be
financially interested or otherwise affiliated with persons who are parties to
any or all of the contracts mentioned in this Section 4.3.
4.4. COMPLIANCE WITH 1940 ACT. Any contract entered into pursuant to
Section 4.1 shall be consistent with and subject to the requirements of Section
15 of the 1940 Act, as modified by any applicable order or orders of the
Commission or interpretive releases of the Commission thereunder, with respect
to its continuance in effect, its termination and the method of authorization
and approval of such contract or renewal thereof.
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ARTICLE V
LIMITATIONS OF LIABILITY
5.1. NO PERSONAL LIABILITY OF TRUSTEES, HOLDERS. No Trustee, when
acting in such capacity, shall be subject to any personal liability whatsoever
to any Person, other than the Trust or its Holders, in connection with Trust
Property or the affairs of the Trusts. No Trustee, when acting in such capacity,
shall be subject to any personal liability whatsoever, provided that nothing
contained herein or in the Delaware Act shall protect any Trustee against any
liability to the Trust or its Holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustees hereunder. No
Holder shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the affairs of the Trust. The Trustees shall
have no power to bind any Holder personally or to call upon any Holder for the
payment of any sum of money or assessment whatsoever other than such as the
Holder may at any time personally agree to pay by way of purchase of or increase
in Interests or otherwise.
5.2. INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in
Section (b) below:
(i) Every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of being or having
been a Trustee or officer and against amounts paid or incurred by him
in the settlement thereof;
(ii) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) Who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
Covered Person's office or (B) not to have acted in good faith in the
reasonable belief that Covered Person's action was in the best interest
of the Trust; or
(ii) In the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Trustee's or officer's office,
(A) By the court or other body approving the
settlement;
(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or
(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to
a full trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 5.2 may be paid by the Trust or Series
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from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 5.2; provided, however, that
either (a) such Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any such
advance payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 5.2.
(e) Conditional advancing of indemnification monies under this Section
5.2 for actions based upon the 1940 Act may be made only on the following
conditions: (i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including costs
connected with the preparation of a settlement; (ii) advances may be made only
upon receipt of a written promise by, or on behalf of, the recipient to repay
that amount of the advance which exceeds that amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond,
other suitable insurance or an equivalent form of security which assures that
any repayments may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the recipient of
the advance, or (b) a majority of a quorum of the Trust's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
(f) In case any Holder or former Holder of any Series shall be held to
be personally liable solely by reason of the Holder or former Holder being or
having been a Holder of that Series and not because of the Holder or former
Holder acts or omissions or for some other reason, the Holder or former Holder
(or the Holder or former Holder's heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Holder, assume the defense of
any claim made against the Holder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
5.3. NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of the Trustee's duties hereunder.
5.4. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, or other person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust or any Series, and every other act
or thing whatsoever executed in connection with the Trust or any Series, shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series made or sold by the Trustees or by any
officer, employee or agent of the Trust, in their capacity as such, shall
contain an appropriate recital to the effect that the Trustee, officer, employee
and agent of the Trust shall not personally be bound by or liable thereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made therein
to the Instrument, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, its Holders, Trustees, officers, employees and agents in such amount
as the Trustees shall deem adequate to cover possible tort liability, and such
other insurance as the Trustees in their sole judgment shall deem advisable.
5.5. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of
the Trust shall, in the performance of the Trustee's, officer's and employee's
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or any Series, upon an opinion of counsel,
or upon reports made to the Trust or any Series by any of its officers or
employees or by any Investment Manager, accountant, appraiser or other experts
or consultants selected with reasonable care by the Trustees, officers or
employees of the Trust, regardless of whether such counsel or expert may also be
a Trustee.
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5.6 HOLDER OFFERING DOCUMENTS. (a) Each Holder of an Interest shall
indemnify and hold harmless the Trust and each Covered Person against any
losses, claims, damages or liabilities, joint or several, to which the Trust or
such Covered Person may become subject, under the 1933 Act or otherwise,
specifically including but not limited to losses, claims, damages or liabilities
related to negligence on the part of the Trust or any Covered Person, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any Misstatement in a Holder Statement; and each
Holder further agrees to reimburse the Trust and each Covered Person for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however that the Holder of an Interest shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any Misstatement made in such Holder Statement in reliance upon
and in conformity with written information furnished to such Holder by the Trust
or such Covered Person for use in the preparation thereof. The foregoing proviso
shall not apply to exculpate a Holder under this Section 5.6(a) with respect to
any losses, claims, damages or liabilities to which the Trust or any such
Covered Person may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
Misstatement in any Holder Statement or portion thereof of such Holder, if such
Misstatement only relates to (i) any investment company or series thereof that
does not and does not propose, as of the time the Misstatement is made, to
invest all or a portion of its assets in a Series of the Trust or (ii) to an
offering of securities (as defined under the 1933 Act) of such Holder or its
affiliates the proceeds from which are not and are not proposed, as of the time
the Misstatement is made, to be invested in a Series of the Trust.
The indemnity provisions of this Section 5.6(a) shall inure to the
benefit of each person, if any, who controls the Trust or any Covered Person
within the meaning of the 1933 Act.
(b) The Trust shall indemnify and hold harmless each Holder against any
losses, claims, damages or liabilities, joint or several, to which such Holder
may become subject under the 1933 Act or otherwise, specifically including but
not limited to losses, claims, damages or liabilities (or actions in respect
thereof) that arise out of or are based upon any Misstatement in the Holder
Statement of such Holder, in each case to the extent, but only to the extent,
that such Misstatement was made in reliance upon and in conformity with written
information furnished to such Holder by the Trust for inclusion therein, and
will reimburse such Holder for any legal or other expenses reasonably incurred
by such Holder in connection with investigating or defending any such loss,
claim, damage, liability or action.
This indemnity provision in this Section 5.6(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer
and director of each Holder and each person, if any, who controls such Holder
within the meaning of the 1933 Act.
(c) Promptly after receipt by an indemnified party under this Section
5.6 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
Section 5.6(a) or 5.6(b), notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under Section 5.6(a) or 5.6(b). In case any such action is
brought against any indemnified party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified parties and the
indemnifying party and the indemnified party shall have reasonably concluded
that there are legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the indemnifying
party and that as a result thereof, the indemnified party shall reasonably
conclude that it is inadvisable for it to be represented by counsel for the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel (or the unreasonable
withholding of such approval), the indemnifying party will not be liable to such
indemnified party under Section 5.6(a) or 5.6(b) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel approved by the indemnifying party,
representing all the indemnified
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parties under Section 5.6(a) or 5.6(b) hereof who are parties to such action),
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall approved the terms of such
settlement; provided, however, that such consent shall not be unreasonably
withheld or delayed.
(d) For purposes of this Section 5.6, the following terms shall have
the following meanings:
"Holder Statement" shall mean any registration statement or prospectus,
as such terms are defined under the 1933 Act, or any other material or
information, written or oral, distributed or communicated to shareholders or
partners, or prospective shareholders or partners, of a Holder by or at the
direction of such Holder, including, without limitation, proxies and proxy
statements, as such terms are defined under the 1940 Act and the Securities
Exchange Act of 1934, as amended.
"Misstatement" shall mean, with respect to any Holder Statement, any
untrue statement or alleged untrue statement of any material fact, or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
"1933 Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"1940 Act" shall mean the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(e) The provisions of this Section 5.6 shall apply to each Holder
effective on the date such Holder becomes a shareholder of the Trust and shall
survive after such Holder no longer holds an interest in the Trust.
(f) Notwithstanding anything else herein, no amendment to Section 5.6
shall be effective until at least 30 days after the Trust has delivered all
Holders (as of the date of such notice) written notice of such amendment.
ARTICLE VI
INTERESTS OF THE TRUST
6.1. INTERESTS. The beneficial interest in the property of the Trust
shall be divided into Interests of one or more separate and distinct Series as
the Trustees shall from time to time create and establish. The Trustees may
permit the purchase of Interests in any Series by any number of Persons. Subject
to applicable law and to such restrictions as may be adopted by the Trustees, a
Holder may increase or decrease its Interest in any Series without limitation.
6.2. RIGHTS OF HOLDERS. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests and they
shall have no right to call for any partition or division of any property,
profits or rights of the Trust. The Interests shall be personal property giving
only the rights specifically set forth in this Instrument.
6.3. PURCHASE OF OR INCREASE IN INTERESTS. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit the
purchase of Interests of any Series by such party or parties (or increase in the
Interest of a Holder in any Series) and for such type of consideration,
including cash or property, at such time or times (including, without
limitation, each business day), and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses; provided, however, that the Trustees may not permit the purchase of
Interests of any Series if any Series would have more than 500 Holders. The
Trustees may make such additional rules and regulations, not inconsistent with
this Instrument, as they may deem expedient concerning the purchase or increase
of Interests.
6.4. REGISTER OF INTERESTS. A register shall be kept at the principal
office of the Trust under the direction of the Trustees which shall contain the
names and addresses of the Holders of each Series and the Book
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Capital Account balances of each Holder of each Series. Each such register shall
be conclusive as to who are the Holders of each Series of the Trust and who
shall be entitled to payments of distributions or otherwise to exercise or enjoy
the rights of Holders. No Holder shall be entitled to receive payment of any
distribution, or to have notice given to it as herein provided, until it has
given its address to such officer or agent of the Trustees as shall keep the
said register for entry thereon.
6.5. NON-TRANSFERABILITY. Interests of a Series shall not be
transferable, unless the prospective transferor obtains the prior unanimous
consent of the Holders of that Series to the transfer. Except as otherwise
provided by law, the Trust shall be entitled to recognize the exclusive right of
a person in whose name any Interest stands on the record of Holders as the
holder of such Interest for all purposes, including, without limitation, the
rights to receive distributions, and to vote as such holder, and the Trust shall
not be bound to recognize any equitable or legal claim to or interest in any
such Interest on the part of any other person.
6.6. NOTICES. Any and all notices to which any Holder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Holder of record at its last known
address as recorded on the register of the Trust.
6.7. ASSENT TO TRUST INSTRUMENT. Every Holder, by virtue of having
become a Holder, shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto.
6.8. ESTABLISHMENT OF SERIES. The Trust created hereby shall consist of
one or more Series and separate and distinct records shall be maintained by the
Trust for each Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or any other
Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the Holders
of any Series of the Trust, to establish and designate and to change in any
manner any such Series of Interests and to fix such preferences, voting powers,
right and privileges of such Series as the Trustees may from time to time
determine, to classify or reclassify any unissued Interests or any Series into
one or more Series, and to take such other action with respect to the Interests
as the Trustees may deem desirable. The establishment and designation of any
Series shall be effective upon the adoption of a resolution by a majority of the
Trustees setting forth such establishment and designation and the relative
rights and preferences of the Interests of such Series. At any time that there
are no Interests outstanding of any particular Series previously established and
designated, the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
All references to Interests in this Trust Instrument shall be deemed to
be Interests of any or all Series, as the context may require. All provisions
herein relating to the Trust shall apply equally to each Series of the Trust,
except as the context otherwise requires.
6.9. ASSETS AND LIABILITIES OF SERIES. All consideration received by
the Trust for the issuance or sale of Interests of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall be held and accounted for separately from the other assets of the Trust
and of every other Series and may be referred to herein as "assets belonging to"
that Series. The assets belonging to a particular Series shall belong to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Holders of all Series for
all purposes, and such assets, income, earnings, profits or funds, or payments
and proceeds with respect thereto shall be assets belonging to that Series. The
assets belonging to a particular Series shall be so recorded upon the books of
the Trust, and shall be held by the Trustees in trust for the benefit of the
Holders of Interests of that Series. The assets belonging to each particular
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Holders of all
Series for all purposes. Without limitation of the foregoing provisions of this
Section 6.9, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, changes or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
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enforceable against assets of such Series only, and not against the assets of
the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of the Delaware Act setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any debt
with respect to that Series. No Holder or former Holder of any Series shall have
a claim on or any right to any assets allocated or belonging to any other
Series.
ARTICLE VII
DECREASES AND WITHDRAWALS
7.1. DECREASES AND WITHDRAWALS. A Holder shall have the authority to
decrease or withdraw its Interest in any Series of the Trust, at such Holder's
option, subject to the terms and conditions provided in this Article VII. The
Trust shall, upon application of any Holder or pursuant to authorization from
any Holder, and subject to this Article VII, decrease or withdraw such Holder's
Interest for an amount (which shall be treated as a distribution for purposes of
Section 8.1) determined by the application of a formula adopted for such purpose
by resolution of the Trustees; provided that (a) such amount shall not exceed
the positive balance in such Holder's Book Capital Account (determined after
taking into account such adjustments as are required by Treasury Department
Regulation ss. 1.704-1(b) (2) (ii) (b) (2) but before reduction thereof to
reflect the distribution of such amount) and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for
effecting such decrease or withdrawal, at such rates as the Trustees may
establish, and may, at any time and from time to time, suspend such right of
decrease or withdrawal. The procedures for effecting decreases or withdrawals
shall be as determined by the Trustees from time to time.
ARTICLE VIII
DETERMINATION OF BOOK CAPITAL ACCOUNT
BALANCES, NET ASSET VALUE, ALLOCATIONS AND DISTRIBUTIONS
8.1. BOOK CAPITAL ACCOUNT BALANCES. A Book Capital Account shall be
maintained for each Holder of each Series. With respect to each Series, each
Book Capital Account shall be credited with the amounts of consideration paid by
the Holder to purchase or increase its Interest in the Series and with its share
of the Series' Net Profits (defined below), shall be charged with such Holder's
share of the Series' Net Losses (defined below), distributions and withholding
taxes (if any) and shall otherwise appropriately reflect transactions of the
Series and the Holders. No interest shall be paid on any amount of consideration
paid to the Trust to purchase or increase Interests.
"Net Profits" of a Series for any given time period shall mean the
excess of the Net Asset Value of the Series (defined in Section 8.2) at the
close of business on the last day of the period, prior to any distribution being
made with respect to such period, over the Net Asset Value of the Series as of
the opening of business on the first day of such period, after any additional
contributions made on such date.
"Net Losses" of a Series for any given time period shall mean the
excess of the Net Asset Value of the Series as of the opening of business on the
first day of the period, after any additional contributions made on such date,
over the Net Asset Value of the Series at the close of business on the last day
of such period, prior to any distribution being made with respect to such
period.
The Book Capital Account balances of Holders of each Series shall be
determined periodically at such time or times as the Trustees may determine. The
power and duty to make calculations necessary to determine these balances may be
delegated by the Trustees to the Investment Manager, custodian, or such other
person as the Trustees may determine.
Notwithstanding anything herein to the contrary, the Book Capital
Accounts and any related accounts (including without limitation tax capital
accounts, gross appreciation [unrealized gain] accounts, and gross depreciation
[unrealized loss] accounts) of the Holders and of any series shall at all times
during the full term of such Series be determined and maintained in accordance
with the rules of Treasury Department Regulation ss. 1.704-1 (b) (2) (iv). The
Trustees are authorized to prescribe, in their absolute discretion, such
policies for the
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establishment and maintenance of such accounts ("Policies") as they, in
consultation with the Trust's professional advisers, consider to be in
accordance with the requirements of such rules.
8.2. NET ASSET VALUE. The term "Net Asset Value" shall mean, with
respect to any Series, that amount by which the assets of the Series exceed its
liabilities, all as determined by or under the direction of the Trustees. In
making this determination, the Trustees, without Holder approval, may alter the
method of valuing portfolio securities insofar as permitted under the 1940 Act
and the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any order of the Commission applicable
to the Series. The Trustees may delegate any of their powers and duties under
this Section 8.2 with respect to valuation of assets and liabilities.
8.3. ALLOCATION OF NET PROFITS AND NET LOSSES.
(a) Net Profits and Net Losses of each Series shall be determined and
allocated daily as of the close of business to and among the Holders of that
Series in proportion to their respective Interests in the Series, determined as
of the opening of business on such day.
(b) Except as otherwise provided in this Section 8.3, for each fiscal
year, items of income, deduction, gain, loss or credit that are recognized by a
Series for tax purposes shall be allocated pursuant to Treasury Department
Regulations ss. 1.704-1(b) in such manner as to equitably reflect amounts
credited or debited to the Book Capital Account of each Holder of that Series
for such year. Allocations of such items also shall be made, where appropriate,
in accordance with section 704(c) of the Code and the regulations thereunder, as
may be provided in any Policies adopted by the Trustees pursuant to Section 8.1.
(c) Expenses of a Series, if any, which are borne by any Holder of that
Series in its individual capacity shall be specially allocated to that Holder.
(d) Notwithstanding anything in Section 8.3(b) or (c) to the contrary,
in the event any Holder of a Series unexpectedly receives any adjustments,
allocations or distributions described in Treasury Department Regulations
ss.1.704-1(b)(2)(ii)(d)(4), ss.1.704-1(b)(2)(ii)(d)(5) or
ss.1.704-1(b)(2)(ii)(d)(6), items of income (including gross income) and gain of
that Series shall be specially allocated to such Holder in an amount and manner
sufficient to eliminate the deficit balance in the Holder's Book Capital Account
(as determined in accordance with Treasury Department Regulation ss. 1.704-1
(b)(2)(ii)(d)) created by such adjustments, allocations or distributions as
quickly as possible. Any special allocations of income and gain of a Series
pursuant to this Section 8.3(d) shall be taken into account in computing
subsequent allocations of income and gain of that Series pursuant to this
Article VIII, so that the net amount of any items of that Series so allocated
and the income, gain, loss, deduction and all other items of that Series
allocated to each Holder pursuant to this Article VIII shall, to the extent
possible, equal the net amount that would have been allocated to each such
Holder pursuant to the provisions of this Article VIII if such special
allocations had not been made.
8.4. DISTRIBUTIONS. The Trustees may from time to time agree to the
payment of distributions to Holders of a Series. The amount of such
distributions and the payment of them and whether they are in cash or in any
other assets of the Series shall be wholly in the discretion of the Trustees.
8.5. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of the
foregoing provisions of this Article VIII, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining, for financial
reporting and/or tax accounting purposes, (a) the Net Profits, Net Losses,
taxable income, tax loss, and/or net assets of any Series (or, where appropriate
in the Trustees' judgment, of the Trust as a whole), and/or (b) the allocation
of the Net profits or Net Losses and taxable income or tax loss so determined
among, or the payment of distributions to, the Holders of any Series as they
deem necessary or desirable to enable the Trust or any Series to comply with any
provision of the 1940 Act, the Code, any rule or regulation thereunder, or any
order of exemption issued by the Commission, all as in effect now or as
hereafter amended or modified.
ARTICLE IX
HOLDERS
9.1. MEETINGS OF HOLDERS. Meetings of the Holders of any Series may be
called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Holders holding, in the aggregate, not less than
10% of the Interests of that Series, such request specifying the purpose or
purposes for
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which such meeting is to be called. Any such meeting shall be held within or
without the State of Delaware on such day and at such time as the Trustees shall
designate. Holders of one-third of the Interests entitled to vote, present in
person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by law or by this Instrument. The
Chairman, if any, shall act as chairman at all meetings of the Holders; in the
Chairman's absence, the President shall act as chairman; and in the absence of
the Chairman and the President, the Trustee or Trustees present at each meeting
may elect a temporary chairman for the meeting, who may be one of themselves.
Holders may vote either in person or by duly executed proxy and each Holder
shall be entitled to vote proportionate to the Holder's Interest in the Trust or
affected Series. If a quorum is present at a meeting, an affirmative vote of a
majority of interest of the Holders present and entitled to vote thereon, either
in person or by proxy, at such meeting constitutes the action of the Holders,
unless law or this Instrument requires a greater number of affirmative votes.
9.2. NOTICE OF MEETINGS. Notice of all meetings of the Holders of any
Series, stating the time, place and purposes of the meeting, shall be given by
the Trustees by mail to each Holder of that Series, at the Holder's registered
address, mailed at least 10 days and not more than 90 days before the meeting.
At any such meeting, any business properly before the meeting may be considered
whether or not stated in the notice of the meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any Holder
who shall have failed to inform the Trust of the Holder's current address or if
a written waiver of notice, executed before or after the meeting by the Holder
or the Holder's attorney thereunto authorized, is filed with the records of the
meeting.
9.3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, including any
adjournment thereof, or to participate in any distribution, or for the purpose
of any other action, the Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of the Holders or payment of
distributions or other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders of record for such
purposes. If the Trustees do not, prior to any meeting of Holders, so fix a
record date, then the date of mailing notice of the meeting shall be the record
date.
9.4. PROXIES, ETC. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken. A proxy may be
given in writing, by any electronic or telecommunications device or in any other
manner. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Holders of record shall be entitled to vote. Each Holder shall
be entitled to a vote proportionate to its Interest in the Trust or applicable
Series, as the case may be. When Interests are held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest. A proxy purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the Holder is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of its Interest, the Holder
may vote by the Holder's guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy. No proxy shall be
valid after eleven (11) months from the date of its execution, unless a longer
period is expressly stated in such proxy.
9.5. INSPECTORS OF ELECTION. In advance of any meeting of Holders, the
Trustees may appoint Inspectors of Election to act at the meeting or any
adjournment thereof. If Inspectors of Election are not so appointed, the
Chairman, if any, of any meeting of Holders may, and on the request of any
Holder or the Holder's proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed at
the meeting on the request of one or more Holders or proxies, a majority of the
Interests present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Holders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as Chairman. The
Inspectors of Election shall determine the percentage of the total Interests
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Holders. If there are three Inspectors of
Election, the decision, act or certificate of a majority is effective in all
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respects as the decision, act or certificate of all. On request of the Chairman,
if any, of the meeting, or of any Holder or a Holder's proxy, the Inspectors of
Election shall make a report in writing of any challenge or question or matter
determined by them and shall execute a certificate of any facts found by them.
9.6. INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours for any purpose not harmful
to the Trust. At each meeting of the Holders of the Trust or any Series there
shall be open for inspection the minutes of the last previous meeting of Holders
of the Trust or Series, as the case may be, and a list of the Holders of the
Trust or Series, certified to be true and correct by the Secretary or other
proper agent of the Trust, as of the record date of the meeting. Such list of
Holders shall contain the name of each Holder and the address and the percentage
of the total Interests owned by such Holder.
9.7. HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by
Holders may be taken without a meeting if Holders shall unanimously consent to
the action in writing and the written consents are filed with the records of the
meetings of Holders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Holders.
9.8. VOTING POWERS. The Holders shall have power to vote only (i) for
the election of Trustees as provided in Sections 2.2 and 2.4; (ii) for the
removal of Trustees as provided in Section 2.3; (iii) with respect to any
investment management contract entered into pursuant to Section 4.1; (iv) with
respect to termination of the Trust as provided in Section 10.1; and (v) with
respect to any such additional matters relating to the Trust as may be required
by this Instrument or any registration of the Trust as an investment company
under the 1940 Act with the Commission (or any successor agency) or as the
Trustees may consider necessary or desirable. On any matter submitted to a vote
of the Holders, all Interests shall be voted separately by individual Series,
except (i) when required by the 1940 Act, Interests shall be voted in the
aggregate and not by individual Series; and (ii) when the Trustees have
determined that the matter affects the interests of more than one Series, then
the Holders of all such Series shall be entitled to vote thereon. There shall be
no cumulative voting in the election of Trustees. Until Interests are issued and
at any time wherein no Interests are outstanding, the Trustees may exercise all
rights of Holders and may take any action required by law or this Instrument to
be taken by Holders.
ARTICLE X
DURATION; TERMINATION; DISSOLUTION;
AMENDMENT; MERGERS; ETC.
10.1. TERMINATION OF TRUST OR ANY SERIES.
(a) The Trust or any Series may be terminated by (i) a Majority
Interests Vote of each Series affected by the matter or, if applicable, a
Majority Interests vote of the Trust, or (ii) the Trustees by written notice to
the Holders. Upon any such termination,
(i) The Trust or any affected Series shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or any affected Series and all of the powers of the Trustees
under this Instrument with respect to the Trust or any affected Series
shall continue until the affairs of the Trust or any such Series shall
have been wound up, including the power to fulfill or discharge the
contracts of the Trust or any such Series, collect its assets, sell,
convey, assign, exchange, or otherwise dispose of all or any part of
the remaining assets of the Trust or any such Series to one or more
persons at public or private sale for consideration which may consist
in whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees shall distribute the remaining assets of the Trust or any
affected Series, in cash or in kind or partly each, among the Holders
of the Trust or the affected Series in proportion to their respective
Interests in the Trust or Series (that is, in accordance with the
positive Book Capital Account balances of the Holders), after taking
into account such adjustments as are required by Treasury Department
Regulation ss. 1.704-1(b) (2) (ii) (b) (2).
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(b) Upon termination of the Trust or any Series and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination. Upon termination of the Trust or any Series, the Trustees
shall thereupon be discharged from all further liabilities and duties hereunder
with respect to the Trust or Series, and the rights and interests of all Holders
of the Trust or Series shall thereupon cease.
10.2. DISSOLUTION. Any Series shall be dissolved 120 days after a
Holder of an Interest in such Series either (a) makes an assignment for the
benefit of creditors, (b) files a voluntary petition in bankruptcy, (c) is
adjudicated a bankrupt or insolvent, (d) files any pleading admitting or failing
to contest the material allegations of a petition filed against it in any
bankruptcy or insolvency proceeding, or (e) seeks, consents to, or acquiesces in
the appointment of a trustee, receiver, or liquidator of such Holder or of all
or any substantial part of its assets, unless, within such 120 days, Holders
(excluding the Holder with respect to whom such event occurs) owning a majority
of the Interests in such Series vote to continue the Series. Upon any
dissolution pursuant to this section, the provisions of Section 10.1(a) (i),
(ii), and (iii) shall apply as if such dissolution were a termination described
in Section 10.1.
10.3. AMENDMENT PROCEDURE.
(a) Except as specifically provided herein, the Trustees may, without
the vote or consent of Holders, amend or otherwise supplement this Instrument by
making an amendment, a trust instrument supplemental hereto or an amended and
restated trust instrument. Holders shall have the right to vote (i) on any
amendment which would affect their right to vote granted in Section 9.8, (ii) on
any amendment to this Section 10.3, (iii) on any amendment as may be required by
law or by the Trust's registration statement filed with the Commission, and (iv)
on any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Holders which, as the Trustees determine, shall
affect the Holders of one or more Series shall be authorized by vote of the
Holders of each Series affected, and no vote of Holders of a Series not affected
shall be required.
(b) Notwithstanding anything else herein, any Amendment to Article 5
hereof shall not limit the rights to indemnification or insurance provided
therein with respect to action or omission of Covered Persons prior to such
amendment. Nothing contained in this Instrument shall permit the amendment of
this Instrument to impair the exemption from personal liability of the Holders
or Trustees of the Trust.
(c) Notwithstanding anything else herein, no amendment to Section 5.6
shall be effective until at least 30 days after the Trust has delivered all
Holders (as of the date of such notice) written notice of such amendment.
(d) A certification signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Holders or by the
Trustees as aforesaid or a copy of the Instrument, as amended, executed by a
majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Instrument may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
10.4. MERGER, CONSOLIDATION OR ASSET SALE. Notwithstanding anything
else herein, the Trustees may, without the prior consent or vote of the Holders,
cause the Trust or any Series to merge or consolidate with, or sell
substantially all of its assets to, any other partnership, trust or other
organization. Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Instrument, any agreement of merger or consolidation may
effect any amendment to the Instrument or effect the adoption of a new trust
instrument of the Trust if the Trust or Series is the surviving or resulting
entity in the merger or consolidation.
10.5. INCORPORATION. Notwithstanding anything else herein, the Trustees
may, without the prior consent or vote of the Holders, cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all of the Trust Property or the assets of any Series or to carry
on any business in which the Trust or any Series shall directly or indirectly
have any interest, and to sell, convey and transfer the Trust Property or the
assets of any Series to any such corporation, trust, association or organization
in exchange for the equity interests thereof or otherwise, and to lend money to,
subscribe for the equity interests of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which
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the Trust or any Series holds or is about to acquire equity interests. The
Trustees may also cause a merger or consolidation between the Trust or any
Series or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. In addition, nothing contained herein
shall be construed as requiring approval of the Holders for the Trustees to
organize or assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property or the assets of any Series to such organizations
or entities.
ARTICLE XI
MISCELLANEOUS
11.1. GOVERNING LAW. The trust set forth in this instrument is made in
the State of Delaware, and the Trust and this Instrument, and the rights and
obligations of the Trustees and Holders hereunder, are to be governed by and
construed and administered according to the Delaware Act and the laws of said
State; provided, however, that there shall not be applicable to the Trust, the
Trustees or this Instrument (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of Delaware (other than the Delaware Act) pertaining to trusts which
relate to or regulate (i) the filing with any court or governmental body or
agency of trustee accounts or schedules of trustee fees and charges, (ii)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Instrument. The Trust shall be of the type commonly called a "business
trust," and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
11.2. COUNTERPARTS. This Instrument may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
11.3. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Instrument may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Holders; (b) the due
authorization of the execution of any instrument or writing; (c) the form of any
vote passed at a meeting of Trustees or Holders; (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Instrument; (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or; (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
11.4. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Instrument are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with any applicable laws or regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Instrument; provided, however, that such determination shall not affect any of
the remaining provisions of this Instrument or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Instrument shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Instrument in any jurisdiction.
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(c) It is intended that each Series of the Trust be classified as a
partnership for federal income tax purposes. The Trustees, in their sole
discretion and without the vote or consent of the Holders, may amend this
Instrument and do whatever else they determine to be necessary to ensure that
this objective is achieved.
11.5. SIGNATURES. All contracts and other instruments shall be executed
on behalf of the Trust by such officer, officers, agent or agents, as provided
in this Instrument or as the Trustees may from time to time by resolution
provide.
11.6. SEAL. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Delaware business corporation.
11.7. FISCAL YEAR. The fiscal year of the Trust and each Series shall
begin on June 1, provided, however, that the Trustees may from time to time
change the fiscal year of the Trust or of any Series.
11.8. WAIVERS OF NOTICE. Whenever any notice whatever is required to be
given by law or this Instrument, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been telegraphed, cabled or wirelessed for the purposes of this Instrument
when it has been delivered to a representative of any telegraph, cable or
wireless company with instructions that it be telegraphed, cabled or wirelessed.
11.9. REPORTS. The Trustees shall cause to be prepared, at least
annually, a report of operations containing those financial statements as may be
required by laws or as the Trustees may direct for each Series prepared in
conformity with generally accepted accounting principles and an opinion of an
independent public accountant on such financial statements. The Trustees shall,
in addition, furnish to the Holders of each Series at least semi-annually
interim reports containing unaudited financial statements as may be required by
laws or as the Trustees may direct.
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EXHIBIT (G)(2)
CORE TRUST (DELAWARE)
CUSTODIAN AGREEMENT
Agreement made this 7th day of May, 1999, between Core Trust (Delaware)
(the "Trust"), a business trust organized under the laws of the State of
Delaware, having its principal place of business at Two Portland Square,
Portland, Maine 04101, and Union Bank of California, N.A., a national
association, having its principal place of business at 350 California Street,
San Francisco, California 94104.
WHEREAS, the Trust is authorized to issue interests in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust offers interests in various series as listed in
Appendix A hereto intends to initially offer interests in three series: the
Treasury Cash Portfolio, Government Cash Portfolio, and Cash Portfolio, (each a
"Portfolio," and collectively the "Portfolios"), (such series together with all
other series subsequently established by the Trust and made subject to this
AgreementContract in accordance with Section 12);
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Trust hereby employs the Custodian as the custodian of the assets
of the Portfolios pursuant to the provisions of the Trust Instrument. The Trust
on behalf of the Portfolios agrees to deliver to the Custodian all securities
and cash of the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by the
Portfolios from time to time, and the cash consideration received by it for such
shares of beneficial interest of the Trust representing interests in the
Portfolios ("Interests") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.
The Trust hereby authorizes the Custodian to use Imperial Bank and The
Bank of New York as subcustodians, the use of Imperial Bank being limited to
custodianship of cash. In addition, the Custodian may, at any time and from time
to time, appoint any other bank as defined in Section 2(a)(5) of the Investment
Company Act of 1940 ("1940 Act") meeting the requirements of a custodian under
Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act
on behalf of one or more Portfolios as a subcustodian for the purposes of
holding cash, securities and other assets of the Portfolios and performing other
functions of the Custodian; provided that the Custodian sends written
notification to the Trust on or before the day upon which such other
subcustodian is first employed. The Custodian shall be liable for the actions or
omissions of any subcustodian to the same extent as if such action or omission
were performed by the Custodian itself.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF
THE TRUST HELD BY TO CUSTODIAN
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities Systems."
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian only upon receipt of Proper
Instructions from the Trust on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
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2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.11 or into the name
or nominee name of any subcustodian appointed pursuant to
Section l; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such day
upon which such other subcustodian is first employed. The
Custodian shall be liable for the actions or omissions of any
subcustodian to the same extent as if such action or omission
were performed by the Custodian itself.
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Trust on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
Government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Trust on behalf of the Portfolio requiring a pledge of
assets by the Trust on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Trust, for delivery to such
Transfer Agent or to the holders of interests in connection
with distributions in kind, as may be described from time to
time in the currently effective Part A and Part B of the
registration statement of the Trust related to the Portfolios
("Prospectus"), in satisfaction of requests by holders of
Interests for repurchase or redemption; and
13) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Trust on
behalf of the applicable Portfolio, a writing signed by an
officer of the Trust and certified by the Secretary or an
Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose
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to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Trust on behalf of the
Portfolio or of any nominee of the Custodian, or in the name or nominee
name of any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any subcustodian appointed pursuant to Section 1,
unless specifically directed by Proper Instructions to hold such
registered securities in so-called street name; provided that, in any
event, all such securities and other assets shall be held in an account
of the Custodian containing only assets of a Portfolio, or only assets
held by a Custodian as a fiduciary or custodian for customers, and
provided further, that the records of the Custodian shall indicate at
all times the Portfolio or other customer for which such securities and
other assets are held in such account and their respective interests
therein.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or other accounts in the name of Custodian, as custodian of
each Portfolio, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the 1940 Act. Cash held hereunder shall be deemed to
be a special deposit. Funds held by the Custodian for a Portfolio may
be deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be appointed in accordance with
and subject to the terms of Section 1 hereof.
2.5 PAYMENTS FOR INTERESTS. The Custodian shall receive from the placement
agent for the Interests or from the Transfer Agent of the Trust and
deposit into the account of the appropriate Portfolio such payments as
are received for Interests of that Portfolio issued or sold form time
to time by the Trust. The Custodian will provide timely notification to
the Trust on behalf of each such Portfolio and the Transfer Agent of
any receipt by it of payments for Interests of such Portfolio.
2.6 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Trust
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Trust on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Trust and the
Custodian in the amount of checks received in payment for Interests of
such Portfolio which are deposited into the Portfolio's account.
2.7 COLLECTION OF INCOME. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held
hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 10) shall
be the responsibility of the Trust. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist the Trust
in arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.8 PAYMENT OF MONIES. Upon receipt of Proper Instructions from the Trust
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of securities, for the account of the
Portfolio but only (a) against the delivery of such securities
to the Custodian (or any bank, banking firm or trust company
doing business in the United States which is qualified under
the 1940 Act to act as a custodian and has been designed by
the Custodian as its agent for this purpose) registered in the
name of the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form
for transfer; (b)
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in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.12 hereof; (c) in the case of repurchase
agreements entered into between the Trust on behalf of the
Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of the NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (d) for transfer to a time
deposit account of the Trust in any domestic bank; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Trust as defined in Section 2.17;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Interests issued by
the Portfolio as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Trust whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
5) For the payment of any distributions on Interests of the
Portfolio declared pursuant to the governing documents of
the Trust;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Trust on behalf of
the Portfolio, a writing signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Agreement, in any and
every case where payment for purchase of securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Trust on behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely liable to the Trust for such securities
to the same extent as if the securities had been received by the
Custodian.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF INTERESTS OF THE TRUST. From
such funds as may be available for the purpose but subject to the
limitations of the Trust Instrument and any applicable votes of the
Board of Trustees of the Trust (the "Board") pursuant thereto, the
Custodian shall, upon receipt of instructions from the Transfer Agent,
make funds available for payment to holders of Interests who have
delivered to the Transfer Agent a request for redemption or repurchase
of their Interests. In connection with the redemption or repurchase of
Interests of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection
with the redemption or repurchase of Interests of the Trust, the
Custodian shall honor checks drawn on the Custodian by a holder of
Interests, which checks have been furnished by the Trust to the holder
of Interests, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Trust and the Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this
Section 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
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2.12 DEPOSIT OF TRUST ASSETS IN SECURITIES SYSTEMS. Upon receipt of Proper
Instructions, the Custodian may deposit and/or maintain securities
owned by a Portfolio in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities Systems" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and regulations, if
any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Trust at its request. Upon
request, the Custodian shall furnish the Trust on behalf of
the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice or
notice and shall furnish to the Trust on behalf of the
Portfolio copies of daily transaction sheets reflecting each
days transactions in the Securities System for the account of
the Portfolio.
4) The Custodian shall provide the Trust for the Portfolio with
any report obtained by the Custodian on the Securities Systems
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System;
5) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Trust, it shall be entitled to
be subrogated to the rights of the Custodian with respect to
any claim against the Securities System or any other person
which the Custodian may have as a consequence of any such loss
or damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
2.13 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Trust on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for an on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) for
the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (ii) for other proper corporate purposes, but only, in
the case of clause (ii), upon receipt of, in addition to Proper
Instructions from the Trust on behalf of the applicable Portfolio, a
writing signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
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2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Portfolio held by it and in
connection with transfers of securities.
2.15 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Portfolio or a nominee of the Portfolio, all proxies are to
be voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such securities.
2.16 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. The Custodian shall
transmit promptly to the Trust for each Portfolio all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person or
persons as the Board shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been
given by a person authorized to give such instructions with respect to
the transaction involved. The Trust shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the
Board, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such procedures afford
adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.13.
Notwithstanding anything to the contrary contained in the Agreement, no
person authorized by the Board as described in the preceding paragraph,
Trustee, officer, employee or agent of the Trust shall have physical
access to the assets of any Portfolio held by the Custodian nor shall
the Custodian deliver any assets of a Portfolio for delivery to an
account of such person; provided, however, that nothing in this Section
2.17 shall prohibit the Trust's independent certified public
accountants from examining or reviewing the assets of the Portfolio's
held by the Custodian.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Trust on behalf of each
applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Trust on behalf of the
Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board.
2.19 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other
instrument or paper reasonably believed by it to be genuine and to have
been properly executed by or on behalf of the Trust. The Custodian may
receive and accept a certified copy of a vote of the Board as
conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the Trust Instrument as described in such
vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
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SECTION 3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board who keep the books of account of
each Portfolio.
SECTION 4. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Trust under the 1940 Act with
particular attention to Section 31 thereof and Rules 3la-1 and 3la-2 thereunder.
All such records shall be the property of the Trust and shall at all times
during the regular business hours of the Custodian be open for inspection by
duly authorized officers, employees and agents of the Trust and employees and
agents of the Securities and Exchange Commission. The Custodian shall, at the
Trust's request, supply the Trust with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by the
Trust and for such compensation as shall be agreed upon between the Trust and
the Custodian, include certificate numbers in such tabulations.
SECTION 5. OPINION OF TRUST'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Trust on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Trust's independent accountants with respect
to its activities hereunder in connection with the preparation of the Trust's
Form N-lA, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
SECTION 6. REPORTS TO TRUST BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Trust, on behalf of each of the
Portfolios at such times as the Trust may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including securities
deposited and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Agreement; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Trust to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 7. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Trust on behalf of each applicable Portfolio and the Custodian.
SECTION 8. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement, but shall be kept indemnified by and shall be
without liability to the Trust for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Trust) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Trust on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Trust or the Portfolio being liable for
the payment of money or incurring liability of some other form, the Trust on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
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If the Trust requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominees own negligent
action, negligent failure to act or willful misconduct, the Custodian promptly
shall notify the Trust of the existence of any such advances, their amount and
the Portfolio to which the advance applies. Such advances shall be payable on
demand, on the first business day following the Trust's receipt of notice of
such demand.
SECTION 9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided, that
the Trust on behalf of one or more of the Portfolios may at time by action of
its Board (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) terminate this
Agreement immediately or at such later time as the Trust may designate in the
event the Trust determines that there is a reasonable basis to conclude that the
Custodian is insolvent or that the financial condition of the Custodian is
deteriorating in any material respect.
Upon termination of the Agreement, the Trust on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
SECTION 10. SUCCESSOR CUSTODIAN
If a successor custodian for the Trust or of one or more of the
Portfolios shall be appointed by the Board, the Custodian shall, upon
termination, deliver to such successor custodian at the office of the Custodian
all property of the Trust then held by it hereunder and, in the case of
securities, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System. The Custodian shall take all reasonable steps to assist in
the transfer of the assets of the applicable Portfolios to the successor
custodian.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board, deliver
at the office of the Custodian and transfer such securities, funds and other
properties in accordance with such vote. In the event that no written order
designating a successor custodian or certified copy of a vote of the Board shall
have been delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver to a
bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in New York City, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this
Agreement on behalf of each applicable Portfolio and to transfer to an account
of such successor custodian all the securities of each such Portfolio held in
any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Agreement relating to the duties and obligations of the Custodian shall
remain in full force and effect.
SECTION 11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian
and the Trust on behalf of each of the Portfolios, may from time to time agree
on such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state
28
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regulations or any provision of the Trust Instrument of the Trust. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
SECTION 12. ADDITIONAL PORTFOLIOS
In the event that the Trust establishes one or more series of Interests
in addition to the Portfolios with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Interests shall become a Portfolio
hereunder.
SECTION 13. CALIFORNIA LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of State of California.
SECTION 14. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior contracts between the Trust on behalf of each of the Portfolios and the
Custodian relating to the custody of the Trust's assets.
SECTION 15. MISCELLANEOUS
15.1 The Custodian agrees to treat all records and other information
relative to the Trust and its prior, present or potential Shareholders
confidentially and the Custodian on behalf of itself and its employees
agrees to keep confidential all such information, except after prior
notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld. The preceding notwithstanding, in
the event legal process is served upon the Custodian requiring certain
disclosure, the Custodian may divulge such information. In such event,
the Custodian shall, if legally permissible, advise the Trust of its
receipt of such legal process.
15.2 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 debt, obligation or liability or any other Portfolio, whether
arising under the Agreement or otherwise.
15.3 The provisions of this Section 15, Sections 7, 8, 13 and 16, and
Section 2.19, and any other rights or obligations incurred or accrued
by any party hereto prior to termination of this Agreement shall
survive any termination of this Agreement.
SECTION 16. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND
SHAREHOLDERS OFFICERS, EMPLOYEES AND AGENT
A copy of the Trust Instrument of the Trust is on file with the
Secretary of the Trust. The parties agree that neither the Shareholders,
Trustees, officers, employees nor any agent of the Trust shall be liable
hereunder and that the parties to this Agreement other than the Trust shall look
solely to the Trust property for the performance of this Agreement or payment of
any claim under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
ATTEST CORE TRUST (DELAWARE)
By: /s/ David I. Goldstein By: /s/ John Y. Keffer
David I. Goldstein John Y. Keffer
Secretary President
29
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ATTEST UNION BANK OF
CALIFORNIA, N.A.
By:/s/ Jai Sondhi By: /s/ Michael Vaughan
Title: Senior Vice President Title: President
Jai Sondhi Michael Vaughan
Senior Vice President President
30
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CUSTODIAN AGREEMENT
CORE TRUST (DELAWARE)
APPENDIX A
PORTFOLIOS OF THE TRUST
MAY 11, 1999
Government Portfolio
Treasury Cash Portfolio
Government Cash Portfolio
Cash Portfolio
Municipal Cash Portfolio
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CORE TRUST (DELAWARE)
CUSTODIAN CONTRACT FEE ARRANGEMENT
September 1, 1995
WHEREAS, Core Trust (Delaware), a business trust organized under the
laws of the State of Delaware, having its principal place of business at 61
Broadway, New York, N.Y. 10006 (the "Trust") and Imperial Trust Company, a
California trust company, having its principal place of business at 201 N.
Figueroa Street, Suite 610, Los Angeles, California 90012 (the "Custodian") have
entered into a Custodian Contract on the 1st day of September, 1995 (the
"Contract"); and
WHEREAS, Section 7 of the Contract provides that the Custodian shall be
entitled to reasonable compensation for its services and expenses as Custodian,
as agreed upon from time to time between the Trust on behalf of each portfolio
of the Trust and the Custodian;
NOW THEREFORE, in consideration of the services to be provided by the
Custodian under the Contract, the Trust and the Custodian agree that the Trust
shall pay the Custodian, with respect to Treasury Cash Portfolio, Government
Cash Portfolio, and Cash Portfolio, (each a "Portfolio"), a fee of 0.025% of the
average annual daily net assets of each Portfolio. Such fees shall be accrued by
the Trust daily and payable monthly in arrears on the first day of the next
month.
ATTEST CORE TRUST (DELAWARE)
<TABLE>
<S> <C>
/s/ David I. Goldstein By: /s/ John Y. Keffer
David I. Goldstein John Y. Keffer
Secretary President
ATTEST IMPERIAL TRUST COMPANY
/s/ Jai Sondhi By: /s/ Michael Vaughan
Jai Sondhi Michael Vaughan
Senior Vice President President
</TABLE>
32
<PAGE>
CORE TRUST (DELAWARE)
CUSTODIAN CONTRACT FEE ARRANGEMENT
as of June 16, 1998
WHEREAS, Core Trust (Delaware), a business trust organized under the
laws of the State of Delaware, having its principal place of business at Two
Portland Square, Portland, Maine 04101 (the "Trust") and Imperial Trust Company,
a California trust company, having its principal place of business at 201 N.
Figueroa Street, Suite 610, Los Angeles, California 90012 (the "Custodian") have
entered into a Custodian Contract on the 1st day of September, 1995 (the
"Contract"); and
WHEREAS, Section 7 of the Contract provides that the Custodian shall be
entitled to reasonable compensation for its services and expenses as Custodian,
as agreed upon from time to time between the Trust on behalf of each portfolio
of the Trust and the Custodian;
NOW THEREFORE, in consideration of the services to be provided by the
Custodian under the Contract, the Trust and the Custodian agree that the Trust
shall pay the Custodian, with respect to Treasury Cash Portfolio, Government
Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio (each a
"Portfolio"), a fee of 0.025% of the average annual daily net assets of each
Portfolio. Such fees shall be accrued by the Trust daily and payable monthly in
arrears on the first day of the next month.
ATTEST CORE TRUST (DELAWARE)
\s\ David I. Goldstein By:\s\ John Y. Keffer
David I. Goldstein John Y. Keffer
Secretary President
ATTEST IMPERIAL TRUST COMPANY
\s\ Jai Sondhi By:\s\ William Klepper
Jai Sondhi William Klepper
Title: Senior Vice President Title: Vice President / Manager
33
<PAGE>
CORE TRUST (DELAWARE)
CUSTODIAN AGREEMENT FEE ARRANGEMENT
as of May 7, 1999
WHEREAS, Core Trust (Delaware), a business trust organized under the
laws of the State of Delaware, having its principal place of business at Two
Portland Square, Portland, Maine 04101 (the "Trust") and Union Bank of
California, N.A., a national association, having its principal place of business
at 350 California Street, San Francisco, California 94104 (the "Custodian") have
entered into a Custodian Agreement on the 7th day of May, 1999, (the
"Agreement"); and
WHEREAS, Section 7 of the Agreement provides that the Custodian shall
be entitled to reasonable compensation for its services and expenses as
Custodian, as agreed upon from time to time between the Trust on behalf of each
portfolio of the Trust and the Custodian;
NOW THEREFORE, in consideration of the services to be provided by the
Custodian under the Agreement, the Trust and the Custodian agree that the Trust
shall pay the Custodian, with respect to Treasury Cash Portfolio, Government
Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash
Portfolio (each a "Portfolio"), the following fees:
Fee as a % of the
Portfolio Annual Average Daily Net Assets of
Each Portfolio
Municipal Cash Portfolio 0.025%
Total of All Other Portfolios 0.025% of the first $1.5 billion,
0.020% of the next $1.0 billion
and 0.015% of the balanceremaining
assets
Such fees shall be accrued by the Trust daily and payable monthly in arrears on
the first day of the next month.
ATTEST CORE TRUST (DELAWARE)
By: \s\ David I. Goldstein By:\s\ John Y. Keffer
David I. Goldstein John Y. Keffer
Secretary President
ATTEST UNION BANK OF
CALIFORNIA, N.A.
By:\s\ Jay Sondhi By:\s\ William Klepper
Jai Sondhi William Klepper
Title: Senior Vice President Title: Vice President / Manager
34
<PAGE>
Exhibit (h)(4)
CORE TRUST (DELAWARE)
PLACEMENT AGENT AGREEMENT
AGREEMENT made this 1st day of March 1999, between Core Trust (Delaware)
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Forum Fund Services, LLC ("Forum"), a Delaware limited
liability with its principal place of business at Two Portland Square, Portland,
Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end management investment company and
is authorized to issue Interests (as defined in the Trust's Trust Instrument) in
separate series; and
WHEREAS, the Trust desires that Forum perform placement agent services
for each of the portfolios of the Trust as listed in Appendix A hereto (each a
"Portfolio," and collectively the "Portfolios") and Forum is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
SECTION 1. SERVICES AS PLACEMENT AGENT
(a) Forum will act as Placement Agent of the Interests of the
Portfolios. As Placement Agent, Forum shall have the right to sell Interests of
the Portfolios upon the terms set forth in the Trust's registration statement,
as such registration statement is amended and in effect from time to time. In
acting as Placement Agent, neither Forum nor its employees nor any agents
thereof shall make any offer or sale of Interests in a manner which would
require the Interests to be registered under the Securities Act of 1933, as
amended (the "1933 Act"). As used in this Agreement the term "registration
statement" shall mean any registration statement filed with the Securities and
Exchange Commission (the "Commission") as modified by any amendments thereto
that at any time shall have been filed with the Commission by or on behalf of
the Trust.
(b) All activities by Forum and its agents and employees as Placement
Agent of Interests shall comply with all applicable laws, rules and regulations,
including without limitation, all rules and regulations adopted pursuant to the
1940 Act by the Commission.
(c) Nothing herein shall be construed to require the Trust to accept
any offer to purchase any Interests, all of which shall be subject to approval
by the Trust's Board of Trustees.
(d) The Trust shall furnish from time to time for use in connection
with the sale of Interests such information with respect to the Trust and
Interests as Forum may reasonably request. The Trust shall also furnish Forum
upon request with: (a) audited annual and unaudited semiannual statements of the
Trust's books and accounts prepared by the Trust, and (b) from time to time such
additional information regarding the Trust's financial or regulatory condition
as Forum may reasonably request.
(e) The Trust represents to Forum that all registration statements
filed by the Trust with the Commission under the 1940 Act with respect to
Interests have been prepared in conformity with the requirements of such statute
and rules and regulations of the Commission thereunder. The Trust represents and
warrants to Forum that any registration statement will contain all statements
required to be stated herein in conformity with both such statute and the rules
and regulations of the Commission; that all statements of fact contained in any
registration statement will be true and correct in all material respects at the
time of filing of such registration statements or amendments thereto; and that
no registration statement will include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
35
<PAGE>
the statements therein not misleading to a purchaser of Interests. The Trust may
but shall not be obligated to, propose from time to time such amendment to any
registration statement as in the light of future developments may, in the
opinion of the Trust's counsel, be necessary or advisable. If the Trust shall
not propose such amendment and/or supplement within fifteen days after receipt
by the Trust of a written request from Forum to do so, Forum may, at its option,
terminate this Agreement. The Trust shall not file any amendment to any
registration statement without giving Forum reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall in
any way limit the Trust's right to file at any time such amendment to any
registration statement as the Trust may deem advisable, such right being in all
respects absolute and unconditional.
(f) The Trust agrees to indemnify, defend and hold Forum, its several
officers and directors, and any person who controls Forum within the meaning of
Section 15 of the 1933 Act or Section 20 of the Securities Exchange Act of 1934
(the "1934 Act") (for purposes of this Section 1(f), collectively, "Covered
Persons") free and harmless from and against any and all claims, demands,
liabilities and any counsel fees incurred in connection therewith) which any
Covered Person may incur under the 1933 Act, the 1934 Act, common law or
otherwise, arising out of or based on any untrue statement of a material fact
contained in any registration statement, private placement memorandum or other
offering material ("Offering Material") or arising out of or based on any
omission to state a material fact required to be stated in any Offering Material
or necessary to make the statements in any Offering Material not misleading,
provided, however, that the Trust's agreement to indemnify Covered Persons shall
not be deemed to cover any claims, demands, liabilities or expenses arising out
of any financial and other statements as are furnished in writing to the Trust
by Forum in its capacity as Placement Agent for use in the answers to any items
of any registration statement or in any statements made in any Offering
Material, or arising out of or based on any omission or alleged omission to
state a material fact in connection with the giving of such information required
to be stated in such answers or necessary to make the answers not misleading;
and further provided that the Trust's indemnification 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 1(f) and the Trust's representations and warranties in
this Agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of Covered Persons, and shall survive the
delivery of any Interests. This agreement of indemnity will inure exclusively to
Covered Persons and their successors. The Trust agrees to notify Forum promptly
of the commencement of any litigation or proceedings against the Trust or any of
its officers or Trustees in connection with the issue and sale of any Interests.
(g) Forum agrees to indemnify, defend and hold the Trust, its several
officers and trustees, and any person who controls the Trust within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for purposes of
this Section 1(g) collectively, "Covered Persons") free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, liabilities and any
counsel fees incurred in connection therewith) that Covered Persons may incur
under the 1933 Act, the 1934 Act, or common law or otherwise, but only to the
<PAGE>
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).
(h) No Interests shall be offered by either Forum or the Trust under
any of the provisions of this Agreement and no orders for the purchase or sale
of Interests hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement or any necessary amendments thereto
shall be suspended under any of the provisions of the 1940 Act; provided,
however, that nothing contained in this Section 1(h) shall in any way restrict
or have an application to or bearing on the Trust's obligation to redeem
Interests from any investor in accordance with the provisions of the Trust's
registration statement or Trust Instrument, as amended from time to time.
(i) The Trust agrees to advise Forum as soon as reasonably practical by
a notice in writing delivered to Forum or its counsel:
(i) of any request by the Commission for amendment to the registration
statement then in effect or for additional information;
(ii) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(iii) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement then in effect or
that requires the making of a change in such registration statement in
order to make the statements therein not misleading; and
(iv) of all action of the Commission with respect to any amendment to
any registration statement that may from time to time be filed with the
Commission.
For purposes of this Section 1(i), informal requests by or acts of the
Staff of the Commission shall not be deemed actions or requests by the
Commission.
(j) Forum agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information not otherwise publicly available relative to the Trust and its
prior, present or potential investors and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval 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 comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
36
<PAGE>
(k) In addition to Forum's duties as Placement Agent, the Trust
understands that Forum may, in its discretion, perform additional functions in
connection with transactions in Interests.
(l) Forum shall receive no fee for its services hereunder.
(m) The processing of Interest transactions may include, but is not
limited to, compilation of all transactions; creation of a transaction tape and
timely delivery of it to the Trust's transfer agent for processing;
reconciliation of all transactions delivered to the Trust's transfer agent; and
the recording and reporting of these transactions executed by the Trust's
transfer agent in customer statements; and rendering of periodic customer
statements.
(n) Forum may also provide other investor services, such as
communicating with Trust investors and other functions in administering customer
accounts for Trust investors.
(o) Nothing herein is intended, nor shall be construed, as requiring
Forum to perform any of the foregoing functions.
SECTION 2. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each
Portfolio on the date hereof and with respect to each future portfolio of the
Trust on the date this Agreement or Appendix A hereto is amended. 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
for a period of one year from its effectiveness and shall continue in effect for
successive twelve-month periods; provided, however, that continuance is
specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting interests of the Portfolio and (ii) by a vote
of a majority of Trustees of the Trust who are not parties to this agreement or
interested persons of any such party (other than as Trustees of the Trust);
provided further, however, that if the continuation of this agreement is not
approved as to a Portfolio, Forum may continue to render to the Portfolio the
services described herein in the manner and to the extent permitted by the Act
and the rules and regulations thereunder.
(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. This
agreement shall terminate upon assignment.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Forum and the Trust each hereby represents and warrants to the other
that it has all requisite authority to enter into, execute, deliver and perform
its obligations under this Agreement and that, with respect to it, this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
SECTION 4. ACTIVITIES OF FORUM
Except to the extent necessary to perform Forum's obligations
hereunder, nothing herein shall be deemed to limit or restrict Forum's right, or
the right of any of Forum's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons 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.
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SECTION 5. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interestholders 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 interestholders of
the Portfolios.
SECTION 6. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(b) 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.
(c) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(d) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(e) This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Maine.
(f) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
(g) The terms "vote of a majority of the outstanding voting interests,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act to the terms "vote of a majority of the
outstanding voting securities," "interested person," "affiliated person" and
"assignment," respectively.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
CORE TRUST (DELAWARE)
/s/ Mark D. Kaplan
-------------------------
Mark D. Kaplan
Vice President
FORUM FUND SERVICES, LLC.
/s/ John Y. Keffer
-------------------------
John Y. Keffer
President
38
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CORE TRUST (DELAWARE)
PLACEMENT AGENT AGREEMENT
APPENDIX A
AS OF MARCH 1, 1999
Treasury Cash Portfolio
Government Cash Portfolio
Cash Portfolio
Treasury Portfolio
Municipal Cash Portfolio
39
<PAGE>
EXHIBIT K
INDEPENDENT AUDITORS' REPORT MAY 31, 1999
- ------------------------------------------------------------------------------
To the Board of Trustees and Partners
Core Trust (Delaware)
We have audited the accompanying statements of assets and
liabilities of fifteen portfolios of Core Trust (Delaware), Stable
Income Portfolio, Managed Fixed Income Portfolio, Positive Return
Bond Portfolio, Strategic Value Bond Portfolio, Index Portfolio,
Income Equity Portfolio, Disciplined Growth Portfolio, Large Company
Growth Portfolio, Small Cap Index Portfolio, Small Company Stock
Portfolio, Small Cap Value Portfolio, Small Company Value Portfolio,
Small Company Growth Portfolio, International Portfolio and
International Equity Portfolio (collectively the "Portfolios"),
including the schedules of investments, as of May 31, 1999, and the
related statements of operations for the year then ended, except for
International Equity Portfolio, which is for the period from February
12, 1999 (commencement of operations) to May 31, 1999, and the
statements of changes in net assets and financial highlights for each
of the years or periods in the two-year period then ended for Stable
Income Portfolio, Managed Fixed Income Portfolio, Positive Return
Portfolio, Strategic Value Bond Portfolio, Income Equity Portfolio,
Disciplined Growth Portfolio, Large Company Growth Portfolio, Small
Cap Index Portfolio and Small Cap Value Portfolio, and for the year
or period ended May 31, 1999 for Index Portfolio, Small Company Stock
Portfolio, Small Company Growth Portfolio, Small Company Value
Portfolio, International Portfolio and International Equity
Portfolio. These financial statements and financial highlights are
the responsibility of the Portfolios' management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits. The statements of changes in net
assets and the financial highlights for all periods ending prior to
June 1, 1998 for Index Portfolio, Small Company Stock Portfolio,
Small Company Value Portfolio, Small Company Growth Portfolio and
International Portfolio were audited by other auditors, whose report
dated July 21, 1998 expressed an unqualified opinion on those
financial statements and financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements
and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999, by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Portfolios as of May 31, 1999, the results
of their operations, changes in their net assets, and financial
highlights for each of the periods indicated in the first paragraph
above, in conformity with generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts
July 16, 1999
CORE TRUST (DELAWARE)
40
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC
STABLE MANAGED FIXED POSITIVE VALUE
INCOME INCOME RETURN BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments (Note 2)
Investments at cost........ $ 302,414,324 $431,056,476 $155,445,666 $ 245,852,884 $ 1,058,670,021
Repurchase agreements at
cost................... 9,626,349 15,740,368 130,519,632 5,166,334 -
Net unrealized appreciation
(depreciation)......... (1,047,135) (7,671,927) (1,979,267) (4,665,136) 771,746,997
------------- ------------- ------------- ------------- ---------------
TOTAL INVESTMENTS AT VALUE... 310,993,538 439,124,917 283,986,031 246,354,082 1,830,417,018
Collateral for securities
loaned (Notes 2 and 6)... 40,353,991 47,785,832 35,662,519 27,776,778 170,332,749
Receivable from daily
variation margin......... - - - - 474,950
Receivable for investments
sold..................... - - - - 122,435
Receivable for dividends, and
interest and other
receivables.............. 4,077,055 5,159,099 997,323 3,197,599 3,005,438
Organization costs, net of
amortization (Note 2).... 6,719 6,672 6,672 - 2,749
------------- ------------- ------------- ------------- ---------------
TOTAL ASSETS.................. 355,431,303 492,076,520 320,652,545 277,328,459 2,004,355,339
------------- ------------- ------------- ------------- ---------------
LIABILITIES
Payable for investments
purchased................ 5,718,843 17,660,615 - 6,849,264 3,105,409
Payable for securities loaned
(Notes 2 and 6).......... 40,353,991 47,785,832 35,662,519 27,776,778 170,332,749
Payable for forward foreign
currency contracts....... - - - - -
Payable to custodian (Note
3)....................... 3,908 4,903 3,695 3,345 17,076
Payable to investment adviser
and affiliates (Note
3)....................... 79,024 127,008 84,722 103,546 237,027
Payable to administrator
(Note 3)................. 2,010 2,742 2,472 2,334 4,436
Accrued expenses and other
liabilities.............. 8,768 9,197 6,914 8,678 17,235
------------- ------------- ------------- ------------- ---------------
TOTAL LIABILITIES............. 46,166,544 65,590,297 35,760,322 34,743,945 173,713,932
------------- ------------- ------------- ------------- ---------------
NET ASSETS.................... $ 309,264,759 $426,486,223 $284,892,223 $ 242,584,514 $ 1,830,641,407
------------- ------------- ------------- ------------- ---------------
------------- ------------- ------------- ------------- ---------------
</TABLE>
See Notes to Financial Statements
CORE TRUST (DELAWARE)
41
<PAGE>
MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE SMALL SMALL SMALL
INCOME DISCIPLINED COMPANY CAP COMPANY CAP
EQUITY GROWTH GROWTH INDEX STOCK VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments (Note
2)
Investments at
cost......... $ 1,306,018,686 $ 151,972,731 $ 987,687,972 $ 153,232,133 $ 130,862,157 $ 109,171,495
Repurchase
agreements at
cost......... 27,836,112 1,363,697 63,992,038 - 597,042 1,565,562
Net unrealized
appreciation
(depreciation)... 1,080,143,065 35,589,125 796,442,200 (16,578,172) 3,453,576 14,925,967
--------------- ------------- --------------- ------------- ------------- -------------
TOTAL INVESTMENTS
AT VALUE....... 2,413,997,863 188,925,553 1,848,122,210 136,653,961 134,912,775 125,663,024
Collateral for
securities
loaned (Notes 2
and 6)......... 154,020,259 15,040,148 155,815,110 7,068,031 14,122,412 17,139,329
Receivable from
daily variation
margin......... - - - 40,225 - -
Receivable for
investments
sold........... - - - 392,166 1,146,454 193,217
Receivable for
dividends, and
interest and
other
receivables.... 5,709,009 218,176 376,128 79,012 50,140 25,413
Organization costs,
net of
amortization
(Note 2)....... 8,877 - 8,765 - 1,047 -
--------------- ------------- --------------- ------------- ------------- -------------
TOTAL ASSETS........ 2,573,736,008 204,183,877 2,004,322,213 144,233,395 150,232,828 143,020,983
--------------- ------------- --------------- ------------- ------------- -------------
LIABILITIES
Payable for
investments
purchased...... - - - 369,146 - -
Payable for
securities
loaned (Notes 2
and 6)......... 154,020,259 15,040,148 155,815,110 7,068,031 14,122,412 17,139,329
Payable for forward
foreign
currency
contracts...... - - - - - -
Payable to
custodian (Note
3)............. 22,122 2,858 17,026 2,190 2,198 2,033
Payable to
investment
adviser and
affiliates
(Note 3)....... 1,042,379 145,982 960,099 29,422 106,397 101,865
Payable to
administrator
(Note 3)....... 60,717 2,447 64,825 5,702 627 2,817
Accrued expenses
and other
liabilities.... 12,758 7,779 11,322 12,780 10,667 6,829
--------------- ------------- --------------- ------------- ------------- -------------
TOTAL LIABILITIES... 155,158,235 15,199,214 156,868,382 7,487,271 14,242,301 17,252,873
--------------- ------------- --------------- ------------- ------------- -------------
NET ASSETS.......... $ 2,418,577,773 $ 188,984,663 $ 1,847,453,831 $ 136,746,124 $ 135,990,527 $ 125,768,110
--------------- ------------- --------------- ------------- ------------- -------------
--------------- ------------- --------------- ------------- ------------- -------------
<CAPTION>
SMALL SMALL
COMPANY COMPANY INTERNATIONAL
VALUE GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments (Note
2)
Investments at
cost......... $ 159,815,116 $ 581,814,580 $ 684,495,777 $141,935,384
Repurchase
agreements at
cost......... 2,713,461 26,008,407 - 8,358,679
Net unrealized
appreciation
(depreciation)... 5,579,449 126,503,766 98,322,915 5,209,005
------------- ------------- --------------- -------------
TOTAL INVESTMENTS
AT VALUE....... 168,108,026 734,326,753 782,818,692 155,503,068
Collateral for
securities
loaned (Notes 2
and 6)......... 9,872,873 - 7,961,515 -
Receivable from
daily variation
margin......... - - - -
Receivable for
investments
sold........... 2,836,595 12,738,685 14,722,620 53,625
Receivable for
dividends, and
interest and
other
receivables.... 160,621 192,763 3,883,371 638,085
Organization costs,
net of
amortization
(Note 2)....... 964 979 2,749 -
------------- ------------- --------------- -------------
TOTAL ASSETS........ 180,979,079 747,259,180 809,388,947 156,194,778
------------- ------------- --------------- -------------
LIABILITIES
Payable for
investments
purchased...... 2,312,198 12,941,912 3,649,209 1,449,637
Payable for
securities
loaned (Notes 2
and 6)......... 9,872,873 - 7,961,515 -
Payable for forward
foreign
currency
contracts...... - - 145,345 -
Payable to
custodian (Note
3)............. 2,572 7,494 43,915 6,956
Payable to
investment
adviser and
affiliates
(Note 3)....... 128,852 559,817 263,973 161,722
Payable to
administrator
(Note 3)....... 3,557 29,542 104,065 -
Accrued expenses
and other
liabilities.... 11,329 12,209 15,275 24,333
------------- ------------- --------------- -------------
TOTAL LIABILITIES... 12,331,381 13,550,974 12,183,297 1,642,648
------------- ------------- --------------- -------------
NET ASSETS.......... $ 168,647,698 $ 733,708,206 $ 797,205,650 $154,552,130
------------- ------------- --------------- -------------
------------- ------------- --------------- -------------
</TABLE>
CORE TRUST (DELAWARE)
42
<PAGE>
STATEMENTS OF OPERATIONS
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED
STABLE FIXED POSITIVE STRATEGIC
INCOME INCOME RETURN BOND VALUE BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.............. $ - $ - $ - $ - $ 21,699,973
Interest income.............. 16,518,500 24,695,129 13,813,058 15,884,448 1,826,068
Securities lending income
(Note 2)................. 55,203 49,876 133,414 35,450 412,363
------------ ------------ ------------ ------------ -------------
TOTAL INVESTMENT INCOME....... 16,573,703 24,745,005 13,946,472 15,919,898 23,938,404
------------ ------------ ------------ ------------ -------------
EXPENSES
Advisory (Note 3)............ 864,254 1,307,275 871,345 1,203,467 2,351,029
Administration (Note 3)...... 144,042 186,754 124,478 120,347 783,676
Custody (Note 3)............. 43,808 52,351 39,896 39,069 171,735
Accounting (Note 3).......... 93,500 87,500 62,000 83,500 153,500
Legal........................ 1,054 1,379 921 802 5,734
Audit........................ 17,728 18,207 17,233 15,500 36,331
Trustees..................... 549 707 472 466 2,934
Pricing...................... 6,413 7,116 348 5,662 28,971
Amortization of organization
costs (Note 2)........... 2,232 2,220 2,220 - 6,072
Miscellaneous................ 1,504 1,900 1,263 1,280 35,927
------------ ------------ ------------ ------------ -------------
TOTAL EXPENSES................ 1,175,084 1,665,409 1,120,176 1,470,093 3,575,909
Fees waived (Note 4)........ (142,032) (184,012) (122,006) (118,013) (779,240)
------------ ------------ ------------ ------------ -------------
NET EXPENSES.................. 1,033,052 1,481,397 998,170 1,352,080 2,796,669
------------ ------------ ------------ ------------ -------------
NET INVESTMENT INCOME
(LOSS).................... 15,540,651 23,263,608 12,948,302 14,567,818 21,141,735
------------ ------------ ------------ ------------ -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) from
Securities................. 206,974 1,034,541 14,832,978 21,552 21,545,068
Foreign currency
transactions........... - - - - -
Financial futures
transactions........... - - - - 4,808,254
------------ ------------ ------------ ------------ -------------
Net Realized Gain (Loss) from
Investments.............. 206,974 1,034,541 14,832,978 21,552 26,353,322
Net Change in Unrealized
Appreciation
(Depreciation) of
Securities................. (1,386,571) (12,930,678) (13,325,007) (6,494,735) 248,662,572
Foreign currency
transactions........... - - - - -
Financial futures
transactions........... - - - - (1,352,724)
------------ ------------ ------------ ------------ -------------
Net Change in Unrealized
Appreciation
(Depreciation) of
Investments.............. (1,386,571) (12,930,678) (13,325,007) (6,494,735) 247,309,848
------------ ------------ ------------ ------------ -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS............... (1,179,597) (11,896,137) 1,507,971 (6,473,183) 273,663,170
------------ ------------ ------------ ------------ -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ $ 14,361,054 $11,367,471 $14,456,273 $ 8,094,635 $ 294,804,905
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
(a) Net of foreign withholding
taxes of $2,251,666
(b) Net of foreign withholding
taxes of $175,078
(c) Beginnning of period,
February 12, 1999
</TABLE>
See Notes to Financial Statements
CORE TRUST (DELAWARE)
43
<PAGE>
FOR THE YEAR ENDED MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME DISCIPLINED LARGE COMPANY SMALL CAP SMALL COMPANY SMALL CAP
EQUITY GROWTH GROWTH INDEX STOCK VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.............. $ 41,679,387 $ 1,604,613 $ 5,071,653 $ 965,070 $ 1,083,770 $ 533,700
Interest income.............. 2,004,284 195,273 1,723,786 426,748 602,247 329,352
Securities lending income
(Note 2)................. 286,152 44,687 399,953 66,961 54,948 52,810
-------------- -------------- ------------- -------------- ------------- --------------
TOTAL INVESTMENT INCOME....... 43,969,823 1,844,573 7,195,392 1,458,779 1,740,965 915,862
-------------- -------------- ------------- -------------- ------------- --------------
EXPENSES
Advisory (Note 3)............ 10,582,022 1,481,103 9,043,943 303,388 1,455,580 1,021,928
Administration (Note 3)...... 1,058,202 82,284 695,688 60,678 80,866 53,786
Custody (Note 3)............. 226,640 29,685 154,138 23,188 29,113 21,017
Accounting (Note 3).......... 84,500 67,500 81,500 146,500 71,500 64,000
Legal........................ 7,832 518 4,925 407 765 357
Audit........................ 33,176 14,649 25,506 15,350 22,815 14,625
Trustees..................... 4,025 299 2,528 232 342 201
Pricing...................... 3,035 2,338 2,252 34,335 4,717 3,458
Amortization of organization
costs (Note 2)........... 2,964 - 2,916 - 2,088 -
Miscellaneous................ 10,424 799 5,914 2,948 854 506
-------------- -------------- ------------- -------------- ------------- --------------
TOTAL EXPENSES................ 12,012,820 1,679,175 10,019,310 587,026 1,668,640 1,179,878
Fees waived (Note 4)........ (425,107) (79,837) (137,320) (54,976) (80,239) (50,969)
-------------- -------------- ------------- -------------- ------------- --------------
NET EXPENSES.................. 11,587,713 1,599,338 9,881,990 532,050 1,588,401 1,128,909
-------------- -------------- ------------- -------------- ------------- --------------
NET INVESTMENT INCOME
(LOSS).................... 32,382,110 245,235 (2,686,598) 926,729 152,564 (213,047)
-------------- -------------- ------------- -------------- ------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) from
Securities................. 10,703,154 (3,141,344) 181,443,136 2,836,817 (44,032,289) (30,465,857)
Foreign currency
transactions........... - - - - - -
Financial futures
transactions........... - - - (368,383) - -
-------------- -------------- ------------- -------------- ------------- --------------
Net Realized Gain (Loss) from
Investments.............. 10,703,154 (3,141,344) 181,443,136 2,468,434 (44,032,289) (30,465,857)
Net Change in Unrealized
Appreciation
(Depreciation) of
Securities................. 273,274,958 24,845,328 267,110,572 (10,222,537) (12,472,166) 9,548,982
Foreign currency
transactions........... - - - - - -
Financial futures
transactions........... - - - 621,911 - -
-------------- -------------- ------------- -------------- ------------- --------------
Net Change in Unrealized
Appreciation
(Depreciation) of
Investments.............. 273,274,958 24,845,328 267,110,572 (9,600,626) (12,472,166) 9,548,982
-------------- -------------- ------------- -------------- ------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS............... 283,978,112 21,703,984 448,553,708 (7,132,192) (56,504,455) (20,916,875)
-------------- -------------- ------------- -------------- ------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ $ 316,360,222 $ 21,949,219 $445,867,110 $ (6,205,463) $(56,351,891) $ (21,129,922)
-------------- -------------- ------------- -------------- ------------- --------------
-------------- -------------- ------------- -------------- ------------- --------------
(a) Net of foreign withholding
taxes of $2,251,666
(b) Net of foreign withholding
taxes of $175,078
(c) Beginnning of period,
February 12, 1999
<CAPTION>
SMALL INTER-
COMPANY SMALL COMPANY NATIONAL
VALUE GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(c)
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.............. $ 2,218,558 $ 3,134,738 $ 12,099,251(a) $ 1,089,495(b)
Interest income.............. 270,560 2,205,073 4,278,287 393,937
Securities lending income
(Note 2)................. 40,894 - 261,711 -
------------ ------------- ------------- -------------
TOTAL INVESTMENT INCOME....... 2,530,012 5,339,811 16,639,249 1,483,432
------------ ------------- ------------- -------------
EXPENSES
Advisory (Note 3)............ 1,297,868 6,579,692 3,937,758 536,814
Administration (Note 3)...... 72,104 365,538 1,312,586 22,367
Custody (Note 3)............. 26,631 88,108 562,901 27,215
Accounting (Note 3).......... 74,500 88,500 129,500 29,286
Legal........................ 547 2,854 6,556 8,173
Audit........................ 21,572 26,633 38,507 20,000
Trustees..................... 277 1,450 1,695 3,385
Pricing...................... 5,468 5,701 41,274 885
Amortization of organization
costs (Note 2)........... 1,920 1,944 6,072 -
Miscellaneous................ 710 3,620 4,507 179
------------ ------------- ------------- -------------
TOTAL EXPENSES................ 1,501,597 7,164,040 6,041,356 648,304
Fees waived (Note 4)........ (68,547) (1,559) (717,860) (22,367)
------------ ------------- ------------- -------------
NET EXPENSES.................. 1,433,050 7,162,481 5,323,496 625,937
------------ ------------- ------------- -------------
NET INVESTMENT INCOME
(LOSS).................... 1,096,962 (1,822,670) 11,315,753 857,495
------------ ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) from
Securities................. (4,559,162) (77,753,826) 87,310,735 (121,711)
Foreign currency
transactions........... - - (3,237,271) 1,902
Financial futures
transactions........... - - - -
------------ ------------- ------------- -------------
Net Realized Gain (Loss) from
Investments.............. (4,559,162) (77,753,826) 84,073,464 (119,809)
Net Change in Unrealized
Appreciation
(Depreciation) of
Securities................. (9,541,409) (15,097,262) (104,592,618) 5,209,005
Foreign currency
transactions........... - - (1,919,141) (12,932)
Financial futures
transactions........... - - - -
------------ ------------- ------------- -------------
Net Change in Unrealized
Appreciation
(Depreciation) of
Investments.............. (9,541,409) (15,097,262) (106,511,759) 5,196,073
------------ ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS............... (14,100,571) (92,851,088) (22,438,295) 5,076,264
------------ ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ $(13,003,609) $(94,673,758) $(11,122,542) $ 5,933,759
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
(a) Net of foreign withholding
taxes of $2,251,666
(b) Net of foreign withholding
taxes of $175,078
(c) Beginnning of period,
February 12, 1999
</TABLE>
CORE TRUST (DELAWARE)
44
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC
STABLE MANAGED FIXED POSITIVE VALUE
INCOME INCOME RETURN BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, MAY 31, 1997...... $ - $ - $ - $ - $ 455,992,618
------------- ------------- ------------- ------------- ---------------
OPERATIONS
Net investment income
(loss)................... 13,556,855 18,213,362 11,929,000 7,290,368 18,212,835
Net realized gain (loss) from
investments.............. 423,040 2,891,576 6,562,062 67,326 40,577,843
Net change in unrealized
appreciation
(depreciation) of
investments.............. 333,836 5,029,200 13,771,972 1,829,598 232,315,725
------------- ------------- ------------- ------------- ---------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ 14,313,731 26,134,138 32,263,034 9,187,292 291,106,403
------------- ------------- ------------- ------------- ---------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 329,276,657 374,891,352 255,480,588 254,050,881 791,000,962
Withdrawals.................. (84,881,467) (65,362,303) (63,633,906) (26,360,998) (152,820,060)
------------- ------------- ------------- ------------- ---------------
Net increase from
transactions in
investors' beneficial
interest................. 244,395,190 309,529,049 191,846,682 227,689,883 638,180,902
------------- ------------- ------------- ------------- ---------------
NET INCREASE IN NET ASSETS.... 258,708,921 335,663,187 224,109,716 236,877,175 929,287,305
------------- ------------- ------------- ------------- ---------------
NET ASSETS, MAY 31, 1998...... 258,708,921 335,663,187 224,109,716 236,877,175 1,385,279,923
------------- ------------- ------------- ------------- ---------------
OPERATIONS
Net investment income
(loss)................... 15,540,651 23,263,608 12,948,302 14,567,818 21,141,735
Net realized gain (loss) from
investments.............. 206,974 1,034,541 14,832,978 21,552 26,353,322
Net change in unrealized
appreciation
(depreciation) of
investments.............. (1,386,571) (12,930,678) (13,325,007) (6,494,735) 247,309,848
------------- ------------- ------------- ------------- ---------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ 14,361,054 11,367,471 14,456,273 8,094,635 294,804,905
------------- ------------- ------------- ------------- ---------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 169,711,858 131,264,423 99,726,877 54,726,275 338,399,367
Withdrawals.................. (133,517,074) (51,808,858) (53,400,643) (57,113,571) (187,842,788)
------------- ------------- ------------- ------------- ---------------
Net increase (decrease) from
transactions in
investors' beneficial
interest................. 36,194,784 79,455,565 46,326,234 (2,387,296) 150,556,579
------------- ------------- ------------- ------------- ---------------
NET INCREASE IN NET ASSETS.... 50,555,838 90,823,036 60,782,507 5,707,339 445,361,484
------------- ------------- ------------- ------------- ---------------
NET ASSETS, MAY 31, 1999...... $ 309,264,759 $426,486,223 $284,892,223 $ 242,584,514 $ 1,830,641,407
------------- ------------- ------------- ------------- ---------------
------------- ------------- ------------- ------------- ---------------
(a) Beginning of Period....... Jun 1, 1997 Jun 1, 1997 Jun 1, 1997 Oct 1, 1997 Jun 1, 1997
</TABLE>
See Notes to Financial Statements
CORE TRUST (DELAWARE)
45
<PAGE>
FOR THE YEARS OR PERIODS (a) ENDED MAY 31, 1998 AND MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE SMALL
INCOME DISCIPLINED COMPANY SMALL CAP COMPANY
EQUITY GROWTH GROWTH INDEX STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, MAY 31, 1997...... $ - $ - $ - $ - $ -
--------------- ------------- --------------- ------------- --------------
OPERATIONS
Net investment income
(loss)................... 27,302,997 418,520 (254,889) 190,716 (903,690)
Net realized gain (loss) from
investments.............. 21,124,145 (4,466,320) 103,483,455 (31,860) 75,015,565
Net change in unrealized
appreciation
(depreciation) of
investments.............. 331,743,519 11,172,163 175,686,535 (6,730,568) (41,102,519)
--------------- ------------- --------------- ------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ 380,170,661 7,124,363 278,915,101 (6,571,712) 33,009,356
--------------- ------------- --------------- ------------- --------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 1,656,178,203 127,393,238 1,039,939,974 130,179,195 462,417,317
Withdrawals.................. (80,546,731) (3,752,382) (236,856,954) (1,115,038) (270,557,970)
--------------- ------------- --------------- ------------- --------------
Net increase from
transactions in
investors' beneficial
interest................. 1,575,631,472 123,640,856 803,083,020 129,064,157 191,859,347
--------------- ------------- --------------- ------------- --------------
NET INCREASE IN NET ASSETS.... 1,955,802,133 130,765,219 1,081,998,121 122,492,445 224,868,703
--------------- ------------- --------------- ------------- --------------
NET ASSETS, MAY 31, 1998...... 1,955,802,133 130,765,219 1,081,998,121 122,492,445 224,868,703
--------------- ------------- --------------- ------------- --------------
OPERATIONS
Net investment income
(loss)................... 32,382,110 245,235 (2,686,598) 926,729 152,564
Net realized gain (loss) from
investments.............. 10,703,154 (3,141,344) 181,443,136 2,468,434 (44,032,289)
Net change in unrealized
appreciation
(depreciation) of
investments.............. 273,274,958 24,845,328 267,110,572 (9,600,626) (12,472,166)
--------------- ------------- --------------- ------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ 316,360,222 21,949,219 445,867,110 (6,205,463) (56,351,891)
--------------- ------------- --------------- ------------- --------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 299,593,165 56,556,716 761,913,767 38,398,557 98,950,579
Withdrawals.................. (153,177,747) (20,286,491) (442,325,167) (17,939,415) (131,476,864)
--------------- ------------- --------------- ------------- --------------
Net increase (decrease) from
transactions in
investors' beneficial
interest................. 146,415,418 36,270,225 319,588,600 20,459,142 (32,526,285)
--------------- ------------- --------------- ------------- --------------
NET INCREASE IN NET ASSETS.... 462,775,640 58,219,444 765,455,710 14,253,679 (88,878,176)
--------------- ------------- --------------- ------------- --------------
NET ASSETS, MAY 31, 1999...... $ 2,418,577,773 $ 188,984,663 $ 1,847,453,831 $ 136,746,124 $ 135,990,527
--------------- ------------- --------------- ------------- --------------
--------------- ------------- --------------- ------------- --------------
(a) Beginning of Period....... Jun 1, 1997 Oct 1, 1997 Jun 1, 1997 Apr 9, 1998 Jun 1, 1997
<CAPTION>
SMALL SMALL INTER-
SMALL CAP COMPANY COMPANY NATIONAL
VALUE VALUE GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, MAY 31, 1997...... $ - $ - $ - $ 539,296,879 $ -
------------- ------------- -------------- -------------- --------------
OPERATIONS
Net investment income
(loss)................... (103,303) 1,194,736 (3,539,839) 10,517,288 -
Net realized gain (loss) from
investments.............. (2,328,929) 49,410,647 157,449,385 18,785,716 -
Net change in unrealized
appreciation
(depreciation) of
investments.............. 5,377,263 1,904,286 (8,948,010) 78,979,779 -
------------- ------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ 2,945,031 52,509,669 144,961,536 108,282,783 -
------------- ------------- -------------- -------------- --------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 109,215,794 182,821,915 893,179,444 406,915,054 -
Withdrawals.................. (7,890,976) (87,806,139) (144,077,860) (103,309,130) -
------------- ------------- -------------- -------------- --------------
Net increase from
transactions in
investors' beneficial
interest................. 101,324,818 95,015,776 749,101,584 303,605,924 -
------------- ------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS.... 104,269,849 147,525,445 894,063,120 411,888,707 -
------------- ------------- -------------- -------------- --------------
NET ASSETS, MAY 31, 1998...... 104,269,849 147,525,445 894,063,120 951,185,586 -
------------- ------------- -------------- -------------- --------------
OPERATIONS
Net investment income
(loss)................... (213,047) 1,096,962 (1,822,670) 11,315,753 857,495
Net realized gain (loss) from
investments.............. (30,465,857) (4,559,162) (77,753,826) 84,073,464 (119,809)
Net change in unrealized
appreciation
(depreciation) of
investments.............. 9,548,982 (9,541,409) (15,097,262) (106,511,759) 5,196,073
------------- ------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................ (21,129,922) (13,003,609) (94,673,758) (11,122,542) 5,933,759
------------- ------------- -------------- -------------- --------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS
Contributions (Note 8)....... 56,411,434 58,867,576 87,802,760 138,115,465 154,175,553
Withdrawals.................. (13,783,251) (24,741,714) (153,483,916) (280,972,859) (5,557,182)
------------- ------------- -------------- -------------- --------------
Net increase (decrease) from
transactions in
investors' beneficial
interest................. 42,628,183 34,125,862 (65,681,156) (142,857,394) 148,618,371
------------- ------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS.... 21,498,261 21,122,253 (160,354,914) (153,979,936) 154,552,130
------------- ------------- -------------- -------------- --------------
NET ASSETS, MAY 31, 1999...... $ 125,768,110 $ 168,647,698 $ 733,708,206 $ 797,205,650 $ 154,552,130
------------- ------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- --------------
(a) Beginning of Period....... Oct 1, 1997 Jun 1, 1997 Jun 1, 1997 Jun 1, 1997 Feb 12, 1999
</TABLE>
CORE TRUST (DELAWARE)
46
<PAGE>
FINANCIAL HIGHLIGHTS
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS(a)
-------------------------------------------
NET
INVESTMENT PORTFOLIO
INCOME NET GROSS TURNOVER
(LOSS) EXPENSES EXPENSES(c) RATE
---------- ----------- -------------- --------
<S> <C> <C> <C> <C>
STABLE INCOME PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 5.39% 0.36% 0.41% 29.46%
June 1, 1997 (b) to May 31, 1998...... 5.96% 0.37% 0.43% 37.45%
MANAGED FIXED INCOME PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 6.23% 0.40% 0.45% 50.87%
June 1, 1997 (b) to May 31, 1998...... 6.53% 0.41% 0.46% 91.59%
POSITIVE RETURN BOND PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 5.20% 0.40% 0.45% 130.81%
June 1, 1997 (b) to May 31, 1998...... 5.74% 0.41% 0.47% 68.18%
STRATEGIC VALUE BOND PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 6.05% 0.56% 0.61% 48.43%
October 1, 1997 (b) to May 31, 1998... 6.06% 0.58% 0.62% 134.56%
INDEX PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 1.35% 0.18% 0.23% 3.61%
June 1, 1997 to May 31, 1998.......... 1.60% 0.19% 0.24% 6.68%
June 1, 1996 to May 31, 1997.......... 2.03% 0.11% 0.31% 7.29%
November 1, 1995 to May 31, 1996...... 2.35% 0.17% 0.32% 7.21%
November 11, 1994 (b) to October 31,
1995................................ 2.42% 0.17% 0.33% 7.73%
INCOME EQUITY PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 1.53% 0.55% 0.57% 3.21%
June 1, 1997 (b) to May 31, 1998...... 1.76% 0.52% 0.57% 3.49%
DISCIPLINED GROWTH PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 0.15% 0.97% 1.02% 90.39%
October 1, 1997 (b) to May 31, 1998... 0.55% 1.01% 1.06% 68.08%
LARGE COMPANY GROWTH PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... (0.19%) 0.71% 0.72% 28.15%
June 1, 1997 (b) to May 31, 1998...... (0.03%) 0.67% 0.73% 13.03%
SMALL CAP INDEX PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 0.76% 0.44% 0.48% 26.48%
April 9, 1998 (b) to May 31, 1998..... 1.04% 0.52% 0.54% 2.25%
SMALL COMPANY STOCK PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 0.09% 0.98% 1.03% 183.61%
June 1, 1997 (b) to May 31, 1998...... (0.27%) 0.95% 1.01% 166.16%
SMALL CAP VALUE PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... (0.20%) 1.05% 1.10% 107.50%
October 1, 1997 (b) to May 31, 1998... (0.17%) 1.08% 1.13% 79.43%
SMALL COMPANY VALUE PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 0.76% 0.99% 1.04% 96.62%
June 1, 1997 (b) to May 31, 1998...... 0.69% 0.99% 1.04% 99.08%
SMALL COMPANY GROWTH PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... (0.25%) 0.98% 0.98% 153.90%
June 1, 1997 (b) to May 31, 1998...... (0.41%) 0.93% 0.98% 123.36%
INTERNATIONAL PORTFOLIO
- - -------------------------------------------------------------------------------------------------
June 1, 1998 to May 31, 1999.......... 1.29% 0.61% 0.69% 93.64%
June 1, 1997 to May 31, 1998.......... 1.23% 0.66% 0.68% 36.96%
June 1, 1996 to May 31, 1997.......... 1.53% 0.19% 0.67% 53.32%
November 1, 1995 to May 31, 1996...... 1.75% 0.23% 0.68% 17.58%
November 11, 1994 (b) to October 31,
1995................................ 1.94% 0.25% 0.70% 28.19%
INTERNATIONAL EQUITY PORTFOLIO
- - -------------------------------------------------------------------------------------------------
February 12, 1999 (b) to May 31,
1999................................ 1.92% 1.40% 1.45% 12.46%
</TABLE>
- - ----------------------------------
(a) Ratios for periods of less than one year are annualized.
(b) Commencement of operations.
(c) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expense ratio
in the absence of any waivers and reimbursements (Note 4).
See Notes to Financial Statements
CORE TRUST (DELAWARE)
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - ----------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Core Trust (Delaware) ("Core Trust") is organized as a Delaware business trust
and is registered as an open-end management investment company under the
Investment Company Act of 1940 (the "Act"). Core Trust currently has twenty-two
separate investment portfolios. These financial statements relate to fifteen
diversified portfolios (individually, a "Portfolio" and, collectively, the
"Portfolios"), which commenced operations on the following dates:
<TABLE>
<S> <C>
Stable Income Portfolio................. June 1, 1997
Managed Fixed Income Portfolio.......... June 1, 1997
Positive Return Bond Portfolio.......... June 1, 1997
Strategic Value Bond Portfolio.......... October 1, 1997
Index Portfolio......................... November 11, 1994
Income Equity Portfolio................. June 1, 1997
Disciplined Growth Portfolio............ October 1, 1997
Large Company Growth Portfolio.......... June 1, 1997
Small Cap Index Portfolio............... April 9, 1998
Small Company Stock Portfolio........... June 1, 1997
Small Cap Value Portfolio............... October 1, 1997
Small Company Value Portfolio........... June 1, 1997
Small Company Growth Portfolio.......... June 1, 1997
International Portfolio................. November 11, 1994
International Equity Portfolio.......... February 12, 1999
</TABLE>
Interests in the Portfolios are sold in private placement transactions without
any sales charges to qualified investors, including open-end management
investment companies.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates. The following summarizes the significant accounting policies of the
Portfolios:
SECURITIES VALUATION---Each Portfolio determines its net asset value at 4:00 PM,
Eastern Time, on each Portfolio business day. Short-term securities that mature
in sixty days or less are valued at amortized cost. Equity securities for which
market quotations are readily available are valued using the last reported sales
price provided by independent pricing services. If no sales are reported, the
mean of the last bid and ask price is used. If no mean price is available, the
last bid price is used. Fixed income and other securities, for which market
quotations are readily available, are valued using the mean of the last bid and
ask price provided by independent pricing services. If no mean price is
available, the last bid price is used. In the absence of readily available
market quotations, securities are valued at fair value determined in accordance
with procedures adopted by the Board of Trustees. As of May 31, 1999, Strategic
Value Bond Portfolio held one fair valued security with an aggregate market
value of $847,167 representing 0.3% of the total net assets of the Portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME---Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date. With respect to dividends on foreign securities, certain instances may
arise where a Portfolio is not notified of a dividend until after the ex-
dividend date has passed. In these instances, a dividend is recorded as soon as
the Portfolio is informed of the dividend. Dividend income is recorded net of
unrecoverable withholding tax. Interest income is recorded on the accrual basis
and includes amortization of premiums and accretion of discounts. Identified
cost of investments sold is used to determine realized gains and losses for both
financial statement and federal income tax purposes. Foreign dividend and
interest income amounts and realized capital gains and losses are converted to
U.S. dollars using foreign exchange rates in effect at the date of the
transactions.
Foreign currency amounts are translated into U.S. dollars at the mean of the bid
and ask price of such currencies against U.S. dollars as follows: (i) assets and
liabilities at the rate of exchange at the end of the respective period; and
(ii) purchases and sales of securities and income and expenses at the rate of
exchange prevailing on the dates of such transactions. The portion of the
results of operations arising from changes in the exchange rates and the portion
due to fluctuations arising from changes in the market prices of securities are
not isolated. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
International Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect against the effect on the U.S. dollar value of the
underlying portfolio of possible adverse movements in foreign exchange rates.
Risks associated with such contracts include the movement in value of the
foreign currency relative to the U.S. dollar and the ability of the counterparty
to perform. Fluctuations in the value of such contracts are recorded as
unrealized gain or loss; realized gain or loss includes net gain or loss on
contracts that have terminated by settlement or by the Portfolio entering into
offsetting commitments.
CORE TRUST (DELAWARE)
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ----------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FUTURES CONTRACTS--Each Portfolio may invest in futures contracts to enhance
return and hedge against a decline in the value of securities. A futures
contract is an agreement between two parties to buy and sell a security at a set
price on a future date. Upon entering into such a contract, the Portfolio is
required to pledge to the broker an amount of cash or securities equal to the
minimum "initial margin" requirements of the exchange on which the contract is
traded. Pursuant to the contract, the Portfolio agrees to receive from, or pay
to, the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Portfolio as unrealized gain or loss. When the contract is
closed, the Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. The potential risk to the Portfolio is that the change in
value of the underlying securities may not correlate to the change in value of
the contracts.
FEDERAL TAXES--The Portfolios are not required to pay federal income taxes on
their net investment income and net capital gain as they are treated as
partnerships for federal income tax purposes. All interest, dividends, gain and
loss of the Portfolios are deemed to have been "passed through" to the
interestholders in proportion to their holdings of the Portfolios regardless of
whether such interest, dividends or gain have been distributed by the
Portfolios.
EXPENSE ALLOCATION--Core Trust accounts separately for the assets and
liabilities and operations of each Portfolio. Expenses that are directly
attributable to more than one Portfolio are allocated among the respective
Portfolios.
ORGANIZATION COSTS--The costs incurred by certain Portfolios in connection with
their organization have been capitalized and are being amortized using the
straight-line method over a five-year period beginning on the commencement of
the Portfolios' operations.
REPURCHASE AGREEMENTS--Each Portfolio may invest in repurchase agreements. The
Portfolios, through their custodian, receive delivery of the underlying
collateral, whose market value must always exceed the repurchase price. In the
event of default, a Portfolio may have difficulties with the disposition of the
collateral.
SECURITY LOANS--The Portfolios may receive fees or retain a portion of interest
on the investment securities or cash received as collateral for lending
securities. A Portfolio also continues to receive interest or dividends on the
securities loaned. Security loans are secured by collateral whose market value
must always exceed the market value of the securities loaned plus accrued
interest. Gain or loss in the market price of the securities loaned that may
occur during the term of the loan are reflected in the value of the Portfolio.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER--The investment adviser of each Portfolio, except
International Portfolio and International Equity Portfolio, is Norwest
Investment Management, Inc. ("Adviser"), a wholly owned subsidiary of Norwest
Bank Minnesota, N.A. ("Norwest"). Norwest is a subsidiary of Wells Fargo &
Company. The investment adviser of International Portfolio is Schroder Capital
Management International Inc. ("Schroder"). Schroder is a wholly owned U.S.
subsidiary of Schroder Inc., which is a wholly owned U.S. subsidiary of Schroder
PLC. The investment adviser of International Equity Portfolio of Core Trust is
Wells Fargo Bank, N.A. ("WFB"). WFB is a wholly owned subsidiary of Wells Fargo
& Company. The Adviser and WFB have retained the services of certain of their
affiliates as investment subadvisers (Galliard Capital Management, Inc.,
Peregrine Capital Management, Inc., Smith Asset Management Group, L.P. and Wells
Capital Management Inc. ("WCM")) on selected Portfolios. The fees related to
subadvisor services are borne directly by the Adviser and WFB and do not
increase the overall fees paid by the Portfolios to the Adviser and WFB. The
investment advisory fee and the associated subadviser is as follows:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY FEE SUBADVISER
-------------- ----------------------------------------
<S> <C> <C>
Stable Income Portfolio................. 0.30% Galliard Capital Management, Inc.
Managed Fixed Income Portfolio.......... 0.35% Galliard Capital Management, Inc.
Positive Return Bond Portfolio.......... 0.35% Peregrine Capital Management, Inc.
Strategic Value Bond Portfolio.......... 0.50% Galliard Capital Management, Inc.
Index Portfolio......................... 0.15% -
Income Equity Portfolio................. 0.50% -
Disciplined Growth Portfolio............ 0.90% Smith Asset Management Group, L.P.
Large Company Growth Portfolio.......... 0.65% Peregrine Capital Management, Inc.
Small Cap Index Portfolio............... 0.25% -
Small Company Stock Portfolio........... 0.90% Wells Capital Management Inc.
Small Cap Value Portfolio............... 0.95% Smith Asset Management Group, L.P.
Small Company Value Portfolio........... 0.90% Peregrine Capital Management, Inc.
Small Company Growth Portfolio.......... 0.90% Peregrine Capital Management, Inc.
International Portfolio................. 0.45% -
International Equity Portfolio.......... 1.20% Wells Capital Management Inc.
</TABLE>
CORE TRUST (DELAWARE)
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ----------------------------------------------------------------------------
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
ADMINISTRATION AND OTHER SERVICE PROVIDERS--Forum Administrative Services, LLC
("FAdS") is the administrator to Core Trust and receives a fee with respect to
each Portfolio (other than International Portfolio) at an annual rate of 0.05%
of each Portfolio's average daily net assets. With respect to International
Portfolio, FAdS receives a fee at an annual rate of 0.15% of the Portfolio's
average daily net assets.
Norwest serves as the custodian for each Portfolio and may appoint subcustodians
for foreign securities and other assets held in foreign countries. For its
custody services, Norwest receives a fee with respect to each Portfolio (other
than International Portfolio and International Equity Portfolio) at an annual
rate of 0.02% of the first $100 million of each Portfolio's average daily net
assets, declining to 0.01% of the average daily net assets of each Portfolio in
excess of $200 million. With respect to International Portfolio and
International Equity Portfolio, Norwest receives a fee at an annual rate of
0.07% of the Portfolio's average daily net assets. Norwest also receives
transaction fees for providing services in connection with the securities
lending program.
Forum Accounting Services, LLC, an affiliate of FAdS, provides portfolio
accounting and interestholder recordkeeping services to each Portfolio.
NOTE 4. WAIVERS
For the year ended May 31, 1999, fees waived by the Portfolios' service
providers were as follows:
<TABLE>
<CAPTION>
FEES WAIVED
BY FAdS
--------------
<S> <C>
Stable Income Portfolio................. $ 142,032
Managed Fixed Income Portfolio.......... 184,012
Positive Return Bond Portfolio.......... 122,006
Strategic Value Bond Portfolio.......... 118,013
Index Portfolio......................... 779,240
Income Equity Portfolio................. 425,107
Disciplined Growth Portfolio............ 79,837
Large Company Growth Portfolio.......... 137,320
Small Cap Index Portfolio............... 54,976
Small Company Stock Portfolio........... 80,239
Small Cap Value Portfolio............... 50,969
Small Company Value Portfolio........... 68,547
Small Company Growth Portfolio.......... 1,559
International Equity Portfolio.......... 22,637
</TABLE>
Schroder waived investment advisory fees of $717,860 for International
Portfolio.
NOTE 5. SECURITIES TRANSACTIONS
The following table presents the cost of purchases and proceeds from sales
(including maturities) of securities (excluding short-term investments) during
the year ended May 31, 1999, as well as the federal tax cost basis of
investments and related gross unrealized appreciation and depreciation for
federal income tax purposes as of May 31, 1999: <TABLE> <CAPTION>
COST OF PROCEEDS TAX UNREALIZED UNREALIZED
PURCHASES FROM SALES COST BASIS APPRECIATION DEPRECIATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Stable Income Portfolio........................... $ 219,483,063 $ 79,916,965 $ 312,040,673 $ 750,169 $ 1,797,304
Managed Fixed Income Portfolio.................... 315,387,092 187,876,028 446,800,000 1,694,969 9,370,052
Positive Return Bond Portfolio.................... 245,376,726 242,922,012 285,965,298 25,332 2,004,599
Strategic Value Bond Portfolio.................... 138,548,332 111,261,550 251,237,870 657,452 5,541,240
Index Portfolio................................... 208,621,074 55,255,404 1,059,195,734 807,923,181 36,701,897
Income Equity Portfolio........................... 204,190,270 66,188,047 1,333,856,677 1,086,475,233 6,334,047
Disciplined Growth Portfolio...................... 160,928,780 144,621,644 153,336,428 41,280,092 5,690,967
Large Company Growth Portfolio.................... 635,306,952 381,966,535 1,052,935,827 840,873,759 45,687,375
Small Cap Index Portfolio......................... 57,133,442 30,458,668 153,430,358 13,612,528 30,388,924
Small Company Stock Portfolio..................... 279,229,225 302,820,065 132,008,232 12,559,628 9,655,085
Small Cap Value Portfolio......................... 157,962,228 110,659,107 110,737,057 20,533,902 5,607,935
Small Company Value Portfolio..................... 171,376,287 135,736,066 163,694,289 18,185,906 13,772,169
Small Company Growth Portfolio.................... 1,071,763,968 1,150,267,944 611,372,097 146,193,731 23,239,075
International Portfolio........................... 653,087,812 801,606,226 685,926,760 137,043,545 40,152,122
International Equity Portfolio.................... 160,714,572 18,657,476 150,899,606 12,273,025 7,669,562
<CAPTION>
NET
UNREALIZED
APPRECIATION
(DEPRECIATION)
-------------
<S> <C>
Stable Income Portfolio........................... $ (1,047,135)
Managed Fixed Income Portfolio.................... (7,675,083)
Positive Return Bond Portfolio.................... (1,979,267)
Strategic Value Bond Portfolio.................... (4,883,788)
Index Portfolio................................... 771,221,284
Income Equity Portfolio........................... 1,080,141,186
Disciplined Growth Portfolio...................... 35,589,125
Large Company Growth Portfolio.................... 795,186,384
Small Cap Index Portfolio......................... (16,776,396)
Small Company Stock Portfolio..................... 2,904,543
Small Cap Value Portfolio......................... 14,925,967
Small Company Value Portfolio..................... 4,413,737
Small Company Growth Portfolio.................... 122,954,656
International Portfolio........................... 96,891,423
International Equity Portfolio.................... 4,603,463
</TABLE>
CORE TRUST (DELAWARE)
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ----------------------------------------------------------------------------
NOTE 6. PORTFOLIO SECURITIES LOANED
As of May 31, 1999, certain Portfolios had loaned portfolio investments in
return for securities and cash collateral, which were invested in various
short-term fixed income securities. The risks to the Portfolio from securities
lending are that the borower may not provide additional collateral when required
or return the securities when due or when called for by the Portfolio. The value
of the securities on loan and the value of the related collateral were as
follows:
<TABLE>
<CAPTION>
SECURITIES COLLATERAL
------------- -------------
<S> <C> <C>
Stable Income Portfolio................. $ 38,371,174 $ 40,353,991
Managed Fixed Income Portfolio.......... 44,529,691 47,785,832
Positive Return Bond Portfolio.......... 34,456,345 35,662,519
Strategic Value Bond Portfolio.......... 25,745,865 27,776,778
Index Portfolio......................... 158,451,323 170,332,749
Income Equity Portfolio................. 145,615,760 154,020,259
Disciplined Growth Portfolio............ 14,603,027 15,040,148
Large Company Growth Portfolio.......... 147,193,745 155,815,110
Small Cap Index Portfolio............... 6,723,619 7,068,031
Small Company Stock Portfolio........... 12,732,939 14,122,412
Small Cap Value Portfolio............... 16,794,055 17,139,329
Small Company Value Portfolio........... 8,586,566 9,872,873
International Portfolio................. 7,566,480 7,961,515
</TABLE>
NOTE 7. CONCENTRATION OF CREDIT RISK
International Portfolio and International Equity Portfolio invest in countries
which may involve greater risks. The consequences of political, social and
economic events in these markets may have disruptive effects on the market
prices of the Portfolios' investments.
NOTE 8. CONTRIBUTION OF SECURITIES
After the close of business on May 31, 1997, International Portfolio (prior to
June 1, 1997, named International Portfolio II) merged with a former portfolio
of Core Trust. In that transaction, International Portfolio acquired the assets
and assumed the liabilities of the former portfolio in exchange for an interest
in International Portfolio equal in value to the net assets of the former
portfolio. The former portfolio had the same investment objective and investment
policies as International Portfolio. The merger, which was not subject to
interestholder approval, was accomplished without the recognition of gain or
loss. The former portfolio contributed net assets with a value of $232,334,610
and the net assets of International Portfolio immediately after the transaction
were $771,507,344.
Also after the close of business on May 31, 1997, Small Company Portfolio (a
former Portfolio of Core Trust) divided into three portfolios-Small Company
Stock Portfolio, Small Company Growth Portfolio and Small Company Value
Portfolio. The assets of Small Company Portfolio (and the related liabilities)
were divided in accordance with the investment style to which the assets had
been allocated. This transaction, which was not subject to interestholder
approval, was accomplished without the recognition of gain or loss. Small
Company Portfolio's net assets were divided as follows: Small Company Stock
Portfolio, $178,533,353; Small Company Growth Portfolio, $167,525,486; and Small
Company Value Portfolio, $165,287,781.
In connection with the merger and divisions, and the contemporaneous
commencement of operations of certain portfolios on June 1, 1997, certain
investors contributed all or a portion of their net assets to the portfolios
listed in the following table:
<TABLE>
<CAPTION>
INVESTOR CONTRIBUTIONS
-----------------------------
NET UNREALIZED
PORTFOLIO ASSETS GAIN/(LOSS)
- - ---------------------------------------- ------------- -------------
<S> <C> <C>
Stable Income Portfolio................. $ 205,865,654 $ 5,601
Managed Fixed Income Portfolio.......... 186,226,721 229,550
Positive Return Bond Portfolio.......... 186,707,645 (2,426,230)
Index Portfolio......................... 512,437,536 115,520,269
Income Equity Portfolio................. 955,691,053 110,368,720
Large Company Growth Portfolio.......... 615,745,586 276,554,260
Small Company Stock Portfolio........... 355,894,495 50,282,300
Small Company Value Portfolio........... 165,287,781 13,216,619
Small Company Growth Portfolio.......... 756,220,600 150,549,039
International Portfolio................. 232,334,610 33,714,226
</TABLE>
CORE TRUST (DELAWARE)
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- - ----------------------------------------------------------------------------
NOTE 8. CONTRIBUTION OF SECURITIES (CONTINUED)
Additionally, on September 15, 1997, certain investors contributed net assets to
the portfolios listed in the following table:
<TABLE>
<CAPTION>
INVESTOR CONTRIBUTIONS
-----------------------------
NET UNREALIZED
PORTFOLIO ASSETS GAIN
- - ---------------------------------------- ------------- -------------
<S> <C> <C>
Income Equity Portfolio................. $ 477,132,067 $190,138,062
Small Company Stock Portfolio........... 45,144,489 6,745,993
Small Company Growth Portfolio.......... 140,475,014 40,180,322
</TABLE>
NOTE 9. PORTFOLIO REORGANIZATIONS
On April 22, 1999, the Board of Trustees of Core Trust approved the
reorganization of each Portfolio managed by the Adviser (except Money Market
Portfolio, Prime Money Market Portfolio and Small Company Stock Portfolio) or
Schroder (the "Norwest Portfolios") into separate portfolios of Wells Fargo Core
Trust, another open-end registered management investment company. Each Wells
Fargo Core Trust portfolio will have substantially similar investment objectives
and policies as its corresponding Norwest Portfolio. The reorganization is part
of a plan to centralize the management of the Norwest Portfolios and Norwest
Advantage Funds, the principal interestholder, under a common Board of Trustees.
Pursuant to Core Trust's Trust Instrument, the reorganization does not require
interestholder approval.
NOTE 10. CHANGES IN CERTIFYING ACCOUNTANT
On November 10, 1998, PricewaterhouseCoopers LLP ("Coopers") resigned as auditor
for Index Portfolio, Small Company Stock Portfolio, Small Company Value
Portfolio, Small Company Growth Portfolio, and International Portfolio (the
"Portfolios"), five series of Core Trust (Delaware) (the "Trust").
The Board of Trustees accepted the resignation of Coopers and approved KPMG LLP
("KPMG") as the new auditors of the Portfolios at its November 10, 1998 meeting.
The decision to replace Coopers with KPMG was motivated by the fact that KPMG
already serves as independent auditor for sixteen other series of the Trust.
Coopers' principal accountant's report on the Portfolios' financial statements
for the past two fiscal years contained no adverse opinion or disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope or
accounting principles. There were no disagreements with Coopers during the past
two fiscal years, or through the date of its resignation, on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
CORE TRUST (DELAWARE)
52
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SCHEDULES OF INVESTMENTS MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STABLE INCOME PORTFOLIO
- - -----------------------------------------------------------------
ASSET BACKED SECURITIES (23.2%)
3,500,000 Aesop Funding II LLC, Series 1997-1 A1, 6.22% V/R, 10/20/01+ $ 3,527,528
688,314 AFC Home Equity Loan Trust,
Series 1995-2 A1, 7.04% V/R, 7/25/26 691,756
5,000,000 Chase Credit Card Master Trust,
Series 1998-6 A, 5.16% V/R, 9/15/04 5,022,925
5,000,000 Chevy Chase Master Credit Card Trust, Series 1998, Class A, 5.27% V/R, 10/15/06 5,014,675
1,092,924 Commercial Loan Funding Trust, Series I, Class A, 5.20% V/R, 8/15/05+ 1,085,410
3,770,000 Deutsche Floorplan Receivables Master Trust, Series 1996-1, Class A, 5.12% V/R, 10/15/01 3,775,523
2,500,000 Discover Master Card Trust I, Series 1997-4, 4.97% V/R, 4/16/03 2,500,438
4,000,000 DreamWorks Firm Trust, 5.22% V/R, 10/17/05+ 3,992,500
1,500,000 EQCC Home Equity Loan Trust,
Series 1995-3 A4, 7.10%, 2/15/12 1,527,023
4,667,950 EQCC Home Equity Loan Trust,
Series 1998-4 A1F, 5.34% V/R, 1/15/29 4,687,252
168,081 First Merchants Auto Receivables Corp., Series 1996-A, Class A2, 6.70%, 7/17/00+ 168,313
577,382 First Merchants Grantor Trust,
Series 1996-2 A, 6.85%, 11/15/01+ 582,125
5,000,000 First USA Credit Card Master Trust,
Series 1995-5 A, 5.11% V/R, 4/15/03 5,007,225
5,000,000 First USA Credit Card Master Trust,
Series 1999-1 B, 5.30% V/R, 10/19/06 5,005,725
3,500,000 Fremont Small Business Loan Master Trust, Series C, Class A, 5.24% V/R, 5/15/02 3,502,538
2,016,050 Green Tree Financial Corp.,
Series 1993-4 A3, 6.25%, 1/15/19 2,023,882
499,575 Green Tree Financial Corp.,
Series 1994-1 A3, 6.90%, 4/15/19 502,715
4,500,000 Household Consumer Loan Trust,
Series 1997-1, Class A3, 5.25% V/R, 3/15/07 4,483,778
5,000,000 Household Consumer Loan Trust,
Series 1997-2, Class A3, 5.33% V/R, 11/15/07 4,960,156
2,400,000 Keystone Home Improvement Loan Trust, Series 1997-P2, Class IA3, 6.99%, 4/25/14+ 2,401,500
750,000 Loop Funding Master Trust I,
Series 1997-AER, Class B1, 5.37% V/R, 12/26/07+ 745,781
4,500,000 Loop Funding Master Trust I,
Series 1997-A144, Class B1, 5.37% V/R, 12/26/07+ 4,474,688
4,000,000 Premier Auto Trust, Series 1997-1, Class B, 6.55%, 9/6/03 4,046,661
2,308,282 Sequoia Mortgage Trust, Series 2, Class A1, 6.04% V/R, 10/25/24 2,302,511
---------------
TOTAL ASSET BACKED SECURITIES (COST $71,984,589) 72,032,628
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STABLE INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (21.3%)
2,870,836 AMBS, Series CS-1012 1, 7.06% V/R, 7/25/02 $ 2,908,964
1,223,928 DLJ Mortgage Acceptance Corp.,
Series 1998-STF1, Class A1, 5.16% V/R, 2/8/00+ 1,223,090
5,000,000 FHLMC, Series 2091 NA, 5.50%, 3/15/04 4,950,925
5,000,000 FHLMC, Series 2091 PC, 6.00%, 6/15/16 4,903,775
3,635,838 FNMA, Series 1994 M2 A, 6.63% V/R, 2/25/01 3,663,889
7,100,000 FNMA, Series 1999-19 LA, 6.50%, 4/1/14 7,136,241
6,200,000 FNMA, Series 1999-19 PB, 6.00%, 4/1/29 6,158,987
2,305,724 Ford Motor Credit Auto Owner Trust,
Series 1994 X, Class A2, 7.78% V/R, 1/25/25 2,399,069
2,877,411 GMAC, Series 1996 C1 A1, 5.73% V/R, 10/16/28 2,869,829
1,049,831 Independent National Mortgage Corp.,
Series 1994 V, Class M, 7.43% V/R , 12/25/24 1,070,708
4,417,637 Independent National Mortgage Corp.,
Series 1995 E, Class A1, 6.69% V/R, 4/25/25 4,498,210
291,076 Merrill Lynch Mortgage Investors, Inc.,
Series 1983-I A2, 5.34% V/R, 11/15/23 291,281
373,418 Merrill Lynch Mortgage Investors, Inc.,
Series 1994-I, 7.25% V/R, 1/25/05 370,646
237,347 MLCC Mortgage Investors, Inc.,
Series 1994 A Class A2, 5.34% V/R, 7/15/19 237,004
3,000,000 MLCC Mortgage Investors, Inc.,
Series 1994 A Class A3, 5.74% V/R, 7/15/19 3,020,146
365,401 MLCC Mortgage Investors, Inc.,
Series 1994-B, 5.38% V/R, 12/15/19 365,659
5,000,000 Nationslink Funding, 5.25% V/R, 9/10/07 5,000,000
436,830 Residential Funding Mortgage Security, Adjustable Rate Mortgage, Series 1989-5A, 7.01% V/R,
10/25/19 431,298
163,670 Residential Funding Mortgage Security, Adjustable Rate Mortgage,
Series 1991 21 BA,6.75% V/R, 8/25/21 165,112
26,384 RTC, Series 1991 M6 A3, 8.35% V/R, 6/25/21 26,351
260,166 RTC, Series 1991-6 E, 11.55% V/R, 5/25/24 259,486
1,439,205 RTC, Series 1992-18P A4, 5.89% V/R, 4/25/28+ 1,438,754
416,617 RTC, Series 1992-4 A2, 7.04% V/R, 7/25/28 415,391
303,290 RTC, Series 1992-C3, Class A3, 6.15% V/R, 8/25/23 303,195
5,616,188 RTC, Series 1994-1, Class A5, 5.59% V/R, 9/25/29 5,640,646
985,953 RTC, Series 1995-1 A3, 6.73% V/R, 10/25/28 1,005,568
8,282 RTC, Series 1995-2 A1B, 7.15%, 5/25/29 8,258
5,375,000 Vendee Mortgage Trust, Series 1993-1,
Class E, 7.00%,1/15/16 5,428,454
---------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $66,585,177) 66,190,936
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
53
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STABLE INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
CORPORATE BONDS & NOTES (23.3%)
1,600,000 Bausch & Lomb, Inc., 6.15%, 8/1/01 $ 1,590,162
4,037,000 Chase Manhattan Corp., 10.13%, 11/1/00 4,262,786
2,500,000 Corestates Capital Corp., 9.63%, 2/15/01 2,641,340
3,250,000 First Data Corp., 6.82%, 9/18/01 3,294,730
2,775,000 Firstar Bank Milwaukee, 6.25%, 12/1/02 2,765,898
3,900,000 Ford Capital BV, 9.38%, 5/15/01 4,132,335
3,200,000 General Electric Capital Corp., 6.29%, 12/15/01 3,203,894
5,000,000 Main Place Real Estate Investment,
5.17% V/R,5/28/02 4,998,438
4,000,000 McDonald's Corp., 6.00%, 6/23/02 3,979,392
2,750,000 Merrill Lynch & Co., Inc., 5.01% V/R, 5/30/01 2,748,936
3,100,000 Monsanto Co., 5.38%, 12/1/01+ 3,036,292
3,475,000 Newell Co., 6.18%, 7/11/00 3,486,586
2,400,000 Philip Morris Cos., Inc., 8.75%, 6/1/01 2,508,175
4,000,000 Raytheon Co., 6.45%, 8/15/02 4,010,156
3,875,000 Rite Aid Corp., 6.70%, 12/15/01 3,874,248
1,000,000 Tenneco, Inc., 10.08%, 2/1/01 1,053,129
1,000,000 Transamerica Financial, 6.36%, 6/26/00 1,004,499
1,500,000 Transamerica Financial, 6.41%, 6/20/00 1,507,475
4,750,000 Tyco International Ltd., 6.50%, 11/1/01 4,768,416
2,650,000 US Bank NA, North Dakota, 4.92% V/R, 6/20/01 2,649,796
2,000,000 USAA Capital Corp., 5.97%, 8/4/99+ 2,001,704
3,400,000 V.F. Corp., 9.50%, 5/1/01 3,601,236
5,350,000 Whitman Corp., 7.50%, 8/15/01 5,469,567
---------------
TOTAL CORPORATE BONDS & NOTES (COST $72,901,854) 72,589,190
---------------
GOVERNMENT AGENCY BONDS & NOTES (2.8%)
3,000,000 FHLB, 5.57%, 8/17/00 3,004,689
2,000,000 FHLB, 7.11%, 7/8/99 2,004,056
1,000,000 FNMA, 8.70%, 6/10/99 1,000,878
2,720,000 TVA, 6.23%, 7/15/45 2,768,239
---------------
TOTAL GOVERNMENT AGENCY BONDS & NOTES
(COST $8,778,351) 8,777,862
---------------
MORTGAGE BACKED SECURITIES (7.5%)
FHLMC (0.3%)
84,505 Pool 410220, 7.31% V/R, 10/1/25 85,898
648,906 Pool 845151, 7.32% V/R, 6/1/22 664,337
220,052 Pool 846367, 7.25%, 4/1/29 226,517
---------------
TOTAL FHLMC (COST $973,585) 976,752
---------------
FNMA (4.7%)
1,123,219 Pool 155506, 6.57% V/R, 4/1/22 1,143,380
6,071,099 Pool 160334, 6.93%, 3/1/01 6,144,116
2,147,997 Pool 190815, 4.66% V/R, 7/1/17 2,060,638
373,870 Pool 220706, 7.24% V/R, 6/1/23 380,143
368,837 Pool 318464, 6.95%, 4/1/25 376,795
624,676 Pool 321051, 7.47% V/R, 8/1/25 639,556
206,876 Pool 331866, 6.72%, 12/1/25 210,844
3,415,015 Pool 459495, 6.00%, 2/3/14 3,337,870
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STABLE INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
MORTGAGE BACKED SECURITIES (continued)
FNMA (continued)
<TABLE>
<C> <S> <C>
205,581 Pool 46698, 5.64% V/R, 12/1/15 $ 210,770
---------------
TOTAL FNMA (COST $14,716,847) 14,504,112
---------------
SBA (2.5%)
104,526 Pool 500025, 7.63% V/R, 12/25/10 107,221
53,993 Pool 500276, 9.63% V/R, 5/25/07 57,679
118,712 Pool 500299, 9.63% V/R, 6/25/07 123,312
83,643 Pool 500569, 9.63% V/R, 6/25/08 88,243
483,425 Pool 500664, 7.63% V/R, 3/25/04 491,019
311,958 Pool 500806, 6.25% V/R, 2/25/14 313,628
351,138 Pool 500957, 8.00% V/R, 7/25/14 365,065
47,210 Pool 501017, 6.13% V/R, 9/25/14 47,404
386,746 Pool 501224, 6.50% V/R, 6/25/15 389,839
48,643 Pool 501973, 9.38% V/R, 12/25/01 49,861
72,781 Pool 502083, 7.63% V/R, 11/25/04 74,027
113,985 Pool 502241, 7.63% V/R, 4/25/03 114,982
212,582 Pool 502583, 8.98% V/R, 9/25/03 219,574
77,276 Pool 502966, 8.98% V/R, 5/25/15 82,964
86,955 Pool 502974, 8.38% V/R, 1/25/10 90,860
624,104 Pool 503405, 8.13% V/R, 5/25/16 663,890
1,940,074 Pool 503611, 7.63% V/R, 12/27/21 2,002,058
1,237,390 Pool 503658, 8.88% V/R, 9/27/10 1,314,097
1,017,500 Pool 503664, 8.23% V/R, 1/25/13 1,064,038
---------------
TOTAL SBA (COST $7,974,332) 7,659,761
---------------
TOTAL MORTGAGE BACKED SECURITIES (COST $23,664,764) 23,140,625
---------------
MUNICIPAL NOTES (6.5%)
3,300,000 Connecticut State, GO Bonds, Taxable
Series A, 5.70%, 1/15/01 3,310,425
2,740,000 Cow Creek Bank Umpqua Tribe of Indians, AMBAC insured, 6.20%, 7/1/03+ 2,738,827
3,145,000 Denver, CO, City and County SD #1, Educational Facilities RV Taxable Pension, School Facilities
Lease, AMBAC insured, 6.34%, 12/15/00 3,178,652
4,000,000 New York State, GO Bonds, Series C, 6.13%, 3/1/02 4,063,284
5,000,000 New York, NY, GO Bonds, 6.10%, 8/1/01 5,061,265
1,870,000 Washington State, GO Bonds, State Housing Trust Fund, Series T, 6.60%, 1/1/01 1,892,870
---------------
TOTAL MUNICIPAL NOTES (COST $20,042,668) 20,245,323
---------------
U.S. TREASURY OBLIGATIONS (12.3%)
37,500,000 U.S. Treasury Notes, 8.50%, 2/15/00
(cost $38,456,921)# 38,390,625
REPURCHASE AGREEMENTS (3.1%)
9,626,349 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $9,626,349)** 9,626,349
---------------
TOTAL INVESTMENTS (100.0%) (COST $312,040,673) $ 310,993,538
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
54
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
MANAGED FIXED INCOME PORTFOLIO
- - -----------------------------------------------------------------
ASSET BACKED SECURITIES (12.1%)
4,000,000 Chevy Chase Master Credit Card Trust, Series 1998, Class A, 5.27% V/R, 10/15/06 $ 4,011,740
1,800,000 ContiMortgage Home Equity Loan Trust, Series 1997-4, Class A7, 6.63%, 9/15/16 1,758,303
2,441,000 EQCC Home Equity Loan Trust,
Series 1996-2 A4, 7.50%, 6/15/21 2,514,096
4,900,000 EQCC Home Equity Loan Trust,
Series 1997-2 A9, 6.81%, 7/15/28 4,905,341
487,435 First Merchants Auto Receivables Corp., Series 1996-A, Class A2, 6.70%, 7/17/00+ 488,106
1,499,556 First Plus Home Loan Trust,
Series 1996-2 A6, 7.85%, 8/20/13 1,515,354
1,000,000 GE Capital Mortgage Services, Inc.,
Series 1997 HE-2, Class A7, 7.12%, 6/25/27 1,008,450
9,597,276 Green Tree Financial Corp.,
Series 1997-7 A8, 6.86%, 9/15/16 9,508,549
136,432 Green Tree Home Improvement Loan Trust, Series 1995-F A4, 6.15%, 1/15/21 136,592
3,000,000 Keystone Home Improvement Loan Trust, Series 1997-P2, Class IA3, 6.99%, 4/25/14+ 3,001,875
2,300,000 Keystone/Lehman Title I Loan Trust, 1996-2, 7.45%, 11/25/10 2,366,483
3,300,000 Loop Funding Master Trust,
Series 1997-A144, Class B1, 5.37% V/R, 12/26/07+ 3,281,438
6,693,000 Oakwood Mortgage Investors, Inc.,
Series 1995-A, Class A3, 7.10% V/R, 9/15/20 6,842,154
5,518,000 Rental Car Finance Corp., Series 1997-1 B3, 6.70% V/R, 9/25/07+ 5,336,078
6,500,000 Van Kampen, CLO-I, 5.30% V/R, 10/5/07+ 6,585,215
---------------
TOTAL ASSET BACKED SECURITIES (COST $53,308,820) 53,259,774
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS (10.2%)
2,631,600 AMBS, Series CS-1012 1, 7.06% V/R, 7/25/02 2,666,551
1,123,635 American Housing Trust, Series VI, Class I-I, 9.15%, 5/25/20 1,201,992
1,500,000 Asset Securitization Corp., Series 1997-D4, Class A1C, 7.42%, 4/14/29 1,566,832
1,245,772 CMC Securities Corp. II, Series 1993-2I A2, 6.13% V/R, 9/25/23 1,252,049
5,000,000 FHLMC, Series 2146 VB, 6.00%, 12/15/14 4,777,475
260,307 FNMA, Series 1988-5 Z, 9.20%, 3/25/18 270,576
2,000,000 FNMA, Series 1998-M6, Class A2,
6.32% V/R, 8/15/08 1,980,630
1,868,946 Independent National Mortgage Corp.,
Series 1994 V, Class M, 7.43% V/R#, 12/25/24 1,906,112
1,074,025 L.F. Rothschild Mortgage Trust, Series 2, Class Z, 9.95%, 8/1/17 1,157,401
458,286 Merrill Lynch Mortgage Investors, Inc.,
Series 1994-I, 7.25% V/R, 1/25/05 454,883
5,000,000 Merrill Lynch Mortgage Investors, Inc.,
Series 1997-CI, Class A3, 7.12%, 6/18/29 5,119,325
176,418 RTC, Series 1991-M5 A, 9.00%, 3/25/17 177,662
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
MANAGED FIXED INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
<TABLE>
<C> <S> <C>
1,166,529 RTC, Series 1992-4 A2, 7.04% V/R, 7/25/28 $ 1,163,092
885,727 RTC, Series 1995 1 class A2C, 7.50%, 10/25/28 886,837
1,000,000 RTC, Series 1995 1 Class A2D, 7.50%, 10/25/28 1,000,872
1,000,000 RTC, Series 1995-2 A1C, 7.45%, 5/25/29 1,011,065
750,000 Series 1832 D, 6.50% V/R, 6/15/08 751,309
291,800 Vendee Mortgage Trust, Series 1992-2,
Class 2D, 7.75%, 12/15/14 293,170
4,072,241 Vendee Mortgage Trust, Series 1992-2,
Class G, 7.25%, 2/15/19 4,162,424
3,250,000 Vendee Mortgage Trust, Series 1995-1C, Class 3E, 8.00%, 7/15/18 3,312,709
5,500,000 Vendee Mortgage Trust, Series 1996-2,
Class 1E, 6.75%, 5/15/20 5,501,183
3,000,000 Vendee Mortgage Trust, Series 1997-1,
Class 2C, 7.50%, 9/15/17 3,042,476
1,500,000 Vendee Mortgage Trust, Series 1997-1,
Class 2D, 7.50%, 1/15/19 1,525,646
---------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $45,561,638) 45,182,271
---------------
CORPORATE BONDS & NOTES (34.4%)
3,000,000 AmSouth Bancorp, 6.13%, 3/1/09 2,831,892
2,400,000 Applied Materials Inc., 7.00%, 9/6/05 2,390,686
3,000,000 Applied Materials Inc., 7.00%, 9/6/05 2,988,357
600,000 Applied Materials, 6.70%, 9/6/05 585,668
5,000,000 BankAmerica Corp., 5.57% V/R, 1/15/27 4,862,690
1,700,000 Bausch & Lomb, Inc., 6.56%, 8/12/26 1,698,703
3,600,000 Cargill, Inc., 8.35%, 2/12/11+ 3,879,000
2,000,000 Charles Schwab Corp., 6.25%, 1/23/03 1,987,807
2,000,000 Charles Schwab Corp., 6.88%, 9/2/03 2,031,358
700,000 Charles Schwab Corp., 7.19%, 5/31/01 712,374
5,000,000 Chase Capital, 5.62% V/R, 8/1/28 4,877,460
3,400,000 Citicorp, 9.50%, 2/1/02 3,650,539
1,500,000 Colonial Pipeline, 7.13%, 8/15/02+ 1,536,640
2,234,332 Continental Airlines, 6.80%, 7/2/07 2,203,979
2,236,331 Continental Airlines, Series 972A, 7.15%, 6/30/07 2,266,488
750,000 Corestates Capital Corp., 5.65% V/R, 1/15/27+ 752,008
2,175,000 Corestates Capital Corp., 5.88%, 10/15/03+ 2,126,234
3,000,000 Dayton Hudson Co., 5.90%, 6/15/37 3,000,699
3,445,000 Dell Computer Corp., 7.10%, 4/15/28 3,333,110
1,000,000 El Paso Natural Gas, 7.75%, 1/15/02 1,024,700
2,916,090 Federal Express, Series 97-B, 7.52%, 1/15/18 3,044,617
200,000 First Bank N.A., 6.00%, 10/15/03 197,422
1,300,000 First Bank Systems, Inc., 7.63%, 5/1/05 1,365,517
2,500,000 First Bank Systems, Inc., 8.00%, 7/2/04# 2,668,230
2,500,000 First Data Corp., 5.80%, 12/15/08 2,321,768
3,000,000 Florida Residential Property & Casualty, 7.25%, 7/1/02+ 3,037,848
1,700,000 Hyundai Semiconductor, 8.25%, 5/15/04 1,445,065
2,000,000 IMC Global, Inc., 7.63%, 11/1/05 2,042,426
2,500,000 Lehman Brothers, Inc., 7.50%, 8/1/26 2,428,960
5,065,000 Levi Strauss & Co., 6.80%, 11/1/03+ 4,753,650
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
55
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
MANAGED FIXED INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
CORPORATE BONDS & NOTES (continued)
<TABLE>
<C> <S> <C>
1,500,000 Lucky Goldstar-Caltex Oil, 7.88%, 7/1/6+ $ 1,441,535
2,500,000 Lincoln National Corp., 7.25%, 5/15/05 2,543,010
2,512,766 Minnesota, Mining & Manufacturing, 5.62%, 7/15/09+ 2,394,910
1,060,000 Nabisco, Inc., 6.00%, 2/15/11 1,052,246
1,000,000 Northwest Airlines Corp., 6.81%, 2/1/20 977,105
1,750,000 Old Kent Financial Corp., 6.63%, 11/15/05 1,728,946
5,635,000 Oracle Corp., 6.72%, 2/15/04 5,629,759
2,650,000 Paine Webber Group, Inc., 6.45%, 12/1/03 2,610,345
1,250,000 Paine Webber Group, Inc., 6.90%, 8/15/03 1,257,900
5,000,000 Pep Boys, 6.71%, 11/3/04 4,692,495
1,305,000 Petroliam Nasional Berhad, 6.63%, 10/18/01+# 1,266,717
2,750,000 Philip Morris Cos., Inc., 7.63%, 5/15/02 2,827,456
2,709,000 Philips Electronics, 6.75%, 8/15/03 2,707,953
2,000,000 Potomac Capital Investment Corp., 7.32%, 4/14/00+ 2,020,960
2,450,000 Prudential Insurance Co., 7.65%, 7/1/07+ 2,556,600
2,000,000 R&B Falcon Corp., 6.75%, 4/15/05 1,640,000
5,200,000 Reinsurance Group of America, 7.25%, 4/1/06+ 5,311,504
4,000,000 Reliastar Financial Corp., 7.13%, 3/1/03 4,065,852
2,500,000 Reynolds & Reynolds, 7.00%, 12/15/06 2,520,617
1,750,000 Royal Carribbean Cruises, 7.13%, 9/18/02 1,759,772
3,325,000 Scholastic Corp., 7.00%, 12/15/03 3,334,945
2,500,000 Sprint Capital Corp., 5.70%, 11/15/03 2,421,190
3,000,000 Susa Partnership LP, 8.20%, 6/1/17 2,947,491
2,200,000 Terra Nova (U.K.) Holdings, 7.20%, 8/15/07 2,159,370
3,000,000 Texas Utilities Co., 6.20%, 10/1/02 2,980,527
3,000,000 Tommy Hilfiger, 6.50%, 6/1/03 2,924,550
1,500,000 Toro Co., 7.13%, 6/15/07 1,402,593
2,500,000 Tyco International Ltd., 6.38%, 1/15/04 2,485,965
750,000 Tyco International Ltd., 6.50%, 11/1/01 752,908
885,000 United Missouri Bancshares, 7.30%, 2/24/03 907,778
1,000,000 Universal Corp., 9.25%, 2/15/01 1,042,955
250,000 Vastar Resources, Inc., 6.95%, 11/8/06 248,616
1,970,000 Whitman Corp., 7.29%, 9/15/26 2,036,606
2,350,000 Whitman Corp., 7.50%, 2/1/03 2,419,220
---------------
TOTAL CORPORATE BONDS & NOTES (COST $153,538,815) 151,116,291
---------------
GOVERNMENT AGENCY BONDS & NOTES (3.1%)
9,000,000 FNMA, 6.16%, 8/7/28# 8,579,259
5,000,000 FNMA, 6.25%, 5/15/29# 4,933,150
---------------
TOTAL GOVERNMENT AGENCY BONDS & NOTES
(COST $14,161,553) 13,512,409
---------------
MORTGAGE BACKED SECURITIES (25.1%)
FHLMC (0.5%)
240,535 Pool 410425, 7.48% V/R, 9/1/26 246,542
124,446 Pool 410464, 7.38% V/R, 11/1/26 126,289
934,534 Pool 606279, 6.88%, 2/1/15 953,103
660,156 Pool 846367, 7.25%, 4/1/29 679,551
---------------
TOTAL FHLMC (COST $1,999,786) 2,005,485
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
MANAGED FIXED INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
MORTGAGE BACKED SECURITIES (continued)
<TABLE>
<C> <S> <C>
FNMA (21.8%)
15,000,000 Pool TBA, 6.00%, 4/1/05 $ 14,639,047
5,000,000 Pool 252494, 6.00%, 6/1/14 4,885,000
137,144 Pool 342042, 6.78%, 6/1/25 140,000
425,074 Pool 344689, 6.99%, 11/1/25 434,324
369,245 Pool 344692, 6.88% V/R, 10/1/25 377,058
177,213 Pool 347712, 7.38% V/R, 6/1/26 181,376
4,914,627 Pool 375168, 7.13%, 6/1/04 5,062,749
4,959,409 Pool 380268, 6.18%, 8/1/08 4,881,904
5,208,575 Pool 408118, 6.50%, 1/1/28 5,101,695
4,652,169 Pool 415414, 6.50%, 2/1/28 4,553,589
8,398,457 Pool 415714, 6.00%, 4/1/28 7,994,743
4,450,461 Pool 417648, 6.00%, 2/1/13 4,349,925
9,061,374 Pool 446118, 6.00%, 12/1/28 8,625,794
2,609,912 Pool 482516, 6.00%, 1/1/14 2,550,954
4,946,417 Pool 483920, 6.00%, 11/1/27 4,708,643
9,919,377 Pool 484776, 6.00%, 3/1/14 9,691,231
12,688,580 Pool 486524, 6.50%, 2/1/29 12,419,709
1,447,541 Pool 73272, 6.48%, 12/1/05 1,451,808
3,424,522 Pool 73919, 6.80%, 1/1/04 3,478,363
---------------
TOTAL FNMA (COST $97,356,208) 95,527,912
---------------
GNMA (2.8%)
691 Pool 2218, 6.50%, 12/15/02 696
2,596,456 Pool 473917, 7.00%, 4/15/28 2,604,038
43 Pool 665, 7.50%, 5/15/01 44
9,870,713 Pool 780626, 7.00%, 8/15/27 9,902,991
---------------
TOTAL GNMA (COST $12,707,093) 12,507,769
---------------
TOTAL MORTGAGE BACKED SECURITIES (COST $112,063,087) 110,041,166
---------------
MUNICIPAL BONDS (2.6%)
3,805,000 Hudson County, NJ, Import Authority Facilities, Leasing RV, FSA insured, 7.40%, 12/1/25 4,064,098
7,500,000 New York State, GO Bonds, Series B, 6.13%, 3/15/07 7,380,795
---------------
TOTAL MUNICIPAL BONDS (COST $11,396,102) 11,444,893
---------------
MUNICIPAL NOTES (1.8%)
3,500,000 Denver, CO, City and County SD #1, Educational Facilities RV Taxable Pension, School Facilities
Lease, AMBAC insured, 6.67%, 12/15/04 3,549,840
4,450,000 Philadelphia, PA, IDR, Pension Funding, Retirement System, Series
A, MBIA insured, 5.69%,
4/15/07 4,253,808
---------------
TOTAL MUNICIPAL NOTES (COST $7,950,000) 7,803,648
---------------
U.S. TREASURY OBLIGATIONS (7.1%)
2,000,000 U.S. Treasury Bonds, 7.00%, 7/15/06** 2,134,376
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
56
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
MANAGED FIXED INCOME PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
U.S. TREASURY OBLIGATIONS (continued)
<TABLE>
<C> <S> <C>
26,550,000 U.S. Treasury Bonds, 6.75%, 8/15/26** $ 28,889,721
---------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $33,076,461) 31,024,097
---------------
REPURCHASE AGREEMENTS (3.6%)
15,740,368 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $15,740,368)** 15,740,368
---------------
TOTAL INVESTMENTS (100.0%) (COST $446,796,844) $ 439,124,917
---------------
---------------
- - -----------------------------------------------------------------
POSITIVE RETURN BOND PORTFOLIO
- - -----------------------------------------------------------------
ASSET BACKED SECURITIES (24.3%)
4,100,000 Capital Automotive Receivables Asset Trust, Series 1999-1, Class A2, 5.58%, 6/15/02 $ 4,090,263
5,587,445 CIT Marine Trust, Series 1999-A, Class A1, 5.45%, 9/15/06 5,596,525
12,337,000 First Chicago Master Trust II, Series 1997-T, Class A, 4.97% V/R, 10/15/02 12,339,406
12,100,000 First Union Master Credit Card Trust,
Series 1996-1 A, 9/15/03 12,121,236
4,600,000 Fleet Credit Card Master Trust,
Series 1995-A, Class A, 5.12% V/R, 1/1/03 4,605,405
5,628,560 Ford Credit Auto Owner Trust,
Series 1998-C, Class A3, 5.73%, 11/15/00 5,642,378
12,700,000 Ford Motor Credit Auto Owner Trust,
Series 1998-B, Class A3, 5.85%, 10/15/01 12,746,292
12,125,000 Household Credit Card Master Trust I,
Series 1995-1, Class A, 5.10% V/R, 12/15/02 12,054,493
---------------
TOTAL ASSET BACKED SECURITIES (COST $69,299,563) 69,195,998
---------------
CORPORATE BONDS & NOTES (3.7%)
10,375,000 Merrill Lynch & Co., 5.05% V/R, 9/25/00 (cost $10,366,700) 10,373,589
---------------
GOVERNMENT AGENCY BONDS & NOTES (12.6%)
8,006,000 FHLB, 4.82%, 11/17/99 7,825,225
13,400,000 FNMA, 4.70%, 10/21/99 13,146,298
15,275,000 FNMA, 4.82%, 2/1/00 14,768,741
---------------
TOTAL GOVERNMENT AGENCY BONDS & NOTES
(COST $35,750,629) 35,740,264
---------------
U.S. TREASURY OBLIGATIONS (13.4%)
15,000,000 U.S. Treasury Note, 5.38%, 1/31/00# 15,037,500
1,650,000 U.S. Treasury Bond, 6.13%, 11/15/27# 1,667,531
14,150,000 U.S. Treasury Bond, 6.38%, 8/15/27# 14,742,530
6,250,000 U.S. Treasury Bond, 6.63%, 2/15/27# 6,708,987
---------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $40,028,774) 38,156,548
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
POSITIVE RETURN BOND PORTFOLIO (continued)
- - -----------------------------------------------------------------
REPURCHASE AGREEMENTS (46.0%)
10,000,000 Banc America, 4.90%, 6/1/99, collateralized by $9,934,502 U.S. Government Agency Securities,
7.50%, 5/1/12, with an aggregate market value of $10,215,450 $ 10,000,000
55,000,000 Banc One Capital Markets Agency, 4.87%, 6/1/99, collateralized by $56,386,000
U.S. Government Agency Securities, 6/24/99--7/30/99, with an aggregate market value of
$56,141,731 55,000,000
35,247,159 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99** 35,247,159
10,000,000 Credit Suisse First Boston, 4.93%, 6/1/99, collateralized by $10,306,785
U.S. Government Agency Securities,
6.00%--6.50%, 11/15/07--3/15/29, with an aggregate market value of $10,250,649 10,000,000
10,000,000 Lehman Brothers Inc., 4.82%, 6/1/99, collateralized by $10,721,494
U.S. Government Obligations, with an aggregate market value of $10,201,406 10,000,000
272,473 Merrill Lynch & Co., 4.68%, 6/1/99, collateralized by $702,742
U.S. Government Securities, Securities, 3.38%, 1/15/07--6/1/17, with an aggregate market
value of $277,928 272,473
10,000,000 Salomon Smith Barney Holdings, 4.90%, 6/1/99, collateralized by $10,970,804
U.S. Government Agency Securities,
5.50%--10.50%, 2/1/00--5/1/31, with an aggregate market value of $10,217,094 10,000,000
---------------
TOTAL REPURCHASE AGREEMENTS (COST $130,519,632) 130,519,632
---------------
TOTAL INVESTMENTS (100.0%) (COST $285,965,298) $ 283,986,031
---------------
---------------
- - -----------------------------------------------------------------
STRATEGIC VALUE BOND PORTFOLIO
- - -----------------------------------------------------------------
ASSET BACKED SECURITIES (6.6%)
3,000,000 Aesop Funding II LLC, Series 1998-1 A, 6.14% V/R, 5/20/06+ $ 2,965,035
3,500,000 Chevy Chase Master Credit Card Trust, Series 1998, Class A, 5.27% V/R, 10/16/06 3,510,273
2,879,183 Green Tree Financial Corp.,
Series 1997-7 A8, 6.86%, 9/15/16 2,852,565
2,000,000 Loop Funding Master Trust I,
Series 1997-AER, Class B1, 5.37% V/R, 12/26/07+ 1,988,750
2,000,000 Oakwood Mortgage Investors, Inc.,
Series 1995-A, Class A3, 7.10% V/R, 9/15/20 2,044,570
2,000,000 Rental Car Finance Corp., Series 1997-1 B3, 6.70% V/R, 9/25/07 1,934,063
989,264 Sequoia Mortgage Trust, Series 2, Class A1, 6.04% V/R, 10/25/24 986,791
---------------
TOTAL ASSET BACKED SECURITIES (COST $16,400,346) 16,282,047
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
57
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STRATEGIC VALUE BOND PORTFOLIO (continued)
- - -----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (7.9%)
1,913,891 AMBS, Series CS-1012 1, 7.06% V/R, 7/25/02 $ 1,939,310
2,300,000 GNMA, Series 1998-14, Class PD, 6.00%, 6/20/23 2,240,361
4,000,000 Merrill Lynch Mortgage Investors, Inc.,
Series 1997-CI, Class A3, 7.12%, 6/18/29 4,095,460
1,500,000 Saco I, Inc.,
Series 1997-2, Class 1A2, 7.00% V/R, 8/25/36 1,504,922
1,628,896 Vendee Mortgage Trust, Series 1992-2,
Class G, 7.25%, 2/15/19 1,664,970
4,500,000 Vendee Mortgage Trust, Series 1994-1,
Class 2E, 6.50%, 1/15/17 4,468,703
3,500,000 Vendee Mortgage Trust, Series 1996-2,
Class 1E, 6.75%, 5/15/20 3,500,753
---------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $19,650,305) 19,414,479
---------------
CORPORATE BONDS & NOTES (45.2%)
750,000 AK Steel Corp., 9.13%, 12/15/06 781,875
1,250,000 American Standard Cos. Inc., 7.13%, 2/15/03 1,209,375
2,000,000 AmSouth Bancorp, 6.13%, 3/1/09 1,887,928
2,500,000 Applied Materials Inc., 7.00%, 9/6/05 2,490,298
525,000 Aramark Corp., 6.75%, 8/2/04 515,537
1,000,000 Atlas Air, Inc., 9.25%, 4/15/08 975,000
3,000,000 BankAmerica Corp., 5.57% V/R, 1/15/27 2,917,614
1,000,000 Barrett Resources Corp., 7.55%, 2/1/07 947,090
2,000,000 Bausch & Lomb, Inc., 6.75%, 12/15/04 1,974,646
500,000 Buckeye Technologies Inc., 8.50%, 12/15/05 505,000
1,000,000 Calenergy Co., Inc., 7.23%, 9/15/05 1,001,760
500,000 Calpine Corp., 7.63%, 4/15/06 491,250
500,000 Chancellor Media Group, 9.38%, 10/1/04 516,250
3,000,000 Charles Schwab Corp., 6.88%, 9/2/03 3,047,037
1,000,000 Charter Comm. Holdings LLC, 8.63%, 4/1/09+ 980,000
3,000,000 Chase Capital, 5.62% V/R, 8/1/28 2,926,476
2,681,198 Continental Airlines, 6.80%, 7/2/07 2,644,774
500,000 CSC Holdings, Inc., 7.25%, 7/15/08 494,375
3,000,000 Dell Computer Corp., 7.10%, 4/15/28 2,902,563
3,000,000 Equitable Life Assurance Society, 6.95%, 12/1/05+ 3,035,919
2,000,000 Farmers Exchange Capital, 7.20%, 7/15/48+ 1,872,822
1,944,060 Federal Express, Series 97-B, 7.52%, 1/15/18 2,029,745
500,000 Federal-Mogul Corp., 7.50%, 7/1/04 490,318
2,500,000 First Bank Systems, Inc., 8.00%, 7/2/04 2,668,230
2,000,000 Genfinance Luxembourg SA, 5.69% V/R, 5/29/49 1,970,000
500,000 Golden State Holdings, 7.13%, 8/1/05 486,293
1,000,000 Gulf Canada Resources Ltd., 8.35%, 8/1/06 997,500
500,000 HMH Properties, Series A, 7.88%, 8/1/05 476,250
1,000,000 Hyundai Semiconductor, 8.25%, 5/15/04 850,038
500,000 Imax Corp., 7.88%, 12/1/05 487,500
2,000,000 IMC Global, Inc., 7.63%, 11/1/05 2,042,426
500,000 Level 3 Communications, Inc., 9.13%, 5/1/08# 490,000
2,000,000 Levi Strauss & Co., 6.80%, 11/1/03+ 1,877,058
2,500,000 Lincoln National Corp., 7.00%, 3/15/18 2,444,310
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STRATEGIC VALUE BOND PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
CORPORATE BONDS & NOTES (continued)
<TABLE>
<C> <S> <C>
500,000 Lyondell Chemical Co., 9.63%, 5/1/07+** $ 507,500
1,000,000 Mallinckrodt, Inc., 6.30%, 3/15/01+ 989,074
4,700,000 Massachusetts Institute of Technology, 7.25%, 11/2/96 4,877,735
750,000 MGM Grand Inc., 6.95%, 2/1/05 704,200
1,000,000 Nabisco, Inc., 6.00%, 2/15/11 992,685
500,000 Nextel Communications, 9.75%, 2/15/02 512,500
500,000 Niagara Mohawk Power, 7.38%, 7/1/03 501,137
700,000 Northwest Airlines Corp., 6.81%, 2/1/20 683,974
1,000,000 Northwest Airlines Corp., 8.38%, 3/15/04 990,458
2,225,000 Old Kent Financial Corp., 6.63%, 11/15/05 2,198,231
2,500,000 Oracle Corp., 6.72%, 2/15/04 2,497,675
750,000 Outdoor Systems, Inc., 8.88%, 6/15/05 787,500
1,000,000 Owens-Illnois, Inc., 7.85%, 5/15/04 1,011,549
750,000 Packaging Resources, Inc., 11.63%, 5/1/02 768,750
2,000,000 Pep Boys, 6.71%, 11/3/04 1,876,998
1,400,000 Potomac Capital Investment, 7.05%, 10/2/01+ 1,399,475
1,250,000 Premier Parks, Inc., 9.25%, 4/1/06 1,275,000
1,750,000 Prudential Insurance Co., 7.65%, 7/1/07+ 1,826,143
750,000 Qwest Communications International, Inc., 7.50%, 11/1/08 753,750
1,000,000 R&B Falcon Corp., 6.75%, 4/15/05 820,000
500,000 Randall's Food Markets, 9.38%, 7/1/07 541,250
1,000,000 Regal Cinemas, Inc., 9.50%, 6/1/08 952,500
2,500,000 Reinsurance Group of America, 7.25%, 4/1/06+ 2,499,625
2,500,000 Reliastar Financial Corp., 7.13%, 3/1/03 2,541,158
3,000,000 Royal Carribbean Cruises, 7.13%, 9/18/02 3,016,749
500,000 Special Devices, Inc., 11.38%, 12/15/07 505,000
2,500,000 Susa Partnership LP, 8.20%, 6/1/17 2,456,243
1,000,000 Teekay Shipping Corp., 8.32%, 2/1/08 966,250
1,000,000 Tenet Healthcare Corp., 7.88%, 1/15/03 990,000
2,500,000 Tenneco, Inc., 10.08%, 2/1/01 2,632,823
2,500,000 Terra Nova (U.K.) Holdings, 7.20%, 8/15/07 2,453,830
1,875,000 Texas Utilities Co., 6.20%, 10/1/02 1,862,829
1,400,000 Tommy Hilfiger, 6.50%, 6/1/03 1,364,790
1,500,000 Toro Co., 7.13%, 6/15/07 1,402,593
1,250,000 Tricon Global Restaurant, 7.65%, 5/15/08 1,246,488
1,000,000 Triton Energy Ltd. Corp., 8.75%, 4/15/02 990,000
3,500,000 Van Kampen, CLO-I, 5.30% V/R, 10/8/07 3,545,885
2,000,000 Whitman Corp., 7.29%, 9/15/26 2,067,620
2,000,000 Williams Cos., Inc., 6.13%, 2/15/02 1,970,524
---------------
TOTAL CORPORATE BONDS & NOTES (COST $113,951,230) 111,407,748
---------------
GOVERNMENT AGENCY BONDS & NOTES (4.4%)
7,350,000 FNMA, 6.16%, 8/7/28# 7,006,395
4,000,000 FNMA, 6.25%, 5/15/29# 3,946,520
---------------
TOTAL GOVERNMENT AGENCY BONDS & NOTES
(COST $10,823,842) 10,952,915
---------------
INVESTMENT IN LIMITED PARTNERSHIP (0.3%)
743,000 PPM America CBO II*** 847,167
---------------
TOTAL INVESTMENT IN LIMITED PARTNERSHIP (COST $743,000) 847,167
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
58
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
STRATEGIC VALUE BOND PORTFOLIO (continued)
- - -----------------------------------------------------------------
MORTGAGE BACKED SECURITIES (24.2%)
FNMA (13.2%)
5,000,000 Pool TBA, 6.00%, 5/18/29 $ 4,879,688
2,479,705 Pool 380268, 6.18%, 8/1/08 2,440,952
2,969,267 Pool 380268, 6.20%, 5/2/05 2,953,215
1,965,851 Pool 380581, 7.13%, 6/1/04 2,025,099
1,894,027 Pool 408118, 6.50%, 1/3/28 1,855,162
2,423,005 Pool 415414, 6.50%, 2/1/28 2,371,661
3,813,220 Pool 415714, 6.00%, 4/1/28 3,629,918
2,848,295 Pool 417648, 6.00%, 2/1/13 2,783,952
5,005,310 Pool 421825, 6.00%, 6/1/28 4,763,498
2,945,828 Pool 486524, 6.50%, 2/1/29 2,883,406
1,956,870 Pool 73919, 6.80%, 1/1/04 1,987,636
---------------
TOTAL FNMA (COST $33,077,972) 32,574,187
---------------
GNMA (11.0%)
2,694,835 Pool 345066, 6.50%, 10/15/23 2,650,451
2,742,933 Pool 346960, 6.50%, 12/15/23 2,697,757
2,450,434 Pool 354692, 6.50%, 11/15/23 2,410,075
3,045,270 Pool 361398, 6.50%, 1/15/24 2,991,034
3,198,405 Pool 366641, 6.50%, 11/15/23 3,145,727
3,333,622 Pool 473918, 7.00%, 4/15/28 3,343,356
9,870,713 Pool 780626, 7.00%, 3/23/29 9,902,984
---------------
TOTAL GNMA (COST $27,608,427) 27,141,384
---------------
TOTAL MORTGAGE BACKED SECURITIES (COST $60,686,399) 59,715,571
---------------
MUNICIPAL BONDS & NOTES (3.4%)
2,000,000 Hudson County, NJ, Import Authority Facilities, Leasing RV FSA insured, 7.40%, 12/1/25 2,136,188
3,160,000 New York, NY, GO Bonds, 6.10%, 8/1/01 3,198,719
1,045,000 Washington State, GO Bonds, State Housing Trust Fund, Series T, 6.60%, 1/1/03 1,065,590
2,010,000 Western Minnesota, Power Agency RV,
Series A, AMBAC insured, 6.33%, 1/1/02 2,021,698
---------------
TOTAL MUNICIPAL BONDS & NOTES (COST $8,287,371) 8,422,195
---------------
U.S. TREASURY OBLIGATIONS (5.7%)
13,000,000 U.S. Treasury Bonds, 6.75%, 8/15/26# 14,145,626
---------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $15,310,391) 14,145,626
---------------
REPURCHASE AGREEMENTS (2.3%)
5,166,334 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $5,166,334)** 5,166,334
---------------
TOTAL INVESTMENTS (100.0%) (COST $251,019,218) $ 246,354,082
---------------
---------------
- - -----------------------------------------------------------------
INDEX PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCKS (96.7%)
AGRICULTURAL PRODUCTION--CROPS (0.1%)
39,700 Pioneer Hi-Bred International, Inc. $ 1,488,750
---------------
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COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
AMUSEMENT & RECREATION SERVICES (0.6%)
21,000 Harrah's Entertainment, Inc.# $ 454,131
340,800 Walt Disney Co.# 9,925,806
---------------
10,379,937
---------------
APPAREL & ACCESSORY STORES (0.6%)
94,500 Gap, Inc. 5,912,156
37,500 Limited, Inc. 1,832,817
23,600 Nordstrom, Inc.# 837,800
53,500 TJX Cos., Inc. 1,605,000
---------------
10,187,773
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (0.1%)
10,700 Liz Claiborne, Inc.# 385,200
19,900 V.F. Corp. 915,400
---------------
1,300,600
---------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.1%)
24,900 Autozone, Inc.* 720,549
8,700 Pep Boys--Manny, Moe & Jack 164,219
---------------
884,768
---------------
AUTOMOTIVE REPAIR, SERVICES & PARKING (0.0%)
11,900 Ryder System, Inc. 285,600
---------------
BUILDING CONSTRUCTION--GENERAL CONTRACTORS & OPERATIVE
BUILDERS (0.0%)
9,900 Centex Corp.# 366,922
8,000 Kaufman & Broad Home Corp. 193,006
7,200 Pulte Corp. 171,454
---------------
731,382
---------------
BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY & MOBILE HOME DEALERS (1.0%)
244,400 Home Depot, Inc. 13,900,255
67,984 Lowe's Cos., Inc. 3,530,925
---------------
17,431,180
---------------
BUSINESS SERVICES (7.7%)
59,500 3Com Corp.* 1,636,250
10,100 Adobe Systems, Inc. 748,666
170,300 America Online, Inc.# 20,329,563
9,800 Autodesk, Inc. 270,731
102,100 Automatic Data Processing, Inc. 4,205,249
39,100 BMC Software, Inc.* 1,933,006
28,500 Cabletron Systems, Inc.* 423,942
127,400 Cendant Corp. 2,348,941
23,700 Ceridian Corp. 782,100
89,301 Computer Associates International, Inc. 4,225,008
26,300 Computer Sciences Corp.* 1,701,288
60,900 Compuware Corp.* 1,891,707
81,700 Electronic Data Systems Corp. 4,595,625
24,400 Equifax, Inc. 878,400
73,400 First Data Corp. 3,298,417
52,800 IMS Health, Inc. 1,300,200
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
59
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COMMON STOCKS (continued)
BUSINESS SERVICES (continued)
<TABLE>
<C> <S> <C>
23,100 Interpublic Group of Cos., Inc. $ 1,749,828
45,922 McKesson HBOC, Inc.# 1,564,217
836,800 Microsoft Corp.* 67,518,113
56,000 Novell, Inc.* 1,316,000
27,900 Omnicom Group, Inc. 1,953,000
238,625 Oracle Corp.* 5,920,884
44,400 Parametric Technology Co.* 616,052
38,600 PeopleSoft, Inc.* 624,838
4,400 Shared Medical Systems Corp.# 289,300
127,600 Sun Microsystems, Inc.* 7,624,100
30,900 US Trust, Inc. 942,450
---------------
140,687,875
---------------
CHEMICALS & ALLIED PRODUCTS (11.5%)
251,600 Abbott Laboratories 11,369,183
38,000 Air Products and Chemicals, Inc. 1,558,000
9,500 Alberto Culver Co. 251,159
10,900 Allergan, Inc.# 1,013,700
16,500 ALZA Corp.*# 588,846
43,600 Avon Products, Inc. 2,155,481
47,400 Baxter International, Inc. 3,060,267
329,400 Bristol-Myers Squibb Co. 22,605,076
19,500 Clorox Co. 1,968,285
48,500 Colgate-Palmolive Co. 4,843,939
36,700 Dow Chemical Co. 4,459,050
186,600 E.I. du Pont de Nemours & Co. 12,210,642
13,100 Eastman Chemical Co. 663,194
21,500 Ecolab, Inc. 913,750
182,300 Eli Lilly & Co. 13,023,060
5,400 FMC Corp. 357,417
12,300 Goodrich (B.F.) Co.# 498,150
9,800 Great Lakes Chemical Corp. 442,841
16,600 Hercules, Inc.# 579,965
17,500 International Flavors & Fragrances, Inc. 719,693
222,900 Johnson & Johnson 20,646,119
11,800 Mallinckrodt, Inc. 408,582
395,000 Merck & Co., Inc. 26,662,500
103,900 Monsanto Co.# 4,311,850
20,100 Morton International, Inc. 783,900
10,900 Nalco Chemical Co. 365,150
215,200 Pfizer, Inc. 23,026,400
84,200 Pharmacia & Upjohn, Inc. 4,667,841
29,100 PPG Industries, Inc. 1,766,008
26,100 Praxair, Inc. 1,274,010
220,100 Procter & Gamble Co. 20,551,840
27,800 Rohm & Haas Co.# 1,115,479
243,600 Schering-Plough Corp.# 10,977,226
28,500 Sherwin-Williams Co. 878,163
16,600 Sigma Aldrich 531,200
22,000 Union Carbide Corp.# 1,128,878
12,200 W.R. Grace & Co.* 217,314
136,200 Warner-Lambert Co. 8,444,400
15,800 Watson Pharmaceuticals, Inc.* 605,338
---------------
211,643,896
---------------
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</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
COMMUNICATIONS (9.6%)
94,900 Airtouch Communications, Inc.* $ 9,537,450
45,600 Alltel Corp. 3,268,953
182,200 Ameritech Corp. 11,991,044
521,661 AT&T Corp. # 28,951,854
257,374 Bell Atlantic Corp. 14,091,230
323,300 BellSouth Corp. 15,255,723
117,100 CBS Corp. 4,888,925
22,800 CenturyTel, Inc. 873,525
53,600 Clear Channel Communications, Inc.# 3,540,952
122,600 Comcast Corp.--Class A# 4,720,100
28,400 Frontier Corp. 1,494,553
160,000 GTE Corp. 10,090,004
11,900 King World Productions, Inc. 397,164
303,895 MCI Worldcom, Inc.*# 26,248,937
100,600 MediaOne Group, Inc.* 7,431,833
47,700 Nextel Communications, Inc.*# 1,758,940
324,300 SBC Communications, Inc. 16,579,840
74,100 Sprint Corp. (FON Group) 8,354,775
72,900 Sprint Corp. (PCS Group)* 3,280,500
83,419 US West, Inc. 4,509,841
---------------
177,266,143
---------------
DEPOSITORY INSTITUTIONS (6.8%)
29,550 AmSouth Bancorp. 838,482
286,874 Bank of America Corp. 18,557,171
126,100 Bank of New York Co., Inc. 4,508,075
194,938 Bank One Corp. 11,026,182
49,100 BankBoston Corp. 2,326,114
15,800 Bankers Trust Corp. 1,462,490
51,500 BB&T Corp.# 1,879,750
140,300 Chase Manhattan Corp. 10,171,750
25,800 Comerica, Inc. 1,559,289
44,100 Fifth Third Bancorp 3,007,069
164,286 First Union Corp. 7,567,430
114,300 Firstar Corp.# 3,293,268
94,200 Fleet Financial Group, Inc. 3,873,976
9,500 Golden West Financial Corp. 901,320
34,930 Huntington Bancshares, Inc. 1,209,453
28,900 J.P. Morgan & Co., Inc. 4,026,134
75,400 KeyCorp 2,620,150
86,600 Mellon Bank Corp. 3,090,540
26,100 Mercantile Bancorp 1,525,220
54,100 National City Corp. 3,580,747
18,500 Northern Trust Corp. 1,671,939
49,900 PNC Bank Corp. 2,856,775
36,700 Regions Financial Corp. 1,390,015
17,700 Republic New York Corp. 1,202,499
27,400 SouthTrust Corp. 1,066,888
26,600 State Street Corp. 2,028,250
28,700 Summit Bancorp# 1,174,907
53,100 Suntrust Banks, Inc. 3,584,250
44,250 Synovus Financial Corp. 890,532
120,778 U.S. Bancorp 3,925,288
22,800 Union Planters Corp. 941,926
33,600 Wachovia Corp. 2,965,200
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
60
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
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COMMON STOCKS (continued)
DEPOSITORY INSTITUTIONS (continued)
<TABLE>
<C> <S> <C>
98,336 Washington Mutual, Inc. $ 3,755,214
272,600 Wells Fargo & Co. 10,904,000
---------------
125,382,293
---------------
EATING & DRINKING PLACES (0.6%)
22,800 Darden Restaurants, Inc. 485,926
224,400 McDonald's Corp. 8,639,400
25,350 Tricon Global Restaurants, Inc.* 1,476,641
20,700 Wendy's International, Inc. 564,075
---------------
11,166,042
---------------
ELECTRIC, GAS & SANITARY SERVICES (3.1%)
31,600 AES Corp.# 1,572,100
22,800 Ameren Corp. 933,378
31,800 American Electric Power Co. 1,379,332
26,200 Browning-Ferris Industries 1,087,300
25,100 Carolina Power & Light Co. 1,098,125
35,300 Central & Southwest Corp. 908,975
26,300 CINergy Corp. 897,493
19,500 CMS Energy Corp.# 906,750
35,300 Coastal Corp. 1,361,260
13,850 Columbia Energy Group 740,975
38,600 Consolidated Edison Co. 1,874,514
15,900 Consolidated Natural Gas Co. 945,059
24,700 Constellation Energy Group 770,334
32,400 Dominion Resources, Inc. 1,399,278
24,000 DTE Energy Co. 1,045,502
60,000 Duke Energy Corp. 3,618,751
3,700 Eastern Enterprises 128,347
58,500 Edison International 1,608,750
58,200 Enron Corp. 4,154,037
40,800 Entergy Corp.# 1,323,451
39,300 FirstEnergy Corp. 1,250,234
29,900 FPL Group, Inc. 1,739,810
21,200 GPU, Inc. 923,527
54,800 Laidlaw, Inc. 383,600
19,000 New Century Energies, Inc. 768,314
31,100 Niagara Mohawk Holdings, Inc. 462,618
7,900 Nicor, Inc. 297,241
25,300 Northern States Power Co.# 659,387
5,200 Oneok, Inc. 156,000
49,300 PacifiCorp 896,647
37,100 Peco Energy Co. 1,815,583
5,800 People's Energy Corp. 223,300
63,400 PG&E Corp. 2,139,750
25,100 PP&L Resources, Inc. 753,000
37,000 Public Service Enterprise Group, Inc. 1,551,688
47,224 Reliant Energy, Inc. 1,440,335
39,850 Sempra Energy# 856,781
18,300 Sonat, Inc. 648,511
115,600 Southern Co. 3,280,159
46,822 Texas Utilities Co. 2,106,990
99,267 Waste Management, Inc. 5,248,478
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</TABLE>
COMMON STOCKS (continued)
ELECTRIC, GAS & SANITARY SERVICES (continued)
<TABLE>
<C> <S> <C>
70,900 Williams Cos., Inc. $ 3,673,507
---------------
59,029,171
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (8.5%)
24,000 Advanced Micro Devices, Inc. 444,000
13,700 Andrew Corp.* 212,351
36,000 Ascend Communications, Inc.* 3,336,751
15,700 Cooper Industries, Inc. 778,134
72,500 Emerson Electric Co. 4,630,939
543,300 General Electric Co. 55,246,827
27,700 General Instrument Corp.* 1,071,646
13,100 Harris Corp. 495,347
9,300 Honeywell, Inc. 880,014
552,800 Intel Corp. 29,885,753
23,500 LSI Logic Corp.* 870,970
438,200 Lucent Technologies, Inc.# 24,922,630
14,900 Maytag Corp. 1,051,382
41,000 Micron Technology, Inc. 1,555,438
99,500 Motorola, Inc. 8,239,848
27,700 National Semiconductor Corp.* 536,691
6,900 National Service Industries 254,009
109,980 Nortel Networks Corp.# 8,248,500
12,800 Raychem Corp. 444,800
12,500 Scientific-Atlanta, Inc. 441,407
64,400 Tellabs, Inc.* 3,767,400
64,600 Texas Instruments, Inc.# 7,065,627
9,400 Thomas & Betts Corp.# 402,441
12,600 Whirlpool Corp. 812,700
---------------
155,595,605
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED SERVICES (0.1%)
27,400 Dun & Bradstreet Corp. 959,000
7,500 EG&G, Inc. 222,659
40,650 Paychex, Inc. 1,204,257
---------------
2,385,916
---------------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY & TRANSPORTATION EQUIPMENT (0.8%)
5,100 Ball Corp. 248,312
11,350 Crane Co. 341,209
20,300 Crown Cork & Seal Co., Inc. 636,916
22,200 Danaher Corp. 1,341,714
28,300 Fortune Brands, Inc. 1,156,770
183,900 Gillette Co. 9,378,900
17,950 Parker-Hannifin Corp. 784,194
10,900 Snap-On, Inc. 394,447
14,700 Stanley Works 478,673
---------------
14,761,135
---------------
FOOD & KINDRED PRODUCTS (4.5%)
6,100 Adolph Coors Co. 289,750
79,300 Anheuser-Busch Cos., Inc. 5,793,863
98,077 Archer Daniels Midland Co. 1,471,157
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
61
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
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</TABLE>
COMMON STOCKS (continued)
FOOD & KINDRED PRODUCTS (continued)
<TABLE>
<C> <S> <C>
47,400 Bestfoods, Inc. $ 2,370,000
11,400 Brown-Forman Corp. 760,241
73,700 Campbell Soup Co.# 3,252,014
408,700 Coca-Cola Co.# 27,919,325
70,400 Coca-Cola Enterprises, Inc. 2,552,000
81,200 ConAgra, Inc.# 2,116,280
25,400 General Mills, Inc. 2,041,530
60,000 Heinz (H.J.) Co. 2,898,753
23,700 Hershey Foods Corp. 1,285,725
67,200 Kellogg Co. 2,331,006
243,200 PepsiCo, Inc. 8,709,603
22,600 Quaker Oats Co. 1,493,016
54,400 Ralston-Ralston Purina Group 1,482,400
53,800 RJR Nabisco Holdings Corp. 1,664,439
151,100 Sara Lee Corp. 3,626,400
66,100 Seagram Co. Ltd.# 3,433,070
94,824 Unilever NV--NY Shares# 6,193,023
19,300 Wrigley (Wm) Jr. Co.# 1,680,310
---------------
83,363,905
---------------
FOOD STORES (0.7%)
40,700 Albertson's, Inc.# 2,177,450
45,600 American Stores Co. 1,504,800
6,400 Great Atlantic & Pacific Tea Co. 209,600
68,200 Kroger Co.*# 3,993,970
80,600 Safeway, Inc.*# 3,747,900
24,600 Winn-Dixie Stores, Inc.# 880,992
---------------
12,514,712
---------------
FURNITURE & FIXTURES (0.1%)
56,300 Masco Corp. 1,608,074
---------------
GENERAL MERCHANDISE STORES (3.0%)
18,100 Consolidated Stores Corp.* 622,190
36,200 Costco Cos., Inc.* 2,624,501
73,100 Dayton Hudson Corp. 4,605,300
17,700 Dilliards, Inc. 621,717
36,689 Dollar General Corp. 974,511
34,800 Federated Department Stores, Inc.*# 1,896,600
11,800 Harcourt General, Inc.# 580,415
43,700 J.C. Penney Co., Inc. 2,258,746
81,700 KMart Corp. 1,256,143
26,200 Kohl's Corp.* 1,786,513
58,050 May Department Stores Co. 2,514,293
63,500 Sears, Roebuck and Co. 3,036,097
737,200 Wal-Mart Stores, Inc.# 31,423,150
---------------
54,200,176
---------------
HEALTH SERVICES (0.3%)
107,000 Columbia HCA Healthcare Corp. 2,521,190
18,400 HCR Manor Care, Inc.* 492,200
70,200 HEALTHSOUTH Corp.*# 938,928
5,631 Lifepoint Hospitals, Inc.* 56,310
51,400 Tenet Healthcare Corp.* 1,259,300
<CAPTION>
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- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
HEALTH SERVICES (continued)
<TABLE>
<C> <S> <C>
5,631 Triad Hospitals, Inc.* $ 57,018
---------------
5,324,946
---------------
HEAVY CONSTRUCTION OTHER THAN BUILDING CONSTRUCTION-- CONTRACTORS (0.1%)
12,500 Fluor Corp. 465,625
6,800 Foster Wheeler Corp. 93,500
44,900 Halliburton Co. 1,857,738
---------------
2,416,863
---------------
HOLDING & OTHER INVESTMENT OFFICES (0.1%)
53,183 Conseco, Inc.# 1,625,409
---------------
HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES (0.1%)
16,600 Circuit City Stores 1,192,091
---------------
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES (0.2%)
43,300 Hilton Hotels Corp. 595,375
40,200 Marriott International--Class A 1,530,115
32,600 Mirage Resorts, Inc.* 668,300
---------------
2,793,790
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (8.3%)
22,600 Apple Computer, Inc.*# 995,814
61,200 Applied Materials, Inc.* 3,362,180
54,270 Baker Hughes, Inc. 1,689,160
14,500 Black & Decker Corp. 825,597
3,900 Briggs & Stratton Corp. 243,750
15,200 Brunswick Corp. 364,800
12,300 Case Corp. 578,100
59,500 Caterpillar, Inc. 3,265,066
6,400 Cincinnati Milacron, Inc. 136,400
261,800 Cisco Systems, Inc.* 28,503,477
279,693 Compaq Computer Corp. 6,625,232
7,000 Cummins Engine Co., Inc. 354,381
8,300 Data General Corp.* 108,944
39,500 Deere & Co. 1,503,469
421,800 Dell Computer Corp.*# 14,525,738
37,000 Dover Corp. 1,394,442
83,200 EMC Corp.* 8,288,804
25,900 Gateway 2000, Inc.*# 1,575,045
28,000 Halliburton Co. 1,158,504
7,900 Harnischfeger Industries, Inc. 56,783
168,300 Hewlett-Packard Co. 15,872,797
306,000 IBM Corp. 35,591,627
27,200 Ingersoll-Rand Co. 1,732,302
9,800 McDermott International, Inc. 251,130
20,700 Pall Corp. 415,296
45,200 Pitney Bowes, Inc. 2,881,500
40,400 Seagate Technology, Inc.* 1,219,576
31,100 Silicon Graphics, Inc.* 384,869
41,700 Solectron Corp.* 2,283,075
16,400 Tandy Corp. 1,353,000
28,200 Tenneco, Inc. 657,415
10,300 Timken Co. 211,798
136,801 Tyco International Ltd.# 11,952,993
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
62
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
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- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (continued)
<TABLE>
<C> <S> <C>
43,300 Unisys Corp.* $ 1,642,699
---------------
152,005,763
---------------
INSURANCE AGENTS, BROKERS & SERVICE (0.3%)
42,300 Aon Corp. 1,818,900
27,700 Humana, Inc. 347,982
42,650 Marsh & McLennan Cos., Inc. 3,102,790
---------------
5,269,672
---------------
INSURANCE CARRIERS (4.7%)
23,700 Aetna Life & Casualty, Inc. 2,152,259
44,000 AFLAC, Inc. 2,244,000
136,000 Allstate Corp. 4,955,503
41,700 American General Corp. 3,012,825
203,607 American International Group, Inc. 23,274,711
27,000 Chubb Corp. 1,891,694
34,200 CIGNA Corp. 3,189,150
27,700 Cincinnati Financial Corp. 1,140,896
374,341 Citigroup, Inc. 24,799,967
38,700 Hartford Financial Services Group 2,447,775
17,550 Jefferson-Pilot Corp. 1,187,917
16,700 Lincoln National Corp. 1,699,225
18,900 Loews Corp. 1,536,809
16,400 MBIA, Inc. 1,120,330
18,100 MGIC Investment Corp. 871,065
12,000 Progressive Corp. 1,684,502
22,400 Provident Companies, Inc. 875,001
23,450 Providian Financial Corp. 2,249,738
22,600 Safeco Corp. 992,990
39,156 St. Paul Cos., Inc.# 1,392,492
23,300 Torchmark Corp. 777,640
30,900 United Healthcare Corp. 1,799,925
23,000 Unum Corp. 1,237,690
---------------
86,534,104
---------------
LUMBER & WOOD PRODUCTS, EXCEPT FURNITURE (0.0%)
18,000 Louisiana-Pacific Corp. 364,500
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.9%)
8,900 Bard (C.R.), Inc. 406,622
9,300 Bausch & Lomb, Inc. 710,294
41,200 Becton, Dickinson and Co. 1,596,500
18,700 Biomet, Inc. 746,835
65,100 Boston Scientific Corp.*# 2,469,737
53,700 Eastman Kodak Co. 3,631,469
49,900 Guidant Corp. 2,495,000
11,600 Honeywell, Inc. 1,097,653
14,100 Johnson Controls, Inc. 889,186
14,500 KLA-Tencor Corp.* 659,750
96,800 Medtronic, Inc. 6,872,800
7,300 Millipore Corp. 243,644
4,150 PE Corp--Celera Genomics Group* 70,550
8,300 PE Corp--PE Biosystems Group 927,009
7,300 Polaroid Corp. 154,218
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC, MEDICAL & OPTICAL
GOODS (continued)
<TABLE>
<C> <S> <C>
55,900 Raytheon Co., Class B $ 3,804,695
13,900 St. Jude Medical, Inc. 469,996
7,750 Tektronix, Inc. 179,703
26,300 Thermo Electron Corp. 502,992
108,700 Xerox Corp.# 6,107,590
---------------
34,036,243
---------------
METAL MINING (0.2%)
61,800 Barrick Gold Corp.# 1,066,050
38,100 Battle Mountain Gold Co. 92,870
15,100 Cyprus Amax Minerals Co. 189,697
27,400 Freeport-McMoRan Copper & Gold, Inc., Class B 387,031
43,100 Homestake Mining Co.# 336,720
27,700 Newmont Mining Corp. 493,407
71,780 Placer Dome, Inc.# 798,559
---------------
3,364,334
---------------
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.2%)
32,600 Hasbro, Inc. 933,175
15,100 ITT Industries, Inc. 570,025
5,800 Jostens, Inc. 122,531
69,100 Mattel, Inc.# 1,826,837
1,300 NACCO Industries, Inc. 97,016
---------------
3,549,584
---------------
MISCELLANEOUS RETAIL (0.6%)
64,600 CVS Corp. 2,971,600
6,500 Longs Drug Stores, Inc. 226,284
42,900 Rite Aid Corp. 1,072,500
76,400 Staples, Inc.* 2,196,501
41,600 Toys "R" Us, Inc.* 959,403
165,500 Walgreen Co.# 3,847,875
---------------
11,274,163
---------------
MOTION PICTURES (0.1%)
36,000 Unicom Corp. 1,523,252
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (2.4%)
75,000 American Express Co. 9,089,067
120,694 Associates First Capital Corp. 4,948,454
10,900 Capital One Financial Corp. 1,642,495
18,700 Countrywide Credit Industries, Inc. 769,040
171,900 Fannie Mae 11,689,200
112,500 Federal Home Loan Mortgage Corp. 6,560,157
80,106 Household International, Inc. 3,474,602
132,902 MBNA Corp. 3,671,365
27,400 SLM Holding Corp. 1,137,100
20,700 Transamerica Corp. 1,518,863
---------------
44,500,343
---------------
OIL & GAS EXTRACTION (0.6%)
21,000 Anadarko Petroleum Corp. 787,500
18,400 Apache Corp. 662,400
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
63
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
OIL & GAS EXTRACTION (continued)
<TABLE>
<C> <S> <C>
29,452 Burlington Resources, Inc. $ 1,264,596
8,200 Helmerich & Payne, Inc. 191,164
57,400 Occidental Petroleum Corp. 1,212,583
13,900 Rowan Cos., Inc. 234,570
90,500 Schlumberger Ltd. 5,446,975
41,600 Union Pacific Resources Group, Inc.# 579,802
---------------
10,379,590
---------------
PAPER & ALLIED PRODUCTS (1.3%)
19,300 Avery Dennison Corp. 1,155,590
8,700 Bemis Co., Inc. 328,425
9,400 Boise Cascade Corp. 372,482
15,800 Champion International Corp. 809,750
36,500 Fort James Corp. 1,336,819
14,600 Georgia-Pacific Group 1,261,988
24,500 IKON Office Solutions, Inc. 341,473
67,979 International Paper Co.# 3,398,950
89,800 Kimberly-Clark Corp. 5,270,145
16,800 Mead Corp. 627,903
66,700 Minnesota Mining and Manufacturing Co. 5,719,525
9,200 Temple-Inland, Inc. 616,400
16,600 Westvaco Corp. 474,141
33,000 Weyerhaeuser Co. 2,048,064
18,400 Willamette Industries, Inc. 779,703
---------------
24,541,358
---------------
PERSONAL SERVICES (0.1%)
16,200 H&R Block, Inc. 780,641
45,300 Service Corp. International# 869,197
---------------
1,649,838
---------------
PETROLEUM REFINING & RELATED INDUSTRIES (5.1%)
15,000 Amerada Hess Corp. 899,066
12,300 Ashland, Inc. 501,225
54,000 Atlantic Richfield Co. 4,519,130
108,200 Chevron Corp. 10,028,792
403,000 Exxon Corp. 32,189,629
14,336 Kerr-McGee Corp. 666,629
129,300 Mobil Corp. 13,091,625
42,200 Phillips Petroleum Co. 2,212,867
355,400 Royal Dutch Petroleum Co.--NY Registered Shares 20,102,313
15,500 Sunoco, Inc. 471,783
88,600 Texaco, Inc.# 5,803,300
40,000 Unocal Corp. 1,590,000
51,000 USX-Marathon Group, Inc. 1,526,817
---------------
93,603,176
---------------
PHARMACEUTICAL PREPARATIONS (1.0%)
218,500 American Home Products Corp. 12,591,063
84,400 Amgen, Inc.* 5,338,300
---------------
17,929,363
---------------
PRIMARY METAL INDUSTRIES (0.5%)
37,700 Alcan Aluminum Ltd. 1,055,600
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
PRIMARY METAL INDUSTRIES (continued)
<TABLE>
<C> <S> <C>
60,900 Alcoa, Inc.# $ 3,349,500
32,600 Allegheny Teledyne, Inc. 666,264
6,600 ASARCO, Inc. 106,013
21,600 Bethlehem Steel Corp.* 179,551
20,800 Engelhard Corp. 421,200
30,000 Inco Ltd. 427,500
14,500 Nucor Corp. 724,096
9,600 Phelps Dodge Corp. 497,402
10,700 Reynolds Metals Co. 569,108
14,600 USX-U.S. Steel Group, Inc. 393,292
15,300 Worthington Industries, Inc. 196,035
---------------
8,585,561
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.6%)
11,600 American Greetings Corp. 332,056
13,300 Deluxe Corp. 479,633
15,500 Dow Jones & Co., Inc. 813,750
46,700 Gannett Co., Inc. 3,374,075
13,000 Knight-Ridder, Inc.# 684,941
32,700 McGraw-Hill Cos., Inc. 1,696,313
8,700 Meredith Corp. 303,961
30,200 New York Times Co. 1,030,575
22,300 R.R. Donnelley & Sons Co. 808,375
203,400 Time Warner, Inc.# 13,843,919
12,000 Times Mirror Co. 707,251
19,700 Tribune Co. 1,555,072
115,400 Viacom, Inc.--Class B* 4,442,900
---------------
30,072,821
---------------
RAILROAD TRANSPORTATION (0.5%)
77,700 Burlington Northern Santa Fe Corp. 2,408,700
36,000 CSX Corp. 1,689,754
18,200 Kansas City Southern Industries, Inc. 1,023,750
62,800 Norfolk Southern Corp. 2,056,700
41,000 Union Pacific Corp. 2,339,564
---------------
9,518,468
---------------
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (0.6%)
6,700 Armstrong World Industries 390,275
12,600 Cooper Tire and Rubber Co. 299,250
25,800 Goodyear Tire & Rubber Co. 1,539,943
41,400 Illinois Tool Works, Inc.# 3,177,450
46,528 Newell Rubbermaid, Inc. 1,884,390
46,900 Nike, Inc.--Class B 2,857,972
9,400 Reebok International Ltd. 186,829
13,853 Sealed Air Corp.*# 860,619
9,600 Tupperware Corp. 213,600
---------------
11,410,328
---------------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES &
SERVICES (1.4%)
18,410 Bear Stearns Cos., Inc. 816,944
66,475 Charles Schwab Corp. 7,033,886
41,800 Franklin Resources, Inc. 1,818,300
18,900 Lehman Brothers Holding, Inc. 1,032,413
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
64
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES &
SERVICES (continued)
<TABLE>
<C> <S> <C>
58,800 Merrill Lynch & Co., Inc $ 4,939,200
95,800 Morgan Stanley Dean Witter & Co. 9,244,703
---------------
24,885,446
---------------
STONE, CLAY, GLASS & CONCRETE PRODUCTS (0.2%)
40,500 Corning, Inc. 2,212,319
9,000 Owens Corning 354,382
25,700 Owens-Illinois, Inc.* 783,850
---------------
3,350,551
---------------
TEXTILE MILL PRODUCTS (0.0%)
12,000 Fruit of the Loom, Inc.* 123,750
5,900 Russell Corp. 138,285
2,900 Springs Industries, Inc.--Class A 114,918
---------------
376,953
---------------
TOBACCO PRODUCTS (0.9%)
403,600 Philip Morris Cos., Inc. 15,563,826
---------------
TRANSPORTATION BY AIR (0.5%)
30,200 AMR Corp.* 1,964,895
23,500 Delta Airlines, Inc.# 1,348,313
49,000 FDX Corp.* 2,698,068
55,750 Southwest Airlines Co. 1,787,486
14,500 US Airways Group, Inc. 704,157
---------------
8,502,919
---------------
TRANSPORTATION EQUIPMENT (2.8%)
92,400 Allied-Signal, Inc. 5,364,981
155,520 Boeing Co.# 6,570,726
27,492 Dana Corp. 1,419,280
93,698 Delphi Automotive Systems Corp.* 1,838,818
11,800 Eaton Corp. 1,028,817
5,700 Fleetwood Enterprises, Inc. 144,999
200,600 Ford Motor Co. 11,446,742
21,000 General Dynamics Corp. 1,380,750
108,500 General Motors Corp. 7,486,500
65,000 Lockheed Martin Corp.# 2,628,443
11,000 Navistar International Corp.* 543,131
11,400 Northrop Grumman Corp. 769,500
12,900 PACCAR, Inc. 726,436
31,500 Rockwell International Corp. 1,738,408
26,200 Textron, Inc. 2,333,442
19,900 TRW, Inc. 996,249
74,800 United Technologies Corp. 4,642,280
---------------
51,059,502
---------------
WATER TRANSPORTATION (0.2%)
98,700 Carnival Corp. 4,046,700
---------------
WHOLESALE TRADE--DURABLE GOODS (0.1%)
29,800 Genuine Parts Co. 1,003,889
15,700 Grainger (W.W.), Inc. 833,085
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
WHOLESALE TRADE--DURABLE GOODS (continued)
<TABLE>
<C> <S> <C>
4,800 Potlatch Corp. $ 189,004
---------------
2,025,978
---------------
WHOLESALE TRADE--NONDURABLE GOODS (0.3%)
45,100 Cardinal Health, Inc. 2,722,913
19,900 Supervalu, Inc. 482,575
55,200 Sysco Corp. 1,638,755
---------------
4,844,243
---------------
TOTAL COMMON STOCKS (COST $998,685,912) 1,770,416,611
---------------
CORPORATE NOTES (0.2%)
2,000,000 NationsBank Corp., 5.12% V/R, 7/1/04 2,012,006
2,000,000 Spintab AB, 5.50% V/R, 12/20/04 2,000,000
---------------
TOTAL CORPORATE NOTES (COST $3,991,069) 4,012,006
---------------
UNIT INVESTMENT TRUST (0.0%)
1,100 Standard and Poor's Depository Receipts (cost $141,212) 143,223
---------------
U.S. TREASURY BILLS (0.2%)
2,130,000 3.96%--4.55% yield, 9/16/99 2,100,247
265,000 4.46%--4.79% yield, 11/12/99 259,229
785,000 4.44% yield, 4/27/00 749,706
---------------
TOTAL U.S. TREASURY BILLS (COST $3,115,832) 3,109,182
---------------
TIME DEPOSITS (2.9%)
52,735,996 Societe Generale, Grand Cayman, 4.50%, 6/1/99 (cost $52,735,996) 52,735,996
---------------
TOTAL INVESTMENTS (100.0%) (COST $1,058,670,021) $ 1,830,417,018
---------------
---------------
FINANCIAL FUTURES CONTRACTS++
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
POSITION CONTRACTS INDEX GAIN (LOSS)
- - --------- ------------- ------------------------------------- -----------
<S> <C> <C> <C>
Long 162 S&P 500 Futures, Expiring June 18,
1999 (notional value $52,536,600) $(935,700)
</TABLE>
<TABLE>
<C> <S> <C>
- - -----------------------------------------------------------------
INCOME EQUITY PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (98.8%)
BUSINESS SERVICES (1.8%)
1,717,800 IMS Health, Inc. $ 42,300,826
---------------
CHEMICALS & ALLIED PRODUCTS (13.5%)
1,050,500 E.I. du Pont de Nemours & Co. 68,742,100
520,750 Johnson & Johnson 48,234,470
574,800 Merck & Co., Inc.# 38,799,000
1,604,800 Morton International, Inc. 62,587,200
530,400 Pfizer, Inc. 56,752,800
554,800 Procter & Gamble Co. 51,804,450
---------------
326,920,020
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
65
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INCOME EQUITY PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
COMMUNICATIONS (5.9%)
1,669,800 AT&T Corp.# $ 92,673,901
782,600 GTE Corp. 49,352,721
---------------
142,026,622
---------------
DEPOSITORY INSTITUTIONS (4.2%)
470,650 J.P. Morgan & Co., Inc. 65,567,439
1,067,850 U.S. Bancorp 34,705,125
---------------
100,272,564
---------------
EATING & DRINKING PLACES (1.9%)
1,205,500 McDonald's Corp. 46,411,750
---------------
ELECTRIC, GAS & SANITARY SERVICES (6.5%)
543,000 Consolidated Natural Gas Co. 32,274,572
740,600 PG&E Corp.# 24,995,251
604,100 Public Service Enterprise Group, Inc. 25,334,454
876,350 Texas Utilities Co. 39,435,750
679,832 Waste Management, Inc.# 35,946,124
---------------
157,986,151
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (8.1%)
777,000 Emerson Electric Co. 49,630,876
550,978 General Electric Co. 56,027,582
1,566,292 Lucent Technologies, Inc.# 89,082,870
---------------
194,741,328
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (2.3%)
1,563,600 Dun & Bradstreet Corp. 54,726,000
---------------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY & TRANSPORTATION EQUIPMENT (3.4%)
2,036,600 Fortune Brands, Inc. 83,246,029
---------------
FOOD & KINDRED PRODUCTS (4.7%)
1,962,640 PepsiCo, Inc. 70,287,049
1,754,500 Sara Lee Corp. 42,108,000
---------------
112,395,049
---------------
GENERAL MERCHANDISE STORES (8.5%)
965,800 Dayton Hudson Corp. 60,845,400
1,138,400 J.C. Penney Co., Inc.# 58,841,059
1,094,250 May Department Stores Co. 47,394,713
773,830 Sears, Roebuck and Co.# 36,998,752
---------------
204,079,924
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (8.8%)
1,206,200 Hewlett-Packard Co. 113,759,571
1,128,647 Tyco International Ltd.# 98,615,534
---------------
212,375,105
---------------
INSURANCE CARRIERS (3.8%)
686,750 American General Corp. 49,617,688
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INCOME EQUITY PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
INSURANCE CARRIERS (continued)
<TABLE>
<C> <S> <C>
1,200,000 St. Paul Cos., Inc.# $ 42,675,001
---------------
92,292,689
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (3.7%)
544,050 Eastman Kodak Co. 36,791,390
567,600 Honeywell, Inc. 53,709,153
---------------
90,500,543
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (4.9%)
412,300 American Express Co. 49,965,611
941,800 Transamerica Corp. 69,104,576
---------------
119,070,187
---------------
OIL & GAS EXTRACTION (1.1%)
440,100 Schlumberger Ltd. 26,488,523
---------------
PAPER & ALLIED PRODUCTS (2.0%)
564,458 Minnesota Mining & Manufacturing Co. 48,402,275
---------------
PETROLEUM REFINING & RELATED INDUSTRIES (7.7%)
538,200 Atlantic Richfield Co. 45,040,618
458,750 Chevron Corp. 42,520,402
541,102 Exxon Corp. 43,220,523
305,900 Mobil Corp. 30,972,376
440,600 Royal Dutch Petroleum Co.--NY Registered Shares# 24,921,439
---------------
186,675,358
---------------
PHARMACEUTICAL PREPARATIONS (2.2%)
937,800 American Home Products Corp. 54,040,726
---------------
TOBACCO PRODUCTS (1.9%)
1,176,550 Philip Morris Cos., Inc. 45,370,719
---------------
TRANSPORTATION EQUIPMENT (1.9%)
738,600 United Technologies Corp.# 45,839,363
---------------
TOTAL COMMON STOCK (COST $1,306,018,686) 2,386,161,751
---------------
REPURCHASE AGREEMENTS (1.2%)
27,836,112 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $27,836,112)** 27,836,112
---------------
TOTAL INVESTMENTS (100.0%) (COST $1,333,854,798) $ 2,413,997,863
---------------
---------------
- - -----------------------------------------------------------------
DISCIPLINED GROWTH PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCKS (99.3%)
APPAREL & ACCESSORY STORES (2.4%)
97,300 Ross Stores, Inc. $ 4,469,723
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (3.1%)
76,830 Tommy Hilfiger Corp.* 5,767,054
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
66
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
DISCIPLINED GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
BUSINESS SERVICES (10.7%)
95,185 BMC Software, Inc.*# $ 4,705,710
59,450 Microsoft Corp.* 4,796,872
177,750 Oracle Corp.* 4,410,422
168,310 Unisys Corp.* 6,385,260
---------------
20,298,264
---------------
CHEMICALS & ALLIED PRODUCTS (2.2%)
91,600 Schering-Plough Corp. 4,127,726
---------------
COMMUNICATIONS (5.0%)
120,720 BellSouth Corp. 5,696,477
98,130 CenturyTel, Inc. 3,759,605
---------------
9,456,082
---------------
DEPOSITORY INSTITUTIONS (5.7%)
147,315 AmSouth Bancorp. 4,180,064
52,300 Chase Manhattan Corp. 3,791,750
141,020 Dime Bancorp, Inc. 2,873,284
---------------
10,845,098
---------------
EATING & DRINKING PLACES (2.8%)
252,145 Darden Restaurants, Inc. 5,373,842
---------------
ELECTRIC, GAS & SANITARY SERVICES (2.4%)
183,180 IPALCO Enterprises, Inc.# 4,522,257
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (2.7%)
89,160 Lucent Technologies, Inc. 5,070,976
---------------
FOOD & KINDRED PRODUCTS (6.6%)
59,000 Anheuser-Busch Cos., Inc. 4,310,688
155,810 IBP, Inc. 3,340,177
73,190 Quaker Oats Co. 4,835,114
---------------
12,485,979
---------------
FORESTRY (2.7%)
81,430 Weyerhaeuser Co. 5,053,750
---------------
GENERAL MERCHANDISE STORES (5.5%)
91,050 Dayton Hudson Corp. 5,736,150
154,450 TJX Cos., Inc. 4,633,500
---------------
10,369,650
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (15.4%)
80,400 Apple Computer, Inc.*# 3,542,625
43,110 EMC Corp.* 4,294,835
67,890 Hewlett-Packard Co. 6,402,851
71,930 Ingersoll-Rand Co. 4,581,042
46,230 Lexmark International Group, Inc.* 6,293,059
133,000 Seagate Technology, Inc.* 4,014,938
---------------
29,129,350
---------------
INSURANCE CARRIERS (4.8%)
68,300 Jefferson-Pilot Corp. 4,623,056
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
DISCIPLINED GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
INSURANCE CARRIERS (continued)
<TABLE>
<C> <S> <C>
52,020 PacifiCare Health Systems, Inc., Class B* $ 4,493,227
---------------
9,116,283
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (2.5%)
67,990 Fannie Mae 4,623,320
---------------
PETROLEUM REFINING & RELATED INDUSTRIES (2.4%)
57,350 Exxon Corp. 4,580,833
---------------
PHARMACEUTICAL PREPARATIONS (3.0%)
89,280 Amgen, Inc.* 5,646,960
---------------
PRINTING & PUBLICATIONS (2.2%)
80,100 Knight-Ridder, Inc.# 4,220,269
---------------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (2.7%)
53,600 Morgan Stanley Dean Witter & Co. 5,172,400
---------------
TRANSPORTATION (2.9%)
97,740 FDX Corp.* 5,381,809
---------------
TRANSPORTATION EQUIPMENT (7.1%)
72,740 Ford Motor Co. 4,150,727
72,780 General Dynamics Corp. 4,785,287
78,695 PACCAR, Inc. 4,431,512
---------------
13,367,526
---------------
WATER TRANSPORTATION (2.1%)
101,340 Royal Caribbean Cruises Ltd. 3,964,929
---------------
WHOLESALE TRADE--DURABLE GOODS (2.4%)
74,520 Martin Marietta Materials, Inc. 4,517,776
---------------
TOTAL COMMON STOCKS (COST $151,972,731) 187,561,856
---------------
REPURCHASE AGREEMENTS (0.7%)
1,363,697 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $1,363,697)** 1,363,697
---------------
TOTAL INVESTMENTS (100.0%) (COST $153,336,428) $ 188,925,553
---------------
---------------
- - -----------------------------------------------------------------
LARGE COMPANY GROWTH PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (96.5%)
AMUSEMENT & RECREATION SERVICES (1.0%)
647,590 Walt Disney Co.# $ 18,861,078
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (2.2%)
628,300 Cintas Corp.# 39,897,050
---------------
BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY & MOBILE HOME
DEALERS (4.7%)
161,200 Fastenal Co.# 8,261,500
1,368,378 Home Depot, Inc.# 77,826,520
---------------
86,088,020
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
67
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
LARGE COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
BUSINESS SERVICES (17.3%)
720,400 Automatic Data Processing, Inc. $ 29,671,477
338,000 DST Systems, Inc.* 18,252,000
424,700 First Data Corp. 19,084,972
775,313 Fiserv, Inc.* 29,074,243
2,180,000 IMS Health, Inc. 53,682,501
1,960,760 Microsoft Corp.* 158,208,655
450,000 Sungard Data Systems, Inc.*# 15,750,000
---------------
323,723,848
---------------
CHEMICALS & ALLIED PRODUCTS (8.1%)
724,600 Merck & Co., Inc.# 48,910,500
686,900 Pfizer, Inc. 73,498,300
428,400 Warner-Lambert Co. 26,560,800
---------------
148,969,600
---------------
DEPOSITORY INSTITUTIONS (1.3%)
313,300 State Street Corp.# 23,889,125
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (18.1%)
1,768,600 Intel Corp. 95,614,940
1,425,200 Lucent Technologies, Inc.# 81,058,250
1,594,600 Solectron Corp.*# 87,304,350
2,617,800 Telefonaktiebolaget LM Ericsson, Series B ADR# 70,517,008
---------------
334,494,548
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (2.2%)
406,600 Gartner Group, Inc.* 9,351,800
1,052,199 Paychex, Inc. 31,171,400
---------------
40,523,200
---------------
FOOD & KINDRED PRODUCTS (2.2%)
582,300 Coca-Cola Co. 39,778,389
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (6.3%)
1,076,475 Cisco Systems, Inc.*# 117,201,224
---------------
INSURANCE CARRIERS (4.6%)
739,843 American International Group, Inc. 84,573,302
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (4.3%)
1,109,100 Medtronic, Inc. 78,746,100
---------------
MISCELLANEOUS RETAIL (5.3%)
242,100 MSC Industrial Direct Co., Inc. 4,569,640
1,504,150 Office Depot, Inc.* 31,399,147
2,146,175 Staples, Inc.* 61,702,537
---------------
97,671,324
---------------
MOTION PICTURES (0.0%)
615 Iwerks Entertainment, Inc.* 557
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
LARGE COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
OIL & GAS EXTRACTION (0.7%)
222,500 Schlumberger Ltd.# $ 13,391,721
---------------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (16.7%)
1,386,275 Charles Schwab Corp. 146,685,225
1,278,600 Franklin Resources, Inc. 55,619,100
1,318,500 T. Rowe Price# 50,927,065
828,100 The Goldman Sachs Group, Inc.*# 56,259,044
---------------
309,490,434
---------------
WHOLESALE TRADE--NONDURABLE GOODS (1.5%)
444,400 Cardinal Health, Inc. 26,830,652
---------------
TOTAL COMMON STOCK (COST $987,687,972) 1,784,130,172
---------------
REPURCHASE AGREEMENTS (3.5%)
63,992,038 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $63,992,038)** 63,992,038
---------------
WARRANTS (0.0%)
1,229 Iwerks Entertainment, Inc. (cost $0) 0
---------------
TOTAL INVESTMENTS (100.0%) (COST $1,051,680,010) $ 1,848,122,210
---------------
---------------
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCKS (98.0%)
ADMINISTRATION OF ENVIRONMENTAL QUALITY & HOUSING PROGRAMS (0.1%)
7,400 Dames & Moore, Inc. $ 116,550
---------------
AGRICULTURAL PRODUCTION--CROPS (0.5%)
26,300 Chiquita Brands International, Inc. 212,044
15,400 Delta & Pine Land Co. 451,413
---------------
663,457
---------------
AGRICULTURAL PRODUCTION--LIVESTOCK & ANIMAL SPECIALTIES (0.1%)
8,500 Michael Foods, Inc. 199,750
---------------
AMUSEMENT & RECREATION SERVICES (0.7%)
4,900 Anchor Gaming* 219,275
10,400 Family Golf Centers, Inc.*# 94,576
10,400 Hollywood Park, Inc.* 150,150
12,900 Players International, Inc.* 83,850
11,600 Westwood One, Inc.* 403,100
---------------
950,951
---------------
APPAREL & ACCESSORY STORES (1.5%)
10,300 AnnTaylor Stores Corp.* 444,832
5,700 Ashworth, Inc.* 27,788
11,000 Cato Corp. 144,376
8,000 Dress Barn, Inc.* 117,500
8,900 Footstar, Inc.* 345,432
13,400 Goody's Family Clothing, Inc.* 145,726
9,700 Gymboree Corp.* 119,432
5,700 J. Baker, Inc. 41,325
12,600 Just For Feet, Inc.*# 96,076
8,300 Pacific Sunwear of California, Inc.* 311,250
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
68
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
APPAREL & ACCESSORY STORES (continued)
<TABLE>
<C> <S> <C>
6,700 St. John Knits, Inc. $ 191,788
---------------
1,985,525
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (1.0%)
9,300 Authentic Fitness Corp. 152,870
6,200 Cyrk, Inc.* 41,077
3,100 Haggar Corp. 39,139
14,100 Hartmarx Corp.* 69,621
11,200 Kellwood Co. 266,000
15,100 Nautica Enterprises, Inc.* 244,432
7,300 Oshkosh B'Gosh, Inc. 143,264
11,000 Phillips-Van Heusen Corp. 96,250
5,700 Pillowtex Corp. 92,625
8,900 Quiksilver, Inc.* 253,650
---------------
1,398,928
---------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.4%)
6,700 Discount Auto Parts, Inc.* 165,825
8,800 O'Reilly Automotive, Inc.* 387,750
---------------
553,575
---------------
AUTOMOTIVE REPAIR, SERVICES & PARKING (0.5%)
14,900 Breed Technologies, Inc.*# 49,357
12,300 Central Parking Corp.# 399,750
23,500 Rollins Truck Leasing Corp. 255,564
---------------
704,671
---------------
BUILDING CONSTRUCTION--GENERAL CONTRACTORS & OPERATIVE
BUILDERS (1.1%)
25,900 D.R. Horton, Inc. 440,300
7,400 MDC Holdings, Inc. 146,150
5,900 Ryland Group, Inc. 164,094
5,100 Southern Energy Homes, Inc.* 23,748
11,900 Standard Pacific Corp. 156,188
14,900 Toll Brothers, Inc.* 325,007
5,400 U.S. Home Corp.* 186,300
---------------
1,441,787
---------------
BUSINESS SERVICES (9.0%)
8,700 ABM Industries, Inc. 237,618
31,400 Acxiom Corp.* 847,800
9,000 ADVO, Inc.* 178,313
16,900 American Management Systems, Inc.* 536,575
9,100 Analysts International Corp. 145,031
10,000 Aspen Technology, Inc.* 104,375
10,800 BISYS Group, Inc.* 592,988
7,400 Catalina Marketing Corp.* 655,363
13,200 Cerner Corp.*# 265,652
23,500 Ciber, Inc.*# 503,784
16,100 Cognex Corp.* 432,689
8,400 Computer Task Group, Inc. 139,651
9,400 Dendrite International, Inc.*# 310,200
16,000 Epicor Software Corp.* 113,001
6,100 FactSet Research Systems, Inc. 260,775
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
BUSINESS SERVICES (continued)
<TABLE>
<C> <S> <C>
5,700 Fair, Isaac and Co., Inc. $ 186,675
12,800 FileNet Corp.* 126,402
9,100 Gerber Scientific, Inc. 212,714
16,700 Harbinger Corp.* 185,267
8,000 Henry (Jack) & Associates 282,500
10,400 HNC Software, Inc.*# 281,450
12,200 Hyperion Solutions Corp.* 189,862
18,000 Inacom Corp.* 199,125
4,500 Insurance Auto Auctions, Inc.* 57,938
19,100 Interim Services, Inc.* 416,619
5,100 Kronos, Inc.* 188,779
6,100 Lason, Inc.* 233,707
16,600 Macromedia, Inc.* 636,507
14,200 Mercury Interactive Corp.* 466,826
15,200 Midway Games, Inc.* 161,500
12,600 National Computer Systems, Inc. 393,750
13,600 National Data Corp. 640,050
13,300 National Instruments Corp.* 506,232
8,600 Network Equipment Technologies, Inc.* 89,225
10,500 Norrell Corp. 194,906
8,500 Primark Corp.* 230,032
6,900 Progress Software Corp.* 179,831
20,600 S3, Inc.* 138,407
16,500 Security Dynamics Technologies, Inc.* 313,500
19,200 System Software Associates, Inc.* 39,002
9,100 TCSI Corp.* 24,174
16,600 Technology Solutions, Inc.* 154,587
18,100 True North Communications, Inc. 423,090
10,500 Vantive Corp.*# 114,188
6,000 Volt Information Sciences, Inc.* 103,500
4,000 Wall Data, Inc.* 40,751
---------------
12,734,911
---------------
CHEMICALS & ALLIED PRODUCTS (4.2%)
15,900 Advanced Tissue Sciences, Inc.*# 61,614
13,400 Alliance Pharmaceutical Corp.* 39,782
10,800 Alpharma, Inc. 288,227
9,200 Barr Laboratories, Inc.* 303,025
9,000 Biomatrix, Inc.*# 275,625
9,900 Cambrex Corp. 222,750
7,600 ChemFirst, Inc. 180,974
9,400 Geon Co. 283,176
8,100 IDEC Pharmaceuticals Corp.* 408,544
9,400 Immune Response Corp.*# 59,927
11,600 Jones Pharma, Inc. 412,526
9,300 Lilly Industries, Inc., Class A 177,281
15,400 Liposome Company, Inc.* 220,413
10,100 Macdermid, Inc. 406,525
4,200 McWhorter Technologies, Inc.* 58,276
10,500 Mississippi Chemical Corp. 101,064
7,300 Natures Sunshine Product, Inc. 88,969
27,400 NBTY, Inc.* 172,108
12,900 North American Vaccine, Inc.*# 69,339
8,600 Noven Pharmaceuticals, Inc.* 52,676
9,500 OM Group, Inc. 355,063
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
69
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
CHEMICALS & ALLIED PRODUCTS (continued)
<TABLE>
<C> <S> <C>
10,000 Parexel International Corp.* $ 239,376
3,000 Penford Corp. 39,470
7,500 Protein Design Labs, Inc.* 147,188
3,500 Quaker Chemical Corp. 60,814
12,700 Roberts Pharmaceutical Corp.* 241,300
7,400 Scotts Co.* 325,600
5,600 USA Detergents, Inc.*# 29,051
10,200 Vertex Pharmaceuticals, Inc.*# 204,638
9,100 W.H. Brady Co. 228,069
---------------
5,753,390
---------------
COMMUNICATIONS (0.6%)
21,100 Brightpoint, Inc.* 120,007
20,000 General Communications, Inc.* 98,751
6,700 Metro Networks, Inc.* 372,688
19,700 TALK.com, Inc.*# 204,389
---------------
795,835
---------------
CONSTRUCTION--SPECIAL TRADE CONTRACTORS (0.7%)
11,100 Apogee Enterprises, Inc. 132,507
3,800 Chemed Corp. 123,263
9,000 Dycom Industries, Inc.* 434,250
10,700 Insituform Technologies, Class A* 179,225
7,000 Service Experts, Inc.* 129,938
---------------
999,183
---------------
CONSUMER PRODUCTS (0.0%)
3,200 Swiss Army Brands, Inc.* 25,800
---------------
DEPOSITORY INSTITUTIONS (7.1%)
7,300 Anchor Bancorp Wisconsin, Inc. 120,450
9,300 Banknorth Group, Inc. 248,194
9,000 Carolina First Corp. 246,937
10,700 Centura Banks, Inc. 623,944
11,000 Commerce Bancorp, Inc. 442,750
24,500 Commercial Federal Corp. 558,907
10,800 Cullen/Frost Bankers, Inc. 607,500
11,300 Downey Financial Corp. 248,600
12,000 First Bancorp/Puerto Rico 288,000
11,700 First Midwest Bancorp, Inc. 453,375
35,900 FirstMerit Corp. 980,520
16,000 Hudson United Bancorp 490,001
3,900 JSB Financial, Inc. 199,875
10,200 MAF Bancorp, Inc. 235,237
10,000 Premier Bancshares, Inc. 208,126
10,290 Provident Bankshares Corp. 237,957
8,600 Queens County Bancorp, Inc. 271,976
12,400 Riggs National Corp. 208,475
8,300 Silicon Valley Bancshares* 159,775
16,800 St. Paul Bancorp, Inc. 435,750
14,400 Susquehanna Bancshares, Inc. 261,901
10,800 TrustCo Bank Corp NY 302,400
17,200 UST Corp. 414,950
7,500 U.S. Trust Corp. 657,659
17,300 United Bankshares, Inc. 461,695
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
DEPOSITORY INSTITUTIONS (continued)
<TABLE>
<C> <S> <C>
9,400 Whitney Holding Corp. $ 383,050
---------------
9,748,004
---------------
EATING & DRINKING PLACES (2.2%)
12,100 Applebee's International, Inc. 356,950
7,300 CEC Entertainment, Inc.* 276,032
8,000 Cheesecake Factory, Inc.* 221,001
20,900 CKE Restaurants, Inc. 384,038
10,700 Consolidated Products, Inc.* 197,952
15,300 Foodmaker, Inc.* 413,100
8,000 IHOP Corp.* 191,000
12,200 Landry's Seafood Restaurants, Inc.* 111,325
9,200 Luby's, Inc. 156,400
13,200 Ruby Tuesday, Inc. 245,025
16,100 Ryan's Family Steak Houses, Inc.* 188,169
7,600 Sonic Corp.* 209,238
5,400 Taco Cabana, Inc., Class A* 57,714
9,200 TCBY Enterprises, Inc. 60,952
---------------
3,068,896
---------------
EDUCATIONAL SERVICES (0.5%)
27,900 DeVry, Inc.* 620,775
---------------
ELECTRIC, GAS & SANITARY SERVICES (4.9%)
3,600 American States Water Co. 96,075
4,550 Aquarion Co. 141,333
12,400 Atmos Energy Corp. 317,752
3,000 Bangor Hydro-Electric Co.* 42,376
4,400 Cascade Natural Gas Corp. 73,975
6,800 Central Hudson Gas & Electric Corp. 286,876
4,600 Central Vermont Public Service Corp. 54,913
5,400 CILCORP, Inc.# 329,064
8,600 Commonwealth Energy System 364,426
4,200 Connecticut Energy Corp. 157,762
8,300 Eastern Utilities Associates 239,663
11,900 Energen Corp. 227,588
2,200 Green Mountain Power Corp. 22,826
7,300 New Jersey Resources Corp. 275,575
10,000 Northwest Natural Gas Co. 240,000
5,400 Orange & Rockland Utilities, Inc. 314,214
4,200 Pennsylvania Enterprises, Inc. 121,800
16,300 Philadelphia Suburban Corp. 358,600
12,400 Piedmont Natural Gas Co. 419,275
8,300 Public Service Co. of North Carolina, Inc. 240,700
12,500 Sierra Pacific Resources 454,688
12,200 Southwest Gas Corp. 344,650
10,100 Southwestern Energy Co. 95,319
13,000 Superior Services, Inc.* 278,687
5,300 TNP Enterprises, Inc. 197,757
5,800 United Illuminating Co. 254,114
15,100 United Water Resources, Inc. 328,425
15,100 Wicor, Inc. 385,050
---------------
6,663,483
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
70
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (9.6%)
5,900 Adaptive Broadband Corp.* $ 93,664
11,000 Allen Group, Inc.* 114,813
6,400 Alpha Industries, Inc.* 222,800
20,600 Aspect Telecommunications Corp.* 175,100
14,900 Baldor Electric Co. 286,825
4,700 Benchmark Electronics, Inc.* 141,000
10,900 BMC Industries, Inc. 109,682
14,900 Burr-Brown Corp.* 476,800
5,000 C&D Technologies, Inc. 136,563
3,600 C-Cor Electronics, Inc.* 85,051
15,100 C-Cube Microsystems, Inc.*# 378,445
11,300 Cable Design Technologies Corp.* 159,614
2,600 Centigram Communications Corp.* 25,026
12,600 Checkpoint Systems, Inc.* 114,976
5,400 CTS Corp. 302,400
6,000 Customtracks Corp.*# 360,000
11,500 Dallas Semiconductor Corp. 500,250
24,800 Digital Microwave Corp.* 313,102
9,000 Dionex Corp.* 368,438
15,400 DSP Communications, Inc.* 473,550
5,000 Electro Scientific Industries, Inc.* 187,500
8,500 Etec Systems, Inc.* 227,907
14,900 General Semiconductor, Inc.* 115,475
5,300 HADCO Corp.* 164,300
7,100 Harman International Industries, Inc. 315,064
4,200 Harmon Industries, Inc. 87,677
9,000 Helix Technology Corp. 153,562
9,900 Hutchinson Technology, Inc.*# 230,175
6,000 Innovex, Inc. 80,252
10,500 Inter-Tel, Inc. 155,532
20,900 International Rectifier Corp.* 227,289
11,300 InterVoice, Inc.* 125,713
5,900 Itron, Inc.*# 49,045
7,500 Juno Lighting, Inc. 172,031
15,800 Kemet Corp.* 253,788
9,400 Lattice Semiconductor Corp.* 461,777
14,300 Methode Electronics, Inc. 263,657
8,000 Micrel, Inc.* 448,000
3,000 National Presto Industries, Inc. 111,938
15,600 Novellus Systems, Inc.* 761,476
7,000 Oak Industries, Inc.* 337,312
19,700 P-COM, Inc.* 86,803
4,200 Park Electrochemical Corp. 100,538
9,700 Photronics, Inc. 191,575
15,500 Picturetel Corp.* 137,564
6,900 Plantronics, Inc.* 422,625
6,100 Plexus Corp.* 186,431
7,800 Powerwave Technologies, Inc.* 180,375
19,800 Read-Rite Corp.* 130,557
8,100 Royal Appliance Manufacturing Co.* 36,450
13,300 Silicon Valley Group* 182,875
11,700 SpeedFam International, Inc.* 153,563
6,200 Standard Microsystems Corp.* 47,276
6,100 SymmetriCom, Inc.* 38,888
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT
(continued)
<TABLE>
<C> <S> <C>
6,500 Technitrol, Inc. $ 193,375
6,400 Thomas Industries, Inc. 129,600
3,000 Three-Five Systems, Inc.* 40,313
12,800 Unitrode Corp.* 266,401
10,800 Valence Technology, Inc.*# 80,325
16,900 Vicor Corp.* 278,850
18,400 VLSI Technology, Inc.* 385,251
2,600 Watkins-Johnson Co. 64,350
---------------
13,101,554
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (3.2%)
13,200 American Oncology Resources, Inc.* 134,063
15,000 Billing Information Concepts Corp.* 187,500
20,900 Bio-Technology General Corp.* 147,607
15,000 Blount International, Inc., Class A 418,126
7,700 CDI Corp.* 249,289
11,600 Cephalon, Inc.* 156,600
9,800 COR Therapeutics, Inc.* 139,038
8,500 Franklin Covey Co.* 82,875
11,200 Incyte Pharmaceuticals, Inc.* 291,200
13,000 MedQuist, Inc.* 477,750
8,600 NFO Worldwide, Inc.* 122,013
11,900 Organogenesis, Inc.*# 131,644
9,400 Pharmaceutical Product Development, Inc.*# 251,450
1,750 Quintiles Transnational Corp.* 71,096
12,500 Regeneron Pharmaceuticals, Inc.* 89,063
5,200 Stone & Webster, Inc. 127,400
12,000 Tetra Tech, Inc.* 255,000
10,900 The Profit Recovery Group International, Inc.* 401,256
10,900 U.S. Bioscience, Inc.* 87,880
20,600 Whittman-Hart, Inc.* 584,525
---------------
4,405,375
---------------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY & TRANSPORTATION EQUIPMENT (1.4%)
4,300 Alliant Techsystems, Inc.* 365,500
14,500 AptarGroup, Inc. 398,750
3,000 Butler Manufacturing Co. 84,376
12,200 Griffon Corp.* 97,600
3,400 Insteel Industries, Inc. 29,326
18,600 Mascotech, Inc. 290,625
6,300 Material Sciences Corp.* 70,090
10,900 Sturm, Ruger & Co., Inc. 121,944
18,600 Tower Automotive, Inc.* 425,475
---------------
1,883,686
---------------
FINANCIAL SERVICES (0.2%)
9,300 Jefferies Group, Inc. 228,432
---------------
FOOD & KINDRED PRODUCTS (1.6%)
7,300 Canandaigua Brands, Inc.* 363,175
3,400 Coca-Cola Bottling Co. 184,876
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
71
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
FOOD & KINDRED PRODUCTS (continued)
<TABLE>
<C> <S> <C>
14,400 Corn Products International, Inc. $ 424,800
17,200 Earthgrains Co. 403,126
3,600 J&J Snack Foods Corp.* 74,700
12,600 Ralcorp Holdings, Inc.* 237,826
16,800 Smithfield Foods, Inc.* 448,351
---------------
2,136,854
---------------
FOOD STORES (0.4%)
4,900 Panera Bread Co., Class A* 34,300
10,700 Whole Foods Market, Inc.* 444,050
---------------
478,350
---------------
FURNITURE & FIXTURES (0.8%)
5,100 Bassett Furniture Industries, Inc. 122,400
16,500 Ethan Allen Interiors, Inc. 525,938
21,100 LA-Z-BOY, Inc. 419,364
---------------
1,067,702
---------------
GENERAL MERCHANDISE STORES (1.1%)
11,100 Ames Department Stores, Inc.* 455,100
21,200 Casey's General Stores, Inc. 284,875
3,100 GC Companies, Inc.* 111,989
5,100 Gottschalks, Inc.* 42,075
10,500 Shopko Stores, Inc.* 372,750
18,300 Stein Mart, Inc.* 168,132
---------------
1,434,921
---------------
HEALTH CARE (0.9%)
24,400 VISX, Inc.* 1,266,981
---------------
HEALTH SERVICES (3.1%)
23,700 Coventry Health Care, Inc.* 314,025
5,100 Curative Health Services, Inc.* 34,744
10,000 Enzo Biochem, Inc.* 107,500
13,500 Express Scripts, Inc.* 946,688
14,200 Genesis Health Ventures, Inc. 63,013
15,500 Idexx Laboratories, Inc.* 395,250
21,300 Integrated Health Services, Inc.* 125,139
12,800 Magellan Health Services, Inc.* 103,200
29,500 Mariner Post-Acute Network* 66,375
19,300 Orthodontic Centers of America, Inc.* 232,807
6,100 Pediatrix Medical Group, Inc.*# 137,633
30,600 PhyCor, Inc.* 213,245
17,600 Renal Care Group, Inc.* 488,400
10,900 Sierra Health Services, Inc.* 166,225
4,400 Syncor International Corp.* 149,600
13,200 Universal Health Services, Inc.* 658,350
---------------
4,202,194
---------------
HEAVY CONSTRUCTION OTHER THAN BUILDING CONSTRUCTION--
CONTRACTORS (0.2%)
21,400 Morrison Knudsen Corp.* 212,664
---------------
HOLDING & OTHER INVESTMENT OFFICES (0.2%)
7,400 DBT Online, Inc.* 266,400
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES (1.4%)
15,000 Bombay Co., Inc.* $ 91,877
15,700 Linens 'N Things, Inc.* 626,039
8,200 MicroAge, Inc.* 45,869
39,200 Pier 1 Imports, Inc. 433,651
22,500 Williams-Sonoma, Inc.* 670,782
---------------
1,868,218
---------------
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES (0.4%)
18,300 Aztar Corp.* 123,525
12,600 Marcus Corp. 158,288
21,100 Prime Hospitality Corp.* 220,232
---------------
502,045
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (4.0%)
14,400 Anixter International, Inc.* 254,700
17,000 Applied Magnetics Corp.*# 51,000
15,500 Applied Power, Inc. 375,875
7,600 Astec Industries, Inc.* 284,051
10,400 Auspex Systems, Inc.* 113,101
7,900 BancTec, Inc.* 127,388
6,600 Dialogic Corp.* 220,276
7,900 Electroglas, Inc.* 114,550
9,100 Exabyte Corp.* 50,050
14,800 Fedders Corp. 84,176
5,900 Flow International Corp.* 58,263
6,500 Gardner Denver, Inc.* 111,313
8,800 Global Industrial Technologies, Inc.* 109,451
8,100 Graco, Inc. 264,770
21,500 Komag, Inc.* 81,969
9,400 Kulicke & Soffa Industries, Inc.* 198,576
5,300 Lindsay Manufacturing Co. 93,413
10,350 Manitowoc Co., Inc. 351,900
6,500 Micro Systems, Inc.* 203,125
19,300 Paxar Corp.* 174,907
4,400 Robbins & Myers, Inc. 105,051
7,200 Scott Technologies, Inc.* 135,901
5,100 SPS Technologies, Inc.* 216,113
6,500 Telxon Corp. 67,438
5,100 Toro Co. 171,170
8,500 Ultratech Stepper, Inc.*# 111,564
10,100 Valmont Industries, Inc. 166,966
12,000 Varian Medical Systems, Inc. 225,751
3,500 Walbro Corp.* 68,469
11,200 Watsco, Inc. 216,300
9,600 Xircom, Inc.* 242,400
12,600 Zebra Technologies Corp.* 404,777
---------------
5,454,754
---------------
INSURANCE AGENTS, BROKERS & SERVICE (0.3%)
6,900 Arthur J. Gallagher & Co. 335,944
5,300 Hilb, Rogal, and Hamilton Co. 107,989
---------------
443,933
---------------
INSURANCE CARRIERS (4.3%)
17,300 American Bankers Insurance Group, Inc. 927,713
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
72
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
INSURANCE CARRIERS (continued)
<TABLE>
<C> <S> <C>
12,800 Capital Re Corp. $ 208,800
9,200 CMAC Investment Corp. 465,176
4,100 Compdent Corp.* 59,450
8,364 Delphi Financial Group, Class A* 290,126
15,100 Enhance Financial Services Group, Inc.# 295,395
4,400 Executive Risk, Inc. 375,100
11,600 Fidelity National Financial, Inc. 196,476
24,200 First American Financial Corp. 397,789
28,100 Fremont General Corp. 595,370
14,900 Frontier Insurance Group, Inc. 256,094
16,100 Mutual Risk Management Ltd. 587,650
7,400 NAC Re Corp. 403,763
10,900 Orion Capital Corp. 318,144
11,300 Selective Insurance Group, Inc. 213,289
4,500 Trenwick Group, Inc. 141,750
6,900 Zenith National Insurance Corp. 156,975
---------------
5,889,060
---------------
LEATHER & LEATHER PRODUCTS (0.8%)
7,300 Brown Shoe Company, Inc. 138,700
10,600 Justin Industries 142,437
4,300 K-Swiss, Inc. 246,713
4,600 Timberland Co.* 297,850
16,500 Wolverine World Wide, Inc. 222,750
---------------
1,048,450
---------------
LEGAL SERVICES (0.2%)
9,400 Pre-Paid Legal Services, Inc.* 249,688
---------------
LOCAL & SUBURBAN TRANSIT & INTERURBAN HIGHWAY PASSENGER TRANSPORTATION (0.0%)
5,800 Rural/Metro Corp.* 43,863
---------------
LUMBER & WOOD PRODUCTS, EXCEPT FURNITURE (0.7%)
19,400 Champion Enterprises, Inc.* 396,488
18,900 Oakwood Homes Corp. 236,250
3,600 Skyline Corp. 112,275
6,300 TJ International, Inc. 173,250
---------------
918,263
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (3.1%)
8,300 ADAC Laboratories* 66,919
3,700 Amcast Industrial Corp. 62,206
5,100 Analogic Corp. 166,069
12,400 Ballard Medical Products 294,500
9,600 Coherent, Inc.* 154,802
5,800 Cooper Cos., Inc. 131,588
8,900 Cygnus, Inc.* 101,239
7,000 Daniel Industries 147,000
6,100 Datascope Corp.* 153,454
5,600 Diagnostic Products Corp. 127,400
6,900 Esterline Technologies Corp.* 103,069
7,600 Hanger Orthopedic Group, Inc.* 124,450
5,400 Hologic, Inc.* 41,176
20,300 Input/Output, Inc.* 172,550
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (continued)
<TABLE>
<C> <S> <C>
5,000 Intermagnetics General Corp.* $ 39,063
12,000 Invacare Corp. 299,251
6,500 Ionics, Inc.* 203,532
5,800 Maxxim Medical, Inc.* 92,076
9,800 Mentor Corp. 156,188
7,500 Molecular Biosystems, Inc.* 18,750
2,500 Nashua Corp.* 28,439
8,300 ReSound Corp.* 63,807
12,800 Respironics, Inc.* 206,401
12,100 Roper Industries, Inc. 390,225
10,000 Sola International, Inc.* 166,875
3,700 SpaceLabs Medical, Inc.* 57,350
17,100 Summit Technology, Inc.* 337,725
9,000 Sunrise Medical, Inc.* 74,813
8,900 Trimble Navigation Ltd.* 111,250
4,500 Whittaker Corp.* 120,939
8,500 X-Rite, Inc. 59,500
---------------
4,272,606
---------------
METAL MINING (0.5%)
6,600 Brush Wellman, Inc. 111,788
8,800 Coeur D'Alene Mines Corp.*# 36,851
22,200 Hecla Mining Co.* 54,113
13,700 Stillwater Mining Co.* 437,544
---------------
640,296
---------------
MINING & QUARRYING OF NONMETALLIC MINERALS, EXCEPT FUELS (0.3%)
10,900 AMCOL International Corp. 154,644
7,600 Florida Rock Industries, Inc. 303,051
---------------
457,695
---------------
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.3%)
6,700 Cross (A.T.) Co. 41,875
11,400 Jan Bell Marketing, Inc.* 34,913
6,700 K2, Inc. 66,582
6,300 Lydall, Inc.* 75,994
9,000 Russ Berrie & Co., Inc. 231,187
---------------
450,551
---------------
MISCELLANEOUS RETAIL (1.0%)
7,100 Books-A-Million, Inc.*# 58,575
10,100 Cash America International, Inc. 128,144
2,600 Damark International, Inc., Class A* 25,513
7,900 Hancock Fabrics, Inc. 44,932
7,700 Jo-Ann Stores, Inc.* 129,456
3,600 Lillian Vernon Corp. 46,351
11,500 Michaels Stores, Inc.* 307,625
12,800 Sports Authority, Inc.* 64,000
14,500 Zale Corp.* 559,157
---------------
1,363,753
---------------
MOTION PICTURES (0.2%)
9,900 Avid Technology, Inc.* 160,875
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
73
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
MOTION PICTURES (continued)
<TABLE>
<C> <S> <C>
4,500 Carmike Cinemas, Inc.* $ 79,032
---------------
239,907
---------------
MOTOR FREIGHT TRANSPORTATION & WAREHOUSING (1.3%)
12,700 American Freightways Corp.* 222,250
7,900 Arkansas Best Corp.* 70,114
6,700 Frozen Food Express Industries, Inc. 46,063
12,100 Heartland Express, Inc.* 185,282
4,200 Landstar System, Inc.* 158,026
5,000 M.S. Carriers, Inc.* 158,126
10,500 USFreightways Corp. 413,439
19,100 Werner Enterprises, Inc. 368,870
10,300 Yellow Corp.* 175,100
---------------
1,797,270
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (0.3%)
25,400 AmeriCredit Corp.* 404,813
---------------
OIL & GAS EXTRACTION (2.6%)
11,900 Benton Oil & Gas Co.* 41,650
10,000 Cabot Oil and Gas Corp. 178,751
18,400 Cross Timbers Oil Co. 198,952
13,000 Devon Energy Corp.# 451,750
605 Eagle Geophysical, Inc.* 2,042
7,500 HS Resources, Inc.* 90,000
16,300 Newfield Exploration Co.* 413,614
9,100 Oceaneering International, Inc.* 140,482
6,800 Plains Resources, Inc.* 116,875
16,100 Pogo Producing Co. 294,831
8,500 Pool Energy Services Co.* 143,438
20,300 Pride International, Inc.* 211,882
8,600 Remington Oil & Gas Corp.* 35,475
5,100 SEACOR SMIT, Inc.* 253,088
9,400 Seitel, Inc.* 148,638
4,400 St. Mary Land & Exploration Co. 88,000
6,000 Stone Energy Corp.* 226,125
5,400 Tetra Technologies, Inc. 45,900
18,000 Tuboscope Vetco International Corp.* 240,752
21,400 Vintage Petroleum, Inc. 240,750
---------------
3,562,995
---------------
PAPER & ALLIED PRODUCTS (0.5%)
14,300 Buckeye Technologies, Inc.* 233,269
5,400 Pope & Talbot, Inc. 54,000
4,800 Republic Group, Inc. 85,801
6,500 Schweitzer-Mauduit International, Inc. 99,532
11,000 Shorewood Packaging Corp.* 188,376
---------------
660,978
---------------
PERSONAL SERVICES (0.7%)
3,500 Angelica Corp. 59,282
4,100 CPI Corp. 129,150
8,300 G & K Services, Inc. 392,175
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
PERSONAL SERVICES (continued)
<TABLE>
<C> <S> <C>
15,300 Regis Corp. $ 369,114
---------------
949,721
---------------
PETROLEUM REFINING & RELATED INDUSTRIES (0.3%)
5,200 Elcor Corp. 209,950
6,200 WD-40 Co. 159,263
---------------
369,213
---------------
PHARMACEUTICAL PREPARATIONS (0.1%)
18,700 Dura Pharmaceuticals, Inc.* 194,013
---------------
PRIMARY METAL INDUSTRIES (2.0%)
9,800 Belden, Inc. 230,912
11,900 Birmingham Steel Corp. 60,989
6,500 Commonwealth Industries, Inc. 69,875
19,800 CommScope, Inc.* 519,750
6,700 IMCO Recycling, Inc. 112,225
10,300 Intermet Corp. 142,914
14,400 Mueller Industries, Inc.* 417,600
5,700 Quanex Corp. 148,914
8,400 RTI International Metals, Inc.*# 111,826
4,500 Steel Technologies, Inc. 40,500
8,500 Texas Industries, Inc. 309,188
14,700 Tredegar Corp. 315,132
7,100 WHX Corp.* 53,250
5,700 Wolverine Tube, Inc.* 135,732
---------------
2,668,807
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.7%)
14,900 Bowne & Co., Inc. 249,575
5,800 Consolidated Graphics, Inc.* 267,527
6,400 Gibson Greetings, Inc.* 46,400
12,500 John H. Harland Co. 223,438
6,500 Merrill Corp. 98,313
5,800 New England Business Service, Inc. 157,689
5,900 Thomas Nelson, Inc. 57,895
22,950 Valassis Communications, Inc.* 798,947
15,400 World Color Press, Inc.* 392,700
---------------
2,292,484
---------------
RAILROAD TRANSPORTATION (0.0%)
3,700 RailTex, Inc.* 49,950
---------------
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (0.4%)
6,200 O'Sullivan Corp. 55,026
22,000 Safeskin Corp.* 275,000
6,500 Standard Products Co. 145,032
8,400 Titan International, Inc. 78,751
---------------
553,809
---------------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (2.4%)
19,700 Amresco Inc.* 135,439
5,000 Dain Rauscher Corp. 260,313
14,400 Eaton Vance Corp. 441,001
9,700 Hambrecht & Quist Group* 348,594
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
74
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (continued)
<TABLE>
<C> <S> <C>
22,700 Legg Mason, Inc. $ 767,546
10,400 Pioneer Group, Inc.* 183,301
19,300 Raymond James Financial, Inc. 427,013
7,100 SEI Investments Co. 724,200
---------------
3,287,407
---------------
STONE, CLAY, GLASS & CONCRETE PRODUCTS (1.1%)
28,900 Gentex Corp.* 867,904
6,500 Libbey, Inc. 194,594
8,200 Lone Star Industries, Inc.# 292,125
5,200 Standex International Corp. 135,851
---------------
1,490,474
---------------
TECHNOLOGY (0.2%)
10,600 Varian Semiconductor Equipment Associates, Inc.* 131,838
10,600 Varian, Inc.* 106,000
---------------
237,838
---------------
TEXTILE MILL PRODUCTS (0.5%)
10,200 Cone Mills Corp.* 63,113
9,800 Delta Woodside Industries, Inc. 69,213
4,800 Galey & Lord, Inc.* 19,801
9,300 Guilford Mills, Inc. 93,000
21,100 Interface, Inc. 163,525
3,300 Oxford Industries, Inc. 91,575
4,500 The Dixie Group, Inc. 41,063
10,200 Triarc Cos., Inc.* 207,826
---------------
749,116
---------------
TRANSPORTATION BY AIR (0.4%)
11,500 Mesa Air Group, Inc.* 76,188
8,600 Offshore Logistics, Inc.* 97,288
7,800 Pittston BAX Group 84,338
9,800 SkyWest, Inc. 227,850
---------------
485,664
---------------
TRANSPORTATION EQUIPMENT (2.5%)
9,400 A. O. Smith Corp. 229,127
11,100 AAR Corp. 219,225
11,000 Arctic Cat, Inc. 91,437
9,900 BE Aerospace, Inc.* 176,964
10,100 Clarcor, Inc. 185,588
6,700 Coachmen Industries, Inc. 147,400
11,600 Halter Marine Group, Inc.* 85,551
4,800 Huffy Corp. 64,501
17,800 JLG Industries, Inc. 343,763
8,300 Kroll-O'Gara Co.* 166,778
14,900 Orbital Sciences Corp.* 337,114
10,300 Polaris Industries, Inc. 443,543
8,400 Regal-Beloit Corp. 195,300
7,400 Simpson Industries, Inc. 74,463
5,100 Spartan Motors, Inc. 29,325
5,200 Standard Motor Products, Inc. 123,826
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
TRANSPORTATION EQUIPMENT (continued)
<TABLE>
<C> <S> <C>
4,900 Thor Industries, Inc. $ 128,932
9,300 Wabash National Corp. 177,281
9,000 Winnebago Industries, Inc. 148,500
---------------
3,368,618
---------------
TRANSPORTATION SERVICES (0.8%)
13,600 Air Express International Corp. 340,000
10,000 Expeditors International of Washington, Inc. 556,252
14,600 Fritz Companies, Inc.* 156,950
---------------
1,053,202
---------------
WATER TRANSPORTATION (0.1%)
8,400 Kirby Corp.* 158,550
---------------
WHOLESALE TRADE--DURABLE GOODS (2.9%)
8,700 Applied Industrial Technologies, Inc. 147,357
5,000 Aviation Sales Co.* 192,500
8,000 Barnes Group, Inc. 184,500
3,900 Bell Industries, Inc.* 39,975
5,100 Building Materials Holding Corp.* 58,650
5,700 Castle (A.M.) & Co. 87,639
5,900 Commercial Metals Co. 138,282
7,200 Department 56, Inc.* 238,950
5,900 Digi International, Inc.* 49,414
18,000 Ha-Lo Industries, Inc.* 217,125
9,700 Hughes Supply, Inc. 261,294
10,100 Insight Enterprises, Inc.*# 256,288
9,500 Kaman Corp., Class A 125,875
11,200 Kent Electronics Corp.* 146,301
4,300 Lawson Products, Inc. 106,425
6,700 Marshall Industries* 118,088
13,100 Owens & Minor, Inc. Holding Co. 142,464
13,400 Patterson Dental Co.* 490,776
10,700 Pioneer-Standard Electronics, Inc. 104,994
7,400 Reliance Steel & Aluminum Co. 263,626
4,700 Simpson Manufacturing Co., Inc.* 208,563
8,500 TBC Corp.* 60,031
8,400 Universal Forest Products, Inc. 151,200
5,000 Vital Signs, Inc. 95,939
7,600 Wynn's International, Inc. 137,275
---------------
4,023,531
---------------
WHOLESALE TRADE--NONDURABLE GOODS (1.9%)
12,800 Barrett Resources Corp.* 432,801
8,900 Bindley Western Industries, Inc. 268,114
10,100 Caraustar Industries, Inc. 266,388
17,900 DIMON, Inc.# 93,975
15,400 Fleming Cos., Inc. 158,814
14,100 Men's Wearhouse, Inc.* 359,992
7,400 Myers Industries, Inc. 169,277
4,500 Nash-Finch Co. 42,188
8,200 NCS HealthCare, Inc.* 112,750
7,500 Priority Healthcare Corp.* 255,938
19,200 Richfood Holdings, Inc. 246,001
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
75
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP INDEX PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
WHOLESALE TRADE--NONDURABLE GOODS (continued)
<TABLE>
<C> <S> <C>
18,700 Stride Rite Corp. $ 195,183
---------------
2,601,421
---------------
TOTAL COMMON STOCKS (COST $150,489,579) 133,913,540
---------------
U.S. TREASURY BILLS (0.7%)
250,000 3.96%--4.55% yield, 9/16/99 246,508
595,000 4.46%--4.79% yield, 11/12/99 582,041
150,000 4.67% yield, 4/27/00 143,256
---------------
971,805
---------------
TOTAL U.S. TREASURY BILLS (COST $973,938) 971,805
---------------
TIME DEPOSITS (1.3%)
1,768,616 Societe Generale, 4.50%, 6/1/99 (cost $1,768,616) 1,768,616
TOTAL INVESTMENTS (100.0%) (COST $153,232,133) $ 136,653,961
---------------
---------------
FINANCIAL FUTURES CONTRACTS ##
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
POSITION CONTRACTS INDEX GAIN (LOSS)
- - -------- --------- ------------------------------------------ --------------
<S> <C> <C> <C>
Long 11 Russell 2000 Index, Expiring June 18, 1999, (notional value $2,424,675) $ 247,175
</TABLE>
<TABLE>
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCKS (99.6%)
AGRICULTURAL SERVICES (0.2%)
22,729 Veterinary Centers of America, Inc.* $ 316,786
---------------
AMUSEMENT & RECREATION SERVICES (0.5%)
19,100 Westwood One, Inc.* 663,725
---------------
APPAREL & ACCESSORY STORES (1.2%)
19,210 American Eagle Outfitters, Inc.* 784,008
37,056 Just For Feet, Inc.*# 282,553
13,700 Pacific Sunwear of California, Inc.* 513,750
---------------
1,580,311
---------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.8%)
17,559 CSK Auto Corp.* 491,652
13,900 O'Reilly Automotive, Inc.* 612,469
---------------
1,104,121
---------------
AUTOMOTIVE REPAIR, SERVICES & PARKING (1.0%)
21,179 Avis Rent A Car, Inc.* 607,573
19,300 Central Parking Corp.# 627,250
16,447 United Road Services, Inc.* 127,465
---------------
1,362,288
---------------
BUILDING CONSTRUCTION--GENERAL CONTRACTORS & OPERATIVE
BUILDERS (0.2%)
11,715 Lennar Corp. 265,052
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
BUSINESS SERVICES (20.9%)
13,100 ABM Industries, Inc. $ 357,794
50,700 Acxiom Corp.* 1,368,900
21,464 Administaff, Inc.* 343,424
27,400 American Management Systems, Inc.* 869,950
16,505 Axent Technologies, Inc.* 205,281
6,203 Bindview Development Corp.* 123,285
17,500 BISYS Group, Inc.* 960,861
12,420 BMC Software, Inc.*# 614,014
9,122 Cambridge Technology Partners, Inc.* 155,074
12,000 Catalina Marketing Corp.* 1,062,751
35,100 Ciber, Inc.*# 752,456
8,372 CMGI, Inc.*# 867,549
26,200 Cognex Corp.* 704,126
12,883 Cognizant Technology Solutions Corp.* 323,685
9,692 Com21, Inc.* 174,456
38,397 Convergys Corp.* 676,747
20,553 Cotelligent, Inc.* 274,897
5,725 CSG Systems International, Inc.* 182,843
13,255 Documentum, Inc.*# 185,570
8,524 Excite, Inc.* 1,133,692
9,300 Fair, Isaac and Co., Inc. 304,575
12,500 Henry (Jack) & Associates 441,407
16,900 HNC Software, Inc.*# 457,356
10,148 IMRglobal Corp.* 212,474
8,937 International Network Services*# 334,021
16,105 International Telecommunication Data Systems, Inc.* 201,313
2,065 Lamar Advertising Co.* 70,468
10,000 Lason, Inc.* 383,126
12,799 Legato Systems, Inc.* 700,745
2,879 Lycos, Inc.* 289,340
26,200 Macromedia, Inc.* 1,004,608
1,140 MarketWatch.com, Inc.*# 59,137
23,200 Mercury Interactive Corp.* 762,700
24,971 Metamor Worldwide, Inc.* 683,581
7,110 Micromuse, Inc.* 283,512
2,992 MindSpring Enterprises, Inc.* 221,408
20,400 National Computer Systems, Inc. 637,500
37,879 National Data Corp. 1,782,681
21,600 National Instruments Corp.* 822,150
26,424 NOVA Corp.* 587,934
13,250 Policy Management Systems Corp.* 481,969
7,839 PSINet, Inc.* 348,836
5,878 RealNetworks, Inc.* 416,603
18,186 Security Dynamics Technologies, Inc.* 345,534
17,063 SEI Investments Co. 1,740,426
12,485 StaffMark, Inc.* 135,774
29,500 True North Communications, Inc. 689,563
4,517 USWeb Corp.* 114,619
9,435 Verio, Inc.* 511,849
9,721 VeriSign, Inc.* 1,151,939
7,747 Vignette Corp.* 459,010
---------------
27,973,513
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
76
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
CHEMICALS & ALLIED PRODUCTS (7.7%)
8,360 ALZA Corp.*# $ 298,348
14,600 Barr Laboratories, Inc.* 480,888
15,200 Biomatrix, Inc.*# 465,500
17,074 Cambrex Corp. 384,165
8,437 Coulter Pharmaceutical, Inc.*# 219,362
23,659 Invitrogen Corp.* 461,351
34,905 Jones Pharma, Inc. 1,241,309
16,400 Macdermid, Inc. 660,100
17,345 Medicis Pharmaceutical Corp.* 463,979
40,739 MedImmune, Inc.* 2,591,973
35,014 Parexel International Corp.* 838,148
24,315 Pharmacyclics, Inc.* 454,387
12,200 Scotts Co.* 536,800
3,591 Sepracor, Inc.*# 228,926
18,529 Serologicals Corp.* 147,074
14,414 Warner-Lambert Co. 893,675
---------------
10,365,985
---------------
COMMUNICATIONS (1.7%)
34,200 Brightpoint, Inc.* 194,513
1,494 Covad Communications Group, Inc.* 76,007
16,675 Emmis Communications Corp.* 779,556
20,069 ITC DeltaCom, Inc.* 479,148
11,100 Metro Networks, Inc.* 617,438
3,364 Voicestream Wireless Corp.* 91,879
3,364 Western Wireless Corp.* 82,418
---------------
2,320,959
---------------
CONSTRUCTION--SPECIAL TRADE CONTRACTORS (0.6%)
15,965 Dycom Industries, Inc.* 770,312
---------------
DEPOSITORY INSTITUTIONS (9.3%)
17,700 Centura Banks, Inc. 1,032,131
5,105 CNB Bancshares, Inc. 220,153
17,800 Commerce Bancorp, Inc. 716,450
25,284 Commercial Federal Corp. 576,792
23,403 Community First Bankshares, Inc. 495,852
17,500 Cullen/Frost Bankers, Inc. 984,375
19,900 First Bancorp/Puerto Rico 477,600
19,400 First Midwest Bancorp, Inc. 751,750
27,337 FirstFed Financial Corp.* 515,986
54,600 FirstMerit Corp. 1,491,263
37,707 Hudson United Bancorp 1,154,778
13,900 Queens County Bancorp, Inc. 439,588
3,849 Silicon Valley Bancshares* 74,094
17,900 TrustCo Bank Corp NY 501,200
12,200 U.S. Trust Corp. 1,069,788
27,900 UST Corp. 673,088
28,100 United Bankshares, Inc. 749,919
15,300 Whitney Holding Corp. 623,475
---------------
12,548,282
---------------
EATING & DRINKING PLACES (0.9%)
24,971 CKE Restaurants, Inc. 458,842
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
EATING & DRINKING PLACES (continued)
<TABLE>
<C> <S> <C>
25,600 Foodmaker, Inc.* $ 691,200
---------------
1,150,042
---------------
EDUCATIONAL SERVICES (0.7%)
44,500 DeVry, Inc.* 990,125
---------------
ELECTRIC, GAS & SANITARY SERVICES (0.3%)
18,500 Philadelphia Suburban Corp. 407,000
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (10.6%)
13,824 Applied Micro Circuits Corp.* 817,344
24,100 Baldor Electric Co. 463,925
24,100 Burr-Brown Corp.* 771,200
24,500 C-Cube Microsystems, Inc.*# 614,032
17,730 Celestica, Inc.* 702,552
16,675 DII Group, Inc.* 549,233
14,500 Dionex Corp.* 593,594
3,120 L-3 Communications Holdings, Inc.* 153,660
20,096 Level One Communications, Inc.* 909,344
14,764 Maxwell Technologies, Inc.* 332,190
13,100 Micrel, Inc.* 733,600
10,148 Network Appliance, Inc.* 478,542
30,267 Novellus Systems, Inc.*# 1,477,409
21,094 NVIDIA Corp.*# 359,916
10,800 Plantronics, Inc.* 661,500
16,646 PMC-Sierra, Inc.* 808,372
9,721 Power Integrations, Inc.* 472,077
3,905 Rambus, Inc.*# 302,638
9,441 Sanmina Corp.*# 707,928
66 SDL, Inc.* 6,138
42,600 Vitesse Semiconductor Corp.* 2,340,338
---------------
14,255,532
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (2.8%)
24,200 Blount International, Inc., Class A 674,576
18,100 Incyte Pharmaceuticals, Inc.* 470,600
21,200 MedQuist, Inc.* 779,100
14,935 Metzler Group, Inc.* 489,121
15,300 Pharmaceutical Product Development, Inc.*# 409,275
33,400 Whittman-Hart, Inc.* 947,726
---------------
3,770,398
---------------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY & TRANSPORTATION EQUIPMENT (0.8%)
7,300 Alliant Techsystems, Inc.* 620,500
30,100 Mascotech, Inc. 470,313
---------------
1,090,813
---------------
FINANCIAL SERVICES (0.2%)
13,700 Jefferies Group, Inc. 336,506
---------------
FOOD & KINDRED PRODUCTS (0.4%)
18,386 American Italian Pasta Co.* 505,616
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
77
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
FOOD STORES (0.5%)
17,300 Whole Foods Market, Inc.*# $ 717,950
---------------
FURNITURE & FIXTURES (0.6%)
27,000 Ethan Allen Interiors, Inc. 860,625
---------------
GENERAL MERCHANDISE STORES (1.6%)
14,368 99 Cents Only Stores*# 677,092
23,574 Ames Department Stores, Inc.* 966,534
3,658 BJ's Wholesale Club, Inc.* 95,108
34,400 Casey's General Stores, Inc. 462,250
---------------
2,200,984
---------------
HEALTH SERVICES (4.3%)
28,392 Covance, Inc.*# 601,556
22,000 Express Scripts, Inc.* 1,542,750
2,192 Healtheon Corp.*# 195,088
25,300 Idexx Laboratories, Inc.* 645,150
31,200 Orthodontic Centers of America, Inc.* 376,350
16,440 Quintiles International* 667,875
26,500 Renal Care Group, Inc.* 735,375
21,300 Universal Health Services, Inc.* 1,062,338
---------------
5,826,482
---------------
HOLDING & OTHER INVESTMENT OFFICES (0.2%)
10,928 Golf Trust of America, Inc. 266,371
---------------
HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES (1.9%)
14,134 Cost Plus, Inc.* 528,258
25,500 Linens 'N Things, Inc.* 1,016,813
36,300 Williams-Sonoma, Inc.* 1,082,194
---------------
2,627,265
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (2.5%)
31,309 Applied Power, Inc. 759,243
16,950 Manitowoc Co., Inc. 576,300
16,105 Metris Cos., Inc. 939,123
15,100 Xircom, Inc.* 381,275
20,400 Zebra Technologies Corp.* 655,350
---------------
3,311,291
---------------
INSURANCE AGENTS, BROKERS & SERVICE (0.4%)
11,300 Arthur J. Gallagher & Co. 550,169
---------------
INSURANCE CARRIERS (2.5%)
14,000 American Bankers Insurance Group, Inc. 750,751
14,800 CMAC Investment Corp. 748,325
39,200 First American Financial Corp. 644,350
2,901 MONY Group, Inc. 80,140
26,200 Mutual Risk Management Ltd.# 956,300
5,689 Reinsurance Group of America, Inc.# 221,871
---------------
3,401,737
---------------
LEGAL SERVICES (0.3%)
15,400 Pre-Paid Legal Services, Inc.* 409,063
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (3.5%)
19,900 Ballard Medical Products $ 472,625
10,719 Cymer, Inc.* 196,292
19,500 Invacare Corp. 486,281
11,545 Maxxim Medical, Inc.* 183,277
19,698 Ocular Sciences, Inc.* 600,790
20,500 Roper Industries, Inc. 661,125
39,800 VISX, Inc.* 2,067,113
---------------
4,667,503
---------------
METAL MINING (0.5%)
22,100 Stillwater Mining Co.* 705,819
---------------
MISCELLANEOUS RETAIL (0.4%)
15,104 Zale Corp.* 582,448
---------------
MOTION PICTURES (0.2%)
16,000 Avid Technology, Inc.* 260,000
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (0.7%)
29,076 AmeriCredit Corp.* 463,399
12,771 HealthCare Financial Partners, Inc.* 431,021
---------------
894,420
---------------
OIL & GAS EXTRACTION (2.1%)
22,577 B.J. Services Co.*# 622,279
25,000 Delta & Pine Land Co. 732,813
20,922 ENSCO International, Inc. 371,366
26,400 Newfield Exploration Co.* 669,901
21,322 Veritas DGC, Inc.* 389,127
---------------
2,785,486
---------------
PERSONAL SERVICES (1.4%)
13,500 G & K Services, Inc. 637,875
53,870 Regis Corp. 1,299,614
---------------
1,937,489
---------------
PRIMARY METAL INDUSTRIES (1.9%)
32,200 CommScope, Inc.* 845,250
23,400 Mueller Industries, Inc.* 678,600
17,745 Superior TeleCom, Inc.# 525,696
22,200 Tredegar Corp. 475,913
---------------
2,525,459
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.3%)
9,300 Consolidated Graphics, Inc.* 428,963
37,350 Valassis Communications, Inc.* 1,300,247
---------------
1,729,210
---------------
REAL ESTATE (0.3%)
24,885 Stewart Enterprises, Inc. 458,817
---------------
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (0.3%)
35,600 Safeskin Corp.* 445,000
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
78
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY STOCK PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (3.3%)
34,378 E*TRADE Group, Inc.*# $ 1,529,821
23,400 Eaton Vance Corp. 716,625
13,700 Investment Technology Group, Inc. 607,081
36,300 Legg Mason, Inc. 1,227,394
12,429 Waddell & Reed Financial, Inc.--Class A 304,511
---------------
4,385,432
---------------
STONE, CLAY, GLASS & CONCRETE PRODUCTS (1.3%)
16,362 Dal-Tile International, Inc.* 160,552
47,000 Gentex Corp.* 1,411,471
29,895 Media Arts Group, Inc.*# 207,399
---------------
1,779,422
---------------
TEXTILE MILL PRODUCTS (0.8%)
37,400 Mohawk Industries, Inc.* 1,089,275
---------------
TRANSPORTATION BY AIR (1.2%)
63,900 Comair Holdings, Inc. 1,210,106
15,900 SkyWest, Inc. 369,675
---------------
1,579,781
---------------
TRANSPORTATION EQUIPMENT (1.5%)
28,700 JLG Industries, Inc. 554,269
13,500 Kroll-O'Gara Co.* 271,267
24,100 Orbital Sciences Corp.* 545,263
16,700 Polaris Industries, Inc. 719,144
---------------
2,089,943
---------------
TRANSPORTATION SERVICES (0.7%)
16,100 Expeditors International of Washington, Inc. 895,563
---------------
WHOLESALE TRADE--DURABLE GOODS (0.6%)
869 Martin Marietta Materials, Inc. 52,683
21,800 Patterson Dental Co.* 798,425
---------------
851,108
---------------
WHOLESALE TRADE--NONDURABLE GOODS (2.0%)
31,014 AmeriSource Health Corp.* 916,851
10,034 Barrett Resources Corp.* 339,275
16,300 Caraustar Industries, Inc. 429,913
13,939 Henry Schein, Inc.* 420,784
23,400 Men's Wearhouse, Inc.* 597,432
---------------
2,704,255
---------------
TOTAL COMMON STOCKS (COST $130,862,157) 134,315,733
---------------
REPURCHASE AGREEMENTS (0.4%)
597,042 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $597,042)** 597,042
---------------
TOTAL INVESTMENTS (100.0%) (COST $131,459,199) $ 134,912,775
---------------
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (98.8%)
APPAREL & ACCESSORY STORES (5.7%)
52,270 AnnTaylor Stores Corp.*# $ 2,257,411
49,750 Intimate Brands, Inc.# 2,577,672
72,600 Talbots, Inc. 2,305,051
---------------
7,140,134
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (1.6%)
139,440 Columbia Sportswear Co.* 2,039,311
---------------
BUILDING CONSTRUCTION--GENERAL CONTRACTORS & OPERATIVE
BUILDERS (4.8%)
52,600 Centex Corp.# 1,949,487
41,910 NVR, Inc.* 2,016,919
72,780 Ryland Group, Inc. 2,024,195
---------------
5,990,601
---------------
BUSINESS SERVICES (11.6%)
71,970 AVT Corp.* 2,401,999
55,660 Check Point Software Technologies Ltd.*# 2,462,955
36,480 FactSet Research Systems, Inc. 1,559,522
47,090 InfoCure Corp.* 1,736,444
51,040 Kronos, Inc.* 1,889,277
124,400 Mastech Corp.* 2,386,925
91,940 THQ, Inc.*# 2,166,337
---------------
14,603,459
---------------
CHEMICALS & ALLIED PRODUCTS (4.7%)
71,870 ChiRex Inc.* 2,169,577
81,900 King Pharmaceuticals, Inc.* 1,945,126
129,200 Liposome Company, Inc.* 1,849,176
---------------
5,963,879
---------------
CONSTRUCTION--SPECIAL TRADE CONTRACTORS (1.3%)
99,400 Insituform Technologies, Class A* 1,664,951
---------------
DEPOSITORY INSTITUTIONS (4.8%)
114,900 FirstFed Financial Corp.* 2,168,739
72,660 Flagstar Bancorp, Inc. 1,707,510
109,100 Staten Island Bancorp, Inc. 2,100,178
---------------
5,976,427
---------------
EATING & DRINKING PLACES (5.3%)
90,870 Foodmaker, Inc.* 2,453,490
103,400 Ruby Tuesday, Inc. 1,919,363
81,525 Sonic Corp.* 2,244,490
---------------
6,617,343
---------------
ELECTRIC, GAS & SANITARY SERVICES (2.3%)
52,530 Calpine Corp.*# 2,846,432
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (7.4%)
88,000 C-Cube Microsystems, Inc.*# 2,205,502
62,430 DII Group, Inc.* 2,056,288
146,850 InterVoice, Inc.* 1,633,707
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
79
<PAGE>
80
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT
(continued)
<TABLE>
<C> <S> <C>
93,640 Melita International Corp.* $ 1,363,632
61,580 SLI, Inc.* 1,993,653
---------------
9,252,782
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (2.5%)
63,300 AHL Services, Inc.* 1,677,450
97,640 RCM Technologies, Inc.* 1,434,088
---------------
3,111,538
---------------
FOOD & KINDRED PRODUCTS (1.4%)
35,530 Canandaigua Brands, Inc.* 1,767,619
---------------
FURNITURE & FIXTURES (3.6%)
118,640 LA-Z-BOY, Inc. 2,357,970
68,500 Winsloew Furniture, Inc.* 2,192,000
---------------
4,549,970
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (8.7%)
90,570 Cybex Computer Products Corp.* 2,054,807
89,710 Detroit Diesel Corp. 2,225,931
50,470 Pentair, Inc. 2,226,990
76,590 Terex Corp.* 2,369,503
82,720 Xircom, Inc.* 2,088,681
---------------
10,965,912
---------------
INSURANCE AGENTS, BROKERS & SERVICE (2.0%)
39,350 E.W. Blanch Holdings, Inc. 2,518,400
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (7.8%)
159,550 Colorado MEDtech, Inc.* 2,253,645
61,910 Ocular Sciences, Inc.* 1,888,255
36,400 Orbotech Ltd.* 1,556,101
36,640 Pinnacle Systems, Inc.* 1,898,410
55,000 Xomed Surgical Products, Inc.* 2,241,250
---------------
9,837,661
---------------
MISCELLANEOUS MANUFACTURING INDUSTRIES (2.1%)
94,400 JAKKS Pacific, Inc.*# 2,613,701
---------------
MISCELLANEOUS RETAIL (0.8%)
65,130 Micro Warehouse, Inc.* 1,009,515
---------------
MOTOR FREIGHT TRANSPORTATION & WAREHOUSING (3.7%)
137,650 American Freightways Corp.* 2,408,875
68,950 M.S. Carriers, Inc.* 2,180,547
---------------
4,589,422
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.7%)
59,260 McClatchy Co. 2,181,509
---------------
STONE, CLAY, GLASS & CONCRETE PRODUCTS (1.8%)
62,960 Lone Star Industries, Inc.# 2,242,950
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
TRANSPORTATION EQUIPMENT (8.6%)
82,290 A. O. Smith Corp. $ 2,005,821
49,900 Arvin Industries, Inc. 1,958,576
53,760 Cordant Technologies, Inc. 2,607,360
96,320 Kellstrom Industries, Inc.* 1,745,801
81,531 Monaco Coach Corp.* 2,445,900
---------------
10,763,458
---------------
WHOLESALE TRADE--DURABLE GOODS (3.2%)
69,680 AptarGroup, Inc. 1,916,200
92,400 Tower Automotive, Inc.*# 2,113,651
---------------
4,029,851
---------------
WHOLESALE TRADE--NONDURABLE GOODS (1.4%)
71,310 Men's Wearhouse, Inc.* 1,820,637
---------------
TOTAL COMMON STOCK (COST $109,171,495) 124,097,462
---------------
REPURCHASE AGREEMENTS (1.2%)
1,565,562 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $1,565,562) 1,565,562
---------------
TOTAL INVESTMENTS (100.0%) (COST $110,737,057) $ 125,663,024
---------------
---------------
- - -----------------------------------------------------------------
SMALL COMPANY VALUE PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (98.4%)
AEROSPACE (2.4%)
89,500 BE Aerospace, Inc.* $ 1,599,813
159,700 LMI Aerospace, Inc.* 778,539
171,852 TriStar Aerospace Co.* 1,589,631
---------------
3,967,983
---------------
APPAREL & ACCESSORY STORES (1.7%)
218,000 Genesco, Inc.* 2,915,752
---------------
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (1.0%)
188,762 Phillips-Van Heusen Corp. 1,651,668
---------------
BUILDING CONSTRUCTION-GENERAL CONTRACTORS & OPERATIVE BUILDERS (2.9%)
79,927 M/I Schottenstein Homes, Inc. 1,548,588
137,500 Standard Pacific Corp. 1,804,689
43,900 U.S. Home Corp.* 1,514,550
---------------
4,867,827
---------------
BUSINESS SERVICES (8.9%)
266,100 Acclaim Entertainment, Inc.* 1,721,348
4,625 Grey Advertising, Inc. 1,392,125
110,200 Huffy Corp. 1,480,815
161,200 Mail-Well, Inc.*# 2,387,776
165,200 Midway Games, Inc.* 1,755,251
87,900 Ogden Corp.# 2,192,007
99,384 Powerhouse Technologies, Inc.* 1,838,604
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
81
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY VALUE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
BUSINESS SERVICES (continued)
<TABLE>
<C> <S> <C>
84,864 Symantec Corp.* $ 2,079,169
---------------
14,847,095
---------------
CHEMICALS & ALLIED PRODUCTS (2.9%)
163,900 Agrium, Inc. 1,475,100
85,700 Crompton & Knowles Corp. 1,547,956
67,800 Cytec Industries, Inc.* 1,860,263
---------------
4,883,319
---------------
DEPOSITORY INSTITUTIONS (11.6%)
53,700 Andover Bancorp, Inc. 1,564,014
61,866 Banknorth Group, Inc. 1,651,050
53,041 BSB Bancorp, Inc. 1,349,232
88,175 Commercial Federal Corp. 2,011,493
98,500 Commonwealth Bancorp, Inc. 1,600,625
60,401 Community Bank System, Inc. 1,419,427
78,800 First Republic Bank* 2,058,653
126,600 FirstFed Financial Corp.* 2,389,578
79,011 Medford Bancorp, Inc. 1,283,930
67,200 Reliance Bancorp, Inc. 1,890,001
78,000 Webster Financial Corp. 2,266,877
---------------
19,484,880
---------------
ELECTRIC, GAS & SANITARY SERVICES (13.1%)
108,900 Avista Corp. 1,967,008
50,200 BEC Energy 2,208,800
45,662 Calpine Corp.*# 2,474,309
195,200 Central Vermont Public Service Corp. 2,330,203
307,200 El Paso Electric Co.* 2,630,401
111,400 MCN Energy Group, Inc. 2,228,000
97,300 Public Service Co. of New Mexico 2,018,977
58,000 Rochester Gas & Electric Corp. 1,620,376
58,600 TNP Enterprises, Inc. 2,186,515
73,925 WPS Resources Corp. 2,365,600
---------------
22,030,189
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (4.9%)
56,600 Harman International Industries, Inc. 2,511,628
247,400 HMT Technology Corp.* 997,345
129,700 Microsemi Corp. 1,248,366
138,500 Powell Industries, Inc.* 1,385,000
100,300 Vishay Intertechnology, Inc.* 2,087,494
---------------
8,229,833
---------------
GENERAL MERCHANDISE STORES (2.7%)
72,400 Ames Department Stores, Inc.*# 2,968,400
43,300 Shopko Stores, Inc.* 1,537,151
---------------
4,505,551
---------------
HEALTH SERVICES (1.5%)
119,800 RehabCare Group, Inc.* 2,575,700
HOLDING & OTHER INVESTMENT OFFICES (2.0%)
37,894 Storage USA, Inc. 1,264,713
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY VALUE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
HOLDING & OTHER INVESTMENT OFFICES (continued)
<TABLE>
<C> <S> <C>
215,700 Winston Hotels, Inc. $ 2,062,630
---------------
3,327,343
---------------
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES (1.2%)
342,808 Boyd Gaming Corp.* 2,035,422
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (2.9%)
143,561 Chart Industries, Inc. 1,516,364
132,500 Data General Corp.* 1,739,063
92,160 Gleason Corp. 1,543,685
---------------
4,799,112
---------------
INSURANCE CARRIERS (8.7%)
102,700 Acceptance Insurance Cos., Inc.* 1,611,107
58,500 Berkley W.R. Corp. 1,484,438
66,600 Farm Family Holdings, Inc.* 2,297,700
137,700 Frontier Insurance Group, Inc. 2,366,719
101,178 Harleysville Group, Inc. 1,960,325
120,500 HCC Insurance Holdings, Inc. 2,681,125
75,120 MONY Group, Inc. 2,075,190
8,147 Nymagic, Inc. 101,838
---------------
14,578,442
---------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL & OPTICAL GOODS (5.3%)
69,700 CONMED Corp.* 2,369,800
135,800 Cooper Cos., Inc. 3,080,873
87,677 Empi, Inc.* 2,148,088
58,000 Tech-Sym Corp.* 1,272,377
---------------
8,871,138
---------------
MISCELLANEOUS RETAIL (2.0%)
99,700 Micro Warehouse, Inc.* 1,545,351
163,600 OfficeMax, Inc.* 1,881,400
---------------
3,426,751
---------------
MOTOR FREIGHT TRANSPORTATION & WAREHOUSING (0.8%)
110,500 Covenant Transportation, Inc.* 1,326,000
---------------
OIL & GAS EXTRACTION (1.8%)
130,300 Pride International, Inc.* 1,360,006
32,600 SEACOR SMIT, Inc.* 1,617,778
---------------
2,977,784
---------------
PAPER & ALLIED PRODUCTS (1.0%)
113,955 FiberMark, Inc.* 1,630,982
---------------
PETROLEUM REFINING & RELATED INDUSTRIES (0.9%)
126,950 Tesoro Petroleum Corp. 1,499,597
---------------
PRIMARY METAL INDUSTRIES (6.0%)
82,900 AK Steel Holding Corp.# 1,989,600
298,222 Armco, Inc.* 1,919,805
93,050 Chase Industries, Inc.* 779,294
140,100 Intermet Corp. 1,943,890
235,458 National Steel Corp. 1,795,370
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
82
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY VALUE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
PRIMARY METAL INDUSTRIES (continued)
<TABLE>
<C> <S> <C>
47,800 Texas Industries, Inc. $ 1,738,728
---------------
10,166,687
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.0%)
104,900 Bowne & Co., Inc. 1,757,076
---------------
REAL ESTATE INVESTMENT TRUST (3.4%)
54,100 Franchise Finance Corp. of America 1,332,213
121,400 Glenborough Realty Trust, Inc. 2,223,137
102,800 Healthcare Realty Trust, Inc. 2,223,052
---------------
5,778,402
---------------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES (0.9%)
146,600 Ragen Mackezie Group, Inc.* 1,539,300
---------------
TRANSPORTATION BY AIR (1.1%)
92,900 America West Airlines, Inc.* 1,811,550
---------------
TRANSPORTATION EQUIPMENT (1.8%)
92,300 Johnstown American Industries, Inc.* 1,453,725
64,700 Meritor Automotive, Inc. 1,577,063
---------------
3,030,788
---------------
WHOLESALE TRADE - DURABLE GOODS (0.7%)
150,000 Griffon Corp.* 1,200,000
---------------
WHOLESALE TRADE-DURABLE GOODS (0.8%)
100,800 Associated Materials Inc.* 1,423,801
---------------
WHOLESALE TRADE-NONDURABLE GOODS (2.5%)
141,800 Merkert American Corp.* 1,506,627
81,600 Richfood Holdings, Inc. 1,045,501
267,053 Standard Commercial Corp. 1,702,465
---------------
4,254,593
---------------
TOTAL COMMON STOCK (COST $159,815,116) 165,394,565
---------------
REPURCHASE AGREEMENTS (1.6%)
2,713,461 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $2,713,461)** 2,713,461
---------------
TOTAL INVESTMENTS (100.0%) (COST $162,528,577) $ 168,108,026
---------------
---------------
- - -----------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (96.5%)
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS & SIMILAR MATERIALS (3.3%)
332,900 Jones Apparel Group, Inc.* $ 10,236,675
184,500 Tommy Hilfiger Corp.* 13,849,032
---------------
24,085,707
---------------
AUTO PARTS & EQUIPMENT (2.5%)
128,500 Dura Automotive Systems, Inc.* 3,822,875
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
AUTO PARTS & EQUIPMENT (continued)
<TABLE>
<C> <S> <C>
619,400 Tower Automotive, Inc.* $ 14,168,777
---------------
17,991,652
---------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.5%)
268,800 Sonic Automotive, Inc.* 3,494,400
---------------
AUTOMOTIVE REPAIR, SERVICES & PARKING (1.1%)
263,700 CSK Auto Corp.* 7,383,600
44,400 Dollar Thrifty Automotive Group, Inc.* 943,500
---------------
8,327,100
---------------
BUSINESS SERVICES (14.5%)
318,600 ABR Information Services, Inc.* 8,044,650
332,000 Avant! Corp.* 4,046,250
371,500 BEA Systems, Inc.* 7,569,314
301,600 Citrix Systems, Inc.* 14,910,351
230,900 IMRglobal Corp.* 4,834,470
76,100 National Computer Systems, Inc. 2,378,125
50,700 Nextera Enterprises, Inc.* 427,781
293,264 Rent-Way, Inc.* 7,368,259
393,700 Rental Service Corp.* 9,399,589
378,600 Snyder Communications, Inc. 9,252,039
156,700 SoftNet Systems, Inc.* 4,074,200
235,400 Sykes Enterprises, Inc.* 7,326,827
345,100 Synopsys, Inc.* 15,313,814
179,100 THQ, Inc.* 4,220,045
171,000 Visio Corp.* 5,621,625
---------------
104,787,339
---------------
CHEMICALS & ALLIED PRODUCTS (15.2%)
286,400 Abgenix, Inc.* 4,152,800
404,200 Alkermes, Inc.* 10,003,950
228,200 Barr Laboratories, Inc.* 7,516,339
210,800 Biovail Corp. International* 8,049,926
273,600 Centocor, Inc.* 11,884,501
350,800 Genzyme Corp.* 14,229,329
440,400 ICN Pharmaceuticals, Inc. 14,478,152
132,000 ImClone Systems, Inc.* 2,607,000
474,700 IVAX Corp. 6,378,780
159,300 Millennium Pharmaceuticals, Inc.* 6,033,488
356,000 Teva Pharmaceutical Industries Ltd. ADR 17,488,502
489,200 Triangle Pharmaceuticals, Inc.* 9,050,200
---------------
111,872,967
---------------
COMMUNICATIONS (3.5%)
232,400 Globalstar Telecommunications Ltd.* 4,110,575
285,700 ITC DeltaCom, Inc.* 6,821,088
150,000 Time Warner Telecom, Inc.* 3,843,750
147,500 United International Holdings, Inc.--
Class A* 10,620,000
---------------
25,395,413
---------------
COMPUTER DISTRIBUTION (0.9%)
263,700 Insight Enterprises, Inc.* 6,691,388
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
83
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
CONSUMER SERVICES (1.6%)
637,800 Stewart Enterprises, Inc. $ 11,759,438
---------------
DEPOSITORY INSTITUTIONS (4.2%)
30,000 Bank United Corp. 1,241,250
164,800 Golden State Bancorp, Inc. 4,047,900
260,200 Riggs National Corp. 4,374,614
529,900 Roslyn Bancorp, Inc. 9,604,440
313,500 UnionBanCal Corp. 11,589,719
---------------
30,857,923
---------------
EATING & DRINKING PLACES (2.8%)
166,000 Cheesecake Factory, Inc.* 4,585,752
403,600 Foodmaker, Inc.* 10,897,200
129,900 Papa John's International, Inc.* 5,131,050
---------------
20,614,002
---------------
ELECTRIC, GAS & SANITARY SERVICES (1.3%)
405,000 Republic Services, Inc.* 9,517,500
---------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT (7.9%)
284,100 3DFX Interactive, Inc.* 5,504,439
375,500 Adaptec, Inc.* 11,593,563
91,400 American Power Conversion Corp.* 3,558,888
266,600 Artesyn Technologies, Inc.* 5,631,926
346,400 Atmel Corp.* 6,841,400
129,800 Micrel, Inc.* 7,268,800
129,500 Pinnacle Systems, Inc.* 6,709,719
184,200 Xilinx, Inc.* 8,185,389
113,900 Xircom, Inc.* 2,875,975
---------------
58,170,099
---------------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT & RELATED
SERVICES (2.5%)
549,300 ACNielson Corp.* 15,483,396
88,400 Metzler Group, Inc.* 2,895,100
---------------
18,378,496
---------------
EQUIPMENT--SEMICONDUCTOR (0.7%)
293,200 Cymer, Inc.* 5,369,227
---------------
FOOD & KINDRED PRODUCTS (1.6%)
227,400 American Italian Pasta Co.* 6,253,500
438,600 Del Monte Foods Co.* 5,455,088
---------------
11,708,588
---------------
FURNITURE & FIXTURES (0.6%)
166,800 Furniture Brands International, Inc.* 4,044,900
---------------
GENERAL MERCHANDISE STORES (1.0%)
361,900 Stein Mart, Inc.* 3,324,958
380,000 Venator Group, Inc. 4,156,250
---------------
7,481,208
---------------
HEALTH CARE--MEDICAL PRODUCTS (0.3%)
63,000 Ocular Sciences, Inc.* 1,921,500
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
HEALTH SERVICES (2.4%)
340,700 American Retirement Corp.* $ 5,770,607
63,400 Orthodontic Centers of America, Inc.* 764,763
112,700 Renal Care Group, Inc.* 3,127,425
220,900 Sunrise Assisted Living, Inc.* 8,173,300
---------------
17,836,095
---------------
HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES (0.4%)
357,300 Musicland Stores Corp.* 3,171,038
---------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT (2.9%)
395,200 Pentair, Inc. 17,438,203
213,800 Watsco, Inc. 4,129,013
---------------
21,567,216
---------------
INSURANCE CARRIERS (3.4%)
274,700 Annuity and Life Re (Holdings) Ltd.* 7,073,525
225,800 CMAC Investment Corp. 11,417,015
202,000 Everest Reinsurance Holdings, Inc.* 6,640,751
---------------
25,131,291
---------------
LEATHER & LEATHER PRODUCTS (0.6%)
219,400 Brown Shoe Company, Inc. 4,168,600
---------------
LUMBER & WOOD PRODUCTS, EXCEPT FURNITURE (0.9%)
321,600 Louisiana-Pacific Corp. 6,512,400
---------------
MISCELLANEOUS CONSUMER (0.3%)
177,500 The Boyds Collection Ltd.* 2,307,500
---------------
MISCELLANEOUS RETAIL (2.3%)
17,000 eToys, Inc.* 1,031,688
1,078,700 Petsmart, Inc.* 9,708,300
262,900 Regis Corp. 6,342,463
---------------
17,082,451
---------------
MOTOR FREIGHT TRANSPORTATION & WAREHOUSING (2.3%)
398,075 Swift Transportation, Inc.* 7,277,328
252,400 USFreightways Corp. 9,938,252
---------------
17,215,580
---------------
NONDEPOSITORY CREDIT INSTITUTIONS (2.2%)
403,500 American Capital Strategies Ltd. 7,843,032
263,500 Heller Financial, Inc. 7,839,125
45,000 Resource America, Inc. 649,688
---------------
16,331,845
---------------
OIL & GAS EXTRACTION (0.5%)
1,109,900 Key Energy Services, Inc.* 3,537,807
---------------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.8%)
371,250 Valassis Communications, Inc.* 12,924,141
---------------
REAL ESTATE (2.7%)
547,600 Intrawest Corp. 8,727,375
441,000 Newhall Land & Farming Co. 11,080,129
---------------
19,807,504
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
84
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST (0.4%)
244,900 Capital Automotive REIT $ 3,168,394
---------------
TRANSPORTATION BY AIR (2.2%)
357,500 Northwest Airlines Corp.* 11,886,875
196,400 SkyWest, Inc. 4,566,300
---------------
16,453,175
---------------
TRANSPORTATION EQUIPMENT (3.3%)
334,800 Gulfstream Aerospace Corp.* 20,673,837
158,900 Heico Corp. 3,734,150
---------------
24,407,987
---------------
WATER TRANSPORTATION (1.0%)
215,300 Sea Containers Ltd. 7,266,375
---------------
WHOLESALE TRADE--NONDURABLE GOODS (0.9%)
400,200 Handleman Co. 4,727,362
150,100 School Specialty, Inc.* 2,232,738
---------------
6,960,100
---------------
TOTAL COMMON STOCK (COST $581,814,580) 708,318,346
---------------
REPURCHASE AGREEMENTS (3.5%)
26,008,407 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99 (cost $26,008,407)** 26,008,407
---------------
TOTAL INVESTMENTS (100.0%) (COST $607,822,987) $ 734,326,753
---------------
---------------
- - -----------------------------------------------------------------
INTERNATIONAL PORTFOLIO
- - -----------------------------------------------------------------
STOCKS & WARRANTS (90.3%)
BELGIUM (0.9%)
COMMON STOCKS
24,350 Grupo Bruxelles Lambert SA* $ 4,251,928
51,000 KBC Bancassurance Holding 3,108,917
---------------
7,360,845
---------------
DENMARK (1.4%)
COMMON STOCKS
59,200 Den Danske Bank Group 6,365,128
89,980 International Service System A/S* 4,533,370
---------------
10,898,498
---------------
FRANCE (16.3%)
COMMON STOCKS
28,340 Accor SA 6,969,596
90,570 AGF (Assurances Generales de France) 4,502,088
35,400 Alcatel 4,219,671
57,040 Axa SA 6,590,407
52,020 Bouygues SA 13,793,995
29,670 Canal Plus 8,608,965
115,663 Elf Aquitaine SA 16,786,269
42,410 Etablissements Economiques du Casino Guichard-Perrachon SA 4,035,340
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
FRANCE (continued)
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
35,710 Groupe Danone $ 9,857,442
50,520 Lafarge SA 4,564,020
88,880 Sanofi* 3,754,532
51,240 STMicroelectronics NV 5,947,064
86,770 Suez Lyonnaise des Eaux 14,416,636
55,620 Total SA, B Shares* 6,775,282
211,494 Vivendi 15,700,984
WARRANTS
55,391 Vivendi Warrants* 119,890
---------------
126,642,181
---------------
GERMANY (5.6%)
COMMON STOCKS
36,930 BASF AG 1,440,319
135,618 DaimlerChrysler AG 11,734,262
135,290 Hoechst AG 6,040,376
112,910 Mannesmann AG 15,465,863
156,010 RWE AG 6,989,945
110,010 Thyssen Krupp AG* 2,174,025
---------------
43,844,790
---------------
INDONESIA (0.1%)
COMMON STOCKS
1,811,500 PT Telekomunikasi Indonesia 840,357
---------------
IRELAND (1.8%)
COMMON STOCKS
353,460 Bank of Ireland 6,560,079
140,820 Elan Corp. plc ADR*# 7,604,280
---------------
14,164,359
---------------
ITALY (5.4%)
COMMON STOCKS
1,991,000 Banca di Roma 2,914,538
1,415,390 ENI SpA 8,864,891
810,780 Italgas SpA 3,484,298
623,240 Olivetti SpA* 1,948,485
228,830 San Paolo--IMI SpA 3,098,512
1,256,180 Telecom Italia Mobile SpA 7,408,008
1,236,032 Telecom Italia SpA 14,216,508
---------------
41,935,240
---------------
JAPAN (16.6%)
COMMON STOCKS
336,000 Amada Metrecs Co. Ltd. 1,854,924
258,000 Arcland Sakamoto 2,882,803
263,000 Bridgestone Corp. 6,900,428
182,650 Credit Saison Co. Ltd. 3,703,794
239,000 Dai-Dan Co. Ltd. 1,681,426
1,122,000 Dai-Tokyo Fire & Marine Insurance Co. Ltd. 3,835,342
319,000 Daiwa House Industry Co. Ltd. 3,442,939
847 East Japan Railway Co. 4,907,299
237,000 Fuji Photo Film Co. 8,474,093
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
85
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
JAPAN (continued)
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
667,000 Hanshin Electric Railway Co. Ltd. $ 2,467,710
520,000 Hitachi Ltd. 3,826,187
564,000 Kuraray Co. Ltd. 6,143,221
294,000 Matsushita Electric Industrial Co. Ltd. 5,329,083
1,219,000 Mitsui & Co. Ltd. 7,799,097
101,000 Murata Manufacturing Co. Ltd. 5,575,815
68,200 Nagaileben Co. Ltd. 1,704,719
275 Nippon Telegraph & Telephone Corp. 2,685,814
70,000 Nitto Denko Corp. 1,404,982
260,000 Nomura Securities Co. Ltd. 2,595,265
149 NTT Mobile Communications Network, Inc. 8,151,712
263,000 Omron Corp. 3,635,241
66,900 Promise Co. Ltd. 3,278,001
147,000 Sekisui House 1,596,292
337,000 Showa Shell Sekiyu 1,899,494
31,300 SMC Corp. 2,854,874
64,200 Sony Corp. 6,036,351
4,020,000 Sumitomo Metal Industries Ltd. 5,290,349
213,000 Takeda Chemical Industries 9,467,056
681,000 Toppan Printing Co. Ltd. 7,637,435
62,000 Toyota Motor Corp. 1,693,428
161,000 Yasuda Fire & Marine Insurance Co. Ltd. 912,804
---------------
129,667,978
---------------
NETHERLANDS (8.0%)
COMMON STOCKS
36,370 Akzo Nobel NV 1,513,550
204,350 Internationale Nederlanden Group NV 10,950,626
220,220 Koninklijke Ahold NV 7,702,352
151,080 Koninklijke Philips Electronics NV* 12,993,118
87,049 Oce NV 2,402,914
184,590 Royal Dutch Petroleum Co. 10,306,705
365,610 TNT Post Group NV 9,213,096
125,620 United Pan-Europe Communications NV* 7,716,798
---------------
62,799,159
---------------
NEW ZEALAND (0.7%)
COMMON STOCKS
1,673,000 Carter Holt Harvey Ltd. 1,919,481
836,500 Telecom Corp of New Zealand Ltd. 3,614,723
---------------
5,534,204
---------------
PHILIPPINES (0.3%)
COMMON STOCKS
2,508,500 Ayala Land, Inc. 807,598
227,500 Manila Electric Co., B Shares 783,245
39,000 Philippine Long Distance Telephone Co. 1,096,713
---------------
2,687,556
---------------
PORTUGAL (1.2%)
COMMON STOCKS
345,590 Electricidade de Portugal SA 6,305,611
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
PORTUGAL (continued)
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
177,750 Semapa--Sociedade de Investimento e Gestao SGPS SA $ 2,899,376
---------------
9,204,987
---------------
SINGAPORE (0.9%)
COMMON STOCKS
326,000 City Developments Ltd. 1,946,861
229,200 Development Bank of Singapore Ltd.-- Foreign Shares 2,365,455
215,827 Singapore Press Holdings Ltd. 2,953,248
---------------
7,265,564
---------------
SPAIN (2.3%)
COMMON STOCKS
28,000 Bankinter SA 1,105,212
520,625 Endesa SA 11,110,625
119,768 Telefonica SA* 5,758,133
---------------
17,973,970
---------------
SWEDEN (2.4%)
COMMON STOCKS
223,730 Electrolux AB, Series B 4,344,993
226,980 Securitas AB, B Shares 3,243,204
426,790 Telefonaktiebolaget LM Ericsson, B Shares 11,424,771
---------------
19,012,968
---------------
SWITZERLAND (4.4%)
COMMON STOCKS
3,568 ABB AG 5,058,577
5,878 Novartis AG--Registered Shares 8,551,121
840 Roche Holding AG 8,909,851
40,872 UBS AG--Registered Shares 11,857,631
---------------
34,377,180
---------------
THAILAND (0.2%)
COMMON STOCKS
179,000 Electricity Generating Public Co. Ltd. 380,697
99,000 PTT Exploration and Production Public Co. Ltd.* 804,899
370,000 Siam Commercial Bank Public Co. Ltd.* 430,811
---------------
1,616,407
---------------
UNITED KINGDOM (21.8%)
COMMON STOCKS
1,098,290 Airtours plc 9,025,647
762,570 Allied Domecq plc 7,313,324
366,550 ARM Holdings plc* 3,582,894
1,789,360 ASDA Group plc 5,075,069
847,990 BP Amoco plc 15,178,010
860,480 British Airways plc 6,177,173
476,430 British Energy plc 4,256,131
716,610 British Land Co. plc 6,315,628
861,000 British Sky Broadcasting Group plc 8,181,422
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
86
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
UNITED KINGDOM (continued)
COMMON STOCKS (continued)
<TABLE>
<C> <S> <C>
444,370 British Telecommunications plc $ 7,412,529
574,040 Cable & Wireless plc 7,082,782
911,140 David S. Smith Holdings plc 1,956,415
1,092,020 Electrocomponents plc 8,828,008
385,820 Glaxo Wellcome plc 10,831,529
559,330 Imperial Chemical Industries plc 6,166,340
571,495 Kingfisher plc 7,184,166
2,495,530 LASMO plc* 5,278,466
858,240 Lloyds TSB Group plc 11,345,760
472,690 Marks & Spencer plc 2,984,307
209,530 Pearson plc 3,995,435
55,000 Rio Tinto plc 806,408
255,810 RMC Group plc 3,414,550
1,807,510 Rolls-Royce plc* 7,602,928
411,770 Shell Transport & Trading Co. plc 2,980,738
226,405 Tibbett and Britten Group plc 1,904,654
561,340 Vodafone Group plc 10,694,951
873,173 Williams plc 5,110,464
---------------
170,685,728
---------------
TOTAL STOCKS & WARRANTS (COST $608,189,056) 706,511,971
---------------
SHORT-TERM INVESTMENTS (6.6%)
11,035,005 Business Class Plus 11,035,005
41,013,524 Norwest Treasury Fund 41,013,524
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $52,048,529) 52,048,529
---------------
TIME DEPOSITS (3.1%)
23,200,000 Euro Dollar Time Deposit (cost $24,258,192) 24,258,192
---------------
TOTAL INVESTMENTS (100.0%) (COST $684,495,777) $ 782,818,692
---------------
---------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE UNREALIZED
DATE CURRENCY UNITS AMOUNT OF VALUE DEPRECIATION
- - ---------- ------------ ------------ --------------- ------------
<C> <S> <C> <C> <C>
8/18/99 Japanese Yen 2,843,147,000 $23,638,719 $ (145,345)
</TABLE>
<TABLE>
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- - -----------------------------------------------------------------
AUSTRALIA (2.0%)
COMMON STOCK
375,000 News Corp. Ltd. $ 3,104,045
---------------
3,104,045
---------------
BRAZIL (1.6%)
COMMON STOCK
75,000 Aracruz Celulose SA ADR 1,443,750
PREFERRED STOCK
9,087,945 Telecomunicacoes de Sao Paulo SA 1,099,968
---------------
2,543,718
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (continued)
- - -----------------------------------------------------------------
CANADA (0.7%)
COMMON STOCK
20,000 Potash Corp. of Saskatchewan, Inc. (CAD) $ 1,089,736
---------------
1,089,736
---------------
FINLAND (1.9%)
COMMON STOCK
42,000 Nokia Corp. ADR 2,982,000
---------------
2,982,000
---------------
FRANCE (13.8%)
COMMON STOCK
26,000 Axa SA 3,004,042
10,000 Canal Plus 2,901,573
20,000 Equant NV--NY Registered Shares* 1,658,751
105,000 Groupe Air France* 1,786,271
8,500 Groupe Danone 2,346,353
36,000 STMicroelectronics NV 4,178,257
18,000 Suez Lyonnaise des Eaux 2,990,659
20,000 Total SA, B Shares* 2,436,276
---------------
21,302,182
---------------
GERMANY (6.0%)
COMMON STOCK
7,500 Allianz AG--Registered 2,054,627
51,111 Deutsche Bank AG 2,672,113
22,500 Fresenius Medical Care AG 1,129,260
28,000 Metro AG 1,771,266
23,000 Sixt AG 1,695,459
---------------
9,322,725
---------------
GREECE (0.8%)
COMMON STOCK
60,000 Hellenic Telecommunication Organization SA 1,301,894
---------------
1,301,894
---------------
HONG KONG (1.8%)
COMMON STOCK
220,000 Cheung Kong (Holdings) Ltd. 1,787,351
30,000 HSBC Holdings plc 982,656
---------------
2,770,007
---------------
HUNGARY (1.5%)
COMMON STOCK
430,000 Magyar Tavkozlesi RT 2,408,036
---------------
2,408,036
---------------
IRELAND (2.4%)
COMMON STOCK
21,000 Elan Corp. plc ADR* 1,134,000
60,000 Ryanair Holdings plc ADR* 2,640,000
---------------
3,774,000
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
87
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (continued)
- - -----------------------------------------------------------------
ISRAEL (0.9%)
COMMON STOCK
67,000 Koor Industries Ltd. ADR $ 1,444,689
---------------
1,444,689
---------------
ITALY (3.6%)
COMMON STOCK
230,000 ENI SpA 1,440,539
150,000 San Paolo--IMI SpA 2,031,101
210,000 Telecom Italia SpA 2,169,435
---------------
5,641,075
---------------
JAPAN (15.3%)
COMMON STOCK
65,000 Canon, Inc. 1,640,870
65,000 Honda Motor Co. Ltd. 2,668,432
100,000 Marui Co. Ltd. 1,503,889
240 Nippon Telegraph & Telephone Corp. 2,343,983
30,000 Secom Co. Ltd. 2,855,488
30,000 Seven-Eleven Japan Co. Ltd. 2,604,701
35,000 Sony Corp. 3,290,846
130,000 Sumitomo Bank Ltd. 1,574,160
50,000 Takeda Chemical Industries 2,222,313
35,000 Takefuji Corp. 3,085,168
---------------
23,789,850
---------------
KOREA, REPUBLIC OF (0.2%)
COMMON STOCK--ADR
12,000 Korea Telecom Corp. ADR* 381,750
---------------
381,750
---------------
MEXICO (2.1%)
COMMON STOCK
650,000 Grupo Elektra SA de CV--CPO 350,458
750,000 Telefonos de Mexico SA de CV Series L 2,945,064
---------------
3,295,522
---------------
NETHERLANDS (7.4%)
COMMON STOCK
43,000 Koninklijke Ahold NV 1,503,956
30,000 Koninklijke Philips Electronics NV* 2,580,047
34,000 Royal Dutch Petroleum Co.--NY Registered Shares 1,923,126
44,643 Unilever NV--CVA 2,975,792
40,000 United Pan-Europe Communications NV* 2,457,188
---------------
11,440,109
---------------
NEW ZEALAND (0.2%)
COMMON STOCK
160,000 Tranz Rail Holdings Ltd. 290,800
---------------
290,800
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (continued)
- - -----------------------------------------------------------------
NORWAY (1.0%)
COMMON STOCK
100,000 Petroleum Geo-Services ASA* $ 1,616,576
---------------
1,616,576
---------------
SINGAPORE (3.3%)
COMMON STOCK
300,000 Development Bank of Singapore Ltd.-- Foreign Shares 3,096,145
150,000 Singapore Press Holdings Ltd. 2,052,501
---------------
5,148,646
---------------
SPAIN (3.6%)
COMMON STOCK
70,000 Banco Santander Central Hispano SA 1,463,856
55,000 Superdiplo SA* 1,258,289
61,200 Telefonica SA* 2,942,327
---------------
5,664,472
---------------
SWEDEN (2.5%)
COMMON STOCK
75,000 OM Gruppen AB 949,165
110,000 Telefonaktiebolaget LM Ericsson, Series B ADR 2,963,125
---------------
3,912,290
---------------
SWITZERLAND (4.5%)
COMMON STOCK
700 Nestle SA--Registered Shares 1,261,218
1,900 Novartis AG--Registered Shares 2,763,587
10,500 UBS AG--Registered Shares 3,046,222
---------------
7,071,027
---------------
UNITED KINGDOM (17.5%)
COMMON STOCK
340,000 Amvescap plc 3,105,451
91,600 ARM Holdings plc ADR* 2,673,575
100,000 Bass plc 1,475,810
175,000 Boots Co. plc 2,288,227
150,000 BP Amoco plc 2,684,821
195,000 British Aerospace plc 1,286,587
85,000 British Telecommunications plc 1,417,884
34,000 Glaxo Wellcome plc ADR 1,912,500
230,000 Select Appointments Holdings plc 2,819,423
30,000 Smithkline Beecham plc ADR 1,968,750
460,000 TeleWest Communications plc* 1,977,281
170,000 Vodafone Group plc 3,238,931
---------------
26,849,240
---------------
REPURCHASE AGREEMENTS (5.4%)
8,358,679 Bear, Stearns & Cos., Inc., 4.90%, 6/1/99# 8,358,679
---------------
TOTAL INVESTMENTS (100.0%) (COST $150,294,063) $ 155,503,068
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
88
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS MAY 31, 1999
- - ----------------------------------------------------------------------------
* Non-income producing security.
+ Securities that may be resold to "qualified institutional buyers" under rule
144A or securities offered pursuant to 4(2) of the Securities Act of 1933, as
amended. These securities had been determined to be liquid pursuant to
procedures adopted by the Board of Trustees.
# Part or all of this investment is on loan. See Note 6 of Notes to Financial
Statements.
** The Portfolios have invested in a joint repurchase agreement. The following
represents the collateral on the Bear Stearns Cos., Inc. joint repurchase
agreement: collateralized by $214,593,114 U.S. Government Agency Securities,
6.00% - 6.50%, 1/1/22 - 3/1/29; with a total market value of $210,016,043.
++ At May 31, 1999, $3,180,000 of U.S. Treasury Bills, 9/16/99 - 4/27/00, with a
market value of $3,109,182 were pledged to cover margin requirements for open
futures contracts.
## At May 31, 1999, $150,000 of U.S. Treasury Bills, 4/27/00, with a market
value of $143,256 were pledged to cover margin requirements for open futures
contracts.
*** Priced at fair value as determined by the Investment Adviser and approved by
the Board of Trustees.
ABBREVIATIONS
- - ----------------------------------------------------------------------------
<TABLE>
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
BIG Bond Insurance Group
CBO Collateralized Bond Obligation
CLO Collateralized Loan Obligation
C/O Crossover refunding
COLL Collateralized
COP Certificate of Participation
DOT Department of Transportation
EDA Economic Development Authority
EFA Education Finance Authority
ETM Escrowed to Maturity
FAMC Federal Agricultural Mortgage Corporation
FFCB Federal Farm Credit Bank
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
HEFA Higher Education Facilities Authority
HEHFA Higher Education & Health Facilities Authority
HFA Housing Finance Authority
HRA Housing & Redevelopment Authority
HUD Department of Housing and Urban Development
IDA Industrial Development Authority
ISD Independent School District
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
MFHR Multi Family Housing Revenue
PCR Pollution Control Revenue
PFA Public Finance Authority
PILOT Payment in Lieu of Taxes
P/R Prerefunded
RIBS Residual Interest Bond Series
RV Revenue Bonds
SCEP State Credit Enhancement Program
SD School District
SFM Single Family Mortgage
SLMA Student Loan Marketing Association
TBA To be announced
TVA Tennessee Valley Authority
USG United States Government
UTGO Unlimited Tax General Obligation
VA Veterans' Administration
V/R Variable Rate - These securities are deemed to have a maturity
remaining until the next adjustment of the interest rate or the
longer of the demand period or readjustment. The interest rates
shown reflect the rate in effect on May 31, 1999.
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
89
<PAGE>
(This page has been left blank intentionally.)
90
<PAGE>
ANNUAL REPORT
MAY 31, 1999
PRIME MONEY MARKET PORTFOLIO
MONEY MARKET PORTFOLIO
CORE TRUST (DELAWARE)
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Partners
Core Trust (Delaware)
We have audited the accompanying statements of assets and
liabilities of two portfolios of Core Trust (Delaware), Prime Money
Market Portfolio and Money Market Portfolio, (collectively, the
"Portfolios"), including the schedules of investments, as of May 31,
1999, and the related statements of operations for the year then
ended, the statements of changes in net assets and financial
highlights for the year then ended and for the period from August 23,
1997 (commencement of operations) to May 31, 1998. These financial
statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements
and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999, by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Portfolios as of May 31, 1999, the results
of their operations, changes in their net assets and financial
highlights for each of the years or periods indicated in the first
paragraph above, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Boston, Massachusetts
July 16, 1999
CORE TRUST (DELAWARE)
91
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME MONEY
MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------- --------------
<S> <C> <C>
ASSETS
Investments at amortized cost (Note 2).............................. $3,751,307,480 $2,727,375,137
Cash................................................................ 2,488,892 1,777,386
Receivable for investments sold..................................... - 29,792,500
Receivable for dividends, interest and other receivables............ 12,476,960 9,202,371
Organization costs, net of amortization (Note 2).................... 9,627 9,627
-------------- --------------
TOTAL ASSETS.......................................................... 3,766,282,959 2,768,157,021
-------------- --------------
LIABILITIES
Payable to custodian (Note 3)....................................... 33,656 25,134
Payable to adviser (Note 3)......................................... 1,070,185 238,597
Payable to other related parties (Note 3)........................... 160,489 278
Accrued expenses and other liabilities.............................. 15,941 13,078
-------------- --------------
TOTAL LIABILITIES..................................................... 1,280,271 277,087
-------------- --------------
NET ASSETS............................................................ $3,765,002,688 $2,767,879,934
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements CORE TRUST (DELAWARE)
92
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME MONEY
MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Interest income (Note 2)............................................ $197,103,552 $150,826,716
------------- ------------
EXPENSES
Advisory (Note 3)................................................... 12,130,849 3,761,486
Administration (Note 3)............................................. 1,832,945 1,400,619
Custody (Note 3).................................................... 381,589 295,124
Accounting (Note 3)................................................. 87,500 86,500
Legal............................................................... 14,498 11,509
Audit............................................................... 23,734 21,591
Trustees............................................................ 6,869 5,246
Amortization of organization costs (Note 2)......................... 3,036 3,036
Miscellaneous....................................................... 40,106 15,287
------------- ------------
TOTAL EXPENSES........................................................ 14,521,126 5,600,398
Fees waived and expenses reimbursed (Note 4)........................ (1,419) (2,360,589)
------------- ------------
NET EXPENSES.......................................................... 14,519,707 3,239,809
------------- ------------
NET INVESTMENT INCOME................................................. 182,583,845 147,586,907
NET REALIZED GAIN FROM INVESTMENTS.................................... 36,033 27,280
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $182,619,878 $147,614,187
------------- ------------
------------- ------------
</TABLE>
See Notes to Financial Statements CORE TRUST (DELAWARE)
93
<PAGE>
FOR THE PERIOD ENDED MAY 31, 1998
STATEMENTS OF CHANGES IN NET ASSETS AND THE YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME MONEY
MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
--------------- ---------------
<S> <C> <C>
NET ASSETS -- AUGUST 23, 1997 (COMMENCEMENT OF OPERATIONS)............ $ - $ -
--------------- ---------------
OPERATIONS
Net investment income............................................... 117,637,986 95,111,701
Net realized loss from investments.................................. (42,987) (21,885)
--------------- ---------------
Increase in net assets resulting from operations................ 117,594,999 95,089,816
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions (Note 5).............................................. 5,373,694,156 4,410,026,378
Withdrawals......................................................... (2,352,537,164) (2,132,747,532)
--------------- ---------------
Net increase from transactions in investors' beneficial
interests...................................................... 3,021,156,992 2,277,278,846
--------------- ---------------
NET INCREASE IN NET ASSETS............................................ 3,138,751,991 2,372,368,662
--------------- ---------------
NET ASSETS -- MAY 31, 1998............................................ 3,138,751,991 2,372,368,662
--------------- ---------------
OPERATIONS
Net investment income............................................... 182,583,845 147,586,907
Net realized gain from investments.................................. 36,033 27,280
--------------- ---------------
Increase in net assets resulting from operations................ 182,619,878 147,614,187
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions....................................................... 4,309,002,882 3,728,647,352
Withdrawals......................................................... (3,865,372,063) (3,480,750,267)
--------------- ---------------
Net increase from transactions in investors' beneficial
interests...................................................... 443,630,819 247,897,085
--------------- ---------------
NET INCREASE IN NET ASSETS............................................ 626,250,697 395,511,272
--------------- ---------------
NET ASSETS -- MAY 31, 1999............................................ $ 3,765,002,688 $ 2,767,879,934
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Financial Statements CORE TRUST (DELAWARE)
94
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE
NET ASSETS
-----------------------------------
NET
NET GROSS INVESTMENT
EXPENSES EXPENSES(b) INCOME
-------- ----------- ----------
<S> <C> <C> <C>
PRIME MONEY MARKET PORTFOLIO
June 1, 1998 to May 31, 1999........................................ 0.40% 0.40% 4.98%
August 23, 1997(c) to May 31, 1998(a)............................... 0.40% 0.40% 5.36%
MONEY MARKET PORTFOLIO
June 1, 1998 to May 31, 1999........................................ 0.12% 0.20% 5.27%
August 23, 1997(c) to May 31, 1998(a)............................... 0.12% 0.21% 5.64%
</TABLE>
(a) Annualized.
(b) During the periods, various fees were waived and reimbursed. The ratio of
Gross Expenses to Average Net Assets reflects the expense ratio in the
absence of any waivers and reimbursements (Note 4).
(c) Commencement of operations.
See Notes to Financial Statements CORE TRUST (DELAWARE)
95
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Core Trust (Delaware) ("Core Trust") is organized as a Delaware business trust
and is registered as an open-end management investment company under the
Investment Company Act of 1940 (the "Act"). Core Trust currently has twenty-two
separate investment portfolios. These financial statements relate to Prime Money
Market Portfolio and Money Market Portfolio (individually, a "Portfolio" and,
collectively, the "Portfolios"), each of which is a diversified portfolio. The
Portfolios commenced operations on August 23, 1997. Interests in the Portfolios
are sold in private placement transactions without any sales charges to
qualified investors, including open-end management investment companies.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates. The following summarizes the significant accounting policies of the
Portfolios:
SECURITY VALUATION - Securities held by the Portfolios are valued as of 4:00 PM,
Eastern Time, on each Portfolio business day, utilizing the amortized cost
method pursuant to Rule 2a-7 under the Act. Under this method, all investments
purchased at a discount or premium are valued by accreting or amortizing,
respectively, the difference between the original purchase price and the
maturity value of the investment over the period to the investment's maturity.
SECURITIES TRANSACTIONS AND INTEREST INCOME - Investment transactions are
accounted for on the trade date, interest income is recorded on an accrual basis
and includes the amortization of premium and the accretion of discount and
realized gain and loss on investments sold are recorded on the basis of
identified cost. The cost basis of investments for federal income tax purposes
at May 31, 1999, is the same as for financial reporting purposes.
FEDERAL TAXES - The Portfolios are not required to pay federal income taxes on
their net investment income and net capital gain as they are treated as
partnerships for federal income tax purposes. All interest and gain and loss of
the Portfolios are deemed to have been "passed through" to the interestholders
in proportion to their holdings of the Portfolios, regardless of whether such
interest and gains have been distributed by the Portfolios.
ORGANIZATION COSTS - The costs incurred by each Portfolio in connection with its
organization have been capitalized and are being amortized using the straight
line method over a five year period beginning on the commencement of the
Portfolios' operations.
REPURCHASE AGREEMENTS - Each Portfolio, along with certain other Norwest
Advantage Funds, may transfer uninvested cash balances into a joint trading
account. These balances are invested in one or more repurchase agreements. The
Portfolios, through their custodian, receive delivery of the underlying
collateral, whose market value must always exceed the repurchase price. In the
event of default, a Portfolio may have difficulties with the disposition of the
collateral.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The investment adviser of each Portfolio is Norwest
Investment Management, Inc. ("Adviser"), a wholly owned subsidiary of Norwest
Bank Minnesota, N.A. ("Norwest"). Norwest is a subsidiary of Wells Fargo &
Company. The Adviser receives an advisory fee from Core Trust with respect to
Prime Money Market Portfolio and Money Market Portfolio at annual rates of 0.40%
and 0.20%, respectively, of the average daily net assets for the first $300
million of average daily net assets of each Portfolio, declining to 0.32% and
0.12%, respectively, of the average daily net assets of each Portfolio in excess
of $700 million.
ADMINISTRATION AND OTHER SERVICE PROVIDERS - The administrator to Core Trust is
Forum Administrative Services, LLC ("FAdS"). FAdS receives an administration fee
of 0.05% of the average daily net assets of each Portfolio.
Norwest also serves as the custodian for the Portfolios and receives a fee of
0.02% of the first $100 million of each Portfolio's average daily net assets,
declining to 0.01% of each Portfolio's average daily net assets in excess of
$200 million.
Forum Financial Services, Inc. acts as Core Trust's placement agent but receives
no compensation for its services.
Forum Accounting Services, LLC provides portfolio accounting and interestholder
recordkeeping services to each Portfolio.
NOTE 4. WAIVERS OF FEES AND REIMBURSEMENT OF EXPENSES
For the year ended May 31, 1999, the Adviser voluntarily waived a portion of its
advisory fees and FAdS voluntarily waived a portion of its administration fees
for Money Market Portfolio in the amounts of $960,248 and $1,400,341,
respectively, and FAds waived a portion of its administration fee for Prime
Money Market Portfolio in the amount of $1,419. The Adviser and FAdS, at their
discretion, may revise or discontinue the voluntary fee waivers at any time.
CORE TRUST (DELAWARE)
96
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5. REORGANIZATION
In connection with the merger and division and the contemporaneous commencement
of operations of certain Portfolios on August 23, 1997, certain investors
contributed all or a portion of their net assets to the Portfolios. The fair
market value and tax cost basis of those contributions are as follows:
<TABLE>
<CAPTION>
MARKET TAX COST
PORTFOLIO VALUE BASIS
- ---------------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Prime Money Market Portfolio.......................................... $ 2,699,819,155 $ 2,699,819,155
Money Market Portfolio................................................ 2,101,885,695 2,101,898,478
</TABLE>
CORE TRUST (DELAWARE)
97
<PAGE>
SCHEDULES OF INVESTMENTS MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
PRIME MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------
ASSET BACKED SECURITIES (1.7%)
23,302,548 STEERS 1998, Series A39, 4.98% V/R,
4/25/00(a) $ 23,302,548
41,305,735 WFP Tower B Finance Corp., Short-Term STEERS Trust, Series A,
5.10%
V/R,10/8/99(a) 41,305,735
--------------
TOTAL ASSET BACKED SECURITIES 64,608,283
--------------
CERTIFICATES OF DEPOSIT (2.8%)
30,000,000 Bayerische Landesbank, Girozentrale,
New York, 5.65%, 7/22/99 30,029,050
50,000,000 Natexis Banque SA, New York Branch,
5.71%, 8/3/99 49,995,041
25,000,000 Svenska Handelsbanken, New York, 5.65%,
8/10/99 25,035,004
--------------
TOTAL CERTIFICATES OF DEPOSIT 105,059,095
--------------
COMMERCIAL PAPER (57.3%)
20,600,000 Ace Overseas Corp., 4.92%, 8/17/99(a) 20,383,220
66,115,000 Ace Overseas Corp., 4.95%, 8/20/99(a) 65,387,734
15,366,000 Atlantis One-Funding Corp., 4.90%,
8/25/99 15,188,223
79,000,000 Barton Capital Corp., 4.95%, 6/1/99(a) 79,000,000
5,411,000 Barton Capital Corp., 5.04%, 8/12/99(a) 5,356,457
5,848,000 Barton Capital Corp., 5.06%, 6/8/99(a) 5,842,246
15,300,000 Bavaria GLB Corp., 4.84%, 7/15/99(a) 15,209,305
27,000,000 Bavaria GLB Corp., 4.85%, 7/1/99(a) 26,890,875
20,000,000 Beta Finance Inc., 4.88%, 1/18/00(a) 19,373,734
20,000,000 CC (USA), Inc., 4.87%, 8/27/99(a) 19,764,859
7,000,000 CC (USA), Inc., 4.91%, 8/27/99(a) 6,916,939
103,000,000 China Merchants Holdings, 5.00%, 6/1/99 103,000,000
30,000,000 Christiania Bank, 4.88%, 1/14/00 29,076,868
7,310,000 City of New York, NY, Bayerische
Landesbank Girozentale, LOC, 5.04%,
6/22/99 7,310,000
50,000,000 Commonwealth Bank of Australia, 4.77%,
11/9/99 48,933,375
25,000,000 Compass Securitization, 4.88%,
6/18/99(a) 24,942,389
30,000,000 Conduit Asset Backed Securities Ltd.,
4.90%, 6/17/99(a) 29,934,667
38,313,000 Conduit Asset Backed Securities Ltd.,
4.90%, 7/8/99(a) 38,120,052
10,000,000 Conduit Asset Backed Securities Ltd.,
4.90%, 8/6/99(a) 9,910,167
18,618,000 Conduit Asset Backed Securities Ltd.,
4.90%, 8/30/99(a) 18,389,930
38,963,000 Conduit Asset Backed Securities Ltd.,
4.91%, 6/11/99(a) 38,909,859
19,198,000 CPI Funding Corp., 4.89%, 9/27/99(a) 18,890,289
38,557,000 CPI Funding Corp., 4.90%, 8/25/99(a) 38,110,917
58,615,000 CPI Funding Corp., 4.92%, 6/25/99(a) 58,422,743
40,000,000 Cregem North America, 4.94%, 12/23/99 38,874,780
8,500,000 CXC, Inc., 4.91%, 8/25/99 8,401,460
60,000,000 Deutsche Bank Financial, Inc., 4.85%,
1/21/00 58,108,501
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
PRIME MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
25,000,000 Dorada Corp., 4.80%, 8/4/99(a) $ 24,786,667
50,000,000 Dorada Corp., 4.86%, 7/6/99(a) 49,764,042
13,500,000 Dorada Corp., 4.91%, 8/16/99(a) 13,360,065
50,000,000 Dorada Corp., 4.91%, 8/20/99(a) 49,454,445
75,000,000 Dresdner, 4.86%, 1/4/00 72,701,625
60,000,000 Grand Funding Corp., 4.85%, 6/9/99(a) 59,935,333
39,270,000 Grand Funding Corp., 4.90%, 8/27/99(a) 38,804,978
30,000,000 K2 (USA) LLC, 4.85%, 7/13/99(a) 29,830,250
25,000,000 KBC Trust, 4.84%, 6/14/99(a) 24,956,306
80,000,000 KBC Trust, 4.85%, 7/15/99(a) 79,525,778
69,000,000 KBC Trust, 4.99%, 8/24/99(a) 68,196,611
40,000,000 Lexington Parker Capital Co. LLC.,
4.78%, 7/20/99(a) 39,739,756
37,175,000 MOAT Funding LLC, 4.80%, 7/6/99(a) 37,001,517
20,000,000 MOAT Funding LLC, 4.82%, 6/29/99(a) 19,925,022
32,153,000 MOAT Funding LLC, 4.86%, 7/8/99(a) 31,992,396
30,028,000 MOAT Funding LLC, 4.90%, 6/17/99(a) 29,962,606
25,000,000 Moriarty Ltd., 4.90%, 8/19/99(a) 24,731,181
130,000,000 Natexis US Finance Corp, 4.95%, 12/22/99 126,353,500
85,000,000 Preferred Receivables Corp, 4.95%,
6/1/99 85,000,000
175,000,000 Sheffield Receivables Corp., 4.95%,
6/1/99(a) 175,000,000
35,000,000 Sigma Finance Corp., 4.80%, 8/2/99(a) 34,710,667
30,000,000 Sigma Finance Corp., 4.85%, 10/12/99(a) 29,462,459
60,000,000 Special Purpose Accounts Receivables
Cooperative Corp., 4.85%, 6/21/99(a) 59,838,333
50,000,000 Swedbank, Inc., 4.78%, 10/4/99 49,170,140
47,860,000 Triple A One Funding, 4.91%, 7/9/99 47,611,952
--------------
TOTAL COMMERCIAL PAPER 2,150,465,218
--------------
CORPORATE NOTES (27.4%)
10,000,000 Asset Backed Trust 1996 Series A-4,
4.96% V/R, 1/18/00(a) 10,000,000
30,000,000 Bear Stearns Cos., Inc., 5.05% V/R,
6/15/00 30,000,000
15,000,000 Bear Stearns Cos., Inc., 5.05% V/R,
6/15/00 14,996,725
45,000,000 Bear Stearns Cos., Inc., 5.25%, 1/18/00 45,000,000
15,000,000 Bear Stearns Cos., Inc. 5.32% V/R,
11/30/99 15,000,000
30,000,000 Bear Stearns Cos., Inc., 5.40% V/R,
11/1/99 30,000,000
30,000,000 Bear Stearns Cos., Inc., Series B, 5.40%
V/R, 10/27/99 30,000,000
80,000,000 Beta Finance Inc., 4.99% V/R,
11/12/99(a) 79,971,769
20,000,000 Bishop's Gate Residential Mortgage
Trust, Series 1998-2, 5.10% V/R,
11/22/99 20,000,000
25,000,000 BRAVO Trust Series 1997-1, 5.05% V/R,
1/18/00(a) 25,000,000
5,000,000 Caterpillar Financial Services Corp.,
6.25%, 1/20/00 5,033,530
80,000,000 CC (USA), Inc., 5.13%, 1/12/00(a) 80,000,000
26,000,000 CC (USA), Inc., 5.14%, 1/19/00(a) 26,000,000
50,000,000 Goldman Sachs Group, 5.76%, 1/14/00 50,173,201
20,000,000 K2 (USA) LLC, 5.20%, 3/29/00(a) 19,996,699
60,000,000 Key Bank, N.A, Cleveland, 5.02% V/R,
10/14/99 60,001,087
30,000,000 Liberty Lighthouse US Capital Co., LLC,
4.88% V/R, 9/1/99(a) 29,998,549
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
98
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
PRIME MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
60,000,000 Liberty Lighthouse US Capital Co., LLC,
4.88% V/R, 9/9/99(a) 59,996,793
50,000,000 Liberty Lighthouse US Capital Co., LLC,
4.98% V/R, 10/8/99(a) $ 49,985,466
80,000,000 Merrill Lynch & Co., Inc., 5.14%,
2/11/00 79,999,222
40,000,000 Morgan Stanley Group, Inc., 5.10% V/R,
5/15/01 40,000,000
87,500,000 Sigma Finance Corp., 5.02% V/R,
10/28/99(a) 87,500,000
20,000,000 STEERS, Medium Term, Series 1997 A-28,
4.98% V/R, 9/23/99(a) 20,000,000
28,000,000 STEERS, Series 1998 A-40, Conti Mortgage
Home Equity Loan Trust, 5.01% V/R,
1/18/00(a) 28,000,000
42,000,000 SunAmerica, Inc., 6.20%, 10/31/99 42,198,927
20,000,000 Syndicated Loan Funding Trust, Series
1999-1, 5.15% V/R, 2/15/00 20,000,000
30,000,000 Transamerica Life Insurance & Annuity
Co., 5.11% V/R, 4/12/00 30,000,000
--------------
TOTAL CORPORATE NOTES 1,028,851,968
--------------
FLOATING RATE FUNDING AGREEMENTS (2.7%) 30,000,000 Allstate Life Insurance Co.,
5.10% V/R,
8/25/99(a) 30,000,000
40,000,000 Monumental Life, 5.01% V/R, 5/15/00 40,000,000
30,000,000 Monumental Life, 5.05% V/R, 5/15/00 30,000,000
--------------
TOTAL FLOATING RATE FUNDING AGREEMENTS 100,000,000
--------------
MASTER NOTES (0.3%)
10,000,000 General Electric Co., 4.85% V/R, 6/8/99 10,000,000
--------------
MUNICIPAL NOTES (0.3%)
4,700,000 Durham, NC, COP, Series B, 4.83% V/R,
7/1/03 4,700,000
1,190,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 1,190,000
615,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 615,000
1,065,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 1,065,000
1,495,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 1,495,000
570,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 570,000
640,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 640,000
1,100,000 Prince William County, VA, Taxable
Notes, Series A, Wachovia Bank of
North Carolina, LOC, 4.83% V/R, 3/1/17 1,100,000
--------------
TOTAL MUNICIPAL NOTES 11,375,000
--------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
PRIME MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.6%)
22,352,527 Merrill Lynch & Co., 4.68%, 6/1/99, collateralized by
$57,649,961 U.S. Government Securities, 3.38%, 6/1/17, with an
aggregate market value of
$22,800,008 $ 22,352,527
--------------
TIME DEPOSITS (6.9%)
83,595,389 Societe Generale, Grand Cayman, 4.50%,
6/1/99 83,595,389
175,000,000 Southtrust Bank, Grand Cayman, 4.81%,
6/1/99 175,000,000
--------------
TOTAL TIME DEPOSITS 258,595,389
--------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (100.0%)
$3,751,307,480
--------------
--------------
- ------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------
ASSET BACKED SECURITIES (1.8%) $ 15,535,032 STEERS 1998, Series A39, 4.98% V/R,
4/25/00 $ 15,535,031
19,211,970 WFP Tower B Finance Corp., Short-Term STEERS Trust, Series A,
5.10%
V/R,10/8/99 19,211,970
14,408,977 WFP Tower B Finance Corp., Short-Term STEERS Trust, Series A,
5.10%
V/R,10/8/99 14,408,977
--------------
TOTAL ASSET BACKED SECURITIES 49,155,978
--------------
CERTIFICATES OF DEPOSIT (2.8%)
20,000,000 Bayerische Landesbank, Girozentrale,
New York, 5.65%, 7/22/99 20,019,366
38,000,000 Natexis Banque SA, New York Branch,
5.71%, 8/3/99 37,996,231
18,000,000 Svenska Handelsbanken, New York, 5.67%,
8/10/99 18,025,263
--------------
TOTAL CERTIFICATES OF DEPOSIT 76,040,860
--------------
COMMERCIAL PAPER (62.8%)
75,000,000 Ace Overseas Corp., 4.78%, 7/22/99(a) 74,492,125
25,000,000 Ace Overseas Corp., 4.85%, 8/16/99(a) 24,744,028
25,000,000 Barton Capital Corp., 4.95%, 6/1/99(a) 25,000,000
20,000,000 Bavaria GLB Corp., 4.84%, 7/15/99(a) 19,881,689
33,500,000 CC (USA), Inc., 4.84%, 7/14/99(a) 33,306,333
7,000,000 CC (USA), Inc., 4.91%, 8/27/99(a) 6,916,939
25,000,000 China Merchants Holdings, 5.00%, 6/1/99 25,000,000
20,000,000 Christiania Bank, 4.88%, 1/14/00 19,384,578
25,389,000 City of Austin, TX, Landesbank Hessen-
Thueringen GZ, LOC, 4.88%, 8/10/99 25,148,087
50,000,000 Commonwealth Bank of Australia, 4.77%,
11/5/99 48,959,875
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
99
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
10,245,000 Conduit Asset Backed Securities Ltd.,
4.90%, 6/17/99(a) $ 10,222,689
20,495,000 Conduit Asset Backed Securities Ltd.,
4.90%, 6/23/99(a) 20,433,629
25,000,000 Conduit Asset Backed Securities Ltd.,
4.90%, 7/8/99(a) 24,874,098
5,307,000 Conduit Asset Backed Securities Ltd.,
4.90%, 8/6/99(a) 5,259,326
15,000,000 Conduit Asset Backed Securities Ltd.,
4.90%, 8/30/99(a) 14,816,251
29,611,000 Conduit Asset Backed Securities Ltd.,
4.91%, 6/9/99(a) 29,578,691
30,000,000 CPI Funding Corp., 4.89%, 9/27/99(a) 29,519,150
40,000,000 CPI Funding Corp., 4.92%, 6/25/99(a) 39,868,800
37,500,000 Cregem North America, 4.94%, 12/27/99 36,424,522
8,500,000 CXC, Inc., 4.91%, 8/25/99 8,401,460
40,000,000 Deutsche Bank Financial, Inc., 4.85%,
1/21/00 38,739,002
14,000,000 Dorada Corp., 4.80%, 8/4/99(a) 13,880,534
20,000,000 Dorada Corp., 4.85%, 7/6/99(a) 19,905,695
12,000,000 Dorada Corp., 4.86%, 7/6/99(a) 11,943,300
25,000,000 Dresdner, 4.86%, 1/4/00 24,233,875
40,000,000 Grand Funding Corp., 4.85%, 6/9/99(a) 39,956,889
55,795,000 Grand Funding Corp., 4.89%, 7/21/99(a) 55,416,059
40,000,000 Grand Funding Corp., 4.90%, 8/27/99(a) 39,526,334
29,200,000 K2 (USA) LLC, 4.84%, 6/22/99(a) 29,117,559
14,000,000 K2 (USA) LLC, 4.85%, 6/9/99(a) 13,984,911
50,000,000 K2 (USA) LLC, 4.85%, 7/13/99(a) 49,717,083
25,000,000 KBC Trust, 4.84%, 6/14/99(a) 24,956,306
40,000,000 KBC Trust, 4.85%, 7/15/99(a) 39,762,889
17,000,000 KBC Trust, 4.99%, 8/24/99(a) 16,802,064
75,000,000 Lexington Parker Capital Co. LLC.,
4.78%, 7/16/99(a) 74,551,875
50,000,000 Lexington Parker Capital Co. LLC.,
4.78%, 7/20/99(a) 49,674,695
31,000,000 MOAT Funding LLC, 4.80%, 7/6/99(a) 30,855,333
20,000,000 MOAT Funding LLC, 4.82%, 6/29/99(a) 19,925,022
25,865,000 MOAT Funding LLC, 4.84%, 7/9/99(a) 25,732,859
35,919,000 MOAT Funding LLC, 4.90%, 9/27/99(a) 35,342,102
50,000,000 Moriarty Ltd., 4.90%, 8/19/99(a) 49,462,362
95,000,000 Natexis US Finance Corp, 4.95%, 12/22/99 92,335,250
28,000,000 Preferred Receivables Corp, 4.95%,
6/1/99 28,000,000
118,000,000 Sheffield Receivables Corp., 4.95%,
6/1/99(a) 118,000,000
15,000,000 Sigma Finance Corp., 4.80%, 8/2/99(a) 14,876,000
20,000,000 Sigma Finance Corp., 4.85%, 10/12/99(a) 19,641,639
15,000,000 Sigma Finance Corp., 4.88%, 8/31/99(a) 14,814,967
25,000,000 Special Purpose Accounts Receivables
Cooperative Corp., 4.83%, 6/10/99(a) 24,969,813
40,000,000 Special Purpose Accounts Receivables
Cooperative Corp., 4.85%, 6/21/99(a) 39,892,222
23,874,000 Sunbelt-Dix Inc., 4.88%, 6/1/99 23,874,000
40,000,000 Swedbank, Inc., 4.78%, 10/4/99 39,336,111
23,000,000 Swedbank, Inc., 4.85%, 7/16/99 22,860,563
51,000,000 Trident Capital Finance, 4.83%,
10/12/99(a) 50,089,948
--------------
TOTAL COMMERCIAL PAPER 1,714,409,531
--------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
CORPORATE NOTES (27.3%)
5,000,000 Asset Backed Trust 1996 Series A-4,
4.96% V/R, 1/18/00(a) $ 5,000,000
20,000,000 Bear Stearns Cos., Inc., 5.05% V/R,
6/15/00 20,000,000
10,000,000 Bear Stearns Cos., Inc., 5.05% V/R,
6/15/00 9,997,817
45,000,000 Bear Stearns Cos., Inc., 5.25%, 1/18/00 45,000,000
10,000,000 Bear Stearns Cos., Inc. 5.32% V/R,
11/30/99 10,000,000
20,000,000 Bear Stearns Cos., Inc., 5.40% V/R,
11/1/99 20,000,000
20,000,000 Bear Stearns Cos., Inc., Series B, 5.40%
V/R, 10/27/99 20,000,000
60,000,000 Beta Finance Inc., 4.99% V/R,
11/12/99(a) 59,978,826
10,000,000 Bishop's Gate Residential Mortgage
Trust, Series 1998-2, 5.10% V/R,
11/22/99 10,000,000
20,000,000 BRAVO Trust Series 1997-1, 5.05% V/R,
1/18/00(a) 20,000,000
5,000,000 Caterpillar Financial Services Corp.,
6.25%, 1/20/00 5,033,530
60,000,000 CC (USA), Inc., 5.13%, 1/12/00(a) 60,000,000
15,000,000 CC (USA), Inc., 5.14%, 1/19/00(a) 15,000,000
20,000,000 Goldman Sachs Group, 5.76%, 1/14/00 20,068,953
15,000,000 K2 (USA) LLC, 5.20%, 3/29/00(a) 14,997,525
40,000,000 Key Bank, N.A, Cleveland, 5.02% V/R,
10/14/99 40,000,724
20,000,000 Liberty Lighthouse US Capital Co., LLC,
4.88% V/R, 9/1/99(a) 19,999,033
40,000,000 Liberty Lighthouse US Capital Co., LLC,
4.88% V/R, 9/9/99(a) 39,997,864
20,000,000 Liberty Lighthouse US Capital Co., LLC,
4.98% V/R, 10/8/99(a) 19,997,250
30,000,000 Liberty Lighthouse US Capital Co., LLC,
4.98% V/R, 10/8/99(a) 29,984,388
67,000,000 Merrill Lynch & Co., Inc., 5.14%,
2/11/00 66,999,348
30,000,000 Morgan Stanley Group, Inc., 5.10% V/R,
11/15/99 30,000,000
60,000,000 Sigma Finance Corp., 5.02% V/R,
10/28/99(a) 60,000,000
20,000,000 STEERS, Medium Term, Series 1997 A-28,
4.98% V/R, 9/23/99(a) 20,000,000
19,000,000 STEERS, Series 1998 A-40, Conti Mortgage
Home Equity Loan Trust, 5.01% V/R,
1/18/00(a) 19,000,000
28,100,000 SunAmerica, Inc., 6.20%, 10/31/99 28,233,510
15,000,000 Syndicated Loan Funding Trust, Series
1999-1, 5.15% V/R, 2/15/00(a) 15,000,000
20,000,000 Transamerica Life Insurance & Annuity
Co., 5.11% V/R, 4/12/00 20,000,000
--------------
TOTAL CORPORATE NOTES 744,288,768
--------------
FLOATING RATE FUNDING AGREEMENTS (2.7%) 20,000,000 Allstate Life Insurance Co.,
5.10% V/R,
8/26/99(a) 20,000,000
35,000,000 Monumental Life, 5.01% V/R, 5/15/00 35,000,000
20,000,000 Monumental Life, 5.05% V/R, 3/15/00 20,000,000
--------------
TOTAL FLOATING RATE FUNDING AGREEMENTS 75,000,000
--------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
100
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
MASTER NOTES (0.4%)
10,000,000 General Electric Co., 4.85% V/R, 6/8/99 $ 10,000,000
--------------
MUNICIPAL BONDS & NOTES (0.4%)
900,000 Durham, NC, COP, Series B, 4.83% V/R,
7/1/03 900,000
2,700,000 Durham, NC, COP, Series B, 4.83% V/R,
7/1/03 2,700,000
440,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 440,000
820,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 820,000
925,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 925,000
405,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 405,000
380,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 380,000
1,090,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 1,090,000
1,320,000 Kalamazoo Funding Corp., Old Kent Bank,
LOC, 4.98% V/R, 12/15/26 1,320,000
900,000 Prince William County, VA, Taxable
Notes, Series A, Wachovia Bank of
North Carolina, LOC, 4.83% V/R, 3/1/17 900,000
--------------
TOTAL MUNICIPAL BONDS & NOTES 9,880,000
--------------
TIME DEPOSITS (1.8%)
23,600,000 Societe Generale, Grand Cayman, 4.50%,
6/1/99 23,600,000
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
MONEY MARKET PORTFOLIO (continued)
- ------------------------------------------------------------------------
25,000,000 Southtrust Bank, 4.81%, 6/1/99 $ 25,000,000
--------------
TOTAL TIME DEPOSITS 48,600,000
--------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (100.0%)
$2,727,375,137
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Securities that may be resold to "qualified institutional buyers" under rule
144A or securities offered pursuant to 4(2) of the Securities Act of 1933,
as amended. These securities had been determined to be liquid pursuant to
procedures adopted by the Board of Trustees.
ABBREVIATIONS
<TABLE>
<S> <C>
COP Certificate of Participation
LOC Letter of Credit
V/R Variable Rate -- These securities are deemed to have a
maturity remaining until the next adjustment of the
interest rate or the longer of the demand period or
readjustment. The interest rates shown reflect the
rate in effect on May 31, 1999.
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
CORE TRUST (DELAWARE)
101
<PAGE>
