<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
File No. 33-91498
File No. 811-9034
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 1
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
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THE CRM FUNDS
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
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Max Berueffy, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Susan Penry-Williams, Esq.
Kramer, Levin,Naftalis, Nessen, Kamin & Frankel
919 West Third Avenue
New York, New York 10022
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It is proposed that this filing will become effective:
_X_ immediately upon filing pursuant to Rule 485, paragraph (b)
___ on [ ] pursuant to Rule 485, paragraph (b)
___ 60 days after filing pursuant to Rule 485, paragraph (a)(i)
___ on [ ] pursuant to Rule 485, paragraph (a)(i)
___ 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
___ on [ ] pursuant to Rule 485, paragraph (a)(ii)
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the investment Company
Act of 1940; accordingly, no fee is payable herewith. A Rule 24f-2 Notice for
the Registrant's fiscal year ending September 30, 1996 will be filed with the
Commission on or about November 30, 1996.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expenses of Investing in the Fund
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description of Registrant Prospectus Summary; Investment
Risks and Practices; Other
Information
Item 5. Management of the Fund Prospectus Summary; Management
Item 5A. Management's Discussion of Not Applicable
Fund Performance
Item 6. Capital Stock and Dividends and Tax Matters; Other
Other Securities Information; Purchases and
Redemptions of Shares
Item 7. Purchase of Securities Purchases and Redemptions of
Being Offered Shares; Other Information;
Management
Item 8. Redemption or Repurchase Purchases and Redemptions of
Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART B
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Other Matters
Item 13. Investment Objectives and Policies Investment Policies; Investment
Limitations
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management; Other Matters
Holders of Securities
Item 16. Investment Advisory and Other Management
Services
Item 17. Brokerage Allocation Portfolio Transactions
and Other Practices
Item 18. Capital Stock and Other Securities Determination of Net Asset Value
Item 19. Purchase, Redemption and Pricing Determination of Net Asset Value;
of Securities Being Offered Additional Purchase and
Redemption Information
Item 20. Tax Status Taxation
Item 21. Underwriters Management
Item 22. Calculation of Performance Data Performance Data and Advertising
Item 23. Financial Statements Financial Statements
<PAGE>
THE CRM SMALL CAP VALUE FUND
<TABLE>
<S> <C>
FUND INFORMATION: ACCOUNT INFORMATION AND
SHAREHOLDER SERVICES:
Two Portland Square
Portland, Maine 04101 Forum Financial Corp.
(800) 276-2883 P.O. Box 446
Portland, Maine 04112
(207) 879-8910
INVESTMENT ADVISER: (800) 844-8258
CRM Advisors, LLC
707 Westchester Avenue
White Plains, New York 10604
</TABLE>
PROSPECTUS
MAY 1, 1996
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This Prospectus offers shares of the CRM Small Cap Value Fund (the "Fund"), a
diversified portfolio of the CRM Funds (the "Trust"), an open-end, management
investment company. The Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies with small market
capitalizations, using a value-oriented approach. Shares of the Fund are
offered to investors without any sales charge.
PLEASE READ THIS PROSPECTUS BEFORE INVESTING IN THE FUND, AND RETAIN IT FOR
FUTURE REFERENCE. It contains important information about the Fund, its
investments and the services available to its shareholders.
The Trust has filed with the Securities and Exchange Commission a Statement of
Additional Information dated May 1, 1996. It contains more detailed information
about the Fund and the Trust and is incorporated into this Prospectus by
reference. To obtain a free copy of the Statement of Additional Information,
please call The CRM Funds at (800) 844-8258.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
SUMMARY OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES. The Fund seeks long-term capital
appreciation by investing primarily in equity securities of small companies.
The Fund's investment adviser employs a "value" approach to the Fund's
investments, seeking to identify small capitalization companies that have
experienced fundamental change, are intrinsically undervalued or are
misunderstood by the investment community. The Portfolio Manager views
investment prospects on a long-term basis and does not attempt to time the
market. SEE "Investment Objective, Policies and Limitations."
MANAGEMENT. CRM Advisors, LLC (the "Adviser"), an affiliate of Cramer
Rosenthal McGlynn, Inc. ("CRM") with the same principals and portfolio
managers as CRM, is the Fund's investment adviser and makes investment
decisions for the Fund. Forum Financial Services, Inc. is the administrator
and distributor of the Fund. SEE "Management."
PURCHASES AND REDEMPTIONS. Shares of the Fund may be purchased or
redeemed without any sales charges Monday through Friday except on days that the
New York Stock Exchange is closed ("Fund Business Day"). The initial
minimum investment is $10,000 or $2,000 for retirement accounts. There is
no minimum for subsequent investments in the Fund. SEE "Purchases and
Redemptions of Shares."
DIVIDENDS. Dividends representing the net investment income of the Fund are
declared and paid at least annually. Net capital gains realized by the Fund,
if any, also will be distributed annually. Dividends and distributions are
reinvested in additional shares of the Fund unless a shareholder elects to
have them paid in cash. SEE "Dividends and Tax Matters."
RISK FACTORS AND INVESTMENT CONSIDERATIONS. The Fund does not invest for
income, and does not by itself provide a complete or balanced investment
program. It may be an appropriate investment for investors willing to tolerate
possibly significant fluctuations in the Fund's net asset value while seeking
long-term returns that are potentially higher than market averages. A company's
market capitalization is the total market value of its outstanding common
stocks. The securities of small capitalization companies typically are more
thinly traded and volatile than those of larger companies. Small capitalization
securities may have greater growth potential in the long-run than other types of
securities. In the shorter term, however, the prices of small capitalization
securities may fluctuate significantly in response to news about the company,
the markets or the economy. Other investments and investment techniques of the
Fund, such as investments in securities of foreign issuers, may entail
additional risks or have speculative characteristics. SEE "Investment
Objective, Policies and Limitations."
-2-
<PAGE>
EXPENSES OF INVESTING IN THE FUND
The following table should help you understand the various costs and expenses
that you will bear if you invest in the Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends . . . None
Deferred Sales Load . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . None
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees (after fee waivers) . . . . . . . . . . . . 0.29%
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses (after expense reimbursements)
Shareholder Servicing Fees . . . . . . . . . . . . . 0.00%
Miscellaneous Expenses . . . . . . . . . . . . . . . 01.61%
Total Fund Operating Expenses . . . . . . . . . . . . . . 1.90%
</TABLE>
The Adviser may, in its sole discretion, waive a portion of its fees or
reimburse certain fund expenses. For a further description of the various
costs and expenses incurred in the Fund's operation, SEE "Management." The
amounts of expenses for the Fund are based on amounts incurred during the
Fund's most recent semi-annual period ended March 31, 1996. Absent waivers,
the Investment Advisory Fee would be 0.75%. Fee waivers are voluntary and may
be reduced or eliminated at any time. Absent expense reimbursements the
expenses of the Fund would be: Other Expenses, 2.31% and Total Operating
Expenses 3.07%.
The amount of the Advisory Fees is the annual rate stated in the
investment advisory agreement. The amount of the Other Expenses is an
estimate for the Fund's current fiscal year ending September 30, 1996,
assuming that the net assets of the Fund are at least equal to $20 million.
The Adviser may, in its sole discretion, waive a portion of its fees or
reimburse certain fund expenses. For a further description of the various
costs and expenses incurred in the Fund's operation, SEE "Management."
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in the Fund would pay assuming a $1,000 investment
in the Fund, a 5% annual return, the reinvestment of all dividends and
distributions and redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
$19 $60 $103 $222
The example is based on the expenses listed in the table. The five percent
annual return is not predictive of and does not represent the Fund's
projected returns; rather, it is required by government regulation. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The following table represents selected data for a single outstanding share
of the Fund for the period shown. Information for the Fund's six month period
ended March 31, 1996, is unaudited. The Funds' financial statements for the
semi-annual period ended March 31, 1996 are contained in the Semi-Annual
Report of the Fund and are incorporated by reference into the Statement of
Additional Information. Further information about the Fund's performance is
contained in the Fund's Semi-Annual Report to shareholders, which may be
obtained from the Trust without charge.
<TABLE>
<CAPTION>
Small Cap Value Fund
--------------------
Period Ended
3/31/96 (a)
--------------------
<S> <C>
BEGINNING NET ASSET VALUE PER SHARE $10.00
Net investment income (0.01)
Net realized and unrealized gain
(loss) on securities 1.99
------
ENDING NET ASSET VALUE PER SHARE $11.98
------
------
RATIOS TO AVERAGE NET ASSETS:
Expenses (b) 1.90% (c)
Net investment income (0.50)%(c)
TOTAL RETURN 19.85%
PORTFOLIO TURNOVER RATE 39.93%
NET ASSETS AT THE END OF PERIOD
(000's omitted) $23,223
</TABLE>
(a) The Fund commenced operations on September 29, 1995.
(b) Calculated using the weighted average number of shares outstanding.
(b) During the period, various fees and expenses were waived and reimbursed,
respectively. Had such waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been: 3.07% on an annualized
basis.
(c) Annualized.
INVESTMENTS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation. The Fund
seeks to achieve this objective by investing at least 75% of its total assets
in the equity securities of small capitalization companies. A small
capitalization company has a market capitalization -- in other words, the
value the stock market assigns all of the company's shares -- of $1 billion
or less at the time of the Fund's investment. Companies whose capitalization
exceeds $1 billion after purchase will continue to be considered small for
purposes of this 75% policy. The Fund may also invest to a limited degree in
companies that have larger market capitalizations. The investment objective
of the Fund may not be changed without the approval of shareholders. SEE
"Investment Objective and Policies."
INVESTMENT STRATEGY
A company may have a small market capitalization because it is new or has
recently gone public, or because it operates in a minor industry or regional
market. These companies may respond more quickly to change in an industry,
and are expected to increase their earnings more rapidly than larger
companies. Historically, small companies have offered greater opportunity
for capital appreciation than larger, more established companies. At the
same time, investing in small companies can be riskier than other
investments. See "INVESTMENT RISKS."
-4-
<PAGE>
Value investing provides investors with a less aggressive way to take
advantage of growth opportunities of small companies. Using a value
approach, the Fund will seek to invest in stocks priced low relative to
comparable companies, determined by price/earnings ratios, cash flows or
other measures. Value investing therefore may reduce downside risk while
offering potential for capital appreciation as a stock gains favor among
other investors and its stock price rises.
The Fund will be managed in accordance with the investment disciplines that
CRM has employed in managing its equity portfolios for over twenty years.
The Adviser relies on stock selection to achieve its results, rather than
trying to time market fluctuations. It seeks out those stocks that are
undervalued and, in some cases, neglected by financial analysts, evaluating
the degree of investor recognition by monitoring the number of analysts who
follow the company and recommend its purchase or sale to investors. The
Adviser begins the investment process by identifying early dynamic change in
a company's operations, finances, or management. In small capitalization
companies, this type of dynamic change tends to be material, and may create
misunderstanding in the marketplace, and result in a company's stock becoming
undervalued.
Once change is identified, the Adviser evaluates the company on several
levels. It analyzes financial models based principally upon projected cash
flow, as opposed to reported earnings. The price of the company's stock is
evaluated in the context of what the market is willing to pay for stock of
comparable companies and what a strategic buyer would pay for the whole
company. Another important consideration is the extent of management's
ownership interest in the company. Finally, the Adviser analyzes the
company's market, in most instances, corroborating its observations and
assumptions by meeting with management, customers, and suppliers.
By reviewing historical relationships and understanding the characteristics
of a business, the Adviser establishes valuation parameters using relative
ratios or target prices. In its overall assessment, the Adviser seeks stocks
that it believes have a greater upside potential than risk over an 18 to 24
month holding period.
INVESTMENT RISKS
An investment in the Fund is not by itself a complete or balanced investment
program. Nevertheless, the small capitalization segment of the equity markets
may be an important part of an investor's portfolio, particularly for
long-term investors able to tolerate short-term fluctuations in the Fund's
net asset value. Investing in small companies can entail more risk than
investing in larger, more established companies, however.
Small companies may have more limited product lines, markets, and financial
resources, making them more susceptible to economic or market setbacks. A
significant portion of the securities in which the Fund invests are traded in
the over-the-counter markets or on a regional securities exchange, and may be
more thinly traded and volatile than the securities of larger companies.
Analysts and other investors typically follow small companies less actively,
and information about these companies is not always readily available. For
these and other reasons, the prices of small capitalization securities may
fluctuate more significantly than the securities of larger companies, in
response to news about the company, the markets or the economy. As a result,
the price of the Fund's shares may exhibit a higher degree of volatility than
the market averages.
In addition, securities 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 traded on a national exchange. The Fund therefore may
have to sell a portfolio security to meet redemptions or otherwise at a
discount from market prices, sell during periods when disposition is not
desirable, or make many small sales over a lengthy period of time.
INVESTMENT POLICIES
Under normal conditions, the Fund will invest at least 75% of its assets in
equity securities of small capitalization companies.
EQUITY SECURITIES may include common and preferred stock, convertible
securities and warrants. COMMON STOCK represents an equity or ownership
interest in a company. Although this interest often gives the Fund the right
to vote on measures affecting the company's organization and operations, the
Fund does not intend to exercise control over the management of companies in
which it invests. Common stocks have a history of long-term growth in value,
but their prices tend to fluctuate in the shorter term.
-5-
<PAGE>
PREFERRED STOCK generally does not exhibit as great a potential for
appreciation or depreciation as common stock, although it ranks above common
stock in its claim on income from dividend payments. CONVERTIBLE SECURITIES
are securities that may be converted either at a stated price or rate within
a specified period of time into a specified number of shares of common stock.
Traditionally, convertible securities have paid dividends or interest greater
than common stocks, but lesser than fixed income or non-convertible
securities. By investing in a convertible security, the Fund may participate
in any capital appreciation or depreciation of a company's stock, but to a
lesser degree than its common stock.
The Fund may invest in preferred stock and convertible securities rated BBB
or higher by Standard & Poor's Corporation, Baa by Moody's Investors Service,
Inc., or the equivalent in the case of unrated instruments. SEE "Description
of Securities Ratings" in Appendix A to the Statement of Additional
Information.
WARRANTS are options to purchase an equity security at a specified price at
any time during the life of the warrant. Unlike convertible securities and
preferred stocks, warrants do not pay a fixed dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid
market for the resale of the warrants, potential price fluctuations as a
result of speculation or other factors and failure of the price of the
underlying security to reach a level at which the warrant can be prudently
exercised (in which case the warrant may expire without being exercised,
resulting in the loss of the Fund's entire investment therein).
The market value of all securities, including equity securities, is based
upon the market's perception of value and not necessarily the book value of
an issuer or other objective measure of a company's worth.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The Fund may invest in ADRs, which
are receipts issued by an American bank or trust company evidencing ownership
of underlying securities issued by a foreign issuer. ADRs, in registered
form, are designed for use in U.S. securities markets. In a "sponsored" ADR,
the foreign issuer typically bears certain expenses of maintaining the ADR
facility "Unsponsored" ADRs may be created without the participation of the
foreign issuer. Holders of unsponsored ADRs generally bear all the costs of
the ADR facility. The bank or trust company depository of an unsponsored ADR
may be under no obligation to distribute shareholder communications received
from the foreign issuer or to pass through voting rights.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in shares of
other investment companies to the extent permitted by the Investment Company
Act of 1940 ("Investment Company Act"). To the extent the Fund invests in
shares of an investment company, it will bear its pro rata share of the other
investment company's expenses, such as investment advisory and distribution
fees, and operating expenses.
ILLIQUID AND RESTRICTED SECURITIES. As a nonfundamental investment policy,
the Fund may not purchase a security if, as a result, more than 10% of its
net assets would be invested in illiquid securities. A security is
considered ILLIQUID if it may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
Fund has valued the security. Over-the-counter options, repurchase
agreements not entitling the holder to payment of principal in 7 days, and
certain "restricted securities" may be illiquid.
A security is RESTRICTED if it is subject to contractual or legal
restrictions on resale to the general public. A liquid institutional market
has developed, however, for certain restricted securities such as repurchase
agreements, commercial paper, foreign securities and corporate bonds and
notes. Thus, restrictions on resale do not necessarily indicate the
liquidity of the security. For example, if a restricted security may be sold
to certain institutional buyers in accordance with Rule 144A under the
Securities Act of 1933 or another exemption from registration under the
Securities Act, the Adviser may determine that the security is liquid under
guidelines adopted by the Fund's Board of Trustees. These guidelines take
into account trading activity in the securities and the availability of
reliable pricing information, among other factors. With other restricted
securities, however, there can be no assurance that a liquid market will
exist for the security at any particular time. The Fund might not be able to
dispose of such securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions. The Fund treats such holdings
as illiquid.
ADDITIONAL INVESTMENT PRACTICES
CONCENTRATION. As a fundamental investment policy, the Fund may not purchase
a security (other than U.S. Government Securities) if as a result more than
25% of its net assets would be invested in a particular industry.
-6-
<PAGE>
DIVERSIFICATION. As a fundamental investment policy, the Fund may not
purchase a security if, as a result (a) more than 5% of the Fund's total
assets would be invested in the securities of a single issuer, or (b) the
Fund would own more than 10% of the outstanding voting securities of a single
issuer. This limitation applies only with respect to 75% of the Fund's total
assets and does not apply to U.S. Government Securities.
BORROWING. As a fundamental investment policy, the Fund may borrow money for
temporary or emergency purposes, including the meeting of redemption
requests, in amounts up to 33 1/3% of the Fund's total assets. As a
nonfundamental investment policy, the Fund may not purchase portfolio
securities if its outstanding borrowings exceed 5% of its total assets or
borrow for purposes other than meeting redemptions in an amount exceeding 5%
of the value of its total assets at the time the borrowing is made.
Borrowing involves special risk considerations. Interest costs on borrowings
may fluctuate with changing market rates of interest and may partially 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, the Fund might need to sell portfolio
securities to meet interest or principal payments at a time when investment
considerations would not favor such sales.
CASH AND TEMPORARY DEFENSIVE POSITIONS. The Fund will hold a certain portion
of its assets in cash or in investment grade cash equivalents to retain
flexibility in meeting redemptions, paying expenses, and timing of new
investments. Cash equivalents may include (i) short-term obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities ("U.S. Government Securities"), (ii) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of
commercial banks doing business in the United States that have an A+ rating
from Standard & Poor's Corporation or an A-1+ rating from Moody's Investors
Service, Inc., (iii) commercial paper rated P-1 by Moody's Investors Service,
Inc. or A-1 by Standard & Poor's Corporation, (iv) repurchase agreements
covering any of the securities in which the Fund may invest directly, and (v)
money market mutual funds.
In addition, when the Adviser believes that business or financial conditions
warrant, the Fund may assume a temporary defensive position. During such
periods, the Fund may invest without limit in cash or cash equivalents. When
and to the extent the Fund assumes a temporary defensive position, it will
not pursue its investment objective.
SHORT SALES. The Fund may not enter into short sales, except short sales
"against the box." In a short sale against the box, the Fund sells
securities it owns, or has the right to acquire at no added cost. The Fund
does not immediately deliver the securities sold, however, and does not
receive proceeds from the sale until it does deliver the securities. The
Fund may enter into a short sale against the box to lock-in a gain or loss in
one year, while deferring recognition of the gain or loss until the next
year. The Fund may also sell short against the box to hedge against the risk
that the price of a security may decline. In such a case, to the extent the
Fund limits its future losses in the security, it limits its opportunity to
achieve future gain in the security as well.
PORTFOLIO TRANSACTIONS. The frequency of portfolio transactions is generally
expressed in terms of a portfolio turnover rate. For example, an annual
turnover rate of 100% would occur if all of the securities in the Fund were
replaced once a year. The Fund's portfolio turnover rate will vary from year
to year depending on market conditions. The Adviser anticipates that, under
normal conditions, the Fund's portfolio turnover rate will not exceed 75%.
INVESTMENT OBJECTIVE AND POLICIES. The investment objective, and investment
policies of the Fund that are identified as fundamental, may not be changed
without approval of the holders of a majority of the Fund's outstanding
voting securities, as defined in the Investment Company Act. Except as
otherwise indicated, however, the Fund's investment policies are not
fundamental and may be changed by the Board of Trustees without shareholder
approval. The Fund will apply the percentage restrictions on its investments
set forth in its investment policies when the investment is made. If the
percentage of the Fund's assets committed to a particular investment or
practice later increases because of a change in the market values of the
Fund's assets or redemptions of Fund shares, it will not constitute a
violation of the limitation.
MANAGEMENT
The business of the Trust and the Fund is managed under the direction of the
Board of Trustees. The Board formulates the general policies of the Fund and
meets periodically to review the Fund's performance, monitor its
-7-
<PAGE>
investment activities and practices, and discuss other matters affecting the
Fund and the Trust. Additional information regarding the Trustees, as well
as the Company's executive officers, may be found in the Statement of
Additional Information under the heading "Management - Trustees and Officers."
INVESTMENT ADVISER
CRM Advisors, LLC (the "Adviser"), 707 Westchester Avenue, White Plains, New
York 10604, serves as investment adviser to the Fund pursuant to an
investment advisory agreement with the Trust. Subject to the general control
of the Board, the Adviser makes investment decisions for the Fund. The
Adviser is a limited liability company organized under the laws of the State
of New York on June 20, 1995, and is a registered investment adviser under
the Investment Advisers Act of 1940. Although as a new entity the Adviser
has no previous experience managing an investment company, the principal
shareholders and portfolio managers of the Adviser have significant
experience in portfolio management through CRM, an affiliate of the Adviser
that is also a registered investment adviser providing investment services to
pension plans, endowments, foundations, and institutions, as well as family
trusts, estates and individuals.
CRM has managed investments in small and mid capitalization companies for
twenty-three years. As of the date of this prospectus, it has over
$1.8 billion of assets under management. The following data relates to
historical performance of the portfolios of all private accounts managed by
CRM that have an investment style and objective substantially similar to the
Fund's. This data compares the performance of these portfolios against the
Russell 2500 market index. It represents dollar weighted total rates of
return that include the impact of capital appreciation as well as the
reinvestment of interest and dividends. This data is unaudited, and does not
indicate how the Fund may perform in the future.
<TABLE>
<CAPTION>
TIME PERIOD (CALENDAR YEARS) CRM(1) RUSSELL 2500(2)
- ---------------------------- ------- ---------------
<S> <C> <C>
20 Years: 1976 - 1995. . . . . . . . 18.8% n/a
15 Years: 1981 - 1995. . . . . . . . 16.8% 14.1%
10 Years: 1986 - 1995. . . . . . . . 15.9% 13.2%
5 Years: 1991 - 1995. . . . . . . . 21.2% 21.0%
3 Years: 1993 - 1995. . . . . . . . 16.2% 14.9%
1 Year: 1995. . . . . . . . . . . . 25.1% 31.7%
</TABLE>
(1) CRM's results are a dollar weighted composite of tax-exempt, fully
discretionary, separately managed accounts that are over $1 million in
size, under CRM's management for at least 3 months, and have investment
objectives and techniques similar to the Fund. The composite consists
of 29 accounts with $425 million in assets (83% of tax-exempt equity
accounts and 37% of all equity accounts). The modified Bank Administration
Institute (BAI) method is used to compute a time-weighted rate of return
in accordance with standards set by the Association for Investment
Management and Research (AIMR). The composite does not reflect all of
assets under CRM's management and may not accurately reflect the
performance of all accounts it manages.
(2) The Russell 2500 Composite Stock Index (the "Russell 2500") is a
market weighted index composed of 2500 companies with market
capitalizations from $40 million to $1.6 billion. The index is unmanaged
and reflects the reinvestment of dividends.
The performance figures are net of advisory fees. The net effect of the
deduction of the operating expenses of the Fund on annualized performance,
including the compounding effect over time, may be substantial. SEE "Table
of Fees and Expenses" in the Prospectus.
All information relies on data supplied by the Adviser or from statistical
services, reports or other sources believed by the Trust to be reliable. It
has not been verified or audited.
The principals of CRM and the Adviser stand on a solid base of more than 130
years of collective investment experience. The principal shareholders and
portfolio managers of the Adviser are:
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Gerald B. Cramer, Chairman of CRM, has been in investment banking and
portfolio management for the past thirty-seven years. Before joining CRM in
1973, Mr. Cramer was a senior partner at Oppenheimer & Co. His
responsibilities include investment policy and portfolio management. He
received a B.S. from Syracuse University and attended the University of
Pennsylvania Wharton Graduate School of Finance.
Ronald H. McGlynn, President and Chief Investment Officer of CRM, is the
Adviser's Portfolio Manager. He has been with CRM for twenty-two years and
is responsible for investment policy, portfolio management, and investment
research. Prior to his association with CRM and the Adviser, Mr. McGlynn was
a Portfolio Manager at Oppenheimer & Co. He received a B.A. from Williams
College and an MBA from Columbia University.
Jay B. Abramson, Executive Vice President and General Counsel of CRM, is
the Adviser's Director of Research. He has been with CRM for ten years and
is responsible for investment research and portfolio management. Mr.
Abramson received a B.S.E. and J.D. from the University of Pennsylvania
Wharton School and Law School, respectively. He is also a Certified Public
Accountant. Mr. Abramson is primarily responsible for the day-to-day
management of the Fund's portfolio.
For its services under the Advisory Agreement, the Adviser receives an
advisory fee at an annual rate of 0.75% of the average daily net assets of
the Fund. The Adviser's fees are accrued daily and paid monthly. The
Adviser, at its sole discretion, may waive all or any portion of its advisory
fees. Any waiver would have the effect of increasing the Fund's yield for
the period during which the waiver was in effect and would not be recouped by
the Adviser at a later date.
ADMINISTRATOR
On behalf of the Fund, the Trust has entered into an Administration and
Distribution Agreement with Forum Financial Services, Inc. ("Forum"). As
provided in this agreement, Forum is responsible for the supervision of the
overall management of the Trust (including the Trust's receipt of services
for which it must pay), providing the Trust with general office facilities
and providing persons satisfactory to the Board of Trustees to serve as
officers of the Trust. For these services, Forum receives a fee computed and
paid monthly at an annual rate of 0.15% of the average daily net assets of
the Fund, with an annual minimum of $40,000. Like the Adviser, Forum, in its
sole discretion, may waive all or any portion of its fees.
Forum is located at Two Portland Square, Portland, Maine 04101. It was
incorporated under the laws of the State of Delaware on February 7, 1986 and
as of the date hereof manages, administers or distributes registered
investment companies and collective investment funds with assets of
approximately $14 billion. Forum is a registered broker-dealer and
investment adviser and is a member of the National Association of Securities
Dealers, Inc.
DISTRIBUTOR
Pursuant to the Administration and Distribution Agreement, Forum acts as
distributor of the Fund's shares. Forum acts as the agent of the Trust in
connection with the offering of shares of the Fund. Forum receives no
compensation for its services under the Distribution Agreement. Forum may
enter into arrangements with banks, broker-dealers or other financial
institutions ("Selected Dealers") through which investors may purchase or
redeem shares. Forum may, at its own expense and from its own resources,
compensate certain persons who provide services in connection with the sale
or expected sale of shares of the Fund. Investors purchasing shares of the
Fund through another financial institution should read any materials and
information provided by the financial institution to acquaint themselves with
its procedures and any fees that it may charge.
SHAREHOLDER SERVICES
The Trust has adopted a shareholder services plan providing that the Trust
may obtain the services of the Adviser and other qualified financial
institutions to act as shareholder servicing agents for their customers.
Under this plan, the Trust has authorized the Transfer Agent to enter into
agreements pursuant to which the shareholder servicing agent performs certain
shareholder services not otherwise provided by the Transfer Agent. For these
services, the Trust pays the shareholder servicing agent a fee of up to 0.25%
of the average daily net assets of the Investor Shares owned by investors for
which the shareholder servicing agent maintains a servicing relationship.
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Among the services provided by shareholder servicing agents are: answering
customer inquiries regarding account matters; assisting shareholders in
designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Fund
shares held beneficially; and providing such other services as the Trust or a
shareholder may request.
TRANSFER AGENT
The Trust has entered into a Transfer Agency Agreement with Forum Financial
Corp. ("FFC") pursuant to which FFC acts as the Fund's transfer agent and
dividend disbursing agent. FFC maintains an account for each shareholder of
the Trust (unless such accounts are maintained by sub-transfer agents),
performs other transfer agency functions and acts as dividend disbursing
agent for the Trust. In addition, FFC performs portfolio accounting services
for the Fund, including determination of the Fund's net asset value.
EXPENSES OF THE TRUST
The Adviser has agreed to reimburse the Trust for certain of the Fund's
operating expenses (exclusive of interest, taxes, brokerage, fees and
organization expenses, all to the extent permitted by applicable state law or
regulation) which in any year exceed the limits prescribed by any state in
which the Fund's shares are qualified for sale. The Trust may elect not to
qualify its shares for sale in every state. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated
and accrued daily, and any appropriate estimated payments will be made by the
Adviser monthly. Subject to the above obligations, the Trust is obligated to
pay all of the Trust's other expenses.
PURCHASES AND REDEMPTIONS OF SHARES
GENERAL
You may purchase or redeem shares of the Fund without a sales charge at their
net asset value on any weekday except on business holidays and when the New York
Stock Exchange is closed ("Fund Business Day"). The Fund's net asset value is
calculated at 4:00 p.m., Eastern time on each Fund Business Day. SEE
"Determination of Net Asset Value."
PURCHASES. Fund shares are issued at a price equal to the net asset value
per share next determined after an order in proper form is received and
accepted. The Fund reserves the right to reject any subscription for the
purchase of its shares and may, in the Adviser's discretion, accept portfolio
securities in lieu of cash as payment for Fund shares. Fund shares become
entitled to receive dividends on the day after the shares are issued to an
investor.
REDEMPTIONS. There is no redemption charge, no minimum period of investment,
and no restriction on frequency of redemptions. Shares are redeemed at a
price equal to the net asset value per share next determined following
acceptance by FFC of the redemption order in proper form (and any supporting
documentation which FFC may require). Shares redeemed are not entitled to
participate in dividends declared after the day on which a redemption becomes
effective.
The date of payment of redemption proceeds may not be postponed for more than
seven days after shares are tendered to FFC for redemption by a shareholder
of record. The right of redemption may not be suspended except in accordance
with the provisions of the Investment Company Act.
MINIMUM INVESTMENTS. There is a $10,000 minimum for initial investments in
the Fund. For individual retirement accounts, the investment minimum is
$2,000. The minimum for subsequent investments is $100. The Trust and the
Administrator each reserve the right to waive the minimum investment
requirement.
ACCOUNT STATEMENTS. Shareholders will receive from the Trust periodic
statements listing account activity during the statement period.
SHARE CERTIFICATES. FFC maintains a shareholder account for each
shareholder. The Trust does not issue share certificates.
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PURCHASE AND REDEMPTION PROCEDURES
You may obtain the account application necessary to open an account by
calling (800) 844-8258 or by writing The CRM Small Cap Value Fund at P.O. Box
446, Portland, Maine 04112.
INITIAL PURCHASE OF SHARES
MAIL. Investors may send a check made payable to "CRM Funds" with a
completed account application to:
The CRM Small Cap Value Fund
P.O. Box 446
Portland, Maine 04112
Checks are accepted at full value subject to collection. All checks must be
drawn on a United States bank. If a check is returned unpaid, the purchase
will be canceled, and the investor will be liable for any resulting losses or
fees incurred by the Fund, the Adviser or FFC.
BANK WIRE. To make an initial investment in the Fund using the fedwire
system for transmittal of money between banks, you should first telephone FFC
at 207-879-8910 or 800-844-8258 to obtain an account number. You should then
instruct a member commercial bank to wire your money immediately to:
The First National Bank of Boston
Boston, Massachusetts
ABA # 011000390
For Credit to: Forum Financial Corp.
Account # 541-54171
The CRM Small Cap Value Fund
(Investor's Name)
(Investor's Account Number)
You should then promptly complete and mail the account application.
If you plan to wire funds, you should instruct your bank early in the day so
the wire transfer can be accomplished the same day. Your bank may access
charges for transmitting the money by bank wire and for use of Federal Funds.
The Trust does not charge investors for the receipt of wire transfers.
Payment in the form of a bank wire received prior to 4:00 p.m., Eastern time
on a Fund Business Day will be treated as a Federal Funds payment received
before that time.
THROUGH BROKERS. You may purchase and redeem shares of the Fund through
brokers and other financial institutions that have entered into sales
agreements with Forum. These institutions may charge a fee for their
services and are responsible for promptly transmitting purchase, redemption
and other requests to the Trust. The Trust is not responsible for the
failure of any institution to promptly forward these requests.
If you purchase shares through a broker-dealer or financial institution, your
purchase will be subject to its procedures, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition
to, or different from, those applicable to shareholders who invest in the
Fund directly. You should acquaint yourself with the institution's
procedures and read this Prospectus in conjunction with any materials and
information provided by your institution. If you purchase Fund shares in
this manner, you may or may not be the shareholder of record and, subject to
your institution's and the Fund's procedures, may have Fund shares
transferred into your name. There is typically a one to five day settlement
period for purchases and redemptions through broker-dealers.
AUTOMATIC INVESTMENT PLAN. Current shareholders may purchase additional
shares by arranging systematic monthly, bi-monthly or quarterly investments
into the Fund with the Trust's Automatic Investment Plan ("AIP"). The minimum
automatic investment is $100. After shareholders give the Trust proper
authorization, their bank accounts, which must be with banks that are members
of the Automated Clearing House, will be debited accordingly to purchase
shares. Shareholders will receive a confirmation from the Trust for every
transaction, and a withdrawal will appear on their bank statements.
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To participate in AIP, shareholders must complete the appropriate sections
of the Automatic Investment Plan Form. This form may be obtained by calling
the Trust at 207-879-8910 or 800-844-8258. The amount shareholders specify
will automatically be invested in shares at the Fund's net asset value per
share next determined after payment is received by the Trust.
SUBSEQUENT PURCHASES OF SHARES
You may purchase additional shares of the Fund by mailing a check or sending
a bank wire as indicated above. Shareholders using the wire system for
subsequent purchases should first telephone FFC at 207-879-8910 or
800-844-8258 to notify it of the wire transfer. All payments should clearly
indicate the shareholder's name and account number.
REDEMPTION OF SHARES
Redemption requests will not be effected unless any check used for investment
has been cleared by the shareholder's bank, which may take up to 15 calendar
days. This delay may be avoided by investing in the Fund through wire
transfers. Normally redemption proceeds are paid immediately following any
redemption, but in no event later than seven days after redemption, by check
mailed to the shareholder of record at his record address. Shareholders that
wish to redeem shares by Telephone or by Bank Wire must elect these options
by properly completing the appropriate sections of their account application.
These privileges may be modified or terminated by the Trust at any time.
Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon not less than 60 days' written notice, all
shares in any Fund account with an aggregate net asset value of less than
$10,000 ($2,000 for IRAs). The Fund will not redeem accounts that fall below
these amounts solely as a result of a reduction in net asset value of the
Fund's shares.
REDEMPTION BY MAIL. You may redeem all or any number of your shares by
sending a written request to FFC at the address above. You must sign all
written requests for redemption and provide a signature guarantee. SEE
"Signature Guarantees."
TELEPHONE REDEMPTIONS. A shareholder that has elected telephone
redemption privileges may make a telephone redemption request by calling FFC
at 207-879-8910 or 800-844-8258. The minimum amount for a telephone
redemption is $1,000. In response to the telephone redemption instruction,
the Fund will mail a check to the shareholder's record address or, if the
shareholder has elected wire redemption privileges, wire the proceeds.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, the Trust and FFC will employ reasonable procedures to confirm
that such instructions are genuine. Shareholders must provide FFC with the
shareholder's account number, the exact name in which the shares are
registered and some additional form of identification such as a password.
The Trust or FFC may employ other procedures such as recording certain
transactions. If such procedures are followed, neither FFC nor the Trust
will be liable for any losses due to unauthorized or fraudulent redemption
requests. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, it may be difficult to
make a redemption by telephone. If you cannot reach FFC by telephone, you
may mail or hand-deliver your request to FFC at Two Portland Square,
Portland, Maine 04101.
BANK WIRE REDEMPTIONS. If you have elected wire redemption privileges, the
Fund will upon request transmit the proceeds of any redemption greater than
$10,000 by Federal Funds wire to a bank account designated on your account
application. If you wish to request bank wire redemptions by telephone, you
must also elect telephone redemption privileges.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange their shares for shares of the Daily
Assets Treasury Fund, a money market fund managed by Forum and a separate
series of Forum Funds, Inc. You may receive a copy of that fund's
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prospectus by writing FFC or calling (800) 844-8254. No sales charges is
imposed on exchanges between the Fund and the Daily Assets Treasury Fund.
EXCHANGE PROCEDURES. You may request an exchange by writing to FFC at 2
Portland Square, Portland, Maine 04101. The minimum amount for an exchange
to open an account in the Daily Assets Treasury Fund is $2,500. Exchanges
may only be made between identically registered accounts. You do not need to
complete a new account application, unless you are requesting different
shareholder privileges for the new account. The Fund reserves the right to
reject any exchange request and may modify or terminate the exchange
privilege at any time. There is no charge for the exchange privilege or
limitation as to frequency of exchanges.
An exchange of shares in the Fund pursuant to the exchange privilege is, in
effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made
(at net asset value) and may result in a shareholder realizing a taxable gain
or loss for Federal income tax purposes. The exchange privilege is available
to shareholders residing in any state in which shares of the Daily Assets
Treasury Fund may legally be sold.
TELEPHONE EXCHANGES. If you have elected telephone exchange privileges, you
may request an exchange by calling FFC at (800) 844-8254. The Fund and FFC
are not responsible for the authenticity of telephone instructions or losses,
if any, resulting from unauthorized telephone exchange requests. The Fund
employs reasonable procedures to insure that telephone orders are genuine
and, if it does not, may be liable for any losses due to unauthorized
transactions. Shareholders should verify the accuracy of telephone
instructions immediately upon receipt of confirmation statements.
CHANGES TO ACCOUNT INFORMATION.
To change the record name or address of your account, the designated bank
account, the dividend election, or the telephone redemption option election
on an account, you must provide a signature guarantee.
SIGNATURE GUARANTEES. When a signature guarantee is called for, you must
have "Signature Guaranteed" stamped under your signature and signed by a
commercial bank or trust company, a broker, dealer or securities exchange, a
credit union or a savings association that is authorized to guarantee
signatures.
RETIREMENT ACCOUNTS.
The Fund may be a suitable investment for part or all of the assets held in
retirement such as IRAs, SEP-IRAs, Keoghs, or other types of retirement
accounts. The minimum initial investment for investors opening a retirement
account or investing through your own IRA is $2,000. There is no minimum for
subsequent investments.
For information on investing in the Fund for retirement, and retirement
account plans, call FFC at (800) 844-8258, or write to Two Portland Square,
Portland, Maine 04101.
DIVIDENDS AND TAX MATTERS
DIVIDENDS
Dividends of the Fund's net investment income, if any, are declared and paid
annually. Net capital gains realized by the Fund, if any, also will be
distributed annually. All dividends and net capital gains distributions are
reinvested in additional shares of the Fund, unless you elect to receive
distributions in cash. For Federal income tax purposes, dividends are
treated the same whether they are received in cash or reinvested in
additional shares of the Fund. SEE "Taxes."
Income dividends will be reinvested at the Fund's net asset value as of the
last day of the period with respect to which the dividends are paid and
capital gains dividends will be reinvested at the net asset value of the Fund
on the payment date for the dividend. Cash payments may be made more than
seven days following the date on which dividends would otherwise be
reinvested.
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TAXES
The Fund intends to qualify for each fiscal year and elect to be treated as a
"regulated investment company," or "RIC," under Subchapter M of the Internal
Revenue Code of 1986 (the "Code"). As a RIC, the Fund is not liable for
Federal income and excise taxes on the net investment income and capital
gains that it distributes to shareholders in accordance with applicable
provisions of the Code. The Fund intends to distribute all of its net income
and net capital gains each year. Accordingly, the Fund should not be subject
to Federal income and excise taxes.
Dividends paid by the Fund out of its net investment income and short-term
capital gains are taxable to its shareholders as ordinary income
notwithstanding that such dividends may be reinvested in additional shares of
the Fund. Distributions of the Fund's net long-term capital gains, if any,
are taxable to the shareholders as long-term capital gains, regardless of the
length of time the shareholder has held shares in the Fund at the time of
distribution. A portion of the Fund's dividends may qualify for the dividends
received deduction available to corporations.
If a shareholder holds shares for six months or less and redeems his shares
at a loss after receiving a distribution taxable to him as a long-term
capital gain, the loss would be treated as a long-term capital loss to the
extent of the distribution.
Any dividend or other distribution received by a shareholder on shares of the
Fund will reduce the net asset value of his shares by the amount of the
dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of shares by a shareholder, although in effect a
return of capital would still be taxable to him as a dividend as described
above.
Distributions to shareholders are treated in the same manner for Federal
income tax purposes whether received in cash or reinvested in additional
shares of the Fund.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions)
made to a non-corporate shareholder unless the shareholder certifies in
writing that the social security or tax identification number provided by him
is correct and that the shareholder is not subject to backup withholding for
prior underreporting to the Internal Revenue Service.
Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by the Fund
will be mailed to shareholders shortly after the close of each year.
OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of the Fund as of 4:00
P.M., Eastern time, on each Fund Business Day by dividing the value of the
Fund's net assets (I.E., the value of its securities and other assets less
its liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the number of shares outstanding at the time the
determination is made. Securities owned by the Fund for which market
quotations are readily available are valued at current market value, or, in
their absence, at fair value as determined by the Board of Trustees.
Purchases and redemptions will be effected at the time of determination of
net asset value next following the receipt of any purchase or redemption
order as described under "Purchases and Redemptions of Shares."
DESCRIPTION OF COMMON STOCK
The Trust is registered with the SEC as an open-end management investment
company and was organized as a business trust under the laws of the State of
Delaware on April 24, 1995. The Board has the authority to issue an
unlimited number of shares of beneficial interest of separate series with no
par value per share and to create classes of shares within each series. If
shares of separate series are issued, each share of each series would be
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of that series. Voting rights would not be
cumulative and the shares of each series of the Trust would be voted
separately except when an aggregate vote is required by law. No other series
or classes of shares are currently authorized.
Delaware law does not require a registered investment company to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by Federal or state law.
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<PAGE>
Shareholders have available procedures for requiring the Trustees to call a
meeting and for removing Trustees. Shares issued by the Trust have no
conversion, subscription or preemptive rights. SEE "OTHER INFORMATION - The
Trust and its Shareholders" in the Statement of Additional Information.
As of the date of this Prospectus, CRM owned all the shares of the Fund and
accordingly controls the Trust.
PERFORMANCE INFORMATION
The Fund's performance may be quoted in advertising in terms of yield or
total return. Both types of performance are based on historical results and
are not intended to indicate future performance. The Fund's yield is a way
of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. To calculate yield, the Fund takes the
interest income it earned from its portfolio of investments for a 30 day
period (net of expenses), divides it by the average number of shares entitled
to receive dividends, and expresses the result as an annualized percentage
rate based on the Fund's share price at the beginning of the 30 day period.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period
of time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return
if the Fund's performance had been constant over the entire period. Because
average annual returns tend to smooth out variations in the Fund's returns,
shareholders should recognize that they are not the same as actual
year-by-year results. To illustrate the components of overall performance,
the Fund may separate its cumulative and average annual returns into income
results and capital gain or loss.
The Fund's advertisements may reference ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical
Services, Inc. or CDA/Weisenberger. In addition, the performance of the Fund
may be compared to recognized indices or market performance. The comparative
material found in the Fund's advertisements, sales literature or reports to
shareholders may contain performance ratings. These are not to be considered
representative or indicative of future performance.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF THE FUND'S SHARES, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
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<PAGE>
THE CRM SMALL CAP VALUE FUND
FUND INFORMATION: ACCOUNT INFORMATION AND
SHAREHOLDER SERVICES:
Two Portland Square
Portland, Maine 04101 Forum Financial Corp.
(800) 276-2883 P.O. Box 446
Portland, Maine 04112
(207) 879-8910
(800) 844-8258
INVESTMENT ADVISER:
CRM Advisors, LLC
707 Westchester Avenue
White Plains, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
The CRM Funds (the "Trust") is a registered open-end investment company.
This Statement of Additional Information supplements the Prospectus offering
shares of the CRM Small Cap Value Fund (the "Fund") and should be read only
in conjunction with the Prospectus, a copy of which may be obtained by an
investor without charge by contacting shareholder servicing at the address
listed above.
TABLE OF CONTENTS
Page
----
1. Investment Policies . . . . . . . . . . . .
2. Investment Limitations. . . . . . . . . . .
3. Performance Data and Advertising. . . . . .
4. Management. . . . . . . . . . . . . . . . .
5. Determination of Net Asset Value. . . . . .
6. Portfolio Transactions. . . . . . . . . . .
7. Additional Purchase and
Redemption Information . . . . . . . . . .
8. Taxation. . . . . . . . . . . . . . . . . .
9. Other Matters . . . . . . . . . . . . . . .
Appendix A -- Description of Securities Ratings
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY
IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES
The following discussion is intended to supplement the disclosure in the
Prospectus concerning the Fund's investments, investment techniques and the
risks associated therewith.
DEFINITIONS
These terms in the SAI shall have the following meanings:
"Board" shall mean the Board of Trustees of the Trust.
"U.S. Treasury obligations" shall mean securities issued by the
United States Treasury, such as Treasury bills, notes and bonds,
that are fully guaranteed as topayment of principal and interest by
the United States.
"1940 Act" shall mean the Investment Company Act of 1940, as
amended.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities and
includes, among other things, purchased over-the-counter (OTC) options and
repurchase agreements maturing in more than seven days.
The Board has the ultimate responsibility for determining whether
specific securities are liquid or illiquid. The Board has delegated the
function of making day-to-day determinations of liquidity to CRM Advisers,
LLC (the "Adviser"), pursuant to guidelines approved by the Board. The
Adviser takes into account a number of factors in reaching liquidity
decisions, including but not limited to: (1) the frequency of trades and
quotations for the security; (2) the number of dealers willing to purchase or
sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer. The Adviser monitors the liquidity of the securities in the Fund's
portfolio and reports periodically on such decisions to the Board.
OPTIONS
The Fund may seek to hedge against a decline in the value of securities
it owns or an increase in the price of securities which it plans to purchase
by purchasing and writing (I.E., selling) covered options on an exchange or
over the counter. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security
or maintains cash, U.S. Government Securities or other liquid, high-grade
debt securities in a segregated account with a value at all times sufficient
to cover the Fund's obligation under the option.
The use of options subjects the Fund to certain investment risks and
transaction costs to which it might not otherwise be subject. These risks
include: (1) dependence on the Adviser's
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ability to predict movements in the prices of individual securities and
fluctuations in the general securities markets; (2) imperfect correlation
between movements in the prices of options and movements in the price of the
securities hedged or used for cover; (3) the fact that skills and techniques
needed to trade these instruments are different from those needed to select
the other securities in which the Fund invests; (4) lack of assurance that a
liquid secondary market will exist for any particular option at any
particular time; and (5) the possible need to defer closing out of certain
options to avoid adverse tax consequences. Other risks include the inability
of the Fund, as the writer of covered call options, to benefit from the
appreciation of the underlying securities above the exercise price and the
possible loss of the entire premium paid for options purchased by the Fund.
The Fund will not hedge more than 30% of its total assets by buying put
options and writing call options.
CORPORATE DEBT SECURITIES AND COMMERCIAL PAPER
The Fund may invest in corporate debt securities including corporate bonds
and notes and short-term investments such as commercial paper and variable
rate demand notes. Commercial paper (short-term promissory notes) is issued
by companies to finance their or their affiliates' current obligations.
Variable and floating rate demand notes are unsecured obligations redeemable
upon not more than 30 days' notice. These obligations include master demand
notes that permit investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangement 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. These obligations generally are not traded, nor
generally is there an established secondary market for these obligations. To
the extent a demand note does not have a 7 day or shorter demand feature and
there is no readily available market for the obligation, it is treated as an
illiquid security.
CONVERTIBLE SECURITIES
The Fund may also invest in convertible securities. A convertible
security is a bond, debenture, note, preferred stock or other security that
may be converted into or exchanged for a prescribed amount of common stock of
the same or a different issuer within a particular period of time at a
specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common
stocks of the same or similar issuers. Convertible securities rank senior to
common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. Although no securities
investment is without some risk, investment in convertible securities
generally entails less risk than in the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed income
security. Convertible securities have unique investment characteristics in
that they generally (1) have higher yields than common stocks, but lower
yields than comparable non-convertible securities, (2) are less subject to
fluctuation in value than the underlying stocks
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since they have fixed income characteristics and (3) provide the potential
for capital appreciation if the market price of the underlying common stock
increases.
The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price
of the underlying common stock. If the conversion value is low relative to
the investment value, the price of the convertible security is governed
principally by its investment value and generally the conversion value
decreases as the convertible security approaches maturity. To the extent the
market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for
redemption, the Fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
RATINGS AS INVESTMENT CRITERIA
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P") 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 corporate bonds, including convertible
securities by Moody's and S&P is included in Appendix A to this Statement of
Additional Information. The Fund may use these ratings in determining whether
to purchase, sell or hold a security. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
securities with the same maturity, interest rate and rating may have
different market prices. Subsequent to its purchase by the Fund, an issue of
securities may cease to be rated or its rating may be reduced. The Adviser
will consider such an event in determining whether the Fund should continue
to hold the obligation. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations
in market value. Also, rating agencies may fail to make timely changes in
credit ratings in response to subsequent events, so that an issuer's current
financial condition may be better or worse than the rating indicates.
-4-
<PAGE>
2. INVESTMENT LIMITATIONS
FUNDAMENTAL INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations
that cannot be changed without the affirmative vote of the lesser of (i) more
than 50% of the outstanding shares of the Fund or (ii) 67% of the shares of
the Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the outstanding shares of the Fund are present or
represented. The Fund may not:
(1) Purchase the securities of issuers (other than U.S. Government
Securities) conducting their business activity in the same industry if,
immediately after such purchase, the value of the Fund's investments in
such industry would comprise 25% or more of the value of its total assets.
(2) Purchase a security if, as a result (a) more than 5% of the Fund's
total assets would be invested in the securities of a single issuer, or
(b) the Fund would own more than 10% of the outstanding voting securities
of a single issuer. This limitation applies only with respect to 75% of
the Fund's total assets and does not apply to U.S. Government Securities.
(3) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
the Fund may be deemed to be an underwriter for purpose of the Securities
Act of 1933.
(4) Purchase or sell real estate or any interest therein, except that the
Fund may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such
as mortgage pass-throughs and collateralized mortgage obligations, or
issued by companies that invest in real estate or interests therein.
(5) Purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities.
(6) Make loans to other persons except for the purchase of debt securities
that are otherwise permitted investments or loans of portfolio securities
through the use of repurchase agreements.
(7) Issue senior securities except pursuant to Section 18 of the
Investment Company Act and except that the Fund may borrow money subject
to its investment limitation on borrowing.
OTHER INVESTMENT LIMITATIONS.
The Fund has adopted the following nonfundamental investment limitations
that may be changed by the Board without shareholder approval. The Fund may
not:
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(a) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted to be incurred by the Fund. The deposit in escrow
of securities in connection with the writing of put and call options,
collateralized loans of securities and collateral arrangements with
respect to margin for futures contracts are not deemed to be pledges or
hypothecations for this purpose.
(b) Make short sales of securities except short sales against the box.
(c) Purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio
securities, but the Fund may make margin deposits in connection with
permitted transactions in options.
(d) Purchase a security if, as a result, more than 10% of its net assets
would be invested in illiquid securities.
(e) Purchase portfolio securities if its outstanding borrowings exceed
5% of the value of its total assets or borrow for purposes other than
meeting redemptions in an amount exceeding 5% of the value of its total
assets at the time the borrowing is made.
(f) Invest more than 5% of its net assets 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 Fund could invest.
(g) Invest in or hold securities of any issuer if officers and Trustees
of the Trust or the Adviser, individually owning beneficially more than
1/2 of 1% of the securities of the issuer, in the aggregate own more than
5% of the issuer's securities.
(h) Invest in interests in oil or gas or interests in other mineral
exploration or development programs.
If a percentage restriction contained in an investment policy set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from a change in the market values of the Fund's assets
or redemptions of Fund shares will not be considered a violation of the
limitation.
3. PERFORMANCE DATA AND ADVERTISING
PERFORMANCE DATA
The Fund may quote performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's net asset value, yield and
total return will fluctuate in response to market conditions and other
factors, and the value of Fund shares when redeemed may be more or less than
their original cost.
In performance advertising the Fund may compare any of its performance
information with data published by independent evaluators such as
Morningstar, Lipper Analytical Services, Inc., IBC/Donoghue, Inc.,
CDA/Wiesenberger or other companies which track the investment
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performance of investment companies ("Fund Tracking Companies"). The Fund may
also compare any of its performance information with the performance of
recognized stock, bond and other indices, including but not limited to the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average, the Salomon Brothers Bond Index, the Shearson Lehman Bond Index,
U.S. Treasury bonds, bills or notes and changes in the Consumer Price Index
as published by the U.S. Department of Commerce. The Fund may refer to
general market performances over past time periods such as those published by
Ibbotson Associates. In addition, the Fund may refer in such materials to
mutual fund performance rankings and other data published by Fund Tracking
Companies. Performance advertising may also refer to discussions of the Fund
and comparative mutual fund data and ratings reported in independent
periodicals, such as newspapers and financial magazines.
TOTAL RETURN CALCULATIONS
The Fund may advertise total return. Total returns quoted in advertising
reflect all aspects of the Fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the Fund's net
asset value per share over the period. Average annual returns are calculated
by determining the growth or decline in value of a hypothetical historical
investment in the Fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result
if the rate of growth or decline in value had been constant over the period.
For example, a cumulative return of 100% over ten years would produce an
average annual return of 7.18%, which is the steady annual rate that would
equal 100% growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the performance is not constant over time but
changes from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of the Fund.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such periods
according to the following formula:
P(1+T)n = ERV; where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value (ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 payment made at the
beginning of the applicable period).
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value
of an investment over a stated period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors and
their contributions to total return. Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
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<PAGE>
Period total return is calculated according to the following formula:
PT = (ERV/P-1); where:
PT = period total return;
The other definitions are the same as in average annual total return
above.
OTHER INFORMATION
The Fund may include other information in its advertisements including,
but not limited to, (i) portfolio holdings and portfolio allocation as of
certain dates, such as portfolio diversification by instrument type, by
instrument, by location of issuer or by maturity; (ii) statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed by an investor to meet specific financial
goals; (iii) descriptions of the Fund's portfolio managers and the portfolio
management staff of the Adviser or summaries of the views of the portfolio
managers with respect to the financial markets; (iv) information regarding
the background, experience or areas of expertise of the Fund's trustees; (v)
the results of a hypothetical investment in a Fund over a given number of
years, including the amount that the investment would be at the end of the
period; and, (vi) the net asset value, net assets or number of shareholders
of a Fund as of one or more dates. The Fund may also compare the Fund's
operations to the operations of other funds or similar investment products.
Such comparisons may refer to such aspects of operations as the nature and
scope of regulation of the products and the products' weighted average
maturity, liquidity, investment policies, and the manner of calculating and
reporting performance.
In connection with its advertisements the Fund may provide
"shareholders' letters" to provide shareholders or investors an introduction
to the Fund's, the Trust's or any of the Trust's service provider's policies
or business practices. The Fund may also include in sales materials
information regarding the Adviser including the nature of its management
techniques.
4. MANAGEMENT
The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Trustees deemed to be
"interested persons" of the Trust as defined in the 1940 Act are marked with
an asterisk.
*Fred M. Filoon, Chairman and President.
Senior Vice President, Cramer Rosenthal McGlynn, Inc., New York, New York
since June 1991. From June 1989 to June 1991, Mr. Filoon was
Vice-President and Senior Portfolio Manager with Morgan Stanley Asset
Management, New York, New York. He is 53 year old. His address is 520
Madison Avenue, New York, New York 10022.
John E. Appelt, Trustee.
Certified Financial Planner, The Equitable from 1993 to the Present;
Equitable From 1990 to 1993, Mr. Appelt was a District Manager with The
Equitable. He is 49 years old.
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His address is 1221 Avenue of the Americas, 32nd Floor, New York, New
York 10020-1088.
Louis Klein Jr., Trustee.
From 1991 to the Present, Mr. Klein has been self-employed as a financial
and professional services consultant. He has also held the following
positions during that period: Trustee, Manville Personal Injury
Settlement Trust; Director, Riverwood International Corporation;
Director, Manville Corporation. From 1989 to 1991, Mr. Klein was Chairman
and CEO of Stendig Inc., a New York based importer and marketer of office,
institutional and residential furniture and textiles. He is 60 years old.
His address is 114 West 27th Street, New York, New York 10001.
Clement C. Moore, II, Trustee.
President, Mariemont Corporation, a commercial real estate holding and
management company, from 1980 to present. He is 51 years old. His address
is 717 Fifth Avenue, Suite 2300, New York, New York.
*Eugene A. Trainor, III, Trustee, Secretary and Treasurer.
Vice-President and CFO, Cramer Rosenthal McGlynn, Inc., New York, New
York since August 1994. From July 1990 to August 1994, he was CFO,
Grotech Capital Group, Timonium, Maryland. He is 31 years old. His
address is 707 Westchester Avenue, White Plains, NY 10604.
Max Berueffy, Assistant Secretary.
Counsel, Forum Financial Services, Inc., with which he has been
associated since May 1994. Prior to that, Mr. Berueffy was a member of the
staff of the U.S. Securities and Exchange Commission. Mr. Berueffy is also
an officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. He is 43 years old. His address is Two Portland Square,
Portland, Maine 04101.
David I. Goldstein, Assistant Secretary.
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1991. Prior to that, Mr. Goldstein was associated with
the law firm of Kirkpatrick & Lockhart. Mr. Goldstein also serves as an
officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. He is years old. His address is Two Portland Square,
Portland, Maine 04101.
Michael D. Martins, Assistant Treasurer.
Director of Operations, Forum Financial Corp. Prior to that, Mr. Martins
was a Manager of Deloitte & Touche, LLP. Mr. Martins is also an officer
of various registered
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investment companies for which Forum Financial Corp. serves as fund
accountant and /or transfer agent. He is 29 years old. His address is Two
Portland Square, Portland, Maine 04101.
Michael J. McKeen, Assistant Treasurer.
Fund Accounting Manager, Forum Financial Corp., with which he has been
associated since June 1993. Prior to that, Mr. McKeen was attending the
University of Maine, from which he obtained a B.S. degree in Finance in
May of 1993. Mr. McKeen also serves as an officer for various registered
investment companies for which Forum Financial Corp. serves as fund
accountant and /or transfer agent. He is 24 years old. His address is Two
Portland Square, Portland, Maine 04101.
The following table sets forth an estimate of the fees that will be paid to
each Trustee of the Trust for the period from October 1, 1995 to September
30, 1996.
<TABLE>
<CAPTION>
NAME OF PERSON AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL
COMPENSATION RETIREMENT BENEFITS UPON COMPENSATION
FROM TRUST BENEFITS ACCRUED RETIREMENT FROM TRUST AND
AS PART OF FUND FUND COMPLEX
EXPENSES TO TRUSTEES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred M. Filoon $0.00 $0.00 $0.00 $0.00
John E. Appelt $5000.00 $0.00 $0.00 $5000.00
Louis Klein, Jr. $5000.00 $0.00 $0.00 $5000.00
Clement C. Moore $5000.00 $0.00 $0.00 $5000.00
Eugene A. Trainor $0.00 $0.00 $0.00 $0.00
</TABLE>
THE INVESTMENT ADVISER
The Fund's investment adviser, CRM Advisors, LLC (the "Adviser")
furnishes at its own expense all services, facilities and personnel necessary
in connection with managing the Fund's investments and effecting portfolio
transactions for the Fund. The Advisory Agreement will remain in effect for a
period of twelve months from the date of its effectiveness and will continue
in effect thereafter only if its continuance is specifically approved at
least annually by the Board of Trustees or by vote of the shareholders, and
in either case by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Advisory Agreement.
The Advisory Agreement is terminable without penalty by the Trust with
respect to the Fund on 60 days' written notice when authorized either by vote
of its shareholders or by a vote of a majority of the Board of Trustees, or
by the Adviser on 60 days' written notice to the Trust, and will
automatically terminate in the event of its assignment. The Advisory
Agreement also provides that, with respect to the Fund, the Adviser shall not
be liable for any error of judgment or mistake of law or for any act or
omission in the performance of its duties to the Fund, except
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for willful misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of reckless disregard of its obligations and duties
under the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others. In addition to receiving its advisory fee from the Fund, CRM and the
Adviser may also act and be compensated as investment manager for its clients
with respect to assets which are invested in the Fund. If an investor in the
Fund also has a separately managed account with CRM, CRM will credit an
amount equal to all or a portion of the fees received by the Adviser against
any investment management fee received from a client.
ADMINISTRATOR
Forum Financial Services, Inc. ("Forum") acts as administrator to the
Trust pursuant to an Administration Agreement with the Trust. As
administrator, Forum provides management and administrative services
necessary to the operation of the Trust (which include, among other
responsibilities, negotiation of contracts and fees with, and monitoring of
performance and billing of, the transfer agent and custodian and arranging
for maintenance of books and records of the Trust), and provides the Trust
with general office facilities. The Administration Agreement will remain in
effect for a period of twelve months with respect to the Fund and thereafter
is automatically renewed each year for an additional term of one year.
The Administration Agreement terminates automatically if it is assigned
and may be terminated without penalty with respect to the Fund by vote of the
Fund's shareholders or by either party on not more than 60 days' written
notice. The Administration Agreement also provides that Forum shall not be
liable for any error of judgment or mistake of law or for any act or omission
in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of Forum's
duties or by reason of reckless disregard of its obligations and duties under
the Administration Agreement.
At the request of the Board, Forum provides persons satisfactory to the
Board to serve as officers of the Trust. Those officers, as well as certain
other employees and Trustees of the Trust, may be directors, officers or
employees of Forum, the Adviser, the subadviser or their affiliates.
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DISTRIBUTOR
Forum is also the Trust's distributor and acts as the agent of the Trust
in connection with the offering of shares of the Fund pursuant to a
Distribution Agreement. The Distribution Agreement will continue in effect
for twelve months and will continue in effect thereafter only if its
continuance is specifically approved at least annually by the Board or by
vote of the shareholders entitled to vote thereon, and in either case, by a
majority of the Trustees who (i) are not parties to the Distribution
Agreement, (ii) are not interested persons of any such party or of the Trust
and (iii) with respect to any class for which the Trust has adopted a
distribution plan, have no direct or indirect financial interest in the
operation of that distribution plan or in the Distribution Agreement, at a
meeting called for the purpose of voting on the Distribution Agreement. All
subscriptions for shares obtained by Forum are directed to the Trust for
acceptance and are not binding on the Trust until accepted by it. Forum
receives no compensation or reimbursement of expenses for the distribution
services provided pursuant to the Distribution Agreement and is under no
obligation to sell any specific amount of Fund shares.
The Distribution Agreement provides that Forum shall not be liable for
any error of judgment or mistake of law or in any event whatsoever, except
for willful misfeasance, bad faith or gross negligence in the performance of
Forum's duties or by reason of reckless disregard of its obligations and
duties under the Distribution Agreement.
The Distribution Agreement is terminable with respect to the Fund
without penalty by the Trust on 60 days' written notice when authorized
either by vote of the Fund's shareholders or by a vote of a majority of the
Board, or by Forum on 60 days' written notice. The Distribution Agreement
will automatically terminate in the event of its assignment.
Forum may enter into agreements with selected broker-dealers, banks, or
other financial institutions for distribution of shares of the Fund. These
financial institutions may charge a fee for their services and may receive
shareholders service fees even though shares of the Fund are sold without
sales charges or distribution fees. These financial institutions may
otherwise act as processing agents, and will be responsible for promptly
transmitting purchase, redemption and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the
procedures of the institution through whom they purchase shares, which may
include charges, investment minimums, cutoff times and other restrictions in
addition to, or different from, those listed herein. Information concerning
any charges or services will be provided to customers by the financial
institution. Investors purchasing shares of the Fund in this manner should
acquaint themselves with their institution's procedures and should read this
Prospectus in conjunction with any materials and information provided by
their institution. The financial institution and not its customers will be
the shareholder of record, although customers may have the right to vote
shares depending upon their arrangement with the institution.
TRANSFER AGENT
Forum Financial Corp. (the "Transfer Agent") acts as transfer agent and
dividend disbursing agent of the Trust pursuant to a Transfer Agency
Agreement. For its services, the
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Transfer Agent receives with respect to the Fund an annual fee of $12,000
plus $25 per shareholder account. Pursuant to a Fund Accounting Agreement,
the Transfer Agent also provides the Fund with portfolio accounting,
including the calculation of the Fund's net asset value. For these services,
the Transfer Agent receives with respect to the Fund an annual fee ranging
from $36,000 to $60,000 depending upon the amount and type of the Fund's
portfolio transactions and positions.
Both the Transfer Agency Agreement and Fund Accounting Agreement were
approved by the Board of Trustees, including a majority of the Trustees who
are not parties to the respective agreements or interested persons of any
such party, at a meeting called for the purpose of voting on the respective
agreements. Each of these agreements will remain in effect for a period of
one year and will continue in effect thereafter only if its continuance is
specifically approved at least annually by the Board of Trustees or by a vote
of the shareholders and in either case by a majority of the Trustees who are
not parties to the respective agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the respective
agreements.
EXPENSES
Under the Advisory Agreement, the Trust has confirmed its obligation to
pay all its expenses subject to the obligation of the Adviser to reimburse
the Trust for its excess expenses as described in the Prospectus. The Trust
believes that currently the most restrictive expense ratio limitation imposed
by any state is 2-1/2% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million of its average net assets and 1-1/2% of
its average net assets in excess of $100 million.
The Trust's expenses include: interest charges, taxes, brokerage fees
and commissions; certain insurance premiums; fees, interest charges and
expenses of the Trust's custodian and transfer agent; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership
in trade associations; telecommunications expenses; funds transmission
expenses; auditing, legal and compliance expenses; costs of forming the Trust
and maintaining corporate existence; costs of preparing and printing the
Trust's prospectuses, statements of additional information and shareholder
reports and delivering them to existing shareholders; costs of maintaining
books and accounts; costs of reproduction, stationery and supplies;
compensation of the Trust's Trustees; compensation of the Trust's officers
and employees who are not employees of the Adviser, Forum or their respective
affiliates and costs of other personnel performing services for the Trust;
costs of corporate meetings; Securities and Exchange Commission registration
fees and related expenses; state securities laws registration fees and
related expenses; the fees payable under the Advisory Agreement, and the
Administration and Distribution Agreement.
5. DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of the Fund as of
4:00 P.M., Eastern time, on Fund Business Days (as defined in the
Prospectus), by dividing the value of the Fund's net assets (i.e., the value
of its securities and other assets less its liabilities, including expenses
payable or accrued) by the number of shares outstanding at the time the
determination is made.
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The Trust does not determine net asset value on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Veterans' Day, Thanksgiving and
Christmas.
6. PORTFOLIO TRANSACTIONS
The Fund generally will effect purchases and sales through brokers who
charge commissions. 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 shareholders of
the Fund 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 Fund.
The Fund 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 Fund 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 Fund (i) to the Fund or (ii) to other persons on behalf of the Fund
for services provided to it for which it would be obligated to pay. The
Adviser may also take into account sales of Fund shares when allocating
brokerage.
In addition, the Adviser may give consideration to research services
furnished by brokers to the Adviser for its use and may cause the Fund to pay
these brokers a higher amount of commission than may be charged by other
brokers. Such research and analysis may be used by the Adviser in connection
with services to clients other than the Fund, and the Adviser's fee is not
reduced by reason of the Adviser's receipt of the research services.
Investment decisions for the Fund will be made independently from those
for any other account or investment company that is or may in the future
become managed by the Adviser or its affiliates. If, however, the Fund and
other investment companies or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund. In
addition, when purchases or sales of the same security for the Fund and for
other investment companies and accounts managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or
sales.
The Fund contemplates that, consistent with the policy of obtaining best
net results, brokerage transactions may be conducted through the Adviser's
affiliates, affiliates of those persons or Forum. The Advisory Agreement
authorizes the Adviser to so execute trades. The Board of Trustees has
adopted procedures in conformity with applicable rules under the Investment
Company Act to ensure that all brokerage commissions paid to these persons
are reasonable and fair.
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<PAGE>
7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis by the distributor at
net asset value without any sales charge. Shareholders may effect purchases
or redemptions or request any shareholder privilege in person at FFC's
offices located at Two Portland Square, Portland, Maine 04101.
The Trust accepts orders for the purchase or redemption of shares Monday
through Friday on all Fund Business Days (as defined in the prospectus)
between the hours of 9:00 a.m. and 6:00 p.m. (Eastern Time). The Trust does
not determine net asset value, and does not accept orders, on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving and Christmas. The Trust also reserves the right to cease
accepting purchase and redemption orders for same day credit when the Public
Securities Association (PSA) recommends that the securities market close
early. On days that the Trust closes early, purchase and redemption orders
received after the PSA recommended closing time will be credited for the next
Business Day. In addition, the Trust reserves the right to advance the time
by which purchase and redemption orders must be received for same Business
Day credit as permitted by the SEC.
ADDITIONAL REDEMPTION MATTERS
The Trust may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to
transactions effected for the benefit of a shareholder which is applicable to
the Fund's shares as provided in the Prospectus from time to time.
Proceeds of redemptions normally are paid in cash. However, payments may
be made wholly or partly in portfolio securities if the Board of Trustees
determines economic conditions exist which would make payment in cash
detrimental to the best interests of the Fund. If payment for shares redeemed
is made wholly or partly in portfolio securities, brokerage costs may be
incurred by the shareholder in converting the securities to cash. The Trust
has filed an election with the Securities and Exchange Commission pursuant to
which the Fund may only effect a redemption in portfolio securities if the
particular shareholder is redeeming more than $250,000 or 1% of the Fund's
total net assets, whichever is less, during any 90-day period.
In addition to the situations described in the Prospectus under
"Purchases and Redemptions of Shares," the Trust may redeem shares
involuntarily to reimburse the Fund for any loss sustained by reason of the
failure of a shareholder to make full payment for shares purchased by the
shareholder or to collect any charge relating to transactions effected for
the benefit of a shareholder which is applicable to the Fund's shares as
provided in the Prospectus from time to time.
Shareholders' rights of redemption may not be suspended, except (i) for
any period during which the New York Stock Exchange, Inc. is closed (other
than customary weekend and holiday closings) or during which the Securities
and Exchange Commission determines that
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<PAGE>
trading thereon is restricted, (ii) for any period during which an emergency
(as determined by the Securities and Exchange Commission) exists as a result
of which disposal by the Fund of its securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (iii) for such other period as
the Securities and Exchange Commission may by order permit for the protection
of the shareholders of the Fund.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that (i) are not restricted as to transfer either by law
or liquidity of market and (ii) have a value which is readily ascertainable (and
not established only by valuation procedures).
8. TAXATION
The Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). Such qualification does not involve
governmental supervision of management or investment practices or policies of
the Fund. The information set forth in the Prospectus and the following
discussion relates solely to Federal income taxes on dividends and
distributions by the Fund and assumes that the Fund qualifies as a regulated
investment company. Investors should consult their own counsel as to the
consequences to them of Federal, state and local tax laws.
As a regulated investment company, the Fund will not be subject to
Federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital
losses) that it distributes to shareholders, provided that it distributes at
least 90% of investment company taxable income (i.e., net investment income
and capital loss) for the taxable year (the "Distribution Requirement"), and
satisfies certain other requirements of the Code that are described below.
Distributions by the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will
be considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gain from options,
futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "Income Requirement");
and (2) derive less than 30% of its gross income (exclusive of certain gains
on designated hedging transactions that are offset by realized or unrealized
losses on offsetting positions) from the sale or other disposition of stock,
securities or foreign currencies (or options, futures or forward contracts
thereon) held for less than three months (the "Short-Short Gain Test").
However, foreign currency gains, including those derived from options,
futures and forwards, will not in any event be characterized as Short-Short
Gains if they are directly related to the
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<PAGE>
regulated investment company's investments in stock or securities (or options
or futures thereon). Because of the Short-Short Gain Test, the Fund may have
to limit the sale of appreciated securities that it has held for less than
three months. However, the Short-Short Gain Test will not prevent the Fund
from disposing of investments at a loss, since the recognition of a loss
before the expiration of the three-month holding period is disregarded for
this purpose.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. For purposes of determining whether
capital gain or loss recognized by the Fund on the disposition of an asset is
long-term or short-term, the holding period of the asset may be affected if
(1) the asset is used to close a "short sale" (which includes for certain
purposes the acquisition of a put option) or is substantially identical to
another asset so used, or (2) the asset is otherwise held by the Fund as part
of a "straddle" (which term generally excludes a situation where the asset is
stock and the Fund grants a qualified covered call option (which, among other
things, must not be deep-in-the-money) with respect thereto). However, for
purposes of Short-Short Gain Test, the holding period of the asset disposed
of may be reduced only in the case of clause (1) above. In addition, the Fund
may be required to defer the recognition of a loss on the disposition of an
asset held as part of a straddle to the extent of any unrecognized gain on
the offsetting position.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable for shareholders as ordinary income and treated as dividends for
federal income tax purposes, and may qualify for the 70% dividends-received
deduction for corporate shareholders.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. Net capital gain that is distributed and designated as a capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his shares.
Distributions by the Fund that do no constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his
shares; any excess will be treated as gain from the sale of his shares, as
discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
-17-
<PAGE>
Shareholders purchasing shares of the Fund just prior to the ex-dividend
date will be taxed on the entire amount of the dividend received, even though
the net asset value per share on the date of such purchase reflected the
amount of such dividend.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which they are made. However, dividends declared
in October, November or December of any year and payable to shareholders of
record on a specified date in such a month will be deemed to have been
received by the shareholders (and made by the Fund) on December 31 of such
calendar year if such dividends are actually paid in January of the following
year. Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made (or deemed made) to them during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemptions of shares, paid to any shareholder (1) who
has provided either an incorrect tax identification number or no number at
all, (2) who is subject to backup withholding by the IRS for failure to
report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that it is not subject to backup withholding or
that it is a corporation or other "exempt recipient."
For Federal income tax purposes, when put and call options purchased by
the Fund expire unexercised, the premiums paid by the Fund give rise to
short- or long-term capital losses at the time of expiration (depending on
the length of the respective exercise periods for the options). When put and
call options written by the Fund expire unexercised, the premiums received by
the Fund give rise to short-term capital gains at the time of expiration.
When the Fund exercises a call, the purchase price of the underlying security
is increased by the amount of the premium paid by the Fund. When the Fund
exercises a put, the proceeds from the sale of the underlying security are
decreased by the premium paid. When a put or call written by the Fund is
exercised, the purchase price (selling price in the case of a call) of the
underlying security is decreased (increased in the case of a call) for tax
purposes by the premium received. There may be short- or long-term gains and
losses associated with closing purchase or sale transactions. For purposes of
the Short-Short Gain Test, the holding period of an option written by the
Fund will commence on the date it is written and end on the date it lapses or
the date a closing transaction is entered into. Accordingly, the Fund may be
limited in its ability to write options which expire within three months and
to enter into closing transactions at a gain within three months of the
writing of options.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss)
for any taxable year, to elect (unless it has made a taxable year election
for excise tax purposes as discussed below) to treat all or any part of any
net capital loss, any net long-term capital loss or any net foreign currency
loss incurred after October 31 as if it had been incurred in the succeeding
year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets
-18-
<PAGE>
must consist of cash and cash items, U.S. government securities, securities
of other regulated investment companies, and securities of other issuers (as
to which the Fund has not invested more than 5% of the value of the Fund's
total assets in securities of such issuer and as to which the Fund does not
hold more than 10% of the outstanding voting securities of such issuer), and
no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the fund controls and which are engaged in the same or similar
trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gain) will be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and such distributions will be taxable to
the shareholders as ordinary dividends to the extent of the Fund's current
and accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30, or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain)
by the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar
year (and, instead, include such gains and losses in determining ordinary
taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Fund may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds
of the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
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<PAGE>
the sale or redemption. In general, any gain or loss arising from (or treated
as arising from) the sale or redemption of shares of the Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares. For this purpose, the special
holding period rules of Code Section 246(c) (3) and (4) generally will apply
in determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year
are deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding
tax at the rate of 30% (or lower applicable treaty rate) upon the gross
amount of the dividend. Such a foreign shareholder would generally be exempt
from U.S. Federal income tax on gains realized on the sale of shares of the
Fund, capital gain dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends, and any gains realized upon the sale of
shares of the Fund will be subject to U.S. Federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of a noncorporate foreign shareholder, the Fund may be
required to withhold U.S. Federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding (or taxable at a
reduced treaty rate), unless the shareholder furnishes the Fund with proper
notification of its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund, including the applicability of foreign taxes.
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<PAGE>
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. Federal income tax consequences
is based on the code and Treasury Regulations issued thereunder as in effect
on the date of this Statement. Future legislative or administrative changes
or court decisions may significantly change the conclusions expressed herein,
and any such changes or decisions may have a retroactive effect.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from
the rules for U.S. Federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of Federal, state
and local tax rules with respect to an investment in the Fund.
9. OTHER MATTERS
CUSTODIAN
Pursuant to an agreement (the "Custodian Agreement"), The First National
Bank of Boston (the "Custodian"), P.O. Box 1959, Boston, Massachusetts 02105,
acts as the custodian of the Funds' assets. The Custodian's responsibilities
include safeguarding and controlling the Fund's cash and securities,
determining income and collecting interest on Fund investments. The Custodian
may employ foreign subcustodians to provide custody of the Fund's foreign
assets in accordance with applicable regulations. The Custodian is paid a fee
at an annual rate of 0.02% of the first $100 million of the average daily net
assets of the Fund, 0.015% of the next $100 million of the average daily net
assets of the Fund and 0.001% of the average daily net assets of the Fund
over $200 million, and certain transaction fees.
COUNSEL
Legal matters in connection with the issuance of shares of stock of the
Trust are passed upon by Messrs. Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, New York 10022. Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel has relied upon the opinion of Messrs. Morris,
Nichols, Arsht & Tunnell, 1201 N. Market Street, Wilmington, Delaware, for
matters relating to Delaware law.
AUDITORS
Ernst & Young LLP, independent auditors, have been selected as auditors
for the Trust .
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<PAGE>
THE TRUST AND ITS SHAREHOLDERS
The Trust was organized as a Delaware business trust on April 24, 1995.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however,
have indicated that they and the courts in their state may decline to apply
Delaware law on this point. The Trust Instrument contains an express
disclaimer of shareholder liability for the debts, liabilities, obligations,
and expenses of the Trust and requires that a disclaimer be given in each
contract entered into or executed by the Trust or the Trustees. The Trust
Instrument provides for indemnification out of each series' property of any
shareholder or former shareholder held personally liable for the obligations
of the series. The Trust Instrument also provides that each series shall,
upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the series and satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Delaware law does
not apply, no contractual limitation of liability was in effect and the
portfolio is unable to meet its obligations. Forum believes that, in view of
the above, there is no risk of personal liability to shareholders.
The Trust Instrument further provides that the Trustees shall not be
liable to any person other than the Trust or its shareholders; moreover, the
Trustees shall not be liable for any conduct whatsoever, provided that a
Trustee is not protected against any liability 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 his office.
Fund capital consists of shares of beneficial interest. Shares are fully
paid and nonassessable, except as set forth above with respect to Trustee and
shareholder liability. Shareholders representing 10% or more of the Trust or
a series may, as set forth in the Trust Instrument, call meetings of the
Trust or series for any purpose related to the Trust or series, as the case
may be, including, in the case of a meeting of the entire Trust, the purpose
of voting on removal of one or more Trustees. The Trust or any series may be
terminated upon the sale of its assets to, or merger with, another open-end
management investment company or series thereof, or upon liquidation and
distribution of its assets. Generally such terminations must be approved by
the vote of the holders of a majority of the outstanding shares of the Trust
or the series; however, the Trustees may, without prior shareholder approval,
change the form of organization of the Trust by merger, consolidation or
incorporation. If not so terminated or reorganized, the Trust and its series
will continue indefinitely. Under the Trust Instrument, the Trustees may,
without shareholder vote, cause the Trust to merge or consolidate into one or
more trusts, partnerships or corporations or cause the Trust to be
incorporated under Delaware law, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Trust's registration statement.
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<PAGE>
OWNERSHIP OF SHARES OF THE FUND
As of March 25, 1996, the amount of shares owned by all officers and
directors of the Fund, as a group, was less than 1.00% of the Fund's
outstanding shares. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding common stock as of March 25, 1996:
<TABLE>
<CAPTION>
Nature
Name and Address % of Shares of Ownership
- ---------------- ----------- ------------
<S> <C> <C>
Robert Pergament 5.37% Beneficial
621 NW 53rd Street
Boca Raton, FL 33487
Gerald Cramer 5.04% Beneficial
1330 Journeys End Road
Croton-On-Hudson, NY 10520
</TABLE>
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<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
CORPORATE BONDS (INCLUDING CONVERTIBLE DEBT)
(A) MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's rates corporate bond issues, including convertible debt issues, as
follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime 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 payment 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 of or maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
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.
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 believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1, and B1.
(B) STANDARD & POOR'S CORPORATION ("S&P")
S&P rates corporate bond issues, including convertible debt issues, as
follows:
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas, they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Bonds rated `BB' have less near-term vulnerability to default 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 timely interest and principal payments.
Bonds rated `B' have a greater vulnerability to default but currently have
the capacity to meet interest payments and principal payments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
A-2
<PAGE>
Bonds rated `CCC' have currently identifiable vulnerability to default, and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
The `C' rating may be used to cover a situation where a bankruptcy petition
has been filed, but debt service payments are continued. The rating `Cl' is
reserved for income bonds on which no interest is being paid.
Bonds are rated D when the issue is in payment default, or the obligor has
filed for bankruptcy. Bonds rated `D' are in payment default. The `D' rating
category is used when interest payments or principal payments 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
also will be used upon the filing of a bankruptcy petition if debt service
payments 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 rating category.
PREFERRED STOCK
(A) MOODY'S
Moody's rates preferred stock issues as follows:
An issue which is rated aaa is a top-quality preferred stock. This rating
indicates good asset protection and the least risk of dividend impairment among
preferred stock issues.
An issue which is rated "aa" is a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue which is rated "a" is 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 which is rated "baa" is 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 which is rated "ba" has 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.
A-3
<PAGE>
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.
(B) STANDARD & POOR'S
Standard & Poor's rates preferred stock issues 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. While 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.
A-4
<PAGE>
To provide more detailed indications of preferred stock quality, the
ratings from "AA" to "B" may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories.
A-5
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ ----------
<C> <S> <C>
COMMON STOCKS (88.3%)
BUILDING CONSTRUCTION-GENERAL CONTRACTORS AND OPERATIVE BUILDERS (1.8%)
32,000 Walter Industries, Inc.*................ $ 440,000
----------
BUSINESS SERVICES (3.7%)
10,500 CDI Corporation*........................ 280,875
6,200 Continuum, Inc.*........................ 258,075
25,000 Iron Mountain, Inc.*.................... 381,250
----------
920,200
----------
CHEMICALS AND ALLIED PRODUCTS (2.7%)
28,000 Carter-Wallace, Inc. ................... 458,500
10,000 Church & Dwight Company, Inc. .......... 208,750
----------
667,250
----------
ELECTRIC, GAS, AND SANITARY SERVICES (2.5%)
30,000 UGI Corporation......................... 637,500
----------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT AND COMPONENTS, EXCEPT
COMPUTERS (5.8%)
12,500 Augat, Inc.............................. 218,750
22,000 GSE Systems, Inc.*...................... 316,250
40,000 Rexel, Inc.*............................ 490,000
26,000 Strattec Security Corporation*.......... 429,000
----------
1,454,000
----------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY AND TRANSPORTATION EQUIPMENT
(5.0%)
20,000 TriMas Corporation...................... 440,000
15,000 Watts Industries, Inc. -- Class A....... 298,125
22,000 Whittaker Corporation*.................. 517,000
----------
1,255,125
----------
FINANCIAL INSTITUTIONS (4.3%)
10,000 BankUnited Financial Corporation*....... 82,500
5,000 Center Financial Corporation............ 90,625
400 Charter One Financial, Inc. ............ 13,500
3,000 Commercial Federal Corporation.......... 116,625
10,000 Fidelity Federal Bank -- Class A........ 95,000
7,000 Long Island Bancorp, Inc................ 196,875
14,000 ONBANCorp, Inc.......................... 490,000
----------
1,085,125
----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ ----------
<C> <S> <C>
FOOD STORES (2.1%)
12,000 Penn Traffic Company*................... $ 178,500
27,500 Ruddick Corporation..................... 336,875
----------
515,375
----------
FURNITURE AND FIXTURES (1.1%)
30,000 Furniture Brands International, Inc.*... 277,500
----------
GENERAL MERCHANDISE STORES (8.5%)
45,000 Big B, Inc.............................. 466,875
47,500 Egghead, Inc.*.......................... 507,655
18,000 Fred Meyer, Inc.*....................... 504,000
15,000 Neiman-Marcus Group, Inc.*.............. 333,750
10,440 Proffitt's, Inc.*....................... 328,860
----------
2,141,140
----------
HOLDING AND OTHER INVESTMENT COMPANIES (2.4%)
24,000 Express America Holdings Company*....... 105,000
22,000 John Hancock Bank and Thrift Opportunity
Fund................................... 503,250
----------
608,250
----------
INDUSTRIAL AND COMMERCIAL MACHINERY AND COMPUTER EQUIPMENT (9.5%)
20,000 Acme-Cleveland Corporation.............. 617,500
26,000 Black Box Corporation*.................. 442,000
6,000 Culligan Water Technologies*............ 195,000
50,000 Power Control Technologies*............. 456,250
8,000 Silicon Valley Group, Inc.*............. 195,000
20,000 Wang Laboratories, Inc.*................ 475,000
----------
2,380,750
----------
LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE (2.1%)
22,700 Fibreboard Corporation.................. 536,290
----------
MEASURING, ANALYZING, AND CONTROLLING INSTRUMENTS; PHOTOGRAPHIC,
MEDICAL, AND OPTICAL GOODS (7.0%)
27,500 Elsag Bailey Process Automation N.V.*... $ 629,060
17,000 Tektronix, Inc.......................... 552,500
33,500 Tracor, Inc.*........................... 584,155
----------
1,765,715
----------
</TABLE>
* Non-income producing security
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
4
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ ----------
OIL AND GAS EXTRACTION (6.2%)
<C> <S> <C>
23,000 Barrett Resources Corporation*.......... 575,000
20,000 Flores & Rucks, Inc.*................... 370,000
40,000 Forest Oil Corporation*................. 495,000
17,000 Hugoton Energy Corporation*............. 131,750
----------
1,571,750
----------
PRIMARY METAL INDUSTRIES (7.1%)
26,000 Commonwealth Aluminum Corporation....... 461,500
29,000 Schnitzer Steel Industries, Inc......... 757,625
14,000 Wolverine Tube, Inc.*................... 568,750
----------
1,787,875
----------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (6.1%)
21,000 Big Flower Press Holdings, Inc.*........ 267,750
11,000 Devon Group, Inc.*...................... 313,500
29,000 Duplex Products*........................ 266,438
10,000 Houghton Mifflin Company................ 441,250
25,000 Playboy Enterprises, Inc. -- Class B*... 253,127
----------
1,542,065
----------
REAL ESTATE (3.2%)
6,000 Hospitality Properties Trust ........... 160,500
16,000 Insignia Financial Group, Inc. -- Class
A*..................................... 390,000
15,000 RFS Hotel Investors, Inc................ 260,625
----------
811,125
----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ ----------
<C> <S> <C>
TRANSPORTATION EQUIPMENT (6.2%)
60,400 Mascotech, Inc.......................... $ 807,850
23,000 Safety Components International,
Inc.*.................................. 322,000
30,000 Terex Corporation*...................... 202,500
5,000 Thiokol Corporation .................... 219,375
----------
1,551,725
----------
WHOLESALE TRADE-NONDURABLE GOODS (1.0%)
26,000 Central Garden and Pet Company*......... 247,000
----------
TOTAL COMMON STOCKS (COST $20,456,481)...................... $22,195,760
----------
CONVERTIBLE PREFERRED STOCK (1.5%)
TRANSPORTATION EQUIPMENT (1.5%)
15,000 Terex Corporation, 13.00%, due
12/31/00(a)............................ 390,000
----------
TOTAL CONVERTIBLE PREFERRED STOCK (COST $354,375)........... $ 390,000
----------
WARRANTS (0.9%)
TRANSPORTATION EQUIPMENT (0.9%)
15,000 Terex Corporation(a).................... 225,000
----------
TOTAL WARRANTS (COST $135,000).............................. $ 225,000
----------
SHORT-TERM HOLDINGS (9.3%)
426,103 1784 U.S. Treasury Money Market Fund.... 426,103
1,177,997 Dreyfus Government Cash Management
Fund................................... 1,177,997
705,467 Forum Daily Assets Treasury Fund........ 705,467
32,026 Monarch Government Institutional Fund... 32,026
----------
TOTAL SHORT-TERM HOLDINGS (COST $2,341,593)................. $2,341,593
----------
TOTAL INVESTMENTS (100.0%) (COST $23,287,449)............... $25,152,353
----------
----------
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" pursuant
to Rule 144A under, or securities offered pursuant to Section 4(2) of, the
Securities Act of 1933, as amended. These Securities have been determined to
be liquid under guidelines established by the Board of Directors.
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
5
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $23,287,449)...... $25,152,353
Interest, dividends and other receivables..... 14,708
Receivable for securities sold................ 243,552
Receivable for shares issued.................. 110,000
Organization costs, net....................... 79,668
-----------
Total assets...................................... 25,600,281
-----------
LIABILITIES:
Accrued advisory fees......................... 12,627
Accrued fees and other expenses............... 16,078
Payable for securities purchased.............. 2,348,300
-----------
Total liabilities................................. 2,377,005
-----------
NET ASSETS........................................ $23,223,276
-----------
-----------
COMPONENTS OF NET ASSETS:
Capital paid in............................... $21,097,038
Distribution in excess of net investment
income....................................... (25,086)
Net unrealized appreciation................... 1,864,904
Accumulated net realized gains................ 286,420
-----------
NET ASSETS........................................ $23,223,276
-----------
-----------
SHARES OUTSTANDING................................ 1,938,311
-----------
-----------
NET ASSET VALUE PER SHARE......................... $ 11.98
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
6
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income............................... $ 38,213
Interest income............................... 23,221
----------
Total income...................................... 61,434
----------
EXPENSES:
Advisory...................................... 32,994
Administration................................ 20,000
Shareholder services.......................... 10,998
Transfer agency............................... 8,490
Accounting.................................... 18,000
Legal......................................... 7,500
Auditing and tax reporting.................... 7,500
Compliance.................................... 10,166
Directors fees and expenses................... 7,500
Amortization of organization costs............ 7,243
Other......................................... 4,461
----------
Total expenses.................................... 134,852
----------
Fees waived................................... (51,365)
----------
Net expenses...................................... 83,487
----------
NET INVESTMENT LOSS............................... (22,053)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain............................. 286,420
Net change in unrealized appreciation......... 1,864,904
----------
Net realized and unrealized gain on investment.... 2,151,324
----------
INCREASE IN NET ASSETS FROM OPERATIONS............ $2,129,271
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
7
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 2, 1995 THROUGH MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SHARES
----------- ---------
<S> <C> <C>
NET ASSETS--OCTOBER 2, 1995 (a)................... $ 100,000
OPERATIONS:
Net investment loss........................... (22,053)
Net realized gain on investments.............. 286,420
Net change in unrealized appreciation......... 1,864,904
-----------
2,129,271
-----------
DISTRIBUTIONS TO SHAREHOLERS:
Net investment income......................... (3,033)
-----------
CAPITAL SHARE TRANSACTIONS:
Sale of shares................................ 21,038,348 1,931,941
Reinvested dividends.......................... 3,021 282
----------- ---------
21,041,369 1,932,223
Shares repurchased............................ (44,331) (3,912)
----------- ---------
20,997,038 1,928,311
----------- ---------
---------
NET ASSETS--MARCH 31, 1996........................ $23,223,276
-----------
-----------
</TABLE>
(a) See Note 1 of notes to financial statements for commencement of operations.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
8
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING DURING THE PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1996(C)
-------------
<S> <C>
Beginning net asset value per share......................................... $ 10.00
-------------
Net investment income....................................................... (0.01)
Net realized and unrealized gain on securities.............................. 1.99
-------------
Ending net asset value per share............................................ $ 11.98
-------------
-------------
Ratios to average net assets
Expenses (a)............................................................ 1.90%(b)
Net investment income................................................... (0.50)%(b)
Total return................................................................ 19.85%
Portfolio turnover rate..................................................... 39.93%
Net assets at end of period (000's omitted)................................. $ 23,223
</TABLE>
<TABLE>
<S> <C>
(a) During the period, various fees and expenses were waived. Had such waivers not occurred,
the ratio of expenses to average net assets would have been: 3.07%(b)
(b) Annualized.
(c) See Note 1 of notes to financial statements for commencement of operations.
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS CRM FUNDS
9
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION
Small Cap Value Fund (the "Fund"), a diversified portfolio of The CRM Funds (the
"Trust"), is an open-end management investment company. Investment operations
commenced on October 2, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles based upon the following significant accounting
policies.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with GAAP requires the Fund's management to make estimates and assumptions
that affect certain reported amounts. Actual results may differ from those
estimates.
SECURITY VALUATION -- Securities held by the Fund 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. In the absence of readily
available market quotations, securities are valued at fair value determined
pursuant to procedures adopted by the Board of Directors. Short-term
securities, having a maturity of 60 days or less, are valued at amortized
cost.
INTEREST AND DIVIDEND INCOME AND DIVIDENDS TO SHAREHOLDERS -- Interest
income is accrued as earned. Dividend income is recorded on ex-dividend
date. Dividends to shareholders of net investment income and net capital
gains are declared and paid annually.
Distributions from net investment income and realized capital gain are based
on amounts calculated in accordance with applicable income tax regulations.
Any differences between financial statement amounts available for
distribution and distributions made in accordance with income tax
regulations are primarily attributable to wash sales.
Discounts on Treasury Bills purchased are amortized over the life of the
respective securities.
ORGANIZATIONAL COSTS -- The Fund incurred costs in connection with its
organization in the amount of $86,911. These costs have been capitalized and
are being amortized using the straight-line method over a five year period
beginning on the commencement of the Fund's investment operations.
FEDERAL INCOME TAX -- The Fund intends to qualify as a regulated investment
company and distributes all of its taxable income. Therefore, no provision
for Federal income tax provision is required.
OTHER -- Investment security transactions are recorded on trade date.
Realized gains and losses on investments sold are recorded on the basis of
identified cost.
- --------------------------------------------------------------------------------
AVALON CAPITAL, INC.
10
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser to the Fund is CRM Advisors, LLC (the "Adviser"). The
Adviser receives from the Fund an advisory fee at an annual rate of 0.75% of the
average daily net assets of the Fund .
The administrator of the Fund is Forum Financial Services, Inc. ("Forum").
Pursuant to an Administration Agreement, Forum receives a fee at an annual rate
of .15% of the average daily net assets of the Fund. Forum also serves as
distributor of the Fund's shares pursuant to a Distribution Agreement under
which it receives no fees.
Forum Financial Corp. ("FFC") serves as the Fund's transfer agent and dividend
disbursing agent, for which it receives $12,000 plus certain shareholder account
fees. FFC also provides fund accounting services to the Fund. For these
services, FFC receives an annual fee of $36,000 plus certain amounts based upon
the number and types of portfolio transactions within the Fund. Forum and FFC
are affiliated companies. The Trust has adopted a shareholder service plan
providing that it may obtain the services of the Adviser and other qualified
financial institutions to act as shareholder servicing agents for their
customers. Under this plan, FFC may pay shareholder servicing agents up to 0.25%
of the average daily net assets of the Fund attributable to accounts for which
the agent provides shareholder services. The Trust reimburses FFC an amount
equal to any shareholder servicing fees it pays to shareholder servicing agents.
For the period ended March 31, 1996, the Adviser waived $20,367 of its advisory
fee and $10,998 of its shareholder service fee. For the same period, Forum
waived $20,000 of its administration fee.
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of portfolio
securities (excluding short-term investments) during the period ended March 31,
1996 amounted to $24,634,454 and $3,975,097, respectively.
The cost basis of securities for Federal income tax purposes is the same as for
financial accounting purposes. Unrealized appreciation and depreciation as of
March 31, 1996 were $2,212,435 and $347,531, respectively.
- --------------------------------------------------------------------------------
AVALON CAPITAL, INC.
11
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included in the Prospectus (Part A):
Financial Highlights
Included in the Statement of Additional Information (Part B):
Unaudited financial statements for the six month period ended March
31, 1996 including: statement of assets and liabilities, statement of
operations, statement of changes in net assets, notes to financial
statements, financial highlights and schedule of investments.
(b) EXHIBITS: NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED
HEREIN BY REFERENCE. ALL REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR
PRE-EFFECTIVE AMENDMENT ("PREEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S
REGISTRATION STATEMENT ON FORM N-1A, FILE NO. 33-91498.
(1) Copy of Trust Instrument (filed herewith).
(2) Copy of Bylaws (filed herewith).
(3) Inapplicable.
(4) Inapplicable.
(5)* Form of Investment Advisory Agreement between Registrant and CRM
Advisors, Inc. (filed on August 21, 1995 as Exhibit 5 of PreEA No.1).
(6)* Form of Distribution Agreement between Registrant and Forum Financial
Services, Inc. (filed on August 21, 1995 as Exhibit 6 of PreEA No.1).
(7) Inapplicable.
(8)* Form of Custodian Agreement (filed on August 21, 1995 as Exhibit 8 of
PreEA No.1).
(9) (a)* Form of Administration Agreement between Registrant and Forum
Financial Services, Inc. (filed on August 21, 1995 as Exhibit
9(a) of PreEA No.1).
C-1
<PAGE>
(b)* Form of Transfer Agency Agreement to be between Registrant and
Forum Financial Corp. (filed on August 21, 1995 as Exhibit 9(b)
of PreEA No.1).
(c)* Form of Fund Accounting Agreement to be between Registrant and
Forum Financial Corp. (filed on August 21, 1995 as Exhibit 9(c)
of PreEA No.1).
(10) (a)* Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
(filed on September 29, 1995 as Exhibit 10(a) of PreEA No.2).
(b)* Opinion of Morris, Nichols, Arsht & Tunnell (filed on September
29, 1995 as Exhibit 10(b) of PreEA No.2).
(11) Not applicable to this filing.
(12) Inapplicable.
(13) Form of Investment Representation Letter (filed on September 29, 1995
as Exhibit 13 of PreEA No.2).
(14) Inapplicable.
(15) Inapplicable.
(16) Inapplicable.
Other Exhibits:
(A) Power of Attorney of Fred M. Filoon (filed on September 29, 1995 as
Other Exhibit (A) of PreEA No.2).
(B) Power of Attorney of John E. Appelt (filed on September 29, 1995 as
Other Exhibit (B) of PreEA No.2).
(C) Power of Attorney of Louis Klein Jr. (filed on September 29, 1995 as
Other Exhibit (C) of PreEA No.2).
(D) Power of Attorney of Clement C. Moore, II (filed on September 29, 1995
as Other Exhibit (D) of PreEA No.2).
(E) Power of Attorney of Eugene A. Trainor, III (filed on September 29,
1995 as Other Exhibit (E) of PreEA No.2).
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF MARCH 25, 1996.
<TABLE>
<CAPTION>
Title of Class of Shares
of Beneficial Interest Number of Holders
------------------------ -----------------
<S> <C>
The CRM Small Cap Value Fund 213
</TABLE>
ITEM 27. INDEMNIFICATION.
Section 10.01 of the Registrant's Trust Instrument provides that a Trustee,
when acting in such capacity, will not be personally liable to any person other
than the Trust or Shareholders for any act, omission or obligation of the Trust
or any Trustee. Section 10.01 also provides that a Trustee, when acting in such
capacity, will not be liable to the Trust or to Shareholder except for acts or
omissions constituting willful misfeasance, bad faith, gross negligence or
reckless disregard of the Trustee's duties under the Trust Instrument.
The general effect of Section 10.02 of the 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. Section 10.02 also provides that the Trust may obtain
insurance coverage for the indemnification rights provided for section 10.02.
The foregoing description of the limitation of liability, indemnification
and insurance provisions of the Trust Instrument is modified in its entirety by
the provisions of Article X of the Trust Instrument contained in this
Registration Statement as Exhibit 1 and incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant 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
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant 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 Registrant 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 1933 Act and
will be governed by the final adjudication of such issue.
C-3
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
The description of CRM Advisors, LLC, under the caption "Management of the
Trust - The Adviser" and "Management - Investment Adviser" in the Prospectus and
Statement of Additional Information, constituting certain of Parts A and B,
respectively, of this Registration Statement, are incorporated by reference
herein.
The address of CRM Advisors, LLC, is 707 Westchester Avenue, White Plains,
New York 10604. The following are the partners and executive officers of CRM
Advisors, LLC, including any business connections of a substantial nature which
they have had in the past two years.
Gerald Bertram Cramer, Member; Chairman of the Board
Chairman of the Board of Cramer Rosenthal McGlynn, Inc., and CRM
Management, Inc., 707 Westchester Avenue, White Plains, New York
10604.
Edward John Rosenthal, Member; Vice Chairman
Currently Vice Chairman and Treasurer of Cramer Rosenthal McGlynn,
Inc., and CRM Management, Inc., 707 Westchester Avenue, White Plains,
New York 10604, Mr. Rosenthal was formerly Executive Vice President of
Cramer Rosenthal McGlynn, Inc., and CRM Management, Inc.
Ronald Harward McGlynn, Member; President
President of Cramer Rosenthal McGlynn, Inc., and CRM Management, Inc.,
707 Westchester Avenue, White Plains, New York 10604.
Jay Brian Abramson, Member; Executive Vice President
Executive Vice President and General Counsel of Cramer Rosenthal
McGlynn, Inc., and CRM Management, Inc., 707 Westchester Avenue, White
Plains, New York 10604.
Fred Marden Filoon, Member; Senior Vice President
Senior Vice President of Cramer Rosenthal McGlynn, Inc., and CRM
Management, Inc., 707 Westchester Avenue, White Plains, New York
10604.
Arthur Jay Pergament, Member; Senior Vice President
Senior Vice President of Cramer Rosenthal McGlynn, Inc., and CRM
Management, Inc., 707 Westchester Avenue, White Plains, New York
10604.
Eugene Anthony Trainor, III, Treasurer and Assistant Secretary
C-4
<PAGE>
Currently Vice President and Chief Financial Officer of Cramer
Rosenthal McGlynn, Inc., 707 Westchester Avenue, White Plains, New
York 10604, Mr. Trainor was formerly the Chief Financial Officer and
Controller of Grotech Capital Group, Inc., in Timonium, MD.
Amelia Claudette Jones Sher, Secretary and Assistant Treasurer
Currently Vice President and Director of Operations and Compliance of
Cramer Rosenthal McGlynn, Inc., 707 Westchester Avenue, White Plains,
New York 10604, Ms. Sher was formerly Director, Senior Vice President,
Director of Operations, Treasurer and Assistant Secretary of Schaenen
Wood & Associates, Inc., 600 Madison Avenue, New York, NY.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves
as underwriter to Avalon Capital, Inc., Core Trust (Delaware), The CRM Funds,
The Cutler Trust, Forum Funds, Monarch Funds, Norwest Advantage Funds, Norwest
Select Funds, Sound Shore Fund, Inc., Stone Bridge Funds, Inc. and Trans Adviser
Funds, Inc.
(b) John Y. Keffer, President and Secretary of Forum Financial Services,
Inc., is the Chairman and President of Registrant. David R. Keffer is the Vice
President and Treasurer of Forum Financial Services, Inc. Their business address
is Two Portland Square, Portland, Maine 04101.
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 (the "1940
Act") and the Rules thereunder are maintained at the offices of Forum Financial
Services, Inc., and Forum Financial Corp. The offices of both companies are
located at Two Portland Square, Portland, Maine 04101. The records required to
be maintained under Rule 31a-1(b)(1) with respect to journals of receipts and
deliveries of securities and receipts and disbursements of cash are maintained
at the offices of the Registrant's custodian, as listed under "Other Information
- - Custodian" in Part B to this Registration Statement.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
C-5
<PAGE>
ITEM 32. UNDERTAKINGS.
Registrant undertakes to:
(i) contain in its Trust Instrument or bylaws provisions for assisting
shareholder communications and for the removal of trustees substantially
similar to those provided for in Section 16(c) of the 1940 Act, except to
the extent such provisions are mandatory or prohibited under applicable
Delaware law; and,
(ii) furnish each person to whom a prospectus is delivered a copy of
Registrant's latest annual report to shareholders relating to the portfolio
or class thereof to which the prospectus relates upon request and without
charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Portland, State of Maine
on the 25th day of April, 1996.
THE CRM FUNDS
By: FRED M. FILOON*
President
*By: /s/ Max Berueffy
------------------------------
Max Berueffy, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 25th
day of April, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
FRED M. FILOON* President and Trustee
*By: /s/ Max Berueffy
------------------------------
Max Berueffy, Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
EUGENE A. TRAINOR, III Treasurer
*By: /s/ Max Berueffy
------------------------------
Max Berueffy, Attorney-in-Fact
(c) Majority of the Directors
JOHN E. APPELT* Trustee
FRED M. FILOON* Trustee
LOUIS KLEIN, JR.* Trustee
CLEMENT C. MOORE, II* Trustee
EUGENE A. TRAINOR* Trustee
*By: /s/ Max Berueffy
------------------------------
Max Berueffy, Attorney-in-Fact
C-7
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page Number
- ------- -----------
1 Trust Instrument of the Registrant.
2 By-Laws of the Registrant.
<PAGE>
EXHIBIT (1)
<PAGE>
THE CRM FUNDS
TRUST INSTRUMENT
DATED APRIL 20, 1995
<PAGE>
THE CRM FUNDS
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name 1
Section 1.02 Definitions 1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest 2
Section 2.02 Issuance of Shares 2
Section 2.03 Register of Shares and Share Certificates 2
Section 2.04 Transfer of Shares 3
Section 2.05 Treasury Shares 3
Section 2.06 Establishment of Series 3
Section 2.07 Investment in the Trust 3
Section 2.08 Assets and Liabilities of Series 4
Section 2.09 No Preemptive Rights 4
Section 2.10 No Personal Liability of Shareholders 4
Section 2.11 Assent to Trust Instrument 5
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust 5
Section 3.02 Initial Trustees 5
Section 3.03 Term of Office 5
Section 3.04 Vacancies and Appointments 6
Section 3.05 Temporary Absence 6
Section 3.06 Number of Trustees 6
Section 3.07 Effect of Ending of a Trustee's Service 6
Section 3.08 Ownership of Assets of the Trust 6
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers 7
Section 4.02 Issuance and Repurchase of Shares 9
Section 4.03 Trustees and Officers as Shareholders 9
Section 4.04 Action by the Trustees 9
Section 4.05 Chairman of the Trustees 10
Section 4.06 Principal Transactions 10
ARTICLE V EXPENSES OF THE TRUST 10
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser 11
Section 6.02 Principal Underwriter 11
Section 6.03 Administrator 11
Section 6.04 Transfer Agent 11
<PAGE>
Section 6.05 Parties to Contract 12
Section 6.06 Provisions and Amendments 12
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers 12
Section 7.02 Meetings 13
Section 7.03 Quorum and Required Vote 13
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties 13
Section 8.02 Central Certificate System 14
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions 14
Section 9.02 Redemptions 14
Section 9.03 Determination of Net Asset Value
and Valuation of Portfolio Assets 15
Section 9.04 Suspension of the Right of Redemption 15
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability 16
Section 10.02 Indemnification 16
Section 10.03 Shareholders 17
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership 17
Section 11.02 Trustee's Good Faith Action,
Expert Advice, No Bond or Surety 17
Section 11.03 Establishment of Record Dates 18
Section 11.04 Termination of Trust 18
Section 11.05 Reorganization 19
Section 11.06 Filing of Copies, References, Headings 19
Section 11.07 Applicable Law 19
Section 11.08 Amendments 20
Section 11.09 Fiscal Year 20
Section 11.10 Provisions in Conflict with Law 20
THE CRM FUNDS
April 20, 1995
TRUST INSTRUMENT, made by Max Berueffy, James F. Patterson and David I.
Goldstein (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed
to the trust hereunder shall be held and managed in trust under this Trust
Instrument as herein set forth below.
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "The CRM
Funds."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(b) "Bylaws" means the Bylaws of the trust as adopted by the Trustees, as
amended from time to time;
(c) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person", "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(d) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(e) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(f) "Outstanding Shares" means those Shares shown from time to time in the
books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(h) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) The "Trust" means The CRM Funds and reference to the Trust, when
applicable to one or more Series of the Trust, shall refer to any such Series;
(k) The "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as he or they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
III hereof and reference herein to a Trustee or to the Trustees shall refer to
the individual Trustees in their capacity as Trustees hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
<PAGE>
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, 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. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into
a greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register shall
be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be entitled
to receive dividends or other distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or other distribution, nor to have notice given to him as herein
or in the Bylaws provided, until he has given his address to the transfer agent
or such officer or other agent of the Trustees as shall keep the said register
for entry thereon. No share certificates shall be issued by the Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 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
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
<PAGE>
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 Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares 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 Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each Series
of the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such Shareholder shall
be paid solely out of the funds and property of such Series of the Trust.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration received
by the Trust for the issue or sale of Shares 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 Shareholders 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 Shares 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 Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, 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
enforceable against the 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 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
<PAGE>
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 Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees, whether of the same or other Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligation and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue of
having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. 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 Trust Instrument. 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 both within and without the State of Delaware, in
any and all states of the United States of America, in the District of Columbia,
in any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign jurisdiction 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 Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the persons
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least three (3) but not more than twelve (12) Trustees, as specified by the
Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified
<PAGE>
therein; (b) that any Trustee may be removed at any time by written
instrument, signed by at least two-thirds of the number of Trustees prior to
such removal, specifying the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has died,
become physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy
in the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at least
three (3), and thereafter shall be such number as shall be fixed from time to
time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination to
serve, death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and
the right to conduct any business shall at all times be considered as vested in
the Trustees on behalf of the Trust, except that the Trustees may cause legal
title to any Trust Property to be held by, or in the name of the Trust, or in
the name of any person as nominee. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have,
except as otherwise provided for herein, a proportionate undivided beneficial
interest in the Trust or Series. The Shares shall be personal property giving
only the rights specifically set forth in this Trust Instrument.
<PAGE>
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust:
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of an obligation or engagement of any other Person and to lend
Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders; such Bylaws
shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, manager, custodian, underwriter or
other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
<PAGE>
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or either
in the name of the Trust or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual practice of
Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to 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 II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders
in the manner provided herein;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the redemption of
the Shares of any Shareholders whose investment is less than such minimum upon
giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers of
the Trustees to said committees and to adopt a committee charter providing for
such responsibilities, membership (including Trustees, officers or other agents
of the Trust therein) and any other characteristics of said committees as the
Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
<PAGE>
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see the application of
any payments made or property transferred to the Trustees or upon their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer
or other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he were not a Trustee, officer or agent; and the Trustees may issue
and sell or cause to be issued and sold Shares to and buy such Shares from any
such person or any firm or company in which he is interested, subject only to
the general limitations herein contained as to the sale and purchase of such
Shares; and all subject to any restrictions which may be contained in the
Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote at a meeting duly called or by unanimous written consent without a meeting
or by telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date
and place of all meetings of the Trustees shall be given by the party calling
the meeting to each Trustee by telephone, facsimile or other electronic
mechanism sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours in advance of the meeting. Notice need not
be given to any Trustee who attends the meeting without objecting to the lack of
notice or who executes a written waiver of notice with respect to the meeting.
Any meeting conducted by telephone shall be deemed to take place at the
principal office of the Trust, as determined by the Bylaws or by the Trustees.
Subject to the requirements of the 1940 Act, 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. Written
consents or waivers of the Trustees may be executed in one or more counterparts.
Execution of a written consent or waiver and delivery thereof to the Trust may
be accomplished by facsimile or other similar electronic mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one of
their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust 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
adviser, administrator, distributor 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 adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
<PAGE>
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the Trustees
shall be reimbursed from the Trust estate or the assets belonging to the
appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust's
trustees; compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust; costs of Trustee meetings;
Securities and Exchange Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts with
respect to the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, all upon such terms and conditions as may
be prescribed in the Bylaws or as the Trustees may in their discretion determine
(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws). Notwithstanding any other provision of this
Trust Instrument, the Trustees may authorize any investment adviser (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by all of the
Trustees.
The Trustees may authorize the investment adviser to employ, from time to
time, one or more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed upon
between the investment adviser and sub-adviser (such terms and conditions not to
be inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Any reference in this Trust Instrument to the investment adviser shall be deemed
to include such sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions
<PAGE>
of this Trust Instrument or of the Bylaws); and such contract may also
provide for the repurchase or sale of Shares by such other party as principal
or as agent of the Trust.
SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character described
in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any contract of the
character described in Article VIII hereof may be entered into with any
corporation, firm, partnership, 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 relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder 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, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Sections 6.01 and 6.06 hereof, and (d) with respect to
such additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940 Act,
Shares 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 Shareholders of all such Series shall be entitled to
vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and
<PAGE>
each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may
be voted in person or by proxy or in any manner provided for in the Bylaws.
A proxy may be given in writing. The Bylaws may provide that proxies may
also, or may instead, be given by any electronic or telecommunications device
or in any other manner. Notwithstanding anything else herein or in the
Bylaws, in the event a proposal by anyone other than the officers or Trustees
of the Trust is submitted to a vote of the Shareholders of one or more Series
or of the Trust, or in the event of any proxy contest or proxy solicitation
or proposal in opposition to any proposal by the officers or Trustees of the
Trust, Shares may be voted only in person or by written proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required or permitted by law, this Trust Instrument or any of the
Bylaws of the Trust to be taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware.
Special meetings of the Shareholders of any Series may be called by the Trustees
and shall be called by the Trustees upon the written request of Shareholders
owning at least one-tenth of the Outstanding Shares entitled to vote. Whenever
ten or more Shareholders meeting the qualifications set forth in Section 16(c)
of the 1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view to
obtaining signatures on such a request for a meeting, the Trustees shall comply
with the provisions of said Section 16(c) with respect to providing such
Shareholders access to the list of the Shareholders of record of the Trust or
the mailing of such materials to such Shareholders of record, subject to any
rights provided to the Trust or any Trustees provided by said Section 16(c).
Notice shall be sent, by First Class Mail or such other means determined by the
Trustees, at least 15 days prior to any such meeting.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned. Except
when the 1940 Act requires that a particular action be taken only at a duly
called meeting of the shareholders, shareholders may act by unanimous written
consent, and actions taken by Series (or class) may be consented to unanimously
in writing by Shareholders of that Series (or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. 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
twenty million dollars ($20,000,000) and is a member of the Depository Trust
Company as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust: (a) to hold the securities owned by the Trust and
deliver the same upon written order or oral order confirmed in writing; (b) to
receive and receipt for any moneys due to the Trust and deposit the same in its
own banking department or elsewhere as the Trustees may direct; and (c) to
disburse such funds upon orders or vouchers.
<PAGE>
The Trustees may also authorize the custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and is a
member of the Depository Trust Company or such other person as may be permitted
by the Commission or otherwise in accordance with the 1940 Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, 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, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock dividend pro rata among
the Shareholders of a particular Series, or class thereof, as of the record date
of that Series fixed as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any such Shares to be redeemed, as aforesaid, in
cash or property from the assets of that Series and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective. Upon redemption, shares shall become Treasury shares and
may be re-issued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO
ASSETS. The term "Net Asset Value" of any Series shall mean that amount by
which the assets of that Series exceed its liabilities, all as determined by or
under the direction of the Trustees. Such value shall be determined separately
for each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be
<PAGE>
made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Trustees; provided, however, that the Trustees, without Shareholder 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 9.03 with respect to valuation of
assets and liabilities. The resulting amount, which shall represent the
total Net Asset Value of the particular Series, shall be divided by the total
number of shares of that Series outstanding at the time and the quotient so
obtained shall be the Net Asset Value per Share of that Series. At any time
the Trustees may cause the Net Asset Value per Share last determined to be
determined again in similar manner and may fix the time when such
redetermined value shall become effective. If, for any reason, the net
income of any Series, determined at any time, is a negative amount, the
Trustees shall have the power with respect to that Series (a) to offset each
Shareholder's pro rata share of such negative amount from the accrued
dividend account of such Shareholder, (b) to reduce the number of Outstanding
Shares of such Series by reducing the number of Shares in the account of each
Shareholder by a pro rata portion of that number of full and fractional
Shares which represents the amount of such excess negative net income, (c) to
cause to be recorded on the books of such Series an asset account in the
amount of such negative net income (provided that the same shall thereupon
become the property of such Series with respect to such Series and shall not
be paid to any Shareholder), which account may be reduced by the amount, of
dividends declared thereafter upon the Outstanding Shares of such Series on
the day such negative net income is experienced, until such asset account is
reduced to zero; (d) to combine the methods described in clauses (a) and (b)
and (c) of this sentence; or (e) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net
Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration.
The Trustees shall also have the power not to declare a dividend out of net
income for the purpose of causing the Net Asset Value per Share to be
increased. The Trustees shall not be required to adopt, but may at any time
adopt, discontinue or amend the practice of maintaining the Net Asset Value
per Share of the Series at a constant Amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders 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 Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(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
<PAGE>
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 his 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 Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his 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 his 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 Shareholder 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
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) 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 Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his 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 Shareholder,
assume the defense of any claim made against the Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder
shall have any power to bind personally either the Trust officers or any
Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee 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 Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of the
Trust or any affected Series to another trust, partnership, association or
corporation, or to a separate series of shares thereof, organized under the laws
of any state which trust, partnership, association or corporation is an open-end
management investment company as defined in the 1940 Act, or is a series
thereof, for adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any affected Series, and which may include shares of beneficial
interest, stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
<PAGE>
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in Subsection 11.05(b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be canceled
and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth, possession or colony of the United
States or (b) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
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
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument.
All expressions like "his", "he" and "him", shall be deemed to include the
feminine and neuter, as well as masculine, genders. Headings are placed herein
for convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust
Instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders 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 Trust 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
<PAGE>
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 of 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 Trust 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.
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to
vote (a) on any amendment which would affect their right to vote granted in
Section 7.01 of Article VII hereof, (b) on any amendment to this Section 11.08,
(c) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission and (d) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, any amendment to Article X
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.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust 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 matter affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees of
the Trust, have executed this instrument as of date first written above.
______________________________
Max Berueffy, as Trustee
and not individually
______________________________
James F. Patterson, as Trustee
and not individually
______________________________
David I. Goldstein, as Trustee
and not individually
<PAGE>
EXHIBIT (2)
<PAGE>
THE CRM FUNDS
BYLAWS
APRIL 20, 1995
<PAGE>
THE CRM FUNDS
BYLAWS
These Bylaws of The CRM Funds (the "Trust"), a Delaware business trust, are
subject to the Trust Instrument of the Trust, dated April 20, 1995, as from time
to time amended, supplemented or restated (the "Trust Instrument"). Capitalized
terms used herein which are defined in the Trust Instrument are used as therein
defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in New York City, New
York, or such other location as the Trustees may, from time to time, determine.
The Trust may establish and maintain such other offices and places of business
as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
SECTION 2.01 OFFICERS. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers as the Trustees may from time to
time elect. The Trustees may delegate to any officer or committee the power to
appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
SECTION 2.02 ELECTION OF OFFICERS. The Treasurer and Secretary shall be
chosen by the Trustees. The President shall be chosen by and from the Trustees.
Two or more offices may be held by a single person except the offices of
President and Secretary. Subject to the provisions of Section 3.13 hereof, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees.
SECTION 2.03 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The business and affairs of the
Trust shall be managed by, or under the direction of, the Trustees, and they
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
SECTION 3.02 EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect from
their own number an executive committee, which shall have any or all the powers
of the Trustees while the Trustees are not in session. The Trustees may also
elect from their own number other committees from time to time. The number
composing such committees and the powers conferred upon the same are to be
determined by vote of a majority of the Trustees. All members of such
committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
SECTION 3.03 COMPENSATION. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
<PAGE>
SECTION 3.04 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint from
among their number a Chairman who shall serve as such at the pleasure of the
Trustees. When present, he shall preside at all meetings of the Shareholders
and the Trustees, and he may, subject to the approval of the Trustees, appoint a
Trustee to preside at such meetings in his absence. He shall perform such other
duties as the Trustees may from time to time designate.
SECTION 3.05 PRESIDENT. The President shall be the chief executive
officer of the Trust and, subject to the direction of the Trustees, shall have
general administration of the business and policies of the Trust. Except as the
Trustees may otherwise order, the President shall have the power to grant,
issue, execute or sign such powers of attorney, proxies, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisors and agents and counsel for the
Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
SECTION 3.06 TREASURER. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall
perform such additional duties as the Trustees may from time to time designate.
SECTION 3.07 SECRETARY. The Secretary shall record in books kept for the
purpose all votes and proceedings of the Trustees and the Shareholders at their
respective meetings. He shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
SECTION 3.08 VICE PRESIDENT. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 3.09 ASSISTANT TREASURER. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer.
SECTION 3.10 ASSISTANT SECRETARY. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary.
SECTION 3.11 SUBORDINATE OFFICERS. The Trustees from time to time may
appoint such officers or agents as they may deem advisable, each of whom shall
have such title, hold office for such period, have such authority and perform
such duties as the Trustees may determine. The Trustees from time to time may
delegate to one or more officers or committees of Trustees the power to appoint
any such subordinate officers or agents and to prescribe their respective terms
of office, authorities and duties.
SECTION 3.12 SURETY BONDS. The Trustees may require any officer or agent
of the Trust to execute a bond (including without limitation, any bond required
by the 1940 Act and the rules and regulations of the Commission) to the Trust in
such sum and with such surety or sureties as the Trustees may determine,
conditioned upon the faithful performance of his duties to the Trust including
responsibility for negligence and for the accounting of any of the Trust's
property, funds or securities that may come into his hands.
SECTION 3.13 REMOVAL. Any officer may be removed from office whenever in
the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at any regular meeting
or any special meeting of the Trustees. In addition, any officer or agent
appointed in accordance with the provisions of Section 3.10 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Trustees.
<PAGE>
SECTION 3.14 REMUNERATION. The salaries or other compensation, if any, of
the officers of the Trust shall be fixed from time to time by resolution of the
Trustees.
ARTICLE IV
SHAREHOLDER'S MEETINGS
SECTION 4.01 SPECIAL MEETINGS. A special meeting of the shareholders
shall be called by the Secretary whenever (a) ordered by the Trustees or (b)
requested in writing by the holder or holders of at least 10% of the Outstanding
Shares entitled to vote. If the Secretary, when so ordered or requested,
refuses or neglects for more than 30 days to call such special meeting, the
Trustees or the Shareholders so requesting, may, in the name of the Secretary,
call the meeting by giving notice thereof in the manner required when notice is
given by the Secretary. If the meeting is a meeting of the Shareholders of one
or more Series or classes of Shares, but not a meeting of all Shareholders of
the Trust, then only special meetings of the Shareholders of such one or more
Series or classes shall be called and only the shareholders of such one or more
Series or classes shall be entitled to notice of and to vote at such meeting.
SECTION 4.02 NOTICES. Except as provided in Section 4.01, notices of any
meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen (15) days
before the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
SECTION 4.03 VOTING-PROXIES. Subject to the provisions of the Trust
Instrument, shareholders entitled to vote may vote either in person or by proxy,
provided that either (a) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven (11) months before
the meeting, unless the instrument specifically provides for a longer period or
(b) the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, which authorization is received not more than eleven (11) months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder thereof to
vote at any adjournment of a meeting. A proxy purporting to be exercised by or
on behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden or proving invalidity shall rest on the
challenger. At all meetings of the Shareholders, unless the voting is conducted
by inspectors, all questions relating to the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes shall be decided
by the Chairman of the meeting. Except as otherwise provided herein or in the
Trust Instrument, as these Bylaws or such Trust Instrument may be amended or
supplemented from time to time, all maters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholder of a Delaware corporation.
SECTION 4.04 PLACE OF MEETING. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
SECTION 4.05 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
<PAGE>
ARTICLE V
TRUSTEES' MEETINGS
SECTION 5.01 SPECIAL MEETINGS. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
SECTION 5.02 REGULAR MEETINGS. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
SECTION 5.03 QUORUM. A majority of the Trustees shall constitute a quorum
for the transaction of business and an action of a majority of the quorum shall
constitute action of the Trustees.
SECTION 5.04 NOTICE. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the party calling the meeting to each
Trustee, as provided for the Section 4.04 of the Trust Instrument. A written
notice may be mailed, postage prepaid, addressed to him at his address as
registered on the books of the Trust or, if not so registered, at his last known
address.
SECTION 5.05 PLACE OF MEETING. All special meetings of the Trustees shall
be held at the principal place of business of the Trust or such other place as
the Trustees may designate. Any meeting may adjourn to any place.
SECTION 5.06 SPECIAL ACTION. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
SECTION 5.07 ACTION BY CONSENT. Unless the 1940 Act requires that a
particular action be taken at a meeting at which the Trustees are present in
person, any action by the Trustees may be taken without a meeting if a written
consent thereto is signed by all the Trustees and filed with the records of the
Trustees' meeting. Such consent shall be treated, for all purposes, as a vote
at a meeting of the Trustees held at the principal place of business of the
Trustees.
SECTION 5.08 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Trustees
may participate in a meeting of Trustees by conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting. Any meeting conducted by telephone shall be deemed to
take place at and from the principal office of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.01 BENEFICIAL INTEREST. The beneficial interest in the Trust
shall at all times divided into such transferable Shares of one or more separate
and distinct Series, or classes thereof, as the Trustees shall from time to time
create and establish. The number of Shares is unlimited, and each Share of each
Series or class thereof shall be without par value and shall represent an equal
proportionate interest with each other Share in the Series, none having priority
or preference over another, except to the extent that such priorities or
preference are established with respect to one or more classes of shares
consistent with applicable law and any rule or order of the Commission.
SECTION 6.02 TRANSFER OF SHARES. The Shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
on the books of the Trust, in person or by attorney.
SECTION 6.03 EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be
entitled to treat the holder of record of any Share or Shares of beneficial
interest as equitable or other claim or interest in such Share or Shares on the
part of any other person except as may be otherwise expressly provided by law.
<PAGE>
SECTION 6.04 SHARE CERTIFICATE. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise authorize. The
Trustees may issue certificates to a Shareholder of any Series or class thereof
for any purpose and the issuance of a certificate to one or more Shareholders
shall not require the issuance of certificates generally. In the event that the
Trustees authorize the issuance of Share certificates, such certificate shall be
in the form proscribed from time to time by the Trustees and shall be signed by
the President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary. Such signatures may be facsimiles if the
certificate is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trusts for the record holders of such Shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such Shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
SECTION 6.05 LOSS OF CERTIFICATES. In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
SECTION 6.06 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may
at any time discontinue the issuance of Share certificates and may, by written
notice to each Shareholder, require the surrender of Share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of Shares in the Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be deemed to
hold legal and beneficial ownership of any income earned on securities held by
the Trust issued by any business entity formed, organized or existing under the
laws of any jurisdiction other than a state, commonwealth, possession or colony
of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what extent,
and at what times and places, and under what conditions and regulations the
accounts and books of the Trust or any of them shall be open to the inspection
of the Shareholder; and no Shareholder shall have any right to inspect any
account or book or document of the Trust except as conferred by law or otherwise
by the Trustees or by resolution of the Shareholders.
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ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any Covered
Person or employee of the Trust, including any Covered Person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that protects
or purports to protect any Trustee or officer of the Trust against any liability
to the Trust of its Shareholders to which he would otherwise be subject by
reason or willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the inscription:
"THE CRM FUNDS -- 1995
THE STATE OF DELAWARE"
