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CRM SMALL CAP VALUE FUND
FUND INFORMATION:
FORUM FINANCIAL SERVICES, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
800-CRM-2883
800-276-2883
INVESTMENT ADVISER:
CRM Advisors, LLC
707 Westchester Avenue
White Plains, New York 10604
PROSPECTUS
MAY 1, 1996
This Prospectus offers shares of the 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.
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
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Manager views investment prospects on a long-term basis and does not attempt to
time the market. SEE "Investments."
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. The minimum for subsequent
investments in the Fund is $100. 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 Risks"
and "Investment Policies."
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.
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 0.75%
12b-1 Fees None
Other Expenses
Shareholder Servicing Fees 0.25%
Miscellaneous Expenses 0.90%
TOTAL FUND OPERATING EXPENSES 1.90%
The Adviser may, from time to time in its sole discretion, voluntarily pay
expenses incurred by the Fund or agree to waive or defer a portion of its fees.
If the Adviser pays Fund expenses or defers its fees, it may seek reimbursement
or payment, respectively, from the Fund after such practice is discontinued. No
such
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reimbursements or payments will be made, however, if and to the extent the
Fund's total expenses would exceed 1.90%.
The amount of 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 net assets of the Fund
are at least equal to $20 million. 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:
One Year Three Years
$19 $60
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.
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 Fund's 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.
SMALL CAP
VALUE FUND
Period Ended
3/31/96(a)
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
(a) The Fund commenced operations on
September 29, 1995.
(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.
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(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."
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.
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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.
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
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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.
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.
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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 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
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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 table presents 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.
TIME (CALENDAR YEARS) CRM(1) RUSSELL PERIOD
2500(2)
20 Yrs: ................... 1976 - 1995 18.8% n/a
15 Yrs: 1981 - 1995........ 16.8% 14.1%
10 Yrs: 1986 - 1995........ 15.9% 13.2%
5 Yrs: 1991 - 1995........ 21.2% 21.0%
3 Yrs: 1993 - 1995........ 16.2% 14.9%
1 Yr: 1995 .............. 25.1% 31.7%
(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 "Expenses
of Investing in the Fund."
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:
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 is President and Chief Executive Officer of CRM and the
Adviser. He has been with CRM for twenty-three 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 of CRM, is the Fund's Portfolio
Manager. He has been with CRM for eleven 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.
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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 total return for the period during
which the waiver was in effect.
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.
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
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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 days that 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 $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.
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
<PAGE>
MAIL. Investors may send a check made payable to "The CRM Funds" with a
completed account application to:
The CRM Funds
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 cancelled, 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
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
Funds with the Trust's Automatic Investment ("AIP"). The minimum automatic
investment is $100. After a shareholder gives the Trust proper authorization,
its bank accounts, which must be with a bank that is a member 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.
To participate in AIP, a shareholder 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 specified amount will
automatically be invested in shares at the Fund's net asset value per share next
determined after payment is received by the Trust.
<PAGE>
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 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
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. SEE "Bank Wire Redemptions."
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 prospectus by writing
FFC or calling 800-844-8254. No sales charge 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 Two
Portland Square, Portland, Maine 04101. The minimum amount for an exchange to
open an account in the Daily Assets
<PAGE>
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.
OTHER
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.
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
<PAGE>
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
<PAGE>
state law. 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 "The Trust and its
Shareholders" in the Statement of Additional Information.
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.
Prospectus Summary .................. 2
Expenses of Investing in the Fund..... 3
Financial Highlights.................. 4
Investments........................... 4
Investment Risks...................... 5
Investment Policies .................. 5
Additional Investment Practices....... 7
Management............................ 8
Purchases and Redemptions of Shares... 10
Dividends and Tax Matters............. 13
Other Information..................... 14
SMALL CAP
VALUE FUND
<PAGE>
PROSPECTUS
May 1, 1996
