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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1997
File No. 33-91498
File No. 811-9034
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4
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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 & Frankel
919 West Third Avenue
New York, New York 10022
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It is proposed that this filing will become effective:
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immediately upon filing pursuant to Rule 485, paragraph (b)
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X on February 1, 1997 pursuant to Rule 485, paragraph (b)
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60 days after filing pursuant to Rule 485, paragraph (a)(i)
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on [ ] pursuant to Rule 485, paragraph (a)(i)
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75 days after filing pursuant to Rule 485, paragraph (a)(ii)
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on [ ] pursuant to Rule 485, paragraph (a)(ii)
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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 was filed with the
Commission on November 27, 1996.
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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 Prospectus Summary
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description of Prospectus Summary; Investment
Registrant Objective Strategies and Risks;
Investment Policies; Additional
Investment Practices; Other
Information
Item 5. Management of the Fund Prospectus Summary; Management
Item 5A. Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Dividends and Tax Matters; Other
Other Securities Information; Investment in the Fund
Item 7. Purchase of Securities Investment in the Fund; Other
Being Offered Information; Management
Item 8. Redemption or Repurchase Investment in the Fund
Item 9. Pending Legal Proceedings Not Applicable
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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 Other Matters
History
Item 13. Investment Objectives and Investment Policies; Investment
Policies 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 Determination of Net Asset Value
Securities
Item 19. Purchase, Redemption and Determination of Net Asset Value;
Pricing of Securities Being Additional Purchase and Redemption
Offered Information
Item 20. Tax Status Taxation
Item 21. Underwriters Management
Item 22. Calculation of Performance Performance Data and Advertising
Data
Item 23. Financial Statements Financial Statements
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THE CRM FUNDS
SMALL CAP VALUE FUND
PROSPECTUS
FEBRUARY 1, 1997
THE FUND SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY IN
EQUITY SECURITIES OF COMPANIES WITH SMALL MARKET CAPITALIZATIONS,
USING A VALUE-ORIENTED APPROACH.
INVESTMENT ADVISER:
CRM ADVISORS, LLC,
AN AFFILIATE OF CRAMER ROSENTHAL MCGLYNN, INC.
1-800-CRM-2883
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY....................................................................... 2
FEE TABLE................................................................................ 3
FINANCIAL HIGHLIGHTS..................................................................... 3
PERFORMANCE.............................................................................. 4
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS............................................... 5
Investment Objective..................................................................... 5
Investment Strategies.................................................................... 5
Investment Risks......................................................................... 6
INVESTMENT POLICIES...................................................................... 6
ADDITIONAL INVESTMENT PRACTICES.......................................................... 8
MANAGEMENT............................................................................... 9
Investment Adviser....................................................................... 9
Administrator............................................................................ 11
Distributor.............................................................................. 11
Shareholder Services..................................................................... 11
Transfer Agent........................................................................... 12
Expenses of the Trust.................................................................... 12
INVESTMENT IN THE FUND................................................................... 12
Purchases and Redemption of Shares....................................................... 12
Purchase and Redemption Procedures....................................................... 13
Exchange Privilege....................................................................... 15
Other Investment Information............................................................. 16
DIVIDENDS AND TAX MATTERS................................................................ 16
Dividends................................................................................ 16
Taxes.................................................................................... 16
OTHER INFORMATION........................................................................ 17
Determination of Net Asset Value......................................................... 17
The Trust and Its Shares................................................................. 17
</TABLE>
i
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THE CRM FUNDS
SMALL CAP VALUE FUND
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<TABLE>
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FUND INFORMATION: SHAREHOLDER ACCOUNT INFORMATION:
Forum Financial Services, Inc. Forum Financial Corp.
Two Portland Square P.O. Box 446
Portland, Maine 04101 Portland, Maine 04112
800-CRM-2883 800-844-8258
800-276-2883
INVESTMENT ADVISOR:
CRM Advisors, LLC
707 Westchester Avenue
White Plains, New York 10604
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PROSPECTUS
FEBRUARY 1, 1997
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.
To learn more about the Fund and the Trust, you may obtain a copy of the Fund's
Statement of Additional Information dated February 1, 1997, as amended from time
to time (the "SAI"). The SAI has been filed with the Securities and Exchange
Commission ("SEC") and is available together with other related materials for
reference on the SEC's Internet Web Site (http://www.sec.gov). The SAI is
incorporated by reference into this Prospectus and may be obtained without
charge from the Trust by writing to Two Portland Square, Portland, Maine 04101
or by calling 1-800-CRM-2883.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
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, Strategies
and Risks" for more detailed information.
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" for more detailed information.
SIZE. As of February 1, 1997, the Fund had over $69 million in assets.
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 and automatic investment plans. The
minimum for subsequent investments in the Fund is $100. SEE "Investment in the
Fund" for more detailed information.
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" for more detailed
information.
RISK 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 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, Strategies and Risks" for more detailed information.
Of course, as with any mutual fund, there is no assurance that the Fund will
achieve its investment objective.
2
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FEE TABLE
The following table should help you understand the various costs and expenses
that you will bear if you invest in the Fund.
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Shareholder Transaction Expenses
Maximum sales load imposed on None
purchases
Maximum sales load imposed on None
reinvested dividends
Deferred sales load None
Redemption Fees None
Exchange Fees None
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Annual Fund Operating Expenses(1)
Advisory Fees 0.58%
12b-1 Fees None
Other Expenses
Shareholder servicing fees None
Miscellaneous expenses 0.91%
Total Fund Operating Expenses
(after waivers or
reimbursements)(2) 1.49%
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(1) Annual Fund Operating Expenses are calculated as a percentage of average net
assets after waivers and reimbursements.
(2) The amounts of fees and expenses are based on amounts incurred by the Fund
during the Fund's most recent fiscal year ending September 30, 1996. Absent
expense reimbursements and fee waivers, the fees and expenses for the Fund would
have been: Advisory Fees: 0.75%, Other Expenses: 1.23%, and Total Fund Operating
Expenses: 1.98%. SEE "Management," for a more detailed description of the
various costs and expenses incurred in the Fund's operation. Expense
reimbursements and fee waivers are voluntary and may be reduced or eliminated at
any time.
EXAMPLE
The 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:
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After 1 Year $ 15
After 3 Years $ 47
After 5 Years $ 81
After 10 Years $178
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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. This information has been audited in connection
with an audit of the Fund's financial statements by Ernst & Young, LLP,
independent auditors. The Fund's financial statements and independent auditors'
report thereon are incorporated by reference into the SAI. Further
3
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information about the Fund's performance is contained in the Fund's Annual
Report to shareholders, which may be obtained from the Trust without charge by
calling 1-800-CRM-2883.
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SMALL CAP VALUE FUND
YEAR ENDED 9/30/96
BEGINNING NET ASSET VALUE PER $10.00
SHARE
Net investment loss (0.02)
Net realized and unrealized gain 3.73
on securities
Dividends from net investment --
income (a)
ENDING NET ASSET VALUE PER SHARE $13.71
RATIOS TO AVERAGE NET ASSETS:
Expenses (b) 1.49%
Net investment loss (0.40)%
TOTAL RETURN 37.15%
PORTFOLIO TURNOVER RATE 111.18%
Average Brokerage Commission Rate $0.0374
(c)
NET ASSETS AT THE END OF PERIOD $45,385
(000's omitted)
</TABLE>
(a) Less than $0.01 per share.
(b) During the period, various fees and expenses were waived and reimbursed,
respectively. Had such waivers and reimbursements not occurred, the
expenses would have been 1.98% of average net assets.
(c) Amount represents the average commission per share, paid to brokers, on the
purchase and sale of portfolio securities.
PERFORMANCE
The Fund may, from time to time, include quotations of its average annual total
return, cumulative total return and other non-standard performance measures in
advertisements or reports to shareholders or prospective investors. Average
annual total return is based upon the overall dollar or percentage change in
value of a hypothetical investment each year over specified periods. Average
annual total returns reflect the deduction of a proportional share of the Fund's
expenses (on an annual basis) and assume investment and reinvestment of all
dividends and distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized. For a description of the methods used to determine total
return and other performance measures for the Fund, please see the SAI.
The Fund's fiscal year runs from October 1 to September 30. The table below
show's the Fund's performance over the past fiscal year compared to investing in
a broad selection of stocks as measured by the S&P 500 and Russell 2000 Index.
AVERAGE ANNUAL TOTAL RETURNS
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For the Year Ended 9/30/96 Past 1 year
Small Cap Value Fund 37.15%
S&P 500 20.25%
Russell 2000 Index 13.22%
</TABLE>
The Fund may also be compared to various unmanaged securities indices, groups of
mutual funds tracked by mutual fund ratings services, or other general economic
indicators. Unmanaged indices may assume the reinvestment of dividends but do
not reflect deductions for administrative and management costs and expenses.
They also do not include any allowance for the brokerage commissions or other
fees you would pay if you actually invested in those stocks.
The S&P 500-Registered Trademark- is the Standard & Poor's 500 Index, a widely
recognized, unmanaged index of common stock prices. The S&P 500 figures assume
reinvestment of all dividends paid by stocks included in the Index.
4
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The Russell 2000-Registered Trademark- Index (the "Russell 2000") is a market
weighted index composed of 2000 companies with market capitalizations from $50
million to $1.8 billion. The index is unmanaged and reflects the reinvestment of
dividends.
PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND DOES NOT
NECESSARILY INDICATE FUTURE RESULTS.
INVESTMENT OBJECTIVE,
STRATEGIES AND RISKS
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.
----------------
INVESTMENT STRATEGIES
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.
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.
5
<PAGE>
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 at a discount from market prices, or
otherwise 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 formula 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 less 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.
6
<PAGE>
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 SAI.
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.
----------------
7
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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.
CASH AND TEMPORARY DEFENSIVE POSITIONS. The Fund will hold a certain portion of
its assets in cash or 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
8
<PAGE>
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. Higher rates of turnover will result in higher brokerage costs for
the Fund. The Adviser weighs the anticipated benefits of short-term investments
against these consequences. The Fund's portfolio turnover rate is reported under
"Financial Highlights." Tax rules applicable to short-term trading may affect
the timing of the Fund's transactions or its ability to realize short-term
trading profits or establish short-term positions.
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 SAI 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-four years. As of the date of this prospectus, it has over $2.5 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. The private accounts,
however, have a heavier weighting of mid-capitalization issuers than the Fund.
This data compares the performance of these portfolios against the Russell
2500-TM- 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.
9
<PAGE>
- -------------------------------------------
<TABLE>
<CAPTION>
Period (Calendar Years) CRM(1) Russell
<S> <C> <C>
2500(2)
20 Years: 1977 - 1996 17.5% N/A
15 Years: 1982 - 1996 17.8% 15.2%
10 Years: 1987 - 1996 16.2% 13.9%
5 Years: 1992 - 1996 19.1% 16.0%
3 Years: 1994 - 1996 16.7% 15.8%
1 Year: 1996 30.1% 19.0%
</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 and under CRM's management for at least 3 months. These accounts
have investment objectives and techniques similar to the Fund, but with a
heavier weighting of mid-capitalization issuers. The composite consists
of 35 accounts with $834 million in assets (82% of tax-exempt equity
accounts and 49% 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 the assets under CRM's management and may not accurately reflect
the performance of all accounts it manages.
(2) The Russell 2500-TM- Index (the "Russell 2500") is a market weighted
index composed of 2500 companies with market capitalizations from $50
million to $3.9 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 effect of compounding over time, may be substantial. SEE "Fee
Table."
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-nine 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-four 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 Adviser's Director of
Research. 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.
Fred M. Filoon is President of the Fund and Senior Vice President of CRM. Mr.
Filoon has over
10
<PAGE>
30 years of investment experience and is responsible for portfolio management at
CRM. Mr. Filoon received a B.A. from Bowdoin College and attended New York
University Business School.
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 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 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 $18
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 a Distribution Agreement with the Trust, 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 Forum to enter into agreements pursuant to which the
shareholder servicing agent performs certain shareholder services not otherwise
provided by the Fund's 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
11
<PAGE>
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 Fund's expenses comprise Trust expenses attributable to the Fund, which are
charged to the Fund. Subject to the obligation of the Adviser to reimburse the
Fund for excess expenses of the Fund, the Trust pays for all of its expenses.
The Adviser, Forum and FFC, in their sole discretion, may waive all or any
portion of their respective fees, which are accrued daily, and paid monthly. Any
such waiver, which could be discontinued at any time, would have the effect of
increasing the Fund's performance for the period during which the waiver was in
effect and would not be recouped at a later date.
INVESTMENT IN THE FUND
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 when the New York Stock Exchange
is closed ("Fund Business Day"). The Trust does not accept orders on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Thanksgiving and Christmas. 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
12
<PAGE>
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 and automatic investment plans, 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.
PURCHASE AND REDEMPTION PROCEDURES
You may obtain the account application 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 assess 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.
13
<PAGE>
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 an automatic investment plan. The initial minimum is $2,000 and the
minimum subsequent 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.
To participate in an automatic investment plan, shareholders must complete the
appropriate sections of the enrollment 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 or automatic investment plans). 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
14
<PAGE>
$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. You may receive a copy of that fund's prospectus by writing FFC
or calling (800) 844-8258. No sales charges are 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 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) 844-8258. 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.
15
<PAGE>
OTHER INVESTMENT INFORMATION
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 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. 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
16
<PAGE>
shares by a shareholder, although in effect a return of capital would still be
taxable to him as a dividend as described above.
Dividends and other 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 using the last reported sales price provided by independent pricing
services. If no sale price is reported, the mean of the last bid and ask price
is used. If no mean price is available, the last bid price is used. In the
absence of readily available market quotations, securities are valued at fair
value as determined by the valuation committee of 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."
THE TRUST AND ITS SHARES
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. 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 SAI.
17
<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
INVESTMENT ADVISER: (207) 879-8910
CRM Advisors, LLC (800) 844-8258
707 Westchester Avenue
White Plains, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1997
The CRM Funds (the "Trust") is a registered open-end investment company.
This Statement of Additional Information supplements the Prospectus dated
February 1, 1997 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
2. Investment Limitations. . . . . . . 5
3. Performance Data and Advertising. . 7
4. Management. . . . . . . . . . . . . 9
5. Determination of Net Asset Value. . 15
6. Portfolio Transactions. . . . . . . 15
7. Additional Purchase and
Redemption Information . . . . . . 16
8. Taxation. . . . . . . . . . . . . . 17
9. Other Matters . . . . . . . . . . . 22
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 to payment 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, as 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.
<PAGE>
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 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
-2-
<PAGE>
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 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.
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<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:
(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
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<PAGE>
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 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 performance of
-5-
<PAGE>
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 Russell 2000-Registered Trademark- 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:
n
P(1+T) = 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.
-6-
<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.
For the one year period ended September 30, 1996, the average annual total
return of the Fund was 37.15%. The Fund commenced operations on October 1,
1995. Accordingly, the previously stated figure also reflects the average
annual total return for the period since inception of the Fund.
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
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<PAGE>
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. 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 of Grotech
Capital Group, Timonium, Maryland. He is 32 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 44 years old. His address is Two Portland Square,
Portland, Maine 04101.
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<PAGE>
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 35 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 25 years old. His address is Two
Portland Square, Portland, Maine 04101.
The following table sets forth the fees 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 Total
Compensation Retirement Annual Compensation
from Trust Benefits Benefits upon from Trust and
Accrued as Part Retirement Fund Complex
of Fund to Trustees
Expenses
- -------------------------------------------------------------------------------------------------
<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>
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<PAGE>
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 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 with assets invested in
the Fund, 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.
The dollar amount of the fees payable under the Investment Advisory
Agreement between CRM and the Adviser, the amount of the fee waived by the
Adviser and the actual fee received by the Adviser, respectively, for the fiscal
year ended September 30, 1996, were as follows: $173,105, $39,802 and $132,303.
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.
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<PAGE>
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 or their affiliates.
The dollar amount of the fees payable under the Administration Agreement
between CRM and the Forum, the amount of the fee waived by Forum and the actual
fee received by Forum, respectively, for the fiscal year ended September 30,
1996, were as follows: $40,000, $15,579 and $24,421.
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
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<PAGE>
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 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.
The dollar amount of the fees payable under the Transfer Agency Agreement
and the Fund Accounting Agreement between CRM and the Transfer Agent, the amount
of the fees waived by the Transfer Agent and the actual fees received by the
Transfer Agent for the fiscal year ended September 30, 1996, were as follows:
Fees Payable Amount of Fees Waived Fees Received
or Reimbursed
Transfer Agency $20,413 0 $20,413
Fund Accounting $39,000 0 $39,000
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.
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<PAGE>
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'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. The Trust does not determine net asset value on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus 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.
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<PAGE>
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.
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
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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.
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 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).
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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
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.
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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 (i.e., the taxable income of a regulated investment
company adjusted pursuant to Section 852(b)(2) of the Code) 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, except to the extent that they may be offset by capital loss
carryovers. 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 not 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.
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.
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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 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
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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 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
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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
federal 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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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 & Frankel, 919 Third
Avenue, New York, New York 10022. Kramer, Levin, Naftalis & 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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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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OWNERSHIP OF SHARES OF THE FUND
As of January 15, 1997, 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.
Also as of that date, no person owned of record 5% or more of the Fund's
outstanding shares.
FINANCIAL STATEMENTS
The financial statements of the Fund for the year ended September 30, 1996
(which include statements of assets and liabilities, including the schedule
of investments of the Fund and the related statements of operations, the
statement of changes in net assets, the financial highlights, and the
independent auditors' report thereon) are included in the Annual Report to
shareholders of the Trust are delivered along with this SAI and incorporated
herein by reference.
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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.
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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.
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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.
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.
-3-
<PAGE>
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.
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.
-4-
<PAGE>
The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
A preferred stock rated "C" is a non-paying issue.
A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
To provide more detailed indications of preferred stock quality, the
ratings from "AA" to "B" may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories.
-5-
<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):
Audited financial statements for the fiscal year ended September 30,
1996 including: statement of assets and liabilities, the schedule of
investments of CRM Small Cap Value Fund and related statement of
operations, the statement of changes in net assets, and the financial
highlights are incorporated herein by reference from the CRM Small
Cap Value Fund Anuual Report dated September 30, 1996, filed with
the Securities and Exchange Commission pursuant to Section 30(b) of
the Investment Company Act of 1940 and Rule 30b-2 thereunder on
December 2, 1996, (accession number 0000912057-96-028018).
(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 on April 30, 1996 as Exhibit 1 of PEA
No. 1).
(2) Copy of Bylaws (filed on April 30, 1996 as Exhibit 2 of PEA No. 1).
(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.
<PAGE>
(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).
(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) (a) Consent of independent auditors, Ernst & Young LLP (filed herewith
as Exhibit 11(a))
(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.
(17) Financial Data Schedule (filed herewith as Exhibit 27).
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).
-2-
<PAGE>
(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).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF JANUARY 15, 1997.
Title of Class of Shares
of Beneficial Interest Number of Holders
------------------------ ------------------
The CRM Small Cap Value Fund 527
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
-3-
<PAGE>
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.
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
-4-
<PAGE>
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
Vice President and Chief Financial Officer of Cramer Rosenthal
McGlynn, Inc., 707 Westchester Avenue, White Plains, New York 10604.
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
-5-
<PAGE>
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.
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.
-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 30th day
of January, 1997.
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 30th
day of January, 1997.
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
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page Number
- ------- -----------
99.1 Consent of independent auditors, Ernst & Young. 62
27 Financial Data Schedule 64
<PAGE>
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Auditors" in the
Statement of Additional Information and to the incorporation by reference of
our report dated November 12, 1996 of CRM Small Cap Value Fund in this
Registration Statement (Form N-1A No. 33-91498) of The CRM Funds.
/s/ Ernst & Young LLP
Ernst & Young LLP
White Plains, New York
January 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CRM SMALL CAP VALUE FUND DATED 09/30/96
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 010
<NAME> CRM SMALL CAP VALUE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 40,869,347
<INVESTMENTS-AT-VALUE> 45,316,217
<RECEIVABLES> 473,889
<ASSETS-OTHER> 69,528
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,859,634
<PAYABLE-FOR-SECURITIES> 397,396
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,528
<TOTAL-LIABILITIES> 474,924
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,799,147
<SHARES-COMMON-STOCK> 3,309,727
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,138,693
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,446,870
<NET-ASSETS> 45,384,710
<DIVIDEND-INCOME> 156,746
<INTEREST-INCOME> 91,184
<OTHER-INCOME> 0
<EXPENSES-NET> 341,509
<NET-INVESTMENT-INCOME> (93,579)
<REALIZED-GAINS-CURRENT> 2,217,922
<APPREC-INCREASE-CURRENT> 4,446,870
<NET-CHANGE-FROM-OPS> 6,571,213
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,033
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,407,658
<NUMBER-OF-SHARES-REDEEMED> 1,694,149
<SHARES-REINVESTED> 3,021
<NET-CHANGE-IN-ASSETS> 45,284,710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172,105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 454,259
<AVERAGE-NET-ASSETS> 22,947,393
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 3.73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.71
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
