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As filed with the Securities and Exchange Commission on December 2, 1998
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. 7
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 9
THE CRM FUNDS
Two Portland Square
Portland, Maine 04101
(207)879-1900
David I. Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Copies to:
Susan Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel
919 West Third Avenue
New York, New York 10022
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on pursuant to Rule 485, paragraph (b)
[X] 60 days after filing pursuant to Rule 485, paragraph (a)(i)
[ ] on _____ pursuant to Rule 485, paragraph (a)(i)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
[ ] on _____ pursuant to Rule 485, paragraph (a)(ii)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: CRM Small Cap Value Fund, CRM Mid Cap
Value Fund, CRM Large Cap Value Fund and CRM Value Fund.
<PAGE>
LOGO
THE CRM FUNDS
PROSPECTUS
FEBRUARY 1, 1999
SMALL CAP VALUE FUND
MID CAP VALUE FUND
LARGE CAP VALUE FUND
VALUE FUND
INVESTOR SHARES
Each of the Funds seeks long-term capital appreciation by investing primarily
in equity securities, using a value-oriented approach.
Shares of the Funds are offered to investors without any sales charge.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED ANY
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY...............................................
PERFORMANCE.......................................................
FEE TABLES........................................................
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......................
MANAGEMENT........................................................
YOUR ACOUNT.......................................................
How to Contact the Funds
General Information
Buying Shares
Selling Shares
Exchange Privileges
Retirement Accounts
OTHER INFORMATION.................................................
FINANCIAL HIGHLIGHTS..............................................
<PAGE>
RISK/RETURN SUMMARY
THE INVESTMENT GOAL OF EACH FUND -- Long-term capital appreciation.
SMALL CAP VALUE FUND
[Margin callout: CONCEPT TO UNDERSTAND
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market.]
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with small market capitalizations, using a value-oriented approach. A
small capitalization company has a market capitalization of $1 billion or less
at the time of the Fund's investment.
MID CAP VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with medium market capitalizations, using a value-oriented approach. A
medium capitalization company has a market capitalization between $1 billion and
$10 billion at the time of the Fund's investment.
LARGE CAP VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with large market capitalizations, using a value-oriented approach. A
large capitalization company has a market capitalization of greater than $10
billion at the time of the Fund's investment.
VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with varying market capitalizations, using a value-oriented approach.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in a Fund, or the Fund could
underperform other investments, if any of the following occurs:
o The stock market goes down.
o Value stocks fall out of favor with the stock market.
o The stock market continues indefinitely to undervalue the stocks in the
Funds' portfolios.
o The stocks in the Fund's portfolios turn out not to be undervalued after
all (in other words, the Adviser did not make the best investment
decision).
WHO MAY WANT TO INVEST IN THE FUNDS
The Funds may be appropriate for investors who:
o Are willing to tolerate significant fluctuations in the value of their
investment.
o Are pursuing a long-term goal.
o Want to add an investment with growth potential to diversify a
portfolio.
o Are willing to accept higher short-term risk along with higher potential
long-term returns.
The Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries.
o Need regular income or stability of principal.
o Are pursuing a short-term goal or investing emergency reserves.
<PAGE>
PERFORMANCE
The following chart and tables illustrate the variability of the Funds' returns.
This provides some indication of the risks of investing in the Funds by showing
changes in the Funds' performance from year to year (if the Fund has operated
more than one year) and how the Funds' returns compare to a broad measure of
market performance. PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND
DOES NOT NECESSARILY INDICATE FUTURE RESULTS. FOR A DESCRIPTION OF THE METHODS
USED TO DETERMINE TOTAL RETURN AND OTHER PERFORMANCE MEASURES FOR THE FUNDS, SEE
THE SAI.
SMALL CAP VALUE FUND
The following chart shows the annual total returns for each full calendar year
shares of the Fund has operated.
Average Annual Total Return
[EDGAR REPRESENTATION OF GRAPHICAL CHART]
10-3-95 to 12-31-95 .045%
1-1-96 to 12-31-96 .0962%
1-1-97 to 12-31-97 .1528%
1-1-98 to 12-31-98 .2153%
*Date of Fund's inception.
During the periods shown in the table, the highest quarterly return was ___%
(for the quarter ended __________, 199_) and the lowest quarterly return was
___% (for the quarter ended ______, 199_).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to a securities index.
YEAR(S) SMALL CAP VALUE FUND RUSSELL 2000 INDEX
1 Year (1998) XX% XX%
Since Inception (10/3/95-12/31/98) XX% XX%
The Russell 2000(R)Index 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.
2
<PAGE>
MID CAP VALUE FUND
The Fund has not been in operation for a full calendar year. In addition, at
December 31, 1998, Investor Shares were not offered. The following table
compares the Fund's (Institutional Shares) average annual total returns as of
December 31, 1998 to a securities index.
YEAR(S) MID CAP VALUE FUND RUSSELL MIDCAP INDEX
Since Inception (1/6/98- 12/31/98) XX% XX%
The Russell MidcapTM Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 35% of the
total market capitalization of the Russell 1000 Index.
LARGE CAP VALUE FUND
The Fund has not been in operation for a full calendar year. The following table
compares the Fund's average annual total returns as of December 31, 1998 to a
securities index.
YEAR(S) LARGE CAP VALUE FUND S&P 500 INDEX
Since Inception (8/25/98- 12/31/98) XX% XX%
The S&P 500(R)Index is the Standard & Poor's 500(R)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.
VALUE FUND
The Fund has not been in operation for a full calendar year. The following table
compares the Fund's average annual total returns as of December 31, 1998 to a
securities index.
YEAR(S) VALUE FUND RUSSELL 1000 VALUE INDEX
Since Inception (1/6/98-12/31/98) XX% XX%
The Russell 1000(R) Value Index contains those stocks in The Russell 1000 Index
with a less than average growth orientation. Companies in this index generally
have low price to book and price-earnings ratios, higher dividend yields and
lower forecasted growth values.
3
<PAGE>
FEE TABLES
The following tables describe the various fees and expenses that you will bear
if you invest in a Fund.
Shareholder transaction expenses are charges you pay when buying, selling or
exchanging shares of a Fund. Operating expenses, which include fees and expenses
the Adviser and for shareholder services, are paid out of a Fund's assets and
are factored into a Fund's share price rather than charged directly to
shareholder accounts.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested distributions None
Deferred sales charges None
Redemption fees None
Exchange fees None
ANNUAL FUND OPERATING EXPENSES (1)
SMALL CAP VALUE FUND
Advisory fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.63%
Total annual fund operating expenses 1.38%
LARGE CAP VALUE FUND
Advisory fees 0.75%
Distribution (12b-1 fees) None
Other expenses 3.20%
Total annual fund operating expenses 3.95%
VALUE FUND
Advisory fees 0.75%
Distribution (12b-1 fees) None
Other expenses 2.47%
Total annual fund operating expenses 3.22%
</TABLE>
(1) The Adviser has voluntarily undertaken to waive a portion of its
fees and assume certain expenses of each Fund to the extent that total
annual fund operating expenses exceed 1.50%.
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in a Fund, a 5% annual return, the Fund's
operating expenses remain the same as stated in the table above, reinvestment of
all distributions and redemption at the end of each period. Although your actual
costs may be higher or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
---------------- ----------------- ---------------- -----------------
SMALL CAP MID CAP VALUE LARGE CAP
VALUE FUND FUND VALUE FUND VALUE FUND
------------------- ---------------- ----------------- ---------------- -----------------
After 1 year $140 N/A $397 $325
------------------- ---------------- ----------------- ---------------- -----------------
After 3 years $437 N/A $1,204 $992
------------------- ---------------- ----------------- ---------------- -----------------
After 5 years $755 N/A N/A $1,683
------------------- ---------------- ----------------- ---------------- -----------------
After 10 years $1,657 N/A N/A $3,522
------------------- ---------------- ----------------- ---------------- -----------------
</TABLE>
4
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES & RISKS
INVESTMENT OBJECTIVES
SMALL CAP VALUE FUND seeks to achieve long-term capital appreciation by
investing at least 65% of its total assets in the equity securities of SMALL
CAPITALIZATION companies. A small capitalization company has a market
capitalization of $1 billion or less at the time of the Fund's investment. The
Fund may also invest to a limited degree in companies that have larger market
capitalizations
MID CAP VALUE FUND seeks to achieve long-term capital appreciation by investing
at least 65% of its total assets in the equity securities of MEDIUM
CAPITALIZATION companies. A medium capitalization company has a market
capitalization between $1 billion and $10 billion at the time of the Fund's
investment. The Fund may also invest to a limited degree in companies that have
smaller and larger market capitalizations.
LARGE CAP VALUE FUND seeks to achieve long-term capital appreciation by
investing at least 65% of its total assets in the equity securities of LARGE
CAPITALIZATION companies. A large capitalization company has a market
capitalization greater than $10 billion at the time of the Fund's investment.
The Fund may also invest to a limited degree in companies that have smaller
market capitalizations.
VALUE FUND seeks to achieve long-term capital appreciation by investing at least
65% of its total assets in the equity securities of companies with varying
market capitalizations.
INVESTMENT STRATEGIES
[Margin callout: CONCEPTS TO UNDERSTAND
"VALUE" INVESTING means to invest in stocks that are priced low
relative to comparable companies PRICE/EARNINGS RATIO means the price
of a stock divided by the company's earnings per share.]
VALUE INVESTING. "Value Investing" provides investors with a less aggressive way
to take advantage of growth opportunities of companies. Using the Adviser's
value approach, the Funds 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 risk while offering potential for
capital appreciation as a stock gains favor among other investors and its stock
price rises.
The Funds are managed in accordance with the investment disciplines that the
Adviser has employed in managing equity portfolios for over twenty-five 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. The Adviser evaluates 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'S PROCESS. The Adviser begins the investment process by identifying
early dynamic change in a company's operations, finances, or management. 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:
o Financial models based principally upon projected cash flow;
o The price of the company's stock 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;
o The extent of management's ownership interest in the company; and
o The company's market by corroborating its observations and assumptions
by meeting with management, customers, and suppliers.
5
<PAGE>
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
GENERALLY. An investment in each Fund is not by itself a complete or balanced
investment program. Nevertheless, the small, medium, and large capitalization
segments 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 a Fund's net asset value.
Because the Adviser seeks securities that are undervalued by the market, there
is a risk that the market will not recognize a security's intrinsic value for an
unexpectedly long time, or that securities the Adviser believes are undervalued
are actually priced appropriately due to intractable or fundamental problems
that are not yet apparent.
SPECIFIC RISKS. The investments of Small Cap Value Fund and Mid Cap Value Fund
in small and medium size companies can entail more risk than investing in
larger, more established companies. Some of the risk arises from the following:
o More limited product lines, markets, and financial resources makes these
companies more susceptible to economic or market setbacks;
o Analysts and other investors typically follow these companies less
actively;
o Information about these companies is not always readily available;
o Large portions of the securities are traded in the over-the-counter
markets or on a regional securities exchange making them thinly traded
and potentially more volatile.
For these and other reasons, the prices of small and mid capitalization
securities can fluctuate more significantly than the securities of larger
companies. As a result, the net asset value of the shares of Small Cap Value
Fund and Mid Cap Value Fund may exhibit a higher degree of volatility than the
market averages.
YEAR 2000. Like other organizations around the world, the Funds could be
adversely affected if the computer systems used by its various service providers
(or the market in general) do not properly operate after January 1, 2000. The
Funds are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance, however, that
these steps will be sufficient to avoid a temporary service disruption or any
adverse impact on the Funds.
INVESTMENT POLICIES
Under normal conditions, each Fund will invest at least 65% of its total assets
in equity securities. 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 owner
the right to vote on measures affecting the company's organization and
operations, the Funds do not intend to exercise control over the management of
companies in which each invests. Common stocks have a history of long-term
growth in value, but their prices tend to fluctuate in the shorter term.
[Margin callout: CONCEPTS TO UNDERSTAND
COMMON STOCK: represents an equity or ownership interest in a company
PREFERRED STOCK: stock that has a preference to the company's dividends
(and thus greater potential for income) and whose value generally
fluctuates less than common stock
CONVERTIBLE SECURITY: a security such as preferred stock or bonds that
may be converted into a specified number of shares of common stock
WARRANT: an option to purchase an equity security at a specified price
at any time during the warrant's life]
6
<PAGE>
MANAGEMENT
The business of The CRM Funds and each Fund is managed under the direction of
the Board of Trustees. The Board formulates the general policies of the Funds
and meets periodically to review the Funds' performance, monitor investment
activities and practices, and discuss other matters affecting the Funds.
Additional information regarding the Trustees, as well as executive officers,
may be found in the SAI.
THE ADVISER
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New York
10604, serves as investment adviser to each Fund. Subject to the general control
of the Board, the Adviser makes investment decisions for the Funds. For its
services, the Adviser receives an advisory fee at an annual rate of 0.75% of the
average daily net assets of each Fund.
The Adviser and its predecessors have managed investments in small and medium
capitalization companies for over twenty-five years. As of the date of this
prospectus, the Adviser has over $___ billion of assets under management.
MID CAP VALUE STYLE PERFORMANCE INFORMATION
The following reflects the historical performance of the portfolios of all
private accounts managed by the Adviser that have investment objectives,
policies and strategies substantially similar to that of Mid Cap Value Fund.
This data does not reflect the performance of the Funds. This data compares the
performance of these private accounts against the Russell Midcap(TM) Index. This
data should not consider this performance data as an indication of future
performance of any Fund or of the Adviser.
<TABLE>
<S> <C> <C>
PERIOD ADVISER(1) RUSSELL MIDCAP INDEX(2)
20 Years: 10/1/78-9/30/98 ____% N/A
15 Years: 10/1/83-9/30/98 ____% ____%
10 Years: 10/1/88-9/30/98 ____% ____%
5 Years: 10/1/93-9/30/98 ____% ____%
3 Years: 10/1/95-9/30/98 ____% ____%
1 Year: 10/1/97-9/30/98 ____% ____%
</TABLE>
(1) These results are a dollar weighted composite of tax-exempt, fully
discretionary, separately managed accounts that are over $1 million in
size and under the Adviser's and its predecessor's management for at
least 3 months. The composite consists of 65 accounts with $1.56
billion in assets (83% of tax-exempt equity assets and 44% of all
equity assets) and was calculated in accordance with standards set by
the Association for Investment Management and Research (AIMR). The
composite does not reflect all of the assets under the Adviser's
management and may not accurately reflect the performance of all
accounts it manages. The separately managed accounts in the composite
are not subject to the same types of expenses to which the Fund is
subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed by the 1940 Act or
Internal Revenue Code. All returns reflect the deduction of advisory
fees, brokerage commissions and execution costs paid by the Adviser's
private accounts, without provision for federal or state income taxes.
The net effect of the deduction of the operating expenses of the Funds
on the annualized performance, including the effect of compounding over
time, may be substantial. Consequently, the performance results for the
accounts could have been adversely affected if the accounts included in
the composite had been regulated as an investment company under the
federal securities laws.
(2) As of the latest reconstitution, the average market capitalization of
the Russell MidcapTM Index was approximately $___ billion; the median
market capitalization was approximately $___ billion. The largest
company in the index had an approximate market capitalization of $____
billion.
PORTFOLIO MANAGERS
The day-to-day management of the Funds is shared by a committee of individuals
employed by the Adviser. Ronald H. McGlynn and Jay B. Abramson are responsible
for the management of each Fund. In addition, Michael A. Prober is part of the
committee responsible for the management of Small Cap Value Fund and Scott L.
Scher is part of the committee responsible for the management of Mid Cap Value
Fund. Each portfolio manager's business experience and educational background is
as follows:
7
<PAGE>
RONALD H. MCGLYNN. President and Chief Executive Officer since 1983 and Co-Chief
Investment Officer of the Adviser. He has been with the Adviser for twenty-five
years and is responsible for investment policy, portfolio management, and
investment research. Prior to his association with the Adviser, Mr. McGlynn was
a Portfolio Manager at Oppenheimer & Co. He received a B.A. from Williams
College and an M.B.A. from Columbia University.
JAY B. ABRAMSON. Executive Vice President since 1989 and Director of Research
and Co-Chief Investment Officer of the Adviser. He has been with the Adviser for
twelve 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, and is a Certified
Public Accountant.
MICHAEL A. PROBER. Vice President of the Adviser since 1993 where he is
responsible for investment research. Prior to joining the Adviser in 1993, he
worked in corporate finance and commercial banking at Chase Manhattan Bank and
as a Research Analyst for Alpha Capital Venture Partners. Mr. Prober received a
B.B.A. from the University of Michigan and an M.M. from Northwestern University,
J.L. Kellogg Graduate School of Management.
SCOTT L. SCHER, CFA. Vice President of the Adviser since 1995 where he is
responsible for investment research. Prior to joining the Adviser in 1995, he
worked as an analyst/portfolio manager at The Prudential from 1988. Mr. Scher
received an A.B. from Harvard College, an M.B.A. from Columbia Business School
and is a Chartered Financial Analyst.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide various services to the
Funds. As of the date of this prospectus, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $__ billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Funds' shares. The distributor acts as the agent of The CRM
Funds in connection with the offering of shares of the Funds. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of shares of the Funds.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Funds' transfer
agent.
FUND EXPENSES
The Funds pay for all of their expenses. Each Fund's expenses comprise expenses
attributable to the Fund and expenses not attributable to any particular Fund,
which are allocated among the Funds. The Adviser or other service providers may
voluntarily waive all or any portion of their fees, which are accrued daily and
paid monthly. Any waiver would have the effect of increasing a Fund's
performance for the period during which the waiver was in effect and may not be
recouped at a later date.
The Adviser has voluntarily undertaken to waive its fees or assume certain
expenses of each Fund in order to limit the Funds' expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses) to 1.15% or
less of the average daily net assets of the Funds. This undertaking may be
terminated at any time.
8
<PAGE>
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Write to us at:
The CRM Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(800) CRM-2883 or
(800) 844-8258
Wire investments (or ACH payments) to us at:
Bank Boston
Boston, Massachusetts
ABA #011000390 For Credit to:
Forum Shareholder Services, LLC Account # 541-54171 The CRM
Funds (Your Name goes on this line) (Your Account Number goes
on this line)
(Your Social Security number or tax identification number goes
on this line)
GENERAL INFORMATION
You pay no sales charge to purchase or sell (also called "redeem") shares of a
Fund. Shares are purchased and sold by the Funds at the next share price (also
called "net asset value" or "NAV" per share) calculated after a transaction is
received in good order by the Transfer Agent. For instance, if your purchase
request is received in proper form after 4 p.m., your transaction will be priced
at the next day's NAV. The Funds cannot accept orders that request a particular
day or price for the transaction or any other special conditions.
The Funds do not issue share certificates.
You will receive annual statements and a confirmation of each transaction. You
should verify the accuracy of all transactions I your account immediately upon
receipt of confirmations.
The Funds reserve the right to minimum investment amounts and temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED. The net asset value per share ("NAV") of each
Fund is calculated s of the close of the New York Stock Exchange (normally 4:00
p.m., Eastern time) on each Fund Business Day. The time at which NAV is
calculated may be changed in case of an emergency or if the New York Stock
Exchange closes early. A Fund's NAV is determined by dividing the value of the
Fund's assets by the number of shares outstanding. Securities for which market
quotations are readily available are valued at current market value. If market
quotations are not readily available, then securities are valued at fair value.
TRANSACTIONS THROUGH THIRD PARTIES. If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Funds. Banks, brokers, retirement plans and
financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
9
<PAGE>
BUYING SHARES
HOW TO MAKE PAYMENTS. All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS. For individual or UGMA accounts, the check must be made payable
to "The CRM Funds" or to one or more owners of the account and endorsed
to "The CRM Funds." For all other accounts, the check must be made
payable on its face to "The CRM Funds." No other method of check
payment is acceptable (for instance, payment by travelers checks is
prohibited).
ACH PAYMENT. Instruct your financial institution to make an ACH
(automated clearing house) payment to us. These payments typically take
two days. Your financial institution may charge you a fee for this
service.
WIRES. Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
MINIMUM INVESTMENTS. Following are the minimum investments accepted by the
Funds:
<TABLE>
<S> <C> <C>
------------------------- --------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
-------------------------------------- ------------------------- --------------------------
Standard Minimums $10,000 $100
-------------------------------------- ------------------------- --------------------------
Traditional and Roth IRA Accounts $2,000 $100
-------------------------------------- ------------------------- --------------------------
Automatic Investment Plans $2,000 $100
-------------------------------------- ------------------------- --------------------------
</TABLE>
<TABLE>
<CAPTION>
ACCOUNT REQUIREMENTS
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TYPE OF ACCOUNT REQUIREMENT
- ------------------------------------------------------------ ---------------------------------------------------------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Joint accounts can have two or more owners
Individual accounts are owned by one person, as are sole (tenants)
proprietor ship accounts. o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as their names appear on the account
- ------------------------------------------------------------ ---------------------------------------------------------
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can
set up a These custodial accounts provide a way to give money to a custodial
account under the Uniform Gift to Minors child and obtain tax benefits. An
individual can give up Act or the Uniform Transfers to Minors Act to $10,000 a
year per child without paying Federal gift o The trustee must sign instructions
in a manner tax. indicating trustee capacity
- ------------------------------------------------------------ ---------------------------------------------------------
TRUSTS, BUSINESSES AND ORGANIZATION o Additional documentation required for
investors in any representative capacity
o For trusts, the trust must be established
before an account can be opened
o At least one person authorized by corporate
resolution to act on the account must sign
instructions
o A corporate resolution with corporate seal or
a signature guarantee is required to open accounts
- ------------------------------------------------------------ ---------------------------------------------------------
EXECUTOR, ADMINISTRATOR, CONSERVATOR OR GUARDIAN o Call us if you need further information
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PROCEDURES
<S> <C> <C> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
- ------------------------------------------------------------ ---------------------------------------------------------
BY MAIL BY MAIL
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation or statement Or
o Mail us your application and a check o Write a letter to us
o Write your account number on your check.
o Mail us the slip (or your letter) and a check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us
o You will be assigned an account number
o Mail us your application
o Instruct your bank to wire your money to us
AUTOMATICALLY AUTOMATICALLY
o On your application, complete the "Automatic o Call or write us for an "Automatic Investment"
Investment" section form
o Attach a voided check to your application o Complete the form
o Mail us your application o Attach a voided check to your form
o Pay either by "Check" or "Wire" (see above) o Mail us the form
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
AUTOMATIC INVESTMENTS. You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Automatic investments must be for at least $50.
LIMITATIONS ON PURCHASES. The Funds reserve the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Funds or their operations. This includes those from any individual or group
who, in the Funds' view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the Funds within a calendar year).
CANCELED OR FAILED PAYMENTS. Checks and ACH transfers are accepted at full value
subject to collection. If your payment for shares is not received or you pay
with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Funds or the Transfer Agent, and the Funds may redeem shares you own in the
account (or another identically registered account in any Fund) as
reimbursement. The Funds and their agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
Redemption orders are processed promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TO SELL SHARES FROM YOUR ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if:
o You have elected wire redemption privileges AND
o Your redemption is for $10,000 or more
o Call us with your request (if you have elected telephone redemption privileges
- See "By Telephone") Or o Mail us your request (See "By Mail") BY TELEPHONE o
Telephone redemptions are only available if you have elected telephone
redemption privileges. o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you Or
o Wired to you (if you have elected wire redemption privileges - See "By Wire"))
AUTOMATICALLY
o Call or write us for an "Automatic Redemption" form
o Attach a voided check to your form
o Mail us your form
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
TELEPHONE REDEMPTION PRIVILEGES. You may only redeem your shares by telephone if
you elect telephone redemption privileges on your account application or by
completing a (or separate form). You may be responsible for any fraudulent
telephone order as long as the Transfer Agent takes reasonable measures to
verify the order.
WIRE REDEMPTION PRIVILEGES. You may only redeem your shares by wire if you elect
wire redemption privileges on your account application (or separate form). The
minimum amount that may be redeemed by wire is $10,000. If you wish to request a
wire redemption by telephone, you must also elect telephone redemption
privileges.
AUTOMATIC REDEMPTIONS. You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic redemptions must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." For requests
made in writing a signature guarantee is required for any of the following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name or address
12
<PAGE>
o Redemptions from an account for which the address or account
registration has changed within the last 30 days o Sending redemption
proceeds to any person, address, brokerage firm or bank account
not on record o Sending redemption proceeds to an account with a
different registration (name or ownership) from yours.
o Changes to automatic investment or redemption, distribution, telephone
redemption or exchange option or any other election in connection with
your account.
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
SMALL ACCOUNTS. If the value of your account falls below $10,000 ($2000 for IRAs
or automatic investment plans), the Fund may ask you to increase your balance.
If the account value is still below $10,000 after 60 days, the Fund may close
your account and send you the proceeds. A Fund will not close your account if it
falls below these amounts solely as a result of a reduction in your accounts
market value.
REDEMPTIONS IN KIND. The Funds reserve the right to make "redemptions in kind"
- -- payment of redemption proceeds in portfolio securities rather than cash --if
the amount redeemed is large enough to affect Fund operations (for example, if
it represents more than 1% of the fund's assets).
LOST ACCOUNTS. The Transfer Agent will consider your account "lost" if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is "lost," all
distributions on the account will be reinvested in additional shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy shares of another Fund (an "exchange") by
telephone or in writing. You may also exchange Fund shares for [___] Shares of
Daily Assets Government Fund, a money market fund. Because exchanges are treated
as a sale and purchase, they may have tax consequences.
REQUIREMENTS. Exchanges may be made only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Funds reserve the right to limit exchanges. See "Buying
Shares - Limitation on Purchases."
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
HOW TO EXCHANGE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The name of the Fund from which you are exchanging and into which you
are exchanging
o The dollar amount or number of shares you want to sell (and
exchange)
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Telephone exchanges are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
RETIREMENT ACCOUNTS
The Fund's offer IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing in any IRA or other retirement plan, investors should consult their
tax advisors. Whenever making an investment onto an IRA, be sure to indicate the
year the for which the contribution is made.
14
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Small Cap Value Fund, Mid Cap Value Fund and Value Fund distribute their the net
investment income annually. Large Cap Value Fund distributes its net investment
income quarterly. Any net capital gain realized by a Fund will be distributed at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated in the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Funds' distributions of net investment income (which include net short-term
capital gain) are taxable to shareholders as ordinary income. The Funds'
distributions of net capital gain are taxable to shareholders as long-term
capital gain, regardless of how long a shareholder has held shares.
Distribution will reduce the net asset value of the Funds' shares by the amount
of the distribution. Furthermore, a distribution made shortly after the purchase
of shares, although in effect a return of capital, is still be taxable to the
shareholder in the manner described above.
Shareholders will incur a capital gain or loss when they sell their shares based
on the amount paid for the shares and the value of the shares upon redemption.
Reports containing appropriate information with respect to the Federal income
tax status of distributions paid during the year by a Fund will be mailed to
shareholders after the close of each year.
For further information about the tax effects of investing in a Fund, see the
SAI.
ORGANIZATION
The CRM Funds is a Delaware business trust that is registered with the SEC as an
open-end, management investment company (a "mutual fund"). The Funds are the
only four series of The CRM Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law and all
shareholders of each Fund are entitled to vote at shareholders' meetings unless
a matter is determined to effect only a specific Fund (such as approval of an
advisory agreement for a Fund.) From time to time, large shareholders may
control a Fund or The CRM Funds. See the SAI.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table reflects the Funds' financial performance. Information is
not included for Mid Cap Value Fund as no Investor Shares of the Fund were
outstanding as of September 30, 1997. Total return in the table represents the
rate an investor would have earned (or lost) on an investment in a Fund
(assuming the reinvestment of all distributions). This information has been
audited by Ernst & Young, LLP. The Funds' financial statements and the auditor's
report are included in the Annual Report, and may be obtained without charge.
<TABLE>
<S> <C> <C> <C>
SMALL LARGE
CAP VALUE CAP
VALUE FUND VALUE
FUND FUND
---------- ---------- ----------
Year Year Year
Ended Ended Ended
9/30/98(1) 9/30/98(1) 9/30/98(1)
---------- ---------- ----------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share
Investment Operations
Net investment loss
Net realized and unrealized gain on
securities
Distributions From
Net investment income
Net realized gain on investments
Total Distributions
Ending Net Asset Value Per Share
OTHER INFORMATION
Ratios to Average Net Assets:
Expenses
Net investment income
Expenses (excluding reimbursements and
waivers)
Total Return
Portfolio Turnover Rate
Average Brokerage Commission Rate (3)
Net Assets at End of Period (000's Omitted)
</TABLE>
(1) Investor Shares of the Funds commenced operations on the following dates:
Small Cap Value Fund, October 3, 1998; Large Cap Value Fund, August 25,
1998; and Value Fund, January 6, 1998.
(2) Annualized.
(3) Represents the average commission per share paid to brokers on the purchase
and sale of securities.
16
<PAGE>
LOGO
THE CRM FUNDS
SMALL CAP VALUE FUND
MID CAP VALUE FUND
LARGE CAP VALUE FUND
VALUE FUND
If you want more information about the Funds,
the following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In each Fund's annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affect the Fund's performances during their last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the
Funds and is incorporated into this Prospectus by reference.
You can get free copies of both reports and the SAI, request other information
and discuss your questions about the Funds by contacting your broker or the
Funds at:
The CRM Funds
Two Portland Square
Portland, Maine 04101
1-800-CRM-2883
You can also review the Funds' reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies, for a fee,
by writing to or calling the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free copies are available from the Commission's Internet website at
http://www.sec.gov.
Investment Company Act File No. 811-9034.
17
<PAGE>
LOGO
THE CRM FUNDS
PROSPECTUS
FEBRUARY 1, 1999
SMALL CAP VALUE FUND
MID CAP VALUE FUND
LARGE CAP VALUE FUND
VALUE FUND
INSTITUTIONAL SHARES
Each of the Funds seeks long-term capital appreciation by investing primarily
in equity securities, using a value-oriented approach.
Shares of the Funds are offered to investors without any sales charge.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED ANY
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY..............................................
PERFORMANCE......................................................
FEE TABLES.......................................................
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS......................
MANAGEMENT.......................................................
YOUR ACOUNT......................................................
How to Contact the Funds
General Information
Buying Shares
Selling Shares
Exchange Privileges
Retirement Accounts
OTHER INFORMATION................................................
FINANCIAL HIGHLIGHTS.............................................
<PAGE>
RISK/RETURN SUMMARY
THE INVESTMENT GOAL OF EACH FUND -- Long-term capital appreciation.
SMALL CAP VALUE FUND
[Margin callout: CONCEPT TO UNDERSTAND
MARKET CAPITALIZATION of a company means the value of the company's
common stock in the stock market.]
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with small market capitalizations, using a value-oriented approach. A
small capitalization company has a market capitalization of $1 billion or less
at the time of the Fund's investment.
MID CAP VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with medium market capitalizations, using a value-oriented approach. A
medium capitalization company has a market capitalization between $1 billion and
$10 billion at the time of the Fund's investment.
LARGE CAP VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with large market capitalizations, using a value-oriented approach. A
large capitalization company has a market capitalization of greater than $10
billion at the time of the Fund's investment.
VALUE FUND
PRINCIPAL INVESTMENT STRATEGY: Invests primarily in equity securities of
companies with varying market capitalizations, using a value-oriented approach.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in a Fund, or the Fund could
underperform other investments, if any of the following occurs:
o The stock market goes down.
o Value stocks fall out of favor with the stock market.
o The stock market continues indefinitely to undervalue the stocks in
the Funds' portfolios.
o The stocks in the Fund's portfolios turn out not to be undervalued
after all (in other words, the Adviser did not make the best
investment decision).
WHO MAY WANT TO INVEST IN THE FUNDS
The Funds may be appropriate for investors who:
o Are willing to tolerate significant fluctuations in the value of their
investment.
o Are pursuing a long-term goal.
o Want to add an investment with growth potential to diversify a
portfolio.
o Are willing to accept higher short-term risk along with higher
potential long-term returns.
The Funds may NOT be appropriate for investors who:
o Want an investment that pursues market trends or focuses only on
particular sectors or industries.
o Need regular income or stability of principal.
o Are pursuing a short-term goal or investing emergency reserves.
<PAGE>
PERFORMANCE
The following chart and tables illustrate the variability of the Funds' returns.
This provides some indication of the risks of investing in the Funds by showing
changes in the Funds' performance from year to year (if the Fund has operated
more than one year) and how the Funds' returns compare to a broad measure of
market performance. PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND
DOES NOT NECESSARILY INDICATE FUTURE RESULTS. FOR A DESCRIPTION OF THE METHODS
USED TO DETERMINE TOTAL RETURN AND OTHER PERFORMANCE MEASURES FOR THE FUNDS, SEE
THE SAI.
SMALL CAP VALUE FUND
The following chart shows the annual total returns for each full calendar year
Investor Shares of the Fund has operated because Institutional Shares have been
in existence for less than one calendar year. Investor Shares are nor offered by
this Prospectus. The returns of the two classes are substantially similar
because they have a common portfolio of securities. Annual returns will differ
only to the extent the classes have different expenses.
Average Annual Total Return
[EDGAR REPRESENTATION OF GRAPHICAL CHART]
10-3-95 to 12-31-95 .045%
1-1-96 to 12-31-96 .0962%
1-1-97 to 12-31-97 .1528%
1-1-98 to 12-31-98 .2153%
*Date of Fund's inception.
During the periods shown in the table, the highest quarterly return was ___%
(for the quarter ended __________, 199_) and the lowest quarterly return was
___% (for the quarter ended ______, 199_).
The following table compares the Fund's (Investor Shares) average annual total
returns as of December 31, 1998 to a securities index.
YEAR(S) SMALL CAP VALUE FUND RUSSELL 2000 INDEX
1 Year (1998) XX% XX%
Since Inception (10/3/95-12/31/98) XX% XX%
The Russell 2000(R)Index 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.
2
<PAGE>
MID CAP VALUE FUND
The Fund has not been in operation for a full calendar year. The following table
compares the Fund's average annual total returns as of December 31, 1998 to a
securities index.
YEAR(S) MID CAP VALUE FUND RUSSELL MIDCAP INDEX
Since Inception (1/6/98- 12/31/98) XX% XX%
The Russell MidcapTM Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 35% of the
total market capitalization of the Russell 1000 Index.
LARGE CAP VALUE FUND
The Fund has not been in operation for a full calendar year. In addition, at
December 31, 1998, Institutional Shares were not offered. The following table
compares the Fund's (Investor Shares) average annual total returns as of
December 31, 1998 to a securities index.
YEAR(S) LARGE CAP VALUE FUND S&P 500 INDEX
Since Inception (8/25/98- 12/31/98) XX% XX%
The S&P 500(R)Index is the Standard & Poor's 500(R)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.
VALUE FUND
The Fund has not been in operation for a full calendar year. In addition, at
December 31, 1998, Institutional Shares were not offered. The following table
compares the Fund's (Investor Shares) average annual total returns as of
December 31, 1998 to a securities index.
YEAR(S) VALUE FUND RUSSELL 1000 VALUE INDEX
Since Inception (1/6/98-12/31/98) XX% XX%
The Russell 1000(R) Value Index contains those stocks in The Russell 1000 Index
with a less than average growth orientation. Companies in this index generally
have low price to book and price-earnings ratios, higher dividend yields and
lower forecasted growth values.
3
<PAGE>
FEE TABLES
The following tables describe the various fees and expenses that you will bear
if you invest in a Fund.
Shareholder transaction expenses are charges you pay when buying, selling or
exchanging shares of a Fund. Operating expenses, which include fees and expenses
the Adviser and for shareholder services, are paid out of a Fund's assets and
are factored into a Fund's share price rather than charged directly to
shareholder accounts.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested distributions None
Deferred sales charges None
Redemption fees None
Exchange fees None
ANNUAL FUND OPERATING EXPENSES (1)
SMALL CAP VALUE FUND
Advisory fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.48%
Total annual fund operating expenses 1.23%
MID CAP VALUE FUND
Advisory fees 0.75%
Distribution (12b-1 fees) None
Other expenses 3.41%
Total annual fund operating expenses 4.16%
(1) The Adviser has voluntarily undertaken to waive a portion of its
fees and assume certain expenses of each Fund to the extent that total
annual fund operating expenses exceed 1.15%.
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in a Fund, a 5% annual return, the Fund's
operating expenses remain the same as stated in the table above, reinvestment of
all distributions and redemption at the end of each period. Although your actual
costs may be higher or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
---------------- ----------------- ---------------- -----------------
SMALL CAP MID CAP VALUE LARGE CAP
VALUE FUND FUND VALUE FUND VALUE FUND
------------------- ---------------- ----------------- ---------------- -----------------
After 1 year $125 $418 N/A N/A
------------------- ---------------- ----------------- ---------------- -----------------
After 3 years $390 $1,264 N/A N/A
------------------- ---------------- ----------------- ---------------- -----------------
After 5 years $676 $2,124 N/A N/A
------------------- ---------------- ----------------- ---------------- -----------------
After 10 years $1,489 $4,339 N/A N/A
------------------- ---------------- ----------------- ---------------- -----------------
</TABLE>
4
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES & RISKS
INVESTMENT OBJECTIVES
SMALL CAP VALUE FUND seeks to achieve long-term capital appreciation by
investing at least 65% of its total assets in the equity securities of SMALL
CAPITALIZATION companies. A small capitalization company has a market
capitalization of $1 billion or less at the time of the Fund's investment. The
Fund may also invest to a limited degree in companies that have larger market
capitalizations
MID CAP VALUE FUND seeks to achieve long-term capital appreciation by investing
at least 65% of its total assets in the equity securities of MEDIUM
CAPITALIZATION companies. A medium capitalization company has a market
capitalization between $1 billion and $10 billion at the time of the Fund's
investment. The Fund may also invest to a limited degree in companies that have
smaller and larger market capitalizations.
LARGE CAP VALUE FUND seeks to achieve long-term capital appreciation by
investing at least 65% of its total assets in the equity securities of LARGE
CAPITALIZATION companies. A large capitalization company has a market
capitalization greater than $10 billion at the time of the Fund's investment.
The Fund may also invest to a limited degree in companies that have smaller
market capitalizations.
VALUE FUND seeks to achieve long-term capital appreciation by investing at least
65% of its total assets in the equity securities of companies with varying
market capitalizations.
INVESTMENT STRATEGIES
[Margin callout: CONCEPTS TO UNDERSTAND
"VALUE" INVESTING means to invest in stocks that are priced low
relative to comparable companies PRICE/EARNINGS RATIO means the price
of a stock divided by the company's earnings per share.]
VALUE INVESTING. "Value Investing" provides investors with a less aggressive way
to take advantage of growth opportunities of companies. Using the Adviser's
value approach, the Funds 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 risk while offering potential for
capital appreciation as a stock gains favor among other investors and its stock
price rises.
The Funds are managed in accordance with the investment disciplines that the
Adviser has employed in managing equity portfolios for over twenty-five 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. The Adviser evaluates 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'S PROCESS. The Adviser begins the investment process by identifying
early dynamic change in a company's operations, finances, or management. 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:
o Financial models based principally upon projected cash flow;
o The price of the company's stock 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;
o The extent of management's ownership interest in the company; and
o The company's market by corroborating its observations and assumptions
by meeting with management, customers, and suppliers.
5
<PAGE>
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
GENERALLY. An investment in each Fund is not by itself a complete or balanced
investment program. Nevertheless, the small, medium, and large capitalization
segments 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 a Fund's net asset value.
Because the Adviser seeks securities that are undervalued by the market, there
is a risk that the market will not recognize a security's intrinsic value for an
unexpectedly long time, or that securities the Adviser believes are undervalued
are actually priced appropriately due to intractable or fundamental problems
that are not yet apparent.
SPECIFIC RISKS. The investments of Small Cap Value Fund and Mid Cap Value Fund
in small and medium size companies can entail more risk than investing in
larger, more established companies. Some of the risk arises from the following:
o More limited product lines, markets, and financial resources makes
these companies more susceptible to economic or market setbacks;
o Analysts and other investors typically follow these companies less
actively;
o Information about these companies is not always readily available;
o Large portions of the securities are traded in the over-the-counter
markets or on a regional securities exchange making them thinly traded
and potentially more volatile.
For these and other reasons, the prices of small and mid capitalization
securities can fluctuate more significantly than the securities of larger
companies. As a result, the net asset value of the shares of Small Cap Value
Fund and Mid Cap Value Fund may exhibit a higher degree of volatility than the
market averages.
YEAR 2000. Like other organizations around the world, the Funds could be
adversely affected if the computer systems used by its various service providers
(or the market in general) do not properly operate after January 1, 2000. The
Funds are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance, however, that
these steps will be sufficient to avoid a temporary service disruption or any
adverse impact on the Funds.
INVESTMENT POLICIES
Under normal conditions, each Fund will invest at least 65% of its total assets
in equity securities. 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 owner
the right to vote on measures affecting the company's organization and
operations, the Funds do not intend to exercise control over the management of
companies in which each invests. Common stocks have a history of long-term
growth in value, but their prices tend to fluctuate in the shorter term.
[Margin callout: CONCEPTS TO UNDERSTAND
COMMON STOCK: represents an equity or ownership interest in a company
PREFERRED STOCK: stock that has a preference to the company's dividends
(and thus greater potential for income) and whose value generally
fluctuates less than common stock
CONVERTIBLE SECURITY: a security such as preferred stock or bonds that
may be converted into a specified number of shares of common stock
WARRANT: an option to purchase an equity security at a specified price
at any time during the warrant's life]
6
<PAGE>
MANAGEMENT
The business of The CRM Funds and each Fund is managed under the direction of
the Board of Trustees. The Board formulates the general policies of the Funds
and meets periodically to review the Funds' performance, monitor investment
activities and practices, and discuss other matters affecting the Funds.
Additional information regarding the Trustees, as well as executive officers,
may be found in the SAI.
THE ADVISER
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New York
10604, serves as investment adviser to each Fund. Subject to the general control
of the Board, the Adviser makes investment decisions for the Funds. For its
services, the Adviser receives an advisory fee at an annual rate of 0.75% of the
average daily net assets of each Fund.
The Adviser and its predecessors have managed investments in small and medium
capitalization companies for over twenty-five years. As of the date of this
prospectus, the Adviser has over $___ billion of assets under management.
MID CAP VALUE STYLE PERFORMANCE INFORMATION
The following reflects the historical performance of the portfolios of all
private accounts managed by the Adviser that have investment objectives,
policies and strategies substantially similar to that of Mid Cap Value Fund.
This data does not reflect the performance of the Funds. This data compares the
performance of these private accounts against the Russell Midcap(TM) Index. This
data should not consider this performance data as an indication of future
performance of any Fund or of the Adviser.
<TABLE>
<S> <C> <C>
PERIOD ADVISER(1) RUSSELL MIDCAP INDEX(2)
20 Years: 10/1/78-9/30/98 ____% N/A
15 Years: 10/1/83-9/30/98 ____% ____%
10 Years: 10/1/88-9/30/98 ____% ____%
5 Years: 10/1/93-9/30/98 ____% ____%
3 Years: 10/1/95-9/30/98 ____% ____%
1 Year: 10/1/97-9/30/98 ____% ____%
</TABLE>
(1) These results are a dollar weighted composite of tax-exempt, fully
discretionary, separately managed accounts that are over $1 million in
size and under the Adviser's and its predecessor's management for at
least 3 months. The composite consists of 65 accounts with $1.56
billion in assets (83% of tax-exempt equity assets and 44% of all
equity assets) and was calculated in accordance with standards set by
the Association for Investment Management and Research (AIMR). The
composite does not reflect all of the assets under the Adviser's
management and may not accurately reflect the performance of all
accounts it manages. The separately managed accounts in the composite
are not subject to the same types of expenses to which the Fund is
subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed by the 1940 Act or
Internal Revenue Code. All returns reflect the deduction of advisory
fees, brokerage commissions and execution costs paid by the Adviser's
private accounts, without provision for federal or state income taxes.
The net effect of the deduction of the operating expenses of the Funds
on the annualized performance, including the effect of compounding over
time, may be substantial. Consequently, the performance results for the
accounts could have been adversely affected if the accounts included in
the composite had been regulated as an investment company under the
federal securities laws.
(2) As of the latest reconstitution, the average market capitalization of
the Russell MidcapTM Index was approximately $___ billion; the median
market capitalization was approximately $___ billion. The largest
company in the index had an approximate market capitalization of $____
billion.
PORTFOLIO MANAGERS
The day-to-day management of the Funds is shared by a committee of individuals
employed by the Adviser. Ronald H. McGlynn and Jay B. Abramson are responsible
for the management of each Fund. In addition, Michael A. Prober is part of the
committee responsible for the management of Small Cap Value Fund and Scott L.
Scher is part of the committee responsible for the management of Mid Cap Value
Fund. Each portfolio manager's business experience and educational background is
as follows:
7
<PAGE>
RONALD H. MCGLYNN. President and Chief Executive Officer since 1983 and Co-Chief
Investment Officer of the Adviser. He has been with the Adviser for twenty-five
years and is responsible for investment policy, portfolio management, and
investment research. Prior to his association with the Adviser, Mr. McGlynn was
a Portfolio Manager at Oppenheimer & Co. He received a B.A. from Williams
College and an M.B.A. from Columbia University.
JAY B. ABRAMSON. Executive Vice President since 1989 and Director of Research
and Co-Chief Investment Officer of the Adviser. He has been with the Adviser for
twelve 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, and is a Certified
Public Accountant.
MICHAEL A. PROBER. Vice President of the Adviser since 1993 where he is
responsible for investment research. Prior to joining the Adviser in 1993, he
worked in corporate finance and commercial banking at Chase Manhattan Bank and
as a Research Analyst for Alpha Capital Venture Partners. Mr. Prober received a
B.B.A. from the University of Michigan and an M.M. from Northwestern University,
J.L. Kellogg Graduate School of Management.
SCOTT L. SCHER, CFA. Vice President of the Adviser since 1995 where he is
responsible for investment research. Prior to joining the Adviser in 1995, he
worked as an analyst/portfolio manager at The Prudential from 1988. Mr. Scher
received an A.B. from Harvard College, an M.B.A. from Columbia Business School
and is a Chartered Financial Analyst.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provide various services to the
Funds. As of the date of this prospectus, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $__ billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Funds' shares. The distributor acts as the agent of The CRM
Funds in connection with the offering of shares of the Funds. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of shares of the Funds.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Funds' transfer
agent.
FUND EXPENSES
The Funds pay for all of their expenses. Each Fund's expenses comprise expenses
attributable to the Fund and expenses not attributable to any particular Fund,
which are allocated among the Funds. The Adviser or other service providers may
voluntarily waive all or any portion of their fees, which are accrued daily and
paid monthly. Any waiver would have the effect of increasing a Fund's
performance for the period during which the waiver was in effect and may not be
recouped at a later date.
The Adviser has voluntarily undertaken to waive its fees or assume certain
expenses of each Fund in order to limit the Funds' expenses (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses) to 1.15% or
less of the average daily net assets of the Funds. This undertaking may be
terminated at any time.
8
<PAGE>
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Write to us at:
The CRM Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(800) CRM-2883 or
(800) 844-8258
Wire investments (or ACH payments) to us at:
Bank Boston
Boston, Massachusetts
ABA #011000390 For Credit to:
Forum Shareholder Services, LLC Account # 541-54171 The CRM
Funds (Your Name goes on this line) (Your Account Number goes
on this line)
(Your Social Security number or tax identification number goes
on this line)
GENERAL INFORMATION
You pay no sales charge to purchase or sell (also called "redeem") shares of a
Fund. Shares are purchased and sold by the Funds at the next share price (also
called "net asset value" or "NAV" per share) calculated after a transaction is
received in good order by the Transfer Agent. For instance, if your purchase
request is received in proper form after 4 p.m., your transaction will be priced
at the next day's NAV. The Funds cannot accept orders that request a particular
day or price for the transaction or any other special conditions.
The Funds do not issue share certificates.
You will receive annual statements and a confirmation of each transaction. You
should verify the accuracy of all transactions I your account immediately upon
receipt of confirmations.
The Funds reserve the right to minimum investment amounts and temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED. The net asset value per share ("NAV") of each
Fund is calculated s of the close of the New York Stock Exchange (normally 4:00
p.m., Eastern time) on each Fund Business Day. The time at which NAV is
calculated may be changed in case of an emergency or if the New York Stock
Exchange closes early. A Fund's NAV is determined by dividing the value of the
Fund's assets by the number of shares outstanding. Securities for which market
quotations are readily available are valued at current market value. If market
quotations are not readily available, then securities are valued at fair value.
TRANSACTIONS THROUGH THIRD PARTIES. If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Funds. Banks, brokers, retirement plans and
financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
9
<PAGE>
BUYING SHARES
HOW TO MAKE PAYMENTS. All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS. For individual or UGMA accounts, the check must be made payable
to "The CRM Funds" or to one or more owners of the account and endorsed
to "The CRM Funds." For all other accounts, the check must be made
payable on its face to "The CRM Funds." No other method of check
payment is acceptable (for instance, payment by travelers checks is
prohibited).
ACH PAYMENT. Instruct your financial institution to make an ACH
(automated clearing house) payment to us. These payments typically take
two days. Your financial institution may charge you a fee for this
service.
WIRES. nstruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
MINIMUM INVESTMENTS. Following are the minimum investments accepted by the
Funds:
<TABLE>
<S> <C> <C>
------------------------- --------------------------
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
-------------------------------------- ------------------------- --------------------------
Standard Minimums $10,000 $100
-------------------------------------- ------------------------- --------------------------
Traditional and Roth IRA Accounts $2,000 $100
-------------------------------------- ------------------------- --------------------------
Automatic Investment Plans $2,000 $100
-------------------------------------- ------------------------- --------------------------
</TABLE>
<TABLE>
<CAPTION>
ACCOUNT REQUIREMENTS
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TYPE OF ACCOUNT REQUIREMENT
- ------------------------------------------------------------ ---------------------------------------------------------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Joint accounts can have two or more owners
Individual accounts are owned by one person, as are sole (tenants)
proprietor ship accounts. o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as their names appear on the account
- ------------------------------------------------------------ ---------------------------------------------------------
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can
set up a These custodial accounts provide a way to give money to a custodial
account under the Uniform Gift to Minors child and obtain tax benefits. An
individual can give up Act or the Uniform Transfers to Minors Act to $10,000 a
year per child without paying Federal gift o The trustee must sign instructions
in a manner tax. indicating trustee capacity
- ------------------------------------------------------------ ---------------------------------------------------------
TRUSTS, BUSINESSES AND ORGANIZATION o Additional documentation required for
investors in any representative capacity
o For trusts, the trust must be established
before an account can be opened
o At least one person authorized by corporate
resolution to act on the account must sign
instructions
o A corporate resolution with corporate seal or
a signature guarantee is required to open accounts
- ------------------------------------------------------------ ---------------------------------------------------------
EXECUTOR, ADMINISTRATOR, CONSERVATOR OR GUARDIAN o Call us if you need further information
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
10
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
- ------------------------------------------------------------ ---------------------------------------------------------
BY MAIL BY MAIL
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation or statement Or
o Mail us your application and a check o Write a letter to us
o Write your account number on your check.
o Mail us the slip (or your letter) and a check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us
o You will be assigned an account number
o Mail us your application
o Instruct your bank to wire your money to us
AUTOMATICALLY AUTOMATICALLY
o On your application, complete the "Automatic o Call or write us for an "Automatic Investment"
Investment" section form
o Attach a voided check to your application o Complete the form
o Mail us your application o Attach a voided check to your form
o Pay either by "Check" or "Wire" (see above) o Mail us the form
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
AUTOMATIC INVESTMENTS. You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Automatic investments must be for at least $50.
LIMITATIONS ON PURCHASES. The Funds reserve the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Funds or their operations. This includes those from any individual or group
who, in the Funds' view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the Funds within a calendar year).
CANCELED OR FAILED PAYMENTS. Checks and ACH transfers are accepted at full value
subject to collection. If your payment for shares is not received or you pay
with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Funds or the Transfer Agent, and the Funds may redeem shares you own in the
account (or another identically registered account in any Fund) as
reimbursement. The Funds and their agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
Redemption orders are processed promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
11
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
TO SELL SHARES FROM YOUR ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if:
o You have elected wire redemption privileges AND
o Your redemption is for $10,000 or more
o Call us with your request (if you have elected telephone redemption
privileges - See "By Telephone") Or
o Mail us your request (See "By Mail") BY TELEPHONE
o Telephone redemptions are only available if you have elected
telephone redemption privileges.
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you Or
o Wired to you (if you have elected wire redemption privileges - See "By
Wire"))
AUTOMATICALLY
o Call or write us for an "Automatic Redemption" form
o Attach a voided check to your form
o Mail us your form
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
TELEPHONE REDEMPTION PRIVILEGES. You may only redeem your shares by telephone if
you elect telephone redemption privileges on your account application or by
completing a (or separate form). You may be responsible for any fraudulent
telephone order as long as the Transfer Agent takes reasonable measures to
verify the order.
WIRE REDEMPTION PRIVILEGES. You may only redeem your shares by wire if you elect
wire redemption privileges on your account application (or separate form). The
minimum amount that may be redeemed by wire is $10,000. If you wish to request a
wire redemption by telephone, you must also elect telephone redemption
privileges.
AUTOMATIC REDEMPTIONS. You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic redemptions must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." For requests
made in writing a signature guarantee is required for any of the following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name or address
12
<PAGE>
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours.
o Changes to automatic investment or redemption, distribution, telephone
redemption or exchange option or any other election in connection with
your account.
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
SMALL ACCOUNTS. If the value of your account falls below $10,000 ($2000 for IRAs
or automatic investment plans), the Fund may ask you to increase your balance.
If the account value is still below $10,000 after 60 days, the Fund may close
your account and send you the proceeds. A Fund will not close your account if it
falls below these amounts solely as a result of a reduction in your accounts
market value.
REDEMPTIONS IN KIND. The Funds reserve the right to make "redemptions in kind"
- -- payment of redemption proceeds in portfolio securities rather than cash --if
the amount redeemed is large enough to affect Fund operations (for example, if
it represents more than 1% of the fund's assets).
LOST ACCOUNTS. The Transfer Agent will consider your account "lost" if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is "lost," all
distributions on the account will be reinvested in additional shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy shares of another Fund (an "exchange") by
telephone or in writing. You may also exchange Fund shares for [___] Shares of
Daily Assets Government Fund, a money market fund. Because exchanges are treated
as a sale and purchase, they may have tax consequences.
REQUIREMENTS. Exchanges may be made only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Funds reserve the right to limit exchanges. See "Buying
Shares - Limitation on Purchases."
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
HOW TO EXCHANGE
- ----------------------------------------------------------------------------------------------------------------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The name of the Fund from which you are exchanging and into which you
are exchanging
o The dollar amount or number of shares you want to sell (and exchange)
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Telephone exchanges are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
RETIREMENT ACCOUNTS
The Fund's offer IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing in any IRA or other retirement plan, investors should consult their
tax advisors. Whenever making an investment onto an IRA, be sure to indicate the
year the for which the contribution is made.
14
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Small Cap Value Fund, Mid Cap Value Fund and Value Fund distribute their the net
investment income annually. Large Cap Value Fund distributes its net investment
income quarterly. Any net capital gain realized by a Fund will be distributed at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated in the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
The Funds' distributions of net investment income (which include net short-term
capital gain) are taxable to shareholders as ordinary income. The Funds'
distributions of net capital gain are taxable to shareholders as long-term
capital gain, regardless of how long a shareholder has held shares.
Distribution will reduce the net asset value of the Funds' shares by the amount
of the distribution. Furthermore, a distribution made shortly after the purchase
of shares, although in effect a return of capital, is still be taxable to the
shareholder in the manner described above.
Shareholders will incur a capital gain or loss when they sell their shares based
on the amount paid for the shares and the value of the shares upon redemption.
Reports containing appropriate information with respect to the Federal income
tax status of distributions paid during the year by a Fund will be mailed to
shareholders after the close of each year.
For further information about the tax effects of investing in a Fund, see the
SAI.
ORGANIZATION
The CRM Funds is a Delaware business trust that is registered with the SEC as an
open-end, management investment company (a "mutual fund"). The Funds are the
only four series of The CRM Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law and all
shareholders of each Fund are entitled to vote at shareholders' meetings unless
a matter is determined to effect only a specific Fund (such as approval of an
advisory agreement for a Fund.) From time to time, large shareholders may
control a Fund or The CRM Funds. See the SAI.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table reflects the Funds' financial performance. Information is
not included for Value Fund as no Institutional Shares of the Fund were
outstanding as of September 30, 1997. Total return in the table represents the
rate an investor would have earned (or lost) on an investment in a Fund
(assuming the reinvestment of all distributions). This information has been
audited by Ernst & Young, LLP. The Funds' financial statements and the auditor's
report are included in the Annual Report, and may be obtained without charge.
<TABLE>
<S> <C> <C> <C>
SMALL MID CAP LARGE
CAP VALUE CAP
VALUE FUND VALUE
FUND FUND
---------- ---------- ----------
Year Year Year
Ended Ended Ended
9/30/98(1) 9/30/98(1) 9/30/98(1)
---------- ---------- ----------
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share
Investment Operations
Net investment loss
Net realized and unrealized gain on
securities
Distributions From
Net investment income
Net realized gain on investments
Total Distributions
Ending Net Asset Value Per Share
OTHER INFORMATION
Ratios to Average Net Assets:
Expenses
Net investment income
Expenses (excluding reimbursements and
waivers)
Total Return
Portfolio Turnover Rate
Average Brokerage Commission Rate (3)
Net Assets at End of Period (000's Omitted)
</TABLE>
(1) Institutional Shares of the Funds commenced operations on the following
dates: Small Cap Value Fund, January 6, 1998; Mid Cap Value Fund, January
6, 1998; and Large Cap Value Fund, August 25, 1998.
(2) Annualized.
(3) Represents the average commission per share paid to brokers on the purchase
and sale of securities.
16
<PAGE>
LOGO
THE CRM FUNDS
SMALL CAP VALUE FUND
MID CAP VALUE FUND
LARGE CAP VALUE FUND
VALUE FUND
If you want more information about the Funds,
the following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In each Fund's annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affect the Fund's performances during their last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the
Funds and is incorporated into this Prospectus by reference.
You can get free copies of both reports and the SAI, request other information
and discuss your questions about the Funds by contacting your broker or the
Funds at:
The CRM Funds
Two Portland Square
Portland, Maine 04101
1-800-CRM-2883
You can also review the Funds' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You
can get text-only copies, for a fee, by writing to or calling the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free copies are available from the Commission's Internet website at
http://www.sec.gov.
Investment Company Act File No. 811-9034.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1999
THE CRM FUNDS
SMALL CAP VALUE FUND
MID CAP VALUE FUND
LARGE CAP VALUE FUND
VALUE FUND
FUND INFORMATION:
The CRM Funds
Two Portland Square
Portland, Maine 04101
(800) CRM-2883
http://www.CRMfunds.com
INVESTMENT ADVISER:
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue
New York, New York 10604
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O Box 446
Portland, Maine 04101
(207) 879-8910
(800) 844-8258
This Statement of Additional Information or SAI supplements the Prospectuses
dated February 1, 1999, as may be amended from time to time, offering Investor
Shares and Institutional Shares of Small Cap Value Fund, Mid Cap Value Fund,
Large Cap Value Fund and Value Fund (the "Funds"). This SAI is not a prospectus
and should only be read in conjunction with a prospectus. The Prospectuses may
be obtained without charge by contacting shareholder services at the address or
telephone number listed above.
The financial statements for the Funds for the year ended September 30, 1998,
included in the Annual Report to shareholders, are incorporated into this SAI by
reference.
<PAGE>
<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
Glossary ............................................................................... 1
1. Investment Policies and Risks........................................................... 2
A. Security Ratings Information................................................... 2
B. Temporary Defensive Position................................................... 2
C. Hedging and Option Income Strategies........................................... 3
D. Convertible Securities......................................................... 4
E. Illiquid and Restricted Securities............................................. 5
2. Investment Limitations.................................................................. 6
A. Fundamental Limitations........................................................ 6
B. Nonfundamental Limitations..................................................... 7
3. Performance Data and Advertising........................................................ 8
A. Performance Data............................................................... 8
B. Performance Calculations....................................................... 8
C. Multiclass Performance......................................................... 10
D. Other Matters.................................................................. 10
4. Management.............................................................................. 12
A. Trustees and Officers.......................................................... 12
B. Compensation of Trustees and Officers.......................................... 13
C. Investment Adviser............................................................. 14
D. Distributor.................................................................... 15
E. Other Fund Service Providers................................................... 15
5. Portfolio Transactions.................................................................. 18
A. How Securities are Purchased and Sold.......................................... 18
B. Commissions Paid............................................................... 18
C. Adviser Responsibility for Purchases and Sales................................. 18
D. Securities of Regular Broker-Dealers........................................... 19
6. Additional Purchase and Redemption Information.......................................... 21
A. General Information............................................................ 21
B. Additional Purchase Information................................................ 21
C. Additional Redemption Information.............................................. 22
D. NAV Determination.............................................................. 22
E. Distributions.................................................................. 22
7. Taxation ............................................................................... 23
A. Qualification as a Regulated Investment Company................................ 23
B. Fund Distributions............................................................. 24
C. Certain Tax Rules Applicable to the Funds Transactions......................... 24
D. Federal Excise Tax ............................................................ 25
E. Sale or Redemption of Shares................................................... 25
F. Withholding Tax................................................................ 26
G. Foreign Shareholders........................................................... 26
H. State and Local Taxes.......................................................... 26
I. State, Local and Foreign Tax Considerations.................................... 27
8. Other Matters........................................................................... 28
A. The Trust and its Shareholders................................................. 28
B. Fund Ownership................................................................. 29
C. Limitations on Shareholders' and Trustees' Liability........................... 30
D. Registration Statement......................................................... 30
E. Financial Statements........................................................... 30
Appendix A - Description of Securities Ratings................................................... A-1
Appendix B - Miscellaneous Tables................................................................ B-1
Appendix C - Performance Data.................................................................... C-1
</TABLE>
<PAGE>
GLOSSARY
As used in this SAI, the following terms have the meanings listed.
"Adviser" means Cramer Rosenthal McGlynn, LLC.
"Board" means the Board of Trustees of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means Investors Bank & Trust Company, the custodian of each Fund.
"FAdS" means Forum Administrative Services, LLC, the administrator of each Fund.
"Fitch" means Fitch IBCA, Inc.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's shares.
"Fund" means each of the separate series of the Trust to which this SAI relates
as identified on the cover page.
"Moody's" means Moody's Investors Service.
"NRSRO" means a nationally recognized statistical rating organization.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer agent and
distribution disbursing agent of each Fund.
"Trust" means The CRM Funds.
"U.S. Government Securities" means obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
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<PAGE>
1. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the prospectuses about
each Fund's investment techniques, strategies and risks. Certain Funds are
designed for investment of that portion of an investor's funds, which can
appropriately bear the special risks associated with certain types of
investments (e.g., investments in smaller capitalization companies).
A. SECURITY RATINGS INFORMATION
The Funds' investments in fixed income securities are subject to credit risk
relating to the financial condition of the issuers of the securities that each
Fund holds. To limit credit risk, each Fund invests its assets in debt
securities that are considered investment grade. Investment grade means rated in
the top four long-term rating categories or top two short-term rating categories
by an NRSRO, or unrated and determined by the Adviser to be of comparable
quality
The lowest long-term ratings that are investment grade for corporate bonds,
including convertible bonds, are "Baa" in the case of Moody's and "BBB" in the
case of S&P and Fitch; for preferred stock are "Baa" in the case of Moody's and
"BBB" in the case of S&P and Fitch; and for short-term debt, including
commercial paper, are "Prime-2" (P-2) in the case of Moody's, "A-2" in the case
of S&P and "F-2" in the case of Fitch.
Unrated securities may not be as actively traded as rated securities. A Fund may
retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Funds
may use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by a Fund, the Adviser will determine whether the Fund should
continue to hold the obligation. To the extent that the ratings given by an
NRSRO may change as a result of changes in such organizations or their rating
systems, the Adviser will attempt to substitute comparable ratings. 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. An issuer's current financial
condition may be better or worse than a rating indicates.
B. TEMPORARY DEFENSIVE POSITION
A Fund may assume a temporary defensive position and may invest without limit in
commercial paper and other money market instruments that are of prime quality.
Prime quality instruments are those instruments that are rated in one of the two
highest short-term rating categories by an NRSRO or, if not rated, determined by
the Adviser to be of comparable quality.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which a fund may invest include
U.S. Government Securities, time deposits, bankers acceptances and certificates
of deposit of depository institutions (such as banks), corporate notes and
short-term bonds and money market mutual funds. The Funds may only invest in
money market mutual funds to the extent permitted by the 1940 Act.
The money market instruments in which a fund may invest may have variable or
floating rates of interest. 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,
2
<PAGE>
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.
C. HEDGING AND OPTION INCOME STRATEGIES
A 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 securities or indices of
securities. The Funds' options may be traded on an exchange or in an over the
counter market.
A Fund will not hedge more than 30% of the value of its total assets by buying
put option and writing call options.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
An option is covered if, as long as a 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 with a value
at all times sufficient to cover the Fund's obligation under the option.
1. IN GENERAL
A call option is a contract pursuant to which the purchaser of the call option,
in return for a premium paid, has the right to buy the security (or index)
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security (or a
cash amount equal to the value of the index) against payment of the exercise
price during the option period.
A put option gives its purchaser, in return for a premium, the right to sell the
underlying security (or index) at a specified price during the term of the
option. The writer of the put option, who receives the premium, has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index), upon exercise at the exercise price during the option
period.
The amount of premium received or paid for an option is based upon certain
factors, including the market price of the underlying security or index, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security or index, the option period, supply and
demand and interest rates.
There are a limited number of options contracts on securities indices and there
are not option contracts on all securities that a Fund may own or seek to own.
2. RISKS
The Fund's 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 correlations between movements in the prices of options
and movements in the price of the securities (or indices) hedged or used for
cover which may cause a given hedge not to achieve its objective; (3) the fact
that the skills and techniques needed to trade these instruments are different
from those needed to select the securities in which the Funds invest; and (4)
lack of assurance that a liquid secondary market will exist for any particular
instrument at any particular time, which, among other things, may hinder a
Fund's ability to limit exposures by closing its positions.
3
<PAGE>
Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund.
D. CONVERTIBLE SECURITIES
The Funds may only invest in convertible securities that are investment grade.
The Funds invest in convertible securities that are investment grade.
1. IN GENERAL
Convertible securities, which include convertible debt, convertible preferred
stock and other securities exchangeable under certain circumstances for shares
of common stock, are fixed income securities or preferred stock which generally
may be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. 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
stream of income with generally higher yields than do those of common stocks of
the same or similar issuers. These securities are usually senior to common stock
in a company's capital structure, but usually are subordinated to
non-convertible debt securities.
Convertible securities have unique investment characteristics in that they
generally: (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stocks since they have fixed income characteristics
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases.
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 the 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.
2. RISKS
Investment in convertible securities generally entails less risk than in the
issuer's common stock. The extent to which such risk is reduced, however,
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.
3. VALUE OF CONVERTIBLE SECURITIES
The value of a convertible security is a function of its "investment value"
(determined by a comparison of its yield 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.
4
<PAGE>
E. ILLIQUID AND RESTRICTED SECURITIES
No Fund may acquire securities or invest in repurchase agreements if, as a
result, more than 10% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
1. IN GENERAL
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which a Fund has valued the securities. Illiquid securities include (1)
repurchase agreements not entitling the holder to payment of principal within
seven days, (2) purchased over-the-counter options, (3) securities which are not
readily marketable and (4) except as otherwise determined by the Adviser,
securities subject to contractual or legal restrictions on resale because they
have not been registered under the 1933 Act ("restricted securities").
2. RISKS
Certain risks are associated with holding illiquid and restricted securities.
For instance, limitations on resale may have an adverse effect on the
marketability of a security and a Fund might also have to register a restricted
security in order to dispose of it, resulting in expense and delay. A Fund might
not be able to dispose of restricted or illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions. There can be no assurance that a liquid market will exist for any
security at any particular time. Any security, including securities determined
by the Adviser to be liquid, can become illiquid.
3. DETERMINATION OF LIQUIDITY
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid and has delegated the function of making
determinations of liquidity to the Adviser, pursuant to guidelines approved by
the Board. The Adviser determines and monitors the liquidity of the portfolio
securities and reports periodically on its decisions to 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.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
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<PAGE>
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Funds: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely and (2) the term Code includes the rules thereunder, IRS
interpretations and any private letter ruling or similar authority upon which
the Fund may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's assets or purchases and redemptions of shares will not be considered
a violation of the limitation.
A fundamental policy of a Fund cannot be changed without the affirmative vote of
the lesser of: (1) 50% of the outstanding shares of the Fund or (2) 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 nonfundamental policy of a Fund may be changed by the Board
without shareholder approval.
A. FUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations, which are
fundamental policies of the Fund.
1. ISSUANCE OF SENIOR SECURITIES
No Fund may issue senior securities except pursuant to Section 18 of the
Investment Company Act and except that a Fund may borrow money subject to its
investment limitation on borrowing.
2. BORROWING
Each 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.
3. UNDERWRITING ACTIVITIES
No Fund may act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities, a Fund
may be deemed to be an underwriter for purpose of the 1933 Act.
4. CONCENTRATION
No Fund may 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 a Fund's investments in such
industry would comprise 25% or more of the value of its total assets.
5. PURCHASES AND SALES OF REAL ESTATE
No Fund may purchase or sell real estate or any interest therein, except that a
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.
6. PURCHASES AND SALES OF COMMODITIES
No Fund may purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities.
6
<PAGE>
7. MAKING LOANS
No Fund may 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.
8. DIVERSIFICATION
No Fund may purchase a security if, as a result (1) more than 5% of a Fund's
total assets would be invested in the securities of a single issuer, or (2) a
Fund would own more than 10% of the outstanding voting securities of a single
issuer. This limitation applies only with respect to 75% of a Fund's total
assets and does not apply to U.S. Government Securities.
Each Fund is "diversified" as that term is defined in the 1940 Act.
B. NONFUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations, which are not
fundamental policies of the Fund.
1. BORROWING
No Fund may 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.
2. ILLIQUID SECURITIES
No Fund may acquire securities or invest in repurchase agreements if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
3. SHORT SALES
No Fund may make short sales of securities (except short sales against the box).
4. PURCHASES ON MARGIN
No Fund may purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities, but a Fund may make margin deposits in connection with permitted
transactions in options.
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<PAGE>
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
A Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
Performance information is reported on a class basis.
A Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger
or other companies which track the investment performance of investment
companies ("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including
but not limited to the Standard & Poor's 500(R) Index, the Russell
2000(R) Index, the Russell MidcapTM Index, the Russell 1000(R) Value
Index, the Russell 2500(R) Index, the Morgan Stanley - Europe,
Australian and Far East 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.
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of a Fund but rather are standards by
which the Fund's Adviser and shareholders may compare the performance of the
Fund to an unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
A Fund may refer to (1) general market performances over past time periods such
as those published by Ibbotson Associates (for instance, its "Stocks, Bonds,
Bills and Inflation Yearbook"), (2) mutual fund performance rankings and other
data published by Fund Tracking Companies and (3) material and comparative
mutual fund data and ratings reported in independent periodicals, such as
newspapers and financial magazines.
A Fund's performance will fluctuate in response to market conditions and other
factors.
A listing of certain performance data as of September 30, 1998 is contained in
Appendix C -- Performance Data.
B. PERFORMANCE CALCULATIONS
A Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for a Fund used in advertising are computed by dividing
the Fund's interest income (in accordance with specific standardized rules) for
a given 30 days or one month period, net of expenses, by the average number of
shares entitled to receive income distributions during the period, dividing this
figure by the Fund's net asset value per share at the end of the period and
annualizing the result (assuming compounding of income in accordance with
specific standardized rules) in order to arrive at an annual percentage rate.
Capital gains and losses generally are excluded from these calculations.
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<PAGE>
Income calculated for the purpose of determining a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that a Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Financial intermediaries may charge their customers that
invest in a Fund fees in connection with that investment. This will have the
effect of reducing the Fund's after fee yield to those shareholders.
The yields of a Fund are not fixed or guaranteed, and an investment in a Fund is
not insured or guaranteed. Accordingly, yield information should not be used to
compare shares of a Fund with investment alternatives, which, like money market
instruments or bank accounts, may provide a fixed rate of interest. Also, it may
not be appropriate to compare a Fund's yield information directly to similar
information regarding investment alternatives, which are insured or guaranteed.
Yield quotations are based on amounts invested in a Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
The Funds charge no sales charges.
The SEC's formula for calculating yield is contained in Item 21, Paragraph
(b)(2) of the SEC's Form N-1A, the registration statement form used by the Funds
to register with the SEC.
2. TOTAL RETURN CALCULATIONS
A Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
Total return figures may be based on amounts invested in a Fund net of sales
charges that may be paid by an investor. A computation of total return that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
The Funds charge no sales charges.
(A) AVERAGE ANNUAL TOTAL RETURN. Average annual total return is
calculated using a formula prescribed by the SEC. To calculate standard average
annual total returns a Fund (1) determines the growth or decline in value of a
hypothetical historical investment in a Fund over a stated period and (2)
calculates 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 total return of 7.18%. 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 according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
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
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<PAGE>
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results.
(B) OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes
may be accompanied by non-standardized total return figures calculated by
alternative methods.
A Fund may quote unaveraged or cumulative total returns which reflect a
Fund's performance over a stated period of time.
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.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period. Total returns may be quoted with or without
taking into consideration a Fund's front-end sales charge or contingent deferred
sales charge (if applicable).
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
C. MULTICLASS PERFORMANCE
When a Fund has more than one class of shares, performance calculations for the
classes of shares that are created after the initial class may be stated so as
to include the performance of the initial class or classes of the Fund.
Generally, performance of the initial class is not restated to reflect the
expenses or expense ratio of the subsequent class.
Currently, the Funds use the actual date a class of shares commenced operations
as the beginning of that class' performance.
D. OTHER MATTERS
A Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) 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; (2) 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, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively; (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Fund's investment adviser, summaries of
the views of the portfolio managers with respect to the financial markets, or
descriptions of the nature of the Adviser's and its staff's management
techniques; (7) the results of a hypothetical investment in the Fund over a
given number of years, including the amount that the investment would be at the
end of the period; (8) the effects of earning Federally and, if applicable,
state tax-exempt income from the Fund or investing in a tax-deferred account,
such as an individual retirement account or Section
10
<PAGE>
401(k) pension plan; (9) the net asset value, net assets or number of
shareholders of the Fund as of one or more dates; and (10) a comparison of the
Fund's operations to the operations of other funds or similar investment
products, such as a comparison of 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.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of a Fund's performance.
A Fund may advertise information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging. In a dollar cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in a Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
SYSTEMATIC SHARE SHARES
PERIOD INVESTMENT PRICE PURCHASED
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
TOTAL AVERAGE TOTAL
INVESTED $600 PRICE $15.17 SHARES 41.81
</TABLE>
In connection with its advertisements. a Fund may provide "shareholders letters"
which serve to provide shareholders or investors an introduction into the
Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
the Adviser that [_____].
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<PAGE>
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
The names of the Trustees and officers of the Trust, their positions with the
Trust, their principal occupations during the past five years and their age
(date of birth) are set forth below. Each Trustee who is an "interested person"
(as defined by the 1940 Act) of the Trust is indicated by an asterisk.
<TABLE>
<S> <C>
NAME, POSITION WITH TRUST PRINCIPAL OCCUPATION(S)
Fred M. Filoon*, Chairman and President Senior Vice President, Cramer Rosenthal McGlynn, Inc.
DOB: March 1942
707 Westchester Avenue
White Plains, NY 10604
John E. Appelt, Trustee Certified Financial Planner, The Equitable (an insurance
DOB: September 1945 company)
1221 Avenue of the Americas
32nd Floor, New York, NY 10020
Louis Klein Jr., Trustee Self-employed as a financial and professional service
DOB: May 1935 consultant; Trustee, Manville Personal Injury Settlement
80 Butternut Lane Trust; Director, Riverwood International Corporation;
Stamford, CT 06093 Director, Manville Corporation
Clement C. Moore, II, Trustee Managing Partner, Mariemont Holdings, LLC (a commercial real
DOB: ___, 1943 estate holding and development company)
10 Rockefeller Plaza, #1120
New York, NY
Eugene A. Trainor, III, Vice President, Secretary Senior Vice-President and CFO, Cramer Rosenthal McGlynn, Inc.
and Treasurer
DOB: December 1963
707 Westchester Avenue
White Plains, NY 10604
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NAME, POSITION WITH TRUST PRINCIPAL OCCUPATION(S)
Sara M. Morris, Assistant Treasurer Treasurer and CFO, Forum Financial Group LLC
DOB: September 1963
Two Portland Square
Portland, Maine 04101
Dawn J. Taylor, Assistant Treasurer 10/97 - Present. Tax Manager, Forum Financial Group, LLC
DOB: ____, 1964 __/97 - 10/97.
Two Portland Square __/96 - __/97. Senior Fund Accountant, Forum Financial
Portland, Maine 04101 Group, LLC
Stephen J. Barrett, Vice President 9/96 - Present. Manager of Client Services, Forum Financial
DOB: November 1968 Group, LLC
Two Portland Square 1994 - 8/96. Senior Product Manager, Fidelity Investments
Portland, Maine 04101
D. Blaine Riggle, Assistant Secretary 1/98 - Present. Assistant Counsel, Forum Financial Group, LLC
DOB: November 1966 1/97 - 1/98. Associate Counsel, Wright Express Corporation
Two Portland Square (a fleet credit card company)
Portland, Maine 04101 1994 - 1/97. Associate at the law firm of Friedman, Babcock
& Gaythwaite
Marcella Cote, Assistant Secretary 5/98 - Present. Fund Administrator, Forum Financial Group,
DOB: January 1947 LLC
Two Portland Square __/97 - 5/98. Budget Analyst, State of Maine Department of
Portland, Maine 04101 Human Services
</TABLE>
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee is paid $10,000 (paid annually).
Trustees are also reimbursed for travel and related expenses incurred in
attending meetings of the Board.
Trustees that are affiliated with the Adviser receive no compensation for their
services or reimbursement for their associated expenses. No officer of the Trust
is compensated by the Trust.
The following table sets forth the fees paid to each Trustee by the Trust for
the period October 1, 1997 to September 30, 1998.
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<TABLE>
<S> <C> <C> <C> <C>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation from as Part of Fund Benefits upon Compensation from
Name, Position Trust Expenses Retirement Trust
- ------------------------------------- ------------------- ------------------- -------------------- -------------------
Fred M. Filoon $0 $0 $0 $0
Chairman and President
John E. Appelt
Trustee $5,000 $0 $0 $5,000
Louis Klein, Jr.
Trustee $6,250 $0 $0 $6,250
Clement C. Moore II
Trustee $6,250 $0 $0 $6,250
</TABLE>
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to each Fund pursuant to an investment
advisory agreement with the Trust. Under that agreement, the Adviser furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing a Fund's investments and effecting portfolio
transactions for a Fund.
2. OWNERSHIP OF ADVISER/AFFILIATIONS
The Adviser is 76% owned (and therefore controlled by) by Cramer, Rosenthal,
McGlynn, Inc. ("CRM") and its shareholders. CRM is an investment adviser.
[Control persons of the Adviser or of CRM]
The trustees or officers of the Trust that are employed by the Adviser (or
affiliates of the Adviser) are Fred M. Filoon and Eugene A. Trainor, III. [5%
ownership of Adviser by either of them to be listed].
3. FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee is accrued daily by the Funds and is paid monthly based on
average net assets for the previous month. The fee is allocated among the
classes of shares of a Fund based on the average net assets of each class during
the same period.
In addition to receiving its advisory fee from each Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets which are invested in a Fund. If an investor in a 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.
Table 1in Appendix B shows the dollar amount of the fees payable by the Trust to
the Adviser, the amount of the fee waived by the Adviser and the actual fee
received by the Adviser. The data is for the past three fiscal years or shorter
period if a Fund has been in operation for a shorter period.
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4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Adviser's agreement must be approved at least annually by the Board or by
vote of the shareholders, and in either case by a majority of the Trustees who
are not parties to the agreement or interested persons of any such party.
The Adviser's agreement is terminable without penalty by the Trust with respect
to a Fund on 60 days' written notice when authorized either by vote of the
Fund's shareholders or by a vote of a majority of the Board, or by the Adviser
on 60 days' written notice to the Trust.
Under its agreement, the Adviser is 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 a
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 agreement.
5. EXPENSE LIMITATIONS
The Adviser has voluntarily undertaken to assume certain expenses of the Funds
(or waive its fees). This undertaking is designed to place a maximum limit on
expenses (including all fees to be paid to the Adviser but excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses and
extraordinary expenses) of (1) 1.15% of the average daily net assets of the
Institutional Class of each Fund and (2) 1.50% of the average daily net assets
of the Investor Class of each Fund.
D. DISTRIBUTOR
The distributor (also known as principal underwriter) of the shares of each Fund
is Forum Fund Services, LLC. FFS is located at Two Portland Square, Portland,
Maine 04101, is a registered broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
Under its agreement with the Trust, FFS acts as the agent of the Trust in
connection with the offering of shares of the Funds. FFS continually distributes
shares of the Funds on a best effort basis. FFS has no obligation to sell any
specific quantity of Fund shares.
FFS receives no compensation for its distribution services. Shares are sold with
no sales commission; accordingly, FFS receives no sales commissions. FFS may
enter into arrangements with various financial institutions through which
investors may purchase or redeem shares. FFS 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 Funds.
Prior to December __, 1998, Forum Financial Services, Inc., an affiliate of FFS,
provided distribution services to the Trust pursuant to an agreement, the
material terms of which were the same as the current agreement.
Under its agreement, FFS is indemnified by the Trust for certain [FILL IN - DAL]
FFS, FAdS, FAcS and the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC. Forum Financial Group, LLC is controlled by John Y.
Keffer.
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust, providing the Trust
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Trust.
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<PAGE>
For its services, FAdS receives a fee from each Fund at an annual rate as
follows: (1) 0.15% of the average daily net assets of the Fund for the first $50
million in Fund assets, (2) 0.10% of the average daily net assets of the Fund
for the next $50 million in Fund assets and (3) 0.05% of the average daily net
assets of the Fund for remaining Fund assets. The fee is accrued daily by the
Funds and is paid monthly based on average net assets for the previous month.
Prior to December 17, 1997, Forum Financial Services, Inc., an affiliate of
FAdS, provided administrative services to the Trust pursuant to an agreement,
the material terms of which were the same as the current agreement.
Table 2 in Appendix B shows the dollar amount of the fees payable by the Trust
to FAdS, the amount of the fee waived by FAdS and the actual fee received by
FAdS. The data is for the past three fiscal years or shorter period if a Fund
has been in operation for a shorter period.
FAdS's agreement is terminable without penalty by the Trust or by FAdS with
respect to a Fund on 60 days' written notice. Under the agreement, FAdS is 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 a 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 agreement.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to each Fund. These services include calculating the NAV per
share of each Fund (and class) and preparing the Funds' financial statements and
tax returns.
For its services, FAcS receives a fee from each Fund at an annual rate of
$36,000 plus $12,000 for each class of shares above one and certain surcharges
based upon the amount and type of a Fund's portfolio transactions and positions.
The fee is accrued daily by the Funds and is paid monthly based on the
transactions and positions for the previous month.
Table 3 in Appendix B shows the dollar amount of the fees payable by the Trust
to FAcS, the amount of the fee waived by FAcS and the actual fee received by
FAcS. The data is for the past three fiscal years or shorter period if a Fund
has been in operation for a shorter period.
FAcS's agreement is terminable without penalty by the Trust or by FAcS with
respect to a Fund on 60 days' written notice. Under the agreement, FAcS is 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 a 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 agreement. Under the
agreement, in calculating a Fund's NAV per share, FAcS is deemed not to have
committed an error if the NAV per share it calculates is within 1/10 of 1% of
the actual NAV per share (after recalculation). In addition, in calculating NAV
per share FAcS is not liable for the errors of others, including the companies
that supply securities prices to FAcS and the Funds.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust, the Transfer Agent maintains an account for each shareholder of
record of a Fund and is responsible for processing purchase and redemption
requests and paying distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, the Transfer Agent receives a fee from each Fund at an annual
rate of $24,000 plus $12,000 for each class of shares above one and $30.00 per
Investor Class shareholder account and $120.00 per Institutional Class
shareholder account. The fee is accrued daily by the Funds and is paid monthly.
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<PAGE>
The Transfer Agent's agreement is terminable without penalty by the Trust or by
the Transfer Agent with respect to a Fund on 60 days' written notice. Under the
agreement, the Transfer Agent is 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 a
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 agreement.
4. SHAREHOLDER SERVICE
Table 4 in Appendix B shows the dollar amount of the fees payable by the Trust
to the Adviser under the Plan, the amount of the fee waived by the Adviser and
the actual fee received by the Adviser. The data is for the past three fiscal
years or shorter period if a Fund has been in operation for a shorter period.
5. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Investors Bank & Trust
Company safeguards and controls the Funds' cash and securities, determines
income and collects interest on Fund investments. The Custodian may employ
foreign subcustodians to provide custody of a Fund's foreign assets. The
Custodian is located at P.O. Box 1959, Boston, Massachusetts 02105.
For its services, the Custodian receives a fee from each Fund at an annual rate
as follows: (1) 0.02% of the average daily net assets of the Fund for the first
$100 million in Fund assets, (2) 0.015% of the average daily net assets of the
Fund for the next $100 million in Fund assets and (3) 0.001% of the average
daily net assets of the Fund for remaining Fund assets. The Custodian is also
paid certain transaction fees. These fees are accrued daily by the Funds and are
paid monthly based on average net assets and transactions for the previous
month.
6. LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Trust are passed
upon by Kramer Levin Naftalis & Frankel, LLP, 919 Third Avenue, New York, New
York 10022. Kramer Levin Naftalis & Frankel has relied upon the opinion of
Morris, Nichols, Arsht & Tunnell, 1201 N. Market Street, Wilmington, Delaware,
for matters relating to Delaware law.
7. INDEPENDENT AUDITORS
Ernst & Young, LLP, One North Broadway, White Plains, New York 10601,
independent auditors, have been selected as auditors for each Fund. The auditors
audit the annual financial statements of the Funds and provide the Funds with an
audit opinion. The auditors also review certain regulatory filings of the Funds
and the Funds' tax returns.
17
<PAGE>
5. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from who the Fund
purchases or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers). These securities normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for these
securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected (1) if the
security is traded on an exchange, through brokers who charge commissions, and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. Where transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.
B. COMMISSIONS PAID
Table 5 in Appendix B shows the aggregate brokerage commissions with respect to
each Fund. The data presented is for the past three fiscal years or a shorter
period if the Fund has been in operation for a shorter period, except as
otherwise noted. The table also indicates the reason for any material change in
the last two years in the amount of brokerage commissions paid by a Fund.
C. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser place orders for the purchase and sale of securities with brokers
and dealers selected by and in the discretion of the Adviser. No Fund has any
obligation to deal with any specific broker or dealer in the execution of
portfolio transactions. 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 each Fund rather than by
any formula.
The Adviser seeks "best execution" for all portfolio transactions. This means
that the Adviser seeks the most favorable price and execution available. The
Adviser's primary consideration in executing transactions for a Fund is prompt
execution of orders in an effective manner and at the most favorable price
available.
1. CHOOSING BROKER-DEALERS
The Funds may not always pay the lowest commission or spread available. Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection with securities transactions, the Adviser takes into account
factors such as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the research services described below)
and any risk assumed by the executing broker.
Consistent with applicable rules and the Adviser's duties, the Adviser may (1)
consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute portfolio transactions for a Fund and (2) take into
account payments made by brokers effecting transactions for a Fund (these
payments may be made to the Fund or to other
18
<PAGE>
persons on behalf of the Fund for services provided to the Fund for which those
other persons would be obligated to pay.
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause a Fund to pay these brokers a higher
amount of commission than may be charged by other brokers. This research is
designed to augment the Adviser's own internal research and investment strategy
capabilities. This research may be used by the Adviser in connection with
services to clients other than the Funds, and not all research services may be
used by the Adviser in connection with the Funds. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
3. COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to each Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
4. TRANSACTIONS THROUGH AFFILIATES
The Adviser may effect brokerage transactions through affiliates of the Adviser
(or affiliates of those persons). The Board has adopted procedures to ensure
that all brokerage commissions paid to these persons are reasonable and fair.
5. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Funds are 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. Investment decisions are the product of many
factors, including basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which, in the
respective Adviser's opinion, is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of a portfolio security for one client could have an adverse
effect on another client that has a position in that security. In addition, when
purchases or sales of the same security for a Fund and other client accounts
managed by the Adviser occurs contemporaneously, the purchase or sale orders may
be aggregated in order to obtain any price advantages available to large
denomination purchases or sales.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. Portfolio turnover rate
is reported in the Prospectus. From time to time a Fund may engage in active
short-term trading to take advantage of price movements affecting individual
issues, groups of issues or markets. An annual portfolio turnover rate of 100%
would occur if all of the securities in a Fund were replaced once in a period of
one year. Higher portfolio turnover rates may result in increased brokerage
costs to a Fund and a possible increase in short-term capital gains or losses.
D. SECURITIES OF REGULAR BROKER-DEALERS
From time to time a Fund may acquire and hold securities issued by its "regular
brokers and dealers" or the parents of those brokers and dealers. For this
purpose, regular brokers and dealers means the 10 brokers or dealers that: (1)
received the greatest amount of brokerage commissions during the Fund's last
fiscal year; (2) engaged in the largest
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<PAGE>
amount of principal transactions for portfolio transactions of the Fund during
the Fund's last fiscal year; or (3) sold the largest amount of the Fund's shares
during the Fund's last fiscal year. Following is a list of the regular brokers
and dealers of each Fund whose securities (or the securities of the parent
company) were acquired during the past fiscal year and the aggregate value of
the Funds' holdings of those securities as of the Funds' most recent fiscal
year.
REGULAR BROKER OR DEALER VALUE OF SECURITIES HELD ($)
20
<PAGE>
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
Shareholders may effect purchases or redemptions or request any shareholder
privilege in person at the Transfer Agent's offices located at Two Portland
Square, Portland, Maine 04101.
The Funds accept orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
B. ADDITIONAL PURCHASE INFORMATION
Shares of each Fund are sold on a continuous basis by the distributor at NAV per
share without any sales charge. Accordingly, the offering price per share is the
same as the NAV per share. That information is contained in the Funds' financial
statements (specifically in the statements of assets and liabilities).
The Funds reserve the right to refuse any purchase request in excess of 1% of a
Fund's total assets.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, a Fund may accept portfolio securities that meet the investment
objective and policies of a Fund as payment for Fund shares. A Fund will only
accept securities that (1) are not restricted as to transfer by law and are not
illiquid and (2) have a value which is readily ascertainable (and not
established only by valuation procedures).
1. IRAS
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of an UGMA/UTMA
account, the investor must provide a copy of the trust document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Funds.
If you purchase shares through a financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in a Fund directly. When you purchase a Fund's shares
through a financial institution, you may or may not be the shareholder of record
and, subject to your institution's procedures, you may have Fund shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your institution for further
information. If you hold shares through a financial institution, the Funds may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Funds are not
responsible for the failure of any financial institution to carry out its
obligations.
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<PAGE>
Investors purchasing shares of the Funds through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
C. ADDITIONAL REDEMPTION INFORMATION
A Fund 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 a
Fund's shares as provided in the Prospectus.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except (1) 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, (2) for any period during which
an emergency (as determined by the SEC) exists as a result of which disposal by
a Fund of its securities is not reasonably practicable or as a result of which
it is not reasonably practicable for a Fund fairly to determine the value of its
net assets, or (3) for such other period as the SEC may by order permit for the
protection of the shareholders of a Fund.
2. REDEMPTION -IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of a
Fund. If redemption proceeds are paid 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 SEC pursuant to which a 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.
D. NAV DETERMINATION
Purchases and redemptions are processed using the NAV per share that is
determined on the next Fund Business Day after the purchase or redemption order
is received.
The Funds do not determine NAV per share, 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, Thanksgiving and
Christmas.
In determining a Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
sales price. If no sale price is reported, the average of the last bid and ask
price is used. If no average price is available, the last bid price is used. If
market quotations are not readily available, then securities are valued at fair
value as determined by Board (or its delegate).
E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at a Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of a
Fund on the payment date for the distribution. Cash payments may be made more
than seven days following the date on which distributions would otherwise be
reinvested.
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<PAGE>
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relate solely to U.S. federal income tax law and assumes that each Fund
qualifies as a regulated investment company (as discussed below).
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the applicable tax rules applicable to the
Funds and their shareholders. Any of these changes or court decisions may have a
retroactive effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of a Fund.
The tax year end of each Fund is September 30 (the same as the Fund's fiscal
year end).
1. MEANING OF QUALIFICATION
As a regulated investment company, a 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. In order to qualify as a regulated investment
company a Fund must satisfy the following requirements:
o The Fund must distribute at least 90% of investment company taxable
income (i.e., net investment income and capital gain net income) for
the tax year. (Certain distributions made by a Fund after the close of
its tax year are considered distributions during the previous tax year
for purposes of satisfying satisfy this requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) 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 the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer), and (2)
no more than 25% of the value of the Fund's 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.
2. FAILURE TO QUALIFY
If for any tax year a 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 the Fund's distributions will be taxable to the shareholders
as ordinary dividends to the extent of a Fund's current and accumulated earnings
and profits. These distributions generally will be eligible for the
dividends-received deduction in the case of corporate shareholders.
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Failure to qualify as a regulated investment company would thus have a negative
impact on a Fund's income and performance. It is possible that a Fund does not
qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its net investment
income for each tax year. These distributions are taxable to shareholders as
ordinary income. These distributions may qualify for the 70% dividends-received
deduction for corporate shareholders.
Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but the Funds may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held shares.
Each Fund may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
Any capital loss carryovers are listed in the Funds' financial statements.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce the shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's basis would
be reduced below zero.
All distributions by a Fund will be treated in the manner described above
regardless of whether the distribution is 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.
A shareholder may purchase shares whose net asset value at the time reflects
undistributed net investment income or recognized capital gain, or unrealized
appreciation in the value of the assets of a Fund. Distributions of these
amounts are taxable to the shareholder in the manner described above, although
the distribution economically constitutes a return of capital to the
shareholder.
Shareholders purchasing shares of a Fund just prior to the ex-dividend date of a
distribution will be taxed on the entire amount of the distribution received,
even though the net asset value per share on the date of the purchase reflected
the amount of the distribution.
If a shareholder holds shares for six months or less and redeems shares at a
loss after receiving a capital gain distribution, the loss will be treated as a
long-term capital loss to the extent of the distribution.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which they are made. A distributions declared in October,
November or December of any year and payable to shareholders of record on a
specified date in those months, however, is deemed to be received by the
shareholders (and made by the Fund) on December 31 of that calendar year if the
distribution is 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.
C. CERTAIN TAX RULES APPLICABLE TO THE FUNDS TRANSACTIONS
For Federal income tax purposes, when put and call options purchased by a Fund
expire unexercised, the premiums paid by a 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 a Fund expire unexercised, the premiums received by the Fund give rise to
short-term capital gains at the time of expiration. When a Fund exercises a
call, the purchase price of the underlying security is increased by the amount
of the premium paid by a
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Fund. When a 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 a 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.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "section 1256 contracts" for Federal income tax
purposes. Section 1256 contracts held by a Fund at the end of each tax year are
"marked to market" and treated for Federal income tax purposes as though sold
for fair market value on the last business day of the tax year. Gain or loss
realized by a Fund on section 1256 contracts generally is considered 60%
long-term and 40% short-term capital gain or loss. Each Fund can elect to exempt
its section 1256 contracts which are part of a "mixed straddle" (as described
below) from the application of section 1256.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by the Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (1) loss realized on
disposition of one position of a straddle not be recognized to the extent that
the Fund has unrealized gains with respect to the other position in such
straddle; (2) the Fund's holding period in straddle positions be suspended while
the straddle exists (possibly resulting in gain being treated as short-term
capital gain rather than long-term capital gain); (3) losses recognized with
respect to certain straddle positions which are part of a mixed straddle and
which are non-section 1256 positions be treated as 60% long-term and 40%
short-term capital loss; (4) losses recognized with respect to certain straddle
positions which would otherwise constitute short-term capital losses be treated
as long-term capital losses; and (5) the deduction of interest and carrying
charges attributable to certain straddle positions may be deferred. Various
elections are available to a Fund which may mitigate the effects of the straddle
rules, particularly with respect to mixed straddles. In general, the straddle
rules described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.
D. FEDERAL EXCISE TAX
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 (1) 98% of ordinary
taxable income for the calendar year and (2) 98% of capital gain net income for
the one-year period ended on October 31 of the calendar year. If the Fund
changes its tax year end to November 30 or December 31, it may elect to use that
date instead of the October 31 date in making this calculation. The balance of
the Fund's income must be distributed during the next calendar year. A Fund will
be treated as having distributed any amount on which it is subject to income tax
for any tax year ending in a calendar year.
For purposes of the excise tax, each Fund: (1) reduces 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) excludes foreign currency gains and losses
incurred after October 31 of any year (or November 30 or December 31 if it has
made the election described above) in determining the amount of ordinary taxable
income for the current calendar year. The Fund will include foreign currency
gains and losses incurred after October 31 in determining ordinary taxable
income for the succeeding calendar year.
Each Fund intends to make sufficient 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. Investors should note, however, that a Fund
may in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
E. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in
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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 (a so called "wash sale"). In general, any gain or loss
arising from the sale or redemption of shares of a 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. Any capital loss arising from the sale or
redemption of shares held for six months or less, however, is treated as a
long-term capital loss to the extent of the amount of capital gain distributions
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 gain (gain from assets held for more than 12
months) of noncorporate taxpayers are generally taxed at a maximum federal rate
19.6% 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.
F. WITHHOLDING TAX
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, 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 a Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
G. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from a Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income distributions 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 distribution.
The foreign shareholder would generally be exempt from U.S. Federal income tax
on gain realized on the sale of shares of a Fund, capital gain distributions
from a Fund and amounts retained by a Fund that are designated as undistributed
capital gain.
If the income from a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income distributions, capital
gain distributions, and any gain realized upon the sale of shares of a Fund will
be subject to U.S. Federal income tax at the rates applicable to U.S. citizens
or U.S. corporations.
In the case of a noncorporate foreign shareholder, a 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.
The tax rules of other countries with respect to distributions from a Fund can
differ from the rules for U.S. Federal income taxation described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in a Fund, distributions from a Fund, the applicability
of foreign taxes and related matters.
H. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from a Fund can differ from the rules for U.S.
Federal income taxation described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax
26
<PAGE>
rules with respect to an investment in a Fund, distributions from a Fund, the
applicability of state and local taxes and related matters.
I. STATE, LOCAL AND FOREIGN TAX CONSIDERATIONS
The tax rules of the various states of the U.S. and their local jurisdictions,
as well as of other countries, with respect to distributions from a Fund can
differ from the rules for U.S. Federal income taxation described above. These
state, local and foreign rules are not discussed herein. Shareholders are urged
to consult their tax advisers as to the consequences of state and local (and
foreign) tax rules with respect to an investment in a Fund, distributions from a
Fund and related matters.
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8. OTHER MATTERS
A. THE TRUST AND ITS SHAREHOLDERS
1. GENERAL INFORMATION
The CRM Funds was organized as a business trust under the laws of the State of
Delaware on April 24, 1995. The Trust has operated under that name and as an
investment company since that date.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in its series (the
Funds) and in classes of shares of those series. As of the date hereof, the
Trust consisted of the following shares of beneficial interest:
o Institutional Shares of each of Small Cap Value Fund, Mid Cap Value
Fund, Large Cap Value Fund and Value Fund.
o Investor Shares of each of Small Cap Value Fund, Mid Cap Value Fund,
Large Cap Value Fund and Value Fund.
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate series and may divide series into classes of
shares; the costs of doing so will be borne by the Trust.
The Trust and each Fund will continue indefinitely until terminated.
2. CLASSES OF SHARES
Each class of a Fund may have a different expense ratio and each class'
performance will be affected by its expenses. For more information on any other
class of shares of the Fund, investors may contact the Transfer Agent.
3. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency, shareholder service and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust 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.
There are no conversion or preemptive rights in connection with shares of the
Trust.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
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Shareholders representing 10% or more of the Trust's (or a Fund's) outstanding
shares may, as set forth in the Trust Instrument, call meetings of the Trust (or
Fund) for any purpose related to the Trust (or Fund), including, in the case of
a meeting of the Trust, the purpose of voting on removal of one or more
Trustees.
4. CERTAIN REORGANIZATION TRANSACTIONS
The Trust or any Fund 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 Fund. The Trustees may, without prior shareholder
approval, change the form of organization of the Trust by merger, consolidation
or incorporation. 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.
B. FUND OWNERSHIP
As of January ____, 1999, the percentage of shares owned by all officers and
trustees of the Trust as a group was as follows. To the extent officers and
trustees own less than 1% of the shares of each class of shares of a Fund (or of
the Trust), the table reflects "N/A" for not applicable.
PERCENTAGE OF SHARES
FUND (OR TRUST) OWNED
The Trust %
Small Cap Value Fund %
Mid Cap Value Fund %
Large Cap Value Fund %
Value Fund %
Also as of that date, certain shareholders owned of record 5% or more of a class
of shares of a Fund. These shareholders and any shareholder known by a Fund to
own beneficially 5% or more of a class of shares of a Fund are listed in Table 6
in Appendix B.
From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote. As of January __, 1999, the
following persons beneficially owned 25% or more of the shares of a Fund (or of
the Trust) and may be deemed to control the Fund (or the Trust). For each person
listed that is a company, the jurisdiction under the laws of which the company
is organized (if applicable) and the company's parents are listed.
CONTROLLING PERSON INFORMATION
PERCENTAGE OF
SHARES
SHAREHOLDER FUND (OR TRUST) OWNED
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C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the Trust believes that 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's Trust Instrument (the document that governs the
operation of the Trust) 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. FAdS believes that, in view of the above, there
is no risk of personal liability to shareholders.
The Trust Instrument provides that the Trustees shall not be liable to any
person other than the Trust or its shareholders. In addition, the Trust
Instrument provides that 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.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, reference is made to the copy of such contract or other
documents filed as exhibits to the registration statement.
E. FINANCIAL STATEMENTS
The financial statements of the Funds for the year ended September 30, 1998
included in the Annual Report to shareholders of the Trust are incorporated
herein by reference. These financial statements only include the schedules of
investments, statements of assets and liabilities, statements of operations,
statements of changes in net assets, financial highlights, notes and independent
auditors' report.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
AAA Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
some time in the future.
BAA Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
BA 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.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
CAA 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. Ca 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.
C 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
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
-A1-
<PAGE>
2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only
in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
Note. Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree
of speculation and C the highest. While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments
on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category is
used when payments on an obligation are not made on the date due even
if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
NOTE
Plus (+) or minus(-). The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
The "r" symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns which are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
-A2-
<PAGE>
risk-such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse
floaters.
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+
AA High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions.
A+
A, A- Protection factors are average but adequate. However, risk factors are
more variable in periods of greater economic stress.
BBB+
BBB
BBB- Below-average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic
cycles.
BB+
BB
BB- Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according
to industry conditions. Overall quality may move up or down frequently
within this category.
B+
B, B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
-A3-
<PAGE>
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
CCC
CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal imminent
default.
DDD
DD, D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% - 90%
of such outstandings, and `D' the lowest recovery potential, i.e. below
50%.
-A4-
<PAGE>
B. PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
AAA An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
AA An issue which is rated "aa" is considered a high- grade preferred
stock. This rating indicates that there is a reasonable assurance the
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
A An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater then in
the "aaa" and "aa" classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
BAA An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
BA An issue which is rated "ba" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this
class.
B 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.
CAA 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.
CA 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
payments.
C This is the lowest rated class of preferred or preference stock. Issues
so rated can thus be regarded as having extremely poor prospects of
ever attaining any real investment standing.
NOTE
Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA 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.
A 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.
BBB An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
-A5-
<PAGE>
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.
BB
B, CCC Preferred stock rated BB, B, and CCC is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BB indicates the lowest degree of
speculation and CCC the highest. While such issues will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
NOTE
Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
-A6-
<PAGE>
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
2. STANDARD AND POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that
the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than obligations in higher rating categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to
meet its financial commitment on the obligation; however, it faces
major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation.
-A7-
<PAGE>
D A short-term obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
3. FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for timely
repayment under Fitch IBCA's national rating scale for that country,
relative to other obligations in the same country. This rating is
automatically assigned to all obligations issued or guaranteed by the
sovereign state.
Where issues possess a particularly strong credit feature, a "+" is
added to the assigned rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the relative
degree of risk is slightly higher than for issues classified as `A1'
and capacity for timely repayment may be susceptible to adverse change
sin business, economic, or financial conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is more
susceptible to adverse changes in business, economic, or financial
conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is uncertain
relative to other obligors in the same country. The capacity for timely
repayment is susceptible to adverse changes in business, economic, or
financial conditions.
C Obligations for which there is a high risk of default to other obligors in the
same country or which are in default.
-A8-
<PAGE>
APPENDIX B - MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
The following Table shows the dollar amount of fees payable to the Adviser with
respect to each Fund, the amount of fee that was waived by the Adviser, if any,
and the actual fee received by the Adviser.
<TABLE>
<S> <C> <C> <C>
ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
SMALL CAP VALUE FUND WAIVED
Year Ended September 30, 1998 $1,434,005 $0 $1,434,005
Year Ended September 30, 1997 $635,864 $0 $635,864
Year Ended September 30, 1996 $173,105 $39,802 $132,303
ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
MID CAP VALUE FUND WAIVED
Year Ended September 30, 1998 $25,934 $25,934 $0
ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
LARGE CAP VALUE FUND WAIVED
Year Ended September 30, 1998 $6,174 $6,174 $0
ADVISORY FEE PAYABLE ADVISORY FEE ADVISORY FEE RETAINED
VALUE FUND WAIVED
Year Ended September 30, 1998 $39,465 $39,465 $0
</TABLE>
-B1-
<PAGE>
TABLE 2 - ADMINISTRATION FEES
The following Table shows the dollar amount of fees payable to FAdS with respect
to each Fund, the amount of fee that was waived by FAdS, if any, and the actual
fee received by FAdS.
<TABLE>
<S> <C> <C> <C>
ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
SMALL CAP VALUE FUND PAYABLE WAIVED RETAINED
Year Ended September 30, 1998 $190,232 $17,897 $172,335
Year Ended September 30, 1997 $127,123 $0 $127,123
Year Ended September 30, 1996 $40,000 $15,579 $24,421
ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
MID CAP VALUE FUND PAYABLE WAIVED RETAINED
Year Ended September 30, 1998 $18,414 $0 $18,414
ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
LARGE CAP VALUE FUND PAYABLE WAIVED RETAINED
Year Ended September 30, 1998 $2,554 $0 $2,554
ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
VALUE FUND PAYABLE WAIVED RETAINED
Year Ended September 30, 1998 $18,414 $0 $18,414
</TABLE>
-B2-
<PAGE>
TABLE 3 - ACCOUNTING FEES
The following table shows the dollar amount of fees payable to FAcS with respect
to each Fund.
ACCOUNTING FEE PAYABLE
SMALL CAP VALUE FUND
Investor Shares
Year Ended September 30, 1998 $44,832
Year Ended September 30, 1997 $41,500
Year Ended September 30, 1996 $39,000
Institutional Shares
Year Ended September 30, 1998 $6,168
ACCOUNTING FEE PAYABLE
MID CAP VALUE FUND
Year Ended September 30, 1998 $28,516
ACCOUNTING FEE PAYABLE
LARGE CAP VALUE FUND
Year Ended September 30, 1998 $5,677
ACCOUNTING FEE PAYABLE
VALUE FUND
Year Ended September 30, 1998 $30,516
-B3-
<PAGE>
TABLE 4 - SHAREHOLDER SERVICE FEES
The following table shows the dollar amount of shareholder service fees payable
to the Transfer Agent with respect to Investor Shares of each Fund.
SMALL CAP VALUE FUND FEE PAYABLE
Year Ended September 30, 1998 $
Year Ended September 30, 1997 $
Year Ended September 30, 1996 $
MID CAP VALUE FUND FEE PAYABLE
Year Ended September 30, 1998 $
LARGE CAP VALUE FUND FEE PAYABLE
Year Ended September 30, 1998 $
VALUE FUND FEE PAYABLE
Year Ended September 30, 1998 $
-B4-
<PAGE>
TABLE 5 - COMMISSIONS
The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.
AGGREGATE COMMISSION
SMALL CAP VALUE FUND PAID
Year Ended September 30, 1998 $0
Year Ended September 30, 1997 $0
Year Ended September 30, 1996 $0
AGGREGATE COMMISSION
MID CAP VALUE FUND PAID
Year Ended September 30, 1998 $0
Year Ended September 30, 1997 $0
Year Ended September 30, 1996 $0
AGGREGATE COMMISSION
LARGE CAP VALUE FUND PAID
Year Ended September 30, 1998 $0
Year Ended September 30, 1997 $0
Year Ended September 30, 1996 $0
AGGREGATE COMMISSION
VALUE FUND PAID
Year Ended September 30, 1998 $0
Year Ended September 30, 1997 $0
Year Ended September 30, 1996 $0
-B5-
<PAGE>
TABLE 6 - 5% SHAREHOLDERS
The following table lists (1) the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund and (2) any person known by a
Fund to own beneficially 5% or more of a class of shares of a Fund, as of
January __, 1999.
<TABLE>
<S> <C> <C> <C> <C>
% OF % OF FUND
FUND/CLASS OF SHARES NAME AND ADDRESS SHARES CLASS
Small Cap Value Fund
Investor Shares
Institutional Shares
Mid Cap Value Fund
Investor Shares
Institutional Shares
Large Cap Value Fund
Investor Shares
Institutional Shares
Value Fund
Investor Shares
Institutional Shares
</TABLE>
-B6-
<PAGE>
APPENDIX C - PERFORMANCE DATA
TABLE 1 - YIELDS
For the 30-day period ended September 30, 1998, the annualized yield of each
class of shares of the Funds was as follows.
TAX EQUIVALENT YIELD
SMALL CAP VALUE FUND YIELD
Investor Shares 0% 0%
Institutional Shares 0% 0%
TAX EQUIVALENT YIELD
MID CAP VALUE FUND YIELD
Institutional Shares 0% 0%
LARGE CAP VALUE FUND TAX EQUIVALENT YIELD
YIELD
Investor Shares 0% 0%
TAX EQUIVALENT YIELD
VALUE FUND YIELD
Investor Shares 0% 0%
-C1-
<PAGE>
TABLE 2 - TOTAL RETURNS
The average annual total return of each class of shares of each Fund for the
period ended September 30, 1998, was as follows.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CALENDAR
ONE THREE YEAR TO ONE YEAR THREE FIVE TEN SINCE
SMALL CAP VALUE FUND MONTH MONTHS DATE YEARS YEARS YEARS INCEPTION
Investor Shares 0.00% 0.00% 0.00% 0.00% 0.00% n/a n/a 0.00%
Institutional Shares 0.00% 0.00% 0.00% 0.00% n/a n/a n/a 0.00%
CALENDAR
ONE THREE YEAR TO ONE YEAR THREE FIVE TEN SINCE
MID CAP VALUE FUND MONTH MONTHS DATE YEARS YEARS YEARS INCEPTION
Institutional Shares 0.00% 0.00% 0.00% 0.00% n/a n/a n/a 0.00%
CALENDAR
ONE THREE YEAR TO ONE YEAR THREE FIVE TEN SINCE
LARGE CAP VALUE FUND MONTH MONTHS DATE YEARS YEARS YEARS INCEPTION
Investor Shares 0.00% 0.00% 0.00% 0.00% n/a n/a n/a 0.00%
CALENDAR
ONE THREE YEAR TO ONE YEAR THREE FIVE TEN SINCE
VALUE FUND MONTH MONTHS DATE YEARS YEARS YEARS INCEPTION
Investor Shares 0.00% 0.00% 0.00% 0.00% n/a n/a n/a 0.00%
</TABLE>
-C2-
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Trust Instrument of Registrant dated April 20, 1995 as amended August
7, 1997 (see Note 1).
(b) Bylaws of Registrant dated April 20, 1995 as amended August 7, 1997
(filed herewith).
(c) Not Applicable.
(d) Investment Advisory Agreement between Registrant and Cramer Rosenthal
McGlynn, LLC dated as of January 1, 1998 (see Note 2).
(e) Distribution Agreement between Registrant and Forum Financial Services,
Inc. dated as of November 19, 1996 (see Note 3).
(f) Not Applicable.
(g) Custodian Agreement between Registrant and the First National Bank of
Boston dated as of September 15, 1995 (see Note 3).
(h) (1) Administration Agreement between Registrant and Forum
Administrative Services, LLC dated as of January 1, 1998 (see
Note 2).
(2) Transfer Agency Agreement between Registrant and Forum
Shareholder Services, LLC dated as of January 1, 1998 (see
Note 2).
(3) Fund Accounting Agreement to be between Registrant and Forum
Accounting Services, LLC dated as of January 1, 1998 (see
Note 2).
(i) (1) Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
dated September 26, 1995 (see Note 2).
(2) Opinion of Morris, Nichols, Arsht & Tunnell dated September
26, 1995 (see Note 3).
(j) Not Applicable.
(k) Not Applicable.
(l) Form of Investment Representation Letter (see Note 3).
(m) Not Applicable.
(n) Financial Data Schedules (see Note 4).
(o) Multiclass (Rule 18f-3) adopted by the Trust (see Note 2).
Other Exhibits:
(A) Power of Attorney of Fred M. Filoon (see note 3).
(B) Power of Attorney of John E. Appelt (see note 3).
(C) Power of Attorney of Louis Klein Jr. (see note 3).
(D) Power of Attorney of Clement C. Moore, II(see note 3).
<PAGE>
(E) Power of Attorney of Eugene A. Trainor, III (see note 3).
- --------------
Notes:
(1) Exhibit incorporated by reference as filed in
Post-Effective Amendment No. 1 via EDGAR on April 30, 1996,
accession number 0000912057-96-007562.
(2) Exhibit incorporated by reference as filed in
Post-Effective Amendment No. 5, via EDGAR on July 17, 1998,
accesssion number 0001004402-98-000396.
(3) Exhibit incorporated by reference as filed in
Post-Effective Amendment No. 3 via EDGAR on October 17,
1997, accession number 0001047469-97-001104.
(4) Exhibit incorporated by reference as filed in
Post-Effective Amendment No. 6 via EDGAR on August 21,
1998, accession number 0001004402-98-000452.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. 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 Shareholders
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 (a) and incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
The description of Cramer Rosenthal McGlynn, 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 Cramer Rosenthal McGlynn, LLC, is 707 Westchester
Avenue, White Plains, New York 10604. The following are the partners and
executive officers of Cramer Rosenthal McGlynn, LLC, including any business
<PAGE>
connections of a substantial nature which they have had in the past two years.
Unless otherwise indicated, the address of any other business connection is also
707 Westchester Avenue, White Plains, New York 10604.
<TABLE>
<S> <C> <C>
- --------------------------------------- --------------------------------------- -------------------------------------
Name Title Business Connection
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Gerald Bertram Cramer Chairman Cramer Rosenthal McGlynn, LLC.
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Edward John Rosenthal Vice Chairman and Treasurer Cramer Rosenthal McGlynn, LLC.
--------------------------------------- -------------------------------------
Executive Vice President CRM Management, Inc.
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Ronald Howard McGlynn President Cramer Rosenthal McGlynn, LLC.
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Jay Brian Abramson Executive Vice President Cramer Rosenthal McGlynn, LLC
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Fred Marden Filoon Senior Vice President Cramer Rosenthal McGlynn, LLC.
--------------------------------------- -------------------------------------
President The CRM Funds
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Arthur Jay Pergament Senior Vice President Cramer Rosenthal McGlynn, LLC.
- --------------------------------------- --------------------------------------- -------------------------------------
- --------------------------------------- --------------------------------------- -------------------------------------
Eugene Anthony Trainor, III Treasurer and Assistant Secretary Cramer Rosenthal McGlynn, LLC.
--------------------------------------- -------------------------------------
Treasurer, Vice President, Secretary The CRM Funds
--------------------------------------- -------------------------------------
--------------------------------------- -------------------------------------
Chief Financial Officer and Controller Grotech Capital Group, Inc.
Timonium, MD
- --------------------------------------- --------------------------------------- -------------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter for the following investment companies registered under the
Investment Company Act of 1940, as amended:
BT Alex Brown Funds
The Cutler Trust
Forum Funds
Memorial Funds
Monarch Funds
Norwest Advantage Funds
Norwest Select Funds
Sound Shore Fund, Inc.
(b) The following directors and officers of Forum Financial Services, Inc.
hold the following positions with Registrant. Their business address
is Two Portland Square, Portland, Maine 04101
<TABLE>
<S> <C> <C>
------------------------------------- ------------------------------- -----------------------------
Name Position with Underwriter Position with Registrant
------------------------------------- ------------------------------- -----------------------------
------------------------------------- ------------------------------- -----------------------------
------------------------------------- ------------------------------- -----------------------------
Sara M. Morris Treasurer Treasurer
------------------------------------- ------------------------------- -----------------------------
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 (the "1940
Act") and the Rules thereunder are maintained at the offices of Forum
Administrative Services, LLC, and Forum Financial Corp. The offices of both
companies are located at Two Portland Square, Portland, Maine 04101. The records
required to be maintained under Rule 31a-1(b)(1) with respect to journals of
receipts and deliveries of securities and receipts and disbursements of cash are
<PAGE>
maintained at the offices of the Registrant's custodian, as listed under "Other
Information - Custodian" in Part B to this Registration Statement.
ITEM 29. MANAGEMENT SERVICES.
Inapplicable.
ITEM 30. UNDERTAKINGS.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
post-effective amendment number 7 to Registrant's registration statement to be
signed on its behalf by the undersigned, duly authorized, in the City of White
Plains, State of New York on the 2nd day of December, 1998.
THE CRM FUNDS
/s/ Fred M. Filoon
----------------------------
Fred M. Filoon, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on the 2nd
day of December, 1998.
Signatures Title
(a) Principal Executive Officer
/s/ Fred M. Filoon
---------------------------------
Fred M. Filoon President
(b) Principal Financial and
Accounting Officer
/s/ Eugene A. Trainor, III Treasurer
--------------------------------
Eugene A. Trainor, III
(c) A Majority of the Trustees
John E. Appelt Trustee
Fred M. Filoon Trustee
Louis Klein, Jr. Trustee
Clement C. Moore, II Trustee
By /s/ David I. Goldstein
----------------------------------
David I. Goldstein, Attorney-in-Fact*
* Pursuant to powers of attorney filed as Other Exhibits A, B, C and D
to this Registration Statement.
<PAGE>
---------------------------
OMG APPROVAL
---------------------------
OMB Number:
Expires:
Estimated average burden
hours per response:
---------------------------
INDEX TO EXHIBITS
Exhibit
(b) Bylaws of Registrant dated April 20, 1995 as amended August 7, 1997.
THE CRM FUNDS
BYLAWS
APRIL 20, 1995
as amended August 7, 1997
<PAGE>
THE CRM FUNDS
BYLAWS
These Bylaws of The CRM Funds (the "Trust"), a Delaware business trust,
are subject to the Trust Instrument of the Trust, dated April 20, 1995, as from
time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in New York City,
New York, or such other location as the Trustees may, from time to time,
determine. The Trust may establish and maintain such other offices and places of
business as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
SECTION 2.01 OFFICERS. The officers of the Trust shall be a President,
a Treasurer, a Secretary, and such other officers as the Trustees may from time
to time elect. The Trustees may delegate to any officer or committee the power
to appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
SECTION 2.02 ELECTION OF OFFICERS. The Treasurer and Secretary shall be
chosen by the Trustees. The President shall be chosen by and from the Trustees.
Two or more offices may be held by a single person except the offices of
President and Secretary. Subject to the provisions of Section 3.13 hereof, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees.
SECTION 2.03 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The business and affairs of the
Trust shall be managed by, or under the direction of, the Trustees, and they
<PAGE>
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
SECTION 3.02 EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect
from their own number an executive committee, which shall have any or all the
powers of the Trustees while the Trustees are not in session. The Trustees may
also elect from their own number other committees from time to time. The number
composing such committees and the powers conferred upon the same are to be
determined by vote of a majority of the Trustees. All members of such committees
shall hold such offices at the pleasure of the Trustees. The Trustees may
abolish any such committee at any time. Any committee to which the Trustees
delegate any of their powers or duties shall keep records of its meetings and
shall report its actions to the Trustees. The Trustees shall have power to
rescind any action of any committee, but no such rescission shall have
retroactive effect.
SECTION 3.03 COMPENSATION. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
SECTION 3.04 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint from
among their number a Chairman who shall serve as such at the pleasure of the
Trustees. When present, he shall preside at all meetings of the Shareholders and
the Trustees, and he may, subject to the approval of the Trustees, appoint a
Trustee to preside at such meetings in his absence. He shall perform such other
duties as the Trustees may from time to time designate.
SECTION 3.05 PRESIDENT. The President shall be the chief executive
officer of the Trust and, subject to the direction of the Trustees, shall have
general administration of the business and policies of the Trust. Except as the
Trustees may otherwise order, the President shall have the power to grant,
issue, execute or sign such powers of attorney, proxies, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisors and agents and counsel for the
Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
SECTION 3.06 TREASURER. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees may from time to time designate.
SECTION 3.07 SECRETARY. The Secretary shall record in books kept for
the purpose all votes and proceedings of the Trustees and the Shareholders at
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their respective meetings. He shall have the custody of the seal of the Trust.
The Secretary shall perform such additional duties as the Trustees may from time
to time designate.
SECTION 3.08 VICE PRESIDENT. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 3.09 ASSISTANT TREASURER. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer.
SECTION 3.10 ASSISTANT SECRETARY. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary.
SECTION 3.11 SUBORDINATE OFFICERS. The Trustees from time to time may
appoint such officers or agents as they may deem advisable, each of whom shall
have such title, hold office for such period, have such authority and perform
such duties as the Trustees may determine. The Trustees from time to time may
delegate to one or more officers or committees of Trustees the power to appoint
any such subordinate officers or agents and to prescribe their respective terms
of office, authorities and duties.
SECTION 3.12 SURETY BONDS. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by the 1940 Act and the rules and regulations of the Commission) to the
Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his duties to the Trust
including responsibility for negligence and for the accounting of any of the
Trust's property, funds or securities that may come into his hands.
SECTION 3.13 REMOVAL. Any officer may be removed from office whenever
in the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at any regular meeting
or any special meeting of the Trustees. In addition, any officer or agent
appointed in accordance with the provisions of Section 3.10 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Trustees.
SECTION 3.14 REMUNERATION. The salaries or other compensation, if any,
of the officers of the Trust shall be fixed from time to time by resolution of
the Trustees.
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ARTICLE IV
SHAREHOLDER'S MEETINGS
SECTION 4.01 SPECIAL MEETINGS. A special meeting of the shareholders
shall be called by the Secretary whenever (a) ordered by the Trustees or (b)
requested in writing by the holder or holders of at least 10% of the Outstanding
Shares entitled to vote. If the Secretary, when so ordered or requested, refuses
or neglects for more than 30 days to call such special meeting, the Trustees or
the Shareholders so requesting, may, in the name of the Secretary, call the
meeting by giving notice thereof in the manner required when notice is given by
the Secretary. If the meeting is a meeting of the Shareholders of one or more
Series or classes of Shares, but not a meeting of all Shareholders of the Trust,
then only special meetings of the Shareholders of such one or more Series or
classes shall be called and only the shareholders of such one or more Series or
classes shall be entitled to notice of and to vote at such meeting.
SECTION 4.02 NOTICES. Except as provided in Section 4.01, notices of
any meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen (15) days
before the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
SECTION 4.03 VOTING-PROXIES. Subject to the provisions of the Trust
Instrument, shareholders entitled to vote may vote either in person or by proxy,
provided that either (a) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven (11) months before
the meeting, unless the instrument specifically provides for a longer period or
(b) the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, which authorization is received not more than eleven (11) months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder thereof to
vote at any adjournment of a meeting. A proxy purporting to be exercised by or
on behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden or proving invalidity shall rest on the
challenger. At all meetings of the Shareholders, unless the voting is conducted
by inspectors, all questions relating to the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes shall be decided
by the Chairman of the meeting. Except as otherwise provided herein or in the
Trust Instrument, as these Bylaws or such Trust Instrument may be amended or
supplemented from time to time, all maters relating to the giving, voting or
<PAGE>
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholder of a Delaware corporation.
SECTION 4.04 PLACE OF MEETING. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
SECTION 4.05 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
ARTICLE V
TRUSTEES' MEETINGS
SECTION 5.01 SPECIAL MEETINGS. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
SECTION 5.02 REGULAR MEETINGS. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
SECTION 5.03 QUORUM. A majority of the Trustees shall constitute a
quorum for the transaction of business and an action of a majority of the quorum
shall constitute action of the Trustees.
SECTION 5.04 NOTICE. Except as otherwise provided, notice of any
special meeting of the Trustees shall be given by the party calling the meeting
to each Trustee, as provided for the Section 4.04 of the Trust Instrument. A
written notice may be mailed, postage prepaid, addressed to him at his address
as registered on the books of the Trust or, if not so registered, at his last
known address.
SECTION 5.05 PLACE OF MEETING. All special meetings of the Trustees
shall be held at the principal place of business of the Trust or such other
place as the Trustees may designate. Any meeting may adjourn to any place.
SECTION 5.06 SPECIAL ACTION. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
<PAGE>
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
SECTION 5.07 ACTION BY CONSENT. Unless the 1940 Act requires that a
particular action be taken at a meeting at which the Trustees are present in
person, any action by the Trustees may be taken without a meeting if a written
consent thereto is signed by all the Trustees and filed with the records of the
Trustees' meeting. Such consent shall be treated, for all purposes, as a vote at
a meeting of the Trustees held at the principal place of business of the
Trustees.
SECTION 5.08 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Trustees may participate in a meeting of Trustees by conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at such meeting. Any meeting conducted by telephone shall be
deemed to take place at and from the principal office of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.01 BENEFICIAL INTEREST. The beneficial interest in the Trust
shall at all times divided into such transferable Shares of one or more separate
and distinct Series, or classes thereof, as the Trustees shall from time to time
create and establish. The number of Shares is unlimited, and each Share of each
Series or class thereof shall have a par value equal to $0.01 and shall
represent an equal proportionate interest with each other Share in the Series,
none having priority or preference over another, except to the extent that such
priorities or preference are established with respect to one or more classes of
shares consistent with applicable law and any rule or order of the Commission.
SECTION 6.02 TRANSFER OF SHARES. The Shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
on the books of the Trust, in person or by attorney.
SECTION 6.03 EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be
entitled to treat the holder of record of any Share or Shares of beneficial
interest as equitable or other claim or interest in such Share or Shares on the
part of any other person except as may be otherwise expressly provided by law.
SECTION 6.04 SHARE CERTIFICATE. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In the
event that the Trustees authorize the issuance of Share certificates, such
certificate shall be in the form proscribed from time to time by the Trustees
and shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder services
<PAGE>
agent or by a registrar, other than a Trustee, officer or employee of the Trust.
In case any officer who has signed or whose facsimile signature has been placed
on certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or the
transfer or shareholder services agent may either issue receipts therefor or may
keep accounts upon the books of the Trusts for the record holders of such
Shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
SECTION 6.05 LOSS OF CERTIFICATES. In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
SECTION 6.06 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be deemed to
hold legal and beneficial ownership of any income earned on securities held by
the Trust issued by any business entity formed, organized or existing under the
laws of any jurisdiction other than a state, commonwealth, possession or colony
of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholder; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
<PAGE>
ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any Covered
Person or employee of the Trust, including any Covered Person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust of its Shareholders to which he would otherwise be
subject by reason or willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"THE CRM FUNDS -- 1995
THE STATE OF DELAWARE"