FORUM FUNDS INC, 497, 1996-08-07

FORUM FUNDS INC
497, 1996-08-07

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FORUM FUNDS
PROSPECTUS

AUGUST 1, 1996

DAILY ASSETS
TREASURY FUND

DAILY ASSETS
GOVERNMENT FUND

DAILY ASSETS CASH FUND

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<C> <S> <C>
1. Prospectus Summary................... 2

2. Financial Highlights................. 4

3. Investment Objective and Policies.... 4

4. Management........................... 8

5. Purchases and Redemptions of 10
Shares..............................

6. Dividends and Tax Matters............ 15

7. Other Information.................... 16

Account Application
</TABLE>

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FORUM FUNDS

DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT FUND
[LOGO]
DAILY ASSETS CASH FUND

ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING:
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94 Forum
PROSPECTUS

August 1, 1996
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This Prospectus offers shares of Daily Assets Treasury Fund, Daily Assets
Government Fund and Daily Assets Cash Fund (each a "Fund"), which are
diversified portfolios of Forum Funds (the "Trust"), an open-end, management
investment company. Each Fund's investment objective is to seek to provide its
shareholders with high current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.

DAILY ASSETS TREASURY FUND invests primarily in obligations issued or
guaranteed by the United States Treasury or by certain agencies and
instrumentalities of the United States Government with a view toward
providing income that is generally considered exempt from state and local
income taxes.

DAILY ASSETS GOVERNMENT FUND invests primarily in obligations of the U.S.
Government, its agencies and instrumentalities, and in repurchase
agreements backed by these obligations.

DAILY ASSETS CASH FUND invests in a broad spectrum of high-quality money
market instruments.

EACH FUND CURRENTLY SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS
INVESTABLE ASSETS IN A SEPARATE PORTFOLIO OF A REGISTERED, OPEN-END MANAGEMENT
INVESTMENT COMPANY WITH AN IDENTICAL INVESTMENT OBJECTIVE. SEE "PROSPECTUS
SUMMARY" AND "OTHER INFORMATION - FUND STRUCTURE."

Shares of the Funds are offered to investors at a price equal to the next
determined net asset value without any sales charge.

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission ("SEC") a Statement of
Additional Information dated August 1, 1996, as may be amended from time to time
(the "SAI"), which contains more detailed information about the Trust and the
Funds and which is incorporated into this Prospectus by reference. The SAI is
available without charge by contacting the Trust at the address listed above.

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY
OTHER FEDERAL AGENCY.

THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUNDS

THE FUNDS. Each Fund seeks to achieve its investment objective by investing
all of its investable assets in a separate series of Core Trust (Delaware)
("Core Trust"), itself a registered open-end management investment company.
Daily Assets Treasury Fund, Daily Assets Government Fund and Daily Assets Cash
Fund invest in each of Treasury Portfolio, Government Cash Portfolio and Cash
Portfolio (each a "Portfolio" and collectively the "Portfolios"), respectively.
Accordingly, the investment experience of each Fund will correspond directly
with the investment experience of its corresponding Portfolio. See "Other
Information - Fund Structure."

MANAGEMENT. Forum Financial Services, Inc. ("Forum") supervises the overall
management of the Funds and is the distributor of the Funds' shares. Forum
Advisors, Inc. ("Forum Advisors") is the investment adviser of Treasury
Portfolio and provides professional management of that Portfolio's investments.
Linden Asset Management, Inc. ("Linden") is the investment adviser of Government
Cash Portfolio and Cash Portfolio and provides professional management of those
Portfolios' investments. Forum Advisors and Linden provide certain subadvisory
assistance for the Portfolio's they do not directly advise. The Trust's transfer
agent, dividend disbursing agent and shareholder servicing agent (the "Transfer
Agent") is Forum Financial Corp. See "Management."

SHAREHOLDER SERVICING. The Trust has adopted a Shareholder Service Plan
relating to Shares of each Fund under which Forum is compensated for various
shareholder servicing activities. See "Management - Shareholder Servicing."

PURCHASES AND REDEMPTIONS. Shares of the Funds may be purchased and
redeemed Monday through Friday except on customary national business holidays,
Good Friday and other days that the Federal Reserve Bank of San Francisco is
closed ("Fund Business Days"). Shares of the Funds are offered without a sales
charge and may be redeemed without charge at the next determined net asset
value. The minimum initial investment is $10,000 ($2,000 for IRAs, $2,500 for
exchanges) and the minimum subsequent investment is $500. Shareholders may elect
to have redemptions of over $5,000 transferred by bank wire to a designated bank
account. See "Purchases and Redemptions of Shares."

EXCHANGE PROGRAM. Shareholders of a Fund may exchange their shares without
charge for shares of the other Funds and for the shares of certain other funds
of the Trust not offered by this Prospectus. See "Purchases and Redemptions of
Shares - Exchanges."

DIVIDENDS. Dividends of net investment income are declared daily and paid
monthly by each Fund and are reinvested in Fund shares unless a shareholder
elects to have them paid in cash. See "Dividends and Tax Matters."

RISK FACTORS. There can be no assurance that either Fund will achieve its
investment objective, nor can there be any assurance that either Fund will
maintain a stable net asset value of $1.00 per share. Although the Funds invest
in money market instruments, an investment in any Fund involves certain risks,
depending on the types of investments made and the types of investment
techniques employed. All investments by the Funds entail some risk. Certain
investments and investment techniques, however, entail additional risks,
such as investments in variable and floating rate securities, zero-coupon
securities and forward commitment securities. The use of leverage by a
Fund through borrowings and other investment techniques involves additional
risks. For more details about each Fund and its investments and risks, see
"Investment Objective and Policies." By investing solely in Daily Assets
Government Portfolio and Daily Assets Cash Portfolio, Daily Assets Government
Fund and Daily Assets Cash Fund, respectively, may achieve certain efficiencies
and economies of scale. Nonetheless,

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these investments could also have potential adverse effects on the applicable
Fund. Investors in the Funds should consider these risks, as described under
"Other Information - Core Trust Structure."

EXPENSES OF INVESTING IN THE FUNDS

The purpose of the following table is to assist investors in understanding
the various expenses that an investor in a Fund will bear directly or
indirectly. The table reflects the combined expenses of each Fund and its
corresponding Portfolio. There are no transaction expenses associated with
purchases, redemptions or exchanges of Fund shares.

ANNUAL FUND OPERATING EXPENSES (1)(2)

(as a percentage of average net assets, after applicable expense reimbursements)

<TABLE>
<CAPTION>
Daily Assets
Daily Assets Government Daily Assets
Treasury Fund Fund Cash Fund
------------- ------------- -------------
<S> <C> <C> <C>
Management Fees
(after waivers)
(3)................ 0.20% 0.09% 0.07%
Rule 12b-1 Fees..... None None None
Other Expenses
(after
reimbursements).... 0.30% 0.46% 0.48%
------ ------ ------
Total Fund Operating
Expenses........... 0.50% 0.55% 0.55%
</TABLE>

(1) For a further description of the various expenses incurred in the
operation of the Funds and the Portfolios, see "Management." Expenses for Daily
Assets Treasury Fund are based on actual expenses incurred during the Fund's
most recent fiscal year ended March 31, 1996. Expenses for Daily Assets
Government Fund and Daily Assets Cash Fund are estimated annualized expenses for
the Funds' first fiscal year of operations. Absent expense reimbursement
(estimated reimbursements in the case of Daily Assets Government Fund and Daily
Assets Cash Fund), "Management Fees" for each of Daily Assets Treasury Fund,
Daily Assets Government Fund and Daily Assets Cash Fund would be 0.59%, 0.78%
and 0.81%, respectively, and "Total Fund Operating Expenses" would be 1.06%,
1.02% and 1.06%, respectively. Expense reimbursements and fee waivers are
voluntary and may be reduced or eliminated at any time.

(2) Each Fund's expenses include the Fund's pro rata portion of all
operating expenses of the corresponding Portfolio, which will be borne
indirectly by Fund shareholders. The Trust's board of trustees believes that the
aggregate per share expenses of each Fund and its respective Portfolio will be
approximately equal to the expenses the Fund would incur if its assets were
invested directly in money market securities.

(3) Management Fees include all administration fees and investment advisory
fees incurred by the Funds and the Portfolios; as long as its assets are
invested in a Portfolio, a Fund pays no investment advisory fees directly.

EXAMPLE

Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in a Fund would pay assuming (i) the investment of all
of the Fund's assets in the Portfolio, (ii) a $1,000 investment in the Fund,
(iii) a 5% annual return, (iv) the reinvestment of all dividends and
distributions and (v) redemption at the end of each period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Daily Assets Treasury
Fund.................... $5 $16 $28 $63
Daily Assets Government
Fund.................... $6 $18 N/A N/A
Daily Assets Cash Fund... $6 $18 N/A N/A
</TABLE>

The example is based on the expenses listed in the Annual Fund Operating
Expenses table, which assumes the continued waiver and reimbursement of certain
fees and expenses. The five percent annual return is not predictive of and does
not represent the Fund's projected returns; rather, it is required by government
regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN INDICATED.

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2. FINANCIAL HIGHLIGHTS

The following information represents selected data for a single share
outstanding of Daily Assets Treasury Fund. This information was audited by
Deloitte & Touche LLP, independent auditors. The financial statements and
independent auditors' report thereon for the fiscal year ended March 31, 1996
are incorporated by reference into the SAI. Further information about the Fund's
performance is contained in the Fund's annual report to shareholders which may
be obtained from the Trust without charge. As of July 31, 1996, Daily Assets
Government Fund and Daily Assets Cash Fund had not commenced operations.

<TABLE>
<CAPTION>
DAILY ASSETS TREASURY FUND
Year Ended March 31,
----------------------------------------------------
1996 1995 1994 1993(1)
----------- ------- ------- -----------
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00
----------- ------- ------- -----------
Net Investment Income 0.05 0.04 0.03 0.02
Dividends from Net Investment Income (0.05) (0.04) (0.03) (0.02)
----------- ------- ------- -----------
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00
----------- ------- ------- -----------
----------- ------- ------- -----------
Ratios to Average Net Assets:
Expenses (2) 0.50%(4) 0.37% 0.33% 0.22%(3)
Net Investment Income 5.01% 4.45% 2.82% 2.92%(3)
Gross Expenses (2) 1.06%(4) 1.10% 1.17% 2.43%(3)
Total Return 5.18% 4.45% 2.83% 3.13%(3)
Net Assets at the End of Period (000's
Omitted) $43,103 $36,329 $26,505 $4,687
</TABLE>

(1) The Fund commenced operations on July 1, 1992.

(2) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had such waiver and reimbursements not occurred, the ratio of
expenses to average net assets would have been:

(3) Annualized.

(4) Includes expenses allocated from Treasury Portfolio of Core Trust (Delaware)
of 0.02%, net of waivers of 0.07%.

3. INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The investment objective of each Fund is to provide high current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity. Each Fund currently seeks to achieve its investment objective by
investing all of its investable assets in its corresponding Portfolio, which has
the same investment objective. There

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can be no assurance that any Fund or Portfolio will achieve its investment
objective or maintain a stable net asset value.

INVESTMENT POLICIES

Each Portfolio invests only in high quality, short-term money market
instruments that are determined by its investment adviser, pursuant to
procedures adopted by the Core Trust Board, to be eligible for purchase and to
present minimal credit risks. High quality instruments include those that (i)
are rated (or, if unrated, are issued by an issuer with comparable outstanding
short-term debt that is rated) in the highest rating category by two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
issued a rating, by that NRSRO or (ii) are otherwise unrated and determined by
the Adviser to be of comparable quality. A description of the rating categories
of certain NRSROs, such as Standard & Poor's and Moody's Investors Service,
Inc., is contained in the SAI.

Each Portfolio invests only in U.S. dollar-denominated instruments that have
a remaining maturity of 397 days or less (as calculated under Rule 2a-7 under
the Investment Company Act of 1940 (the "1940 Act")) and maintains a dollar-
weighted average portfolio maturity of 90 days or less. Except to the limited
extent permitted by Rule 2a-7 and except for U.S. Government Securities, each
Portfolio will not invest more than 5% of its total assets in the securities of
any one issuer. As used herein, "U.S. Government Securities" means obligations
issued or guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities.

A portfolio's yield will tend to fluctuate inversely with prevailing market
interest rates. For instance, in periods of falling market interest rates,
yields will tend to be somewhat higher than those rates. Although each Portfolio
only invests in high quality money market instruments, an investment in a
Portfolio is subject to risk even if all securities in the Portfolio's portfolio
are paid in full at maturity. All money market instruments, including U.S.
Government Securities, can change in value when there is a change in interest
rates, the issuer's actual or perceived creditworthiness or the issuer's ability
to meet its obligations.

TREASURY PORTFOLIO

Treasury Portfolio seeks to attain its investment objective by investing
primarily in obligations issued or guaranteed as to principal and interest by
the United States Treasury ("U.S. Treasury Securities"). Under normal market
conditions, the Portfolio will invest at least 65% of its total assets in U.S.
Treasury Securities, such as Treasury bills and notes. The Portfolio may also
invest up to 35% of its total assets in other U.S. Government Securities. The
Portfolio invests with a view toward providing income that is generally
considered exempt from state and local income taxes. The Portfolio will purchase
a U.S. Government Security that is not backed by the full faith and credit of
the U.S. Government only if that security has a remaining maturity of thirteen
months or less.

Among the U.S. Government Securities in which the Portfolio may invest are
obligations of the Farm Credit System, Farm Credit System Financial Assistance
Corporation, Federal Financing Bank, Federal Home Loan Banks, General Services
Administration, Student Loan Marketing Association, and Tennessee Valley
Authority. See "Investment Policies - Government Cash Portfolio." Income on
these obligations and the obligations of certain other agencies and
instrumentalities is generally not subject to state and local income taxes by
Federal law. In addition, the income received by Fund shareholders that is
attributable to these investments will also be exempt in most states from state
and local income taxes. Shareholders should determine through consultation with
their own tax advisers whether and to what extent dividends payable by the Fund
from interest received with respect to its investments will be considered to be
exempt from state and local

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income taxes in the shareholder's state. Shareholders similarly should determine
whether the capital gain and other income, if any, payable by the Fund will be
subject to state and local income taxes in the shareholder's state. See
"Dividend and Tax Matters."

U.S. GOVERNMENT ZERO COUPON SECURITIES. The Portfolio may invest in
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury under the Treasury's Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Zero coupon
securities are sold at original issue discount and pay no interest to holders
prior to maturity. Because of this, zero coupon securities may be subject to
greater fluctuation of market value than the other securities in which the
Portfolio may invest. See "Dividends and Tax Matters - Taxes."

GOVERNMENT CASH PORTFOLIO

Government Cash Portfolio seeks to attain its investment objective by
investing, under normal circumstances, at least 65% of its assets in U.S.
Government Securities and in repurchase agreements backed by U.S. Government
Securities. The U.S. Government Securities in which the Portfolio may invest
include securities issued by the U.S. Treasury and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the U.S. Government, such as those guaranteed by
the Small Business Administration. In addition, the U.S. Government Securities
in which the Portfolio may invest include securities supported primarily or
solely by the creditworthiness of the issuer, such as securities of the Federal
National Mortgage Association. There is no guarantee that the U.S. Government
will support securities not backed by its full faith and credit. Accordingly,
although these securities have historically involved little risk of loss of
principal if held to maturity, they may involve more risk than securities backed
by the U.S. Government's full faith and credit.

CASH PORTFOLIO

Cash Portfolio seeks to attain its investment objective by investing in a
broad spectrum of money market instruments. The Portfolio may invest in (i)
obligations of domestic financial institutions, (ii) U.S. Government Securities
(see "Investment Policies - Government Cash Portfolio") and (iii) corporate debt
obligations of domestic issuers.

Financial institution obligations include negotiable certificates of
deposit, bank notes, bankers' acceptances and time deposits of banks (including
savings banks and savings associations) and their foreign branches. The
Portfolio limits its investments in bank obligations to banks which at the time
of investment have total assets in excess of one billion dollars. Certificates
of deposit represent an institution's obligation to repay funds deposited with
it that earn a specified interest rate over a given period. Bank notes are debt
obligations of a bank. Bankers' acceptances are negotiable obligations of a bank
to pay a draft which has been drawn by a customer and are usually backed by
goods in international trade. Time deposits are non-negotiable deposits with a
banking institution that earn a specified interest rate over a given period.
Certificates of deposit and fixed time deposits, which are payable at the stated
maturity date and bear a fixed rate of interest, generally may be withdrawn on
demand by the Portfolio but may be subject to early withdrawal penalties which
could reduce the Portfolio's yield.

Corporate debt obligations include commercial paper (short-term promissory
notes) issued by companies to finance their, or their affiliates', current
obligations. The Portfolio may also invest in commercial paper or other
corporate securities issued in "private placements" that are restricted as to
disposition under the Federal securities laws ("restricted securities"). Any
sale of these securities may not be made absent registration under the

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Securities Act of 1933 or the availability of an appropriate exemption
therefrom. Some of these restricted securities, however, are eligible for resale
to institutional investors, and accordingly, a liquid market may exist for them.
Pursuant to guidelines adopted by the Core Trust Board, the investment adviser
will determine whether each such investment is liquid.

ADDITIONAL INVESTMENT POLICIES

Each Fund's and each Portfolio's investment objective and certain investment
limitations, as described in the SAI, are fundamental and therefore, may not be
changed without approval of the holders of a majority of the Fund's or
Portfolio's, as applicable, outstanding voting securities (as defined in the
1940 Act). Except as otherwise indicated herein or in the SAI, investment
policies of a Fund or a Portfolio may be changed by the applicable board of
trustees without shareholder approval. Each Portfolio may borrow money for
temporary or emergency purposes (including the meeting of redemption requests),
but, as a individual policy, not in excess of 33 1/3% of the value of the
Portfolio's total assets. Borrowing for purposes other than meeting redemption
requests will not exceed 5% of the value of the Portfolio's total assets. Each
Portfolio is permitted to hold cash in any amount pending investment in
securities and may invest in other investment companies that intend to comply
with Rule 2a-7 and have substantially similar investment objectives and
policies. A further description of the Funds' and the Portfolios' investment
policies is contained in the SAI.

REPURCHASE AGREEMENTS. Each of Government Cash Portfolio and Cash Portfolio
may seek additional income by entering into repurchase agreements. Repurchase
agreements are transactions in which a Portfolio purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. Core Trust holds the
underlying collateral, which is maintained at not less than 100% of the
repurchase price. Repurchase agreements involve certain credit risks not
associated with direct investment in securities. The Portfolios, however, intend
to enter into repurchase agreements only with sellers which Linden believes
present minimal credit risks in accordance with guidelines established by the
Core Trust Board. In the event that a seller defaulted on its repurchase
obligation, however, a Portfolio might suffer a loss.

LIQUIDITY. To ensure adequate liquidity, each Portfolio may not invest more
than 10% of its net assets in illiquid securities, including in the case of
Government Cash Portfolio and Cash Portfolio, repurchase agreements not
entitling the Portfolio to payment of principal within seven days. There may not
be an active secondary market for securities held by a Portfolio. Linden
monitors the liquidity of the Portfolios' investments.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of
being able to obtain securities at prices which Linden believes might not be
available at a future time, each Portfolio may purchase securities on a
when-issued or delayed delivery basis. When these transactions are negotiated,
the price or yield is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Securities so purchased
are subject to market price fluctuation and no interest on the securities
accrues to a Portfolio until delivery and payment take place. Accordingly, the
value of the securities on the delivery date may be more or less than the
purchase price. Commitments for when-issued or delayed delivery transactions
will be entered into only when a Portfolio has the intention of actually
acquiring the securities, but the Portfolio may sell the securities before the
settlement date if deemed advisable. Failure by the other party to deliver a
security purchased by a Portfolio may result in a loss or missed opportunity to
make an alternative investment. The Trust's custodian will set aside and
maintain in a segregated account cash and certain liquid, high-

7
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grade debt securities with a market value at all times equal to the amount of
the Fund's forward commitment obligations. As a result of entering into forward
commitments, the Funds are exposed to greater potential flucuations in the value
of their assets and net asset values per share.

VARIABLE AND FLOATING RATE SECURITIES. The securities in which the
Portfolios invest may have variable or floating rates of interest. These
securities pay interest at rates that are adjusted periodically according to a
specified formula, usually with reference to some interest rate index or market
interest rate. The interest paid on these securities is a function primarily of
the index or market rate upon which the interest rate adjustments are based.
Those securities with ultimate maturities of greater than 397 days may be
purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term
instruments that have demand features which comply with certain requirements and
certain U.S. Government Securities may be purchased. Similar to fixed rate debt
instruments, variable and floating rate instruments are subject to changes in
value based on changes in market interest rates or changes in the issuer's
creditworthiness.

No Portfolio may purchase a variable or floating rate security whose
interest rate is adjusted based on a long-term interest rate or index, on more
than one interest rate or index, or on an interest rate or index that materially
lags behind short-term market rates (these prohibited securities are often
referred to as "derivative" securities). All variable and floating rate
securities purchased by a Portfolio will have an interest rate that is adjusted
based on a single short-term rate or index, such as the Prime Rate.

FINANCIAL INSTITUTION GUIDELINES. Government Cash Portfolio invests only in
instruments which, if held directly by a bank or bank holding company organized
under the laws of the United States or any state thereof, would be assigned to a
risk-weight category of no more than 20% under the current risk based capital
guidelines adopted by the Federal bank regulators. In addition the Portfolio
does not intend to hold in its portfolio any securities or instruments that
would be subject to restriction as to amount held by a National bank under Title
12, Section 24 (Seventh) of the United States Code. See "Investments By
Financial Institutions" in the SAI. In addition, the Portfolio limits its
investments to those permissible for Federally chartered credit unions under
applicable provisions of the Federal Credit Union Act and the applicable rules
and regulations of the National Credit Union Administration. Government Cash
Portfolio limits its investments to investments that are legally permissible for
Federally chartered savings associations without limit as to percentage and to
investments that permit Fund shares to qualify as liquid assets and as
short-term liquid assets.

4. MANAGEMENT

The business of the Trust is managed under the direction of the Board and
the business of Core Trust is managed under the direction the Core Trust Board.
The board formulates the general policies of the Funds and meets periodically to
review the results of the Funds, monitor investment activities and practices and
discuss other matters affecting the Funds and the Trust. The Core Trust Board
performs similar functions for the Portfolios and Core Trust. The SAI contains
general background information about the trustees and officers of the Trust and
Core Trust.

MANAGER AND DISTRIBUTOR

Subject to the supervision of the Board, Forum supervises the overall
management of the Trust and acts as distributor of the Trust's shares. Forum,
Forum Advisors and the Transfer Agent are members of the Forum Financial Group
of companies ("Forum") and together provide a full range of services to the
investment company and financial services industry. As of the date hereof, Forum
acted as manager and distributor of registered investment companies and
collective trust

8
<PAGE>
funds with assets of approximately $16 billion. Forum is a registered
broker-dealer and investment adviser and is a member of the National Association
of Securities Dealers, Inc. As of the date of this Prospectus, Forum, Forum
Advisors and the Transfer Agent were controlled by John Y. Keffer, President and
Chairman of the Trust.

Forum supervises all aspects of the Funds' operations, including the receipt
of services for which the Trust is obligated to pay, provides the Trust with
general office facilities and certain persons to serve as officers and provides,
at the Trust's expense, the services of persons necessary to perform such
supervisory, administrative and clerical functions as are needed to operate the
Trust effectively. Those officers, as well as certain employees and Trustees of
the Trust, may be directors, officers or employees of (and persons providing
services to the Trust may include) Forum and its affiliates. For these services
and facilities, Forum receives a fee at an annual rate of 0.10% of the daily net
assets of Daily Assets Treasury Fund and a fee at an annual rate of 0.15% of the
daily net assets of each of the Daily Assets Government Fund and Daily Assets
Cash Fund. Forum also serves as administrator of Core Trust and provides
administrative services for each Portfolio that are similar to those provided to
the Funds. For its administrative services to the Portfolios Forum receives a
fee at an annual rate of 0.10% of the daily net assets of Treasury Portfolio and
0.05% of the daily net assets of each of Government Cash Portfolio and Cash
Portfolio. As distributor of each Fund, Forum acts as the agent of the Trust in
connection with the offering of shares of the Funds. Forum receives no fee for
distribution of Fund shares.

ADVISERS

Subject to the general supervision of the Core Trust Board, Forum Advisors
makes investment decisions for Treasury Portfolio and monitors that Portfolio's
investments and Linden makes investment decisions for Government Cash Portfolio
and Cash Portfolio and monitors those Portfolios' investments. Forum Advisors,
which is located at Two Portland Square, Portland, Maine 04101, provides
investment advisory services to five other mutual funds. Linden, which is
located at 812 N. Linden Drive, Beverly Hills, California 90210, is controlled
by Anthony R. Fischer, Jr., who is its sole stockholder, director, and officer,
and provides investment advisory services to one other portfolio of Core Trust.
Forum Advisors and Linden act also as investment sub-advisers to the Portfolios
that they do not manage on a daily basis and from time to time may provide each
other with assistance regarding the other's advisory responsibilities. These
services may include management of part of or all of the Portfolios' investment
portfolios.

For its services, Forum Advisors receives an advisory fee at an annual rate
of 0.05% of Treasury Portfolio's average daily net assets. For its services,
Linden receives from each of Government Cash Portfolio and Cash Portfolio an
advisory fee based upon the total average daily net assets of those Portfolios
and the other portfolio of Core Trust that Linden advises ("Total Portfolio
Assets"). Linden's fee is calculated at an annual rate on a cumulative basis as
follows: 0.05% of the first $200 million of Total Portfolio Assets, 0.03% of the
next $300 million of Total Portfolio Assets, and 0.02% of the remaining Total
Portfolio Assets. A Fund's expenses include the Fund's pro rata portion of the
advisory fee paid by the corresponding Portfolio. To the extent Forum Advisors
or Linden has delegated its responsibilities to the other, Forum Advisors or
Linden pays its advisory fee accrued for such period of time to the other.
Currently, it is anticipated that Linden will delegate responsibility for
portfolio management infrequently to Forum Advisors.

SHAREHOLDER SERVICING

Shareholder inquiries and communications concerning the Funds may
be directed to the Transfer Agent at the address and telephone numbers on the
first page of this Prospectus. The Transfer Agent maintains for each
shareholder of record, an account (unless such accounts are maintained by
sub-transfer agents) to which all shares purchased are credited,
together with any distributions that are reinvested in additional
shares. The Transfer

9
<PAGE>

Agent also performs other transfer agency functions and acts as dividend
disbursing agent for the Trust. For its services, the Transfer Agent is
paid a transfer agent fee at an annual rate of 0.25% of the average daily
net assets of each Fund attributable to Institutional Shares plus $12,000
per year and certain account and additional class charges and is reimbursed
for certain expenses incurred on behalf of the Funds.

The Transfer Agent is authorized to subcontract any or all of its functions
to one or more qualified sub-transfer agents or processing agents, which may be
its affiliates, who agree to comply with the terms of the Transfer Agent's
agreement with the Trust. The Transfer Agent may pay those agents for their
services, but no such payment will increase the Transfer Agent's compensation
from the Trust. Forum Financial Corp. performs portfolio accounting services for
the Fund, including determination of the Fund's net asset value per share,
pursuant to a separate agreement with the Trust and is paid a fee for these
services.

EXPENSES OF THE TRUST

The Fund's expenses comprise Trust expenses attributable to the Fund, which
are charged to the Fund, and expenses not attributable to a particular fund of
the Trust, which are allocated among the Fund and all other funds of the Trust
in proportion to their average net assets. Subject to any obligations of Forum
or Forum Advisors to reimburse the Trust for excess expenses, the Trust pays for
all of its expenses. Each service provider in its sole discretion may elect to
waive (or continue to waive) all or any portion of its fees, which are accrued
daily and paid monthly, and may reimburse a Fund for certain expenses. Any such
waivers or reimbursements would have the effect of increasing a Fund's
performance for the period during which the waiver was in effect and would not
be recouped at a later date.

5. PURCHASES AND REDEMPTIONS OF SHARES

GENERAL INFORMATION

All transactions in Fund shares are effected through the Transfer Agent,
which accepts orders for purchases and redemptions from shareholders of record
and new investors. Shareholders of record will receive from the Trust periodic
statements listing all account activity during the statement period. The Trust
reserves the right in the future to modify, limit or terminate any shareholder
privilege, upon appropriate notice to shareholders, and may charge a fee for
certain shareholder services, although no such fees are currently contemplated.

PURCHASES. Fund shares are sold at a price equal to their net asset value
next-determined after acceptance of an order, on all weekdays except customary
national business holidays and Good Friday ("Fund Business Day"). Fund shares
are issued immediately after an order for the shares in proper form, accompanied
by funds on deposit at a Federal Reserve Bank ("Federal Funds"), is accepted by
the Transfer Agent. Daily Assets Treasury Fund's net asset value is calculated
at 12:00 p.m., Eastern time, and Daily Assets Government Fund's and Daily Assets
Cash Fund's net asset value is calculated at 2:00 p.m., Eastern time. Fund
shares become entitled to receive dividends on the next Fund Business Day after
the order is accepted.

Each Fund reserves the right to reject any subscription for the purchase of
Fund shares. Stock certificates are issued only to shareholders of record upon
their written request and no certificates are issued for fractional shares.

10
<PAGE>

of the redemption order in proper form (and any supporting documentation
which the Transfer Agent may require). Shares redeemed are not entitled
to receive dividends declared on or after the day on which the
redemption becomes effective.

Normally, redemption proceeds are paid immediately, but in no event later
than seven days, following acceptance of a redemption order. Proceeds of
redemption requests (and exchanges), however, will not be paid unless any check
used to purchase the shares has been cleared by the shareholder's bank, which
may take up to 15 calendar days. This delay may be avoided by investing through
wire transfers. Unless otherwise indicated, redemption proceeds normally are
paid by check mailed to the shareholder's record address. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the Shares to the Fund except when the New York
Stock Exchange is closed (or when trading thereon is restricted) for any reason
other than its customary weekend or holiday closings or under any emergency or
other circumstance as determined by the SEC.

Proceeds of redemptions normally are paid in cash. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund. The
Trust will only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's net assets,
whichever is less, during any 90-day period.

The Trust employs reasonable procedures to ensure that telephone orders are
genuine (which include recording certain transactions and the use of shareholder
security codes). If the Trust did not employ such procedures, it could be liable
for any losses due to unauthorized or fraudulent telephone instructions.
Shareholders should verify the accuracy of telephone instructions immediately
upon receipt of confirmation statements. During times of drastic economic or
market changes, telephone redemption and exchange privileges may be difficult to
implement. In the event that a shareholder is unable to reach the Transfer Agent
by telephone, requests may be mailed or hand-delivered to the Transfer Agent.

PURCHASE AND REDEMPTION PROCEDURES

Investors may open an account by completing the application at the back of
this Prospectus or by contacting the Transfer Agent at the address on the first
page of this prospectus. For those shareholder services not referenced on the
account application and to change information regarding a share-
holder's account (such as addresses), investors should request an Optional
Services Form from the Transfer Agent.

INITIAL PURCHASE OF SHARES

There is a $10,000 minimum for initial investments in the Fund ($2,000 for
individual retirement accounts, $2,500 for exchanges).

BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application to the address on the cover page of this
Prospectus. Checks are accepted at full value subject to collection. Payment by
a check drawn on any member of the Federal Reserve System can normally be
converted into Federal Funds within two business days after receipt of the
check. Checks drawn on some non-member banks may take longer.

BY BANK WIRE. To make an initial investment in the Fund using the wire
system for transmittal of money among banks, an investor should first telephone
the Trust at 800-94FORUM (800-943-6786)

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<PAGE>

or (207) 879-0001 to obtain an account number. The investor should then
instruct a bank to wire the investor's money immediately to:

First National Bank of Boston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund]
Account #: ______________
Account Name: __________

The investor should then promptly complete and mail the account application.
Any investor planning to wire funds should instruct a bank early in the day so
the wire transfer can be accomplished the same day. There may be a charge
imposed by the bank for transmitting payment by wire, and there also may be a
charge for the use of Federal Funds.

THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed
through certain brokers, banks or other financial institutions ("Processing
Organizations"), including affiliates of the Transfer Agent. Processing
Organizations may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Fund. The Trust is not responsible for the failure of any institution to
promptly forward these requests.

Investors who purchase or redeem shares in this manner will be subject to
the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in the Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase Fund shares
through a Processing Organization may or may not be the shareholder of record
and, subject to their institution's and the Fund's procedures, may have Fund
shares transferred into their name. Certain Processing Organizations may enter
purchase orders with payment to follow. Certain states permit shares to be
purchased and redeemed only through registered broker-dealers, including Forum.

The Trust may confirm purchases and redemptions of a Processing
Organization's customers directly to the Processing Organization, which in turn
will provide its customers with such confirmations and periodic statements as
may be required by law or agreed to between the Processing Organization and its
customers.

SUBSEQUENT PURCHASES OF SHARES

There is a $500 minimum for subsequent purchases. Subsequent purchases may
be made by mailing a check, by sending a bank wire or through a financial
institution as indicated above. Shareholders using the wire system for purchase
should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001
to notify it of the wire transfer. All payments should clearly indicate the
shareholder's name and account number.

Shareholders may purchase Fund shares at regular, preselected intervals by
authorizing the automatic transfer of funds from a designated bank account
maintained with a United States banking institution which is an Automated
Clearing House member. Under the program, existing shareholders may authorize
amounts of $250 or more to be debited from their bank account and invested in
the Fund monthly or quarterly. Shareholders may terminate their automatic
investments or change the amount to be invested at any time by written
notification to the Transfer Agent.

REDEMPTION OF SHARES

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<PAGE>

be available until several weeks after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone
or check.

BY MAIL. Shareholders may make a redemption in any amount by sending a
written request to the Transfer Agent accompanied by any stock certificate that
may have been issued to the shareholder. All written requests for redemption
must be signed by the shareholder with signature guaranteed and all certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed.

BY TELEPHONE. A shareholder that has elected telephone redemption
privileges may make a telephone redemption request by calling the Transfer Agent
at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number. In
response to the telephone redemption instruction, the Fund will mail a check to
the shareholder's record address or, if the shareholder has elected wire
redemption privileges, wire the proceeds.

BY BANK WIRE. For redemptions of more than $5,000, a shareholder that has
elected wire redemption privileges may request the Fund to transmit the
redemption proceeds by Federal Funds wire to a bank account designated on the
shareholder's account application. To request bank wire redemptions by
telephone, the shareholder also must have elected the telephone redemption
privilege. Redemption proceeds are transmitted by wire on the day the redemption
request in proper form is received by the Transfer Agent.

AUTOMATIC REDEMPTIONS. Shareholders may redeem Fund shares at regular,
preselected intervals by authorizing the automatic redemption of shares from
their Fund account. Redemption proceeds will be sent either by check or by
automatic transfer to a designated bank account maintained with a United States
banking institution which is an Automated Clearing House member. Under this
program, shareholders may authorize the redemption of shares in amounts of $250
or more from their account monthly or quarterly. Shareholders may terminate
their automatic redemptions or change the amount to be redeemed at any time by
written notification to the Transfer Agent.

OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. In addition,
a signature guarantee is required for instructions to change a shareholder's
record name or address, designated bank account for wire redemptions or
automatic investment or redemption, dividend election, telephone redemption or
exchange option election or any other option election in connection with the
shareholder's account. Signature guarantees may be provided by any eligible
institution acceptable to the Transfer Agent, including a bank, a broker, a
dealer, a national securities exchange, a credit union, or a savings association
that is authorized to guarantee signatures. Whenever a signature guarantee is
required, the signature of each person required to sign for the account must be
guaranteed.

The Transfer Agent will deem a shareholder's account "lost" if
correspondence to the shareholder's address of record is returned for six
months, unless the Transfer Agent determines the shareholder's new address. When
an account is deemed 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.

EXCHANGES

Shareholders may exchange their shares for shares of any other fund of the
Trust or any other mutual fund managed by Forum that participates with the Funds
in the exchange program (currently, Sound Shore Fund, Inc.). Exchanges are
subject to

13
<PAGE>

the fees charged by, and the restrictions listed in the prospectus
for, and the fund into which a shareholder is exchanging, including minimum
investment requirements. The minimum amount required to open an account in a
Fund through an exchange from another fund is $2,500. The Funds do not charge
for exchanges, and there is currently no limit on the number of exchanges a
shareholder may make, but each Fund reserves the right to limit excessive
exchanges by any shareholder. See "Additional Purchase and Redemption
Information" in the SAI.

Exchanges may only be made between accounts registered in the same name. A
completed account application must be submitted to open a new account in a Fund
through an exchange if the shareholder requests any shareholder privilege not
associated with the new account. Shareholders may only exchange into a fund if
that fund's shares may legally be sold in the shareholder's state of residence.

The Trust (and Federal tax law) treats an exchange as a redemption of the
shares owned and the purchase of the shares of the fund being acquired.
Accordingly, a shareholder may realize a capital gain or loss with respect to
the shares redeemed. Redemptions and purchases are effected at the respective
net asset values of the two funds as next determined following receipt of proper
instructions and all necessary supporting documents by the fund whose shares are
being exchanged.

If a shareholder exchanges into a fund that imposes a sales charge, that
shareholder is required to pay the difference between that fund's sales charge
and any sales charge the shareholder has previously paid in connection with the
shares being exchanged. For example, if a shareholder paid a 2% sales charge in
connection with the purchase of the shares of a fund and then exchanged those
shares into another fund with a 3% sales charge, that shareholder would pay an
additional 1% sales charge on the exchange. Shares acquired through the
reinvestment of dividends and distributions are deemed to have been acquired
with a sales charge rate equal to that paid on the shares on which the dividend
or distribution was paid. The exchange privilege may be modified materially or
terminated by the Trust at any time upon 60 days' notice to shareholders.

BY MAIL. Exchanges may be accomplished by written instruction to the
Transfer Agent accompanied by any stock certificate that may have been issued to
the shareholder. All written requests for exchanges must be signed by the
shareholder (a signature guaranteed is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.

BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder
that has elected telephone exchange privileges by calling the Transfer Agent at
800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number.

INDIVIDUAL RETIREMENT ACCOUNTS

Each of Daily Assets Government Fund and Daily Assets Cash Fund may be
a suitable investment vehicle for part or all of the assets held in
individual retirement accounts ("IRAs"). The minimum initial investment for
IRAs is $2,000, and the minimum subsequent investment is $500.
Individuals may make tax-deductible IRA contributions of up to a maximum
of $2,000 annually. However, this deduction will be reduced if the
individual or, in the case of a married individual filing jointly either the
individual or the individual's spouse, is an active participant in an
employer-sponsored retirement plan and has adjusted gross income above
certain levels.

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<PAGE>

6. DIVIDENDS AND TAX MATTERS

DIVIDENDS

Dividends of each Fund's net investment income are declared daily and paid
monthly following the close of the last Fund Business Day of the month. Net
capital gain realized by a Fund, if any, will be distributed annually. Fund
shares become entitled to receive dividends on the day the shares are issued.
Shares redeemed are not entitled to receive dividends declared on or after the
day on which the redemption becomes effective.

Shareholders may choose to have all dividends reinvested in additional
shares of the Fund or received in cash. In addition, shareholders may have
dividends of net capital gain reinvested in additional shares of the Fund and
dividends of net investment income paid in cash. All dividends are treated in
the same manner for Federal income tax purposes whether received in cash or
reinvested in shares of the Fund.

All dividends will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All dividends are reinvested unless another option
is selected. All dividends not reinvested will be paid to the shareholder in
cash and may be paid more than seven days following the date on which dividends
would otherwise be reinvested.

TAXES

TAX STATUS OF THE FUNDS. Each Fund intends to qualify or continue to
qualify to be taxed as a "regulated investment company" under the Internal
Revenue Code of 1986. Accordingly, each Fund will not be liable for Federal
income taxes on the net investment income and capital gain distributed to its
shareholders. Because the Funds intend to distribute all of their net investment
income and net capital gain each year, the Funds should also avoid Federal
excise taxes.

Dividends paid by each Fund out of its net investment income (including
realized net short-term capital gain) are taxable to the shareholders of the
Fund as ordinary income. Distributions of net long-term capital gain, if any,
realized by a Fund are taxable to shareholders as long-term capital gain,
regardless of the length of time the Fund shares were held by the shareholder at
the time of distribution.

THE PORTFOLIOS. The Portfolios are not required to pay Federal income taxes
on their net investment income and capital gain, as they are treated as
partnerships for Federal income tax purposes. All interest, dividends and gains
and losses of a Portfolio are deemed to have been "passed through" to the
respective Fund in proportion to the Fund's holdings of the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio or losses have been realized by the Portfolio.

STATE AND LOCAL. Daily Assets Treasury Fund's investment policies are
structured to provide shareholders, to the extent permissible by Federal and
state law, with income that is exempt or excluded from income taxation at the
state and local level. Many states (by statute, judicial decision or
administrative action) do not tax dividends from a regulated investment company
that are attributable to interest on obligations of the U.S. Treasury and
certain U.S. Government agencies and instrumentalities if the interest on those
obligations would not be taxable to a shareholder that held the obligation
directly. As a result, substantially all dividends paid by this Fund to
shareholders residing in certain states will be exempt or excluded from state
income taxes. A portion of the dividends paid by Daily Assets Government Fund
and Daily Assets Cash Fund to shareholders may be exempt or excluded from state
income taxes, but
these Funds are not managed to provide any specific amount of state tax-free
income to shareholders.

Shortly after the close of each year, a statement is sent to each
shareholder of the Funds advising the shareholder of the portions of total
dividends paid into the shareholder's account that

15
<PAGE>

is derived from each type of obligation in which the Funds have invested.
These portions are determined for the entire year and on a monthly basis
and, thus, are an annual or monthly average, rather than a day-by-day
determination for each shareholder.

GENERAL. Each Fund may be required by Federal law to withhold 31% of
reportable payments (which may include taxable dividends, capital gain
distributions and redemption proceeds) paid to individuals and certain other
non-corporate shareholders. Withholding is not required if a shareholder
certifies that the shareholder's social security or tax identification number
provided to a Fund is correct and that the shareholder is not subject to backup
withholding.

Zero coupon securities are sold at original issue discount and pay no
interest to holders prior to maturity, but the Fund must include a portion of
the original issue discount of the security as income. Because Daily Assets
Treasury Fund distributes all of its net investment income, the Fund may have to
sell portfolio securities to distribute imputed income, which may occur at a
time when Forum Advisors would not have chosen to sell such securities and which
may result in a taxable gain or loss.

Reports containing appropriate information with respect to the Federal
income tax status of dividends and distributions paid during the year by the
Funds will be mailed to shareholders shortly after the close of each year.

The foregoing is only a summary of some of the important Federal and state
tax considerations generally affecting the Fund and its shareholders. There may
be other Federal, state or local tax considerations applicable to a particular
investor. Prospective investors are urged to consult their tax advisors.

7. OTHER INFORMATION

PERFORMANCE INFORMATION

The performance of Institutional Shares of a Fund may be quoted in
advertising in terms of yield or total return. All performance information is
based on historical results, may vary, is not intended to indicate future
performance and, unless otherwise indicated, is net of all expenses. A Fund's
yield is a way of showing the rate of income earned by the Fund as a percentage
of the Fund's share price. Yield is calculated by dividing the net investment
income of a Fund for a seven day period by the average number of shares entitled
to receive dividends and expressing the result as an annualized percentage rate
based on the Fund's share price at the beginning of the seven day period.
Performance information may in part be based upon the performance of the
Portfolio in which a Fund invests.

The Funds' advertisements may also reference ratings and rankings among
similar funds by independent evaluators such as Morningstar, Lipper Analytical
Services, Inc. or IBC/Donoghue, Inc. In addition, the performance of the Funds
may be compared to recognized indices of market performance. The comparative
material found in a Fund's advertisements, sales literature, or reports to
shareholders may contain performance rankings. This material is not to be
considered representative or indicative of future performance.

BANKING LAW MATTERS

Banking laws and regulations generally permit a bank or bank affiliate to
purchase shares of an investment company as agent for and upon the order of a
customer and permit a bank or bank affiliate to serve as a Processing
Organization or perform sub-transfer agent or similar services for
the Trust and its shareholders. If a bank or bank affiliate were prohibited from
performing all or a

16
<PAGE>

part of the foregoing services, its shareholder customers would be
permitted to remain shareholders of the Trust and alternative means for
continuing to service them would be sought.

DETERMINATION OF NET ASSET VALUE

The Trust determines the net asset value per share of Daily Assets Treasury
Fund as of 12:00 p.m., eastern time, and of Daily Assets Government Fund and
Daily Assets Cash Fund as of 2:00 p.m., eastern time, on each Fund Business Day
by dividing the value of the Fund's net assets (I.E., the value of its portfolio
securities and other assets less its liabilities) by the number of the Fund's
shares outstanding at the time the determination is made.

In order to more easily maintain a stable net asset value per share, each
Portfolio's portfolio securities are valued at their amortized cost (acquisition
cost adjusted for amortization of premium or accretion of discount) in
accordance with Rule 2a-7. The Portfolios will only value their portfolio
securities using this method if the Board and the Core Trust Board believes that
it fairly reflects the market-based net asset value per share. If the market
value of a Fund's portfolio deviates more than 1/2 of 1% form the value
determined on the basis of amortized cost, the Board will consider whether any
action should be initiated to prevent any material dilutive effect on
shareholders.

THE TRUST AND ITS SHARES

The Trust is registered with the SEC as an open-end management investment
company and was organized as a business trust under the laws of the State of
Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the
assets and liabilities of Forum Funds, Inc. The Board has the authority to issue
an unlimited number of shares of beneficial interest of separate series with no
par value per share and to create classes of shares within each series. There
are currently fifteen series of the Trust.

Each share of each fund 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 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 pertain 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 portfolio or class, except if
the matter affects only one portfolio or class or voting by portfolio or class
is required by law, in which case shares will be voted separately by portfolio
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. Shareholders
have available certain procedures for the removal of Trustees. 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. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a portfolio is entitled to the shareholder's pro rata
share of all dividends and distributions arising from that portfolio's assets
and, upon redeeming shares, will receive the portion of the portfolio's net
assets represented by the redeemed shares.

From time to time certain shareholders may own a large percentage of shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of any shareholder vote.

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<PAGE>
FUND STRUCTURE

CORE TRUST STRUCTURE. Each Fund invests all of its assets in its
corresponding Portfolio of Core Trust, a business trust organized under the laws
of the State of Delaware in September 1994 and registered under the 1940 Act as
an open-end management investment company. Accordingly, a Portfolio directly
acquires its own securities and its corresponding Fund acquires an indirect
interest in those securities. The assets of each Portfolio belong only to, and
the liabilities of the Portfolio are borne solely by, the Portfolio and no other
portfolio of Core Trust. Upon liquidation of a Portfolio, investors in the
Portfolio would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.

THE PORTFOLIOS. The investment objective and fundamental investment
policies of the Funds and the Portfolios can be changed only with
shareholder approval. See "Prospectus Summary," "Investment Objective and
Policies," and "Management" for a description of the Portfolio's investment
objective, policies, restrictions, management, and expenses. A Fund's investment
in a Portfolio is in the form of a non-transferable beneficial interest. As of
the date of this Prospectus, Daily Assets Treasury Fund is the only investor
that has invested all of its assets in Treasury Portfolio. There are other
investors in Government Cash Portfolio and Cash Portfolio in addition to Daily
Assets Government Fund and Daily Assets Cash Fund. See "Additional Information"
below. All investors in a Portfolio invest on the same terms and conditions as
the Funds and will pay a proportionate share of the Portfolio's expenses.

The Portfolios normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Portfolio will be entitled to vote
in proportion to the relative value of its interest in the Portfolio. On most
issues subject to a vote of investors, as required by the 1940 Act and other
applicable law, a Fund will solicit proxies from shareholders of the Fund and
will vote its interest in a Portfolio in proportion to the votes cast by its
shareholders. There can be no assurance that any issue that receives a majority
of the votes cast by a Fund's shareholders will receive a majority of votes cast
by all investors in the Portfolio.

CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. If a large investor other than a Fund redeemed its interest
in a Portfolio, the Portfolio's remaining investors (including the Fund) might,
as a result, experience higher pro rata operating expenses, thereby producing
lower returns. A Fund may withdraw its entire investment from a Portfolio at any
time, if the Board determines that it is in the best interests of the Fund and
its shareholders to do so. The Fund might withdraw, for example, if other
investors in the Portfolio, by a vote of shareholders, changed the investment
objective or policies of the Portfolio in a manner not acceptable to the Board
or not permissible by the Fund. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio. If the Fund decided to convert those securities to cash, it usually
would incur transaction costs. If the Fund withdrew its investment from the
Portfolio, the Board would consider what action might be taken, including the
management of the Fund's assets in accordance with its investment objective and
policies by Forum Advisors or the investment of all of the Fund's investable
assets in another pooled investment entity having substantially the same
investment objective as the Fund. The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the Adviser
to manage the Fund's assets, could have a significant impact on shareholders of
the Fund. Forum's experience in managing funds that utilize its "Core and
Gateway" structure began in 1994.

ADDITIONAL INFORMATION. Any other investment company that invests in a
Portfolio may have a different expense ratio and different sales

18
<PAGE>
charges, including distribution fees, and each investment company's performance
will be affected by its expenses and sales charges. Therefore, Fund shareholders
may have different yields than shareholders in another investment company that
invests exclusively in the Portfolio. For more information on any other
investment companies that invest in a Portfolio, investors may contact Forum at
207-879-1900. If an investor invests in a Fund through a financial institution,
the investor also may contact their financial institution to obtain information
about any other investment company investing in a Portfolio.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS'
SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER
MAY NOT LAWFULLY BE MADE.

19
<PAGE>

FORUM FUNDS

[LOGO] ACCOUNT APPLICATION ACCOUNT NUMBER__________

1. INITIAL INVESTMENT ($10,000 minimum)

/ / Check enclosed for $______________________ / / Daily Assets Treasury

/ / I have telephoned the Transfer Agent / / Daily Asset Government
to make wire arrangements (see
instructions on reverse).

/ / My initial investment wire is $___________ / / Daily Assets Cash

2. REGISTRATION (please print)

/ / INDIVIDUALS

-----------------------------------------------------------------
Investor's Name

-----------------------------------------------------------------
Social Security Number

-----------------------------------------------------------------
Joint Investor's Name (right of survivorship
presumed unless tenancy in common is indicated)

-----------------------------------------------------------------
Social Security Number

/ / GIFTS TO MINORS

as custodian for
----------------------------- ----------------------------
Custodian's Name (only one Minor's Name (only one
permitted) permitted)

under the _______________ Uniform Gifts to Minors Act
State

-----------------------------------------------------------------
Minor's Social Security Number

/ / CORPORATIONS, PARTNERSHIPS & OTHERS (additional documentation required for
investors in any representative capacity)

-----------------------------------------------------------------
Name of Entity (indicate type of business, e.g., partnership)

-----------------------------------------------------------------
Taxpayer Identification Number

/ / TRUSTS (including corporate pension plans)

as trustee(s) for
----------------------------- ---------------------------
Trustee(s) Name(s) Name of Trust

-----------------------------------------------------------------
Full date of trust instrument

-----------------------------------------------------------------
Taxpayer Identification Number

3. ADDRESS

CITIZENSHIP: / / U.S. / / Resident Alien / / Non-Resident Alien___________
Country

-----------------------------------------------------------------
Number and Street

--------------------------------------------------------------------------
City State Zip Code

-------------------------------- ------------------ --------------------
Contact Person Telephone (Day) Telephone (Evening)

4. TELEPHONE AND WIRE REDEMPTION PRIVILEGES (subject to the terms set forth in
the Prospectus)

/ / Telephone Redemption/Exchange Privilege

The Fund and Forum Financial Corp. ("Forum") are hereby authorized to honor
verbal instructions for the (i) redemption of any and all Fund shares held
in the undersigned's account provided that proceeds are mailed to the
shareholders address of record or to the bank account indicated below and
(ii) exchange of Fund shares into another account. The Fund and Forum are
authorized to honor any verbal instructions for purposes of redemption or
exchange purporting to be from the shareholder and believed by the Fund or
Forum to be genuine, and neither the Fund nor Forum shall be liable for any
loss, cost or expense for acting upon such instructions.

/ / Wire Redemption Privilege

The Fund and Forum are authorized to honor written instructions with
signature guaranteed or, if Telephone Redemption Privileges are elected,
verbal instructions, to redeem any and all Fund shares held in the
undersigned's account provided that the proceeds are transmitted to the
bank account indicated below. Complete the following if either privilege is
elected:

------------------------------------------------------ -----------------
Name of Bank (attach a voided check or deposit slip) Account Number

------------------------------------------------------ -----------------
Address and Branch of Bank ABA #

<PAGE>

ACCOUNT APPLICATION (CONTINUED)

5. DIVIDEND AND CAPITAL GAIN DISTRIBUTION PAYMENT OPTIONS (check one)

/ / Full Reinvestment: Reinvest all income dividends and capital gain
distributions when paid.

/ / Capital Gain Reinvestment: Reinvest capital gain distributions when paid;
pay income dividends in cash.

/ / Cash: Pay all income dividends and capital gain distributions in cash.

(Note: If none of the above boxes are checked, shareholders are assigned the
Full Reinvestment option.)

6. DUPLICATE STATEMENT ADDRESS (optional)

-----------------------------------------------------------------
Company Name Contact Person

-----------------------------------------------------------------
Number and Street

-----------------------------------------------------------------
City State Zip Code

-------------------------------- -------------------------------
Telephone (Day) Telephone (Evening)

7. DEALER INFORMATION (for broker/dealer use only)

-----------------------------------------------------------------
Firm Name NSCC Code

-----------------------------------------------------------------
Representative's Name Representative's #

-----------------------------------------------------------------
Branch Address Branch Code

-----------------------------------------------------------------
Dealer's Authorized Signature Source of Business Code

8. SIGNATURE

I am (We are) of legal age in the state of my (our) residence and wish to
purchase shares of the Fund(s) indicated as described in the current Prospectus
(a copy of which I (we) have received). By the execution of this Account
Application, the undersigned represent(s) and warrant(s) that I (we) have full
right, power and authority to make this investment and the undersigned is (are)
duly authorized to sign this Account Application and to purchase or redeem
shares of the Fund on behalf of the Investor.

-----------------------------------------------------------------
Signature of Investor/Custodian Trustee Date

-----------------------------------------------------------------
Signature of Joint Investor/Co-Trustee Date

-----------------------------------------------------------------
Corporate Officer (Name) Title

-----------------------------------------------------------------
Signature of Corporate Officer Title

TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
(check appropriate box, if applicable).
Under the penalties of perjury, I certify:

/ / That the number shown on this form is my correct taxpayer identification
number and that I am not subject to backup withholding because (a) I am
exempt from backup withholding, (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup withholding as
a result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.

/ / That I have not provided a taxpayer identification number because I have
not been issued a number, but I have applied for one or will do so in the
near future. I understand that if I do not provide my number to the Fund
within 60 days, the Fund will be required to begin backup withholding.

-----------------------------------------------------------------
Signature of Investor/Custodian/Trustee Date

-----------------------------------------------------------------
Signature of Joint Investor/Co-Trustee Date

-----------------------------------------------------------------
Corporate Officer (Name) Title

-----------------------------------------------------------------
Signature of Corporate Officer Title

9. INITIAL INVESTMENT AND MAILING INSTRUCTIONS

(1) If making your initial investment by check, complete the Account
Application and mail it with your check, payable to "Forum Funds" to:

FORUM FINANCIAL CORP.
ATTN: TRANSFER AGENT
P.O. BOX 446
PORTLAND, ME 04112

(2) If making your initial investment by bank wire, call the Transfer Agent
(Forum Financial Corp.) at 800-94FORUM (800-943-6786) to obtain an account
number. Then instruct your bank to wire Federal Funds to:

FIRST NATIONAL BANK OF BOSTON
BOSTON, MA
ABA # 011000390
CREDIT TO: FORUM FINANCIAL CORP.
ACCOUNT NUMBER: 541-54171
FOR FURTHER CREDIT TO: (FUND NAME)
ACCOUNT NAME / ACCOUNT NUMBER

Complete the Account Application and mail it to the address listed above.
Be sure to indicate the account number assigned to you on this Account
Application.

<PAGE>

- -------------------------------------------------------------------------------

[LOGO]
SHAREHOLDER INFORMATION
Forum Financial Corp.
P.O. Box 446
Portland, ME 04112
207-879-0001 (IN PORTLAND, ME)
800-94FORUM (ELSEWHERE)

<PAGE>

- -------------------------------------------------------------------------------

FORUM FUNDS
PROSPECTUS

AUGUST 1, 1996

INVESTORS BOND FUND

TAXSAVER BOND FUND

[LOGO]
Investment Advisor
Forum Advisors, Inc.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<C> <S> <C>
1. Prospectus Summary................... 2

2. Financial Highlights................. 4

3. Investment Objective and Policies

5
Investors Bond Fund..................

11
TaxSaver Bond Fund...................

4. Certain Risk Factors................. 14

5. Additional Investment Policies....... 15

6. Management........................... 19

7. Purchases and Redemptions of 20
Shares..............................

8. Dividends and Tax Matters............ 26

9. Other Information.................... 29

Account Application
</TABLE>

i
<PAGE>
FORUM FUNDS

INVESTORS BOND FUND
TAXSAVER BOND FUND
[LOGO]
ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING:

Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94FORUM
PROSPECTUS

August 1, 1996
- --------------------------------------------------------------------------------

This Prospectus offers shares of Investors Bond Fund and TaxSaver Bond Fund (the
"Funds"), each a non-diversified series of Forum Funds (the "Trust"), an
open-end, management investment company.

INVESTORS BOND FUND seeks to provide as high a level of current income as is
consistent with capital preservation and prudent investment risk. The Fund
invests primarily in a portfolio of investment grade debt securities.

TAXSAVER BOND FUND seeks to provide shareholders with a high level of
current income exempt from Federal income tax. The Fund invests principally
in investment grade debt obligations issued by the states, territories and
possessions of the United States and their political subdivisions, agencies
and instrumentalities.

Shares of the Funds are offered to investors at a price equal to the next
determined net asset value plus a maximum sales charge of 3.75% of the total
public offering price (3.90% of the net amount invested).

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUNDS

INVESTMENT OBJECTIVES

INVESTORS BOND FUND. The investment objective of the Fund is to provide as
high a level of current income as is consistent with capital preservation and
prudent investment risk. The Fund invests primarily in a portfolio of investment
grade debt securities.

TAXSAVER BOND FUND. The investment objective of the Fund is to provide
shareholders with a high level of current income exempt from Federal income tax.
The Fund invests principally in investment grade debt obligations issued by the
states, territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities. See the "Investment Objectives and
Policies" sections.

FUND MANAGEMENT

The executive offices of the Funds' investment adviser, Forum Advisors, Inc.
(the "Adviser"), are located at Two Portland Square, Portland, Maine 04101. The
manager of the Trust and distributor of its shares is Forum Financial Services,
Inc. ("Forum"). Forum Financial Corp. (the "Transfer Agent"), Two Portland
Square, Portland, Maine 04101, serves as the Trust's transfer agent, dividend
disbursing agent and shareholder servicing agent. See "Management."

PURCHASES AND REDEMPTIONS

Shares of the Funds are offered at the next-determined net asset value per
share plus any applicable sales charge. The minimum initial investment is $5,000
($2,000 for IRAs; $2,500 for exchanges) and the minimum subsequent investment is
$500. Shares may be redeemed without charge. See "Purchases and Redemptions of
Shares."

EXCHANGE PROGRAM

Shareholders of the Funds may exchange their shares without charge for the
shares of certain other funds. See "Purchases and Redemptions of Shares -
Exchanges."

DIVIDENDS

Dividends of net investment income are declared daily and paid monthly by
each Fund and are reinvested in Fund shares unless a shareholder elects to have
them paid in cash. It is anticipated that substantially all of the dividends
paid by TaxSaver Bond Fund will be exempt from Federal income taxes, including
the Federal alternative minimum tax. See "Dividends and Tax Matters."

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS

There can be no assurance that any Fund will achieve its investment
objective, and a Fund's net asset value and total return will fluctuate based
upon changes in the value of its portfolio securities. Normally, the value of a
Fund's investments varies inversely with changes in interest rates. Upon
redemption, an investment in a Fund may be worth more or less than its original
value. The Funds' investments are subject to "credit risk" relating to the
financial condition of the issuers of the securities that each Fund holds.

All investments made by the Funds entail some risk. The Funds' investments
in non-investment grade debt securities and investment techniques, however,
entail certain additional risks, such as the potential use of leverage by a Fund
through borrowings, securities lending, swap transactions and other investment
techniques. See "Additional Investment Policies." Similarly, a Fund's use of
mortgage- and asset-backed securities entails certain risks. See "Investment
Objective and Policies - Investors Bond Fund - Mortgage-Backed Securities" and
"- Asset-Backed Securities." The Funds are non-diversified and, therefore, have
greater freedom to concentrate their investments than if they were diversified
funds. See "Certain Risk Factors."

2
<PAGE>
EXPENSES OF INVESTING IN THE FUND

The purpose of the following table is to assist investors in understanding
the various expenses that an investor in a Fund will bear directly or
indirectly.

<TABLE>
<CAPTION>
Investors TaxSaver
Bond Fund Bond Fund
---------- ----------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases (as a percentage of
public offering price) (1)...... 3.75% 3.75%
Exchange Fee..................... None None
Annual Fund Operating Expenses
(2) (as a percentage of average
net assets after applicable
expense reimbursements and fee
waivers)
Management Fees (3).............. 0.22% 0.40%
12b-1 Fees....................... None None
Other Expenses................... 0.21% 0.20%
Total Fund Operating Expenses.... 0.43% 0.60%
</TABLE>

(1) Certain shareholders may be eligible for reduced sales charges. See
"Purchases and Redemptions of Shares - Reduced Sales Charges."

(2) The amounts of expenses are based on amounts incurred by each Fund
during the Fund's most recent fiscal year ended March 31, 1996. Absent expense
reimbursements and fee waivers, the expenses of Investors Bond Fund and TaxSaver
Bond Fund, respectively, would have been: Management Fees, 0.70% and 0.70%;
Other Expenses, 0.66% and 0.78%; and Total Fund Operating Expenses, 1.36% and
1.48%. For a further description of the various expenses incurred in the
operation of the Fund, see "Management." Expense reimbursements and fee waivers
are voluntary and may be reduced or eliminated at any time.

(3) Includes the Adviser's investment advisory fee and Forum's management
fee.

EXAMPLE

Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in the Fund would pay assuming a $1,000 investment in
the Fund, a 5% annual return, the reinvestment of all dividends and
distributions and redemption at the end of each period and payment of the
maximum initial sales charge:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investors Bond
Fund........... $ 42 $ 51 $ 61 $ 90
TaxSaver Bond
Fund........... $ 43 $ 56 $ 70 $ 110
</TABLE>

The example is based on the expenses listed in the table. The five percent
annual return is not predictive of and does not represent the Funds' projected
returns; rather, it is required by government regulation. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL
EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED.

3
<PAGE>

2. FINANCIAL HIGHLIGHTS

The following information represents selected data for a single share
outstanding of each Fund. This information has been audited by Deloitte & Touche
LLP, independent auditors. The financial statements and independent auditors'
report thereon are incorporated by reference into the SAI. Further information
about the Funds' performance is contained in the Funds' annual report to
shareholders, which may be obtained from the Trust without charge.

<TABLE>
<CAPTION>
INVESTORS BOND FUND
Year Ended March 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(1)
---------- ---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $10.00 $10.38 $10.71 $10.43 $10.09 $9.82 $10.00
---------- ---------- ---------- ---------- ---------- ---------- -------------
Net Investment Income 0.74 0.82 0.81 0.82 0.83 0.84 0.42
Net Realized and Unrealized
Investment Gain (Loss) on
Securities 0.21 (0.38) (0.30) 0.53 0.44 0.27 (0.14)
Dividends from Net
Investment Income (0.74) (0.82) (0.81) (0.82) (0.83) (0.84) (0.42)
Distributions from Net
Realized Gains -- -- (0.03) (0.25) (0.10) -- (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Ending Net Asset Value per
Share $10.21 $10.00 $10.38 $10.71 $10.43 $10.09 $9.82
---------- ---------- ---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- ---------- ---------- -------------
Ratios to Average Net
Assets:
Expenses (2) 0.43 % 0.75 % 0.75 % 0.75 % 0.70 % 0.64 % 0.41 %(3)
Net Investment Income 7.29 % 8.19 % 7.49 % 7.71 % 7.93 % 8.44 % 8.51 %(3)
Total Return 9.84 % 4.55 % 4.70 % 13.53 % 12.91 % 11.76 % 5.79 %(3)
Portfolio Turnover Rate 42.89 % 48.17 % 41.41 % 193.21 % 221.39 % 73.32 % 93.08 %
Net Assets at the End of
Period (000's Omitted) $ 25,676 $ 25,890 $ 26,083 $ 26,832 $ 24,336 $ 19,132 $ 19,400
</TABLE>

(1) The Fund commenced operations on October 2, 1989.

(2) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:

<TABLE>
<CAPTION>
Expenses 1.36% 1.33% 1.31% 1.40% 1.51% 1.68% 1.52%(3)
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>

(3) Annualized.

4
<PAGE>

<TABLE>
<CAPTION>
TAXSAVER BOND FUND
Year Ended March 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(1)
---------- ---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per
Share $10.39 $10.35 $10.63 $10.26 $10.10 $9.97 $10.00
---------- ---------- ---------- ---------- ---------- ---------- ------
Net Investment Income 0.57 0.57 0.57 0.63 0.68 0.67 0.33
Net Realized and Unrealized
Investment Gain (Loss) on
Securities 0.18 0.04 (0.01) 0.49 0.20 0.13 (0.03)
Dividends from Net Investment
Income (0.57) (0.57) (0.57) (0.63) (0.68) (0.67) (0.33)
Distributions from Net
Realized Gains -- -- (0.27) (0.12) (0.04) -- --
---------- ---------- ---------- ---------- ---------- ---------- ------
Ending Net Asset Value per
Share $10.57 $10.39 $10.35 $10.63 $10.26 $10.10 $9.97
---------- ---------- ---------- ---------- ---------- ---------- ------
---------- ---------- ---------- ---------- ---------- ---------- ------
Ratios to Average Net Assets:
Expenses (2) 0.60% 0.60% 0.60% 0.60% 0.55% 0.49% 0.22%(3)
Net Investment Income 5.35% 5.62% 5.27% 5.98% 6.64% 6.69% 6.54%(3)
Total Return 7.36% 6.18% 5.24% 11.28% 8.95% 8.29% 6.16%(3)
Portfolio Turnover Rate 61.61% 63.85% 141.80% 240.36% 104.29% 54.62% 13.25%
Net Assets at the End of
Period (000's Omitted) $17,915 $16,018 $16,518 $16,580 $11,207 $9,998 $9,546
</TABLE>

(1) The Fund commenced operations on October 2, 1989.

<TABLE>
<CAPTION>
Expenses 1.48% 1.45% 1.50% 1.56% 1.66% 1.86% 1.66%(3)
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>

(3) Annualized.

3. INVESTMENT OBJECTIVE AND POLICIES

INVESTORS BOND FUND

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide as high a level of
current income as is consistent with capital preservation and prudent investment
risk. By seeking capital preservation the Fund attempts to control the risk of
default and the risk of capital losses in periods of falling prices for debt
securities. There can be no assurance that the Fund will achieve its investment
objective.

INVESTMENT POLICIES

The Fund seeks to attain its investment objective by investing primarily in
a portfolio consisting of investment grade debt securities. Under normal
circumstances, the Fund intends to invest at least 65% of its assets in debt
securities, U.S. Government Securities, and mortgage-backed and asset-backed
securities.

5
<PAGE>

The securities in which the Fund invests will include debt securities which
are rated in one of the four highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") such as Moody's Investors
Service ("Moody's") or Standard & Poor's ("S&P") (See SAI -"Description of
Securities Ratings"), obligations issued or guaranteed as to principal and
interest by the United States Government or by any of its agencies or
instrumentalities ("U.S. Government Securities") and mortgage-backed and asset
backed securities rated in one of the two highest rating categories by a NRSRO.

The Fund also may invest in commercial paper and other money market
instruments rated in one of the two highest rating categories by a NRSRO, and
banker's acceptances or negotiable certificates of deposit issued by the
commercial banks doing business in the United States that have, at the time of
investment, total assets in excess of one billion dollars and that are insured
by the Federal Deposit Insurance Corporation.

The Fund may from time to time lend securities from its portfolio to
brokers, dealers and other financial institutions. Securities loans must be
continuously secured by cash or U.S. Government Securities with a market value,
determined daily, at least equal to the value of the Fund's securities loaned,
including accrued interest. The Fund receives interest in respect of securities
loans from the borrower or from investing cash collateral. The Fund may pay fees
to arrange the loans. The Fund will, as a fundamental policy, limit securities
lending to not more than 10% of the value of its total assets.

The Fund will invest, as a fundamental policy, at least 90% of the value of
its total assets at the time of investment in the above types of securities or
in repurchase agreements covering those securities.

The Fund may also invest up to 10% of the value of its total assets at the
time of investment in:

(1) debt securities which are rated in the fifth highest rating category by
an NRSRO (for example, BB by S&P). Bonds rated BB are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

(2) preferred stock which is rated in one of the five highest rating
categories by a NRSRO (for example, ba or above by Moody's). An issue rated ba
is considered to have speculative elements and its future cannot be considered
well assured. Earnings and asset protection may be very moderate and not well
safeguarded during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.

(3) options and futures contracts.

Securities in the four highest rating categories are generally considered to
be investment grade, although Moody's indicates that securities rated Baa have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Debt securities
and preferred stock rated in the fifth highest rating category by Moody's and by
S&P are not considered to be investment grade, are high risk, have predominantly
speculative characteristics and are commonly known as "Junk Bonds." See "Certain
Risk Factors." The Fund may purchase unrated securities which the Adviser
believes to be of comparable

6
<PAGE>

quality to the rated securities in which the Fund may invest. Unrated securities
may not be as actively traded as rated securities. An unrated security will be
considered for investment by the Fund when the Adviser believes that the
financial condition of the issuer of the obligation and the protection afforded
by the terms of the obligation itself limit the risk to the Fund to a degree
comparable to that of rated securities in which the Fund may invest.

During its last fiscal year, the Fund had 75.07% of its average annual
assets in securities rated by Moody's or S&P and 24.93% of its average annual
assets in unrated investments, including cash and cash equivalents. For that
year the Fund had the following percentages of its average annual net assets
invested in rated securities: Aaa/AAA - 18.6%, Aa/AA - 6.48%, A/A - 15.91%,
Baa/BBB - 17.87%, Ba/BB - 7.25% and B/B - 0.65%. Securities with different
ratings from Moody's and S&P were assigned the higher rating. This information
reflects the average month end composition of the assets for the Fund's last
fiscal year and is not necessarily representative of the Fund as of the end of
last year, the current fiscal year or any other time.

In general, the longer the maturity of a security, the higher the rate of
interest it pays. However, a longer average maturity is generally associated
with a higher level of volatility in the market value of a security. The average
maturity of the Fund's portfolio will vary depending on anticipated market
conditions. It is anticipated that the Fund will invest in debt obligations with
maturities ranging from short-term (including overnight) to 30 years, and that
the Fund's portfolio of securities will have an average weighted maturity of
between five and 20 years.

CORPORATE DEBT SECURITIES AND FOREIGN SECURITIES. In selecting corporate
debt securities for the Fund, the Adviser reviews and monitors the
creditworthiness of each issuer and issue. Interest rate trends and specific
developments which may affect individual issuers will also be analyzed. In
addition to the debt securities of domestic corporations, the Fund may invest in
debt securities registered and sold in the United States by foreign issuers
(Yankee Bonds) and those sold outside the United States by foreign or U.S.
issuers (Eurobonds). The Fund restricts its purchases of these securities to
issues denominated and payable in United States dollars. All obligations of non-
U.S. issuers purchased by the Fund will be issued or guaranteed by a sovereign
government, by a supranational agency whose members are sovereign governments,
or by a U.S. issuer in whose debt securities the Fund could invest.

U.S. GOVERNMENT SECURITIES. The U.S. Government Securities in which the
Fund may invest include direct obligations of the U.S. Treasury (such as
Treasury bills and notes) and other securities backed by the full faith and
credit of the U.S. Government, such as those issued by the Government National
Mortgage Association ("GNMA"). The Fund may also invest in U.S. Government
Securities that have lesser degrees of government backing. For instance, the
Fund may purchase obligations of the of the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC")
(which are supported by the right of the issuer to borrow from the Treasury
under certain circumstances) and obligations of the Student Loan Marketing
Association and the Federal Home Loan Banks (which are supported only by the
credit of the agency or instrumentality). There is no guarantee that the U.S.
Government will support securities not backed by its full faith and credit and,
accordingly, these securities may involve more risk than other U.S. Government
Securities.

MORTGAGE-BACKED SECURITIES. The Adviser anticipates that up to 50% of the
value of the Fund's total assets may be invested in mortgage-backed securities.
Mortgage-backed securities represent an interest in a pool of mortgages
originated by lenders such as commercial banks, savings associations and
mortgage bankers and brokers.

7
<PAGE>

Mortgage-backed securities may be issued by governmental or government-related
entities or by non-governmental entities such as special purpose trusts created
by banks, savings associations, private mortgage insurance companies or mortgage
bankers.

Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.

UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Fund may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

LIQUIDITY AND MARKETABILITY. The market for mortgage-backed securities has
expanded considerably in recent years. The size of the primary issuance market
and active participation in the secondary market by securities dealers and many
types of investors make government and government-related pass-through pools
highly liquid. The recently introduced private conventional pools of mortgages
(pooled by commercial banks, savings and loan institutions and others, with no
relationship with government and government-related entities) have also achieved
broad market acceptance and consequently an active secondary market has emerged.
However, the market for conventional pools is smaller and less liquid than the
market for government and government-related mortgage pools.

AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool
varies with the maturities of the underlying mortgage instruments. In addition,
a pool's terms may be shortened by unscheduled or early payments of principal
and interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of the
Fund and may even result in losses to the Fund if the securities were acquired
at a premium. The occurrence of mortgage prepayments is affected by various
factors including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years.

YIELD CALCULATIONS. Yields on pass-through securities are typically quoted
by investment dealers based on the maturity of the underlying instruments and
the associated average life assumption.

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In periods of falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of a pool of mortgages. Conversely,
in periods of rising rates, the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. Actual prepayment experience
may cause the yield to differ from the assumed average life yield. Reinvestment
of prepayments may occur at higher or lower interest rates than the original
investment, thus affecting the yield of the Fund.

GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government
guarantor of mortgage-backed securities is the Government National Mortgage
Association ("GNMA"), a wholly-owned United States Government corporation within
the Department of Housing and Urban Development. GNMA is authorized to
guarantee, with the full faith and credit of the United States Government, the
timely payment of principal and interest on securities issued by institutions
approved by GNMA and backed by pools of FHA-insured or VA-guaranteed mortgages.

The Federal National Mortgage Association ("FNMA") is a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller-servicers. The Federal Home
Loan Mortgage Corporation ("FHLMC") is a corporate instrumentality of the United
States Government that was created by Congress in 1970 for the purpose of
increasing the availability of mortgage credit for residential housing. Its
stock is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation
Certificates ("PCs") which represent interests in mortgages from FHLMC's
national portfolio. FNMA and FHLMC each guarantee the payment of principal and
interest on the securities they issue. These securities, however, are not backed
by the full faith and credit of the United States Government.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
offered by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans; and collateralized mortgage obligations.

Mortgage-backed securities issued by non-governmental issuers may offer a
higher rate of interest than securities issued by government issuers because of
the absence of direct or indirect government guarantees of payment. Many non-
governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on such securities. Timely
payment of interest and principal may also be supported by various forms of
insurance, including individual loan, title, pool and hazard policies. There can
be no assurance that the private issuers or insurers will be able to meet their
obligations under the relevant guarantees and insurance policies.

ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMs")are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or
market interest rate. Although the rate adjustment feature may act as a buffer
to reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely
than non-adjustable rate securities of comparable quality and maturity to
increase significantly in value when market interest rates fall. Also,
most adjustable rate securities (or the underlying mortgages) are subject
to caps or floors. "Caps" limit the maximum amount by which the interest rate
paid by the borrower may change at each reset date or over the life of the
loan and, accordingly, fluctuation in interest rates above these levels could

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<PAGE>

cause such mortgage securities to "cap out" and to behave more like long-term,
fixed-rate debt securities.

ARMs may have less risk of a decline in value during periods of rapidly
rising rates, but they may also have less potential for capital appreciation
than other debt securities of comparable maturities due to the periodic
adjustment of the interest rate on the underlying mortgages and due to the
likelihood of increased prepayments of mortgages as interest rates decline.
Furthermore, during periods of declining interest rates, income to the Fund will
decrease as the coupon rate resets to reflect the decline in interest rates.
During periods of rising interest rates, changes in the coupon rates of the
mortgages underlying the Fund's ARMs may lag behind changes in market interest
rates. This may result in a slightly lower net value until the interest rate
resets to market rates. Thus, investors could suffer some principal loss if they
sold Fund Shares before the interest rates on the underlying mortgages were
adjusted to reflect current market rates.

COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized Mortgage Obligations
("CMOs") are debt obligations that are collateralized by mortgages or mortgage
pass-through securities issued by GNMA, FHLMC or FNMA or by pools of
conventional mortgages ("Mortgage Assets"). CMOs may be privately issued or U.S.
Government Securities. Payments of principal and interest on the Mortgage Assets
are passed through to the holders of the CMOs on the same schedule as they are
received, although, certain classes (often referred to as tranches) of CMOs have
priority over other classes with respect to the receipt of payments. Multi-class
mortgage pass-through securities are interests in trusts that hold Mortgage
Assets and that have multiple classes similar to those of CMOs. Unless the
context indicates otherwise, references to CMOs include multi-class mortgage
pass-through securities. Payments of principal of and interest on the underlying
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide funds to pay debt service on the CMOs or to make scheduled distributions
on the multi-class mortgage pass-through securities. Parallel pay CMOs are
structured to provide payments of principal on each payment date to more than
one class. These simultaneous payments are taken into account in calculating the
stated maturity date or final distribution date of each class, which, as with
other CMO structures, must be retired by its stated maturity date or final
distribution date but may be retired earlier. Planned amortization class
mortgage-based securities ("PAC Bonds") are a form of parallel pay CMO. PAC
Bonds are designed to provide relatively predictable payments of principal
provided that, among other things, the actual prepayment experience on the
underlying mortgage loans falls within a contemplated range. If the actual
prepayment experience on the underlying mortgage loans is at a rate faster or
slower than the contemplated range, or if deviations from other assumptions
occur, principal payments on a PAC Bond may be greater or smaller than
predicted. The magnitude of the contemplated range varies from one PAC Bond to
another; a narrower range increases the risk that prepayments will be greater or
smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-backed securities.

The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a Z-tranche). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increases the face amount of the security at a
compounded rate, but is not paid to the bond holder. After all previous tranches
are retired, accrual bond holders start receiving cash payments that include
both principal and continuing interest. The market value of accrual bonds can
fluctuate widely and their average life depends on the other aspects of the CMO
offering. Interest on accrual bonds is taxable when accrued even though the
holders receive no

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<PAGE>

accrual payment. The Fund distributes all of its net investment income, and may
have to sell portfolio securities to distribute imputed income, which may occur
at a time when the Adviser would not have chosen to sell such securities and
which may result in a taxable gain or loss. The Adviser's analyses of particular
CMO issues and estimates of future economic indicators (such as interest rates)
become more important to the performance of the Fund as the securities become
more complicated.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities are
classes of mortgage-backed securities that receive different proportions of the
interest and principal distributions from the underlying Mortgage Assets. They
may be may be privately issued or U.S. Government Securities. In the most
extreme case, one class will be entitled to receive all or a portion of the
interest but none of the principal from the Mortgage Assets (the interest-only
or "IO" class) and one class will be entitled to receive all or a portion of the
principal, but none of the interest (the "PO" class).

ASSET-BACKED SECURITIES. The Adviser anticipates that up to 15% of the
value of the Fund's total assets may be invested in asset-backed securities.
Asset-backed securities represent direct or indirect participations in, or are
secured by and payable from, assets other than mortgage-backed assets such as
motor vehicle installment sales contracts, installment loan contracts, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements. Asset-backed securities, including adjustable
rate asset-backed securities, have yield characteristics similar to those of
mortgage-backed securities and, accordingly, are subject to many of the same
risks.

Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-backed
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.

TAXSAVER BOND FUND

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide shareholders with a high
level of current income exempt from Federal income tax. Although the Fund will
attempt to invest 100% of its assets in municipal securities the interest on
which is exempt from all Federal income tax, including the Federal alternative
minimum tax ("AMT"), the Fund reserves the right to invest up to 20% of the
value of its net assets in securities on which the interest income is subject to
Federal income taxation. In addition, the Fund may assume a temporary defensive
position and invest without limit in cash and cash equivalents that may be
taxable. There can be no assurance that the Fund will achieve its investment
objective.

INVESTMENT POLICIES

The Fund pursues its objective by investing principally in investment grade
debt obligations issued by the states, territories and possessions of the United
States and their political subdivisions, agencies and instrumentalities. These
securities are generally known as "municipal securities" and include municipal
bonds, notes and leases. It is anticipated that under normal circumstances
substantially all

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<PAGE>

of the Fund's total assets will be invested in municipal securities the interest
income from which is exempt from Federal income taxes, including the Federal
AMT.

In general, the longer the maturity of a municipal security, the higher the
rate of interest it pays. However, a longer average maturity is generally
associated with a higher level of volatility in the market value of a municipal
security. The average maturity of the Fund's portfolio will vary depending on
anticipated market conditions. It is anticipated, however, that the average
weighted maturity of all municipal securities in the Fund's portfolio will
normally range between five and 15 years.

Some municipal securities are related in such a way that an economic,
business or political development affecting one municipal security would have a
similar effect on another municipal security. For example, the repayment of
different obligations may depend on similar types of projects. While the Fund
may invest more than 25% of its total assets in private activity bonds ("PABs"),
under normal circumstances no single type of revenue bond (for example, electric
revenue bonds or housing revenue bonds) will constitute more than 25% of the
Fund's total assets. In addition, under normal circumstances no more than 25% of
the Fund's total assets may be invested in issuer's located in any one state,
territory or possession.

Under current Federal tax law, interest on certain municipal securities
issued after August 7, 1986 to finance "private activities" will be a "tax
preference item" for purposes of the Federal AMT applicable to certain
individuals and corporations. The interest on these securities generally is
fully tax-exempt for regular Federal income tax purposes. The Fund may from time
to time purchase certain municipal securities the interest on which constitutes
a "tax preference item" for purposes of the Federal AMT.

LENDING OF PORTFOLIO SECURITIES. The Fund may from time to time lend
securities from its portfolio to brokers, dealers and other financial
institutions. Securities loans must be continuously secured by cash or U.S.
Government Securities with a market value, determined daily, at least equal to
the value of the Fund's securities loaned, including accrued interest. The Fund
receives interest in respect of securities loans from the borrower or from
investing cash collateral. The Fund may pay fees to arrange the loans. The Fund
will, as a fundamental policy, limit securities lending to not more than 10% of
the value of its total assets.

CREDIT MATTERS. Normally, at least 65% of the Fund's total assets will be
invested in municipal bonds rated at the time of purchase within the four
highest grades assigned by a nationally recognized statistical rating
organization ("NRSRO") such as Moody's (Aaa, Aa, A and Baa) or S&P (AAA, AA, A
and BBB) or which are unrated and determined by the Adviser to be of comparable
quality. Securities in these ratings generally are considered to be investment
grade securities, although Moody's indicates that municipal securities rated Baa
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Unrated
securities may not be as actively traded as rated securities. A further
description of the ratings used by Moody's, S&P and other NRSROs is included in
the SAI.

The tax-free yields sought by the Fund are generally obtainable from
securities rated within the four highest rating categories by NRSROs. The Fund
may, however, invest up to 25% of its total assets in municipal bonds rated in
the fifth highest rating category by any NRSRO or which are unrated and
determined by the Adviser to be of comparable quality. These securities are not
considered to be investment grade and have speculative or predominantly
speculative characteristics and are commonly known as "Junk Bonds." See "Certain

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<PAGE>

Risk Factors." The Fund only will invest in municipal notes and other short-term
municipal obligations in the two highest rating categories assigned by an NRSRO
or which are unrated and determined by the Adviser to be of comparable quality.
The 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) only if the Adviser determines that retaining the
security is in the best interests of the Fund.

A non-rated municipal security will be considered for investment by the Fund
when the Adviser believes that the financial condition of the issuer of such
obligation and the protection afforded by the terms of the obligation limit the
risk to the Fund to a degree comparable to that of rated securities in which the
Fund may invest. During its last fiscal year, the Fund had 88.36% of its average
annual assets in municipal securities rated by Moody's or S&P and 11.64% of its
average annual assets in unrated investments, including cash and cash
equivalents. For that year the Fund had the following percentages of its average
annual net assets invested in rated securities: Aaa/AAA - 25.36%, Aa/AA - 8.97%,
A/A - 9.15% and Baa/BBB - 37.34%. Securities with different ratings from Moody's
and S&P were assigned the higher rating. This information reflects the average
composition of the Fund's assets for the Fund's last fiscal year and is not
necessarily representative of the Fund as of the end of last year, the current
fiscal year or any other time.

MUNICIPAL BONDS. Municipal bonds, which are intended to meet longer term
capital needs of the issuer, can be classified as either "general obligation" or
"revenue" bonds. General obligation bonds are secured by a municipality's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are generally payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other tax, but not from general tax revenues.
Municipal bonds also include PABs, which are bonds issued by or on behalf of
public authorities to finance various privately operated facilities. PABs are in
most cases revenue bonds and generally do not have the pledge of the full faith,
credit and taxing power of the municipality issuer. The payment of the principal
and interest on these bonds is dependent solely on the ability of an initial or
subsequent user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property financed by
the bond as security for payment. The Fund will acquire only PABs whose interest
payments, in the opinion of the issuer's counsel, are exempt from Federal income
taxation (other than the AMT).

MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either "general
obligation" or "revenue" securities, are intended to fulfill the short-term
capital needs of the issuer and generally have original maturities of 397 days
or less. They include tax anticipation notes, revenue anticipation notes, bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Municipal leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased assets to pass eventually to the
government issuer) are a means for governmental issuers to acquire property and
equipment without meeting the constitutional and statutory requirements for the
issuance of long-term debt. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds or notes as
described in the SAI.

PARTICIPATION INTERESTS. The Fund may purchase participation interests in
municipal securities (which may be fixed, floating or variable rate securities)
that are owned by banks or other financial institutions. Participation interests
carry a demand feature backed by a letter of credit or guarantee of the bank or
institution permitting the holder to tender them back to the bank or other
institution. The Fund will only purchase participation interests from Federal
Deposit Insurance Corporation insured banks having total assets of more than one

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<PAGE>

billion dollars or from other financial institutions whose long-term debt
securities are rated within the four highest rating categories by an NRSRO or
which are unrated and determined by the Adviser to be of comparable quality.
Prior to purchasing any participation interest, the Fund will obtain appropriate
assurances from counsel retained by the Trust that the interest earned by the
Fund from the obligations in which it holds participation interests is exempt
from Federal income tax.

STAND-BY COMMITMENTS. The Fund may purchase municipal securities together
with the right to resell them to the seller at an agreed upon price or yield
within specified periods prior to their maturity dates. These rights to resell
are commonly known as "stand-by commitments." The aggregate price which the Fund
pays for securities with a stand-by commitment may be higher than the price
which otherwise would be paid. The primary purpose of this practice is to permit
the Fund to be as fully invested as practicable in municipal securities while
preserving the necessary flexibility and liquidity to meet unanticipated
redemptions. The Fund will enter into stand-by commitments only with banks or
municipal securities dealers that in the opinion of the Adviser present minimal
credit risks. The value of a stand-by commitment is dependent on the ability of
the writer to meet its repurchase obligation.

CORE AND GATEWAY-REGISTERED TRADEMARK-. Shareholders of each Fund have
approved a new investment policy that permits the Fund to seek to achieve its
investment objective by converting to a Core and Gateway structure. The Funds
upon future action by the Board of Trustees and notice to shareholders, may
convert to this structure, in which each Fund would hold as its only investment
securities the shares of another investment company having substantially the
same investment objective and policies as the Fund. The Board of Trustees will
not authorize conversion to a Core and Gateway structure if it would materially
increase costs to a Fund's shareholders.

4. CERTAIN RISK FACTORS

DIVERSIFICATION MATTERS. Each Fund is non-diversified, which means that
they have greater latitude than a diversified fund with respect to the
investment of its assets in the securities of a relatively few municipal
issuers. As non-diversified portfolios, the Funds may present greater risks than
diversified funds. The Funds' diversification requirements provide that, as of
the last day of each fiscal quarter, with respect to 50% of its assets, a Fund
may not own the securities of a single issuer, other than a U.S. Government
security, with a value of more than 5% of the Fund's total assets. Except for
U.S. Government Securities, no more than 25% of the total assets of a Fund may
be invested in securities of any one issuer. These limitations do not apply to
securities of an issuer payable solely from the proceeds of escrowed U.S.
Government securities. A Fund will be subject to a greater risk of loss if an
issuer in which the Fund invests a substantial amount of its assets is unable to
make interest or principal payments or if the market value of securities
declines.

NON-INVESTMENT GRADE DEBT SECURITIES. The Funds may invest in
non-investment grade, high risk securities (securities rated lower than the
fourth highest rating category by an NRSRO), which provide poor protection for
payment of principal and interest. These lower rated securities (often referred
to as "junk bonds") involve greater risk of default or price changes due to
changes in the issuer's creditworthiness than do higher quality securities. The
market for these securities may be thinner and less active than that for higher
quality securities, which may affect the price at which the lower rated
securities can be sold. These risks may be magnified in the case of unrated junk
bonds. In addition, the market prices of lower rated securities may fluctuate
more than the market prices of higher quality securities and may decline
significantly in periods of general economic difficulty or rising interest
rates. Further information concerning these investments is contained in the SAI.

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<PAGE>

5. ADDITIONAL INVESTMENT POLICIES

All investment policies of a Fund that are designated as fundamental, and
each Fund's investment objective, may not be changed without approval of the
holders of a majority of that Fund's outstanding voting securities. A majority
of a Fund's outstanding voting securities means the lesser of 67% of the shares
of that Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the shares are present or represented, or more than
50% of the outstanding shares of the Fund. Except as otherwise indicated,
investment policies of the Funds are not fundamental and may be changed by the
Board of Trustees of the Trust (the "Board") without shareholder approval. A
further description of the Funds' investment policies is contained in the SAI.

The Funds may borrow money for temporary or emergency purposes (including
the meeting of redemption requests), but, as a fundamental policy, not in excess
of 33 1/3% of the value of a Fund's total assets. Borrowing for purposes other
than meeting redemption requests will not exceed 10% of the value of a Fund's
total assets. The Funds may not invest more than 15% of their net assets in
illiquid securities, including repurchase agreements not entitling the Fund to
the payment of principal within seven days. Although they have no current
intention, each Fund may in the future seek to hedge against a decline in the
value of securities they own or an increase in the price of securities which it
plans to purchase through the writing and purchase of exchange-traded and
over-the-counter options and the purchase and sale of futures contracts and
options on those futures contracts. In order to avoid maintaining idle cash, the
Funds may invest up to 10% of their total assets in money market mutual funds
that, in the case of TaxSaver Bond Fund, invest in municipal securities exempt
from Federal income taxes.

TECHNIQUES INVOLVING LEVERAGE

Utilization of leveraging involves special risks and may involve speculative
investment techniques. The Funds may borrow for other than temporary or
emergency purposes, lend their securities, enter into reverse repurchase
agreements, and purchase securities on a when issued or forward commitment
basis. Each of these transactions involve the use of "leverage" when cash made
available to a Fund through the investment technique is used to make additional
portfolio investments. In addition, the use of swap and related agreements may
involve leverage. The Funds use these investment techniques only when the
Adviser to a Fund believes that the leveraging and the returns available to the
Fund from investing the cash will provide shareholders a potentially higher
return.

Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.

The risks of leverage include a higher volatility of the net asset value of
the Fund's shares and the relatively greater effect on the net asset value of
the shares caused by favorable or adverse market movements or changes in the
cost of cash obtained by leveraging and the yield obtained from investing the
cash. So long as a Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, if any, leverage will
result in higher current net investment income being realized by the Fund than
if the Fund were not leveraged. On the other hand, interest rates change from
time to time as does their relationship to each other depending upon such
factors as supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the relationship between the
cost of leveraging and the yield to change so that rates involved in the

15
<PAGE>

leveraging arrangement may substantially increase relative to the yield on the
obligations in which the proceeds of the leveraging have been invested. To the
extent that the interest expense involved in leveraging approaches the net
return on the Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, the Fund's use of leverage would result in a lower rate
of return than if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if the Fund were not leveraged. In an extreme case, if the Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for the Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.

SEGREGATED ACCOUNT. In order to limit the risks involved in various
transactions involving leverage, the Trust's custodian will set aside and
maintain in a segregated account cash, U.S. Government Securities and other
liquid, high-grade debt securities in accordance with SEC guidelines. The
account's value, which is marked to market daily, will be at least equal to the
Fund's commitments under these transactions. The Fund's commitments may include
(i) the Fund's obligations to repurchase securities under a reverse repurchase
agreement, settle when-issued and forward commitment transactions and make
payments under a cap or floor (see "Swap Agreements") and (ii) the greater of
the market value of securities sold short or the value of the securities at the
time of the short sale (reduced by any margin deposit). The net amount of the
excess, if any, of a Fund's obligations over its entitlements with respect to
each interest rate swap will be calculated on a daily basis and an amount at
least equal to the accrued excess will be maintained in the segregated account.
If the Fund enters into an interest rate swap on other than a net basis, the
Fund will maintain the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap in their segregated account. The use of a
segregated account in connection with leveraged transactions may result in a
Fund's portfolio being 100 percent leveraged.

REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may
seek additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss. The
Adviser monitors the creditworthiness of counterparties to these transactions
and intends to enter into these transactions only when it believes the
counterparties present minimal credit risks and the income to be earned from the
transaction justifies the attendant risks.

Repurchase agreements are transactions in which a Fund purchases a security
and simultaneously commits to resell that security to the seller at an
agreed-upon price on an agreed-upon future date, normally one to seven days
later. The resale price reflects a market rate of interest that is not related
to the coupon rate or maturity of the purchased security. When a Fund lends a
security it receives interest from the borrower or from investing cash
collateral. The Trust maintains possession of the purchased securities and any
underlying collateral in these transactions, the total market value of which on
a continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans.

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<PAGE>

which is generally expressed in yield terms, is fixed at the time the commitment
is made, but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the transaction.
The Funds enter into when-issued and forward commitments only with the intention
of actually receiving or delivering the securities, as the case may be.
When-issued securities may include bonds purchased on a "when, as and if issued"
basis under which the issuance of the securities depends upon the occurrence of
a subsequent event, such as approval of a proposed financing by appropriate
municipal authorities.

During the period between a commitment and settlement, no payment is made
for the securities purchased and, thus, no interest accrues to the purchaser
from the transaction. However, at the time a Fund makes a commitment to purchase
securities in this manner, the Fund immediately assumes the risk of ownership,
including price fluctuation. Failure by the other party to deliver or pay for a
security purchased or sold by the Fund may result in a loss or a missed
opportunity to make an alternative investment. Any significant commitment of a
Fund's assets committed to the purchase of securities on a when-issued or
forward commitment basis may increase the volatility of its net asset value.

The use of when-issued transactions and forward commitments may enable a
Fund to hedge against anticipated changes in interest rates and prices. If the
Adviser were to forecast incorrectly the direction of interest rate movements,
however, the Fund might be required to complete these transactions at prices
inferior to the current market values. No when-issued or forward commitments
will be made by a Fund if, as a result, more than 15% of the value of the Fund's
total assets would be committed to such transactions.

DEBT SECURITIES. The market value of debt securities (including municipal
securities) depends on, among other things, conditions in the market for the
security and the fixed income markets generally, the size of a particular
offering, the maturity of the obligation, and the rating of the issue. The
market value of the interest-bearing debt securities held by the Funds will be
affected by changes in interest rates. There is normally an inverse relationship
between the market value of securities sensitive to prevailing interest rates
and actual changes in interest rates. In other words, a decline in interest
rates produces an increase in market value, while an increase in interest rates
produces a decrease in market value. Moreover, the longer the remaining maturity
of a security, the greater will be the effect of interest rate changes on the
market value of that security. Changes in the ability of an issuer to make
payments of interest and principal and in the market's perception of an issuer's
creditworthiness will also affect the market value of the debt securities of
that issuer. Obligations of issuers of debt securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors. The possibility exists, therefore, that, as a result of
litigation or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its debt securities may be materially impaired.

RATING MATTERS. The Funds will invest in securities rated in the categories
specified by their investment policies. The Funds also may purchase unrated
securities if the Adviser determines the security to be of comparable quality to
a rated security that the Fund may purchase. Unrated securities may not be as
actively traded as rated securities. Each Fund may retain a security whose
rating has been lowered below the Fund's 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 Fund's lowest permissible
rating category) if the Adviser determines that retaining the security is in the
best interests of the Fund.

17
<PAGE>

The Fund's investments are subject to "credit risk" relating to the
financial condition of the issuers of the securities that the Funds hold. A
further description of the rating categories of certain NRSROs is contained in
the SAI.

VARIABLE AND FLOATING RATE SECURITIES. The securities in which the Funds
invest may have variable or floating rates of interest. These securities pay
interest at rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index or market interest
rate (the "underlying index"). The interest paid on these securities is a
function primarily of the underlying index upon which the interest rate
adjustments are based. Such adjustments minimize changes in the market value of
the obligation and, accordingly, enhance the ability of a Fund to maintain a
stable net asset value. Similar to fixed rate debt instruments, variable and
floating rate instruments are subject to changes in value based on changes in
market interest rates or changes in the issuer's creditworthiness. The rate of
interest on securities purchased by a Fund may be tied to various rates of
interest or index.

There may not be an active secondary market for certain floating or variable
rate instruments, which could make it difficult for a Fund to dispose of an
instrument during periods that the Fund is not entitled to exercise any demand
rights it may have. The Fund could, for this or other reasons, suffer a loss
with respect to an instrument. The Adviser monitors the liquidity of the Funds'
investment in variable and floating rate instruments, but there can be no
guarantee that an active secondary market will exist.

SWAP AGREEMENTS.

To manage its exposure to different types of investments, a Fund may enter into
interest rate, currency and mortgage (or other asset) swap agreements and may
purchase and sell interest rate "caps," "floors" and" collars." In a
typical interest rate swap agreement, one party agrees to make regular payments
equal to a floating interest rate on a specified amount (the "notional principal
amount") in return for payments equal to a fixed interest rate on the same
amount for a specified period. If a swap agreement provides for payment in
different currencies, the parties may also agree to exchange the notional
principal amount. Mortgage swap agreements are similar to interest rate swap
Agreements, except that the notional principal amount is tied to a reference
pool of mortgages. In a cap or floor, one party agrees, usually in return for
a fee, to make payments under particular circumstances. For example, the
purchaser of an interest rate cap has the right to receive payments to the
extent a specified interest rate exceeds an agreed upon level; the purchaser of
an interest rate floor has the right to receive payments to the extent a
specified interest rate falls below an agreed upon level. A collar entitles the
purchaser to receive payments to the extent a specified interest rate falls
outside an agreed upon range.

Swap agreements may involve leverage and may be highly volatile; depending
on how they are used, they may have a considerable impact on the Fund's
performance. See "Techniques Involving Leverage." Swap agreements involve risks
depending upon the counterparties creditworthiness and ability to perform as
well as the Fund's ability to terminate its swap agreements or reduce its
exposure through offsetting transactions. The Adviser monitors the
creditworthiness of counterparties to these transactions and intends to enter
into these transactions only when it believes the counterparties present minimal
credit risks and the income expected to be earned from the transaction justifies
the attendant risks.

TEMPORARY DEFENSIVE POSITION. When business or financial conditions
warrant, for example, when issues of sufficient quality and liquidity are not
available, a Fund may assume a temporary defensive position and invest all or
part of its assets in cash or prime quality cash equivalents, including (i)
short-term U.S. Government securities, (ii) certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of commercial banks

18
<PAGE>

doing business in the United States, (iii) commercial paper, (iv) repurchase
agreements covering any of the securities in which the Fund may invest directly
and (v) to the extent permitted by the Investment Company Act of 1940, money
market mutual funds. During periods when and to the extent that a Fund has
assumed a temporary defensive position, it will not be pursuing its investment
objective.

PORTFOLIO TURNOVER. The frequency of portfolio transactions of each Fund
(the portfolio turnover rate) will vary from year to year depending on market
conditions. From time to time the Funds may engage in active short-term trading
to benefit from yield disparities among different issues of debt securities, to
seek short-term profits during periods of fluctuating interest rates, or for
other reasons. This type of trading will increase the Funds' portfolio turnover
rate and transaction costs and may increase the Funds' short-term capital gain,
which is taxable as ordinary income. The Adviser weighs the anticipated benefits
of short-term investments against these consequences. The Funds' portfolio
turnover rate is reported under "Financial Highlights."

6. MANAGEMENT

The business of the Trust 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 results of the Funds, monitor investment activities
and practices and discuss other matters affecting the Fund and the Trust.

MANAGER AND DISTRIBUTOR

Subject to the supervision of the Board, Forum supervises the overall
management of the Funds. Forum, the Adviser and the Transfer Agent are members
of the Forum Financial Group of companies and together provide a full range of
services to the investment company and financial services industry. As of the
date hereof Forum acted as manager and distributor of registered investment
companies and collective trust funds with assets of approximately $16 billion.
Forum, whose address is Two Portland Square, Portland, Maine 04101, is a
registered broker-dealer and investment adviser and is a member of the National
Association of Securities Dealers, Inc. As of the date of this Prospectus,
Forum, the Adviser and the Transfer Agent were controlled by John Y. Keffer,
President and Chairman of the Trust.

Under its management agreement with the Trust, Forum supervises all aspects
of the Funds' operations, including the receipt of services for which the Trust
is obligated to pay, provides the Trust with general office facilities and
provides, at the Trust's expense, the services of persons necessary to perform
such supervisory, administrative and clerical functions as are needed to
effectively operate the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
(and persons providing services to the Trust may include) Forum and its
affiliates. For these services and facilities, Forum receives with respect to
each Fund a management fee at an annual rate of 0.30% of each Fund's average
daily net assets.

Forum also acts as the distributor of shares of the Funds and pursuant to a
distribution agreement with the Trust. Forum receives, and may reallow to
certain financial institutions, the sales charge paid by the purchasers of the
Funds' shares. See "Purchases and Redemptions of Shares - Sales Charges."

ADVISER

Forum Advisors, Inc. serves as the investment adviser of each Fund. Subject
to the general supervision 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 0.40% of each Fund's average daily net assets. The Adviser was
incorporated under the laws of Delaware in 1987 and is registered under the
Investment Advisers Act of 1940.

19
<PAGE>

Les C. Berthy, Managing Director of the Adviser since 1989, is primarily
responsible for the day-to-day management of the Funds' portfolios and has been
since the Funds' inception. Prior to his association with the Adviser, Mr.
Berthy was Managing Director and Co-Chief Executive Officer of Irwin Union
Capital Corp., an affiliate of Irwin Union Bank & Trust Co.

SHAREHOLDER SERVICING

Shareholder inquiries and communications concerning each Fund may be
directed to the Transfer Agent. The Transfer Agent also acts as the Funds'
dividend disbursing agent. The Transfer Agent maintains for each shareholder of
record, an account (unless such accounts are maintained by sub-transfer agents)
to which all shares purchased are credited, together with any distributions that
are reinvested in additional shares and also performs other transfer agency
functions. In addition, the Transfer Agent performs portfolio accounting
services for the Funds, including determination of the Funds' net asset value,
pursuant to a separate agreement with the Trust. For its services, the Transfer
Agent receives a fee at an annual rate of 0.25% of each Fund's average daily net
assets.

The Transfer Agent is authorized to subcontract any or all of its functions
to one or more qualified sub-transfer agents or processing agents, which may be
processing organizations (as described under "Purchases and Redemptions of
Shares - Purchases and Redemptions through Financial Institutions"), Forum or
affiliates of Forum, who agree to comply with the terms of the Transfer Agency
Agreement. The Transfer Agent may pay those agents for their services, but no
such payment will increase the Transfer Agent's compensation from the Trust.

EXPENSES OF THE TRUST

Each Fund's expenses comprise Trust expenses attributable to a Fund, which
are charged to the Fund, and expenses not attributable to a particular fund of
the Trust, which are allocated among the Fund and all other funds of the Trust
in proportion to their average net assets. Subject to the obligations of the
Adviser to reimburse the Trust for excess expenses of the Funds, the Trust pays
for all of its expenses. The Adviser, Forum and the Transfer Agent, in their
sole discretion, may waive all or any portion of their respective fees, which
are accrued daily and paid monthly. Any such waiver, which could be discontinued
at any time, would have the effect of increasing a Fund's performance for the
period during which the waiver was in effect and would not be recouped at a
later date.

7. PURCHASES AND REDEMPTIONS OF SHARES

GENERAL INFORMATION

Investments in a Fund may be made either by an investor directly or through
certain brokers or financial institutions of which the investor is a customer.
All transactions in Fund shares are effected through the Transfer Agent, which
accepts orders for purchases and redemptions from shareholders of record and new
investors. Shareholders of record will receive from the Trust periodic
statements listing all account activity during the statement period. The Trust
reserves the right in the future to modify, limit or terminate any shareholder
privilege upon appropriate notice to shareholders and may charge a fee for
certain shareholder services, although no such fees are currently contemplated.

PURCHASES. Fund Shares are sold at a price equal to their net asset value
next-determined after acceptance of an order, plus any applicable sales charge
on all weekdays except customary national business holidays and Good Friday
("Fund Business Day") (see "Sales Charges" below). Fund shares are issued
immediately after an order for the shares in proper form is accepted by the
Transfer Agent. Each Fund's net asset value is calculated at 4:00 p.m., Eastern
time on each Fund Business Day. Fund shares become entitled to receive
dividends on the next Fund Busines Day after the order is accepted.

20
<PAGE>

The Funds reserve the right to reject any subscription for the purchase of
their shares. Stock certificates are issued only to shareholders of record upon
their written request and no certificates are issued for fractional shares.

REDEMPTIONS. Fund shares may be redeemed without charge at their net asset
value on any Fund Business Day. There is no minimum period of investment and no
restriction on the frequency of redemptions. Fund shares are redeemed as of the
next determination of the Fund's net asset value following acceptance by the
Transfer Agent of the redemption order in proper form (and any supporting
documentation which the Transfer Agent may require). Shares redeemed are not
entitled to receive dividends declared after the day on which the redemption
becomes effective.

Normally, redemption proceeds are paid immediately, but in no event later
than seven days, following acceptance of a redemption order. Proceeds of
redemption requests (and exchanges), however, will not be paid unless any check
used to purchase the shares has been cleared by the shareholder's bank, which
may take up to 15 calendar days. This delay may be avoided by investing through
wire transfers. Unless otherwise indicated, redemption proceeds normally are
paid by check mailed to the shareholder's record address. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the shares to the Fund except when the New York
Stock Exchange is closed (or when trading thereon is restricted) for any reason
other than its customary weekend or holiday closings or under any emergency or
other circumstance as determined by the SEC.

Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon not less than 60 days' written notice, all
shares in any Fund account with an aggregate net asset value of less than
$1,000. The Trust will not redeem accounts that fall below that amount solely as
a result of a reduction in net asset value.

PURCHASE AND REDEMPTION PROCEDURES

The following purchase and redemption procedures and shareholder services
apply to investors who invest in the Funds directly. These investors may open an
account by completing the application at the back of this Prospectus or by
contacting the Transfer Agent at the address on the first page of this
prospectus. For those shareholder services not referenced on the account
application and to change information regarding a shareholder's account (such as
addresses), investors should request an Optional Services Form from the Transfer
Agent.

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<PAGE>
INITIAL PURCHASE OF SHARES

There is a $5,000 minimum for initial investments in either Fund ($2,000 for
individual retirement accounts).

BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application to the Fund at the address listed on the cover
page of this Prospectus. Checks are accepted at full value subject to
collection. If a check does not clear, the purchase order will be canceled and
the investor will be liable for any losses or fees incurred by the Trust, the
Transfer Agent or Forum.

BY BANK WIRE. To make an initial investment in either Fund using the wire
system for transmittal of money among banks, an investor should first telephone
the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to obtain an account
number. The investor should then instruct a bank to wire the investor's money
immediately to:

First National Bank of Boston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund]
Account #: ______________
Account Name: __________

SUBSEQUENT PURCHASES OF SHARES

There is a $500 minimum for subsequent purchases. Subsequent purchases may
be made by mailing a check or by sending a bank wire as indicated above.
Shareholders using the wire system for purchase should first telephone the Trust
at 800-94FORUM (800-943-6786) or (207) 879-0001 to notify it of the wire
transfer. All payments should clearly indicate the shareholder's name and
account number.

Shareholders may purchase Fund shares at regular, preselected intervals by
authorizing the automatic transfer of funds from a designated bank account
maintained with a United States banking institution which is an Automated
Clearing House member. Under the program, existing shareholders may authorize
amounts of $250 or more to be debited from their bank account and invested in a
Fund monthly or quarterly. Shareholders may terminate their automatic
investments or change the amount to be invested at any time by written
notification to the Transfer Agent.

REDEMPTION OF SHARES

Shareholders that wish to redeem shares by telephone or receive redemption
proceeds by bank wire must elect these options by properly completing the
appropriate sections of their account application. These privileges may not be
available until several weeks after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone.

22
<PAGE>

number. In response to the telephone redemption instruction, the Fund will mail
a check to the shareholder's record address or, if the shareholder has elected
wire redemption privileges, wire the proceeds.

BY BANK WIRE. For redemptions of more than $5,000, a shareholder that has
elected wire redemption privileges may request a Fund to transmit the redemption
proceeds by Federal Funds wire to a bank account designated on the shareholder's
account application. To request bank wire redemptions by telephone, the
shareholder also must have elected the telephone redemption privilege.
Redemption proceeds are transmitted by wire on the day after the redemption
request in proper form is received by the Transfer Agent.

AUTOMATIC REDEMPTIONS. Shareholders may redeem Fund shares at regular,
preselected intervals by authorizing the automatic redemption of shares from
their Fund account. Redemption proceeds will be sent either by check or by
automatic transfer to a designated bank account maintained with a United States
banking institution which is an Automated Clearing House member. Under this
program, shareholders may authorize the redemption of shares in amounts of $250
or more from their account monthly, twice a month or quarterly. Shareholders may
terminate their automatic redemptions or change the amount to be redeemed at any
time by written notification to the Transfer Agent.

OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. In addition,
a signature guarantee also is required for instructions to change a
shareholder's record name or address, designated bank account for wire
redemptions or automatic investment or redemption, dividend election, telephone
redemption or exchange option election or any other option election in
connection with the shareholder's account. Signature guarantees may be provided
by any eligible institution, including a bank, a broker, a dealer, a national
securities exchange, a credit union, or a savings association that is authorized
to guarantee signatures, acceptable to the Transfer Agent. Whenever a signature
guarantee is required, the signature of each person required to sign for the
account must be guaranteed.

SALES CHARGES

The public offering price for shares of a Fund is the sum of the net asset
value of the shares being purchased plus any applicable sales charge. No sales
charge is assessed on the reinvestment of dividends or other distributions. The
sales charge is assessed as follows (net asset value percentages are rounded to
the nearest one-hundredth percent):

<TABLE>
<CAPTION>
Sales Charge
-------------------------------------------
Public as % of Net
Offering Asset Dealers'
Amount of Purchase Price Value* Reallowance
- --------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
less than $100,000 3.75% 3.90% 3.25%
$100,000 but less
than $200,000 3.25 3.36 2.85
$200,000 but less
than $400,000 2.50 2.56 2.20
$400,000 but less
than $600,000 2.00 2.04 1.75
$600,000 but less
than $800,000 1.50 1.52 1.25
$800,000 but less
than $1,000,000 1.00 1.01 0.75
$1,000,000 and up 0.50 0.50 0.40
</TABLE>

*Rounded to the nearest one-hundredth percent.

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<PAGE>

Forum's commission is the sales charge shown above less any applicable
discount reallowed to selected brokers and dealers (including banks and bank
affiliates purchasing shares as principal or agent). Normally, Forum will
reallow discounts to selected brokers and dealers in the amounts indicated in
the table above. From time to time, however, Forum may elect to reallow the
entire sales charge to selected brokers or dealers for all sales with respect to
which orders are placed with Forum during a particular period. The dealers'
reallowance may be changed from time to time.

In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (i) the provision of travel arrangements and lodging,
(ii) tickets for entertainment events and (iii) merchandise.

No sales charge will be assessed on purchases made for investment purposes
by: (a) any bank, trust company, savings association or similar institution with
whom Forum has entered into a share purchase agreement acting on behalf of the
institution's fiduciary customer accounts or any account maintained by its trust
department (including a pension, profit sharing or other employee benefit trust
created pursuant to a qualified retirement plan); (b) any registered investment
adviser with whom Forum has entered into a share purchase agreement and which is
acting on behalf of its fiduciary customer accounts; (c) any broker-dealer with
whom Forum has entered into a Selected Dealer Agreement and a Fee-Based or Wrap
Account Agreement and which is acting on behalf of its fee-based program
clients; (d) directors and officers of the Trust; directors, officers and
full-time employees of the Adviser, Forum, any of their affiliates or any
organization with which Forum has entered into a selected dealer or processing
agent agreement; the spouse, sibling, direct ancestor or direct descendent
(collectively, "relatives") of any such person; any trust or individual
retirement account or self-employed retirement plan for the benefit of any such
person or relative; or the estate of any such person or relative; (e) any person
who has, within the preceding 90 days, redeemed Fund shares (but only on
purchases in amounts not exceeding the redeemed amounts) and completes a
reinstatement form upon investment; (f) persons who exchange into a Fund from a
mutual fund other than a fund of the Trust that participates in the Trust's
exchange program, see "Purchases and Redemptions of Shares - Exchange Program;"
and (g) employee benefit plans qualified under Section 401 of the Internal
Revenue Code of 1986. The Trust may require appropriate documentation from an
investor concerning that investor's eligibility to purchase Fund shares without
a sales charge. Any shares so purchased may not be resold except to the Fund.

REDUCED SALES CHARGES

For an investor to qualify for a reduced sales charge as described below,
the investor must notify the Transfer Agent at the time of purchase. Programs
for reduced sales charges may be modified or terminated at any time and are
subject to confirmation of an investor's holdings.

RIGHTS OF ACCUMULATION. An investor's purchase of additional shares of a
Fund may qualify for rights of accumulation ("ROA") wherein the applicable sales
charge will be based on the total of the investor's current purchase and the net
asset value (at the end of the previous Fund Business Day) of shares of that
Fund held by the investor. For example, if an investor owned shares of a Fund
worth $400,000 at the then current net asset value and purchased shares of the
Fund worth an additional $50,000, the sales charge for the $50,000 purchase
would be at the 2% rate applicable to a single $450,000 purchase, rather than at
the 3.75% rate. To qualify for ROA on a purchase, the investor must inform the
Transfer Agent and supply sufficient information to verify that each purchase
qualifies for the privilege or discount.

24
<PAGE>

LETTER OF INTENT. Investors may also obtain reduced sales charges based on
cumulative purchases by means of a written Letter of Intent ("LOI"), which
expresses the investor's intention to invest $100,000 or more within a period of
13 months in shares of a Fund. Each purchase of shares under a LOI will be made
at the public offering price applicable at the time of the purchase to a single
transaction of the dollar amount indicated in the LOI.

An LOI is not a binding obligation upon the investor to purchase the full
amount indicated. Shares purchased with the first 5% of the amount indicated in
the LOI will be held subject to a registered pledge (while remaining registered
in the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased within 13 months. Pledged shares will be involuntarily redeemed to pay
the additional sales charge, if necessary. When the full amount indicated has
been purchased, the shares will be released from pledge. Share certificates are
not issued for shares purchased under an LOI. Investors wishing to enter into an
LOI can obtain a form of LOI from their broker or financial institution or by
contacting the Transfer Agent.

EXCHANGES

Fund shareholders are entitled to exchange their shares for shares of the
other Fund, any other fund of the Trust or any other fund that participates in
the exchange program (currently, Sound Shore Fund, Inc.) and whose shares are
eligible for sale in the shareholder's state of residence. Exchanges may only be
made between accounts registered in the same name. The minimum amount to open an
account in a Fund through an exchange from another fund is $2,500. A completed
account application must be submitted to open a new account in a Fund through an
exchange if the shareholder requests any shareholder privilege not associated
with the existing account. Exchanges are subject to the fees charged by, and the
restrictions listed in the prospectus for, the fund into which a shareholder is
exchanging, including minimum investment requirements. The Funds do not charge
for the exchange privilege and there is currently no limit on the number of
exchanges a shareholder may make.

The Trust (and Federal tax law) treats an exchange as a redemption of the
shares owned and the purchase of the shares of the fund being acquired.
Redemptions and purchases are effected at the respective net asset values of the
two funds as next determined following receipt of proper instructions and all
necessary supporting documents by the fund whose shares are being exchanged.

BY MAIL. Exchanges may be accomplished by written instruction to the
Transfer Agent accompanied by any stock certificate that may have been issued to
the shareholder. All written requests for exchanges must be signed by the
shareholder (a signature guarantee is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.

BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder
that has

25
<PAGE>

elected telephone exchange privileges by calling the Transfer Agent at
800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number.

INDIVIDUAL RETIREMENT ACCOUNTS

Investors Bond Fund should not be considered as a complete investment
vehicle for the assets held in individual retirement accounts ("IRAs"). The
minimum initial investment for an IRA is $2,000 and the minimum subsequent
investment is $500. Individuals may make tax-deductible IRA contributions of up
to a maximum of $2,000 annually. However, this deduction will be reduced if the
individual or, in the case of a married individual filing jointly, either the
individual or the individual's spouse is an active participant in an employer-
sponsored retirement plan and has adjusted gross income above certain levels.

PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS

Shares may be purchased and redeemed through certain broker-dealers, banks,
trust companies and their affiliates, and other financial institutions,
including affiliates of the Transfer Agent ("Processing Organizations").
Processing Organizations may receive as a dealer's reallowance a portion of the
sales charge paid by their customers who purchase Fund shares. In addition,
Processing Organizations may charge their customers a fee for their services and
are responsible for promptly transmitting purchase, redemption and other
requests to the Fund. The Trust is not responsible for the failure of any
institution to promptly forward these requests.

Investors who purchase shares through a Processing Organization may be
charged a fee if they effect transactions in Fund Shares through a broker or
agent and will be subject to the procedures of their Processing Organization,
which may include limitations, investment minimums, cutoff times and
restrictions in addition to, or different from, those applicable to shareholders
who invest in the Fund directly. These investors should acquaint themselves with
their Processing Organization's procedures and should read this Prospectus in
conjunction with any materials and information provided by their Processing
Organization. Customers who purchase Fund shares through a Processing
Organization may or may not be the shareholder of record and, subject to their
Processing Organization's and the Fund's procedures, may have Fund shares
transferred into their name. Under their arrangements with the Trust, broker-
dealer Processing Organizations are not generally required to deliver payment
for purchase orders until several business days after a purchase order has been
received by a Fund. Certain other Processing Organizations may also enter
purchase orders with payment to follow.

Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with such confirmations and periodic statements as may be required by
law or agreed to between the Processing Organization and its customers. The
Trust is not responsible for the failure of any Processing Organization to carry
out its obligations to its customer. Certain states permit shares of the Fund to
be purchased and redeemed only through registered broker-dealers, including the
Fund's distributor.

8. DIVIDENDS AND TAX MATTERS

DIVIDENDS

Dividends of each Fund's net investment income are declared daily and paid
monthly. Dividends of net capital gain, if any, realized by a Fund are
distributed annually.

26
<PAGE>

Shareholders may choose either to have all dividends reinvested in
additional shares of the Fund that paid the dividend or received in cash. In
addition, shareholders may have dividends of net capital gain reinvested in
shares of each of the Funds and dividends of net investment income paid in cash.
All dividends are treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of the Funds.

All dividends will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All dividends are reinvested unless another option
is selected. All dividends not reinvested will be paid to the shareholder in
cash. Cash payments may be paid more than seven days following the date on which
dividends would otherwise be reinvested.

TAXES

Each Fund intends to continue to qualify for each fiscal year to be taxed as
a "regulated investment company" under the Internal Revenue Code of 1986. As
such, the Funds will not be liable for Federal income taxes on the net
investment income and net capital gain distributed to their shareholders.
Because the Funds intend to distribute all of their net investment income and
net capital gain each year, the Funds should avoid all Federal income and excise
taxes.

INVESTORS BOND FUND. Dividends paid by the Fund out of its net investment
income (including any realized net short-term capital gain) are taxable to
shareholders as ordinary income.

TAXSAVER BOND FUND. Shareholders of the Fund generally will not be subject
to Federal income tax on dividends paid by the Fund out of tax-exempt interest
income earned by the Fund ("exempt-interest dividends"), assuming certain
requirements are met. Substantially all of the dividends paid by the Fund are
anticipated to be exempt-interest dividends. Any dividends paid by the Fund out
of its taxable net investment income (including any realized net short-term
capital gain) are taxable to shareholders as ordinary income.

Persons who are "substantial users" or "related persons" thereof of
facilities financed by private activity bonds held by the Fund may be subject to
Federal income tax on their pro rata share of the interest income from these
bonds and should consult their tax advisors before purchasing shares of the
Fund. Under current Federal tax law, interest on certain private activity bonds
is treated as an item of tax preference for purposes of the Federal AMT imposed
on individuals and corporations. In addition, interest on all tax-exempt
obligations is included in the "adjusted current earnings" of corporations for
Federal AMT purposes.

Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund generally is not deductible for Federal income tax purposes.

The exemption for Federal income tax purposes of dividends derived from
interest on municipal securities does not necessarily result in an exemption
under the income or other tax laws of any state or local taxing authority.
Shareholders of the Fund may be exempt from state and local taxes on exempt
interest dividends derived from obligations of the state and/or municipalities
of the state in which they reside. Shareholders may, however, be subject to tax
on income derived from the municipal securities of jurisdictions other than
those in which they reside. Shareholders are advised to consult with their tax
advisors concerning the application of state and local taxes to investments in
the Fund which may differ from the Federal income tax consequences described
above.

If Fund shares are sold at a loss after being held for six months or less,
the loss will be disallowed to the extent of any exempt-interest dividends
received on those shares.

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Shortly after the close of each year, a statement is sent to each
shareholder of the Fund advising the shareholder of the portion of total
dividends paid into the shareholder's account that is exempt from Federal income
tax and that is derived from the municipal securities of each state and from
other sources. These portions are determined for the entire year and on a
monthly basis and, thus, are an annual or monthly average, rather than a
day-by-day determination for each shareholder.

GENERAL. Distributions by the Funds of realized net long-term capital gain,
if any, are taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder may have held shares in the Fund. If Fund shares
are sold at a loss after being held for six months or less, the loss will be
treated as long-term capital loss to the extent of any long-term capital gain
distribution received on those shares.

Any capital gain distribution received by a shareholder reduces the net
asset value of the shareholder's shares by the amount of the distribution. To
the extent that capital gain was accrued by a Fund before the shareholder
purchased the shares, the distribution would be in effect a return of capital to
the shareholder. Capital gain distributions, including those that operate as a
return of capital, however, are taxable to the shareholder receiving them.

The Funds may be required by Federal law to withhold 31% of reportable
payments (which may include taxable dividends, capital gain distributions and
redemption proceeds) paid to individuals and certain other non-corporate
shareholders. Withholding is not required if a shareholder certifies that the
shareholder's social security or tax identification number provided to the Funds
is correct and that the shareholder is not subject to backup withholding.

TAX-EXEMPT INCOME VS. TAXABLE INCOME

The table below shows approximate equivalent taxable and tax-free yields at
various approximate marginal Federal tax bracket rates. For example, an investor
in the 31% tax bracket for 1996 whose investments earn a 5% tax-free yield would
have to earn a 7.25% taxable yield to receive the same benefit.

1996 FEDERAL TAXABLE VS. TAX-FREE YIELDS

<TABLE>
<CAPTION>
A Tax-Free Yield of
----------------------------------------------------------------------
5.0% 5.5% 6.0% 6.5% 7.0%
Federal
Tax Bracket
7.5%
equals a taxable yield of approximately
- ----------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
39.6% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42%
36.0% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72%
31.07% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87%
28.0% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42%
15.0% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
</TABLE>

The yields listed are for illustration only and are not necessarily
representative of TaxSaver Bond Fund's yield. Although the Fund primarily
invests in securities the interest from which is exempt from Federal income
taxes, some of the Fund's investments may generate taxable income. An investor's
tax bracket will depend upon the investor's taxable income. The figures set
forth above do not reflect the Federal alternative minimum taxes or any state or
local income taxes.

The foregoing is only a summary of some of the important Federal and state
tax considerations generally affecting the Funds and their shareholders. There
may be other Federal, state or local tax considerations applicable to a
particular investor. Prospective investors are urged to consult their tax
advisors.

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<PAGE>

9. OTHER INFORMATION

PERFORMANCE INFORMATION

Each Funds' performance may be quoted in advertising in terms of yield or
total return. Both types are based on historical results and are not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income earned by the Fund as a percentage of the Fund's share price. Yield is
calculated by dividing the net investment income of the Fund for the stated
period by the average number of shares entitled to receive dividends and
expressing the result as an annualized percentage rate based on the Fund's share
price at the end of the period. TaxSaver Bond Fund may also quote tax equivalent
yields, which show the taxable yields a shareholder would have to earn to equal
the Fund's tax-free yields after taxes. A tax equivalent yield is calculated by
dividing the Fund's tax-free yield by one minus a stated Federal, state or
combined Federal and state tax rate. Total return refers to the average annual
compounded rates of return over some representative period that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment, after giving effect to the reinvestment of
all dividends and distributions and deductions of expenses during the period.
Each of the Funds also may advertise its total return over different periods of
time on a before-tax, after-tax or taxable-equivalent basis or by means of
aggregate, average, year by year, or other types of total return figures.
Because average annual returns tend to smooth out variations in the Funds'
returns, shareholders should recognize that they are not the same as actual
year-by-year results. A computation of yield or total return that does not take
into account the sales load paid by an investor will be higher than a
computation based on the public offering price of the shares purchased that does
take into account payment of a sales load.

The Funds' advertisements may reference ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC/Donoghue, Inc. In addition, the performance of the Funds may be
compared to recognized indices of market performance. The comparative material
found in a Fund's advertisements, sales literature or reports to shareholders
may contain performance ratings. These are not to be considered representative
or indicative of future performance.

BANKING LAW MATTERS

Banking laws and regulations generally permit a bank or bank affiliate to
purchase shares of an investment company as agent for and upon the order of a
customer and in the view of Forum would permit a bank or bank affiliate to serve
as a Processing Organization or perform sub-transfer agent or similar services
for the Trust and its shareholders. If a bank or bank affiliate were prohibited
from performing all or a part of the foregoing services, its shareholder
customers would be permitted to remain shareholders of the Trust and alternative
means for continuing to service them would be sought. It is not expected that
shareholders would suffer adverse financial consequences as a result of any
changes in bank or bank affiliate service arrangements.

DETERMINATION OF NET ASSET VALUE

The Trust determines the net asset value per share of the each Fund as of
4:00 p.m., Eastern time, on each Fund Business Day by dividing the value of the
Fund's net assets (I.E., the value of its portfolio securities and other assets
less its liabilities) by the number of that Fund's shares outstanding at the
time the determination is made. Securities owned by a Fund for which market
quotations are readily available are valued at current market value, or, in
their absence, at fair value as determined by the Board.

THE TRUST AND ITS SHARES

The Trust was originally incorporated in Maryland on March 24, 1980 and
assumed the name of Forum Funds, Inc. on March 16, 1987. On January 5, 1996,
Forum Funds, Inc. was reorganized as a

29
<PAGE>

Delaware business trust. 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 portfolios or series
(such as the Fund) and may in the future divide portfolios or series into two or
more classes of shares (such as Investor and Institutional Shares). Currently
the authorized shares of the Trust are divided into 15 separate series.

From time to time, certain shareholders may own a large percentage of the
shares of the Fund. Accordingly, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.

30
<PAGE>

FORUM FUNDS

[LOGO] ACCOUNT APPLICATION ACCOUNT NUMBER__________

1. INITIAL INVESTMENT ($5,000 minimum)

/ / Check enclosed for $______________________ / / Investors Bond

/ / I have telephoned the Transfer Agent / / Tax Saver Bond
to make wire arrangements (see
instructions on reverse).

/ / My initial investment wire is $___________