<PAGE>
As filed with the Securities and Exchange Commission on August 29, 1997
File No. 2-67052
File No. 811-3023
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 45
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 47
------------------------------------
FORUM FUNDS
(Formerly Forum Funds, Inc.)
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
------------------------------------
Max Berueffy, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Anthony C.J. Nuland, Esq.
Seward & Kissel
1200 G Street, N.W.
Washington, D.C. 20005
------------------------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485, paragraph (b)
-----
on [ ] pursuant to Rule 485, paragraph (b)
-----
60 days after filing pursuant to Rule 485, paragraph (a)(i)
-----
<PAGE>
X 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
-----
on [ ] pursuant to Rule 485, paragraph (a)(ii)
-----
----- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed
a Rule 24f-2 notice for its most recent fiscal year ended March 31, 1997, on May
29, 1997.
2
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering Investor Shares of Daily Assets Treasury Fund,
Daily Assets Governemnt Fund, Daily Assets Cash Fund, Daily Assets Tax-Exempt
Fund and Daily Assets Treasury Fund II)
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
- --------- --------------------------
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment
Objective and Policies; Other
Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objective and Policies;
Dividends and Tax Matters; Other
Information - The Trust and its
Shares
Item 7. Purchase of Securities
Being Offered: Purchases and Redemptions of
Shares; Other Information -
Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
3
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering Institutional Shares of Daily Assets Treasury
Fund, Daily Assets Governemnt Fund, Daily Assets Cash Fund, Daily Assets
Tax-Exempt Fund and Daily Assets Treasury Fund II)
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
- --------- --------------------------
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment
Objective and Policies; Other
Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objective and Policies;
Dividends and Tax Matters; Other
Information - The Trust and its
Shares
Item 7. Purchase of Securities
Being Offered: Purchases and Redemptions of
Shares; Other Information -
Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
4
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering Institutional Service Shares of Daily Assets
Treasury Fund, Daily Assets Governemnt Fund, Daily Assets Cash Fund, Daily
Assets Tax-Exempt Fund and Daily Assets Treasury Fund II)
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
- --------- --------------------------
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description
of Registrant: Prospectus Summary; Investment
Objective and Policies; Other
Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objective and Policies;
Dividends and Tax Matters; Other
Information - The Trust and its
Shares
Item 7. Purchase of Securities
Being Offered: Purchases and Redemptions of
Shares; Other Information -
Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
5
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering Shares of S&P 500 Index Fund, Investors Equity Fund,
Small Cap Fund, International Equity Fund and Emerging Markets Fund)
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
- --------- --------------------------
Item 1. Cover Page: Cover Page
Item 2. Synopsis: Prospectus Summary
Item 3. Condensed Financial
Information: Not Applicable
Item 4. General Description Prospectus Summary;
of Registrant: Investment Objective and Policies;
Other Information
Item 5. Management of the Fund: Prospectus Summary; Management
Item 6. Capital Stock and
Other Securities Investment Objective and Policies;
Dividends and Tax Matters; Other
Information - The Trust and its
Shares
Item 7. Purchase of Securities
Being Offered: Purchases and Redemptions of
Shares; Other Information -
Determination of Net Asset Value;
Management
Item 8. Redemption or Repurchase
of Shares: Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
6
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(All other Prospectuses)
Not Applicable in this Filing
7
<PAGE>
PART B
(SAI offering Shares of Daily Assets Treasury Fund, Daily Assets Governemnt
Fund, Daily Assets Cash Fund, Daily Assets Tax-Exempt Fund and Daily Assets
Treasury Fund II)
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
- --------- -------------------------
Item 10. Cover Page: Cover Page
Item 11. Table of Contents: Cover Page
Item 12. General Information and History: Management; Other Information
Item 13. Investment Objectives and
Policies: Investment Policies; Investment
Limitations
Item 14. Management of the Registrant: Management
Item 15. Control Persons and
Principal Holders of
Securities: Other Information
Item 16. Investment Advisory
and Other Services: Management;
Other Information - Custodian,
Counsel, Auditors
Item 17. Brokerage Allocation
and Other Practices: Portfolio Transactions
Item 18. Capital Stock and
Other Securities: Determination of Net Asset Value
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered: Determination of Net Asset
Value; Additional Purchase and
Redemption Information
Item 20. Tax Status: Taxation
Item 21. Underwriters: Management
Item 22. Calculation of
Performance Data: Performance Data
Item 23. Financial Statements: Not Applicable
8
<PAGE>
PART B
(SAI offering Shares of S&P 500 Index Fund, Investors Equity Fund, Small Cap
Fund, International Equity Fund and Emerging Markets Fund)
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
- --------- -------------------------
Item 10. Cover Page: Cover Page
Item 11. Table of Contents: Cover Page
Item 12. General Information and History: Management; Other Information
Item 13. Investment Objectives and
Policies: Investment Policies; Investment
Limitations
Item 14. Management of the Registrant: Management
Item 15. Control Persons and
Principal Holders of
Securities: Other Information
Item 16. Investment Advisory
and Other Services: Management; Other Information -
Custodian, Counsel, Auditors
Item 17. Brokerage Allocation
and Other Practices: Portfolio Transactions
Item 18. Capital Stock and
Other Securities: Determination of Net Asset Value
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered: Determination of Net Asset
Value; Additional Purchase and
Redemption Information
Item 20. Tax Status: Taxation
Item 21. Underwriters: Management
Item 22. Calculation of
Performance Data: Performance Data
Item 23. Financial Statements: Not Applicable
9
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART B
(All other SAIs)
Not Applicable in this Filing
10
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
PRELIMINARY PROSPECTUS
FORUM FUNDS SUBJECT TO COMPLETION
November 15, 1997
Daily Assets Treasury Fund
Daily Assets Treasury Fund II
Daily Assets Government Fund
Daily Assets Cash Fund
Daily Assets TaxSaver Fund
This Prospectus offers Investor Shares of Daily Assets Treasury Fund, Daily
Assets Treasury Fund II, Daily Assets Government Fund, Daily Assets Cash Fund
and Daily Assets TaxSaver Fund (each a "Fund"). Each Fund is a diversified
no-load, money market portfolio of Forum Funds (the "Trust"), an open-end,
management investment company. Each Fund seeks to provide its shareholders with
high current income (which, in the case of Daily Assets TaxSaver Fund, is exempt
from federal income taxes) to the extent consistent with the preservation of
capital and the maintenance of liquidity.
Each Fund 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." Through the portfolio in which it
invests:
DAILY ASSETS TREASURY FUND invests primarily in obligations of the U.S.
Treasury or certain agencies and instrumentalities of the U.S. Government
with a view toward providing income that is generally considered exempt
from state and local income taxes.
DAILY ASSETS TREASURY FUND II invests primarily in obligations of the U.S.
Treasury and in repurchase agreements backed by these obligations.
DAILY ASSETS GOVERNMENT CASH 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.
DAILY ASSETS TAXSAVER FUND invests primarily in high-quality obligations of
the states, territories and possessions of the U.S. and of their
subdivisions, authorities and corporations ("municipal securities") with a
view toward providing income that is exempt from federal income taxes.
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 November 15, 1997, 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 Funds' transfer agent, Forum
Financial Corp. at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800)
94FORUM.
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>
TABLE OF CONTENTS
1. Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . 2
2. Financial Highlights . . . . . . . . . . . . . . . . . . . . . . 4
3. Investment Objectives and Policies . . . . . . . . . . . . . . . 5
4. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Purchases and Redemptions of Shares. . . . . . . . . . . . . . . 12
6. Distributions and Tax Matters. . . . . . . . . . . . . . . . . . 16
7. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
This prospectus offers shares of the Investor class ("Investor Shares") of each
of the Funds. The Funds operate in accordance with the provisions of Rule 2a-7
under the Investment Company Act of 1940 (the "1940 Act"). Daily Assets
Treasury Cash Fund, Daily Assets Treasury Cash Fund II, Daily Assets Government
Cash Fund, Daily Assets Cash Fund and Daily Assets TaxSaver Fund invest all of
their investable assets in Treasury Portfolio, Treasury Cash Portfolio,
Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio (each a
"Portfolio" and collectively the "Portfolios"), respectively. The Portfolios
are separate series of Core Trust (Delaware) ("Core Trust"), an open-end,
management investment company. 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 Administrative Services, LLC ("FAS") supervises the overall
management of the Funds and the Portfolios and Forum Financial Services, Inc.
("FFSI") is the distributor of the Funds' shares. Forum Advisors, Inc. ("Forum
Advisors") is the investment adviser of Treasury Portfolio and Municipal Cash
Portfolio and provides professional management of those Portfolio's investments.
Linden Asset Management, Inc. ("Linden") is the investment adviser of Treasury
Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provides
professional management of those Portfolios' investments. Forum Advisors and
Linden provide certain subadvisory assistance for the Portfolios they do not
directly advise. The Funds' transfer agent, dividend disbursing agent and
shareholder servicing agent (the "Transfer Agent") is Forum Financial Corp. See
"Management" for a description of the services provided and fees charged to the
Funds.
SHAREHOLDER SERVICING AND DISTRIBUTION. The Trust has adopted a Shareholder
Service Plan and a Plan of Distribution relating to Investor Shares under which
FAS and Forum, respectively, are compensated for various shareholder servicing
and distribution related activities. See "Management - Shareholder Servicing"
and "- Administration and Distribution."
PURCHASES AND REDEMPTIONS. The minimum initial investment in Investor Shares is
$10,000 ($2,000 for IRAs, $2,500 for exchanges). The minimum subsequent
investment is $500. Investor Shares may be purchased and redeemed Monday
through Friday, between the hours of 9:00 a.m. and 6:00 p.m., Eastern time,
except on Federal holidays and days that the Federal Reserve Bank of San
Francisco (Boston in the case of Daily Assets Treasury Fund and Daily Assets
TaxSaver Fund) is closed ("Fund Business Days"). To be eligible to receive that
days' income, purchase orders must be received by the Transfer Agent in good
order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets
Treasury Fund). Shareholders may elect to have redemptions of over $5,000
transferred by bank wire to a designated bank account. To be able to receive
redemption proceeds by wire on the day of the redemption, redemption orders must
be received by the Transfer Agent in good order no later than 2:00 p.m., Eastern
time (noon in the case of Daily Assets Treasury Fund and Daily Assets TaxSaver
Fund). All times may be changed without notice by management due to market
activities. See "Purchase and Redemption of Shares."
EXCHANGES. Shareholders of a Fund may exchange Investor Shares without charge
for Investor Shares of the other Funds and for the shares of other certain other
mutual funds not offered by this Prospectus. See "Purchases and Redemptions of
Shares - Exchanges."
DISTRIBUTIONS. Distributions of net investment income are declared daily and
paid monthly by each Fund and are automatically reinvested in additional Fund
shares unless the shareholder has requested payment in cash. See "Distributions
and Tax Matters."
INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able
to maintain a stable net asset value of $1.00 per share. Although the
Portfolios invest only 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. Investment in any security, including U.S.
Government Securities, involves some level of investment risk. An investment in
a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss
of principal. By investing in its corresponding Portfolio, each Fund may
achieve certain efficiencies and economies of scale. Nonetheless, these
investments could also have potential adverse effects on the applicable Fund.
See "Other Information - Core Trust Structure."
- 3 -
<PAGE>
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 Investor Shares will bear directly or
indirectly. There are no transaction expenses associated with purchases,
redemptions or exchanges of Fund shares.
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)(1)
<TABLE>
<CAPTION>
Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets
Treasury Treasury Government Cash TaxSaver
Fund Fund II Cash Fund Fund Fund
---- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C>
Management Fees(2) 0.15% 0.14% 0.14% 0.14% 0.15%
Rule 12b-1 Fees 0.15% 0.15% 0.15% 0.15% 0.15%
Other Expenses(3)
(after expense reimbursements) 0.45% 0.46% 0.46% 0.46% 0.45%
---- ---- ---- ---- ----
Total Operating Expenses 0.75% 0.75% 0.75% 0.75% 0.75%
</TABLE>
(1) For a further description of the various expenses incurred in the operation
of the Funds and the Portfolios, see "Management." The amount of expenses for
each Fund is based on estimated annualized expenses for the Funds' fiscal year
ending August 31, 1998. Each Fund's expenses include the Fund's pro rata
portion of all expenses of its corresponding Portfolio, which are borne
indirectly by Fund shareholders.
(2) 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.
(3) Absent estimated reimbursements by Forum Advisors and its affiliates, Other
Expenses would be 0.__% and Total Fund Operating Expenses would be 0.__% for
each Fund. Expense reimbursements are voluntary and may be reduced or
eliminated at any time.
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of expenses
that an investor in Investor Shares 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 distributions and (v)
redemption at the end of each period:
One Year Three Years Five Years Ten Years
Daily Assets Treasury Fund $8 $26 $46 $103
Daily Assets Treasury Fund II $8 $26 $46 $103
Daily Assets Government Fund $8 $26 $46 $103
Daily Assets Cash Fund $8 $26 $46 $103
Daily Assets TaxSaver Fund $8 $26 $46 $103
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 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.
- 4 -
<PAGE>
2. FINANCIAL HIGHLIGHTS
As of the date hereof, Investor Shares were not offered. The following
information represents selected data for a single outstanding Institutional
Service Share of Daily Assets Treasury Fund and of Daily Assets Cash Fund..
Those classes were the first offered by the respective Funds and, accordingly,
represent data since each Fund's inception. This information was audited by
________, independent auditors. The financial statements for Daily Assets
Treasury Fund and Daily Assets Cash Fund and independent auditors' report
thereon for the fiscal year ended August 31, 1997 are incorporated by reference
into the SAI. Further information about those Fund's performance is contained
in the Funds' annual report to shareholders which may be obtained from the Trust
without charge. As of the date hereof, Daily Assets Treasury Fund II, Daily
Assets Government Fund and Daily Assets TaxSaver Fund had not commenced
operations. As of August 31, 1997, Treasury Cash Portfolio, Government Cash
Portfolio and Cash Portfolio had assets of _____, _____ and _____, respectively.
<TABLE>
<CAPTION>
Ratios to Average Net
- Assets
Beginning Distributions Ending ------------------------
Net Asset Net From Net Net Asset Net
Value Per Investment Investment Value per Investment
Share Income Income Share Expenses Income
----- ------ ------ ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997 $ 1.00 $ 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70%
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01%
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45%
Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82%
Year Ended March 31, 1993(1) 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2)
DAILY ASSETS CASH FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997(1) 1.00 1.00
<CAPTION>
Net Assets at Ratio to
End of Average Net
Period Assets
Total (000's Gross
Return Omitted) Expenses(3)
------ -------- -----------
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997
Year Ended March 31, 1997 4.80% 43,975 0.99%
Year Ended March 31, 1996 5.18% 43,103 1.06%
Year Ended March 31, 1995 4.45% 36,329 1.10%
Year Ended March 31, 1994 2.83% 26,505 1.17%
Year Ended March 31, 1993(1) 3.13%(2) 4,687 2.43%(2)
</TABLE>
(1) Daily Assets Treasury Fund commenced operations on July 1, 1992 and Daily
Assets Cash Fund commenced operations on and October 1, 1996.
(2) Annualized.
(3) During each period, various fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects the
expense ratio in the absence of any waivers and reimbursements for the Fund and
its respective Portfolio.
- 5 -
<PAGE>
3. INVESTMENT OBJECTIVES 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. The investment objective of Daily Assets TaxSaver Fund is to provide
high current income which is exempt from federal income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity.
THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE.
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. In addition, all investment policies of each Fund and its
corresponding Portfolio are substantially identical. Therefore, although the
following in part discusses the investment policies of the Portfolios (and the
responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it
applies equally to the Funds (and the Trust's board of trustees (the "Board")).
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
investment 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
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
and "Treasury Securities" means U.S. Treasury bills and notes and other U.S.
Government Securities which are guaranteed as to principal and interest by the
U.S. Treasury.
In the case of municipal securities, when the assets and revenues of an issuing
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the issuing entity and a security is
backed only by the assets and revenues of the entity, the entity will be deemed
to be the sole issuer of the security. Similarly, in the case of a security
issued by or on behalf of public authorities to finance various privately
operated facilities, such as industrial development bonds, that is backed only
by the assets and revenues of the non-governmental user, the non-governmental
user will be deemed to be the sole issuer of the security.
A Fund'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 and municipal 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. The achievement of a Portfolio's
investment objective is dependent in part on the continuing ability of the
issuers of the securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when due.
DAILY ASSETS TREASURY FUND
Treasury Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in Treasury Securities. The
Portfolio may also invest in other
- 6 -
<PAGE>
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. 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 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 "Distributions and
Tax Matters."
The U.S. Government Securities in which the Portfolio may invest include
securities supported primarily or solely by the creditworthiness of the issuer.
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.
DAILY ASSETS TREASURY FUND II
Treasury Cash Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities and in repurchase agreements backed by Treasury
Securities.
DAILY ASSETS GOVERNMENT FUND
Government Cash Portfolio seeks to attain its investment objective by investing
primarily 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 Treasury Securities and securities supported
primarily or solely by the creditworthiness of the issuer, such as securities of
the Federal National Mortgage Association, Federal Home Loan Banks and Student
Loan Marketing 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.
DAILY ASSETS CASH FUND
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 Objectives and Policies - Daily Assets Government
Cash Fund") 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
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<PAGE>
securities may not be made absent registration under the 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.
DAILY ASSETS TAXSAVER FUND
Municipal Cash Portfolio seeks to attain its investment objective by investing
primarily in municipal securities. During periods of normal market condition
the Portfolio will have at least 80% of its net assets invested in federally
tax-exempt municipal securities.
The Portfolio may from time to time invest more than 25% of its assets in
obligations of issuers located in one state but, under normal circumstances,
will not invest more than 35% of its assets in obligations of issuers located in
one state. If the Portfolio concentrates its investments in this manner, it
will be more susceptible to factors adversely affecting issuers of those
municipal securities than would be a more geographically diverse municipal
securities portfolio. These risks arise from the financial condition of the
particular state and its political subdivisions.
MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities that
generally are 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 usually 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 may also be "moral obligation" bonds, which are normally issued by special
purpose public authorities. If the issuer is unable to meet its obligations
under the bonds from current revenues, it may draw on a reserve fund that is
backed by the moral commitment (but not the legal obligation) of the state or
municipality that created the issuer.
The Portfolio may invest in industrial development bonds, which in most cases
are revenue bonds and generally do not have the pledge of the credit of the
municipality. 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 so financed as security for such
payment. The Portfolio will acquire these securities only if the interest
payments on the security 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 short-term fixed income securities that
generally are intended to fulfill short-term capital needs of a municipality.
Municipal Leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities. Municipal
leases frequently have special risks not normally associated with other
municipal securities. Lease and installment purchase or conditional sale
contracts (which normally provide for title to the leased assets to pass
eventually to the government issuer) have evolved as a means for governmental
issuers to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Generally,
the Portfolio will invest in municipal lease obligations through certificates of
participation.
PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in
municipal securities that are owned by banks or other financial institutions.
Participation interests usually 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 Portfolio will acquire these
securities only if the interest payments on the security are exempt from federal
income taxation (other than the AMT).
THE SHORT-TERM MUNICIPAL SECURITIES MARKET. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
municipal security markets and the fixed income markets in general, the size of
a particular offering, the maturity of the obligation and the rating of the
issue.
Although the Portfolio invests primarily in municipal securities, it is
anticipated that a substantial amount of the securities held
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<PAGE>
by the Portfolio will be supported by credit and liquidity enhancements, such as
letters of credit (which are not covered by federal deposit insurance) or put or
demand features, of third party financial institutions, generally domestic and
foreign banks. Accordingly, the credit quality and liquidity of the Portfolio
will be dependent in part upon the credit quality of the banks supporting the
Portfolio's investments. This will result in exposure to risks pertaining to
the banking industry, including the foreign banking industry. These risks
include a sustained increase in interest rates, which can adversely affect the
availability and cost of a bank's lending activities; exposure to credit losses
during times of economic decline; concentration of loan portfolios in certain
industries; regulatory developments; and competition among financial
institutions. Brokerage firms and insurance companies also provide certain
liquidity and credit support. The Portfolio's policy is to purchase municipal
securities with third party credit or liquidity support only after the
investment adviser has considered the creditworthiness of the financial
institution providing the support and believes that the security presents
minimal credit risk.
The Portfolio may purchase long term municipal securities with various maturity
shortening provisions. For instance, variable rate demand notes ("VRDN") are
municipal bonds with maturities of up to 40 years that are sold with a demand
feature (an option for the holder of the security to sell the security back to
the issuer) which may be exercised by the security holder at predetermined
intervals, usually daily or weekly. The interest rate on the security is
typically reset by a remarketing or similar agent at prevailing interest rates.
VRDNs may be issued directly by the municipal issuer or created by a bank,
broker-dealer or other financial institution by selling a previously issued
long-term bond with a demand feature attached. Similarly, tender option bonds
(also referred to as certificates of participation) are municipal securities
with relatively long original maturities and fixed rates of interest that are
coupled with an agreement of a third party financial institution under which the
third party grants the security holders the option to tender the securities to
the institution and receive the face value thereof. The option may be exercised
at periodic intervals, usually six months to a year. As consideration for
providing the option, the financial institution receives a fee equal to the
difference between the underlying municipal security's fixed rate and the rate,
as determined by a remarketing or similar agent, that would cause the
securities, coupled with the tender option, to trade at par on the date of the
interest rate determination. These bonds effectively provide the holder with a
demand obligation that bears interest at the prevailing short-term municipal
securities interest rate.
The Portfolio also may acquire "puts" on municipal securities it purchases. A
put gives the Portfolio the right to sell the municipal security at a specified
price at any time before a specified date. The Portfolio will acquire puts only
to enhance liquidity, shorten the maturity of the related municipal security or
permit the Portfolio to invest its funds at more favorable rates. Generally,
the Portfolio will buy a municipal security that is accompanied by a put only if
the put is available at no extra cost. In some cases, however, the Portfolio
may pay an extra amount to acquire a put, either in connection with the purchase
of the related municipal security or separately from the purchase of the
security.
The Portfolio may purchase municipal securities together with the right to
resell them to the seller or a third party at an agreed-upon price or yield
within specified periods prior to their maturity dates. Such a right to resell
is commonly known as a "stand-by commitment," and the aggregate price which the
Portfolio 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 Portfolio to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, the Portfolio acquires stand-by
commitments solely to facilitate portfolio liquidity and does not exercise its
rights thereunder for trading purposes. Stand-by commitments involve certain
expenses and risks, including the inability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised,
non-marketability of the commitment, and differences between the maturity of the
underlying security and the maturity of the commitment.
TAXABLE INVESTMENTS. Although the Portfolio will attempt to invest 100% of its
assets in municipal securities, the Portfolio may invest up to 20% of the value
of its net assets in cash and cash equivalents the interest income on which is
subject to federal income taxation. In addition, when business or financial
conditions warrant or when an adequate supply of appropriate municipal
securities is not available, the Portfolio may assume a temporary defensive
position and invest without limit in any of the instruments in which Cash
Portfolio (the Portfolio in which Daily Assets Cash Fund invests) invests.
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,
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<PAGE>
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 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 Portfolio may seek additional income or liquidity
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. Each
Portfolio, however, intends to enter into repurchase agreements only with
sellers which its investment adviser 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, 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. The value of securities that have a limited market tend to fluctuate
more than those that have an active market. Each Portfolio's investment adviser
monitors the liquidity of the Portfolio's investments.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of
being able to obtain securities at prices which it believes might not be
available at a future time, each Portfolio's investment adviser 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. As a result of entering into
forward commitments, the Funds are exposed to greater potential fluctuations in
the value of their assets and net asset values per share.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio
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.
ZERO-COUPON SECURITIES. Each Portfolio may invest in zero-coupon securities
such as Treasury bills and separately traded principal and interest components
of Treasury Securities issued or guaranteed under the U.S. Treasury's Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.).
These 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
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<PAGE>
value than the other securities in which the Portfolios may invest.
FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and 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. These Portfolios do not intend to hold in their 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. In addition, these Portfolios limit their 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.
ADMINISTRATION AND DISTRIBUTION
Subject to the supervision of the Board, FAS supervises the overall management
of the Trust, including overseeing the Trust's receipt of services, advising the
Trust and the Trustees on matters concerning the Trust and its affairs, and
providing the Trust with general office facilities and certain persons to serve
as officers. For these services and facilities, FAS receives a fee at an annual
rate of 0.05% of the daily net assets of each Fund. FAS also serves as
administrator of the Portfolios and provides administrative services for each
Portfolio that are similar to those provided to the Funds. For its
administrative services to the Portfolios, FAS receives a fee at an annual rate
of 0.05% of the average daily net assets of each Portfolio. Forum Accounting
Services, LLC ("Forum Accounting") performs portfolio accounting services for
the Funds and Portfolios pursuant to an agreement with the Trust and is paid a
separate fee for these services.
FFSI acts as the agent of the Trust in connection with the offering of shares of
the Funds. FFSI is a registered broker-dealer and is a member of the National
Association of Securities Dealers, Inc. In order to facilitate the distribution
of Investor Shares, the Trust has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Investor
Shares. Under the Plan, Forum receives a fee at an annual rate of 0.15% of the
average daily net assets of each Fund attributable to Investor Shares as
compensation for Forum's services as distributor. From this amount, Forum may
make payments to various financial institutions, including broker-dealers, banks
and trust companies as compensation for services or reimbursement of expenses in
connection with the distribution of shares or the provision of various
shareholder services. If the distribution related expenses of Forum exceed its
Rule 12b-1 fees for any Fund, the Fund will not be obligated to pay Forum an
additional amount and if Forum's distribution related expenses are less than its
Rule 12b-1 fees, Forum will realize a profit.
FAS, FFSI, Forum Advisors, Forum Accounting 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 of this Prospectus, each of these companies was controlled by John Y.
Keffer, President and Chairman of the Trust and FAS and FFSI provided
administration services to registered investment companies with assets of
approximately $30 billion.
INVESTMENT ADVISERS
Subject to the general supervision of the Core Trust Board, Forum Advisors makes
investment decisions for Treasury Portfolio and Municipal Cash Portfolio and
monitors those Portfolio's investments and Linden makes investment decisions for
Treasury Cash Portfolio, 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
four other mutual
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<PAGE>
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. Forum Advisors and Linden act also as
investment 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 and Municipal Cash Portfolio's average daily net
assets. For its services, Linden receives from each of Treasury Cash Portfolio,
Government Cash Portfolio and Cash Portfolio an advisory fee based upon the
total average daily net assets of those Portfolios ("Total Portfolio Assets").
Linden's fee is calculated at an annual rate on a cumulative basis as follows:
0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the next
$300 million of Total Portfolio Assets, and 0.03% 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 Forum Advisors and Linden will delegate
responsibility for portfolio management to the other investment adviser
infrequently.
SHAREHOLDER SERVICING
TRANSFER AND DIVIDEND DISBURSING AGENT. 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 an account for each shareholder of the Funds (unless
such accounts are maintained by sub-transfer agents or processing agents) and
performs other transfer agency and related functions. 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. For its services,
the Transfer Agent is paid a transfer agent fee at an annual rate of 0.20% of
the average daily net assets of each Fund attributable to Investor Shares plus
$12,000 per year for each Fund and certain account and additional class charges
and is reimbursed for certain expenses incurred on behalf of the Funds.
SHAREHOLDER SERVICE AGENTS. The Trust has adopted a shareholder service plan
("Shareholder Service Plan") which provides that, as compensation for FAS's
service activities with respect to the Investor Shares, the Trust shall pay FAS
a fee at an annual rate of 0.25% of the average daily net assets attributable to
Investor Shares. FAS is authorized to enter into shareholder servicing
agreements pursuant to which a shareholder servicing agent, on behalf of its
customers, performs certain shareholder services not otherwise provided by the
Transfer Agent. As compensation for its services, the shareholder servicing
agent is paid a fee by FAS of up to 0.25% of the average daily net assets of
Investor Shares owned by investors for which the shareholder service agent
maintains a servicing relationship. Certain shareholder servicing agents may be
subtransfer or processing agents.
Among the services provided by shareholder servicing agents are answering
customer inquiries regarding the manner in which purchases, exchanges and
redemptions of shares of the Trust may be effected and other matters pertaining
to the Trust's services; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting shareholders
in arranging for processing purchase, exchange and redemption transactions;
arranging for the wiring of funds; guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; integrating periodic statements with other
customer transactions; and providing such other related services as the
shareholder may request.
EXPENSES OF THE FUNDS
Each 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. 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.
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<PAGE>
Each Fund's expenses include the service fees described in this Prospectus, the
fees and expenses of the Board, applicable insurance and bonding expenses and
state and SEC registration fees. Each Fund bears its pro rata portion of the
expenses of the portfolio in which it invests along with all other investors in
the Portfolio.
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 each 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 and Daily Assets
TaxSaver Fund's net asset value is calculated at 12:00 p.m., Eastern Time, and
each other Fund's net asset value is calculated at 2:00 p.m., Eastern Time.
Fund shares become entitled to receive distributions on the day the purchase
order is accepted if the order and payment are received by the Transfer Agent as
follows:
<TABLE>
Order Must be Received by Payment Must be Received by
------------------------- ---------------------------
<S> <C> <C>
Daily Assets Treasury Fund and
Daily Assets TaxSaver Fund 12:00 p.m., Eastern time [5:00] p.m., Eastern time
All other Funds 2:00 p.m., Eastern time [5:00] p.m., Eastern time
</TABLE>
If a purchase order is transmitted to the Transfer Agent (or the wire is
received) after the times listed above, the investor will not receive a
distribution on that day. On days that the New York Stock Exchange or Federal
Reserve Bank of San Francisco (Boston in the case of Daily Assets Treasury Fund
and Daily Assets TaxSaver Fund) closes early or the Public Securities
Association recommends that the government securities markets close early, the
Trust may advance the time by which the Transfer Agent must receive completed
wire purchase orders and the cut-off times in the above table.
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.
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 distributions declared on or after the day on which the
redemption becomes effective.
For wire redemption orders received after 12:00 p.m., Eastern time, in the case
of Daily Assets Treasury Fund and Daily Assets TaxSaver Fund, and after 2:00
p.m., Eastern Time, in the case of each other Fund, the Transfer Agent will wire
proceeds the next Fund Business Day. On days that the New York Stock Exchange
or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets
Treasury Fund and Daily Assets TaxSaver Fund) closes early or the Public
Securities Association recommends that the government securities markets close
early, the Trust may advance the time by which the Transfer Agent must receive
completed wire redemption orders.
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
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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 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.
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 $5,000.
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 shareholder'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 each 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 Transfer Agent. 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 a 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:
BankBoston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund] - Investor Shares
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 broker-dealers, banks or other
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<PAGE>
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 a Fund. The Trust is not responsible for the
failure of any Processing Organization 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 a 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. Investors 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.
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
Shareholders who 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 days after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone.
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 who 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 who 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.
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<PAGE>
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. 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 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 administered by FAS that participates with the Funds in
the exchange program (currently, Sound Shore Fund, Inc. and CRM Small Cap Value
Fund). 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 minimum amount required to open
an account in a Fund through an exchange from another fund (other than the
Funds) 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 guarantee is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.
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<PAGE>
BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder who
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 Fund (other than Daily Assets TaxSaver 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 either
the individual or the individual's spouse, is an active participant in an
employer-sponsored retirement plan and the individual (or in certain cases, the
married couple has adjusted gross income above certain levels.
6. DISTRIBUTIONS AND TAX MATTERS
DISTRIBUTIONS
Distributions 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.
Shareholders may choose to have all distributions reinvested in additional
shares of the Fund or received in cash. [In addition, shareholders may have
distributions of net capital gain reinvested in additional shares of the Fund
and distributions of net investment income paid in cash.] All distributions are
treated in the same manner for Federal income tax purposes whether received in
cash or reinvested in shares of the Fund.
All distributions will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All distributions are reinvested unless another
option is selected. All distributions not reinvested will be paid to the
shareholder in cash and may be paid more than seven days following the date on
which distribution 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, as amended. Accordingly, each Fund will not be liable for Federal income
taxes on the net investment income and capital gain distributed to its
shareholders. Because each Fund intends to distribute all of its net investment
income and net capital gain each year, the Funds should also avoid Federal
excise taxes.
Distributions 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.
DAILY ASSETS TAXSAVER FUND. Distributions paid by Daily Assets TaxSaver Fund
out of federally tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to federal income tax in the hands of
the Fund's shareholders. Substantially all of the distributions paid by the
Fund are anticipated to be exempt-interest dividends. Persons who are
"substantial users" or "related persons" thereof of facilities financed by
private activity securities held by the Fund, however, may be subject to federal
income tax on their pro rata share of the interest income from those securities
and should consult their tax advisers before purchasing Shares. Exempt-interest
dividends are included in the "adjusted current earnings" of corporations for
AMT purposes.
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<PAGE>
Interest on indebtedness incurred by shareholders to purchase or carry shares of
the Fund generally is not deductible for federal income tax purposes. Under
rules for determining when borrowed funds are used for purchasing or carrying
particular assets, Shares of the Fund may be considered to have been purchased
or carried with borrowed funds even though those funds are not directly linked
to the Shares.
The income from the Portfolio's investments may be subject to the federal
alternative minimum tax ("AMT"). Under current federal tax law, interest on
certain municipal securities issued after August 7, 1986 to finance "private
activities" ("private activity securities") is a "tax preference item" for
purposes of the AMT applicable to certain individuals and corporations even
though such interest will continue to be fully tax-exempt for regular federal
income tax purposes. The Portfolio may purchase private activity securities,
the interest on which may constitute a "tax preference item" for purposes of the
AMT.
STATE AND LOCAL TAXES. 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 distributions paid by this Fund to
shareholders residing in certain states will be exempt or excluded from state
income taxes. A portion of the distributions paid by Daily Assets Treasury Fund
II, 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.
The exemption for federal income tax purposes of distributions 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 Daily Assets TaxSaver Fund may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions.
Shareholders are advised to consult with their tax advisers concerning the
application of state and local taxes to investments in a Fund which may differ
from the federal income tax consequences described above.
GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable
payments (which may include taxable 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.
The Funds must include a portion of the original issue discount of zero-coupon
securities as income even though these securities do not pay any interest until
maturity. Because each Fund distributes all of its net investment income, a
Fund may have to sell portfolio securities to distribute imputed income, which
may occur at a time when the investment adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
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 distributions paid
to the shareholder that is derived from each type of obligation in which a Fund
has invested , that is derived from the obligations of issuers in the various
states and the portion of the Fund's distributions that is exempt from federal
income taxes. 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.
Reports containing appropriate information with respect to the Federal income
tax status of 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 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>
7. OTHER INFORMATION
PERFORMANCE INFORMATION
Investor Shares' performance may be advertised. All performance information is
based on historical results, is not intended to indicate future performance and,
unless otherwise indicated, is net of all expenses. The Funds may advertise
yield, which shows the rate of income a Fund has earned on its investments as a
percentage of the Fund's share price. To calculate yield, a Fund takes the
interest income it earned from its portfolio of investments for a specified
period (net of expenses), divides it by the average number of shares entitled to
receive distributions, and expresses the result as an annualized percentage rate
based on the Fund's share price at the end of the period. A Fund's compounded
annualized yield assumes the reinvestment of distributions paid by the Fund,
and, therefore will be somewhat higher than the annualized yield for the same
period. A 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 yield,
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. Each class' performance will vary.
The Funds' advertisements may also reference ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC Financial Data, 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 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 each other Fund as of 2:00 p.m., Eastern
Time, on each Fund Business Day by dividing the value of the Fund's net assets
(the value of its interest in the Portfolio and other assets less its
liabilities) by the number of 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 Core Trust Board believes that it fairly
reflects the market-based net asset value per share. The Portfolios' other
assets, if any, are valued at fair value by or under the direction of the Core
Trust Board.
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., which was incorporated in 19__.
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 sixteen series of the Trust.
Each share of each fund of the Trust and each class of shares has equal
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
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<PAGE>
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 (and Trustees)
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. A shareholder in a portfolio is entitled to the
shareholder's pro rata share of all 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. As of the date hereof, due to
initial investment in Daily Assets Treasury Fund II, Daily Assets Government
Fund and Daily Assets TaxSaver Fund, prior to the public offering of Shares FAS
may be deemed to control those Funds.
FUND STRUCTURE
OTHER CLASSES OF SHARES. In addition to Investor Shares, each Fund may create
and issue shares of other classes of securities. Each Fund currently has two
other classes of shares authorized, Institutional Shares and Institutional
Service Shares. Institutional Shares have an investment minimum of $10,000,000.
Institutional Service Shares are offered solely through banks, trust companies
and certain other financial institutions, and their affiliates and
correspondents, for investment of their funds or funds for which they act in a
fiduciary, agency or custodial capacity. Institutional Shares and Institutional
Service Shares incur less expenses than Investor Shares. Except for certain
differences, each share of each class represents an undivided, proportionate
interest in a Fund. Each share of each Fund is entitled to participate equally
in distributions and the proceeds of any liquidation of that Fund except that,
due to the differing expenses borne by the various classes, the amount of
distributions will differ among the classes.
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. 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 and Daily Assets TaxSaver Fund are the only investors
(other than FAS or its affiliates) that have invested in Treasury Portfolio and
Municipal Cash Portfolio, respectively. Each of the other Portfolios has
another investor besides the Funds (and FAS and its affiliates). 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 is 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 the investment adviser to the
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Portfolio 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 Portfolio's investment adviser
to manage the Fund's assets, could have a significant impact on shareholders of
the Fund.
ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company
that invests in a Portfolio) may have a different expense ratio and different
sales charges, including distribution fees, and each class' (and investment
company's) performance will be affected by its expenses and sales charges. For
more information on any other class of shares of the Funds or concerning any
other investment companies that invest in a Portfolio, investors may contact
FFSI at 207-879-1900. If an investor invests through a financial institution,
the investor may also contact their financial institution to obtain information
about the other classes or 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.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
PRELIMINARY PROSPECTUS
FORUM FUNDS SUBJECT TO COMPLETION
November 15, 1997
Daily Assets Treasury Fund
Daily Assets Treasury Fund II
Daily Assets Government Fund
Daily Assets Cash Fund
Daily Assets TaxSaver Fund
- --------------------------------------------------------------------------------
This Prospectus offers Institutional Shares of Daily Assets Treasury Fund, Daily
Assets Treasury Fund II, Daily Assets Government Fund, Daily Assets Cash Fund
and Daily Assets TaxSaver Fund (each a "Fund"). Each Fund is a diversified
no-load, money market portfolio of Forum Funds (the "Trust"), an open-end,
management investment company. Each Fund seeks to provide its shareholders with
high current income (which, in the case of Daily Assets TaxSaver Fund, is exempt
from federal income taxes) to the extent consistent with the preservation of
capital and the maintenance of liquidity.
Each Fund 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." Through the portfolio in which it
invests:
DAILY ASSETS TREASURY FUND invests primarily in obligations of the U.S.
Treasury or certain agencies and instrumentalities of the U.S. Government
with a view toward providing income that is generally considered exempt
from state and local income taxes.
DAILY ASSETS TREASURY FUND II invests primarily in obligations of the U.S.
Treasury and in repurchase agreements backed by these obligations.
DAILY ASSETS GOVERNMENT CASH 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.
DAILY ASSETS TAXSAVER FUND invests primarily in high-quality obligations of
the states, territories and possessions of the U.S. and of their
subdivisions, authorities and corporations ("municipal securities") with a
view toward providing income that is exempt from federal income taxes.
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 November 15, 1997, 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 Funds' transfer agent, Forum
Financial Corp. at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800)
94FORUM.
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>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
1. Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Investment Objectives and Policies. . . . . . . . . . . . . . . . . . . 5
4. Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Purchases and Redemptions of Shares . . . . . . . . . . . . . . . . . . 11
6. Distributions and Tax Matters . . . . . . . . . . . . . . . . . . . . . 15
7. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- --------------------------------------------------------------------------------
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
This prospectus offers shares of the Institutional class ("institutional
Shares") of each of the Funds. The Funds operate in accordance with the
provisions of Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"). Daily Assets Treasury Cash Fund, Daily Assets Treasury Cash Fund II,
Daily Assets Government Cash Fund, Daily Assets Cash Fund and Daily Assets
TaxSaver Fund invest all of their investable assets in Treasury Portfolio,
Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal
Cash Portfolio (each a "Portfolio" and collectively the "Portfolios"),
respectively. The Portfolios are separate series of Core Trust (Delaware)
("Core Trust"), an open-end, management investment company. 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 Administrative Services, LLC ("FAS") supervises the overall
management of the Funds and the Portfolios and Forum Financial Services, Inc.
("FFSI") is the distributor of the Funds' shares. Forum Advisors, Inc. ("Forum
Advisors") is the investment adviser of Treasury Portfolio and Municipal Cash
Portfolio and provides professional management of those Portfolio's investments.
Linden Asset Management, Inc. ("Linden") is the investment adviser of Treasury
Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provides
professional management of those Portfolios' investments. Forum Advisors and
Linden provide certain subadvisory assistance for the Portfolios they do not
directly advise. The Funds' transfer agent, dividend disbursing agent and
shareholder servicing agent (the "Transfer Agent") is Forum Financial Corp. See
"Management" for a description of the services provided and fees charged to the
Funds.
PURCHASES AND REDEMPTIONS. The minimum initial investment in Institutional
Shares is $10,000,000. Institutional Shares may be purchased and redeemed
Monday through Friday, between the hours of 9:00 a.m. and 6:00 p.m., Eastern
time, except on Federal holidays and days that the Federal Reserve Bank of San
Francisco (Boston in the case of Daily Assets Treasury Fund and Daily Assets
TaxSaver Fund) is closed ("Fund Business Days"). To be eligible to receive that
days' income, purchase orders must be received by the Transfer Agent in good
order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets
Treasury Fund). Shareholders may have redemptions of over $5,000 transferred by
bank wire to a designated bank account. To be able to receive redemption
proceeds by wire on the day of the redemption, redemption orders must be
received by the Transfer Agent in good order no later than 2:00 p.m., Eastern
time (noon in the case of Daily Assets Treasury Fund and Daily Assets TaxSaver
Fund). All times may be changed without notice by management due to market
activities. See "Purchase and Redemption of Shares."
EXCHANGES. Shareholders of a Fund may exchange Institutional Shares without
charge for Institutional Shares of the other Funds. See "Purchases and
Redemptions of Shares - Exchanges."
DISTRIBUTIONS. Distributions of net investment income are declared daily and
paid monthly by each Fund and are automatically reinvested in additional Fund
shares unless the shareholder has requested payment in cash. See "Distributions
and Tax Matters."
INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able
to maintain a stable net asset value of $1.00 per share. Although the
Portfolios invest only 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. Investment in any security, including U.S.
Government Securities, involves some level of investment risk. An investment in
a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss
of principal. By investing in its corresponding Portfolio, each Fund may
achieve certain efficiencies and economies of scale. Nonetheless, these
investments could also have potential adverse effects on the applicable Fund.
See "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 Institutional Shares will bear directly or
indirectly. There are no transaction expenses associated with purchases,
redemptions or exchanges of Fund shares.
- 3 -
<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)(1)
<TABLE>
<CAPTION>
Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets
Treasury Treasury Government Cash TaxSaver
Fund Fund II Cash Fund Fund Fund
---- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C>
Management Fees(2) 0.15% 0.14% 0.14% 0.14% 0.15%
Other Expenses(3)
(after expense reimbursements) 0.05% 0.06% 0.06% 0.06% 0.05%
----- ----- ----- ----- -----
Total Operating Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
</TABLE>
(1) For a further description of the various expenses incurred in the
operation of the Funds and the Portfolios, see "Management." The amount of
expenses for each Fund is based on estimated annualized expenses for the Funds'
fiscal year ending August 31, 1998. Each Fund's expenses include the Fund's pro
rata portion of all expenses of its corresponding Portfolio, which are borne
indirectly by Fund shareholders.
(2) 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.
(3) Absent estimated reimbursements by Forum Advisors and its affiliates,
Other Expenses would be 0.17% and Total Fund Operating Expenses would be 0.32%
for each Fund. Expense reimbursements are voluntary and may be reduced or
eliminated at any time.
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of expenses
that an investor in Institutional Shares 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 distributions and
(v) redemption at the end of each period:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Daily Assets Treasury Fund $2 $6 $11 $26
Daily Assets Treasury Fund II $2 $6 $11 $26
Daily Assets Government Fund $2 $6 $11 $26
Daily Assets Cash Fund $2 $6 $11 $26
Daily Assets TaxSaver Fund $2 $6 $11 $26
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 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.
- 4 -
<PAGE>
2. FINANCIAL HIGHLIGHTS
As of the date hereof, Institutional Shares were not offered. The following
information represents selected data for a single outstanding Institutional
Service Share of Daily Assets Treasury Fund and of Daily Assets Cash Fund..
Those classes were the first offered by the respective Funds and, accordingly,
represent data since each Fund's inception. This information was audited by
________, independent auditors. The financial statements for Daily Assets
Treasury Fund and Daily Assets Cash Fund and independent auditors' report
thereon for the fiscal year ended August 31, 1997 are incorporated by reference
into the SAI. Further information about those Fund's performance is contained
in the Funds' annual report to shareholders which may be obtained from the Trust
without charge. As of the date hereof, Daily Assets Treasury Fund II, Daily
Assets Government Fund and Daily Assets TaxSaver Fund had not commenced
operations. As of August 31, 1997, Treasury Cash Portfolio, Government Cash
Portfolio and Cash Portfolio had assets of _____, _____ and _____, respectively.
<TABLE>
<CAPTION>
Ratios to Average Net
- Assets
Beginning Distributions Ending ------------------------
Net Asset Net From Net Net Asset Net
Value Per Investment Investment Value per Investment
Share Income Income Share Expenses Income
----- ------ ------ ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997 $ 1.00 $ 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70%
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01%
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45%
Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82%
Year Ended March 31, 1993(1) 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2)
DAILY ASSETS CASH FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997(1) 1.00 1.00
<CAPTION>
Net Assets at Ratio to
End of Average Net
Period Assets
Total (000's Gross
Return Omitted) Expenses(3)
------ -------- -----------
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997
Year Ended March 31, 1997 4.80% 43,975 0.99%
Year Ended March 31, 1996 5.18% 43,103 1.06%
Year Ended March 31, 1995 4.45% 36,329 1.10%
Year Ended March 31, 1994 2.83% 26,505 1.17%
Year Ended March 31, 1993(1) 3.13%(2) 4,687 2.43%(2)
</TABLE>
(1) Daily Assets Treasury Fund commenced operations on July 1, 1992 and Daily
Assets Cash Fund commenced operations on and October 1, 1996.
(2) Annualized.
(3) During each period, various fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects the
expense ratio in the absence of any waivers and reimbursements for the Fund and
its respective Portfolio.
- 5 -
<PAGE>
3. INVESTMENT OBJECTIVES 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. The investment objective of Daily Assets TaxSaver Fund is to provide
high current income which is exempt from federal income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity.
THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE.
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. In addition, all investment policies of each Fund and its
corresponding Portfolio are substantially identical. Therefore, although the
following in part discusses the investment policies of the Portfolios (and the
responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it
applies equally to the Funds (and the Trust's board of trustees (the "Board")).
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
investment 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
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
and "Treasury Securities" means U.S. Treasury bills and notes and other U.S.
Government Securities which are guaranteed as to principal and interest by the
U.S. Treasury.
In the case of municipal securities, when the assets and revenues of an issuing
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the issuing entity and a security is
backed only by the assets and revenues of the entity, the entity will be deemed
to be the sole issuer of the security. Similarly, in the case of a security
issued by or on behalf of public authorities to finance various privately
operated facilities, such as industrial development bonds, that is backed only
by the assets and revenues of the non-governmental user, the non-governmental
user will be deemed to be the sole issuer of the security.
A Fund'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 and municipal 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. The achievement of a Portfolio's
investment objective is dependent in part on the continuing ability of the
issuers of the securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when due.
DAILY ASSETS TREASURY FUND
Treasury Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in Treasury Securities. The
Portfolio may also invest in other
- 6 -
<PAGE>
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. 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 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 "Distributions and
Tax Matters."
The U.S. Government Securities in which the Portfolio may invest include
securities supported primarily or solely by the creditworthiness of the issuer.
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.
DAILY ASSETS TREASURY FUND II
Treasury Cash Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities and in repurchase agreements backed by Treasury
Securities.
DAILY ASSETS GOVERNMENT FUND
Government Cash Portfolio seeks to attain its investment objective by investing
primarily 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 Treasury Securities and securities supported
primarily or solely by the creditworthiness of the issuer, such as securities of
the Federal National Mortgage Association, Federal Home Loan Banks and Student
Loan Marketing 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.
DAILY ASSETS CASH FUND
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 Objectives and Policies - Daily Assets Government
Cash Fund") 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
- 7 -
<PAGE>
securities may not be made absent registration under the 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.
DAILY ASSETS TAXSAVER FUND
Municipal Cash Portfolio seeks to attain its investment objective by investing
primarily in municipal securities. During periods of normal market condition
the Portfolio will have at least 80% of its net assets invested in federally
tax-exempt municipal securities.
The Portfolio may from time to time invest more than 25% of its assets in
obligations of issuers located in one state but, under normal circumstances,
will not invest more than 35% of its assets in obligations of issuers located in
one state. If the Portfolio concentrates its investments in this manner, it
will be more susceptible to factors adversely affecting issuers of those
municipal securities than would be a more geographically diverse municipal
securities portfolio. These risks arise from the financial condition of the
particular state and its political subdivisions.
MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities that
generally are 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 usually 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 may also be "moral obligation" bonds, which are normally issued by special
purpose public authorities. If the issuer is unable to meet its obligations
under the bonds from current revenues, it may draw on a reserve fund that is
backed by the moral commitment (but not the legal obligation) of the state or
municipality that created the issuer.
The Portfolio may invest in industrial development bonds, which in most cases
are revenue bonds and generally do not have the pledge of the credit of the
municipality. 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 so financed as security for such
payment. The Portfolio will acquire these securities only if the interest
payments on the security 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 short-term fixed income securities that
generally are intended to fulfill short-term capital needs of a municipality.
Municipal Leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities. Municipal
leases frequently have special risks not normally associated with other
municipal securities. Lease and installment purchase or conditional sale
contracts (which normally provide for title to the leased assets to pass
eventually to the government issuer) have evolved as a means for governmental
issuers to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Generally,
the Portfolio will invest in municipal lease obligations through certificates of
participation.
PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in
municipal securities that are owned by banks or other financial institutions.
Participation interests usually 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 Portfolio will acquire these
securities only if the interest payments on the security are exempt from federal
income taxation (other than the AMT).
THE SHORT-TERM MUNICIPAL SECURITIES MARKET. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
municipal security markets and the fixed income markets in general, the size of
a particular offering, the maturity of the obligation and the rating of the
issue.
Although the Portfolio invests primarily in municipal securities, it is
anticipated that a substantial amount of the securities held
- 8 -
<PAGE>
by the Portfolio will be supported by credit and liquidity enhancements, such as
letters of credit (which are not covered by federal deposit insurance) or put or
demand features, of third party financial institutions, generally domestic and
foreign banks. Accordingly, the credit quality and liquidity of the Portfolio
will be dependent in part upon the credit quality of the banks supporting the
Portfolio's investments. This will result in exposure to risks pertaining to
the banking industry, including the foreign banking industry. These risks
include a sustained increase in interest rates, which can adversely affect the
availability and cost of a bank's lending activities; exposure to credit losses
during times of economic decline; concentration of loan portfolios in certain
industries; regulatory developments; and competition among financial
institutions. Brokerage firms and insurance companies also provide certain
liquidity and credit support. The Portfolio's policy is to purchase municipal
securities with third party credit or liquidity support only after the
investment adviser has considered the creditworthiness of the financial
institution providing the support and believes that the security presents
minimal credit risk.
The Portfolio may purchase long term municipal securities with various maturity
shortening provisions. For instance, variable rate demand notes ("VRDN") are
municipal bonds with maturities of up to 40 years that are sold with a demand
feature (an option for the holder of the security to sell the security back to
the issuer) which may be exercised by the security holder at predetermined
intervals, usually daily or weekly. The interest rate on the security is
typically reset by a remarketing or similar agent at prevailing interest rates.
VRDNs may be issued directly by the municipal issuer or created by a bank,
broker-dealer or other financial institution by selling a previously issued
long-term bond with a demand feature attached. Similarly, tender option bonds
(also referred to as certificates of participation) are municipal securities
with relatively long original maturities and fixed rates of interest that are
coupled with an agreement of a third party financial institution under which the
third party grants the security holders the option to tender the securities to
the institution and receive the face value thereof. The option may be exercised
at periodic intervals, usually six months to a year. As consideration for
providing the option, the financial institution receives a fee equal to the
difference between the underlying municipal security's fixed rate and the rate,
as determined by a remarketing or similar agent, that would cause the
securities, coupled with the tender option, to trade at par on the date of the
interest rate determination. These bonds effectively provide the holder with a
demand obligation that bears interest at the prevailing short-term municipal
securities interest rate.
The Portfolio also may acquire "puts" on municipal securities it purchases. A
put gives the Portfolio the right to sell the municipal security at a specified
price at any time before a specified date. The Portfolio will acquire puts only
to enhance liquidity, shorten the maturity of the related municipal security or
permit the Portfolio to invest its funds at more favorable rates. Generally,
the Portfolio will buy a municipal security that is accompanied by a put only if
the put is available at no extra cost. In some cases, however, the Portfolio
may pay an extra amount to acquire a put, either in connection with the purchase
of the related municipal security or separately from the purchase of the
security.
The Portfolio may purchase municipal securities together with the right to
resell them to the seller or a third party at an agreed-upon price or yield
within specified periods prior to their maturity dates. Such a right to resell
is commonly known as a "stand-by commitment," and the aggregate price which the
Portfolio 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 Portfolio to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, the Portfolio acquires stand-by
commitments solely to facilitate portfolio liquidity and does not exercise its
rights thereunder for trading purposes. Stand-by commitments involve certain
expenses and risks, including the inability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised,
non-marketability of the commitment, and differences between the maturity of the
underlying security and the maturity of the commitment.
TAXABLE INVESTMENTS. Although the Portfolio will attempt to invest 100% of its
assets in municipal securities, the Portfolio may invest up to 20% of the value
of its net assets in cash and cash equivalents the interest income on which is
subject to federal income taxation. In addition, when business or financial
conditions warrant or when an adequate supply of appropriate municipal
securities is not available, the Portfolio may assume a temporary defensive
position and invest without limit in any of the instruments in which Cash
Portfolio (the Portfolio in which Daily Assets Cash Fund invests) invests.
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,
- 9 -
<PAGE>
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 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 Portfolio may seek additional income or liquidity
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. Each
Portfolio, however, intends to enter into repurchase agreements only with
sellers which its investment adviser 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, 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. The value of securities that have a limited market tend to fluctuate
more than those that have an active market. Each Portfolio's investment adviser
monitors the liquidity of the Portfolio's investments.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of
being able to obtain securities at prices which it believes might not be
available at a future time, each Portfolio's investment adviser 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. As a result of entering into
forward commitments, the Funds are exposed to greater potential fluctuations in
the value of their assets and net asset values per share.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio
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.
ZERO-COUPON SECURITIES. Each Portfolio may invest in zero-coupon securities
such as Treasury bills and separately traded principal and interest components
of Treasury Securities issued or guaranteed under the U.S. Treasury's Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.).
These 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
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<PAGE>
value than the other securities in which the Portfolios may invest.
FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and 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. These Portfolios do not intend to hold in their 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. In addition, these Portfolios limit their 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.
ADMINISTRATION AND DISTRIBUTION
Subject to the supervision of the Board, FAS supervises the overall management
of the Trust, including overseeing the Trust's receipt of services, advising the
Trust and the Trustees on matters concerning the Trust and its affairs, and
providing the Trust with general office facilities and certain persons to serve
as officers. For these services and facilities, FAS receives a fee at an annual
rate of 0.05% of the daily net assets of each Fund. FAS also serves as
administrator of the Portfolios and provides administrative services for each
Portfolio that are similar to those provided to the Funds. For its
administrative services to the Portfolios, FAS receives a fee at an annual rate
of 0.05% of the average daily net assets of each Portfolio. Forum Accounting
Services, LLC ("Forum Accounting") performs portfolio accounting services for
the Funds and Portfolios pursuant to an agreement with the Trust and is paid a
separate fee for these services.
FFSI acts as the agent of the Trust in connection with the offering of shares of
the Funds but receives no compensation for these services. FFSI is a registered
broker-dealer and is a member of the National Association of Securities Dealers,
Inc.
FAS, FFSI, Forum Advisors, Forum Accounting 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 of this Prospectus, each of these companies was controlled by John Y.
Keffer, President and Chairman of the Trust and FAS and FFSI provided
administration services to registered investment companies with assets of
approximately $30 billion.
INVESTMENT ADVISERS
Subject to the general supervision of the Core Trust Board, Forum Advisors makes
investment decisions for Treasury Portfolio and Municipal Cash Portfolio and
monitors those Portfolio's investments and Linden makes investment decisions for
Treasury Cash Portfolio, 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
four 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. Forum Advisors and Linden act
also as investment 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 and Municipal Cash Portfolio's average daily net
assets. For its services, Linden receives from each of Treasury Cash Portfolio,
Government Cash Portfolio and Cash Portfolio an advisory fee based upon the
total average daily net assets of those Portfolios ("Total Portfolio
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<PAGE>
Assets"). Linden's fee is calculated at an annual rate on a cumulative basis as
follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the
next $300 million of Total Portfolio Assets, and 0.03% 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 Forum Advisors and Linden will delegate
responsibility for portfolio management to the other investment adviser
infrequently.
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 an account for each shareholder
of the Funds (unless such accounts are maintained by sub-transfer agents or
processing agents) and performs other transfer agency and related functions.
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.
For its services, the Transfer Agent is paid a transfer agent fee at an annual
rate of 0.05% of the average daily net assets of each Fund attributable to
Institutional Shares plus $12,000 per year for each Fund and certain account and
additional class charges and is reimbursed for certain expenses incurred on
behalf of the Funds.
EXPENSES OF THE FUNDS
Each 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. 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.
Each Fund's expenses include the service fees described in this Prospectus, the
fees and expenses of the Board, applicable insurance and bonding expenses and
state and SEC registration fees. Each Fund bears its pro rata portion of the
expenses of the portfolio in which it invests along with all other investors in
the Portfolio.
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 each 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 and Daily Assets
TaxSaver Fund's net asset value is calculated at 12:00 p.m., Eastern Time, and
each other Fund's net asset value is calculated at 2:00 p.m., Eastern Time.
Fund shares become entitled to receive distributions on the day the purchase
order is accepted if the order and payment are received by the Transfer Agent as
follows:
<TABLE>
<CAPTION>
Order Must be Received by Payment Must be Received by
------------------------- ---------------------------
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<PAGE>
<S> <C> <C>
Daily Assets Treasury Fund and
Daily Assets TaxSaver Fund 12:00 p.m., Eastern time [5:00] p.m., Eastern time
All other Funds 2:00 p.m., Eastern time [5:00] p.m., Eastern time
</TABLE>
If a purchase order is transmitted to the Transfer Agent (or the wire is
received) after the times listed above, the investor will not receive a
distribution on that day. On days that the New York Stock Exchange or Federal
Reserve Bank of San Francisco (Boston in the case of Daily Assets Treasury Fund
and Daily Assets TaxSaver Fund) closes early or the Public Securities
Association recommends that the government securities markets close early, the
Trust may advance the time by which the Transfer Agent must receive completed
wire purchase orders and the cut-off times in the above table.
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.
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 distributions declared on or after the day on which the
redemption becomes effective.
For wire redemption orders received after 12:00 p.m., Eastern time, in the case
of Daily Assets Treasury Fund and Daily Assets TaxSaver Fund, and after 2:00
p.m., Eastern Time, in the case of each other Fund, the Transfer Agent will wire
proceeds the next Fund Business Day. On days that the New York Stock Exchange
or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets
Treasury Fund and Daily Assets TaxSaver Fund) closes early or the Public
Securities Association recommends that the government securities markets close
early, the Trust may advance the time by which the Transfer Agent must receive
completed wire redemption orders.
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 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.
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 $5,000.
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 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 $10,000,000 minimum for initial investments in each Fund.
BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application to the Transfer Agent. 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 a 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:
BankBoston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund] - Institutional Shares
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 broker-dealers, 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
a Fund. The Trust is not responsible for the failure of any Processing
Organization 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 a 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. Investors 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.
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
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.
REDEMPTION OF SHARES
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<PAGE>
Shareholders who 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 days after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone.
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 who 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 who 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.
OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. 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 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.
EXCHANGES
Shareholders may exchange their shares for Institutional Shares of any other
Fund. 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
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. 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 guarantee is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.
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<PAGE>
BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder who
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.
6. DISTRIBUTIONS AND TAX MATTERS
DISTRIBUTIONS
Distributions 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.
Shareholders may choose to have all distributions reinvested in additional
shares of the Fund or received in cash. [In addition, shareholders may have
distributions of net capital gain reinvested in additional shares of the Fund
and distributions of net investment income paid in cash.] All distributions are
treated in the same manner for Federal income tax purposes whether received in
cash or reinvested in shares of the Fund.
All distributions will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All distributions are reinvested unless another
option is selected. All distributions not reinvested will be paid to the
shareholder in cash and may be paid more than seven days following the date on
which distribution 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, as amended. Accordingly, each Fund will not be liable for Federal income
taxes on the net investment income and capital gain distributed to its
shareholders. Because each Fund intends to distribute all of its net investment
income and net capital gain each year, the Funds should also avoid Federal
excise taxes.
Distributions 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.
DAILY ASSETS TAXSAVER FUND. Distributions paid by Daily Assets TaxSaver Fund
out of federally tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to federal income tax in the hands of
the Fund's shareholders. Substantially all of the distributions paid by the
Fund are anticipated to be exempt-interest dividends. Persons who are
"substantial users" or "related persons" thereof of facilities financed by
private activity securities held by the Fund, however, may be subject to federal
income tax on their pro rata share of the interest income from those securities
and should consult their tax advisers before purchasing Shares. Exempt-interest
dividends are included in the "adjusted current earnings" of corporations for
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. Under
rules for determining when borrowed funds are used for purchasing or carrying
particular assets, Shares of the Fund may be considered to have been purchased
or carried with borrowed funds even though those funds are not directly linked
to the Shares.
The income from the Portfolio's investments may be subject to the federal
alternative minimum tax ("AMT"). Under current federal tax law, interest on
certain municipal securities issued after August 7, 1986 to finance "private
activities" ("private activity securities") is a "tax preference item" for
purposes of the AMT applicable to certain individuals and corporations even
though such interest will continue to be fully tax-exempt for regular federal
income tax purposes. The Portfolio may purchase
- 16 -
<PAGE>
private activity securities, the interest on which may constitute a "tax
preference item" for purposes of the AMT.
STATE AND LOCAL TAXES. 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 distributions paid by this Fund to
shareholders residing in certain states will be exempt or excluded from state
income taxes. A portion of the distributions paid by Daily Assets Treasury Fund
II, 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.
The exemption for federal income tax purposes of distributions 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 Daily Assets TaxSaver Fund may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions.
Shareholders are advised to consult with their tax advisers concerning the
application of state and local taxes to investments in a Fund which may differ
from the federal income tax consequences described above.
GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable
payments (which may include taxable 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.
The Funds must include a portion of the original issue discount of zero-coupon
securities as income even though these securities do not pay any interest until
maturity. Because each Fund distributes all of its net investment income, a
Fund may have to sell portfolio securities to distribute imputed income, which
may occur at a time when the investment adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
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 distributions paid
to the shareholder that is derived from each type of obligation in which a Fund
has invested , that is derived from the obligations of issuers in the various
states and the portion of the Fund's distributions that is exempt from federal
income taxes. 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.
Reports containing appropriate information with respect to the Federal income
tax status of 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 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.
7. OTHER INFORMATION
PERFORMANCE INFORMATION
Institutional Shares' performance may be advertised. All performance
information is based on historical results, is not intended to indicate future
performance and, unless otherwise indicated, is net of all expenses. The Funds
may advertise yield, which shows the rate of income a Fund has earned on its
investments as a percentage of the Fund's share price. To calculate yield, a
Fund takes the interest income it earned from its portfolio of investments for a
specified period (net of expenses), divides it by the average number of shares
entitled to receive distributions, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the period. A
Fund's compounded annualized yield
- 17 -
<PAGE>
assumes the reinvestment of distributions paid by the Fund, and, therefore will
be somewhat higher than the annualized yield for the same period. A 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 yield, 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. Each
class' performance will vary.
The Funds' advertisements may also reference ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC Financial Data, 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 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 each other Fund as of 2:00 p.m., Eastern
Time, on each Fund Business Day by dividing the value of the Fund's net assets
(the value of its interest in the Portfolio and other assets less its
liabilities) by the number of 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 Core Trust Board believes that it fairly
reflects the market-based net asset value per share. The Portfolios' other
assets, if any, are valued at fair value by or under the direction of the Core
Trust Board.
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., which was incorporated in 19__.
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 sixteen series of the Trust.
Each share of each fund of the Trust and each class of shares has equal
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 (and Trustees)
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. A shareholder in a portfolio is entitled to the
shareholder's pro rata share of all 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
- 18 -
<PAGE>
able to greatly affect (if not determine) the outcome of any shareholder vote.
As of the date hereof, due to initial investment in Daily Assets Treasury Fund
II, Daily Assets Government Fund and Daily Assets TaxSaver Fund, prior to the
public offering of Shares FAS may be deemed to control those Funds.
FUND STRUCTURE
OTHER CLASSES OF SHARES. In addition to Institutional Shares, each Fund may
create and issue shares of other classes of securities. Each Fund currently has
two other classes of shares authorized, Institutional Service Shares and
Investor Shares. Institutional Services Shares are offered solely through
banks, trust companies and certain other financial institutions, and their
affiliates and correspondents, for investment of their funds or funds for which
they act in a fiduciary, agency or custodial capacity. Investor Shares are
offered to the general public, have a $10,000 minimum investment and bear
shareholder service and distribution fees. Institutional Service Shares and
investor Shares incur more expenses than Institutional Shares. Except for
certain differences, each share of each class represents an undivided,
proportionate interest in a Fund. Each share of each Fund is entitled to
participate equally in distributions and the proceeds of any liquidation of that
Fund except that, due to the differing expenses borne by the various classes,
the amount of distributions will differ among the classes.
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. 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 and Daily Assets TaxSaver Fund are the only investors
(other than FAS or its affiliates) that have invested in Treasury Portfolio and
Municipal Cash Portfolio, respectively. Each of the other Portfolios has
another investor besides the Funds (and FAS and its affiliates). 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 is 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 the investment adviser to the Portfolio 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 Portfolio's investment adviser to manage the Fund's assets,
could have a significant impact on shareholders of the Fund.
ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company
that invests in a Portfolio) may have a different expense ratio and different
sales charges, including distribution fees, and each class' (and investment
company's) performance will be affected by its expenses and sales charges. For
more information on any other class of shares of the Funds or concerning any
other investment companies that invest in a Portfolio, investors may contact
FFSI at 207-879-1900.
- 19 -
<PAGE>
If an investor invests through a financial institution, the investor may also
contact their financial institution to obtain information about the other
classes or 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.
- 20 -
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
PRELIMINARY PROSPECTUS
FORUM FUNDS SUBJECT TO COMPLETION
November 15, 1997
Daily Assets Treasury Fund
Daily Assets Treasury Fund II
Daily Assets Government Fund
Daily Assets Cash Fund
Daily Assets TaxSaver Fund
- --------------------------------------------------------------------------------
This Prospectus offers Institutional Service Shares of Daily Assets Treasury
Fund, Daily Assets Treasury Fund II, Daily Assets Government Fund, Daily Assets
Cash Fund and Daily Assets TaxSaver Fund (each a "Fund"). Each Fund is a
diversified no-load, money market portfolio of Forum Funds (the "Trust"), an
open-end, management investment company. Each Fund seeks to provide its
shareholders with high current income (which, in the case of Daily Assets
TaxSaver Fund, is exempt from federal income taxes) to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Each Fund 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." Through the portfolio in which it
invests:
DAILY ASSETS TREASURY FUND invests primarily in obligations of the U.S.
Treasury or certain agencies and instrumentalities of the U.S. Government
with a view toward providing income that is generally considered exempt
from state and local income taxes.
DAILY ASSETS TREASURY FUND II invests primarily in obligations of the U.S.
Treasury and in repurchase agreements backed by these obligations.
DAILY ASSETS GOVERNMENT CASH 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.
DAILY ASSETS TAXSAVER FUND invests primarily in high-quality obligations of
the states, territories and possessions of the U.S. and of their
subdivisions, authorities and corporations ("municipal securities") with a
view toward providing income that is exempt from federal income taxes.
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 November 15, 1997, 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 Funds' transfer agent, Forum
Financial Corp. at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800)
94FORUM.
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>
TABLE OF CONTENTS
1. Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Investment Objectives and Policies. . . . . . . . . . . . . . . . . . . 5
4. Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Purchases and Redemptions of Shares . . . . . . . . . . . . . . . . . . 12
6. Distributions and Tax Matters . . . . . . . . . . . . . . . . . . . . . 16
7. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- --------------------------------------------------------------------------------
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
This prospectus offers shares of the Institutional Service class ("Institutional
Service Shares") of each of the Funds. Institutional Services Shares are
offered solely through banks, trust companies and certain other financial
institutions, and their affiliates and correspondents, for investment of their
funds or funds for which they act in a fiduciary, agency or custodial capacity.
The Funds operate in accordance with the provisions of Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"). Daily Assets Treasury Cash
Fund, Daily Assets Treasury Cash Fund II, Daily Assets Government Cash Fund,
Daily Assets Cash Fund and Daily Assets TaxSaver Fund invest all of their
investable assets in Treasury Portfolio, Treasury Cash Portfolio, Government
Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio (each a "Portfolio"
and collectively the "Portfolios"), respectively. The Portfolios are separate
series of Core Trust (Delaware) ("Core Trust"), an open-end, management
investment company. 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 Administrative Services, LLC ("FAS") supervises the overall
management of the Funds and the Portfolios and Forum Financial Services, Inc.
("FFSI") is the distributor of the Funds' shares. Forum Advisors, Inc. ("Forum
Advisors") is the investment adviser of Treasury Portfolio and Municipal Cash
Portfolio and provides professional management of those Portfolio's investments.
Linden Asset Management, Inc. ("Linden") is the investment adviser of Treasury
Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provides
professional management of those Portfolios' investments. Forum Advisors and
Linden provide certain subadvisory assistance for the Portfolios they do not
directly advise. The Funds' transfer agent, dividend disbursing agent and
shareholder servicing agent (the "Transfer Agent") is Forum Financial Corp. See
"Management" for a description of the services provided and fees charged to the
Funds.
SHAREHOLDER SERVICING AND DISTRIBUTION. The Trust has adopted a Shareholder
Service Plan relating to Institutional Service Shares under which FAS is
compensated for various shareholder servicing activities. See "Management -
Shareholder Servicing" and "- Administration and Distribution."
PURCHASES AND REDEMPTIONS. The minimum initial investment in Institutional
Service Shares is $100,000. Institutional Service Shares may be purchased and
redeemed Monday through Friday, between the hours of 9:00 a.m. and 6:00 p.m.,
Eastern time, except on Federal holidays and days that the Federal Reserve Bank
of San Francisco (Boston in the case of Daily Assets Treasury Fund and Daily
Assets TaxSaver Fund) is closed ("Fund Business Days"). To be eligible to
receive that days' income, purchase orders must be received by the Transfer
Agent in good order no later than 2:00 p.m., Eastern time (noon in the case of
Daily Assets Treasury Fund). Shareholders may elect to have redemptions of over
$5,000 transferred by bank wire to a designated bank account. To be able to
receive redemption proceeds by wire on the day of the redemption, redemption
orders must be received by the Transfer Agent in good order no later than 2:00
p.m., Eastern time (noon in the case of Daily Assets Treasury Fund and Daily
Assets TaxSaver Fund). All times may be changed without notice by management
due to market activities. See "Purchase and Redemption of Shares."
EXCHANGES. Shareholders of a Fund may exchange Institutional Service Shares
without charge for Institutional Service Shares of the other Funds. See
"Purchases and Redemptions of Shares - Exchanges."
DISTRIBUTIONS. Distributions of net investment income are declared daily and
paid monthly by each Fund and are automatically reinvested in additional Fund
shares unless the shareholder has requested payment in cash. See "Distributions
and Tax Matters."
INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able
to maintain a stable net asset value of $1.00 per share. Although the
Portfolios invest only 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. Investment in any security, including U.S.
Government Securities, involves some level of investment risk. An investment in
a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss
of principal. By investing in its corresponding Portfolio, each Fund may
achieve certain efficiencies and economies of scale. Nonetheless, these
investments could also have potential adverse effects on the applicable Fund.
See "Other Information - Core Trust Structure."
- 3 -
<PAGE>
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 Institutional Service Shares will bear
directly or indirectly. There are no transaction expenses associated with
purchases, redemptions or exchanges of Fund shares.
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)(1)
<TABLE>
<CAPTION>
Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets
Treasury Treasury Government Cash TaxSaver
Fund Fund II Cash Fund Fund Fund
---- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C>
Management Fees(2) 0.15% 0.14% 0.14% 0.14% 0.15%
Other Expenses(3)
(after expense reimbursements) 0.30% 0.31% 0.31% 0.31% 0.30%
----- ----- ----- ----- -----
Total Operating Expenses 0.45% 0.45% 0.45% 0.45% 0.45%
</TABLE>
(1) For a further description of the various expenses incurred in the operation
of the Funds and the Portfolios, see "Management." The amount of expenses for
Daily Assets Treasury Fund and Daily Assets Cash Fund is based on the Fund's
expenses for its last fiscal year ended August 31, 1997 restated to reflect
current fees and the amount of expenses for each other Fund is based on
estimated annualized expenses for the Funds' fiscal year ending August 31, 1998.
Each Fund's expenses include the Fund's pro rata portion of all expenses of its
corresponding Portfolio, which are borne indirectly by Fund shareholders.
(2) 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.
(3) Absent estimated reimbursements by Forum Advisors and its affiliates, Other
Expenses would be 0.40% and Total Fund Operating Expenses would be 0.55% for
each Fund. Expense reimbursements are voluntary and may be reduced or
eliminated at any time.
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of expenses
that an investor in Institutional Service Shares 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
distributions and (v) redemption at the end of each period:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Daily Assets Treasury Fund $5 $16 $28 $65
Daily Assets Treasury Fund II $5 $16 $28 $65
Daily Assets Government Fund $5 $16 $28 $65
Daily Assets Cash Fund $5 $16 $28 $65
Daily Assets TaxSaver Fund $5 $16 $28 $65
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 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.
- 4 -
<PAGE>
2. FINANCIAL HIGHLIGHTS
The following information represents selected data for a single outstanding
Institutional Service Share of Daily Assets Treasury Fund and of Daily Assets
Cash Fund. This information was audited by ________, independent auditors. The
financial statements for Daily Assets Treasury Fund and Daily Assets Cash Fund
and independent auditors' report thereon for the fiscal year ended August 31,
1997 are incorporated by reference into the SAI. Further information about
those Fund's performance is contained in the Funds' annual report to
shareholders which may be obtained from the Trust without charge. As of the
date hereof, Daily Assets Treasury Fund II, Daily Assets Government Fund and
Daily Assets TaxSaver Fund had not commenced operations. As of August 31, 1997,
Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio had assets
of _____, _____ and _____, respectively.
<TABLE>
<CAPTION>
Ratios to Average Net
- Assets
Beginning Distributions Ending ------------------------
Net Asset Net From Net Net Asset Net
Value Per Investment Investment Value per Investment
Share Income Income Share Expenses Income
----- ------ ------ ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997 $ 1.00 $ 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70%
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01%
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45%
Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82%
Year Ended March 31, 1993(1) 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2)
DAILY ASSETS CASH FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997(1) 1.00 1.00
<CAPTION>
Net Assets at Ratio to
End of Average Net
Period Assets
Total (000's Gross
Return Omitted) Expenses(3)
------ -------- -----------
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Year Ended August 31, 1997
Year Ended March 31, 1997 4.80% 43,975 0.99%
Year Ended March 31, 1996 5.18% 43,103 1.06%
Year Ended March 31, 1995 4.45% 36,329 1.10%
Year Ended March 31, 1994 2.83% 26,505 1.17%
Year Ended March 31, 1993(1) 3.13%(2) 4,687 2.43%(2)
</TABLE>
(1) Daily Assets Treasury Fund commenced operations on July 1, 1992 and
Daily Assets Cash Fund commenced operations on and October 1, 1996. The Funds'
initial share class was renamed Institutional Service Shares on November 15,
1997.
(2) Annualized.
(3) During each period, various fees and expenses were waived and
reimbursed, respectively. The ratio of Gross Expenses to Average Net Assets
reflects the expense ratio in the absence of any waivers and reimbursements for
the Fund and its respective Portfolio.
- 5 -
<PAGE>
3. INVESTMENT OBJECTIVES 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. The investment objective of Daily Assets TaxSaver Fund is to provide
high current income which is exempt from federal income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity.
THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE.
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. In addition, all investment policies of each Fund and its
corresponding Portfolio are substantially identical. Therefore, although the
following in part discusses the investment policies of the Portfolios (and the
responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it
applies equally to the Funds (and the Trust's board of trustees (the "Board")).
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
investment 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
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
and "Treasury Securities" means U.S. Treasury bills and notes and other U.S.
Government Securities which are guaranteed as to principal and interest by the
U.S. Treasury.
In the case of municipal securities, when the assets and revenues of an issuing
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the issuing entity and a security is
backed only by the assets and revenues of the entity, the entity will be deemed
to be the sole issuer of the security. Similarly, in the case of a security
issued by or on behalf of public authorities to finance various privately
operated facilities, such as industrial development bonds, that is backed only
by the assets and revenues of the non-governmental user, the non-governmental
user will be deemed to be the sole issuer of the security.
A Fund'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 and municipal 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. The achievement of a Portfolio's
investment objective is dependent in part on the continuing ability of the
issuers of the securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when due.
DAILY ASSETS TREASURY FUND
Treasury Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in Treasury Securities. The
Portfolio may also invest in other
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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. 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 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 "Distributions and
Tax Matters."
The U.S. Government Securities in which the Portfolio may invest include
securities supported primarily or solely by the creditworthiness of the issuer.
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.
DAILY ASSETS TREASURY FUND II
Treasury Cash Portfolio seeks to attain its investment objective by investing
primarily in Treasury Securities and in repurchase agreements backed by Treasury
Securities.
DAILY ASSETS GOVERNMENT FUND
Government Cash Portfolio seeks to attain its investment objective by investing
primarily 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 Treasury Securities and securities supported
primarily or solely by the creditworthiness of the issuer, such as securities of
the Federal National Mortgage Association, Federal Home Loan Banks and Student
Loan Marketing 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.
DAILY ASSETS CASH FUND
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 Objectives and Policies - Daily Assets Government
Cash Fund") 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
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<PAGE>
securities may not be made absent registration under the 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.
DAILY ASSETS TAXSAVER FUND
Municipal Cash Portfolio seeks to attain its investment objective by investing
primarily in municipal securities. During periods of normal market condition
the Portfolio will have at least 80% of its net assets invested in federally
tax-exempt municipal securities.
The Portfolio may from time to time invest more than 25% of its assets in
obligations of issuers located in one state but, under normal circumstances,
will not invest more than 35% of its assets in obligations of issuers located in
one state. If the Portfolio concentrates its investments in this manner, it
will be more susceptible to factors adversely affecting issuers of those
municipal securities than would be a more geographically diverse municipal
securities portfolio. These risks arise from the financial condition of the
particular state and its political subdivisions.
MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities that
generally are 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 usually 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 may also be "moral obligation" bonds, which are normally issued by special
purpose public authorities. If the issuer is unable to meet its obligations
under the bonds from current revenues, it may draw on a reserve fund that is
backed by the moral commitment (but not the legal obligation) of the state or
municipality that created the issuer.
The Portfolio may invest in industrial development bonds, which in most cases
are revenue bonds and generally do not have the pledge of the credit of the
municipality. 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 so financed as security for such
payment. The Portfolio will acquire these securities only if the interest
payments on the security 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 short-term fixed income securities that
generally are intended to fulfill short-term capital needs of a municipality.
Municipal Leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities. Municipal
leases frequently have special risks not normally associated with other
municipal securities. Lease and installment purchase or conditional sale
contracts (which normally provide for title to the leased assets to pass
eventually to the government issuer) have evolved as a means for governmental
issuers to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Generally,
the Portfolio will invest in municipal lease obligations through certificates of
participation.
PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in
municipal securities that are owned by banks or other financial institutions.
Participation interests usually 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 Portfolio will acquire these
securities only if the interest payments on the security are exempt from federal
income taxation (other than the AMT).
THE SHORT-TERM MUNICIPAL SECURITIES MARKET. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
municipal security markets and the fixed income markets in general, the size of
a particular offering, the maturity of the obligation and the rating of the
issue.
Although the Portfolio invests primarily in municipal securities, it is
anticipated that a substantial amount of the securities held
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by the Portfolio will be supported by credit and liquidity enhancements, such as
letters of credit (which are not covered by federal deposit insurance) or put or
demand features, of third party financial institutions, generally domestic and
foreign banks. Accordingly, the credit quality and liquidity of the Portfolio
will be dependent in part upon the credit quality of the banks supporting the
Portfolio's investments. This will result in exposure to risks pertaining to
the banking industry, including the foreign banking industry. These risks
include a sustained increase in interest rates, which can adversely affect the
availability and cost of a bank's lending activities; exposure to credit losses
during times of economic decline; concentration of loan portfolios in certain
industries; regulatory developments; and competition among financial
institutions. Brokerage firms and insurance companies also provide certain
liquidity and credit support. The Portfolio's policy is to purchase municipal
securities with third party credit or liquidity support only after the
investment adviser has considered the creditworthiness of the financial
institution providing the support and believes that the security presents
minimal credit risk.
The Portfolio may purchase long term municipal securities with various maturity
shortening provisions. For instance, variable rate demand notes ("VRDN") are
municipal bonds with maturities of up to 40 years that are sold with a demand
feature (an option for the holder of the security to sell the security back to
the issuer) which may be exercised by the security holder at predetermined
intervals, usually daily or weekly. The interest rate on the security is
typically reset by a remarketing or similar agent at prevailing interest rates.
VRDNs may be issued directly by the municipal issuer or created by a bank,
broker-dealer or other financial institution by selling a previously issued
long-term bond with a demand feature attached. Similarly, tender option bonds
(also referred to as certificates of participation) are municipal securities
with relatively long original maturities and fixed rates of interest that are
coupled with an agreement of a third party financial institution under which the
third party grants the security holders the option to tender the securities to
the institution and receive the face value thereof. The option may be exercised
at periodic intervals, usually six months to a year. As consideration for
providing the option, the financial institution receives a fee equal to the
difference between the underlying municipal security's fixed rate and the rate,
as determined by a remarketing or similar agent, that would cause the
securities, coupled with the tender option, to trade at par on the date of the
interest rate determination. These bonds effectively provide the holder with a
demand obligation that bears interest at the prevailing short-term municipal
securities interest rate.
The Portfolio also may acquire "puts" on municipal securities it purchases. A
put gives the Portfolio the right to sell the municipal security at a specified
price at any time before a specified date. The Portfolio will acquire puts only
to enhance liquidity, shorten the maturity of the related municipal security or
permit the Portfolio to invest its funds at more favorable rates. Generally,
the Portfolio will buy a municipal security that is accompanied by a put only if
the put is available at no extra cost. In some cases, however, the Portfolio
may pay an extra amount to acquire a put, either in connection with the purchase
of the related municipal security or separately from the purchase of the
security.
The Portfolio may purchase municipal securities together with the right to
resell them to the seller or a third party at an agreed-upon price or yield
within specified periods prior to their maturity dates. Such a right to resell
is commonly known as a "stand-by commitment," and the aggregate price which the
Portfolio 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 Portfolio to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, the Portfolio acquires stand-by
commitments solely to facilitate portfolio liquidity and does not exercise its
rights thereunder for trading purposes. Stand-by commitments involve certain
expenses and risks, including the inability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised,
non-marketability of the commitment, and differences between the maturity of the
underlying security and the maturity of the commitment.
TAXABLE INVESTMENTS. Although the Portfolio will attempt to invest 100% of its
assets in municipal securities, the Portfolio may invest up to 20% of the value
of its net assets in cash and cash equivalents the interest income on which is
subject to federal income taxation. In addition, when business or financial
conditions warrant or when an adequate supply of appropriate municipal
securities is not available, the Portfolio may assume a temporary defensive
position and invest without limit in any of the instruments in which Cash
Portfolio (the Portfolio in which Daily Assets Cash Fund invests) invests.
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,
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<PAGE>
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 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 Portfolio may seek additional income or liquidity
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. Each
Portfolio, however, intends to enter into repurchase agreements only with
sellers which its investment adviser 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, 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. The value of securities that have a limited market tend to fluctuate
more than those that have an active market. Each Portfolio's investment adviser
monitors the liquidity of the Portfolio's investments.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of
being able to obtain securities at prices which it believes might not be
available at a future time, each Portfolio's investment adviser 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. As a result of entering into
forward commitments, the Funds are exposed to greater potential fluctuations in
the value of their assets and net asset values per share.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio
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.
ZERO-COUPON SECURITIES. Each Portfolio may invest in zero-coupon securities
such as Treasury bills and separately traded principal and interest components
of Treasury Securities issued or guaranteed under the U.S. Treasury's Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.).
These 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
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value than the other securities in which the Portfolios may invest.
FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and 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. These Portfolios do not intend to hold in their 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. In addition, these Portfolios limit their 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.
ADMINISTRATION AND DISTRIBUTION
Subject to the supervision of the Board, FAS supervises the overall management
of the Trust, including overseeing the Trust's receipt of services, advising the
Trust and the Trustees on matters concerning the Trust and its affairs, and
providing the Trust with general office facilities and certain persons to serve
as officers. For these services and facilities, FAS receives a fee at an annual
rate of 0.05% of the daily net assets of each Fund. FAS also serves as
administrator of the Portfolios and provides administrative services for each
Portfolio that are similar to those provided to the Funds. For its
administrative services to the Portfolios, FAS receives a fee at an annual rate
of 0.05% of the average daily net assets of each Portfolio. Forum Accounting
Services, LLC ("Forum Accounting") performs portfolio accounting services for
the Funds and Portfolios pursuant to an agreement with the Trust and is paid a
separate fee for these services.
FFSI acts as the agent of the Trust in connection with the offering of shares of
the Funds but receives no compensation for these services. FFSI is a registered
broker-dealer and is a member of the National Association of Securities Dealers,
Inc.
FAS, FFSI, Forum Advisors, Forum Accounting 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 of this Prospectus, each of these companies was controlled by John Y.
Keffer, President and Chairman of the Trust and FAS and FFSI provided
administration services to registered investment companies with assets of
approximately $30 billion.
INVESTMENT ADVISERS
Subject to the general supervision of the Core Trust Board, Forum Advisors makes
investment decisions for Treasury Portfolio and Municipal Cash Portfolio and
monitors those Portfolio's investments and Linden makes investment decisions for
Treasury Cash Portfolio, 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
four 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. Forum Advisors and Linden act
also as investment 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 and Municipal Cash Portfolio's average daily net
assets. For its services, Linden receives from each of Treasury Cash Portfolio,
Government Cash Portfolio and Cash Portfolio an advisory fee based upon the
total average daily net assets of those Portfolios ("Total Portfolio
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Assets"). Linden's fee is calculated at an annual rate on a cumulative basis as
follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the
next $300 million of Total Portfolio Assets, and 0.03% 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 Forum Advisors and Linden will delegate
responsibility for portfolio management to the other investment adviser
infrequently.
SHAREHOLDER SERVICING
TRANSFER AND DIVIDEND DISBURSING AGENT. 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 an account for each shareholder of the Funds (unless
such accounts are maintained by sub-transfer agents or processing agents) and
performs other transfer agency and related functions. 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. For its services,
the Transfer Agent is paid a transfer agent fee at an annual rate of 0.20% of
the average daily net assets of each Fund attributable to Institutional Service
Shares plus $12,000 per year for each Fund and certain account and additional
class charges and is reimbursed for certain expenses incurred on behalf of the
Funds.
SHAREHOLDER SERVICE AGENTS. The Trust has adopted a shareholder service plan
("Shareholder Service Plan") which provides that, as compensation for FAS's
service activities with respect to the Institutional Service Shares, the Trust
shall pay FAS a fee at an annual rate of 0.15% of the average daily net assets
attributable to Investor Shares. FAS is authorized to enter into shareholder
servicing agreements pursuant to which a shareholder servicing agent, on behalf
of its customers, performs certain shareholder services not otherwise provided
by the Transfer Agent. As compensation for its services, the shareholder
servicing agent is paid a fee by FAS of up to 0.15% of the average daily net
assets of Investor Shares owned by investors for which the shareholder service
agent maintains a servicing relationship. Certain shareholder servicing agents
may be subtransfer or processing agents.
Among the services provided by shareholder servicing agents are answering
customer inquiries regarding the manner in which purchases, exchanges and
redemptions of shares of the Trust may be effected and other matters pertaining
to the Trust's services; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting shareholders
in arranging for processing purchase, exchange and redemption transactions;
arranging for the wiring of funds; guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; integrating periodic statements with other
customer transactions; and providing such other related services as the
shareholder may request.
EXPENSES OF THE FUNDS
Each 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. 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.
Each Fund's expenses include the service fees described in this Prospectus, the
fees and expenses of the Board, applicable insurance and bonding expenses and
state and SEC registration fees. Each Fund bears its pro rata portion of the
expenses of the portfolio in which it invests along with all other investors in
the Portfolio.
5. PURCHASES AND REDEMPTIONS OF SHARES
GENERAL INFORMATION
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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 each 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 and Daily Assets
TaxSaver Fund's net asset value is calculated at 12:00 p.m., Eastern Time, and
each other Fund's net asset value is calculated at 2:00 p.m., Eastern Time.
Fund shares become entitled to receive distributions on the day the purchase
order is accepted if the order and payment are received by the Transfer Agent as
follows:
<TABLE>
<CAPTION>
Order Must be Received by Payment Must be Received by
------------------------- ---------------------------
<S> <C> <C>
Daily Assets Treasury Fund and
Daily Assets TaxSaver Fund 12:00 p.m., Eastern time [5:00] p.m., Eastern time
All other Funds 2:00 p.m., Eastern time [5:00] p.m., Eastern time
</TABLE>
If a purchase order is transmitted to the Transfer Agent (or the wire is
received) after the times listed above, the investor will not receive a
distribution on that day. On days that the New York Stock Exchange or Federal
Reserve Bank of San Francisco (Boston in the case of Daily Assets Treasury Fund
and Daily Assets TaxSaver Fund) closes early or the Public Securities
Association recommends that the government securities markets close early, the
Trust may advance the time by which the Transfer Agent must receive completed
wire purchase orders and the cut-off times in the above table.
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.
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 distributions declared on or after the day on which the
redemption becomes effective.
For wire redemption orders received after 12:00 p.m., Eastern time, in the case
of Daily Assets Treasury Fund and Daily Assets TaxSaver Fund, and after 2:00
p.m., Eastern Time, in the case of each other Fund, the Transfer Agent will wire
proceeds the next Fund Business Day. On days that the New York Stock Exchange
or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets
Treasury Fund and Daily Assets TaxSaver Fund) closes early or the Public
Securities Association recommends that the government securities markets close
early, the Trust may advance the time by which the Transfer Agent must receive
completed wire redemption orders.
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.
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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.
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 $5,000.
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 shareholder's account
(such as addresses), investors should request an Optional Services Form from the
Transfer Agent.
INITIAL PURCHASE OF SHARES
There is a $100,000 minimum for total initial investments through of by any
financial institution in each Fund.
BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application to the Transfer Agent. 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 a 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:
BankBoston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund] - Institutional Service Shares
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 broker-dealers, 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
a Fund. The Trust is not responsible for the failure of any Processing
Organization 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 a 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
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<PAGE>
institution. Investors 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.
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
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.
REDEMPTION OF SHARES
Shareholders who 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 days after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone.
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 who 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 who 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.
OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. 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 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
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<PAGE>
Shareholders may exchange their shares for Institutional Service Shares of any
other Fund. 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
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. 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 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 who
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.
6. DISTRIBUTIONS AND TAX MATTERS
DISTRIBUTIONS
Distributions 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.
Shareholders may choose to have all distributions reinvested in additional
shares of the Fund or received in cash. [In addition, shareholders may have
distributions of net capital gain reinvested in additional shares of the Fund
and distributions of net investment income paid in cash.] All distributions are
treated in the same manner for Federal income tax purposes whether received in
cash or reinvested in shares of the Fund.
All distributions will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All distributions are reinvested unless another
option is selected. All distributions not reinvested will be paid to the
shareholder in cash and may be paid more than seven days following the date on
which distribution 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, as amended. Accordingly, each Fund will not be liable for Federal income
taxes on the net investment income and capital gain distributed to its
shareholders. Because each Fund intends to distribute all of its net investment
income and net capital gain each year, the Funds should also avoid Federal
excise taxes.
Distributions 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.
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<PAGE>
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.
DAILY ASSETS TAXSAVER FUND. Distributions paid by Daily Assets TaxSaver Fund
out of federally tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to federal income tax in the hands of
the Fund's shareholders. Substantially all of the distributions paid by the
Fund are anticipated to be exempt-interest dividends. Persons who are
"substantial users" or "related persons" thereof of facilities financed by
private activity securities held by the Fund, however, may be subject to federal
income tax on their pro rata share of the interest income from those securities
and should consult their tax advisers before purchasing Shares. Exempt-interest
dividends are included in the "adjusted current earnings" of corporations for
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. Under
rules for determining when borrowed funds are used for purchasing or carrying
particular assets, Shares of the Fund may be considered to have been purchased
or carried with borrowed funds even though those funds are not directly linked
to the Shares.
The income from the Portfolio's investments may be subject to the federal
alternative minimum tax ("AMT"). Under current federal tax law, interest on
certain municipal securities issued after August 7, 1986 to finance "private
activities" ("private activity securities") is a "tax preference item" for
purposes of the AMT applicable to certain individuals and corporations even
though such interest will continue to be fully tax-exempt for regular federal
income tax purposes. The Portfolio may purchase private activity securities,
the interest on which may constitute a "tax preference item" for purposes of the
AMT.
STATE AND LOCAL TAXES. 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 distributions paid by this Fund to
shareholders residing in certain states will be exempt or excluded from state
income taxes. A portion of the distributions paid by Daily Assets Treasury Fund
II, 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.
The exemption for federal income tax purposes of distributions 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 Daily Assets TaxSaver Fund may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions.
Shareholders are advised to consult with their tax advisers concerning the
application of state and local taxes to investments in a Fund which may differ
from the federal income tax consequences described above.
GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable
payments (which may include taxable 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.
The Funds must include a portion of the original issue discount of zero-coupon
securities as income even though these securities do not pay any interest until
maturity. Because each Fund distributes all of its net investment income, a
Fund may have to sell portfolio securities to distribute imputed income, which
may occur at a time when the investment adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
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<PAGE>
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 distributions paid
to the shareholder that is derived from each type of obligation in which a Fund
has invested , that is derived from the obligations of issuers in the various
states and the portion of the Fund's distributions that is exempt from federal
income taxes. 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.
Reports containing appropriate information with respect to the Federal income
tax status of 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 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.
7. OTHER INFORMATION
PERFORMANCE INFORMATION
Institutional Service Shares' performance may be advertised. All performance
information is based on historical results, is not intended to indicate future
performance and, unless otherwise indicated, is net of all expenses. The Funds
may advertise yield, which shows the rate of income a Fund has earned on its
investments as a percentage of the Fund's share price. To calculate yield, a
Fund takes the interest income it earned from its portfolio of investments for a
specified period (net of expenses), divides it by the average number of shares
entitled to receive distributions, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the period. A
Fund's compounded annualized yield assumes the reinvestment of distributions
paid by the Fund, and, therefore will be somewhat higher than the annualized
yield for the same period. A 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 yield, 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. Each class' performance will vary.
The Funds' advertisements may also reference ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC Financial Data, 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 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 each other Fund as of 2:00 p.m., Eastern
Time, on each Fund Business Day by dividing the value of the Fund's net assets
(the value of its interest in the Portfolio and other assets less its
liabilities) by the number of 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 Core Trust Board believes that it fairly
reflects the market-based net asset value per share. The Portfolios' other
assets, if any, are valued at fair value by or under the direction of the Core
Trust Board.
THE TRUST AND ITS SHARES
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<PAGE>
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., which was incorporated in 19__.
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 sixteen series of the Trust.
Each share of each fund of the Trust and each class of shares has equal
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 (and Trustees)
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. A shareholder in a portfolio is entitled to the
shareholder's pro rata share of all 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. As of the date hereof, due to
initial investment in Daily Assets Treasury Fund II, Daily Assets Government
Fund and Daily Assets TaxSaver Fund, prior to the public offering of Shares FAS
may be deemed to control those Funds.
FUND STRUCTURE
OTHER CLASSES OF SHARES. In addition to Institutional Service Shares, each Fund
may create and issue shares of other classes of securities. Each Fund currently
has two other classes of shares authorized, Institutional Shares and Investor
Shares. Institutional Shares have an investment minimum of $10,000,000.
Investor Shares are offered to the general public, have a $10,000 minimum
investment and bear shareholder service and distribution fees. Institutional
Shares incur less expenses and Investor Shares incur more expenses than
Institutional Service Shares. Except for certain differences, each share of
each class represents an undivided, proportionate interest in a Fund. Each
share of each Fund is entitled to participate equally in distributions and the
proceeds of any liquidation of that Fund except that, due to the differing
expenses borne by the various classes, the amount of distributions will differ
among the classes.
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. 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 and Daily Assets TaxSaver Fund are the only investors
(other than FAS or its affiliates) that have invested in Treasury Portfolio and
Municipal Cash Portfolio, respectively. Each of the other Portfolios has
another investor besides the Funds (and FAS and its affiliates). 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 is 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
- 19 -
<PAGE>
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 the investment adviser to the Portfolio 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 Portfolio's investment adviser to manage the Fund's assets,
could have a significant impact on shareholders of the Fund.
ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company
that invests in a Portfolio) may have a different expense ratio and different
sales charges, including distribution fees, and each class' (and investment
company's) performance will be affected by its expenses and sales charges. For
more information on any other class of shares of the Funds or concerning any
other investment companies that invest in a Portfolio, investors may contact
FFSI at 207-879-1900. If an investor invests through a financial institution,
the investor may also contact their financial institution to obtain information
about the other classes or 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.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
FORUM FUNDS
S&P 500 INDEX FUND
INVESTORS EQUITY FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS FUND
PRELIMINARY PROSPECTUS
- SUBJECT TO COMPLETION
- -------------------------------------------------------------------------------
ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING:
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94FORUM
- -------------------------------------------------------------------------------
This Prospectus offers shares of the S&P 500 Index Fund, Investors Equity Fund,
Small Cap Fund, International Equity Fund and Emerging Markets Fund (each a
"Fund" and collectively the "Funds"), separately-managed, diversified portfolios
of Forum Funds (the "Trust"), a registered open-end management investment
company. S&P 500 Index Fund, Small Cap Fund, International Equity Fund and
Emerging Markets Fund each seek to achieve its investment objective by investing
all of its investable assets in a separate portfolio of another registered,
open-end, management investment company with the same investment objective.
Accordingly, each Fund's investment experience will correspond directly with the
portfolio's investment experience. See "Other Information -- Core & Gateway
Structure." Investors Equity Fund seeks to achieve its investment objective by
investing directly in portfolio securities.
S&P 500 INDEX FUND is designed to duplicate the return of the Standard &
Poor's 500 Composite Stock Index (the "Index") with minimum tracking error,
while also minimizing transaction costs. Under normal circumstances, the
portfolio will hold stocks representing 100 percent or more of the
capitalization-weighted market values of the Index.
INVESTORS EQUITY FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stock of companies domiciled in the
United States. The Fund intends to maintain a portfolio that is broadly
diversified across investment sectors.
SMALL CAP FUND seeks to provide capital appreciation by investing primarily
in equity securities of companies domiciled in the United States that have
market capitalizations of $1.5 billion or less. It is intended for
long-term investors seeking to diversify their growth investments who are
willing to accept the risks associated with investments in smaller
companies. Current income is incidental to the objective of
<PAGE>
capital appreciation.
INTERNATIONAL EQUITY FUND seeks to provide shareholders with long-term
capital appreciation through investment in securities markets outside the
United States. Investments in foreign securities involve special risks in
addition to the risks associated with investments in general and there can
be no assurance that the Fund's objective will be achieved.
EMERGING MARKETS FUND seeks to achieve long-term capital appreciation
direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. It is
designed for investors who seek the aggressive growth potential of emerging
world markets and are willing to bear the special risks of investing in
those markets.
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 4.0% of the total
public offering price (4.17% of the amount invested).
This prospectus sets forth concisely the information a prospective investor
should know before investing in a Fund. A Statement of Additional Information
(the "SAI") dated November 15, 1997 and as supplemented from time to time
containing additional information about the Funds has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and may be
obtained by writing or calling the Funds' transfer agent at the address and
telephone numbers printed 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 FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.
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.
November 15, 1997
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1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUND
THE FUNDS
Each of S&P 500 Index Fund, Small Cap Fund, International Equity Fund and
Emerging Markets Fund seeks to achieve its investment objective by investing all
of its investable assets in a separate series of another registered open-end
management investment company. S&P 500 Index Fund invests in Index Portfolio, a
separate series of Core Trust (Delaware) ("Core Trust") (a "Portfolio"), and
Small Cap Fund, International Equity Fund and Emerging Markets Fund invest in
Schroder U.S. Smaller Companies Portfolio, Schroder International Equity
Portfolio and Schroder Emerging Markets Fund Institutional Portfolio,
respectively, each a separate series of Schroder Capital Funds (Delaware)
("Schroder Core") (each a "Portfolio," collectively the "Schroder Portfolios"
and collectively with Index Portfolio the "Portfolios"). Accordingly, the
investment experience of each of these Funds will correspond directly with the
investment experience of its corresponding Portfolio. See "Other Information -
Fund Structure." Investors Equity Fund invests directly in portfolio
securities.
INVESTMENT ADVISERS
Forum Advisors, Inc. ("Forum Advisors") serves as the investment advisor
to Investors Equity Fund. Forum Advisors is located at Two Portland Square,
Portland, Maine 04101. Peoples Heritage Bank ("Peoples Heritage") serves as
the investment subadviser to Investors Equity Fund. Peoples Heritage, which
is located at One Portland Square, Portland, Maine 04101, is a subsidiary of
Peoples Heritage Financial Group, a multi-bank and financial services holding
company for Peoples Heritage and the Bank of New Hampshire. See "Management -
Advisers and Portfolio Managers."
Norwest Investment Management, Inc. ("Norwest") makes investment decisions
for Index Portfolio. Norwest, which is located at Norwest Center, Sixth Street
and Marquette, Minneapolis, Minnesota 55479, is an indirect subsidiary of
Norwest Corporation, a multi-bank holding company that was incorporated under
the laws of Delaware in 1929. Schroder Capital Management International Inc.
("SCMI") serves as the investment advisor of each Schroder Portfolio. SCMI's
executive offices are located at 787 Seventh Avenue, New York, New York 10019.
The investment advisory fees paid to SCMI by the Schroder Portfolios are borne
indirectly by each of Small Cap Fund, International Equity Fund and Emerging
Markets Fund. Likewise, the investment advisory fees paid to Norwest by Index
Portfolio are borne indirectly by S&P 500 Index Fund. See "Management--
Advisers and Portfolio Managers."
FUND MANAGEMENT
The administrator of the Funds is Forum Administrative Services, LLC
("FAS") and the distributor of their Shares is Forum Financial Services, Inc.
Forum Financial Corp. (the "Transfer Agent"), Two Portland Square, Portland,
Maine 04101, serves as the Funds' transfer agent, dividend disbursing agent and
shareholder servicing agent. See "Management."
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<PAGE>
PURCHASES AND REDEMPTIONS
Shares of each Fund are offered at the next-determined net asset value per
share plus any applicable sales charge. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $5,000, ($2,500 for an
Individual Retirement Account) and the minimum subsequent investment is $500.
Shares may be redeemed without charge. See "Purchases and Redemption of
Shares."
EXCHANGE PROGRAM
Shareholders may exchange their Shares without charge for the shares of
certain other funds of the Trust. See "Purchases and Redemptions of Shares -
Exchanges."
DIVIDENDS AND DISTRIBUTIONS
Dividends of net investment income are declared and paid annually and the
Funds distribute any net realized long-term capital gain at least annually.
With respect to each Fund, dividend and capital gain distributions are
reinvested automatically in additional shares of the Fund at net asset value
unless the shareholder has notified the Fund in his or her Account Application
or otherwise in writing of the shareholder's election to receive dividends or
distributions in cash. See "Dividends and Taxes."
CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS
There can be no assurance that a 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 the securities in which its respective Portfolio or, in the case
of Investors Equity Fund, the Fund invests. The objective of Schroder
International Equity Portfolio and Schroder Emerging Markets Fund Institutional
Portfolio of investing in the securities of foreign issuers may involve risks in
addition to those normally associated with investments in the securities of U.S.
issuers, including risks of foreign political and economic instability, adverse
movements in exchange rates, and the imposition or tightening of limitations on
the repatriation of capital. The policy of investing in small companies
employed by Small Cap Fund also entails certain risks in addition to those
normally associated with investments in equity securities of large
capitalization companies. A single Fund is not a complete investment program.
See "Additional Investment Policies and Risk Considerations."
By investing solely in a Portfolio, the S&P 500 Index Fund, Small Cap Fund,
International Equity Fund and Emerging Markets Fund may achieve certain
efficiencies and economies of scale. Nonetheless, this investment also could
have potential adverse effects on the Funds. Investors in any of these Funds
should consider these risks, as described under "Other Information - Core &
Gateway Structure."
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<PAGE>
EXPENSES OF INVESTING IN THE FUNDS
The purpose of the following table is to assist investors in understanding
the expenses that an investor in Shares of the Funds will bear directly or
indirectly.
<TABLE>
<CAPTION>
S&P 500 Investors Small Cap International Emerging
Index Fund Equity Fund Equity Fund Markets
Fund Fund
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of public offering price)............. 4.0% 4.0% 4.0% 4.0% 4.0%
Exchange Fee........................................... None None None None None
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets after applicable
expense reimbursements and fee waivers)
Management Fees (after fee waivers).................... 0.15% 0.65% 0.57% 0.43% 0.92%
12b-1 Fees............................................. None None None None None
Other Expenses (after expense reimbursements).......... 0.10% 0.45% 0.93% 0.82% 0.68%
Total Fund Operating Expenses.......................... 0.25% 1.10% 1.50% 1.25% 1.60%
</TABLE>
(1) Certain shareholders may be eligible for reduced sales charges. See
"Purchases and Redemptions of Shares - Reduced Sales Charges".
(2) Absent expense reimbursements and fee waivers, Management Fees, Other
Expenses and Total Operating Expenses, respectively, for each Fund would have
been: S&P 500 Index Fund: 0.15%, % and % Investors Equity Fund: %, %
and %, Small Cap Fund: 0.60%, % and %, International Equity Fund: 0.45%,
1.05% and 1.85% and Emerging Markets Fund: 1.00%, % and %. Management
Fees are the investment advisory fees of the Funds and for each Fund that
invests in a Portfolio are the advisory fees incurred by the Portfolio; as long
as a Fund's assets are invested in a Portfolio, a Fund pays no investment
advisory fees directly. The amount of Other Expenses is an estimate for the
Fund's first fiscal year of operations ending October 31, 1998, for Small Cap
Fund, International Equity Fund and Emerging Markets Fund, May 31, 1998 for S&P
Index Fund and March 31, 1998 for Investors Equity Fund. For a further
description of the various expenses incurred in the operation of the Funds, see
"Management." Expense reimbursements and fee waivers are voluntary and may be
reduced or eliminated at any time.
The expenses for S&P 500 Index Fund, Small Cap Fund, International Equity
Fund and Emerging Markets Fund will include each Fund's pro rata portion of all
operating expenses of the Portfolio in which it invests, 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 Portfolio will be approximately
equal to the expenses the Fund would incur if its assets were invested directly
in portfolio securities.
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EXAMPLE
Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in Shares would pay assuming a $1,000 investment in
the Fund, a 5% annual return, the reinvestment of all dividends and other
distributions and redemption at the end of each time period:
1 Year 3 Years
S&P 50 Index Fund $__ $__
Investors Equity Fund $__ $__
Small Cap Fund $__ $__
International Equity Fund $__ $__
Emerging Markets Fund $__ $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURNS, AND ACTUAL EXPENSES OR RETURNS MAY BE MORE OR LESS THAN
THOSE SHOWN. The example is based on the expenses listed in the table. The
5% annual return is not a prediction of the Funds' return; rather it is
required by government regulation.
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<PAGE>
2. INVESTMENT OBJECTIVE AND POLICIES
To achieve their investment objectives, the Funds invest primarily in
common stocks and other equity securities. The domestic securities in which a
Fund invests are generally listed on a securities exchange or included in the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System but may be traded in the over-the-counter securities
market. Each Fund, other than S&P 500 Index Fund and Small Cap Fund, may invest
in foreign issuers. These investments may involve certain risks. (See
"Investment Objectives and Policies -- Foreign Investment Considerations and
Risk Factors.") Under normal circumstances, each of the Funds will invest
substantially all of its assets, but not less than 65 percent of its total
assets, in equity securities.
S&P 500 INDEX FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of the S&P 500 Index Fund is to duplicate the
return of the Standard & Poor's 500 Composite Stock Price Index.
The Fund currently seeks to achieve its investment objective by investing
all of its investable assets in the Index Portfolio of Core Trust, which has
substantially the same investment objective and substantially similar policies
as the Fund. There can be no assurance that the Fund or Portfolio will achieve
its investment objective.
INVESTMENT POLICIES
Although the following discusses the investment policies of Index Portfolio
and the responsibilities of Core Trust's Board of Trustees (the "Core Trust
Board"), it applies equally to the Fund and the Trust's Board of Trustees (the
"Board"). Additional information concerning the investment policies of the Fund
and the Portfolio, including additional fundamental policies, is contained in
the SAI.
The Portfolio is designed to duplicate the return of the Standard & Poor's
500 Composite Stock Index (the "Index") with minimum tracking error, while also
minimizing transaction costs. Under normal circumstances, the Portfolio will
hold stocks representing 100 percent or more of the capitalization-weighted
market values of the Index. Portfolio transactions for the Portfolio generally
are executed only to duplicate the composition of the Index, to invest cash
received from portfolio security dividends or investments in the Portfolio, and
to raise cash to fund redemptions. The Portfolio may hold cash or cash
equivalents for the purpose of facilitating payment of the Portfolio's expenses
or redemptions. For these and other reasons, the Portfolio's performance can be
expected to approximate but not be equal to that of the Index.
The Portfolio may utilize index futures contracts to a limited extent.
Index futures contracts are bilateral agreements pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index
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<PAGE>
value at the close of trading of the contract and the price at which the futures
contract is originally struck. As no physical delivery of securities comprising
the Index is made, a purchaser of index futures contracts may participate in the
performance of the securities contained in the index without the required
capital commitment. Index futures contracts may be used for several reasons:
to simulate full investment in the underlying index while retaining a cash
balance for fund management purposes, to facilitate trading or to reduce
transaction costs. The Portfolio does not invest in futures contracts for
speculative reasons or to leverage the Fund. The Fund is, however, subject to
certain investment risks. These risks include: (i) imperfect correlations
between movements in the prices of futures contracts and movements in the price
of the securities hedged which may cause a given hedge not to achieve its
objective; (ii) the fact that the skills and techniques needed to trade futures
are different from those needed to select the other securities in which the Fund
invests; (iii) lack of assurance that a liquid secondary market will exist for
any particular instrument at any particular time, which, among other things, may
hinder a Fund's ability to limit exposures by closing its positions; and (iv)
the possible need to defer closing out of certain futures contracts to avoid
adverse tax consequences.
The Index tracks the total return performance of 500 common stocks which
are chosen for inclusion in the Index by Standard & Poor's ("S&P") on a
statistical basis. The inclusion of a stock in the Index in no way implies that
S&P believes the stock to be an attractive investment. The 500 securities, most
of which trade on the New York Stock Exchange, represent approximately 70
percent of the total market value of all U.S. common stocks. Each stock in the
Index is weighted by its market value. Because of the market-value weighting,
the 50 largest companies in the Index currently account for approximately 47
percent of its value. The Index emphasizes large capitalizations and,
typically, companies included in the Index are the largest and most dominant
firms in their respective industries.
Neither the Fund nor the Portfolio is not sponsored, endorsed, sold or
promoted by S&P, nor does S&P make any representation or warranty, implied or
express, to the purchasers of the Portfolio or the Fund or any member of the
public regarding the advisability of investing in index funds or the ability of
the Index to track general stock market performance. S&P does not guarantee the
accuracy and/or the completeness of the Index or any data included therein. S&P
makes no warranty, express or implied, as to the results to be obtained by the
Portfolio or the Fund, by the owners of the Portfolio or the Fund, or by any
other person or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and hereby expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the Index or any data included therein.
INVESTORS EQUITY FUND
INVESTMENT OBJECTIVE
The investment objective of the Investors Equity Fund is to seek capital
appreciation by investing primarily in common stock of companies domiciled in
the United States.
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<PAGE>
INVESTMENT POLICIES
To pursue its goal, the Fund intends to invest in securities of
established, growing companies that have demonstrated a high degree of financial
strength and fiduciary quality, and provide good liquidity in the market. Under
normal circumstances, the Fund will invest at least 65% of its assets in these
companies, without concentration in any one industry. In seeking these
investments the investment adviser relies in part upon fundamental and technical
analysis of individual companies. Among the characteristics that the Fund seeks
in companies are: a strong record of earnings growth, industry leadership, a
unique product or niche and good management. The investment adviser also
applies a broader analysis of industry conditions and economic trends. While
the Fund will be broadly diversified across investment sectors, the investment
adviser's top down industry and economic analysis will influence the actual
sector weightings.
The fundamental risk of investing in common stock is the risk that the
value of the stock might decrease. Stock values fluctuate in response to the
activities of an individual company or in response to general market and/or
economic conditions. Historically, common stocks have provided greater
long-term returns and have entailed greater short-term risks than preferred
stocks, fixed-income and money market investments. The market value of all
securities, including equity securities, is based upon the market's perception
of value and not necessarily the book value of an issuer or other objective
measure of a company's worth.
In addition to common stock, the Fund also may invest in preferred stocks
and investment-grade convertible debt securities. The Fund also may invest in
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers. The Fund expects any foreign investments to
remain below 10% of its assets.
SMALL CAP FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of the Fund is capital appreciation. Current
income is incidental to the objective of capital appreciation.
The Fund is not intended for investors whose objective is assured income or
preservation of capital. It is, rather, appropriate for investors who can bear
the special risks associated with investment in smaller capitalization
companies.
The Fund currently seeks to achieve its investment objective by investing
all of its investable assets in the Schroder U.S. Smaller Companies Portfolio,
which has substantially the same investment objective and substantially similar
policies as the Fund. There can be no assurance that the Fund or Portfolio will
achieve its investment objective.
INVESTMENT POLICIES
Although the following discusses the investment policies of the Portfolio
and the
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<PAGE>
responsibilities of Schroder Core's Board of Trustees (the "Schroder Core
Board"), it applies equally to the Fund and the Board. Additional information
concerning the investment policies of the Fund and the Portfolio, including
additional fundamental policies, is contained in the SAI.
Schroder U.S. Smaller Companies Portfolio seeks to achieve its investment
objective by investing primarily in equity securities of companies domiciled in
the United States that, at the time of purchase, have market capitalizations of
$1.5 billion or less.
In its investment approach, SCMI attempts to identify securities of
companies which it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. As part of the
investment decision, Schroder's assessment of the competency of an issuer's
management will be an important consideration. These criteria are not rigid,
and other investments may be included in the Portfolio if they may help the
Portfolio to attain its objective.
The Portfolio will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks). The Portfolio
may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of SCMI, such investments are warranted to
achieve the Portfolio's investment objective.
The Portfolio may invest in securities of small, unseasoned companies
(which, together with any predecessors, have been in operation for less than
three years), as well as in securities of more established companies. In view
of the volatility of price movements of the former, the Portfolio currently
intends to invest no more than 5% of its total assets in securities of small,
unseasoned issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, it is the present intention
of the Portfolio to invest no more than 5% of its net assets in debt securities
rated below the fourth highest rating category. These securities are commonly
known as "high yield/high risk" securities or "junk bonds." The Portfolio will
not invest in debt securities that are in default. High yield/high risk
securities are predominantly speculative with respect to the capacity to pay
interest and repay principal and generally involve a greater volatility of price
than securities in higher rated categories. The Portfolio is not obligated to
dispose of securities due to changes by the rating agencies. (See "Additional
Investment Policies and Risk Considerations -- Debt Securities.") (See the SAI
for information about the risks associated with investing in junk bonds.)
While the Portfolio does not presently intend to do so, it may write
covered call options and purchase certain put and call options, stock index
futures, and options on stock index futures and broadly-based stock indices, all
of which are referred to as "Hedging Instruments." In general, the Portfolio
may use Hedging Instruments: (i) to attempt to protect against declines in the
market value of the Portfolio's securities and thus protect the Fund's net asset
value per share against downward market trends; or (ii) to establish a position
in the equities markets as a temporary substitute for purchasing particular
equity securities. The Portfolio will not use
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<PAGE>
Hedging Instruments for speculation. The Hedging Instruments which the
Portfolio is authorized to use have certain risks associated with them.
Principal among such risks are: (i) the possible failure of such instruments as
hedging techniques in cases where the price movements of the securities
underlying the options or futures do not follow the price movements of the
portfolio securities subject to the hedge; (ii) potentially unlimited loss
associated with futures transactions and the possible lack of a liquid secondary
market for closing out a futures position; and (iii) possible losses resulting
from the inability of the Portfolio's investment adviser to correctly predict
the direction of stock prices, interest rates and other economic factors. The
Hedging Instruments the Portfolio may use and the risks associated with them are
described in greater detail in the SAI.
ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. While all
investments have risks, investments in smaller capitalization companies carry
greater risk than investments in larger capitalization companies. Smaller
capitalization companies generally experience higher growth rates and higher
failure rates than do larger capitalization companies; and the trading volume of
smaller capitalization companies' securities is normally lower than that of
larger capitalization companies and, consequently, generally has a
disproportionate effect on market price (tending to make prices rise more in
response to buying demand and fall more in response to selling pressure).
Investments in small, unseasoned issuers generally carry greater risk than
is customarily associated with larger, more seasoned companies. Such issuers
often have products and management personnel that have not been tested by time
or the marketplace and their financial resources may not be as substantial as
those of more established companies. Their securities (which the Portfolio may
purchase when they are offered to the public for the first time) may have a
limited trading market which can adversely affect their sale by the Portfolio
and can result in such securities being priced lower than otherwise might be the
case. If other institutional investors engage in trading this type of security,
the Portfolio may be forced to dispose of its holdings at prices lower than
might otherwise be obtained.
INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of the Fund is long-term capital appreciation
through investment in securities markets outside the United States.
The Fund is designed for U.S. investors who seek international
diversification of their investments by participating in foreign securities
markets. The Fund is not a complete investment program and investments in the
securities of foreign issuers generally involve risks in addition to the risks
associated with investments in the securities of U.S. issuers. See "Risk
Considerations."
The Fund currently seeks to achieve its investment objective by investing
all of its investment assets in the Schroder International Equity Portfolio,
which has substantially the
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<PAGE>
same investment objective and policies as the Fund. There is no assurance that
the Fund or the Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following discusses the investment policies of the Schroder
International Equity Portfolio and the responsibilities of Schroder Core Board,
it applies equally to the International Equity Fund and the Board. Additional
information concerning the investment policies of the Fund and the Portfolio,
including additional fundamental policies, is contained in the SAI.
The Portfolio normally invests at least 65% of its total assets in equity
securities of companies domiciled outside the United States. Investments by the
Portfolio are selected on the basis of their potential for capital appreciation
without regard for current income. The Portfolio may also invest in debt
securities of foreign governments, international organizations and foreign
corporations and, subject to certain restrictions, in the securities of
closed-end investment companies investing primarily in foreign securities. The
Portfolio may invest up to 5% of its net assets in debt securities with
relatively high risk and high yields (as compared to other debt securities
meeting the Portfolio's investment criteria). The debt securities in which the
Portfolio invests may be unrated, but will not be in default at the time of
purchase. The value of debt securities generally varies inversely with interest
rate changes. See "Additional Investment Policies and Risk Considerations."
Countries in which the Portfolio may invest include, but are not limited
to, countries listed in the Morgan Stanley EAFE-Registered Trademark- Index,
which is a market capitalization index of companies in 20 developed market
countries in Europe, Australia and the Far East. The Portfolio invests in the
securities of foreign issuers domiciled in at least three foreign countries. The
Portfolio may invest more than 25% of its total assets in issuers located in any
one country. To the extent it invests in issuers located in one country, the
Portfolio may be susceptible to factors adversely affecting that country. The
Portfolio also may invest in securities of issuers located in countries
considered by some to be emerging market countries. See "Investment Objective
and Policies -- Emerging Markets Fund -- Investment Policies" and "Additional
Investment Policies and Risk Considerations -- Emerging Markets."
The Portfolio may purchase preferred stock and convertible debt securities,
including warrants and convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio also may enter into foreign exchange contracts,
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to the Portfolio from adverse movements in currency values, the
contracts also limit possible gains from favorable movements. For temporary
defensive purposes, the Portfolio may invest without limitation in (or enter
into repurchase agreements maturing in seven days or less with U.S. banks and
broker-dealers with respect to) short-term debt securities, including U.S.
Government securities, certificates of deposit and bankers' acceptances of U.S.
banks. The Portfolio may also
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<PAGE>
hold cash (U.S. dollars, foreign currencies or multinational currency units) and
time deposits in U.S. and foreign banks. See "Additional Investment Policies and
Risk Considerations" below and "Investment Policies" in the SAI for further
information about all these types of investments.
EMERGING MARKETS FUND
INVESTMENT OBJECTIVE AND THE PORTFOLIO
This Fund seeks to achieve long-term capital appreciation direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe. There is no assurance that the Fund
will achieve its investment objective.
The Fund is designed for investors who seek the aggressive growth potential
of emerging world markets and are willing to bear the special risks of investing
in those markets. Current income is incidental to the Fund's objective. The
Fund is not a complete investment program and investments in the securities of
foreign issuers generally involve risks in addition to the risks associated with
investments in the securities of U.S. issuers. See "Risk Considerations." The
Fund is not intended for investors whose objective is assured income or
preservation of capital.
The Fund seeks to achieve its investment objective by investing
substantially all of its assets in Schroder Emerging Markets Fund Institutional
Portfolio, which has an identical investment objective and substantially similar
investment policies and strategies as the Fund. There can be no assurance that
the Fund or the Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following discusses the investment policies of the Portfolio
and the responsibilities of the Schroder Core Board, it applies equally to the
Fund and the Board. Additional information concerning the investment policies
of the Fund and the Portfolio, including additional fundamental policies, is
contained in the SAI.
The investment objective, and the investment policies of the Fund and the
Portfolio that are designated as fundamental, may not be changed without
approval of the holders of a majority of the outstanding voting securities of
the Portfolio. A majority of outstanding voting securities means the lesser
of: (i) 67% of the shares present or represented at a shareholder meeting at
which the holders of more than 50% of the outstanding shares are present or
represented; or (ii) more than 50% of outstanding shares. Non-fundamental
investment policies may be changed by the Schroder Core Board without
approval of the investors in the Portfolio.
Under normal market conditions, the Portfolio will invest at least 65% of
its total assets in emerging market equity and debt securities, including common
stocks; preferred stocks; convertible preferred stocks; stock rights and
warrants; convertible debt securities; and non-convertible debt securities.
(Investments in stock rights and warrants will not be considered for purposes of
determining compliance with this policy.) The Portfolio may invest up to 35% of
its
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total assets in high-risk debt securities that are unrated or rated below
investment grade. (See, "Additional Investment Policies and Risk
Considerations--Risk Considerations".) Under certain circumstances, the
Portfolio may invest indirectly in emerging market securities by investing in
other investment companies or vehicles. (See "Risk Considerations -- Investment
in Other Investment Companies or Vehicles".)
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state-owned industries, permitting
the value of their currencies to float against the dollar and other major
currencies, and generally reducing the level of state intervention in industry
and commerce. Important intra-regional economic integration also holds the
promise of greater trade and growth. At the same time, significant progress has
been made in restructuring the heavy external debt burden that certain emerging
market countries accumulated during the 1970s and 1980s. While there is no
assurance that these trends will continue, the Portfolio's investment adviser
will seek out attractive investment opportunities in these countries. The
Portfolio may acquire emerging market securities that are not denominated in
emerging market currency.
"Emerging market" countries are all those not included in the Morgan
Stanley Capital International World Index ("MSCI World") of major world
economies. If, however, the investment adviser determines that the economy of a
MSCI World-listed country is an emerging market economy, the adviser may include
such country in the emerging market category. The following countries are
currently excluded from the Portfolio's emerging market category: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Malaysia, Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, United Kingdom, and the United States of America. The Portfolio
will not necessarily seek to diversify investments on a geographic basis and may
invest more than 25% of its total assets in issuers located in any one country.
(See "Additional Investment Policies and Risk Considerations -- Risk
Considerations--Foreign Investments--Geographic Concentration".)
An issuer of a security will be considered to be domiciled or doing
business in an emerging market when: (i) it is organized under the laws of an
emerging market country; (ii) its primary securities trading market is in an
emerging market country; (iii) in the judgment of the investment adviser, at
least 50% of the issuer's revenues or profits are derived from goods produced or
sold, investments made, or services performed in emerging market countries; or
(iv) it has at least 50% of its assets situated in emerging market countries.
The Portfolio may consider investment companies to be located in the country or
countries in which they primarily invest.
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3. ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS
COMMON POLICIES OF THE FUNDS
The investment objective and all investment policies of each of the Funds
and the Portfolios that are designated as fundamental may not be changed without
approval of the holders of a majority of the outstanding voting securities of a
Fund or a Portfolio, as applicable. A majority of outstanding voting securities
means the lesser of (i) 67% of the shares present or represented at a
shareholder meeting at which the holders of more than 50% of the outstanding
shares are present or represented, or (ii) more than 50% of outstanding shares.
Unless otherwise indicated, all investment policies are not fundamental and may
be changed by the Board without approval by shareholders of the Fund. Likewise,
nonfundamental investment policies of a Portfolio may be changed by the Schroder
Core Board or the Core Trust Board, as applicable, without shareholder approval.
For more information concerning shareholder voting, see "Other Information--
"The Trust and Its Shares" and "-- Core & Gateway Structure."
DIVERSIFICATION AND CONCENTRATION. Each Fund except Emerging Markets Fund
is diversified as that term is defined in the Investment Company Act of 1940
(the "1940 Act"). As a fundamental policy, with respect to 75% of its assets, a
diversified fund may not purchase a security (other than a U.S. Government
Security or shares of investment companies) if, as a result: (i) more than 5%
of the Fund's total assets would be invested in the securities of a single
issuer; or (ii) the Fund would own more than 10% of the outstanding voting
securities of any single issuer. Each Fund is prohibited from concentrating its
assets in the securities of issuers in any industry. As a fundamental policy,
no Fund may purchase securities if, immediately after the purchase, more than
25% of the value of the Fund's total assets would be invested in the securities
of issuers conducting their principal business activities in the same industry.
This limit does not apply to investments in U.S. Government Securities, foreign
government securities or repurchase agreements covering U.S. Government
Securities. Each Fund reserves the right to invest up to 100% of its investable
assets in one or more investment companies such as the Portfolios.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, Emerging Markets Fund, like the Schroder
Emerging Markets Fund Institutional Portfolio, has classified itself as a
"non-diversified investment company" under the 1940 Act so that it may invest
more than 5% of its total assets in the securities of a single issuer. This
classification may not be changed without a shareholder vote. However, so that
the Fund may continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended at the close of
each quarter of the taxable year: (i) not more than 25% of the market value of
the Fund's total assets will be invested in the securities of a single issuer;
and (ii) with respect to 50% of the market value of its total assets, not more
than 5% will be invested in the securities of a single issuer; and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
(See "Dividends and Tax Matters".)
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To the extent the Fund makes investments in excess of 5% of its assets in a
particular issuer, its exposure to credit and market risks associated with that
issuer is increased. Also, since a relatively high percentage of the Fund's
assets may be invested in the securities of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
ILLIQUID SECURITIES. Each of the Funds limits its purchase of illiquid
securities. As a fundamental policy, no Fund may knowingly acquire securities
or invest in repurchase agreements with respect to any securities if, as a
result, more than 10 percent of the Fund's net assets taken at current value
would be invested in securities which are not readily marketable. Illiquid
securities are securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities and include, among other things, repurchase agreements not
entitling the holder to payment within seven days and restricted securities
(other than those determined to be liquid pursuant to guidelines established by
the Board, the Schroder Core Board or the Core Trust Board). Under the
supervision of the Board, the Schroder Core Board or the Core Trust Board, the
Advisers determine and monitor the liquidity of the portfolio securities.
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may
enter into repurchase agreements and may lend 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 may have difficulties in exercising its rights to the
underlying securities, may incur costs and experience time delays in disposing
of them and may suffer a loss.
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 and each Fund will limit securities lending to not more than 33
1/3% (25% in the case of Small Cap Opportunities Fund) of the value of its total
assets.
COMMON AND PREFERRED STOCK AND WARRANTS. Each Fund may invest in common
and preferred stock. Common stockholders are the owners of the company issuing
the stock and, accordingly, vote on various corporate governance matters such as
mergers. They are not creditors of the company, but rather, upon liquidation of
the company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and, if applicable,
preferred stockholders are paid. Preferred stock is a class of stock having a
preference over common stock as to dividends and, in general, as to the recovery
of investment. A preferred stockholder is a shareholder in the company and not
a creditor of the company, as is
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a holder of the company's fixed income securities. Dividends paid to common
and preferred stockholders are distributions of the earnings of the company
and not interest payments, which are expenses of the company. Equity
securities owned by a Fund may be traded in the over-the counter market or on
a securities exchange, but may not be traded every day or in the volume
typical of securities traded on a major U.S. national securities exchange.
As a result, disposition by a Fund of a security to meet redemptions by
interest holders or otherwise may require the Fund to sell these securities
at a discount from market prices, to sell during periods when disposition is
not desirable, or to make many small sales over a lengthy period of time.
The market value of all securities, including equity securities, is based
upon the market's perception of value and not necessarily the book value of
an issuer or other objective measure of a company's worth. A Fund may also
invest in warrants, which are options to purchase an equity security at a
specified price (usually representing a premium over the applicable market
value of the underlying equity security at the time of the warrant's
issuance) and usually during a specified period of time.
MARGIN AND SHORT SALES. No Fund may purchase securities on margin or
make short sales of securities, except short sales against the box. A short
sale is "against the box" to the extent that the Fund contemporaneously owns
or has the right to obtain at no added cost securities identical to those
sold short. For federal income tax purposes, short sales against-the-box may
be made to defer recognition of gain or loss on the sale of securities until
the short position is closed out. These prohibitions do not restrict the
Fund's ability to use short-term credits necessary for the clearance of
portfolio transactions and to make margin deposits in connection with
permitted transactions in options and futures contracts.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates
will affect the U.S. dollar values of securities denominated in currencies
other than the U.S. dollar. The rate of exchange between the U.S. dollar and
other currencies fluctuates in response to forces of supply and demand in the
foreign exchange markets. These forces are affected by the international
balance of payments and other economic and financial conditions, government
intervention, speculation and other factors, many of which may be difficult
if not impossible to predict. When investing in foreign securities, the
Portfolio usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. The
Portfolio incurs foreign exchange expenses in converting assets from one
currency to another.
Schroder International Equity Portfolio and Schroder Emerging Markets
Fund Institutional Portfolio may enter into foreign currency forward
contracts for the purchase or sale of foreign currency to "lock in" the U.S.
dollar price of the securities denominated in a foreign currency or the U.S.
dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which
the Portfolio has investments may suffer a decline against the U.S. dollar.
A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities.
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Although the strategy of engaging in foreign currency transactions could
reduce the risk of loss due to a decline in the value of the hedged currency,
it could also limit the potential gain from an increase in the value of the
currency. The Portfolio does not intend to maintain a net exposure to such
contracts where the fulfillment of the Portfolio's obligations under such
contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's portfolio securities or
other assets denominated in the currency. The Portfolio will not enter into
these contracts for speculative purposes and will not enter into non-hedging
currency contracts. These contracts involve a risk of loss if SCMI fails to
predict currency values correctly. The Portfolio has no present intention to
enter into currency futures or options contracts but may do so in the future.
Because most of the Portfolio's income will be received and realized in
foreign currencies and the Portfolio will be required to compute and
distribute income in U.S. dollars, a decline in the value of a particular
foreign currency against the U.S. dollar occurring after the Portfolio's
income has been earned and thereafter computed into U.S. dollars may require
the Portfolio to liquidate some portfolio securities to acquire sufficient
U.S. dollars to make such distributions. Similarly, if the exchange rate
declines between the time the Portfolio incurs expenses in U.S. dollars and
the time such expenses are paid, the Portfolio may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet
such expenses.
OPTIONS AND FUTURES TRANSACTIONS. While the Funds do not presently
intend to do so, they may write covered call options and purchase certain put
and call options, stock index futures, and options on stock index futures and
broadly-based stock indices, all of which are referred to as "Hedging
Instruments." In general, a Fund may use Hedging Instruments: (i) to protect
against declines in the market value of the portfolio's securities or (ii) to
establish a position in the equities markets as a temporary substitute for
purchasing particular equity securities. No Fund will use Hedging
Instruments for speculation. The Hedging Instruments a Fund is authorized to
use have certain risks associated with them, including: (i) the possible
failure of such instruments as hedging techniques in cases where the price
movements of the securities underlying the options or futures do not follow
the price movements of the portfolio securities subject to the hedge; (ii)
potentially unlimited loss associated with futures transactions and the
possible lack of a liquid secondary market for closing out a futures
position; and (iii) possible losses resulting from the inability of the
investment adviser to predict the direction of stock prices, interest rates
and other economic factors. The Hedging Instruments each Fund may use and
the risks associated with them are described in greater detail under "Options
and Futures Transactions" in the SAI.
DEBT SECURITIES. Each Fund except S&P 500 Index Fund may seek capital
appreciation through investment in convertible or non-convertible debt
securities. Capital appreciation in debt securities may arise as a result of
a favorable change in relative foreign exchange rates, in relative interest
rate levels, or in the creditworthiness of issuers. The receipt of income
from such debt securities is incidental to a Fund's or Portfolio's objective
of long-term capital appreciation. Such income can be used, however, to
offset the operating expenses of the Portfolios. In accordance with its
investment objective, the Funds and Portfolios will not seek to benefit from
anticipated short-term fluctuations in currency exchange rates. Schroder U.S.
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Smaller Companies Portfolio and International Equity Portfolio may invest up
to 5% of its net assets in debt securities with relatively high risk and high
yields (as compared to other debt securities meeting the Portfolios'
investment criteria), notwithstanding that the Portfolio may not anticipate
that such securities will experience substantial capital appreciation. The
debt securities in which the Portfolios invests may be unrated, but will not
be in default at the time of purchase. Schroder Emerging Markets Fund
Institutional Portfolio may invest up to 35% of its total assets in debt
securities that are unrated or rated below investment grade (below Baa by
Moody's or BBB by S&P. See "Additional Investment Policies and Risk
Considerations--Risk Considerations--Certain Risks of Debt Securities." For
a further description of S&P's and Moody's securities ratings please see the
Appendix to the SAI. The Portfolios also may invest to a certain extent in
debt securities in order to participate in debt-to-equity conversion programs
incident to corporate reorganizations.
Schroder International Equity Portfolio and Schroder Emerging Markets
Fund Institutional Portfolio may invest in debt securities issued or
guaranteed by foreign governments (including countries, provinces and
municipalities) or their agencies and instrumentalities, debt securities
issued or guaranteed by international organizations designated or supported
by multiple foreign governmental entities (which are not obligations of
foreign governments) to promote economic reconstruction or development, and
debt securities issued by corporations or financial institutions.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS
GENERAL. All investments, domestic and foreign, involve certain risks.
Investment in the securities of foreign issuers may involve risks in addition
to those normally associated with investments in the securities of U.S.
issuers. In general, the Schroder International Equity Portfolio and
Schroder Emerging Markets Fund Institutional Portfolio will invest only in
securities of companies and governments in countries which SCMI, in its
judgment, considers both politically and economically stable. Nevertheless,
all foreign investments are subject to risks of foreign political and
economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital and changes in foreign governmental attitudes
towards private investment possibly leading to nationalization, increased
taxation or confiscation of Portfolio assets. To the extent the Portfolios
invest substantially in issuers located in one country or area, such
investments may be subject to greater risk in the event of political or
social instability or adverse economic developments affecting that country or
area.
Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income available for
distribution to a Portfolio's, and thus the Fund's, shareholders; (ii)
commission rates payable on foreign portfolio transactions are generally
higher than in the U.S.; (iii) accounting, auditing and financial reporting
standards differ from those in the U.S., and this may mean that less
information about foreign companies may be available than is generally
available about issuers of comparable securities in the U.S.;
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(iv) foreign securities often trade less frequently and with less volume than
U.S. securities and consequently may exhibit greater price volatility; and
(v) foreign securities trading practices, including those involving
securities settlement, may expose the Portfolio to increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because Schroder International
Equity Portfolio and Schroder Emerging Markets Fund Institutional Portfolio
will invest heavily in non-U.S. currency denominated securities, changes in
foreign currency exchange rates will affect the value of the Portfolio's
investments. A decline in the value of currencies in which a Portfolio's
investments are denominated against the dollar will result in a corresponding
decline in the dollar value of the Portfolio's assets. This risk tends to be
heightened in the case of investments in certain emerging market countries as
further discussed below.
GEOGRAPHIC CONCENTRATION. Schroder International Equity Portfolio and
Schroder Emerging Markets Fund Institutional Portfolio may invest more than
25% of its total assets in issuers located in any one country. To the extent
it invests in issuers located in one country, a Portfolio is susceptible to
factors adversely affecting that country. In particular, these factors may
include the political and economic developments and foreign exchange rate
fluctuations discussed above. As a result of investing substantially in one
country, the value of a Portfolio's assets may fluctuate more widely than the
value of shares of a comparable fund a lesser degree of geographic
concentration.
EMERGING MARKETS
POLITICAL AND ECONOMIC RISKS. Schroder International Equity Portfolio
and Schroder Emerging Markets Fund Institutional Portfolio may invest in
securities of issuers located in countries considered by some to be emerging
market countries. The risks of investing in foreign securities may be
greater with respect to securities of issuers in, or denominated in the
currencies of, emerging market countries. In any emerging market country,
there is the possibility of expropriation of assets, confiscatory taxation,
nationalization, foreign exchange controls, foreign investment controls on
daily stock market movements, default in foreign government securities,
political or social instability or diplomatic developments which could affect
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
economic growth rates, rates of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments positions. Certain foreign
investments may also be subject to foreign withholding taxes, thereby
reducing the income available for distribution to a Fund's shareholders. The
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries in which they trade.
Certain emerging market countries may restrict investment by foreign
entities. For example, some of these countries may limit the size of foreign
investment in certain issuers, require prior
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approval of foreign investment by the government, impose additional tax on
foreign investors or limit foreign investors to specific classes of
securities of an issuer that have less advantageous rights (with regard to
price or convertibility, for example) than classes available to domiciliaries
of the country. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the costs and expenses of a
Fund.
Substantial limitations may also exist in certain countries with respect
to a foreign investor's ability to repatriate investment income, capital or
the proceeds of sales of securities. A Portfolio could be adversely affected
by delays in, or refusals to grant, any required governmental approvals for
repatriation of capital. If a deterioration occurs in a country's balance of
payments, the country could impose temporary restrictions on foreign capital
remittances. In the event of expropriation, nationalization or other
confiscation, a Portfolio could lose its entire investment in the country
involved.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and
regulation of exchanges and brokers in emerging market countries is
frequently less extensive than in the United States. Therefore, there is an
increased risk of uninsured loss due to lost, stolen or counterfeit stock
certificates. These markets may have different clearance and settlement
procedures. Securities settlements may, in some instances, be subject to
delays and related administrative uncertainties. In certain cases,
settlements have not kept pace with the volume of securities transactions,
making it difficult to conduct such transactions. Delays in settlement could
adversely affect or interrupt the Fund's intended investment program or
result in investment losses due to intervening declines in security values.
The securities markets of many foreign countries, including emerging
market countries, are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of
companies representing a small number of industries. Consequently, a
Portfolio whose investment portfolio includes securities traded in such
markets may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of United
States companies. These foreign markets may be subject to greater influence
by adverse events generally affecting the market, and by large investors
trading significant blocks of securities, than is usual in the United States.
Furthermore, reduced secondary market liquidity may make it more difficult
for the Portfolio to determine the value of its portfolio securities or
dispose of particular instruments when necessary.
Investing in local markets, particularly emerging markets, may require a
Portfolio to adopt special procedures, seek local government approvals or
take other actions each of which may involve additional costs to the
Portfolio. Brokerage commissions and other transaction costs on and off of
foreign securities exchanges are generally higher as well.
FINANCIAL INFORMATION AND STANDARDS AND REGULATION OF ISSUERS. Issuers
of securities in foreign jurisdictions are generally not subject to the same
degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. Foreign companies may not
be subject to uniform accounting, auditing and financial reporting standards.
Often, available
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information about issuers and their securities is less extensive, and, in
certain circumstances, substantially less extensive in foreign markets, and
particularly emerging market countries, than in the United States. In
addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders
such as the Fund than that provided by U.S. laws.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. The risks associated with
currency fluctuations and devaluations often are heightened with respect to
investments in emerging market countries. For example, some currencies of
emerging market countries have experienced steady devaluations relative to
the U.S. dollar, and major adjustments have been made in certain of such
currencies periodically. Some emerging market countries also may have managed
currencies which do not freely float against the U.S. dollar. Exchange rates
are influenced generally by the forces of supply and demand in the foreign
currency markets and by numerous other political and economic events
occurring outside the United States, many of which may be difficult, if not
impossible, to predict.
INFLATION. Several emerging market countries have experienced
substantial, and in some periods extremely high, rates of inflation in recent
years. Inflation and rapid fluctuations in inflation rates may have very
negative effects on the economies and securities markets of certain emerging
market countries. Further, inflation accounting rules in some emerging market
countries require, for companies that keep accounting records in the local
currency, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits for certain emerging market companies.
CERTAIN RISKS OF DEBT SECURITIES
The Schroder Emerging Markets Fund Institutional Portfolio may invest
without limitation in investment grade emerging market debt securities; it
may invest up to 35% of its total assets in debt securities that are unrated
or are rated below investment grade (below "Baa" by Moody's Investor Service
("Moody's")or "BBB" by Standard and Poor's ("S&P"); (for a further
description of Moody's and S&P's securities ratings please see the Appendix
to the SAI.) Note that even debt securities rated "Baa" by Moody's are
considered to have speculative characteristics. Below investment grade
securities (and unrated securities of comparable quality) ("high yield/high
risk securities") are predominantly speculative with respect to the capacity
to pay interest and repay principal, and generally involve a greater
volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds. The risks associated
with junk bonds are generally greater than those associated with higher-rated
securities. The Portfolio is not obligated to dispose of securities due to
rating changes by Moody's, S&P or other rating agencies. The Portfolio is
not authorized to purchase debt securities that are in default, except for
sovereign debt (discussed below) in which the Portfolio may invest no more
than 5% of its total assets while such sovereign debt securities are in
default.
In purchasing high yield/high risk securities, the Portfolio will rely on
the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of
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such securities. Nonetheless, investors should review the investment
objective and policies of the Fund and consider their willingness to assume
risk before making an investment.
High yield/high risk securities' market values are affected more by
individual issuer developments and are more sensitive to adverse economic
changes than are higher-rated securities. Issuers of high yield/high risk
securities may be highly leveraged and may not have more traditional methods
of financing available to them. During economic downturns or substantial
periods of rising interest rates, issuers of high yield/high risk securities,
especially highly leveraged ones, may be less able to service their principal
and interest payment obligations, meet their projected business goals, or
obtain additional financing. The risk of loss due to default by the issuer
is significantly greater for holders of high yield/high risk securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. In addition, the Portfolio may incur additional
expenses if it is required to seek recovery upon a default by the issuer of
such an obligation or participate in the restructuring of such obligation.
Periods of economic uncertainty and change will likely cause increased
volatility in the market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value if it invests in such
securities; market prices of such securities structured as zero coupon or
pay-in-kind securities are more affected by interest rate changes and thus
tend to be more volatile than securities that pay interest periodically and
in cash.
High yield/high risk securities may have call or redemption features
which would permit an issuer to repurchase the securities from the Portfolio.
If a call were exercised by the issuer during a period of declining interest
rates, the Portfolio would likely have to replace called securities with
lower yielding securities, thus decreasing the Portfolio's net investment
income and dividends to shareholders.
While a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines. The Portfolio may, therefore, have difficulty
disposing of particular issues to meet its liquidity needs or in response to
a specific economic event (such as a deterioration in the creditworthiness of
the issuer). Reduced secondary market liquidity for certain high yield/high
risk securities also may make it more difficult for the Portfolio to obtain
accurate market quotations (for purposes of valuing the Portfolio's
investment portfolio): market quotations are generally available on many
high yield/high risk securities only from a limited number of dealers and may
not necessarily represent firm bids of such dealers or prices for actual
sales. Under such conditions, high yield/high risk securities may have to be
valued at fair value as determined by the Schroder Core Board or SCMI under
Board-approved guidelines.
Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk
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securities are likely to adversely affect the Portfolio's, and thus the
Fund's, net asset value.
TEMPORARY DEFENSIVE POSITION
When business or financial conditions warrant, each Fund may assume a
temporary defensive position and invest without limit 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 doing business in the
United States (United States banks in the case of Small Cap Opportunities
Fund); (iii) commercial paper; (iv) repurchase agreements; and (v) shares of
money market funds registered under the 1940 Act within the limits specified
therein. During periods when and to the extent that a Fund has assumed a
temporary defensive position, it may not be pursuing its investment
objective. Prime quality instruments are those that are rated in one of the
two highest short-term rating categories by an NRSRO or, if not rated,
determined by the investment adviser to be of comparable quality. Apart from
temporary defensive purposes, a Fund may at any time invest a portion of its
assets in cash and cash equivalents as described above (in United States
banks in the case of Small Cap Opportunities Fund). International Equity
Portfolio and Emerging Markets Portfolio also may hold cash and bank
instruments denominated in any major foreign currency. Except during periods
when the Fund assumes a temporary defensive position, each Fund will have at
least 65% of its total assets invested in common stock.
PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Funds (the portfolio
turnover rate) will vary from year to year depending on market conditions.
The Funds may engage in short-term trading buts their portfolio turnover rate
is no expected to exceed 100%. An annual portfolio turnover rate of 100%
would occur if all the securities in a Fund were replaced in a one year
period. Higher portfolio turnover and short-term trading involve
correspondingly greater commission expenses and transaction costs. The
investment advisers to the Funds weigh the anticipated benefits of short-term
investments against these consequences. Tax rules applicable to short-term
trading may affect the timing of a Fund's portfolio transactions or its
ability to realize short-term trading profits or establish short-term
positions. Also, higher portfolio turnover rates may cause shareholders of
the Portfolio to recognize gains for federal income tax purposes. See
"Taxation" in the SAI.
4. MANAGEMENT
The business and affairs of the Fund are managed under the direction of the
Board. The Trustees of the Trust are John Y. Keffer, Costas Azariadis, James
C. Cheng and J. Michael Parish. The business and affairs of the Index
Portfolio are managed under the direction of the Core Trust Board. The
Trustees of the Trust also serve as the Trustees of Core Trust. The business
and affairs of the Schroder Portfolios are managed under the direction of the
Schroder Core Board. The Trustees of Schroder Core are Peter E. Guernsey,
Ralph E. Hansmann, John I. Howell, Laura E. Luckyn-Malone, Clarence F.
Michalis, Hermann C. Schwab and Mark J. Smith. Additional information
regarding the Trustees and the respective executive officers of the Trust and
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Schroder Core may be found in the SAI under the heading "Management --
Trustees and Officers."
INVESTMENT ADVISERS AND PORTFOLIO MANAGERS
Forum Advisors, Inc. serves as investment adviser to Investors Equity
Fund pursuant to an investment advisory agreement with the Trust. Subject to
the general control of the Board, Forum Advisors is responsible for among
other things, developing a continuing investment program for the Fund in
accordance with its investment objective and reviewing the investment
strategies and policies of the Fund. Forum Advisors was incorporated under
the laws of Delaware in 1987 and is registered under the Investment Advisers
Act of 1940. For its services, Forum Advisors receives an advisory fee at an
annual rate of 0.__% of Investor Equity Fund's average daily net assets.
Forum Advisors has entered into an investment sub-advisory agreement with
Peoples Heritage to exercise certain investment discretion over the assets
(or a portion of assets) of the Fund. Subject to the general control of the
Board, Peoples Heritage will be responsible for developing a continuing
investment program for the Fund in accordance with its investment objective
and reviewing the investment strategies and policies of the Fund. Peoples
Heritage will not receive an advisory fee. Peoples Heritage, located at One
Portland Square, Portland, Maine 04101, is a subsidiary of Peoples Heritage
Financial Group, a multi-bank holding company. As of October 31, 1997,
Peoples Heritage Financial Group had assets of $___ billion.
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<PAGE>
As of __________, Peoples Heritage and its affiliates managed assets with a
value of approximately $___ billion.
Mark Kaplan, CFA, Dana R. Mitiguy, CFA and Jonathan W. White, CFA serve
as the portfolio managers of Investors Equity Fund. Mark Kaplan has over
thirteen years of experience in the investment industry and has been a
Managing Director at Forum Financial Services, Inc. since September 1995
where he is responsible for investment advisory services. Prior to that Mr.
Kaplan was Managing Director and Director of Research at H.M. Payson & Co.,
an investment advisory and trust services company. Prior thereto, Mr. Kaplan
was a securities analyst in the investment division of UNUM Life Insurance
Company. Mr. Kaplan received a Masters in Business Administration from
Boston University. Dana R. Mitiguy has fourteen years of experience in the
investment industry and is the Chief Investment Officer for Peoples' Heritage
Bank. Prior to joining Peoples in September 1995, Mr. Mitiguy served as a
Vice President at Key Trust of Maine. From 1992 through 1993 Mr. Mitiguy was
a Managing Director with Boston American Asset Management and prior to that
served as Assistant Vice President at The Boston Company. Mr. Mitiguy
received a Bachelor Arts degree from Middlebury College. Jonathan W. White,
Chief Investment Officer for the Bank of New Hampshire has over 25 years of
experience in the investment industry. From 1989 through 1994 Mr. White was
an investment associate with Connecticut Seed Ventures. Prior to that he
served as Vice President - Research at the Bank of New England. Mr. White
received a Bachelor of Arts degree from Dartmouth College and a Masters in
Business Administration from the University of New Hampshire.
Subject to the general supervision of the Core Trust Board, Norwest
provides investment advisory services to Index Portfolio. Norwest manages
the investment and reinvestment of the assets of Index Portfolio and
continuously reviews, supervises and administers the Portfolio's investments.
In this regard, it is the responsibility of Norwest to make decisions
relating to Index Portfolio's investments and to place purchase and sale
orders regarding investments with brokers or dealers selected by it in its
discretion. For its services with respect to the Portfolio, Norwest receives
a monthly advisory fee equal on an annual basis to 0.15% of the Portfolio's
average daily net assets, which Index Fund indirectly bears through
investment in the Portfolio. Norwest, which is located at Norwest Center,
Sixth Street and Marquette, Minneapolis, Minnesota 55479, is an indirect
subsidiary of Norwest Corporation, a multi-bank holding company that was
incorporated under the laws of Delaware in 1929. As of October 31, 1997,
Norwest Corporation had assets of $___ billion, which made it the 11th
largest bank holding company in the United States. As of October 31, 1997,
Norwest and its affiliates managed assets with a value of approximately $___
billion.
David D. Sylvester and Laurie R. White are primarily responsible for the
day-to-day management of Index Portfolio. Mr. Sylvester has been associated
with Norwest for 16 years, the last 8 years as a Vice President and Senior
Portfolio Manager. He has over 20 years' experience in managing securities
portfolios. Ms. White has been a Vice President and Senior Portfolio Manager
of Norwest since 1991; from 1989 to 1991, she was a Portfolio Manager at
Richfield Bank and Trust. Mr. Sylvester and Ms. White began serving as
portfolio managers of Index Portfolio on January 1, 1996.
Each of Small Cap Fund, International Equity Fund and Emerging Markets
Fund currently invests all of its assets in a Schroder Portfolio. SCMI
serves as Investment Adviser to each Schroder Portfolio. SCMI manages the
investment and reinvestment of the assets the Schroder Portfolios and
continuously reviews, supervises and administers the Portfolio's investments.
In this regard, it is the responsibility of SCMI to make decisions relating
to the Schroder Portfolio's investments and to place purchase and sale orders
regarding investments with brokers or dealers selected by it in its
discretion. For its services the Investment Advisory Agreement between SCMI
and Schroder Core provides that SCMI is entitled to receive a monthly
advisory fee at the following annual rates, which each of Small Cap Fund,
International Equity Fund and Emerging Markets Fund bears indirectly through
its respective investment in the Portfolios:
Percent of Portfolio's average
daily net assets
Schroder U.S. Smaller Companies Portfolio 0.60
Schroder International Equity Portfolio 0.45
Schroder Emerging Markets Fund
Institutional Portfolio 1.00
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. subsidiary of Schroders plc, a publicly owned company
organized under the laws of England. Schroders plc is the holding company
parent of a large world-wide group of banks and financial services companies
(referred to as the "Schroder Group"), with associated companies and branch
and representative offices located in eighteen countries world-wide. The
investment
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<PAGE>
management subsidiaries of the Schroder Group had, as of October 31, 1997,
assets under management in excess of $___ billion.
The investment management team of Fariba Talebi (a Vice President of the
Trust and a Group Vice President of SCMI) and Ira Unschuld (a Vice President
of the Trust and of SCMI) with the assistance of an investment committee, is
primarily responsible for the day-to-day management of the Schroder U.S.
Smaller Companies Portfolio's investments and has so managed the Portfolio
since its inception. Ms. Talebi and Mr. Unschuld have been employed by SCMI
in the investment research and portfolio management areas since 1987 and
1990, respectively.
ADMINISTRATIVE AND DISTRIBUTION SERVICES
On behalf of the Funds, the Trust has entered into an administrative
services contract with Forum Administrative Services, LLC ("FAS"). As
provided in this agreement, FAS is responsible for the supervision of the
overall management of the Trust (including the Trust's receipt of services
for which it must pay), providing the Trust with general office facilities
and providing persons satisfactory to the Board of Trustees to serve as
officers of the Trust. For these services, FAS receives from each Fund a fee
computed and paid monthly at an annual rate of 0.20% of the Fund's average
daily net assets. Like the Adviser, FAS, in its sole discretion, may waive
all or any portion of its fees.
Pursuant to a Distribution Agreement with the Trust, Forum Financial
Services, Inc. ("FFSI") acts as distributor of the Fund's shares. FFSI acts
as the agent of the Trust in connection with the offering of shares of the
Fund. FFSI receives no compensation for its services under the Distribution
Agreement. FFSI may enter into arrangements with banks, broker-dealers or
other financial institutions ("Selected Dealers") through which investors may
purchase or redeem shares. FFSI may, at its own expense and from its own
resources, compensate certain persons who provide services in connection with
the sale or expected sale of shares of the Fund. Investors purchasing shares
of the Fund through another financial institution should read any materials
and information provided by the financial institution to acquaint themselves
with its procedures and any fees that it may charge.
FFSI and FAS are located at Two Portland Square, Portland, Maine 04101.
FFSI was incorporated under the laws of the State of Delaware on February 7,
1986. FFSI is a registered broker-dealer and investment adviser and is a
member of the National Association of Securities Dealers, Inc. FAS was
established on December 29, 1995 under the laws of the State of Delaware. As
of the date of this Prospectus FAS and FFSI provide management,
administration and distribution services to registered investment companies
and collective investment funds with assets of approximately $__ billion.
As of the date of this prospectus FAS, FFSI and Forum Financial Corp.,
the transfer agent of the Trust, were controlled by John Y. Keffer, president
and Chairman of the Trust.
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<PAGE>
On behalf of Index Portfolio, Core Trust has entered into an
Administration Agreement with FAS. For these services, FAS receives a fee at
an annual rate of __% of the Portfolio's average daily net assets.
On behalf of the Schroder Portfolios, Schroder Core has entered into an
administrative services contract with Schroder Advisors, 787 Seventh Avenue,
New York, New York 10019. Schroder Advisors is a wholly-owned subsidiary of
SCMI. For these services, Schroder Advisors receives an administrative
services fee at an annual rate of 0.15% of the Portfolio's average daily net
assets. In addition, Schroder Core and Schroder Advisors have entered into a
sub-administration agreement with FAS. Payment for FAS's services with
respect to the Schroder Portfolio is made by Schroder Advisors and is not a
separate expense of the Portfolio.
SHAREHOLDER SERVICING
Shareholder inquiries and communications concerning the Fund may be
directed to Forum Financial Corp. ("FFC"), the Fund's transfer agent. FFC
acts as the Fund's transfer agent and dividend disbursing agent. FFC
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. FFC also performs other transfer agency functions and acts as
dividend disbursing agent for the Trust. In addition, FFC performs portfolio
accounting services for the Fund, including determination of the Fund's net
asset value, pursuant to a separate agreement with the Trust. For its
services, FFC receives a fee at an annual rate of 0.25% of each Fund's
average daily net assets.
FFC 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"), FAS or
affiliates of FAS, who agree to comply with the terms of the Transfer Agency
Agreement. FFC may pay those agents for their services, but no such payment
will increase the Transfer Agent's compensation from the Trust.
FFC also is each Portfolio's transfer agent pursuant to Transfer Agency
Agreements between Schroder Core and FFC and Core Trust and FFC. FFC is
compensated for those services in the amount of $12,000 per year plus certain
interestholder account fees.
EXPENSES OF THE TRUST
The Funds (as well as the Portfolios) are obligated to pay for all of its
expenses, subject to FAS's obligation to reimburse the Trust for excess
expenses of the Funds. The Funds' expenses comprise Trust expenses
attributable to the Funds and expenses not attributable to any particular
portfolio of the Trust, which are allocated among the Funds and the
portfolios in proportion to their average net assets. Except Investors
Equity Fund, each Fund's expenses include the Fund's pro rata share of the
operating expenses of the Portfolio, which are borne indirectly by the Fund's
shareholders. A Fund's expenses include: interest charges; taxes; brokerage
fees and commissions; certain insurance premiums; applicable fees and
expenses
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<PAGE>
under the Trust's, Core Trust's or Schroder Core's contracts with Forum
Advisors, Norwest, SCMI, FAS, the Transfer Agent and any subcustodian; fees
of pricing, interest, dividend, credit and other reporting services; costs of
membership in trade associations; auditing, legal and compliance expenses;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to
existing shareholders; compensation of certain of the Trust's, Core Trust's
or Schroder's trustees, officers and employees and other personnel performing
services for the Trust, Core Trust or Schroder Core; and registration fees
and related expenses.
Forum Advisors, Norwest, SCMI, FAS 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.
PORTFOLIO TRANSACTIONS
Each investment adviser monitors the creditworthiness of counterparties
to the Funds' transactions and intends to enter into a transaction only when
it believes that the counterparty presents minimal credit risks and the
benefits from the transaction justify the attendant risks.
The investment advisers place orders for the purchase and sale of assets
they manage with brokers and dealers selected by and in the discretion of the
respective adviser. The investment advisers seek "best execution" for all
portfolio transactions, but a Fund may pay higher than the lowest available
commission rates when an investment adviser believes it is reasonable to do
so in light of the value of the brokerage and research services provided by
the broker effecting the transaction.
Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and this may cause higher brokerage expenses to accrue
to a Fund that invests in foreign securities than would be the case for
comparable transactions effected on U.S. securities exchanges.
Subject to the Funds' policy of obtaining the best price consistent with
quality of execution of transactions, each investment adviser may employ
broker-dealer affiliates of the investment adviser (collectively "Affiliated
Brokers") to effect brokerage transactions for the
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<PAGE>
Funds. The Fund's payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board, the Core Trust Board or the Schroder Core
Board, to provide that the commissions will not exceed the usual and
customary broker's commissions charged by unaffiliated brokers. No specific
portion of a Fund's brokerage will be directed to Affiliated Brokers and in
no event will a broker affiliated with the investment adviser directing the
transaction receive brokerage transactions in recognition of research
services provided to the adviser. The investment advisers may effect
transactions for the Funds (or the Portfolios) through brokers who sell Fund
shares. The Funds have no obligation to deal with any specific broker or
dealer in the execution of portfolio transactions.
Although Investors Equity Fund and the Portfolios do not currently engage
in directed brokerage arrangements to pay expenses, it may do so in the
future. These arrangements, whereby brokers executing a Fund's or
Portfolio's portfolio transactions would agree to pay designated expenses of
the Fund or Portfolio if brokerage commissions generated by the Fund
Portfolio reached certain levels, might reduce the Fund's or Portfolio's
expenses (and, indirectly, the Fund's expenses). As anticipated, these
arrangements would not materially increase the brokerage commissions paid by
the Fund or Portfolio.
6. PURCHASES AND REDEMPTIONS OF SHARES
GENERAL INFORMATION
Investments in a Fund may be made either by an investor directly or
through certain brokers and 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 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 days when the New York Stock Exchange is
closed, normally, New Year's Day, Dr. Martin Luther King Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas ("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 Business Day after the order
is accepted.
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.
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<PAGE>
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 a 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 following, 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 for investment has been cleared by the shareholder's
bank, which may take up to 15 calendar days. This delay may be avoided by
investing 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 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 Securities and Exchange Commission.
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 insure 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, the 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.
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 a Fund 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
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<PAGE>
application and to change information regarding a shareholder's account (such
as addresses), investors should request an Optional Services Form from the
Transfer Agent.
INITIAL PURCHASE OF SHARES
There is a $5,000 minimum for initial investments in any 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 above.
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 FFSI.
BY BANK WIRE. To make an initial investment in any Fund using the wire
system for transmittal of money among banks, an investor should first
telephone the Trust at (207) 879-0009 or 800-94FORUM (800-943-6786) to obtain
an account number. The investor should then instruct a bank to wire the
investor's money immediately to:
BankBoston
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.
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 (207) 879-0009 or 800-94FORUM (800-943-6786) 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 wishing to participate in this
program may
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<PAGE>
obtain the applicable forms from the Transfer Agent. 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 by check 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.
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 (207) 879-0009 or 800-94FORUM (800-943-6786) 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 also is required for instructions to change a
shareholder's record name or address, designated bank account
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<PAGE>
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.
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.
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 for each Fund as follows (net
asset value percentages are rounded to the nearest one-hundredth percent):
<TABLE>
<CAPTION>
Amount of Purchase Public Net Asset Dealers'
- ------------------ ------ --------- --------
Offering Price Value* Reallowance
-------------- ------ ------------
<S> <C> <C> <C>
less than $100,000.................. 4.00% 4.17% 3.50%
$100,000 but less than $200,000..... 3.50 3.63 3.10
$200,000 but less than $400,000..... 3.00 3.09 2.70
$400,000 but less than $600,000..... 2.50 2.56 2.25
$600,000 but less than $800,000..... 2.00 2.04 1.75
$800,000 but less than $1,000,000... 1.50 1.52 1.30
$1,000,000 and up................... 0.50 0.50 0.40
</TABLE>
* Rounded to the nearest one-hundredth percent.
FFSI'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, FFSI will
reallow discounts to selected brokers and dealers in the amounts indicated in
the table above. From time to time, however, FFSI may elect to reallow the
entire sales charge to selected brokers or dealers for all sales with respect
to which orders are placed with FFSI 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, FFSI 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
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<PAGE>
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 FFSI 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 FFSI has entered into
a share purchase agreement and which is acting on behalf of its fiduciary
customer accounts; (c) any registered investment adviser which is acting on
behalf of its fiduciary customer accounts and for which it provides
additional investment advisory services; (d) any broker-dealer with whom FFSI
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; (e)
directors and officers of the Trust; directors, officers and full-time
employees of the Adviser, FFSI, any of their affiliates or any organization
with which FFSI 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; (f)
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; (g) 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 (h) 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 a 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 2.50% rate applicable to a single
$450,000 purchase, rather than at the 4.0% 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.
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
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<PAGE>
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 any
other fund of the Trust or any other fund that participates in the exchange
program 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. 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, and the fund into which a shareholder is exchanging,
including minimum investment requirements. The Fund does not charge for
exchanges, 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.
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 instructions 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)
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and all certificates submitted for exchange must be endorsed by the
shareholder with signature guaranteed.
EXCHANGE BY TELEPHONE. Exchanges may be accomplished by telephone by any
shareholder that has elected telephone exchange privileges by calling the
Transfer Agent at (207) 879-0009 or 800-94FORUM (800-943-6786) 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.
RETIREMENT PROGRAMS
INDIVIDUAL RETIREMENT ACCOUNTS. A single 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.
EMPLOYEE BENEFIT PLANS. A Fund may be a suitable investment vehicle for
part of the assets held in various employee benefit plans, including 401(k)
plans, 403(b) plans and SARSEPs.
PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased and redeemed through certain broker-dealer 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 a 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.
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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 a Fund to be purchased and redeemed only through registered
broker-dealers, including the Fund's distributor.
7. DIVIDENDS AND TAX MATTERS
THE FUNDS
DIVIDENDS
Dividends of a Fund's net investment income are declared and paid
annually. Dividends of net capital gain, if any, realized by the Funds are
distributed annually.
Shareholders may have all dividends reinvested in additional shares of
the Fund in which they invest or received in cash. In addition, shareholders
may have dividends of net capital gain reinvested in additional shares of the
Fund in which they invest 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 a Fund.
All dividends will be reinvested at a 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
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 Fund should avoid all Federal income and
excise taxes.
Each Fund intends to elect, pursuant to Section 853 of the Code if the
Fund is eligible to do so, to permit shareholders to take a credit (or a
deduction) for foreign income taxes paid by the Fund. An investor should
include as gross income in its Federal income tax returns both cash dividends
received from a Fund and also the amount that the Fund advises is its pro
rata portion of foreign income taxes paid with respect to, or withheld from,
dividends and interest paid to the Fund from the Fund's foreign investments.
An investor would then be entitled, subject to certain
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limitations, to take a foreign tax credit against its Federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
Dividends paid by a Fund out of its net investment income (including any
realized net short-term capital gain) are taxable to shareholders as ordinary
income. Distributions by the Fund of realized net long-term capital gain 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 dividend or distribution received by a shareholder reduces the net
asset value of the shareholder's shares by the amount of the dividend or
distribution. To the extent that the income or gain comprising a dividend or
distribution were accrued by the Fund before the shareholder purchased the
shares, the dividend or distribution would be in effect a return of capital
to the shareholder. All dividends and distributions, including those that
operate as a return of capital, however, are taxable as described above to
the shareholder receiving them regardless of the length of time he may have
held shares prior to the dividend or distribution.
It is expected that a portion of a Fund's dividends to shareholders will
qualify for the dividends received deduction for corporations.
The Funds may be required by Federal law to withhold 31% of reportable
payments (which may include 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
Fund is correct and that the shareholder is not subject to backup
withholding.
Reports containing appropriate information with respect to the Federal
income tax status of dividends and distributions paid during the year by a
Fund will be mailed to shareholders shortly after the close of each year.
EFFECT OF FOREIGN TAXES. With respect to Funds that invest in foreign
securities, foreign governments may impose taxes on the Fund or Portfolio and
its investments, which generally reduce the Fund's income. However, an
offsetting tax credit or deduction may be available to you. If so, your tax
statement will show more taxable income or capital gain than was actually
distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If a Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of
foreign income taxes paid by the Portfolio. If a Fund does make such an
election, its shareholders would include as gross income in their federal
income tax returns both: (i) distributions received from the Fund; and (ii)
the amount that the Fund advises is their pro rata portion of foreign income
taxes paid with respect to or withheld from, dividends and interest paid to
the Fund or Portfolio from its foreign investments.
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Shareholders then would be entitled, subject to certain limitations, to take
a foreign tax credit against their federal income tax liability for the
amount of such foreign taxes or else to deduct such foreign taxes as an
itemized deduction from gross income.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Fund 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.
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 gain and losses of
a Portfolio are deemed to have been "passed through" to the Fund in
proportion to its holdings of the Portfolio, regardless of whether such
interest, dividends or gain have been distributed by the Portfolio or losses
have been realized by the Portfolio. Investment income received by a Fund
from sources within foreign countries may be subject to foreign income or
other taxes, with respect to which shareholders may be entitled to claim a
credit or deduction. See "The Funds - Taxes" immediately above.
8. OTHER INFORMATION
PERFORMANCE INFORMATION
Each Fund's 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 a 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. 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. A Fund also may advertise its total return over
different periods of time 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 a Fund's 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.
Each Fund's 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 a Fund may be compared to recognized indices of market performance. The
comparative material found in a Fund's advertisements, sales literature or
reports
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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 FAS 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 a 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 or
Portfolio 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 Core Trust Board or the Schroder Core Board, as applicable, or
pursuant to procedures approved by the Board, the Core Trust Board, or the
Schroder Core Board, as applicable.
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 Delaware business trust under the name
Forum Funds. 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.
Generally, shares will be voted in the aggregate without reference to a
particular portfolio, except if the matter affects only one portfolio or
voting by portfolio or class is required by law, in which case shares will be
voted separately by portfolio. 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
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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 the
shares of the Fund. Accordingly, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote.
CORE & GATEWAY STRUCTURE
THE PORTFOLIOS. Each of S&P 500 Index Fund, Small Cap Fund,
International Equity Fund and Emerging Markets Fund seeks to achieve its
investment objective by investing all of its investable assets in a
Portfolio, which has substantially the same investment objective and policies
as the Fund. Accordingly, the Portfolios directly acquire their own
securities and the Funds acquire an indirect interest in those securities.
Index Portfolio is a separate series of Core Trust, a business Trust
organized under the laws of the State of Delaware in September 1994. The
Schroder Portfolios are a separate series of Schroder Core, a business trust
organized under the laws of the State of Delaware in September 1995. Each of
Core Trust and Schroder Core is registered under the Act as an open-end
management investment company. Core Trust currently has __ separate
portfolios and Schroder Core currently has four separate portfolios. The
assets of each Portfolio, belong only to, and the liabilities of each
Portfolio are borne solely by, the Portfolio and no other portfolio of the
respective trust.
The investment objective and fundamental investment policies of the Funds
and the Portfolios can be changed only with shareholder approval. See
"Investment Objective and Policies" and "Management" for a complete
description of the Portfolios' investment objective, policies, restrictions,
management, and expenses.
The Funds' investment in the Portfolios is in the form of a
non-transferable beneficial interest. As of the date of this Prospectus,
each of the Portfolios has one other investor, another open-end management
investment company, that invests exclusively in the Portfolio. The Portfolios
may permit other investment companies or institutional investors to invest in
them. All investors in a Portfolio will invest on the same terms and
conditions as the Fund 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 Act. Each investor in a Portfolio will be entitled to vote
in proportion to its relative beneficial interest in the Portfolio. On most
issues subject to a vote of investors, as required by the Act and other
applicable law, a Fund will solicit proxies from shareholders of the Fund and
will vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. If there are other investors in a Portfolio, there can be
no assurance that any issue that receives a majority of the votes cast by
Fund shareholders will receive a majority of votes cast by all investors in
the Portfolio; indeed, if other investors hold a majority interest in a
Portfolio, they could hold have voting control of the Portfolio.
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The Portfolios will not sell their shares directly to members of the
general public. Another investor in a Portfolio, such as an investment
company, that might sell its shares to members of the general public would
not be required to sell its shares at the same public offering price as the
Fund, and could have different advisory and other fees and expenses than the
Fund. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in a
Portfolio. There is currently one other investment company that invests
exclusively in each Portfolio and offers its shares to members of the general
public. Information regarding the funds that invest in the Schroder
Portfolios and any such funds in the future will be available from Schroder
Core by calling Forum Financial Corp. at (207) 879-8903. Information
regarding the fund that invests in Index Portfolio and any such funds in the
future will be available from Core Trust by calling Forum Financial Corp. at
(207) 879-1900.
Under the Federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Both Core Trust and Schroder
Core, their respective Trustees and certain of their officers are required to
sign the registration statement of the Trust and the registration statements
of certain other publicly-offered investors in the Portfolio. In addition,
under the Federal securities laws, Core Trust and Schroder Core could be
liable for a misstatements or omissions of a material fact in any proxy
soliciting material of a publicly-offered investor in Core Trust or Schroder
Core, including the Fund. Under the Trust Instrument for Core Trust, each
investor in Index Portfolio, including the Trust, indemnifies Core Trust and
its Trustees and officers ("Core Trust Indemnitees") against certain claims.
Likewise, under the Trust Instrument for the Schroder Core, each investor in
the Schroder Portfolios, including the Trust, indemnifies Schroder Core and
its Trustees and officers ("Schroder Core Indemnitees") against certain
claims. Indemnified claims are those brought against Core Trust Indemnitees
or Schroder Core Indemnitees but based on a misstatement or omission of a
material fact in the investor's registration statement or proxy materials,
except to the extent such claim is based on a misstatement or omission of a
material fact relating to information about Core Trust or Schroder Core in
the investor's registration statement or proxy materials that was supplied to
the investor by Core Trust or Schroder Core. Similarly, Core Trust and
Schroder Core indemnify each investor in their respective Portfolios,
including the Funds, for any claims brought against the investor with respect
to the investor's registration statement or proxy materials, to the extent
the claim is based on a misstatement or omission of a material fact relating
to information about Core Trust or Schroder Core that is supplied to the
investor by Core Trust or Schroder Core. In addition, each registered
investment company investor in Index Portfolio or in the Schroder Portfolios
indemnifies each Core Trust Indemnitee or Schroder Core Indemnitee,
respectively, against any claim based on a misstatement or omission of a
material fact relating to information about a series of the registered
investment company that did not invest in the Core Trust or Schroder Core.
The purpose of these cross-indemnity provisions is principally to limit the
liability of each of Core Trust and Schroder Core to information that it
knows or should know and can control. With respect to other prospectuses and
other offering documents and proxy materials of investors in Core Trust or in
Schroder Core, Core Trust's and Schroder Core's liability is similarly
limited to information about and supplied by Core Trust or Schroder Core,
respectively.
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CERTAIN RISKS OF INVESTING IN THE PORTFOLIOS. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a Portfolio had a large investor other
than the Fund that redeemed its interest in the 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. A Fund might withdraw, for example, if there were
other investors in a Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the
Board. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by the Portfolio. That
distribution could result in a less diversified portfolio of investments for
the Fund and could affect adversely the liquidity of the Fund's portfolio.
If the Fund decided to convert those securities to cash, it usually would
incur brokerage fees or other transaction costs. If a Fund withdrew its
investment from a 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 Norwest or SCMI, as applicable, or
another investment adviser 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 a Fund to find a suitable
replacement investment, in the event that Norwest or SCMI did not manage the
Fund's assets directly, could have a significant impact on shareholders of
the Fund.
Each investor in a Portfolio, including a Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust or
Schroder Core, as applicable. The risk to an investor in a Portfolio of
incurring financial loss on account of such liability, however, would be
limited to circumstances in which the Portfolio was unable to meet its
obligations. Upon liquidation of a Portfolio, investors, including the Fund,
would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
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[LOGO]
SHAREHOLDER INFORMATION
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
207-879-0001 (IN PORTLAND, ME)
800-94FORUM (ELSEWHERE)
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TABLE OF CONTENTS
Page
Prospectus Summary .......................... 2
Financial Highlights ........................
Investment Objective
And Policies ..............................
Additional Investment Policies
Risk Considerations .......................
Management ..................................
Purchases And Redemptions
Of Shares .................................
Dividends And Tax Matters ...................
Other Information ...........................
Account Application
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FORUM FUNDS
DAILY ASSETS TREASURY FUND
DAILY ASSETS TREASURY FUND II
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
DAILY ASSETS TAXSAVER FUND
Account Information and
Shareholder Servicing: Distributor:
Forum Financial Corp. Forum Financial Services, Inc.
P.O. Box 446 Two Portland Square
Portland, Maine 04112 Portland, Maine 04101
(207) 879-0001 (207) 879-1900
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 15, 1997
This Statement of Additional Information supplements the Prospectuses dated
November 15, 1997 offering Investor Shares, Institutional Service Shares and
Institutional Shares of Daily Assets Treasury Fund, Daily Assets Treasury Fund
II, Daily Assets Government Fund, Daily Assets Cash Fund and Daily Assets
TaxSaver Fund, five portfolios of the Trust, and should be read only in
conjunction with the applicable Prospectus, a copy of which may be obtained by
an investor without charge by contacting the Trust's Distributor at the address
listed above.
TABLE OF CONTENTS Page
----
1. General 2
2. Investment Policies 4
3. Investment Limitations 9
4. Investment by Financial Institutions 13
5. Performance Data 15
6. Management 18
7. Determination of Net Asset Value 28
8. Portfolio Transactions 29
9. Additional Purchase and
Redemption Information 29
10. Taxation 31
11. Other Information 32
12. Financial Statements 36
Appendix A - Description of Securities Ratings
Appendix B - Performance Information
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. GENERAL
THE TRUST
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. Forum Funds, Inc. was incorporated
on March 24, 1980 and assumed the name of Forum Funds, Inc. on March 16, 1987.
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 separate
classes of shares within each series. The Trust currently offers shares of
seventeen series and has three series that have not commenced operation as of
the date of this SAI. The series of the Trust are as follows:
Daily Assets Treasury Fund Austin Global Equity Fund
Daily Assets Treasury Fund II Oak Hall Equity Fund
Daily Assets Government Fund
Daily Assets Cash Fund Quadra International Equity Fund
Daily Assets TaxSaver Fund Quadra Limited Maturity Treasury Fund
Quadra Opportunistic Bond Fund
Investors Bond Fund Quadra Value Equity Fund
TaxSaver Bond Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund
Payson Value Fund
Payson Balanced Fund.
DEFINITIONS
As used in this Statement of Additional Information, the following terms shall
have the meanings listed:
"Adviser" means Forum Advisors or Linden, as applicable.
"Board" means the Board of Trustees of Forum Funds.
"Core Trust" means Core Trust (Delaware), a Delaware business trust.
"Core Trust Board" means the Board of Trustees of Core Trust (Delaware).
"FAS" means Forum Administrative Services, LLC
"FFC" means Forum Financial Corp.
"FFSI" means Forum Financial Services, Inc.
"Forum Advisors" means Forum Advisors, Inc.
"Fund" means Daily Assets Treasury Fund, Daily Assets Treasury Fund II, Daily
Assets Government Fund, Daily Assets Cash Fund or Daily Assets TaxSaver Fund.
"Fund Business Day" has the meaning ascribed thereto in the current Prospectus
of the Funds.
"Linden" means Linden Asset Management, Inc.
"NRSRO" means a nationally recognized statistical rating organization.
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<PAGE>
"Portfolio" means Treasury Portfolio, Treasury Cash Portfolio, Government Cash
Portfolio, Cash Portfolio or Municipal Cash Portfolio, each a portfolio of Core
Trust.
"SAI" means this Statement of Additional Information.
"SEC" means the U.S. Securities and Exchange Commission.
"Subadviser" means Forum Advisors or Linden, as applicable, when acting as
investment subadviser to a Portfolio.
"Treasury Securities" has the meaning ascribed thereto by the current Prospectus
of the Funds.
"Trust" means Forum Funds, a Delaware business trust.
"U.S. Government Securities" has the meaning ascribed thereto by the current
Prospectus of the Funds.
"1940 Act" means the Investment Company Act of 1940, as amended.
2. INVESTMENT POLICIES
Each Fund currently seeks to achieve its investment objective by investing all
of its investable assets in its corresponding Portfolio. The corresponding
Portfolios of Daily Assets Treasury Fund, Daily Assets Treasury Fund II, Daily
Assets Government Fund, Daily Assets Cash Fund and Daily Assets TaxSaver Fund,
respectively, are Treasury Portfolio, Treasury Cash Portfolio, Government Cash
Portfolio, Cash Portfolio and Municipal Cash Portfolio. Following is
information pertaining to the investment policies of the Portfolios, which
supplements the investment policy information contained in the Funds'
Prospectuses.
Each Fund has an investment policy that allows it to invest all of its
investable assets in its corresponding Portfolio. All other investment policies
of each Fund and its corresponding Portfolio are identical. Therefore, although
this and the following sections provide supplemental information regarding the
investment policies of the Portfolios (and the responsibilities of the Core
Trust Board), they apply equally to the investment policies of the Funds (and
the responsibilities of the Board). Information with respect to Daily Assets
Treasury Fund for periods prior to December 5, 1995 (for instance, investment
advisory fees paid), the date that Fund began investing in Treasury Portfolio,
reflects information with respect to the Fund and the Fund's direct investment
in securities.
Debt securities with longer maturities tend to produce higher yields and are
generally subject to greater price movements than obligations with shorter
maturities. An increase in interest rates will generally reduce the market
value of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments.
Each Portfolio invests at least 95% of its total assets in securities in the
highest rating category (as determined pursuant to Rule 2a-7 under the 1940
Act).
Government Cash Portfolio and Cash Portfolio currently are prohibited from
purchasing any security issued by the Federal Home Loan Mortgage Corporation.
This does not prohibit the Portfolios from entering into repurchase agreements
collateralized with securities issued by the Federal Home Loan Mortgage
Corporation.
Except for U.S. Government Securities and to the limited extent otherwise
permitted by Rule 2a-7 under the 1940 Act, the Portfolios may not invest more
than five percent of their total assets in (i) the securities of any one issuer
or (ii) securities that are rated (or are issued by an issuer with comparable
outstanding short-term debt that is rated) in the second highest rating category
or are unrated and determined by an Adviser to be of comparable quality.
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RATINGS AS INVESTMENT CRITERIA
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P") and other NRSROs are private services that provide ratings of the credit
quality of debt obligations. A description of the higher quality ratings
assigned to debt securities by several NRSROs is included in Appendix A to this
SAI. The Portfolios use these ratings in determining whether to purchase, sell
or hold a security. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, securities with the
same maturity, interest rate and rating may have different market prices.
Subsequent to its purchase by a Portfolio, an issue of securities may cease to
be rated or its rating may be reduced. A Portfolio's Adviser, and in certain
cases the Core Trust Board, will consider such an event in determining whether
the Portfolio should continue to hold the obligation. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to developments and events, so that
an issuer's current financial condition may be better or worse than the rating
indicates.
SMALL BUSINESS ADMINISTRATION SECURITIES
Each Portfolio (other than Municipal Cash Portfolio) may purchase securities
issued by the Small Business Administration ("SBA"). SBA securities are
variable rate securities that carry the full faith and credit of the United
States Government, and generally have an interest rate that resets monthly or
quarterly based on a spread to the Prime rate. SBA securities generally have
maturities at issue of up to 25 years. No Portfolio may purchase an SBA
security if, immediately after the purchase, (i) the Portfolio would have more
than 15% of its net assets invested in SBA securities or (ii) either the
unamortized premium or unaccreted discount on SBA securities held by the
Portfolio divided by the sum of the premium or discount securities' par amount,
respectively, would exceed 2.5% (0.025).
ADJUSTABLE RATE MORTGAGE BACKED SECURITIES
The Portfolios (other than Treasury Portfolio) may purchase adjustable rate
mortgage backed or other asset backed securities (such as SBA securities) that
are U.S. Government Securities. Treasury Cash Portfolio may purchase mortgage
backed or asset backed securities that are U.S. Treasury Securities. These
types of securities directly or indirectly represent a participation in, or are
secured by and payable from, adjustable rate mortgages or other loans which may
be secured by real estate or other assets. Unlike traditional debt instruments,
payments on these securities include both interest and a partial payment of
principal. Prepayments of the principal of underlying loans may shorten the
effective maturities of these securities. Some adjustable rate securities (or
the underlying loans) are subject to caps or floors that limit the maximum
change in interest rate during a specified period or over the life of the
security.
Adjustable rate mortgage backed securities ("MBSs") are securities that have
interest rates that are reset at periodic intervals, usually by reference to
some interest rate index or market interest rate. MBSs represent interests in
pools of mortgages made by lenders such as commercial banks, savings
associations, mortgage bankers and mortgage brokers and may be issued by
governmental or government-related entities or by non-governmental entities such
as commercial banks, savings associations, mortgage bankers and other secondary
market issuers.
MBSs differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates in that MBSs provide periodic payments which
consist of interest and, in most cases, principal. In effect, these payments
are a "pass-through" of the periodic payments and optional prepayments made by
the individual borrowers on their mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments to holders of MBSs
are caused by prepayments resulting from the sale of the underlying property or
the refinancing or foreclosure of the underlying mortgage loans. Such
prepayments may significantly shorten the effective maturities of MBSs, and
occur more often during periods of declining interest rates.
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Although the rate adjustment feature of MBSs may act as a buffer to reduce sharp
changes in the value of MBSs, these securities are still subject to changes in
value based on changes in market interest rates or changes in the issuer's
creditworthiness. Because the interest rate is reset only periodically, changes
in the interest rate on MBSs may lag behind changes in prevailing market
interest rates. Also, some MBSs (or the underlying mortgages) are subject to
caps or floors that limit the maximum change in interest rate during a specified
period or over the life of the security.
During periods of declining interest rates, income to the Portfolios derived
from mortgages which are not prepaid will decrease as the coupon rate resets
along with the decline in interest rates in contrast to the income on fixed-rate
mortgages, which will remain constant. At times, some of the MBSs in which the
Portfolios will invest will have higher-than-market interest rates, and will
therefore be purchased at a premium above their par value. Unscheduled
prepayments, which are made at par, will cause the Portfolios to suffer a loss
equal to the unamortized premium, if any.
During periods of rising interest rates, changes in the coupon rates of the
mortgages underlying the Portfolios' investments may lag behind changes in
market interest rates. This may result in a slightly lower value until the
coupons reset to market rates. Many MBSs in the Portfolios' portfolios will
have "caps" that 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
fluctuation in interest rates above these levels could cause these securities to
"cap out" and to behave more like fixed-rate debt securities.
The Portfolios may purchase collateralized mortgage obligations ("CMOs"), which
are collateralized by MBSs or by pools of conventional mortgages. CMOs are
typically structured with a number of classes or series that have different
maturities and are generally retired in sequence. Each class of bonds receives
periodic interest payments according to the coupon rate on the bonds. However,
all monthly principal payments and any prepayments from the collateral pool are
paid first to the "Class 1" bondholders. The principal payments are such that
the Class 1 bonds will be completely repaid no later than, for example, five
years after the offering date. Thereafter, all payments of principal are
allocated to the next most senior class of bonds until that class of bonds has
been fully repaid. Although full payoff of each class of bonds is contractually
required by a certain date, any or all classes of bonds may be paid off sooner
than expected because of an acceleration in pre-payments of the obligations
comprising the collateral pool.
Since the inception of the mortgage-related pass-through security in 1970, the
market for these securities has expanded considerably. 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.
Governmental or private entities may create new types of MBSs in response to
changes in the market or changes in government regulation of such securities.
As new types of these securities are developed and offered to investors, the
Adviser may, consistent with the investment objective and policies of a
Portfolio, consider making investments in such new types of securities.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES
Each Portfolio may purchase securities on a when-issued or delayed delivery
basis. In those cases, the purchase price and the interest rate payable on the
securities are fixed on the transaction date and delivery and payment may take
place a month or more after the date of the transaction. At the time a
Portfolio makes the commitment to purchase securities on a when-issued or
delayed delivery basis, the Portfolio will record the transactions as a purchase
and thereafter reflect the value each day of such securities in determining its
net asset value. If a Portfolio chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio obligation, incur a gain or loss due to market
fluctuation. Failure of an issuer to deliver the security may result in the
Portfolio incurring a loss or missing an opportunity to make an alternative
investment. When a Portfolio agrees to purchase a security on a when-issued or
delayed delivery basis, its
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custodian will set aside and maintain in a segregated account cash, U.S.
Government Securities or other liquid assets with a market value at all times at
least equal to the amount of its commitment.
Core Trust's custodian will set aside and maintain in a segregated account cash
and securities with a market value at all times equal to the amount of each
Portfolio's forward commitment obligations.
ILLIQUID SECURITIES
Each Portfolio may invest up to 10% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means repurchase agreements not
entitling the holder to payment of principal within seven days and securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market.
The Core Trust Board has ultimate responsibility for determining whether
specific securities are liquid or illiquid. The Core Trust Board has delegated
the function of making day-to-day determinations of liquidity to the Advisers
and, with respect to certain types of restricted securities which may be deemed
to be liquid, has adopted guidelines to be followed by the Advisers. The
Advisers take into account a number of factors in reaching liquidity decisions,
including but not limited to (1) the frequency of trades and quotations for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; (4) the nature of the marketplace
trades, including the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer; (5) whether the security is
registered; and (6) if the security is not traded in the United States, whether
it can be freely traded in a liquid foreign securities market. The Advisers
monitor the liquidity of the securities in each Portfolio's portfolio and report
periodically to the Core Trust Board.
Certificates of deposit and other fixed time deposits that carry an early
withdrawal penalty or mature in greater than seven days are treated by the
Portfolio as illiquid securities if there is no readily available market for the
instrument.
REPURCHASE AGREEMENTS AND SECURITIES LENDING
In order to obtain additional income, the Portfolios may from time to time lend
securities from their portfolio to brokers, dealers and financial institutions.
Securities loans must be callable at any time and must be continuously secured
by collateral from the borrower in the form of cash or U.S. Government
Securities. The Portfolios receive fees in respect of securities loans from the
borrower or interest from investing the cash collateral. The Portfolios may pay
fees to arrange the loans. As a fundamental policy, Treasury Portfolio, and as
a nonfundamental policy, the other Portfolios, may not lend portfolio securities
in an amount greater than 33 1/3% of the value of their total assets.
In connection with entering into repurchase agreements and securities loans, the
Portfolios require continual maintenance by Core Trust's custodian of the market
value of the underlying collateral in amounts equal to, or in excess of, the
repurchase price plus the transaction costs (including loss of interest) that
the Portfolios could expect to incur upon liquidation of the collateral if the
counterparty defaults. The Portfolios' use of securities lending entails
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 Portfolio might suffer a loss. Failure by the other party to
deliver a security purchased by a Portfolio may result in a missed opportunity
to make an alternative investment. The Adviser monitors the creditworthiness of
counterparties to these transactions under the Core Trust Board's general
supervision and pursuant to specific Core Trust Board adopted procedures and
intend to enter into these transactions only when they believe the
counterparties present minimal credit risks and the income to be earned from the
transaction justifies the attendant risks.
VARIABLE AND FLOATING RATE SECURITIES
The yield of variable and floating rate securities varies in relation to changes
in specific money market rates, such as the Prime Rate. A "variable" interest
rate adjusts at predetermined intervals (for example, daily, weekly or
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monthly), while a "floating" interest rate adjusts whenever a specified
benchmark rate (such as the bank prime lending rate) changes. These changes are
reflected in adjustments to the yields of the variable and floating rate
securities, and different securities may have different adjustment rates.
Accordingly, as interest rates increase or decrease, the capital appreciation or
depreciation may be less on these obligations than for fixed rate obligations.
To the extent that the Portfolios invest in long-term variable or floating rate
securities, the Adviser believes that the Portfolios may be able to take
advantage of the higher yield that is usually paid on long-term securities.
Cash Portfolio also may purchase variable and floating rate master notes of
corporations, which are unsecured obligations redeemable upon notice that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. These obligations include
master demand notes that permit investment of fluctuating amounts at varying
rates of interest pursuant to direct arrangement with the issuer of the
instrument. The issuer of these obligations often has the right, after a given
period, to prepay their outstanding principal amount of the obligations upon a
specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations.
To the extent a demand note does not have a seven day or shorter demand feature
and there is no readily available market for the obligation, it is treated as an
illiquid security.
INVESTMENT COMPANY SECURITIES
In connection with managing their cash positions, the Portfolios may invest in
the securities of other investment companies within the limits proscribed by the
1940 Act. Under normal circumstances, each Portfolio intends to invest less
than 5% of the value of its net assets in the securities of other investment
companies. In addition to a Portfolio's expenses (including the various fees),
as a shareholder in another investment company, a Portfolio would bear its pro
rata portion of the other investment company's expenses (including fees).
ZERO-COUPON SECURITIES
All zero-coupon securities in which the Portfolios invest will have a maturity
of less than 13 months.
3. INVESTMENT LIMITATIONS
Fundamental investment limitations of a Fund or of a Portfolio cannot be changed
without the affirmative vote of the lesser of (i) more than 50% of the
outstanding interests of the respective Fund or Portfolio or (ii) 67% of the
shares of the Fund or Portfolio present or represented at a shareholders or
interestholders meeting at which the holders of more than 50% of the outstanding
interests of the Fund or Portfolio are present or represented.
Except as required by the 1940 Act, if a percentage restriction on investment or
utilization of assets is adhered to at the time an investment is made, a later
change in percentage resulting from a change in the market values of a
Portfolio's assets, the change in status of a security or purchases and
redemptions of shares will not be considered a violation of the limitation.
Each Fund has adopted the same fundamental and nonfundamental investment
limitations as its corresponding Portfolio. In addition, the Portfolios and the
Funds have adopted a fundamental policy which provides that, notwithstanding any
other investment policy or restriction (whether fundamental), the Portfolio or
Fund, as applicable, may invest all of its assets in the securities of a single
pooled investment fund having substantially the same investment objectives,
policies and restrictions as the Fund or Portfolio, as applicable.
DAILY ASSETS TREASURY FUND/TREASURY PORTFOLIO
Treasury Portfolio has adopted the following fundamental investment limitations
which are in addition to those contained in the Prospectuses of Daily Assets
Treasury Fund and which may not be changed without shareholder approval. The
Portfolio may not:
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(1) With respect to 75% of its assets, purchase securities, other than U.S.
Government Securities, of any one issuer if more than 5% of the value of
the Portfolio's total assets would at the time of purchase be invested in
any one issuer.
(2) Purchase securities, other than U.S. Government Securities, if more than
25% of the value of the Portfolio's total assets would be invested in
securities of issuers conducting their principal business activity in the
same industry, provided that consumer finance companies and industrial
finance companies are considered to be separate industries and that there
is no limit on the purchase of the securities of domestic commercial
banks.
(3) Act as an underwriter of securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, the
Portfolio may be deemed to be an underwriter for purposes of the
Securities Act of 1933.
(4) Purchase or sell real estate or any interest therein, except that the
Portfolio may invest in debt obligations secured by real estate or
interests therein or issued by companies that invest in real estate or
interests therein.
(5) Purchase or sell physical commodities or contracts relating to physical
commodities, provided that currencies and currency-related contracts will
not be deemed to be physical commodities.
(6) Borrow money, except for temporary or emergency purposes (including the
meeting of redemption requests). Total borrowings may not exceed 33 1/3%
of the Portfolio's total assets and borrowing for purposes other than
meeting redemptions may not exceed 5% of the value of each the Portfolio's
total assets. Outstanding borrowings in excess of 5% of the value of the
Portfolio's total assets must be repaid before any subsequent investments
are made by the Portfolio.
(7) Issue senior securities except pursuant to Section 18 of the 1940 Act and
except that the Portfolio may borrow money subject to investment
limitations specified in the Portfolio's Prospectus.
(8) Make loans, except that the Portfolio may (i) purchase debt securities
which are otherwise permissible investments, (ii) enter into repurchase
agreements and (iii) lend portfolio securities.
(9) Purchase or sell real property (including limited partnership interests,
but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in real
estate.)
(10) Pledge, mortgage or hypothecate its assets, except to secure permitted
indebtedness. Collateralized loans of securities are not deemed to be
pledges or hypothecations for this purpose.
(11) Write put and call options.
(12) Invest for the purpose of exercising control over any person.
(13) Purchase restricted securities.
Daily Assets Treasury Portfolio has adopted the following nonfundamental
investment limitations that may be changed by the Core Trust Board without
shareholder approval. The Portfolio may not:
(a) Purchase securities having voting rights, except the Portfolio may invest
in securities of other investment companies to the extent permitted by the
1940 Act.
(b) Purchase securities on margin, or make short sales of securities, except
for the use of short-term credit necessary for the clearance of purchases
and sales of portfolio securities.
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(c) Invest in securities (other than fully-collateralized debt obligations)
issued by companies that have conducted continuous operations for less
than three years, including the operations of predecessors, unless
guaranteed as to principal and interest by an issuer in whose securities
the Portfolio could invest.
(d) Invest in or hold securities of any issuer if officers and Trustees of the
Trust or the Adviser, individually owning beneficially more than 1/2 of 1%
of the securities of the issuer, in the aggregate own more than 5% of the
issuer's securities.
(e) Invest in interests in oil or gas or interests in other mineral
exploration or development programs.
DAILY ASSETS TREASURY FUND II, DAILY ASSETS GOVERNMENT FUND, DAILY ASSETS CASH
FUND, DAILY ASSETS TAXSAVER FUND/TREASURY CASH PORTFOLIO, GOVERNMENT CASH
PORTFOLIO, CASH PORTFOLIO, MUNICIPAL CASH PORTFOLIO
Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal
Cash Portfolio have adopted the following fundamental investment limitations
which are in addition to those contained in the Prospectuses offering Daily
Assets Treasury Fund II, Daily Assets Government Fund, Daily Assets Cash Fund
and Daily Assets TaxSaver Fund and which may not be changed without shareholder
approval. Each Portfolio may not:
(1) With respect to 75% of its assets, purchase a security other than a U.S.
Government Security (or, in the case of Municipal cash Portfolio, other
than a security of an investment company) if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of a
single issuer.
(2) Purchase securities if, immediately after the purchase, more than 25% of
the value of the Portfolio's total assets would be invested in the
securities of issuers having their principal business activities in the
same industry; provided, however, that there is no limit on investments in
U.S. Government Securities.
(3) Underwrite securities of other issuers, except to the extent that the
Portfolio may be considered to be acting as an underwriter in connection
with the disposition of portfolio securities.
(4) Purchase or sell real estate or any interest therein, except that the
Portfolio may invest in debt obligations secured by real estate or
interests therein or issued by companies that invest in real estate or
interests therein.
(5) Purchase or sell physical commodities or contracts relating to physical
commodities, provided that currencies and currency-related contracts will
not be deemed to be physical commodities.
(6) Borrow money, except for temporary or emergency purposes (including the
meeting of redemption requests) and except for entering into reverse
repurchase agreements, provided that borrowings do not exceed 33 1/3% of
the value of the Portfolio's total assets.
(7) Issue senior securities except as appropriate to evidence indebtedness
that the Portfolio is permitted to incur, and provided that the Portfolio
may issue shares of additional series or classes that the Trustees may
establish.
(8) Make loans except for loans of portfolio securities, through the use of
repurchase agreements, and through the purchase of debt securities that
are otherwise permitted investments.
(9) With respect to Government Cash Portfolio, purchase or hold any security
that (i) a Federally chartered savings association may not invest in,
sell, redeem, hold or otherwise deal pursuant to law or regulation,
without limit as to percentage of the association's assets and (ii)
pursuant to 12 C.F.R. Section 566.1 would cause shares of the Portfolio
not to be deemed to be short term liquid assets when owned by Federally
chartered savings associations.
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For purposes of limitation (2): (i) loan participations are considered to be
issued by both the issuing bank and the underlying corporate borrower; (ii)
utility companies are divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (iii) financial service companies will be classified according to
the end users of their services, for example, automobile finance, bank finance
and diversified finance will each be considered a separate industry.
Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal
Cash Portfolio have adopted the following nonfundamental investment limitations
that may be changed by the Core Trust Board without shareholder approval. Each
Portfolio may not:
(a) With respect to 100% of its assets, purchase a security other than a U.S.
Government Security if, as a result, more than 5% of the Portfolio's total
assets would be invested in the securities of a single issuer, unless the
investment is permitted by Rule 2a-7 under the 1940 Act.
(b) Purchase securities for investment while any borrowing equaling 5% or more
of the Portfolio's total assets is outstanding; and if at any time the
Portfolio's borrowings exceed the Portfolio's investment limitations due
to a decline in net assets, such borrowings will be promptly (within three
days) reduced to the extent necessary to comply with the limitations.
Borrowing for purposes other than meeting redemption requests will not
exceed 5% of the value of the Portfolio's total assets.
(c) Purchase securities that have voting rights, except the Portfolio may
invest in securities of other investment companies to the extent permitted
by the 1940 Act.
(d) Purchase securities on margin, or make short sales of securities, except
for the use of short-term credit necessary for the clearance of purchases
and sales of portfolio securities.
(e) Invest in securities (other than fully-collateralized debt obligations)
issued by companies that have conducted continuous operations for less
than three years, including the operations of predecessors (unless
guaranteed as to principal and interest by an issuer in whose securities
the Portfolio could invest), if as a result, more than 5% of the value of
the Portfolio's total assets would be so invested.
(f) Invest in oil, gas or other mineral exploration or development programs,
or leases, or in real estate limited partnerships; provided that the
Portfolio may invest in securities issued by companies engaged in such
activities.
(g) Acquire securities or invest in repurchase agreements with respect to any
securities if, as a result, more than 10% of the Portfolio's net assets
(taken at current value) would be invested in repurchase agreements not
entitling the holder to payment of principal within seven days and in
securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
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4. INVESTMENTS BY FINANCIAL INSTITUTIONS
INVESTMENT BY SHAREHOLDERS THAT ARE BANKS - DAILY ASSETS GOVERNMENT FUND
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 (the "Guidelines"). In the event that the Guidelines are revised,
the Portfolio's portfolio will be modified accordingly, including by disposing
of portfolio securities or other instruments that no longer qualify under the
Guidelines. 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. If the Portfolio's portfolio includes any instruments that would
be subject to a restriction as to amount held by a National bank, investment in
the Portfolio may be limited.
The Guidelines provide that shares of an investment fund are generally assigned
to the risk-weight category applicable to the highest risk-weighted security or
instrument that the fund is permitted to hold. Accordingly, Portfolio shares
should qualify for a 20% risk weighting under the Guidelines. The Guidelines
also provide that, in the case of an investment fund whose shares should qualify
for a risk weighting below 100% due to limitations on the assets which it is
permitted to hold, bank examiners may review the treatment of the shares to
ensure that they have been assigned an appropriate risk-weight. In this
connection, the Guidelines provide that, regardless of the composition of an
investment fund's assets, shares of a fund may be assigned to the 100% risk-
weight category if it is determined that the fund engages in activities that
appear to be speculative in nature or has any other characteristics that are
inconsistent with a lower risk weighting. The Adviser has no reason to believe
that such a determination would be made with respect to the Portfolio. Their
are various subjective criteria for making this determination and, therefore, it
is not possible to provide any assurance as to how Portfolio shares will be
evaluated by bank examiners.
Before acquiring Fund shares, prospective investors that are banks or bank
holding companies, particularly those that are organized under the laws of any
country other than the United States or of any state, territory or other
political subdivision of the United States, and prospective investors that are
U.S. branches and agencies of foreign banks or Edge Corporations, should consult
all applicable laws, regulations and policies, as well as appropriate regulatory
bodies, to confirm that an investment in Fund Shares is permissible and in
compliance with any applicable investment or other limits.
Fund Shares held by National banks are generally required to be revalued
periodically and reported at the lower of cost or market value. Such shares may
also be subject to special regulatory reporting, accounting and tax treatment.
In addition, a bank may be required to obtain specific approval from its board
of directors before acquiring Fund shares, and thereafter may be required to
review its investment in a Fund for the purpose of verifying compliance with
applicable Federal banking laws, regulations and policies.
National banks generally must review their holdings of shares of a Fund at least
quarterly to ensure compliance with established bank policies and legal
requirements. Upon request, the Portfolios will make available to the Funds
investors information relating to the size and composition of their portfolio
for the purpose of providing Fund shareholders with this information.
INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - DAILY ASSETS GOVERNMENT FUND
AND DAILY ASSETS TREASURY FUND II
Treasury Cash Portfolio and Government Cash Portfolio limit their investments to
investments that are legally permissible for Federally chartered credit unions
under applicable provisions of the Federal Credit Union Act (including 12 U.S.C.
Section 1757(7), (8) and (15)) and the applicable rules and regulations of the
National Credit Union Administration (including 12 C.F.R. Part 703, Investment
and Deposit Activities), as such statutes and rules and regulations may be
amended. The Portfolios limit their investments to U.S. Government Securities
(including
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Treasury STRIPS) and repurchase agreements fully collateralized by U.S.
Government Securities. Certain U.S. Government Securities owned by a Portfolio
may be mortgage or asset backed, but, except to reduce interest rate risk, no
such security will be (i) a stripped mortgage backed security ("SMBS"), (ii) a
collateralized mortgage obligation ("CMO") or real estate mortgage investment
conduit ("REMIC") that meets any of the tests outlined in 12 C.F.R. Section
703.5(g) or (iii) a residual interest in a CMO or REMIC. In order to reduce
interest rate risk, the Portfolios may purchase a SMBS, CMO, REMIC or residual
interest in a CMO or REMIC but only in accordance with 12 C.F.R. Section
703.5(i). Treasury Cash Portfolio and Government Cash Portfolio have no current
intention to make any such investment. The Portfolios also may invest in
reverse repurchase agreements in accordance with 12 C.F.R. 703.4(e) to the
extent otherwise permitted hereunder and in the Prospectus.
INVESTMENTS BY SHAREHOLDERS THAT ARE SAVINGS ASSOCIATIONS - DAILY ASSETS
TREASURY FUND II AND DAILY ASSETS GOVERNMENT PORTFOLIO
Treasury Cash Portfolio and Government Cash Portfolio limit their investments to
investments that are legally permissible for Federally chartered savings
associations without limit as to percentage under applicable provisions of the
Home Owners' Loan Act (including 12 U.S.C. Section 1464) and the applicable
rules and regulations of the Office of Thrift Supervision, as such statutes and
rules and regulations may be amended. In addition, the Portfolios limit their
investments to investments that are permissible for an open-end investment
company to hold and would permit shares of the investment company to qualify as
liquid assets under 12 C.F.R. Section 566.1(g) and as short-term liquid assets
under 12 C.F.R. Section 566.1(h). These policies may be amended only by
approval of a Portfolio's or Fund's shareholders, as applicable.
5. PERFORMANCE DATA
For a listing of certain performance data as of August 31, 1997, see Appendix B.
YIELD INFORMATION
Each Fund may provide current annualized and effective annualized yield
quotations for each class based on its daily dividends. These quotations may
from time to time be used in advertisements, shareholder reports or other
communications to shareholders. All performance information supplied by a Fund
is historical and is not intended to indicate future returns.
In performance advertising the Funds may compare any of their performance
information with data published by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc. or CDA/Wiesenberger or
other companies which track the investment performance of investment companies
("Fund Tracking Companies"). The Funds may also compare any of their
performance information with the performance of recognized stock, bond and other
indices. The Funds may also refer in such materials to mutual fund performance
rankings and other data published by Fund Tracking Companies. Performance
advertising may also refer to discussions of a Fund and comparative mutual fund
data and ratings reported in independent periodicals, such as newspapers and
financial magazines.
Any current yield quotation of a class of a Fund which is used in such a manner
as to be subject to the provisions of Rule 482(d) under the Securities Act of
1933, as amended, shall consist of an annualized historical yield, carried at
least to the nearest hundredth of one percent, based on a specific seven-
calendar-day period and shall be calculated by dividing the net change during
the seven-day period in the value of an account having a balance of one share at
the beginning of the period by the value of the account at the beginning of the
period, and multiplying the quotient by 365/7. For this purpose, the net change
in account value would reflect the value of additional shares purchased with
dividends declared on the original share and dividends declared on both the
original share and any such additional shares, but would not reflect any
realized gains or losses from the sale of securities or any unrealized
appreciation or depreciation on portfolio securities. In addition, any
effective annualized yield quotation used by a Fund shall be calculated by
compounding the current yield quotation for such period by adding 1 to the
product, raising the sum to a power equal to 365/7, and subtracting 1 from the
result.
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Although published yield information is useful to investors in reviewing a
class' performance, investors should be aware that each Fund's yield fluctuates
from day to day and that the class' yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Also, Participating Organizations (as that term is used in
the Prospectus) may charge their customers direct fees in connection with an
investment in a Fund, which will have the effect of reducing the class' net
yield to those shareholders. The yields of a class are not fixed or guaranteed,
and an investment in the Fund is not insured or guaranteed. Accordingly, yield
information may not necessarily be used to compare shares of the Fund with
investment alternatives which, like money market instruments or bank accounts,
may provide a fixed rate of interest. Also, it may not be appropriate directly
to compare a Fund's yield information to similar information of investment
alternatives which are insured or guaranteed.
Income calculated for the purpose of determining a class' yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a class may differ from the rate of
distribution the class paid over the same period or the rate of income reported
in the Fund's financial statements.
OTHER PERFORMANCE AND SALES LITERATURE MATTERS
Total returns quoted in sales literature reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions.
Average annual returns generally are calculated by determining the growth or
decline in value of a hypothetical historical investment in a Fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. While average annual returns are a convenient means
of comparing investment alternatives, investors should realize that the
performance is not constant over time but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual year-
to-year performance of the Funds.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over such periods
according to the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 payment made at
the beginning of the applicable period.
OTHER ADVERTISING MATTERS
The Funds may advertise other forms of performance. For example, average annual
and cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of investments,
and/or a series of redemptions over any time period. Total returns may be
broken down into their components of income and capital (including capital gains
and changes in share price) in order to illustrate the relationship of the se
factors and their contributions to total return. Any performance information
may be presented numerically or in a table, graph or similar illustration.
A Fund may also include various information in its advertisements. Information
included in the Fund's advertisements may include, but is not limited to: (i)
the Fund's (or the Fund's corresponding Portfolios) portfolio holdings and
portfolio allocation as of certain dates, such as portfolio diversification by
instrument type, by instrument or by maturity, (ii) descriptions of the
portfolio managers of the Fund or the Fund's corresponding Portfolio and the
portfolio management staff of Linden or Forum Advisors or summaries of the views
of the portfolio managers with respect to the financial markets, (iii) the
results of a hypothetical investment in a Fund over
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a given number of years, including the amount that the investment would be at
the end of the period, (iv) the effects of earning Federally and, if applicable,
state tax-exempt income from the Fund or investing in a tax-deferred account,
such as an individual retirement account and (v) the net asset value, net assets
or number of shareholders of a Fund as of one or more dates.
In connection with its advertisements a Fund may provide "shareholders' letters"
which serve to provide shareholders or investors an introduction into the
Fund's, the Portfolio's, the Trust's, the Core Trust's or any of the Trust's or
the Core Trust's service providers' policies or business practices.
6. MANAGEMENT
TRUSTEES AND OFFICERS OF THE TRUST
The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
John Y. Keffer,* Chairman and President (age 54)
President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Administrative Services, LLC (a mutual fund
administrator), Forum Financial Corp. (a registered transfer agent) and
Forum Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Trustee and/or officer of various registered investment companies for
which Forum Administrative Services, LLC serves as manager or
administrator and for which Forum Financial Services, Inc. serves as
distributor. His address is Two Portland Square, Portland, Maine 04101.
Costas Azariadis, Trustee (age 53)
Professor of Economics, University of California, Los Angeles, since
July 1992. Prior thereto, Dr. Azariadis was Professor of Economics at
the University of Pennsylvania. His address is Department of Economics,
University of California, Los Angeles, 405 Hilgard Avenue, Los Angeles,
California 90024.
James C. Cheng, Trustee (age 54)
President of Technology Marketing Associates (a marketing consulting
company) since September 1991. Prior thereto, Mr. Cheng was President
and Chief Executive Officer of Network Dynamics, Incorporated (a
software development company). His address is 27 Temple Street,
Belmont, Massachusetts 02178.
J. Michael Parish, Trustee (age 53)
Partner at the law firm of Winthrop Stimson Putnam & Roberts since 1989.
Prior thereto, he was a partner at LeBoeuf, Lamb, Leiby & MacRae, a law
firm of which he was a member from 1974 to 1989. His address is 40 Wall
Street, New York, New York 10005.
Mark D. Kaplan, Vice President, Assistant Treasurer and Assistant Secretary (age
41)
Managing Director at Forum Financial Services, Inc. since September
1995. Prior thereto, Mr. Kaplan was Managing Director and Director of
Research at H.M. Payson & Co. His address is Two Portland Square,
Portland, Maine 04101.
Robert Campbell, Treasurer (age 36)
Director of Fund Accounting, Forum Accounting Services, LLC., with which
he has been associated since April 1997. Prior thereto, Mr. Campbell
was the Vice President of Domestic Operations for State Street Fund
Services in Toronto, Ontario, and prior to that, Mr. Campbell served as
Assistant Vice President/Fund
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Manager of Mutual Fund, State Street Bank & Trust in Boston,
Massachusetts. Mr. Campbell is also treasurer of various registered
investment companies for which Forum Administrative Services, LLC or
Forum Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
David I. Goldstein, Secretary (age 35)
General Counsel, Forum Financial Services, Inc., with which he has been
associated since 1991. Prior thereto, Mr. Goldstein was associated with
the law firm of Kirkpatrick & Lockhart LLP. Mr. Goldstein is also
Secretary or Assistant Secretary of various registered investment
companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
Max Berueffy, Assistant Secretary (age 44)
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1994. Prior thereto, Mr. Berueffy was on the staff of
the U.S. Securities and Exchange Commission for seven years, first in
the appellate branch of the Office of the General Counsel, then as a
counsel to Commissioner Grundfest and finally as a senior special
counsel in the Division of Investment Management. Mr. Berueffy is also
Secretary or Assistant Secretary of various registered investment
companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine
04101.
Cheryl O. Tumlin, Assistant Secretary (age 31)
Assistant Counsel, Forum Financial Services, Inc., with which she has
been associated since July 1996. Prior thereto, Ms. Tumlin was on the
staff of the U.S. Securities and Exchange Commission as an attorney in
the Division of Market Regulation and prior thereto Ms. Tumlin was an
associate with the law firm of Robinson Silverman Pearce Aronsohn &
Berman in New York, New York. Ms. Tumlin is also Assistant Secretary of
various registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
M. Paige Turney, Assistant Secretary (age 28).
Fund Administrator, Forum Financial Services, Inc., with which she has
been associated since 1995. Ms. Turney was employed from 1992 as a
Senior Fund Accountant with First Data Corporation in Boston,
Massachusetts. Prior thereto she was a student at Montana State
University. Ms. Turney is also Assistant Secretary of various
registered investment companies for which Forum Administrative Services,
LLC or Forum Financial Services, Inc. serves as manager, administrator
and/or distributor. Her address is Two Portland Square, Portland, Maine
04101.
TRUSTEES AND OFFICERS OF CORE TRUST
The Trustees and officers of Core Trust and their principal occupations during
the past five years are set forth below. Each of the Trustees of the Trust is
also a Trustee of Core Trust and several officers of the Trust serve as officers
of Core Trust . Each Trustee who is an "interested person" (as defined by the
1940 Act) of Core Trust is indicated by an asterisk. Accordingly, for
background information pertaining to the Trustees and these officers, see
"Trustees and Officers of the Trust" above.
John Y. Keffer,* Chairman and President.
Costas Azariadis, Trustee.
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James C. Cheng, Trustee.
J. Michael Parish, Trustee.
Robert Campbell, Treasurer
David I. Goldstein, Secretary
Renee A. Walker, Assistant Secretary (age 26).
Fund Administrator, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, Ms. Walker was an
administrator at Longwood Partners (the manager of a hedge fund
partnership) for a year. After graduating from college, from 1991 to
1993 Ms. Walker was a sales representative assistant at PaineWebber
Incorporated (a broker-dealer). Her address is Two Portland Square,
Portland, Maine 04101.
Sara M. Clark, Vice President, Assistant Secretary and Assistant Treasurer (age
33).
Managing Director, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark
was Controller of Wright Express Corporation (a national credit card
company) and for six years prior thereto was employed at Deloitte &
Touche LLP as an accountant. Ms. Clark is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. Her address is Two
Portland Square, Portland, Maine 04101.
Thomas G. Sheehan, Vice President and Assistant Secretary (age 42)
Counsel, Forum Financial Services, Inc. since October, 1993. Prior
thereto, Mr. Sheehan was a Special Counsel in the Division of Investment
Management of the U.S. Securities and Exchange Commission in Washington,
D.C. His address is Two Portland Square, Portland, Maine 04101.
TRUSTEE COMPENSATION
Each Trustee of the Trust (other than John Y. Keffer, who is an interested
person of the Trust) is paid $1,000 for each Board meeting attended (whether in
person or by electronic communication) and $1,000 for each committee meeting
attended on a date when a Board meeting is not held. As of March 31, 1997, in
addition to the $1,000 for each Board meeting attended, each Trustee is paid
$100 per active portfolio of the Trust. To the extent a meeting relates to only
certain portfolios of the Trust, Trustees are paid the $100 fee only with
respect to those portfolios. Trustees are also reimbursed for travel and
related expenses incurred in attending meetings of the Board. No officer of the
Trust is compensated by the Trust.
The following table provides the aggregate compensation paid to each Trustee.
The Trust has not adopted any form of retirement plan covering Trustees or
officers. Information is presented for the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Mr. Keffer None None None None
Mr. Azariadis $4,000 None None $4,000
Mr. Cheng $4,000 None None $4,000
Mr. Parish $4,000 None None $4,000
</TABLE>
Each of the Trustees of the Trust is also a Trustee of Core Trust. Each Trustee
of Core Trust (other than John Y. Keffer, who is an interested person of Core
Trust) is paid $1,000 for each Core Trust Board meeting attended
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(whether in person or by electronic communication) plus $100 per active
portfolio of Core Trust and is paid $1,000 for each committee meeting attended
on a date when a Core Trust Board meeting is not held. To the extent a meeting
relates to only certain portfolios of Core Trust, trustees are paid the $100 fee
only with respect to those portfolios. Core Trust trustees are also reimbursed
for travel and related expenses incurred in attending meetings of the Core Trust
Board. For the fiscal year of the Portfolios ended August 31, 1997, each Core
Trust trustee received fees totalling $____.
INVESTMENT ADVISERS
Forum Advisors, Inc., Treasury Portfolio's and Municipal Cash Portfolio's
investment adviser and Linden Asset Management, Inc., Treasury Cash Portfolio's,
Government Cash Portfolio's and Cash Portfolio's investment adviser, each
furnishes to the Portfolio(s) which it advises at its own expense all services,
facilities and personnel necessary in connection with managing the Portfolio's
investments and effecting portfolio transactions for the Portfolio, pursuant to
an investment advisory agreement between the Adviser and Core Trust (an
"Advisory Agreement"). Each Advisory Agreement provides, with respect to the
Portfolio, for an initial term of one year from its effective date and for its
continuance in effect for successive twelve-month periods thereafter, provided
the Advisory Agreement is specifically approved at least annually by the Core
Trust Board or by vote of the shareholders of the Portfolio, and in either case
by a majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party.
Table 1 in Appendix C shows the dollar amount of fees paid under the Investment
Advisory Agreement between Core Trust and the applicable Adviser with respect to
each Portfolio or, prior to Daily Assets Treasury Fund investing in Treasury
Portfolio, the dollar amount of fees paid under the Investment Advisory
Agreement between the Trust and Forum Advisors with respect to the Fund. This
information is provided for the past three years (or shorter time a Portfolio
has been operational).
Each Advisory Agreement is terminable without penalty by Core Trust with respect
to the Portfolio on 60 days' written notice when authorized either by vote of
the Portfolio's shareholders or by a vote of a majority of the Core Trust Board,
or by the Adviser on not more than 60 days' nor less than 30 days' written
notice, and will automatically terminate in the event of its assignment. The
Advisory Agreement also provides that, with respect to the Portfolio, the
Adviser shall not be liable for any error of judgment or mistake of law or for
any act or omission in the performance of its duties to the Portfolio, except
for willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties or by reason of reckless disregard of its obligations and
duties under the Advisory Agreement. The Advisory Agreement provides that the
Adviser may render services to others.
In addition to receiving an advisory fee from a Portfolio it advises, an Adviser
may also act and be compensated as investment manager for its clients with
respect to assets which are invested in the Portfolio. In some instances the
Adviser may elect to credit against any investment management fee received from
a client who is also a shareholder in the Portfolio an amount equal to all or a
portion of the fees received by the Adviser or any affiliate of the Adviser from
the Portfolio with respect to the client's assets invested in the Portfolio.
Each Adviser has agreed, with respect to each portfolio(s) it manages, to
reimburse Core Trust for certain of the Portfolio's operating expenses
(exclusive of interest, taxes, brokerage, fees and organization expenses, all to
the extent permitted by applicable state law or regulation) which in any year
exceed the limits prescribed by any state in which the Portfolio's shares are
qualified for sale.
Subject to the above obligations to reimburse Core Trust for its excess
expenses, Core Trust and the Trust have confirmed their respective obligations
to pay all their other expenses, including: interest charges, taxes, brokerage
fees and commissions; certain insurance premiums; fees, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent;
telecommunications expenses; auditing, legal and compliance expenses; costs of
forming the corporation and maintaining corporate existence; costs of preparing
and printing the Trust's prospectuses, statements of additional information,
account application forms and shareholder reports and delivering them to
existing and prospective shareholders; costs of maintaining books of original
entry for portfolio and fund accounting and other required books and accounts
and of calculating the net asset value of shares of Core Trust and
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the Trust; costs of reproduction, stationery and supplies; compensation of
Trustees, officers and employees of Core and costs of other personnel performing
services for Core Trust and the Trust who are not officers of an Adviser, the
manager and distributor or their respective affiliates; costs of corporate
meetings; SEC registration fees and related expenses; state securities laws
registration fees and related expenses; and fees payable to the Adviser under
the Investment Advisory Agreement.
INVESTMENT SUBADVISERS. Linden serves as an investment subadviser to Treasury
Portfolio under an Investment Subadvisory Agreement with Forum Advisors and Core
Trust. Forum Advisors serves as an investment advisor to Government Cash
Portfolio, Cash Portfolio under an Investment Subadvisory Agreement with Linden
and Core Trust. Pursuant to each Investment Subadvisory Agreement, from time to
time the Subadviser provides the Adviser with assistance regarding certain of
the Adviser's responsibilities to the Portfolio, including management of all or
part of the Portfolio's investment portfolios. Each Investment Subadvisory
Agreement will remain in effect for a period of 24 months and will continue in
effect thereafter only if its continuance is specifically approved at least
annually by the Core Trust Board or by vote of the Portfolio's shareholders, and
in either case, by a majority of the Trustees of Core Trust who are not parties
to the Investment Subadvisory Agreement or interested persons of any such party
at a meeting called for the purpose of voting on the Investment Subadvisory
Agreement. To the extent and for the period of time the Adviser has delegated
its responsibilities to the Subadviser, the Adviser pays the advisory fee for
such period to the Subadviser.
Each Investment Subadvisory Agreement is terminable with respect to the
Portfolio without penalty by Core Trust on 60 days' written notice when
authorized either by vote of the Portfolio's shareholders or by vote of a
majority of the Core Trust Board, or by the Subadviser on 60 days' written
notice, and will automatically terminate in the event of its assignment. The
Investment Subadvisory Agreement also provides that, with respect to the
Portfolio, the Subadviser shall not be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to
the Portfolio, except for willful misfeasance, bad faith or gross negligence in
the performance of the Subadvisers' duties or by reason of reckless disregard of
the Subadvisers' obligations and duties under the Investment Subadvisory
Agreement.
INVESTMENT ADVISORY SERVICES TO THE FUNDS. The Trust has retained Forum
Advisors as investment adviser to the Funds under arrangements and an agreement
substantially similar to the arrangements and agreement described above with
respect to the Portfolios and Forum Advisors. Forum's fee from each Fund is
0.05% of the Fund's average annual daily net assets; however, no fee is payable
for investment advisory services under these agreements as long as a Fund is
invested in its corresponding Portfolio or a similar investment.
ADMINISTRATION
Table 2 in Appendix C shows the dollar amount of fees paid for administrative
services by the Funds and the Portfolios. This information is provided for the
past three years (or shorter time a Portfolio has been operational).
THE TRUST. Pursuant to an administration agreement (the "Trust Administration
Agreement"), FAS supervises the overall management of the Trust (which includes,
among other responsibilities, negotiation of contracts and fees with, and
monitoring of performance and billing of, the transfer agent and custodian and
arranging for maintenance of books and records of the Trust) and provides the
Trust with general office facilities. The Trust Administration Agreement may be
terminated by either party without penalty on 60 days' written notice and may
not be assigned except upon written consent by both parties. The Trust
Administration Agreement also provides that FAS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of FAS's duties or by reason of
reckless disregard of its obligations and duties under the Trust Administration
Agreement. Prior to June 19, 1997, FFSI provided administration services to the
Trust.
FAS provides persons satisfactory to the Board to serve as officers of the
Trust. Those officers, as well as certain other employees and Trustees of the
Trust, may be Trustees, officers or employees of (and persons providing services
to the Trust may include) FAS, FFSI, their affiliates or affiliates of Forum
Advisors.
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<PAGE>
CORE TRUST. Pursuant to a management agreement with Core Trust (the "Core Trust
Management Agreement"), FAS supervises the overall management of Core Trust
(which includes, among other responsibilities, negotiation of contracts and fees
with, and monitoring of performance and billing of, the custodian and arranging
for maintenance of books and records of Core Trust) and provides Core Trust with
general office facilities. The Core Trust Management Agreement provides, with
respect to the Portfolios, for an initial term of one year from its effective
date and for its continuance in effect for successive twelve-month periods
thereafter, provided the agreement is specifically approved at least annually by
the Core Trust Board or by the shareholders of the Portfolios, and in either
case by a majority of the Trustees who are not parties to the Core Trust
Management Agreement or interested persons of any such party. Prior to November
15, 1997, FFSI provided administration services to Core Trust.
The Core Trust Management Agreement terminates automatically if it is assigned
and may be terminated without penalty with respect to the Portfolio by vote of a
Portfolio's shareholders or by either party on 60 days' written notice. The
Core Trust Management Agreement also provides that FFSI shall not be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of Core Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of Forum's duties or by reason of
reckless disregard of its obligations and duties under the Core Trust Management
Agreement.
Athe request of the Core Trust Board, FAS provides persons satisfactory to the
Core Trust Board to serve as officers of Core Trust.
DISTRIBUTION
FFSI was incorporated under the laws of the State of Delaware on February 7,
1986 and serves as distributor of shares of the Portfolio pursuant to a
Distribution Agreement between FFSI and the Trust (the "Trust Distribution
Agreement"). The Trust Distribution Agreement provides, with respect to each
Fund, for an initial term of one year from its effective date and for its
continuance in effect for successive twelve-month periods thereafter, provided
the Trust Distribution Agreement is specifically approved at least annually by
the Board or by the shareholders of the Fund, and in either case by a majority
of the Trustees who are not parties to the Trust Distribution Agreement or
interested persons of any such party.
The Trust Distribution Agreement terminates automatically if it is assigned and
may be terminated without penalty with respect to each Fund by vote of the
Fund's shareholders or by either party on 60 days' written notice. The Trust
Distribution Agreement also provides that FFSI shall not be liable for any error
of judgment or mistake of law or for any act or omission in the performance of
services to the Trust, except for willful misfeasance, bad faith or gross
negligence in the performance of FFSI's duties or by reason of reckless
disregard of its obligations and duties under the Trust Distribution Agreement.
With respect to any class that has adopted a distribution plan, the Trust
Distribution Agreement is also terminable upon similar notice by a majority of
the Trustees who (i) are not interested persons of the Trust and (ii) have no
direct or indirect financial interest in the operation of that distribution plan
or in the Trust Distribution Agreement ("Qualified Trustees").
FFSI acts as sole placement agent for interests in the Portfolios and receives
no compensation for those services from the portfolios.
INVESTOR CLASS DISTRIBUTION PLAN. In accordance with Rule 12b-1 under the 1940
Act, with respect to the Investor Class of each Fund, the Trust adopted a
distribution plan (the "Investor Class Plan") which provides for the payment to
Forum of a Rule 12b-1 fee at the annual rate of 0.15% of the average daily net
assets of the Investor class of each Fund as compensation for Forum's services
as distributor.
The Investor Class Plan provides that all written agreements relating to that
plan must be approved by the Board, including a majority of the Qualified
Trustees. In addition, the Investor Class Plan (as well as the Distribution
Agreement) requires the Trust and Forum to prepare and submit to the Board, at
least quarterly, and the Board will
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<PAGE>
review, written reports setting forth all amounts expended under the Investor
Class Plan and identifying the activities for which those expenditures were
made.
The Investor Class Plan provides that it will remain in effect for one year from
the date of its adoption and thereafter shall continue in effect provided it is
approved at least annually by the shareholders or by the Board, including a
majority of the Qualified Trustees. The Investor Class Plan further provides
that it may not be amended to increase materially the costs which may be borne
by the Trust for distribution pursuant to the Investor Class Plan without
shareholder approval and that other material amendments of the Investor Class
Plan must be approved by the Qualified Trustees. The Investor Class Plan may be
terminated at any time by the Board, by a majority of the Qualified Trustees, or
by a Fund's Investor class shareholders.
Table 3 in Appendix C shows the dollar amount of fees payable under the Investor
Class Plan with respect to each Fund. This information is provided for the past
three years (or shorter time a Fund has been operational).
TRANSFER AGENT
Forum Financial Corp. ("FFC") acts as transfer agent of the Trust pursuant to a
transfer agency agreement with the Trust (the "Transfer Agency Agreement"). The
Transfer Agency Agreement provides, with respect to the Funds, for an initial
term of one year from its effective date and for its continuance in effect for
successive twelve-month periods thereafter, provided that the Transfer Agency
Agreement is specifically approved at least annually by the Board or by a vote
of the shareholders of each Fund, and in either case by a majority of the
Trustees who are not parties to the Transfer Agency Agreement or interested
persons of any such party at a meeting called for the purpose of voting on the
Transfer Agency Agreement.
Among the responsibilities of FFC as transfer agent for the Trust are: (1)
answering customer inquiries regarding account status and history, the manner in
which purchases and redemptions of shares of each Fund may be effected and
certain other matters pertaining to each Fund; (2) assisting shareholders in
initiating and changing account designations and addresses; (3) providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records, assisting in processing purchase and redemption
transactions and receiving wired funds; (4) transmitting and receiving funds in
connection with customer orders to purchase or redeem shares; (5) verifying
shareholder signatures in connection with changes in the registration of
shareholder accounts; (6) furnishing periodic statements and confirmations of
purchases and redemptions; (7) arranging for the transmission of proxy
statements, annual reports, prospectuses and other communications from the Trust
to its shareholders; (8) arranging for the receipt, tabulation and transmission
to the Trust of proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and (9) providing such other related services as the
Trust or a shareholder may reasonably request.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation as custodian, investment manager, nominee, agent or fiduciary for
its customers or clients who are shareholders of a Fund with respect to assets
invested in that Fund. FFC or any sub-transfer agent or other processing agent
may elect to credit against the fees payable to it by its clients or customers
all or a portion of any fee received from the Trust or from the Transfer Agent
with respect to assets of those customers or clients invested in the Portfolio.
FFC, FAS or sub-transfer agents or processing agents retained by the FFC may be
Processing Organizations (as defined in the Prospectus) and, in the case of sub-
transfer agents or processing agents, may also be affiliated persons of FFC or
FAS.
For its services under the Transfer Agency Agreement, FFC receives an annual fee
from each Fund of (i) 0.02% of each Fund's average daily net assets attributable
to institutional Shares and 0.25% of each Fund's average daily net assets
attributable to Institutional Service Shares and Investor Shares (computed and
paid monthly in arrears by the Fund), (ii) $12,000 per year (computed and paid
monthly in arrears by the Fund) and (iii) Annual Shareholder Account Fees of
$125 per shareholder account in Institutional Shares and $18.00 per shareholder
account in Institutional Service Shares and Investor Shares (computed as of the
last business day of the prior month).
Table 4 in Appendix C shows the dollar amount of fees paid for transfer agency
services by the Funds. This information is provided for the past three years
(or shorter time a Fund has been operational).
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SHAREHOLDER SERVICE PLAN AND AGREEMENTS
The Trust has adopted a shareholder service plan ("Shareholder Service Plan")
with respect to the Institutional Service class and the Investor class of each
Fund which provides that Forum may obtain the services of financial institutions
to act as shareholder servicing agents for their customers invested in those
classes. The Shareholder Service Plan was effective on November 15, 1997 for
the Institutional Service class of those Funds then operating.
The Shareholder Service Plan provides that all written agreements relating to
that plan must be approved by the Board, including a majority of the Qualified
Trustees. In addition, the Shareholder Service Plan (as well as the various
shareholder service agreements) requires the Trust and Forum to prepare and
submit to the Board, at least quarterly, and the Board will review written
reports setting forth all amounts expended under the plan and identifying the
activities for which those expenditures were made.
The Shareholder Service Plan provides that it will remain in effect for one year
from the date of its adoption and thereafter shall continue in effect provided
it is approved at least annually by the shareholders or by the Board. The
Shareholder Service Plan further provides material amendments of the plan must
be approved by the Qualified Trustees. The Shareholder Service Plan may be
terminated at any time by the Board or by a majority of the Qualified Trustees.
The Trust may enter into shareholder servicing agreements with various
Shareholder Servicing Agents pursuant to which those agents, as agent for their
customers, may agree among other things to: (i) answer shareholder inquiries
regarding the manner in which purchases, exchanges and redemptions of shares of
the Trust may be effected and other matters pertaining to the Trust's services;
(ii) provide necessary personnel and facilities to establish and maintain
shareholder accounts and records; (iii) assist shareholders in arranging for
processing purchase, exchange and redemption transactions; (iv) arrange for the
wiring of funds; (v) guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
(vi) integrate periodic statements with other shareholder transactions; and
(vii) provide such other related services as the shareholder may request.
As Participating Organizations, some Shareholder Servicing Agents also may
impose certain conditions on their customers, subject to the terms of the
Trust's Prospectus, in addition to or different from those imposed by the Trust,
such as requiring a minimum initial investment or by charging their customers a
direct fee for their services. Some Shareholder Servicing Agents may also act
and receive compensation for acting as custodian, investment manager, nominee,
agent or fiduciary for its customers or clients who are shareholders of the
Funds with respect to assets invested in the Funds. These Shareholder Servicing
Agents may elect to credit against the fees payable to it by its clients or
customers all or a portion of any fee received from the Trust with respect to
assets of those customers or clients invested in the Funds.
Table 4 in Appendix C shows the dollar amount of fees payable under the
Shareholder Service Plan with respect to Institutional Service Shares and
Investor Shares of each Fund.
FUND ACCOUNTING
Pursuant to a Fund Accounting Agreement, Forum Accounting Services, LLC.
provides the Funds with accounting services, including the calculation of the
Fund's net asset value. For these services, Forum Accounting Services, LLC.
receives an annual fee ranging from $12,000 to $36,000 depending upon the number
of securities in which the Fund invests and the number of classes in the Fund.
Pursuant to a Fund Accounting Agreement with Core Trust, Forum Accounting
Services, LLC. also provides portfolio accounting services to each Portfolio,
including the calculation of each Portfolio's net asset value. For these
services, Forum Accounting Services, LLC. receives an annual fee of $48,000 per
year plus surcharges depending upon the amount and type of the Fund's portfolio
transactions and positions. The Fee for Treasury Cash Portfolio, Government
Cash Portfolo and Cash Portfolio is the lesser of 0.05% of the average daily net
assets of the Portfolios or $48,000 plus, for each investor in a Portfolio above
one (excluding FFSI and its affiliates), $6,000 per year.
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Forum Accounting Services, LLC is required to use its best judgment and
efforts in rendering fund accounting services and is not be liable to Core Trust
for any action or inaction in the absence of bad faith, willful misconduct or
gross negligence. Forum Accounting Services, LLC is not responsible or liable
for any failure or delay in performance of its fund accounting obligations
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control and Core Trust has agreed to indemnify and hold harmless
Forum Accounting Services, LLC , its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to Forum
Accounting Services, LLC 's actions taken or failures to act with respect to a
Portfolio or based, if applicable, upon information, instructions or requests
with respect to a Portfolio given or made to Forum Accounting Services, LLC by
an officer of the Trust duly authorized. This indemnification does not apply to
Forum Accounting Services, LLC 's actions taken or failures to act in cases of
Forum Accounting Services, LLC 's own bad faith, willful misconduct or gross
negligence.
Table 6 in Appendix C shows the dollar amount of fees paid for accounting
services by the Funds and the Portfolios. This information is provided for the
past three years (or shorter time a Fund or Portfolio has been operational).
7. DETERMINATION OF NET ASSET VALUE
The Fund does not determine net asset value on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas. Purchases and redemptions are effected at the time of the next
determination of net asset value following the receipt of any purchase or
redemption order.
Pursuant to the rules of the SEC, both the Board and the Core Trust Board have
established procedures to stabilize each Fund's and each Portfolio's, as
applicable, net asset value at $1.00 per share. These procedures include a
review of the extent of any deviation of net asset value per share as a result
of fluctuating interest rates, based on available market rates, from each Fund's
and Portfolio's, as applicable, $1.00 amortized cost price per share. Should
that deviation exceed 1/2 of 1%, the Board and the Core Trust Board,
respectively, will consider whether any action should be initiated to eliminate
or reduce material dilution or other unfair results to shareholders. Such
action may include redemption of shares in kind, selling portfolio securities
prior to maturity, reducing or withholding dividends and utilizing a net asset
value per share as determined by using available market quotations.
In determining the approximate market value of portfolio investments, the
Portfolios may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value.
Each investor in a Portfolio, including the Funds, may add to or reduce its
investment in that Portfolio on each business day of the Portfolios (which
corresponds to Fund Business Days). The Portfolios maintain the same Business
Days as do the Funds. As of the close of regular trading on any Fund Business
Day, the value of a Fund's beneficial interest in a Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents the Fund's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of the close of the Fund Business Day, are then effected. The
Fund's percentage of the aggregate beneficial interests in the Portfolio are
then recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of the Fund's investment in the Portfolio as of the close of
the Fund Business Day plus or minus, as the case may be, the amount of net
additions to or reductions from the Fund's investment in the Portfolio effected
as of that time, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the close of the Fund Business Day plus or minus,
as the case may be, the amount of net additions to or reductions from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage determined is then applied to determine the value of the Fund's
interest in the Portfolio as of the close of the next Fund Business Day.
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8. PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities for the Portfolio usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
There usually are no brokerage commissions paid for such purchases. Although
Core Trust does not anticipate that the Portfolio will pay any amounts of
commission, in the event the Portfolio pays brokerage commissions or other
transaction-related compensation, the payments may be made to broker-dealers who
pay expenses of the Portfolio that it would otherwise be obligated to pay
itself. Any transaction for which the Portfolio pays transaction-related
compensation will be effected at the best price and execution available, taking
into account the amount of any payments made on behalf of the Portfolio by the
broker-dealer effecting the transaction. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked prices.
Since each Fund's and Portfolio's inception, no brokerage fees were paid by any
Fund (during those periods of the Funds invested directly in securities), nor
any Portfolio.
Allocations of transactions to dealers and the frequency of transactions are
determined for each Portfolio by the Advisers in their best judgment and in a
manner deemed to be in the best interest of shareholders of that Portfolio
rather than by any formula. The primary consideration is prompt execution of
orders in an effective manner and at the most favorable price available to the
Portfolio.
Investment decisions for the Portfolios will be made independently from those
for any other account or investment company that is or may in the future become
managed by an Adviser or their respective affiliates. If, however, a Portfolio
and other investment companies or accounts managed by an Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by a Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies managed by an Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
No portfolio transactions are executed with Forum Advisors, Linden or any of
their affiliates.
9. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds are sold on a continuous basis by the distributor without
any sales charge.
In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to a Fund's shares as provided in the Prospectus from time to time.
The Trust has filed a formal election with the SEC pursuant to which the Funds
will only effect a redemption in portfolio securities in kind if a shareholder
is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever
is less, during any 90-day period.
The Funds may wire proceeds of redemptions to shareholders that have elected
wire redemption privileges only if the wired amount is greater than $5,000. In
addition, the Funds will only wire redemption proceeds to financial institutions
located in the United States.
By use of the telephone redemption or exchange privilege, the shareholder
authorizes the Transfer Agent to act upon the instruction of any person
representing himself to either be, or to have the authority to act on behalf of,
the
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investor and believed by the Transfer Agent to be genuine. The records of the
Transfer Agent of such instructions are binding.
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.
EXCHANGE PRIVILEGE
The exchange privilege permits shareholders of the Funds to exchange their
shares for shares of any Participating Fund, which includes (i) the other Funds
and (ii) any other mutual fund for which Forum or its affiliates act as
investment adviser, manager or distributor and which participates in the Trust's
exchange privilege program.
Exchange transactions are made on the basis of relative net asset values per
share at the time of the exchange transaction plus any applicable sales charge
of the Participating Fund whose shares are acquired. Exchanges are accomplished
by (i) a redemption of the shares of the Fund exchanged at the next
determination of that Fund's net asset value after the exchange order in proper
form (including any necessary supporting documents required by the Fund whose
shares are being exchanged) is accepted by the Transfer Agent and (ii) a
purchase of the shares of the fund acquired at the next determination of that
fund's net asset value after (or occurring simultaneously with) the time of
redemption.
Shares of any Participating Fund may be exchanged without a sales charge for
shares of any Participating Fund that are offered without a sales charge. If
the Participating Fund whose shares are purchased in the exchange transaction
imposes a higher sales charge the shareholder will be required to pay the sales
charge on the purchased shares. Shareholders are entitled to any reduced sales
charges of the Participating Fund into which they are exchanging to the extent
those reduced sales charges would be applicable to that shareholder's purchase
of shares.
The Funds do not charge for the exchange privilege 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. A pattern of
frequent exchanges may be deemed by the Transfer Agent to be contrary to the
best interests of the Fund's other shareholders and, at the discretion of the
Transfer Agent, may be limited by that Fund's refusal to accept additional
exchanges from the investor.
The terms of the exchange privilege are subject to change, and the privilege may
be terminated by any Participating Fund or the Trust. However the privilege
will not be terminated, and no material change that restricts the availability
of the privilege to shareholders will be implemented, without 60 days' advance
notice to shareholders. No notice need be given of an amendment whose only
material effect is to reduce amount of sales charge required to be paid on the
exchange and no notice need be given if redemptions of shares of a Fund are
suspended or a Fund temporarily delays or ceases the sale of its shares.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The Funds (other than Daily Assets TaxSaver Fund) offer an individual retirement
plan (the "IRA") for individuals who wish to use shares of a Fund as a medium
for funding individual retirement savings. Under the IRA, distributions of net
investment income and capital gain will be automatically reinvested in the IRA
established for the investor. The Funds' custodian furnishes custodial services
to the IRAs for a service fee. Shareholders wishing to invest in a Fund through
an IRA should contact the Transfer Agent for further information.
10. TAXATION
Qualification as a regulated investment company under the Internal Revenue Code
of 1986 does not involve governmental supervision of management or investment
practices or policies. Investors should consult their own
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counsel for a complete understanding of the requirements the Funds must meet to
qualify for such treatment. The information set forth in the Prospectus and the
following discussion relate solely to Federal income taxes on dividends and
distributions by each Fund and assume that the Funds qualify as regulated
investment companies. Investors should consult their own counsel for further
details and for the application of state and local tax laws to the investor's
particular situation.
The Funds expect to derive substantially all of their gross income (exclusive of
capital gain) from sources other than dividends. Accordingly, it is expected
that none of the Funds' dividends or distributions will qualify for the
dividends-received deduction for corporations.
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 his shares by the amount of the distribution. To the extent that
capital gain was accrued by a Fund before the shareholder purchased his shares,
the distribution would be in effect a return of capital to that shareholder.
All capital gain distributions, including those that operate as a return of
capital, are taxable to the shareholder receiving them as described above
regardless of the length of time he may have held his shares prior to the
distribution.
11. OTHER INFORMATION
CUSTODIAN
Pursuant to a Custodian Agreement with Core Trust, The First National Bank of
Boston, 100 Federal Street, Boston, Massachusetts 02106, acts as the custodian
of Treasury Portfoio's and Municipal Cash Portfolio's assets. Pursuant to a
Custodian Agreement with Core Trust, Imperial Trust Company, 201 North Figueroa
Street, Suite 610, Los Angeles, California 90012, acts as the custodian of each
other Portfolio's assets. The custodians' responsibilities include safeguarding
and controlling the Portfolios cash and securities and determining income
payable on and collecting interest on Portfolio investments.
COUNSEL
Legal matters in connection with the issuance of beneficial interest of the
Trust are passed upon by Seward & Kissel, 1200 G Street, N.W., Washington, D.C.
20005.
AUDITORS
______________, 99 High Street, Boston, Massachusetts 02110, independent
auditors, acts as auditors for the Funds and as auditors for the Portfolios.
THE TRUST AND ITS SHARES
The Trust is a business trust organized under Delaware law. Delaware law
provides that shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
securities regulators of some states, however, have indicated that they and the
courts in their state may decline to apply Delaware law on this point.
The Trust Instrument contains an express disclaimer of shareholder liability for
the debts, liabilities, obligations, and expenses of the Trust and requires that
a disclaimer be given in each contract entered into or executed by the Trust or
the Trustees. The Trust Instrument provides for indemnification out of each
series' property of any shareholder or former shareholder held personally liable
for the obligations of the series. The Trust Instrument also provides that each
series shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the series and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Delaware law does not
apply, no contractual
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limitation of liability was in effect and the portfolio is unable to meet its
obligations. (FAS) believes that, in view of the above, there is no risk of
personal liability to shareholders.
The Trust Instrument further provides that the Trustees shall not be liable to
any person other than the Trust or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise by subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
The Board is required to call a meeting of shareholders for the purpose of
voting upon the removal of any trustee when so requested in writing by the
shareholders of record holding at least 10% of the Trust's outstanding shares.
Each series' capital consists of shares of beneficial interest. Shares are
fully paid and nonassessable, except as set forth above with respect to Trustee
and shareholder liability. Shareholders representing 10% or more of the Trust
or a series may, as set forth in the Trust Instrument, call meetings of the
Trust or series for any purpose related to the Trust or series, as the case may
be, including, in the case of a meeting of the entire Trust, the purpose of
voting on removal of one or more Trustees. The Trust or any series may be
terminated upon the sale of its assets to, or merger with, another open-end
management investment company or series thereof, or upon liquidation and
distribution of its assets. Generally such terminations must be approved by the
vote of the holders of a majority of the outstanding shares of the Trust or the
series; however, the Trustees may, without prior shareholder approval, change
the form of organization of the Trust by merger, consolidation or incorporation.
If not so terminated or reorganized, the Trust and its series will continue
indefinitely. Under the Trust Instrument, the Trustees may, without shareholder
vote, cause the Trust to merge or consolidate into one or more trusts,
partnerships or corporations or cause the Trust to merge or consolidate into one
or more trusts, partnerships or corporations or cause the Trust to be
incorporated under Delaware law, so long as the surviving entity is an open-end
management investment company that will succeed to or assume the Trust's
registration statement.
FUND STRUCTURE
CORE AND GATEWAY. The Funds seek to achieve their objective by investing all
of their investable assets in a separate portfolio of a registered, open-end
management investment company with substantially the same investment
objective and policies as the Fund. This "Core and Gateway" fund structure
is an arrangement whereby one or more investment companies or other
collective investment vehicles that share investment objectives -- but offer
their shares through distinct distribution channels -- pool their assets by
investing in a single investment company having substantially the same
investment objective and policies (a "Core Portfolio"). This means that the
only investment securities that will be held by a Fund will be the Fund's
interest in the Core Portfolio. This structure permits other collective
investment vehicles to invest collectively in a Core Portfolio, allowing for
greater economies of scale in managing operations of the single Core
Portfolio. The Board retains the right to withdraw a Fund's investments from
a Core Portfolio at any time; the Fund would then resume investing directly
in individual securities of other issuers or could re-invest all of its
assets in another Core Portfolio.
FUND SHAREHOLDERS' VOTING RIGHTS. A Core Portfolio normally will not hold
meetings of its investors except as required under the 1940 Act. As a
shareholder in a Core Portfolio, a Fund is entitled to vote in proportion to its
relative interest in the Core Portfolio. On any issue, a Fund will vote its
shares in a Core Portfolio in proportion to the votes cast by its shareholders.
If there are other investors in a Core Portfolio, there can be no assurance that
any issue that receives a majority of the votes cast by the Fund's shareholders
will receive a majority of votes cast by all Core Portfolio shareholders.
Generally, a Fund will hold a meeting of its shareholders to obtain instructions
on how to vote its interest in a Core Portfolio when the Core Portfolio is
conducting a meeting of its shareholders. However, subject to applicable
statutory and regulatory requirements, a Fund will not seek instructions from
its shareholders with respect to (i) any proposal relating to a Core Portfolio
that, if made with respect to the Fund, would not require the vote of Fund
shareholders, or (ii) any proposal relating to the Core Portfolio that is
identical to a proposal previously approved by the Fund's shareholders.
In addition to a vote to remove a trustee or change a fundamental policy,
examples of matters that will require approval of shareholders of a Core
Portfolio include, subject to applicable statutory and regulatory requirements:
the
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election of trustees; approval of an investment advisory contract; the
dissolution of a Core Portfolio; certain amendments of the organizational
documents for the Core Portfolio; a merger, consolidation or sale of
substantially all of a Core Portfolio's assets; or any additional matters
required or authorized by the charter or trust instrument and by-laws of a Core
Portfolio or any registration statement of a Core Portfolio, or as the directors
or trustees of the Core Portfolio may consider desirable. The board of trustees
of a Core Portfolio will typically reserve the power to change nonfundamental
policies without prior shareholder approval.
CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Core
Portfolio may be affected by the actions of other large investors in the Core
Portfolio, if any. For example, if the Core Portfolio had a large investor
other than the Fund that redeemed its interest in the Core Portfolio, the Core
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 the Core Portfolio at any time,
if the Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if other investors
in the Core Portfolio, by a vote of shareholders, changed the investment
objective or policies of the Core Portfolio in a manner not acceptable to the
Board. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by the Core Portfolio. That
distribution could result in a less diversified portfolio of investments for the
Fund and could affect adversely the liquidity of the Fund's portfolio. If the
Fund decided to convert those securities to cash, it normally would incur
transaction costs. If a Fund withdrew its investment from the Core 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.
12. FINANCIAL STATEMENTS
The Statements of Assets and Liabilities, Statements of Operations, Statements
of Changes in Net Assets, notes thereto and Financial Highlights of Daily Assets
Treasury Fund and Daily Assets Cash Fund for the fiscal year ended August 31,
1997 and the Independent Auditors' Report thereon (included in the Annual Report
to Shareholders), which are delivered along with this SAI, are incorporated
herein by reference. Also incorporated by reference into this SAI are the
Schedules of Investments, Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, and notes thereto, of Treasury
Portfolio, Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio
for the fiscal year ended August 31, 1997 and the Independent Auditors' Report
thereon.
As Daily Assets Treasury Fund II, Daily Assets Government Fund, Daily Assets
TaxSaver Fund and Municipal Cash Portfolio had not as of the date hereof
commenced operations, no financial statements are available.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
1. CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Note: Those bonds in the Aa and A groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1 and A1.
STANDARD AND POOR'S CORPORATION ("S&P")
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Note: The ratings for AA and A may be modified by the addition of a plus (+) or
minus (-) sign to show the relative standing within the rating category.
FITCH INVESTORS SERVICE, INC. ("FITCH")
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA categories.
2. COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE, INC.
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S CORPORATION
S&P's two highest commercial paper ratings are A and B. Issues assigned an A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety is
not as high as for issues designated A-1. A-3 issues have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. Issues rated B are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
FITCH INVESTORS SERVICE, INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 ratings.
-29-
<PAGE>
APPENDIX B - PERFORMANCE INFORMATION
For the seven day period ended August 31, 1997, the annualized yields of each of
the classes of the Funds that were then operating were as follows:
<TABLE>
<CAPTION>
TAX EQUIVALENT TAX EQUIVALENT
CURRENT YIELD EFFECTIVE YIELD CURRENT YIELD EFFECTIVE YIELD
<S> <C> <C> <C> <C>
DAILY ASSETS TREASURY FUND
Investor Shares -- -- -- --
Institutional Service Shares % % -- --
Institutional Shares -- -- -- --
DAILY ASSETS TREASURY FUND II
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
DAILY ASSETS GOVERNMENT FUND
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
DAILY ASSETS CASH FUND
Investor Shares -- -- -- --
Institutional Service Shares % % -- --
Institutional Shares -- -- -- --
DAILY ASSETS TAXSAVERFUND
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
</TABLE>
As of August 31, 1997, there were no outstanding Institutional Shares, Investor
Shares or Institutional Service Shares of each Fund other than Daily Assets
Treasury Fund and Daily Assets Cash Fund.
-30-
<PAGE>
APPENDIX C- MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
TREASURY PORTFOLIO
Period ended August 31, 1997
Year ended March 31, 1997 $20,637 $0 $20,637
Year ended March 31, 1996(1) $69,466 $0 $69,466
Year ended March 31, 1995(1) $59,382 $53,382 $6,000
TREASURY CASH PORTFOLIO
Year ended August 31, 1997 $0
Year ended August 31, 1996 $12,930 $0 $12,930
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997 $0
Year ended August 31, 1996 $156,552 $0 $156,552
CASH PORTFOLIO
Year ended August 31, 1997 $0
Year ended August 31, 1996 $38,083 $0 $38,083
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --
</TABLE>
(1) Prior to January 15, 1996 Forum Advisors acted as Daily Assets Treasury
Fund's investment adviser under an investment advisory agreement with Forum
Funds, Inc. Under this investment advisory agreement, Forum received a fee at
an annual rate of 0.20% of the average daily net assets of the Fund.
-A1-
<PAGE>
TABLE 2 - ADMINISTRATION FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
TREASURY PORTFOLIO
Period ended August 31, 1997
Year ended March 31, 1997
Year ended March 31, 1996(1)
TREASURY CASH PORTFOLIO
Year ended August 31, 1997
Year ended August 31, 1996 $19,198 $9,307 $9,891
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997
Year ended August 31, 1996 $230,547 $104,558 $125,989
CASH PORTFOLIO
Year ended August 31, 1997
Year ended August 31, 1996 $56,125 $3,719 $52,406
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY FUND
Period ended August 31, 1997
Year ended March 31, 1997
Year ended March 31, 1996
DAILY ASSETS TREASURY FUND II
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1997
DAILY ASSETS TAXSAVER FUND
Year ended August 31, 1997 -- -- --
</TABLE>
-A2-
<PAGE>
TABLE 3 - INVESTOR SHARES RULE 12b-1 FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
Period ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY FUND II
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS TAXSAVER FUND
Year ended August 31, 1997 -- -- --
</TABLE>
For the fiscal year ended August 31, 1997, no Investor Shares were outstanding
and, accordingly, no fees were payable under the Investor Class Plan.
-A3-
<PAGE>
TABLE 4 - TRANSFER AGENCY FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
Institutional Service Shares
Period ended August 31, 1997
Year ended March 31, 1997 $116,051 $101,485 $14,566
Year ended March 31, 1996 $110,792 $96,881 13,911
DAILY ASSETS TREASURY FUND II
Institutional Service Shares
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Institutional Service Shares
Year ended August 31, 1997
DAILY ASSETS TAXSAVER FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
</TABLE>
As of August 31, 1997, there were no outstanding Institutional Shares, Investor
Shares or Institutional Service Shares of each Fund other than Daily Assets
Treasury Fund and Daily Assets Cash Fund.
-A4-
<PAGE>
TABLE 5 - SHAREHOLDER SERVICE FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
DAILY ASSETS TREASURY FUND
Institutional Service Shares
Period ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY FUND II
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS TAXSAVER FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
</TABLE>
As of August 31, 1997, there were no outstanding Investor Shares and no
effective Shareholder Plan with respect to Institutional Service Shares of any
Fund.
-A5-
<PAGE>
TABLE 6 - FUND ACCOUNTING FEES
<TABLE>
<CAPTION>
GROSS FEE FEE WAIVED NET FEE PAID
<S> <C> <C> <C>
TREASURY PORTFOLIO
Period ended August 31, 1997
Year ended March 31, 1997
Year ended March 31, 1996(1)
TREASURY CASH PORTFOLIO
Year ended August 31, 1997 $28,518 $2,259 $26,259
Year ended August 31, 1996 $36,000 $0 $36,000
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997 $42,000 $0 $42,000
Year ended August 31, 1996 $43,000 $0 $432,000
CASH PORTFOLIO
Year ended August 31, 1997 $42,000 $2,259 $39,741
Year ended August 31, 1996 $43,250 $0 $43,250
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY FUND
Period ended August 31, 1997
Year ended March 31, 1997
Year ended March 31, 1996
DAILY ASSETS TREASURY FUND II
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1997
DAILY ASSETS TAXSAVER FUND
Year ended August 31, 1997 -- -- --
</TABLE>
-A6-
<PAGE>
TABLE 7 - 5% SHAREHOLDERS
As of____, 1997, the officers and Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. Also as of that date, the
shareholders listed below owned more than 5% of each Fund. Shareholders owning
25% or more of the shares of a Fund or of the Trust as a whole may be deemed to
be controlling persons. By reason of their substantial holdings of shares,
these persons may be able to require the Trust to hold a shareholder meeting to
vote on certain issues and may be able to determine the outcome of any
shareholder vote. As noted, certain of these shareholders are known to the
Trust to hold their shares of record only and have no beneficial interest,
including the right to vote, in the shares.
As a percentage of all shares of the Trust outstanding, ____________ held of
record for the benefit of its various customers _____% of the shares, and
________ held ___ % of the shares.
PERCENTAGE OF PERCENTAGE OF SHARES
SHARES OWNED OF FUND OWNED
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
H.M. Payson & Co. Custody Account
P.O. Box 31, Portland, ME 04112
H.M. Payson & Co. Custody Account
P.O. Box 31, Portland, ME 04112
DAILY ASSETS CASH FUND
INSTITUTIONAL SERVICE SHARES
H.M. Payson & Co. Custody Account
P.O. Box 31, Portland, ME 04112
H.M. Payson & Co. Custody Account
P.O. Box 31, Portland, ME 04112
-A7-
<PAGE>
S&P 500 INDEX FUND
INVESTORS EQUITY FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS FUND
- -------------------------------------------------------------------------------
Account Information and
Shareholder Servicing: Distributor:
Forum Financial Corp. Forum Financial Services, Inc.
P.O. Box 446 Two Portland Square
Portland, Maine 04112 Portland, Maine 04101
207-879-0001 207-879-1900
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 15, 1997
Forum Funds (the "Trust") is a registered open-end investment company. This
Statement of Additional Information supplements the "Preliminary Prospectus"
dated November 15, 1997 offering shares of S&P 500 Index Fund, Investors
Equity Fund, Small Cap Fund, International Equity Fund and Emerging Markets
Fund (each a Fund and collectively the "Funds") and should be read only in
conjunction with the Prospectus, a copy of which may be obtained by an
investor without charge by contacting the Trust's Distributor at the address
listed above.
Each Fund, except for Investors Equity Fund currently seeks to achieve its
investment objective by holding, as its only investment securities, the
securities of a separate portfolio of a registered open-end management
investment company.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
TABLE OF CONTENTS
Page
----
1. General. . . . . . . . . . . . . . . . . . . . . . . .
2. Investment Policies. . . . . . . . . . . . . . . . . .
3. Investment Limitations . . . . . . . . . . . . . . . .
4. Performance Data . . . . . . . . . . . . . . . . . . .
5. Management . . . . . . . . . . . . . . . . . . . . . .
6. Determination of Net Asset Value . . . . . . . . . . .
7. Portfolio Transactions . . . . . . . . . . . . . . . .
<PAGE>
8. Additional Purchase and. . . . . . . . . . . . . . . .
Redemption Information . . . . . . . . . . . . . . . .
9. Taxation . . . . . . . . . . . . . . . . . . . . . . .
10. Other Information. . . . . . . . . . . . . . . . . . .
Appendix A - Description of Securities Ratings
- 2 -
<PAGE>
1. GENERAL
THE TRUST. 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. Forum Funds,
Inc. was incorporated on March 24, 1980 and assumed the name of Forum Funds,
Inc. on March 16, 1987. 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 separate classes of shares within each series. The
Trust currently offers shares of fourteen series and has two series that have
not commenced operation as of the date of this SAI. The series of the Trust
are as follows:
Investors Bond Fund
TaxSaver Bond Fund
Daily Assets Cash Fund
Daily Assets Treasury Fund
Daily Assets Government Fund
Daily Assets Tax Saver Fund
Payson Value Fund
Payson Balanced Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund
Austin Global Equity Fund
Oak Hall Equity Fund
Quadra International Equity Fund
Quadra Limited Maturity Treasury Fund
Quadra Opportunistic Bond Fund
Quadra Value Equity Fund
DEFINITIONS. As used in this Statement of Additional Information, the following
terms shall have the meanings listed:
"Board" means the Board of Trustees of Forum Funds.
"Core Trust" means Core Trust (Delaware), a Delaware business trust.
"Core Trust Board" means the Board of Trustees of Core Trust (Delaware).
"FAS" means Forum Administrative Services, LLC.
"FAcS" means Forum Accounting Services, LLC.
"FFC" means Forum Financial Corp.
"FFSI" means Forum Financial Services, Inc.
3
<PAGE>
"Forum Advisors" means Forum Advisors, Inc.
"Fund" means S&P 500 Index Fund, Investors Equity Fund, Small Cap Fund,
International Equity Fund or Emerging Markets Fund.
"Fund Business Day" has the meaning ascribed thereto in the current
Prospectus of the Funds.
"NRSRO" means a nationally recognized statistical rating organization.
"Norwest" means Norwest Investment Management, Inc.
"Portfolio" means Index Portfolio, Schroder U.S. Smaller Companies Portfolio,
Schroder International Portfolio or Schroder Emerging Markets Fund
Institutional Portfolio.
"SAI" means this Statement of Additional Information.
"SCMI" means Schroder Capital Management, Inc.
"SEC" means the U.S. Securities and Exchange Commission.
"Schroder Core" means Schroder Capital Funds.
"Schroder Core Board" means the Board of Trustees of Schroder Core.
"Schroder Portfolios" means Schroder U.S. Smaller Companies Portfolio,
Schroder International Portfolio and Schroder Emerging Markets Fund
Institutional Portfolio.
"Trust" means Forum Funds, a Delaware business trust.
"U.S. Government Securities" has the meaning ascribed thereto by the current
Prospectus of the Funds.
"1940 Act" means the Investment Company Act of 1940, as amended.
4
<PAGE>
2. INVESTMENT POLICIES
INTRODUCTION
The following information supplements the discussion found under "Investment
Objective and Policies" in the Prospectus. Each of S&P 500 Index Fund, Small
Cap Fund, International Equity Fund and Emerging Markets Fund currently seeks
to achieve its investment objective by investing all of its investment assets
in a Portfolio, which has the same investment objective and policies. Because
each Fund has the same investment policies as the Portfolio in which it
invests and currently invests all of its assets in that Portfolio, investment
policies for the Funds and Portfolios are generally discussed in reference to
the Fund.
For temporary defensive purposes, to accumulate cash for investments, or to
meet anticipated redemptions, each Fund may invest in (or enter into
repurchase agreements with banks and broker dealers with respect to)
short-term debt securities, including Treasury bills and other U.S.
Government securities, and certificates of deposit and bankers' acceptances
of U.S. banks. The Funds may also hold cash and time deposits in foreign
banks, denominated in any major foreign currency. In anticipation of foreign
exchange requirements and to avoid losses due to adverse movements in foreign
currency exchange rates, the International Equity Fund and Emerging Markets
Fund also may enter into forward contracts to purchase and sell foreign
currencies. See "Forward Foreign Currency Exchange Contracts" below.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Investment Policies" in the
Prospectus sets forth the circumstances in which a Fund may invest in
"restricted securities". In connection with the Funds' original purchase of
restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund. When
registration is required, however, a considerable period may elapse between
the decision to sell the securities and the time the Fund would be permitted
to sell such securities. A similar delay might be experienced in attempting
to sell such securities pursuant to an exemption from registration. Thus, a
Fund may not be able to obtain as favorable a price as that prevailing at the
time of the decision to sell.
5
<PAGE>
LOANS OF PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must (a) on each business day, at
least equal the market value of the loaned securities and (b) must consist of
cash, bank letters of credit, U.S. Government securities, or other cash
equivalents in which the Fund is permitted to invest. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the
issuing bank must be satisfactory to the Fund. When lending portfolio
securities, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the
term of the loan plus the interest on the collateral securities (less any
finders' or administrative fees the Fund pays in arranging the loan). A Fund
may share the interest it receives on the collateral securities with the
borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Board. A Fund will not
lend its portfolio securities to any officer, director, employee or affiliate
of the Fund or the investment adviser to the Fund. The terms of a Fund's
loans must meet certain tests under the Internal Revenue Code and permit the
Fund to reacquire loaned securities on five business days' notice or in time
to vote on any important matter.
U.S. GOVERNMENT SECURITIES
Each Fund may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities which have remaining
maturates not exceeding one year. Agencies and instrumentalities which issue
or guarantee debt securities and which have been established or sponsored by
the U.S. Government include the Bank for Cooperatives, the Export-Import
Bank, the Federal Farm Credit System, the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation, the Federal Intermediate Credit
Banks, the Federal Land Banks, the Federal National Mortgage Association, the
Government National Mortgage Association and the Student Loan Marketing
Association. Except for obligations issued by the U.S. Treasury and the
Government National Mortgage Association, none of the obligations of the
other agencies or instrumentalities referred to above are backed by the full
faith and credit of the U.S. Government.
BANK OBLIGATIONS
Each Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase
in excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation.
Each Fund also may invest in certificates of deposit issued by foreign banks,
denominated in any major foreign currency. Each Fund will invest in
instruments issued by foreign banks which, in the view of its investment
adviser and the Trustees of the Trust, Core Trust or Schroder Core, are of
credit-worthiness and financial stature in their respective countries
comparable to U.S. banks used by the Fund.
6
<PAGE>
A certificate of deposit is an interest-bearing negotiable certificate issued
by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction. Although the
borrower is liable for payment of the draft, the bank unconditionally
guarantees to pay the draft at its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Funds may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies,
corporations and finance companies. The commercial paper purchased by a Fund
for temporary defensive purposes consists of direct obligations of domestic
issuers which, at the time of investment, are rated "P-1" by Moody's
Investors Service, Inc. ("Moody's") or "A-1" by Standard & Poor's Corporation
("S&P"), or securities which, if not rated, are issued by companies having an
outstanding debt issue currently rated Aa by Moody's or AAA or AA by S&P. The
rating "P-1" is the highest commercial paper rating assigned by Moody's and
the rating "A-1" is the highest commercial paper ratings assigned by S&P.
REPURCHASE AGREEMENTS
Each Fund may invest in securities subject to repurchase agreements with U.S.
banks or broker-dealers maturing in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of
the sale to repurchase that security from the buyer at a mutually agreed-upon
time and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the
security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. Each Fund's investment adviser will monitor
the value of the underlying security at the time the transaction is entered
into and at all times during the term of the repurchase agreement to insure
that the value of the security always equals or exceeds the repurchase price.
In the event of default by the seller under the repurchase agreement, a Fund
may have difficulties in exercising its rights to the underlying securities
and may incur costs and experience time delays in connection with the
disposition of such securities. To evaluate potential risks, the investment
adviser reviews the credit-worthiness of those banks and dealers with which
the Fund enters into repurchase agreements.
CONVERTIBLE SECURITIES
The Funds may invest in convertible preferred stocks and convertible debt
securities. A convertible security is a bond, debenture, note, preferred
stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, carry less risk than the corporation's common stock. The
value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion
value" (the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
7
<PAGE>
DEBT-TO-EQUITY CONVERSIONS
Emerging Markets Fund may invest up to 5% of its net assets in debt-to-equity
conversions. Debt-to-equity conversion programs are sponsored in varying
degrees by certain emerging market countries, particularly in Latin America,
and permit investors to use external debt of a country to make equity
investments in local companies. Many conversion programs relate primarily to
investments in transportation, communication, utilities and similar
infrastructure-related areas. The terms of the programs vary from country to
country, but include significant restrictions on the application of proceeds
received in the conversion and on the repatriation of investment profits and
capital. When inviting conversion applications by holders of eligible debt, a
government usually specifies the minimum discount from par value that it will
accept for conversion. SCMI Adviser believes that debt-to-equity conversion
programs may offer investors opportunities to invest in otherwise restricted
equity securities that have a potential for significant capital appreciation
and intends to invest assets of the Portfolio to a limited extent in such
programs under appropriate circumstances. There can be no assurance that
debt-to-equity conversion programs will continue or be successful or that the
Portfolio will be able to convert all or any of its emerging market debt
portfolio into equity investments.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies)
International Equity Fund and Emerging Markets Fund may engage in
transactions in forward foreign currency contracts.
A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell a currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by the
parties) at a price set at the time of the contract. International Equity
Fund and Emerging Markets Fund may enter into forward contracts as a hedge
against fluctuations in future foreign exchange rates.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit a Fund's ability to effectively hedge its
investments in those emerging markets. Hedging against a decline in the value
of a currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. Such
transactions also limit the opportunity for gain if the value of the hedged
currencies should rise. In addition, it may not be possible for a Fund to
hedge against a devaluation that is so generally anticipated that the Fund is
not able to contract to sell the currency at a price above the devaluation
level it anticipates.
A Fund will enter into forward contracts under certain instances. When a
Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, wish to secure the
price of the security in U.S. dollars or some other foreign currency
8
<PAGE>
which the Portfolio is temporarily holding in its portfolio. By entering
into a forward contract for the purchase or sale (for a fixed amount of
dollars or other currency) of the amount of foreign currency involved in the
underlying security transactions, a Fund will be able to protect itself
against possible loss (resulting from adverse changes in the relationship
between the U.S. dollar or other currency being used for the security
purchase and the foreign currency in which the security is denominated)
during the period between the date on which the security is purchased or sold
and the date on which payment is made or received.
In addition, when a Fund anticipates purchasing securities at some future
date, and wishes to secure the current exchange rate of the currency in which
those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount
of currency equal to part or all of the value of the anticipated purchase,
for a fixed amount of U.S. dollars or other currency.
In all of the above instances, if the currency in which a Fund's portfolio
securities (or anticipated portfolio securities) are denominated rises in
value with respect to the currency which is being purchased, then the Fund
will have realized fewer gains than if the Fund had not entered into the
forward contracts. Furthermore, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures.
To the extent that a Fund enters into forward foreign currency contracts to
hedge against a decline in the value of portfolio holdings denominated in a
particular foreign currency resulting from currency fluctuations, there is a
risk that the Fund may nevertheless realize a gain or loss as a result of
currency fluctuations after such portfolio holdings are sold should the Fund
be unable to enter into an "offsetting" forward foreign currency contract
with the same party or another party. A Fund may be limited in its ability to
enter into hedging transactions involving forward contracts by the Internal
Revenue Code requirements relating to qualifications as a regulated
investment company (see "Taxation").
A Fund is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Adviser. Generally, a Fund will not enter into a forward
contract with a term of greater than one year.
OPTIONS AND HEDGING
As discussed in the Prospectus, certain Funds may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and may purchase options of the same series to effect
closing transactions; and may hedge against potential changes in the market
value of its investments (or anticipated investments) by purchasing put and
call options on portfolio (or eligible portfolio) securities (and the
currencies in which they are denominated) and engaging in transactions
involving futures contracts and options on such contracts.
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Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities
exchanges and are written in over-the-counter transactions ("OTC Options").
Listed options are issued or guaranteed by the exchange on which they trade
or by a clearing corporation such as the Options Clearing Corporation
("OCC"). Ownership of a listed call option gives a Fund the right to buy
from the OCC (in the U.S.) or other clearing corporation or exchange, the
underlying security or currency covered by the option at the stated exercise
price (the price per unit of the underlying security or currency) by filing
an exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell, to the OCC (in
the U.S.) or other clearing corporation or exchange, the underlying security
or currency at that exercise price prior to the expiration date of the
option, regardless of its then current market price. Ownership of a listed
put option would give a Fund the right to sell the underlying security or
currency to the OCC (in the U.S.) or other clearing corporation or exchange
at the stated exercise price. Upon notice of exercise of the put option, the
writer of the option would have the obligation to purchase the underlying
security or currency from the OCC (in the U.S.) or other clearing corporation
or exchange at the exercise price.
The OCC or other clearing corporation or exchange that issues listed options
ensures that all transactions in such options are properly executed. OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with a Fund. With OTC
options, variables such as expiration date, exercise price and premium will
be agreed between a Fund and the transacting dealer. If the transacting
dealer fails to make or take delivery of the securities or amount of foreign
currency underlying an option it has written, a Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction. A
Fund will engage in OTC option transactions only with member banks of the
Federal Reserve System or primary dealers in U.S. Government securities or
with affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million.
OPTIONS ON FOREIGN CURRENCIES. International Equity Fund and Emerging
Markets Fund may purchase and write options on foreign currencies for
purposes similar to those involved with investing in forward foreign currency
exchange contracts. For example, in order to protect against declines in the
dollar value of portfolio securities which are denominated in a foreign
currency, a Fund may purchase put options on an amount of such foreign
currency equivalent to the current value of the portfolio securities
involved. As a result, a Fund would be able to sell the foreign currency for
a fixed amount of U.S. dollars, thereby securing the dollar value of the
portfolio securities (less the amount of the premiums paid for the options).
Conversely, a Fund may purchase call options on foreign currencies in which
securities it anticipates purchasing are denominated to secure a set U.S.
dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. A Fund may also purchase
call and put options to close out written option positions.
A Fund may also write covered call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated
in foreign currencies. If the U.S. dollar value of the portfolio securities
falls as a result of a decline in the exchange rate between the
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foreign currency in which it is denominated and the U.S. dollar, then a loss
to a Fund occasioned by such value decline would be ameliorated by receipt of
the premium on the option sold. At the same time, however, a Fund gives up
the benefit of any rise in value of the relevant portfolio securities above
the exercise price of the option and, in fact, only receives a benefit from
the writing of the option to the extent that the value of the portfolio
securities falls below the price of the premium received. A Fund may also
write options to close out long call option positions. A covered put option
on a foreign currency would be written by the Fund for the same reason it
would purchase a call option, namely, to hedge against an increase in the
U.S. dollar value of a foreign security which the Fund anticipates
purchasing. Here, the receipt of the premium would offset, to the extent of
the size of the premium, any increased cost to a Fund resulting from an
increase in the U.S. dollar value of the foreign security. However, a Fund
could not benefit from any decline in the cost of the foreign security which
is greater than the price of the premium received. A Fund may also write
options to close out long put option positions.
Markets in foreign currency options are relatively new and a Fund's ability
to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although a Fund will not purchase
or write such options unless and until, in the opinion of the SCMI, the
market for them has developed sufficiently to ensure that their risks are not
greater than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are
affected by all of those factors that influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar: as a result, the price of
the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
COVERED CALL WRITING. Emerging Markets Fund are permitted to write covered
call options on portfolio securities and on the U.S. dollar and foreign
currencies in which they are denominated, without limit. S&P 500 Index Fund,
Investors Equity Fund and Small Cap Fund may write
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covered calls on up to 100% of their total assets if the calls are listed on
a domestic securities or commodities exchange. Generally, a call option is
"covered" if a Fund owns (or has the right to acquire without additional cash
consideration (or for additional cash consideration held for the Fund by its
Custodian in a segregated account) the underlying security (currency) subject
to the option. In the case of call options on U.S. Treasury Bills, however,
the Fund might own U.S. Treasury Bills of a different series from those
underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is
also covered if a Fund holds a call on the same security as the underlying
security (currency) of the written option, where the exercise price of the
call used for coverage is equal to or less than the exercise price of the
call or greater than the exercise price of the call written if the mark to
market difference is maintained by a Fund in cash, U.S. Government securities
or other high grade debt obligations which the Portfolio holds in a
segregated account maintained with its custodian.
A Fund will receive a premium from the purchaser in return for a call it has
written. Receipt of such premiums may enable a Fund to earn a higher level of
current income than it would earn from holding the underlying securities
(currencies) alone. Moreover, the premium received will offset a portion of
the potential loss incurred by a Fund if the securities (currencies)
underlying the option are ultimately sold (exchanged) by the Fund at a loss.
Furthermore, a premium received on a call written on a foreign currency will
ameliorate any potential loss of value on the portfolio security due to a
decline in the value of the currency. However, during the option period, the
covered call writer has, in return for the premium, given up the opportunity
for capital appreciation above the exercise price should the market price of
the underlying security (or the exchange rate of the currency in which it is
denominated) increase, but has retained the risk of loss should the price of
the underlying security (or the exchange rate of the currency in which it is
denominated) decline. The premium received will fluctuate with varying
economic market conditions. If the market value of the portfolio securities
(or the currencies in which they are denominated) upon which call options
have been written increases, a Fund may receive a lower total return from the
portion of its portfolio upon which calls have been written than it would
have had such calls not been written.
With respect to listed options and certain OTC options, during the option
period a Fund may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to
specific expiration dates). This obligation is terminated upon the
expiration of the option period or at such earlier time when the writer
effects a closing purchase transaction. A closing purchase transaction is
accomplished by purchasing an option of the same series as the option
previously written. However, once a Fund has been assigned an exercise
notice, the Fund will be unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange
of the underlying currency) or to enable a Fund to write another call option
on the underlying security (currency) with either a different exercise price
or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase
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transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security (currency). Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part or exceeded
by a decline in the market value of the underlying security (currency).
If a call option expires unexercised, a Fund realizes a gain in the amount of
the premium on the option less the commission paid. Such a gain, however,
may be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, a Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on the option less the commission paid.
Options written by a Fund will normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option
may be below, equal to or above the current market value of the underlying
security at the time the option is written.
COVERED PUT WRITING. As a writer of a covered put option, a Fund would incur
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by a
Fund will be exercisable by the purchaser only on a specific date). A put is
"covered" if at all times a Fund maintains with its custodian (in a
segregated account) cash, U.S. Government securities or other high grade
obligations in an amount equal to at least the exercise price of the option.
Similarly, a short put position could be covered by a Fund by its purchase of
a put option on the same security (currency) as the underlying security of
the written option, where the exercise price of the purchased option is equal
to or more than the exercise price of the put written or less than the
exercise price of the put written if the marked to market difference is
maintained by a Fund in cash, U.S. Government securities or other high grade
debt obligations which the Fund holds in a segregated account maintained at
its custodian. In writing puts, a Fund assumes the risk of loss should the
market value of the underlying security (currency) decline below the exercise
price of the option (any loss being decreased by the receipt of the premium
on the option written). In the case of listed options, during the option
period a Fund may be required, at any time, to make payment of the exercise
price against delivery of the underlying security (currency). The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
A Fund will write put options for three purposes: (1) to receive the income
derived from the premiums paid by purchasers; (2) when the investment adviser
wishes to purchase the security (or a security denominated in the currency
underlying the option) underlying the option at a price lower than its
current market price (in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought); and (3) to close
out a long put option position. The potential gain on a covered put option
is limited to the premium received on the option (less the commissions paid
on the transaction) while the potential loss equals the differences between
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the exercise price of the option and the current market price of the
underlying securities (currencies) when the put is exercised, offset by the
premium received (less the commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. S&P 500 Index Fund, Investors Equity Fund
and Small Cap Fund may purchase put options ("puts") that relate to: (i)
securities it holds, (ii) Stock Index Futures (whether or not it holds such
Stock Index Futures in its portfolio), or (iii) broadly-based stock indices.
The Fund may not sell puts other than those it previously purchased, nor
purchase puts on securities it does not hold. The fund may purchase calls:
(a) as to securities, broadly-based stock indices or Stock Index Futures, or
(b) to effect a "closing purchase transaction" to terminate its obligation on
a call it has previously written. A call or put may be purchased only if,
after such purchase, the value of all put and call options held by the Fund
would not exceed 5% of the Fund's total assets. Emerging Markets Fund may
purchase listed and OTC call and put options in amounts equaling up to 5% of
its total assets. A Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against
an increase in price of a security it anticipates purchasing or, in the case
of a call option on foreign currency, to hedge against an adverse exchange
rate move of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is
denominated. The purchase of the call option to effect a closing transaction
on a call written over-the-counter may be a listed or an OTC option. In
either case, the call purchased is likely to be on the same securities
(currencies) and have the same terms as the written option. If purchased
over-the-counter, the option would generally be acquired from the dealer or
financial institution which purchased the call written by a Fund.
A Fund may purchase put options on securities (currencies) which it holds in
its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the
put purchased in an amount greater then the premium paid for the option, a
Fund would incur no additional loss. In addition, a Fund may sell a put
option it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain
or loss depending upon whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option that
is sold. Any such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by a Fund expired without being sold or exercised, the
premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price if the market price of the
underlying security (or the value of its denominated currency) increases, but
has retained the risk of loss if the price of the underlying security (or the
value of its denominated currency) declines. The writer has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver or receive the underlying securities at the
exercise price.
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Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to
purchase an offsetting OTC option, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered
call option writer may not be able to sell an underlying security at a time
when it might otherwise be advantageous to do so. A covered put option
writer who is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option would continue to bear the risk of decline in the
market price of the underlying security until the option expires or is
exercised. In addition, a covered put writer would be unable to utilize the
amount held in cash or U.S. Government or other high grade short-term
obligations as security for the put option for other investment purposes
until the exercise or expiration of the option.
A Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options, since such options will generally only be closed
out by entering into a closing purchase transaction with the purchasing
dealer. However, a Fund may be able to purchase an offsetting option that
does not close out its position as a writer but constitutes an asset of equal
value to the obligation under the option written. If a Fund is not able to
either enter into a closing purchase transaction or purchase an offsetting
position, it will be required to maintain the securities subject to the call,
or the collateral underlying the put, even though it might not be
advantageous to do so, until a closing transaction can be entered into (or
the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an exchange; (v) inadequacy of the facilities of an
exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
exchange (or in that class or series of options) would cease to exist.
In the event of the bankruptcy of a broker through which a Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in
the event of the bankruptcy of the writer of an OTC option purchased by a
Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions will be entered into by a Fund only with brokers or
financial institutions deemed creditworthy by SCMI.
Exchanges have established limitations governing the maximum number of
options on the same underlying security or futures contract (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of
positions found to be in
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violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which a Fund
may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. If the option markets close before the
markets for the underlying securities, significant price and rate movements
can take place in the underlying markets that cannot be reflected in the
option markets.
The extent to which a Fund may enter into transactions involving options may
be limited by the Internal Revenue Code's requirements for qualification as a
regulated investment company and a Fund's intention to qualify as such (see
"Taxation").
FUTURES CONTRACTS. Certain Funds may purchase and sell interest rate,
currency, and index futures contracts ("futures contracts") that are traded
on U.S. and foreign commodity exchanges, on such underlying securities as
U.S. Treasury bonds, notes and bills, and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency futures") and on such indices of U.S. and foreign securities as
may exist or come into being ("index futures").
A Fund will purchase or sell interest rate futures contracts for the purpose
of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest
rates. If the investment adviser anticipates that interest rates may rise
and, concomitantly, the price of certain of its portfolio securities fall, a
Fund may sell an interest rate futures contract. If declining interest rates
are anticipated, a Fund may purchase an interest rate futures contract to
protect against a potential increase in the price of securities the Fund
intends to purchase. Subsequently, appropriate securities may be purchased
by a Fund in an orderly fashion; as securities are purchased, corresponding
futures positions would be terminated by offsetting sales of contracts.
A Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If it anticipates that the prices of
securities it holds may fall, a Fund may sell an index futures contract.
Conversely, if a Fund wishes to hedge against anticipated price rises in
those securities which it intends to purchase, the Fund may purchase an index
futures contract.
A Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated
for the purposes of hedging against anticipated changes in currency exchange
rates. A Fund will enter into currency futures contracts for the same
reasons as set forth above for entering into forward foreign currency
exchange contracts; namely, to secure the value of a security purchased or
sold in a given currency vis-a-vis a different currency or to hedge against
an adverse currency exchange rate movement of a portfolio security's (or
anticipated portfolio security's) denominated currency vis-a-vis a different
currency.
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In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out short or long positions maintained by a
Fund in corresponding futures contracts.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale
is closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery
date. If the sale price exceeds the offsetting purchase price, the seller
would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same aggregate amount of the
specific type of security (currency) and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize
a gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss. There is no assurance that a Fund will be
able to enter into a closing transaction.
INTEREST RATE FUTURES CONTRACTS. When a Fund enters into an interest rate
futures contract, it is initially required to deposit with its custodian (in
a segregated account in the name of the broker performing the transaction) an
"initial margin" of cash or U.S. Government securities or other high grade
short-term obligations equal to approximately 2% of the contract amount.
Initial margin requirements are established by the exchanges on which futures
contracts trade and may change. In addition, brokers may establish margin
deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of money
by a brokers' client but is, rather, a good faith deposit on the futures
contract that will be returned to a Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and a
Fund may be required to make subsequent deposits of cash or U.S. Government
securities (called "variation margin") with the Fund's futures contract
clearing broker, which are reflective of price fluctuations in the futures
contract.
CURRENCY FUTURES. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
SCMI will assess such factors as cost spreads, liquidity and transaction
costs in determining whether to use futures contracts or forward contracts in
its foreign currency transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply generally to the buying and selling of futures. In
addition, there are risks associated with foreign currency futures contracts
and their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign
currency futures contract must occur within the country issuing the
underlying currency. Thus, a Fund
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must accept or make delivery of the underlying foreign currency in accordance
with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery
which are assessed in the issuing country.
INDEX FUTURES CONTRACTS. Each Fund,except International Equity Fund, may
invest in index futures contracts. An index futures contract sale creates an
obligation by a Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by a Fund, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indices do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date that reflects
accumulated profits and losses credited or debited to each party's account.
A Fund is required to maintain margin deposits with brokerage firms through
which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to
current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation
margin payments. A Fund may be required to make additional margin payments
during the term of the contract.
At any time prior to expiration of the futures contract, a Fund may elect to
close the position by taking an opposite position, which will operate to
terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by
or released to a Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. A Fund may purchase and write call and put
options on futures contracts traded on an exchange and may enter into closing
transactions with respect to such options to terminate an existing position.
An option on a futures contract gives the purchaser the right (in return for
the premium paid) to assume a position in a futures contract (a long position
if the option is a call and a short position if the option is a put) at a
specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract.
A Fund will purchase and write options on futures contracts for purposes
identical to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out
a long or short position in futures contracts. If, for example, the
investment adviser wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of its
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Adviser seeks to hedge. Any premiums received
in the writing of options on futures contracts may provide a further hedge
against losses resulting from price declines in portions of a Fund's
investment portfolio.
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Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, a Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in SCMI's opinion, the market for such options has developed sufficiently
that the risks in connection with them are not greater than the risks in
connection with transactions in the underlying foreign currency futures
contracts.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. A Fund may not enter
into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of a Fund's total
assets, after taking into account unrealized gains and unrealized losses on such
contracts it has entered into, provided, however, that in the case of an option
that is in-the-money (the exercise price of the call (put) option is less (more)
than the market price of the underlying security) at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. However, there is no
overall limitation on the percentage of a Fund's assets which may be subject to
a hedge position. In addition, in accordance with the regulations of the
Commodity Futures Trading Commission ("CFTC") under which a Fund is exempted
from registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions for purposes of
hedging a part or all of its portfolio. Except as described above, there are no
other limitations on the use of futures and options thereon by a Fund.
The writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. A Fund may sell
a futures contract to protect against the decline in the value of securities (or
the currency in which they are denominated) held by a Fund. However, it is
possible that the futures market may advance and the value of a Fund's
securities (or the currency in which they are denominated) may decline. If this
occurs, a Fund will lose money on the futures contract and also experience a
decline in value of its portfolio securities. While this might occur for only a
very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If a Fund purchases a futures contract to hedge against the increase in value of
securities it intends to buy (or the currency in which they are denominated),
and the value of such securities (currencies) decreases, then a Fund may
determine not to invest in the securities as planned and will realize a loss on
the futures contract that is not offset by a reduction in the price of the
securities.
If a Fund has sold a call option on a futures contract, it will cover this
position by holding (in a segregated account maintained at its Custodian) cash,
U.S. Government Securities or other high
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grade debt obligations equal in value (when added to any initial or variation
margin on deposit) to the market value of the securities (currencies) underlying
the futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities (currencies) underlying the futures
contract, or by holding a call option permitting a Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.
In addition, if a Fund holds a long position in a futures contract it will hold
cash, U.S. Government Securities or other high grade debt obligations equal to
the purchase price of the contract (less the amount of initial or variation
margin on deposit) in a segregated account maintained for a Fund by its
Custodian. Alternatively, a Fund could cover its long position by purchasing a
put option on the same futures contract with an exercise price as high or higher
than the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, a Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, a Fund may be required to
take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
a Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon that are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges and brokerage
commissions, clearing costs and other transaction costs may be higher. Greater
margin requirements may limit a Fund's ability to enter into certain commodity
transactions on foreign exchanges. Moreover, differences in clearance and
delivery requirements on foreign exchanges may cause delays in the settlement of
a Fund's foreign exchange transactions.
In the event of the bankruptcy of a broker through which a Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by a Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by a Fund only with brokers
or financial institutions deemed creditworthy by SCMI.
While the futures contracts and options transactions to be engaged in by a Fund
for the purpose of hedging its portfolio securities are not speculative in
nature, there are risks inherent in the use of such instruments. One such risk
which may arise in employing futures contracts to protect against the price
volatility of portfolio securities (and the currencies in which they are
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denominated) is that the prices of securities and indices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of a Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which a Fund seeks a hedge. A correlation may
also be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
There may exist an imperfect correlation between the price movements of futures
contracts purchased by a Fund and the movements in the prices of the securities
(currencies) which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities or currency markets and futures markets could
result. Price distortions could also result if investors in futures contracts
choose to make or take delivery of underlying securities rather than engage in
closing transactions due to the resultant reduction in the liquidity of the
futures market. In addition, because the deposit requirements in the futures
markets are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market can be anticipated with the
resulting speculation causing temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which a Fund may invest. In the event a liquid
market does not exist, it may not be possible to close out a futures position,
and in the event of adverse price movements, a Fund would continue to be
required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent a Fund from closing out a contract, which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause a Fund to make or take delivery of the
underlying securities (currencies) at a time when it may be disadvantageous to
do so.
The extent to which a Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such.
TAX ASPECTS OF HEDGING INSTRUMENTS. The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986 (the "Code"). One
of the tests for such qualification is that less than 30% of its gross income
must be derived from gains realized on the sale of securities held for less than
three months. Due to this limitation, the Fund will limit the extent to which
it engages in the following activities, but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts
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that expire in less than three months; (iii) effecting closing transactions with
respect to calls or puts purchased less than three months previously; (iv)
exercising puts held by the Fund for less than three months; and (v) writing
calls on investments held for less than three months.
WARRANTS AND STOCK RIGHTS. A Fund may invest in warrants, which are options to
purchase an equity security at a specified price (usually representing a premium
over the applicable market value of the underlying equity security at the time
of the warrant's issuance). A Fund may not invest more than 5% of its net
assets (at the time of investment) in warrants (other than those that have been
acquired in units or attached to other securities). No more than 2% of a Fund's
net assets (at the time of investment) may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Investments in warrants
involve certain risks, including the possible lack of a liquid market for the
resale of the warrants, potential price fluctuations as a result of speculation
or other factors and failure of the price of the underlying security to reach a
level at which the warrant can be prudently exercised (in which case the warrant
may expire without being exercised, resulting in the loss of a Fund's entire
investment therein). The prices of warrants do not necessarily move parallel to
the prices of the underlying securities. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
In addition, a Fund may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.
FOREIGN SECURITIES
Investment in the securities of foreign issuers may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may be less active than U.S. markets, trading may be thin and consequently
securities prices may be more volatile. The Funds' investment adviser, will, in
general, invest only in securities of companies and governments of countries
which, in its judgment, are both politically and economically stable.
Nevertheless, all foreign investments are subject to risks of foreign political
and economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls or other limitations on the
repatriation of foreign capital and changes in foreign governmental attitudes
toward private investment, possibly leading to nationalization, increased
taxation, or confiscation of Portfolio assets.
DEPOSITORY RECEIPTS
Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
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trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets.
Unsponsored ADRs may be created without the participation of the foreign issuer.
Holders of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
USE OF FORWARD CONTRACTS IN FOREIGN EXCHANGE TRANSACTIONS
To protect or "hedge" against adverse movements in foreign currency exchange
rates, International Equity Fund and Emerging Markets Fund may invest in forward
contracts to purchase or sell an agreed-upon amount of a specified currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. Such
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Although such contracts tend to minimize the risk of loss
due to a decline in the value of the currency which is sold, they expose a Fund
to the risk that the counterparty is unable to perform and they tend to limit
commensurately any potential gain which might result should the value of such
currency increase during the contract period.
HIGH YIELD/JUNK BONDS
Small Cap Fund and International Equity Fund may invest up to 5% of its assets
in bonds rated below Baa by Moody's or BBB by S&P (commonly known as "high
yield/high risk securities" or "junk bonds"). Emerging Markets Fund may invest
up to 35% of its assets in such high yield/high risk securities. Securities
rated lower than Baa by Moody's or BBB by S&P are classified as non-investment
grade securities and are considered speculative. Junk bonds may be issued as a
consequence of corporate restructurings (such as leveraged buyouts, mergers,
acquisitions, debt recapitalizations, or similar events) or by smaller or highly
leveraged companies. Although the growth of the high yield securities market in
the 1980's paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goal, or to obtain additional financing. In addition, the market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the market for investment grade securities. Under adverse market or
economic conditions, the market for high yield securities could contract
further, independent of any specific adverse changes in the condition of a
particular issuer. As a result, the Fund could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of
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such lower rated or unrated securities, under these circumstances, may be less
than the prices used in calculating the Fund's net asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Fund may have to use subjective rather than
objective criteria to value its junk bond investments accurately and rely more
heavily on the judgment of the Fund's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by
federally insured savings and loans associations of their investments in high
yield bonds. Also, from time to time, Congress has considered legislation to
restrict or eliminate the corporate tax deduction for interest payments or to
regulate corporate restructurings such as takeovers, mergers or leveraged
buyouts. These laws could adversely affect the Fund's net asset value and
investment practices, the market for high yield securities, the financial
condition of issuers of these securities, and the value of outstanding high
yield securities.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.
SHORT SALES AGAINST-THE-BOX
After the Fund makes a short sale against-the-box, while the short position is
open, the Fund must own an equal amount of the securities sold short; or by
virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out.
3. INVESTMENT LIMITATIONS
The following investment restrictions restate or are in addition to those
described under "Investment Objective and Policies" and "Additional Investment
Policies and Risk Considerations" in the Prospectus. Each Fund has adopted the
following investment limitations which are fundamental policies of the Funds,
unless otherwise stated. Each Fund that invests in a Portfolio has the same
fundamental investment policies as the Portfolio in which it invests. Thus,
reference to any Fund that invests in a Portfolio includes reference to the
Portfolio in which that Fund invests:
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(a) Diversification:
No Fund (other than Emerging Markets Fund) may, with respect to 75% of its
assets, purchase a security if as a result: (i) more than 5% of its assets
would be invested in the securities of any single issuer or (ii) the Fund
would own more than 10% of the outstanding voting securities of any single
issuer. This restriction does not apply to securities issued by the U.S.
Government, its agencies or instrumentalities.
(b) Illiquid Securities
No Fund will invest more than 10% of its assets in "illiquid securities",
which are securities that cannot be disposed of within seven days at their
then current value. For purposes of this limitation, "illiquid securities"
includes, except in those circumstances described below, (i) "restricted
securities", which are securities that cannot be resold to the public
without registration under the Federal securities laws, and (ii) securities
of issuers having a record (together with all predecessors) of less than
three years of continuous operation.
(c) Concentration
No Fund (except Emerging Markets Fund) will invest 25% or more of the value
of its total assets in any one industry.
(d) Underwriting Activities
No Fund will underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under U.S. securities
laws.
(e) Borrowing
International Equity Fund will not borrow money, except from banks, for
temporary emergency purposes and then only in an amount not exceeding 5% of
the value of the total assets of the Fund.
Small Cap Fund may borrow money from banks or by entering into reverse
repurchase agreements, but the Fund will limit borrowings to amounts not in
excess of 33 1/3% of the value of the Fund's total assets (computed
immediately after the borrowing).
S&P 500 Index Fund and Investors Equity Fund may borrow money for temporary
or emergency purposes, including the meeting of redemption requests, but no
in excess of 33 1/3 of the value of the Fund's total assets (computed
immediately after the borrowing).
(f) Pledging
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Small Cap Fund and International Equity Fund may not pledge, mortgage or
hypothecate its assets to an extent greater than 10% of the value of the
total assets of the Fund. With respect to Small Cap Fund, however, this
does not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies.
As a non-fundamental policy, Index Fund and Investors Equity Fund may not
pledge, mortgage, hypothecate or encumber any of its assets except to
secure permitted borrowings or to secure other permitted transactions.
(g) Margin and Short Sales
International Equity Fund may not purchase securities on margin or sell
short.
Each Fund (other than International Equity Fund) may not purchase
securities on margin; however, the Fund may make margin deposits in
connection with any Hedging Instruments, which it may use as permitted by
any of its other fundamental policies.
No Fund may sell securities short.
(h) Investing for Control
No Fund may make investments for the purpose of exercising control or
management.
(i) Real Estate
No Fund may purchase or sell real estate, provided that the a Fund may
invest in securities issued by companies which invest in real estate or
interests therein.
(j) Lending
International Equity Fund will not make loans to other persons, provided
that for purposes of this restriction, entering into repurchase agreements,
acquiring corporate debt securities and investing in U.S. Government
obligations, short-term commercial paper, certificates of deposit and
bankers' acceptances shall not be deemed to be the making of a loan.
S&P 500 Index Fund, Investors Equity Fund and Small Cap Fund will not lend
money except in connection with the acquisition of that portion of
publicly-distributed debt securities which the Fund's investment policies
and restrictions permit it to purchase (see "Investment Objective" and
"Investment Policies" in the Prospectus); the Funds may also make loans of
portfolio securities (see "Loans of Portfolio Securities") and enter into
repurchase agreements (see "Repurchase Agreements");
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Emerging Markets Fund will not lend money except in connection with the
acquisition of debt securities which the Fund's investment policies and
restrictions permit it to purchase (see "Investment Objective" and
"Investment Policies" in the Prospectus); the Portfolio may also make loans
of portfolio securities (see "Loans of Portfolio Securities") and enter
into repurchase agreements (see "Repurchase Agreements");
(k) Purchases and Sales of Commodities
International Equity Fund will invest in commodities; commodity contracts
other than foreign currency forward contracts; or oil, gas and other
mineral resource, lease, or arbitrage transactions.
No Fund (other than International Equity Fund) will invest in commodities
or commodity contracts (other than Hedging Instruments which it may use as
permitted by any of its other fundamental policies, whether or not any such
Hedging Instrument is considered to be a commodity or a commodity
contract);
(l) Options and Futures Contracts
International Equity Fund may not write, purchase or sell options or puts,
calls, straddles, spreads, or combinations thereof.
No Fund (other than International Equity Fund) may purchase or write puts
or calls except as permitted by any of its other fundamental investment
policies.
(n) Warrants
No Fund may invest in warrants, valued at the lower of cost or market, more
than 5% of the value of the Portfolio's net assets (included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities may be deemed to be without value.). This policy is
non-fundamental with respect to S&P 500 Index Fund and Small Cap Fund.
4. PERFORMANCE DATA
The Funds may, from time to time, include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a Fund
over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
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P (1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV - the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the one year period ended __________, the average annual total return of
each Fund was as follows:
Quotations of total return will reflect only the performance of a hypothetical
investment in a Fund during the particular time period shown. Total return for
a Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, a Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of a Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
5. MANAGEMENT
TRUSTEES AND OFFICERS
THE TRUST
The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
John Y. Keffer,* Chairman and President (age 54)
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President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Administrative Services, LLC (a mutual fund
administrator), Forum Financial Corp. (a registered transfer agent) and
Forum Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Trustee and/or officer of various registered investment companies for which
Forum Administrative Services, LLC serves as manager or administrator and
for which Forum Financial Services, Inc. serves as distributor. His
address is Two Portland Square, Portland, Maine 04101.
Costas Azariadis, Trustee (age 53)
Professor of Economics, University of California, Los Angeles, since July
1992. Prior thereto, Dr. Azariadis was Professor of Economics at the
University of Pennsylvania. His address is Department of Economics,
University of California, Los Angeles, 405 Hilgard Avenue, Los Angeles,
California 90024.
James C. Cheng, Trustee (age 54)
President of Technology Marketing Associates (a marketing consulting
company) since September 1991. Prior thereto, Mr. Cheng was President and
Chief Executive Officer of Network Dynamics, Incorporated (a software
development company). His address is 27 Temple Street, Belmont,
Massachusetts 02178.
J. Michael Parish, Trustee (age 53)
Partner at the law firm of Winthrop Stimson Putnam & Roberts since 1989.
Prior thereto, he was a partner at LeBoeuf, Lamb, Leiby & MacRae, a law
firm of which he was a member from 1974 to 1989. His address is 40 Wall
Street, New York, New York 10005.
Mark D. Kaplan, Vice President, Assistant Treasurer and Assistant Secretary (age
41)
Managing Director at Forum Financial Services, Inc. since September 1995.
Prior thereto, Mr. Kaplan was Managing Director and Director of Research at
H.M. Payson & Co. His address is Two Portland Square, Portland, Maine
04101.
Robert Campbell, Treasurer (age 36)
Director of Fund Accounting, Forum Financial Corp., with which he has been
associated since April 1997. Prior thereto, Mr. Campbell was the Vice
President of Domestic Operations for State Street Fund Services in Toronto,
Ontario, and prior to that, Mr. Campbell served as Assistant Vice
President/Fund Manager of Mutual Fund, State Street Bank & Trust in Boston,
Massachusetts. Mr. Campbell is also treasurer of various registered
investment companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
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David I. Goldstein, Secretary (age 35)
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1991. Prior thereto, Mr. Goldstein was associated with the law firm
of Kirkpatrick & Lockhart. Mr. Goldstein is also Secretary or Assistant
Secretary of various registered investment companies for which Forum
Administrative Services, LLC or Forum Financial Services, Inc. serves as
manager, administrator and/or distributor. His address is Two Portland
Square, Portland, Maine 04101.
Max Berueffy, Assistant Secretary (age 44)
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1994. Prior thereto, Mr. Berueffy was on the staff of the U.S.
Securities and Exchange Commission for seven years, first in the appellate
branch of the Office of the General Counsel, then as a counsel to
Commissioner Grundfest and finally as a senior special counsel in the
Division of Investment Management. Mr. Berueffy is also Secretary or
Assistant Secretary of various registered investment companies for which
Forum Administrative Services, LLC or Forum Financial Services, Inc. serves
as manager, administrator and/or distributor. His address is Two Portland
Square, Portland, Maine 04101.
Cheryl O. Tumlin, Assistant Secretary (age 31)
Assistant Counsel, Forum Financial Services, Inc., with which she has been
associated since July 1996. Prior thereto, Ms. Tumlin was on the staff of
the U.S. Securities and Exchange Commission as an attorney in the Division
of Market Regulation and prior thereto Ms. Tumlin was an associate with the
law firm of Robinson Silverman Pearce Aronsohn & Berman in New York, New
York. Ms. Tumlin is also Assistant Secretary of various registered
investment companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. Her address is Two Portland Square, Portland, Maine 04101.
M. Paige Turney, Assistant Secretary (age 28).
Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1995. Ms. Turney was employed from 1992 as a Senior Fund
Accountant with First Data Corporation in Boston, Massachusetts. Ms.
Turney is also Assistant Secretary of various registered investment
companies for which Forum Administrative Services, LLC or Forum Financial
Services, Inc. serves as manager, administrator and/or distributor. Prior
thereto she was a student at Montana State University Her address is Two
Portland Square, Portland, Maine 04101.
TRUSTEE COMPENSATION. Each Trustee of the Trust (other than John Y. Keffer, who
is an interested person of the Trust) is paid $1,000 for each Board meeting
attended (whether in person or by electronic communication) and is paid $1,000
for each committee meeting attended on a
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date when a Board meeting is not held. As of March 31, 1997, in addition to
$1,000 for each Board meeting attended, each Trustee receives $100 per active
portfolio of the Trust. To the extent a meeting relates to only certain
portfolios of the Trust, Trustees are paid the $100 fee only with respect to
those portfolios. Trustees are also reimbursed for travel and related expenses
incurred in attending meetings of the Board. No officer of the Trust is
compensated by the Trust.
The following table provides the aggregate compensation paid to each Trustee.
The Trust has not adopted any form of retirement plan covering Trustees or
officers. Information is presented for the fiscal year ended March 31, 1997.
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
Mr. Keffer None None None None
Mr. Azariadis $4,000 None None $4,000
Mr. Cheng $4,000 None None $4,000
Mr. Parish $4,000 None None $4,000
THE PORTFOLIOS
TRUSTEES AND OFFICERS OF CORE TRUST. The Trustees and officers of Core Trust
and their principal occupations during the past five years and ages are set
forth below. Each Trustee who is an "interested person" (as defined by the 1940
Act) of Core Trust is indicated by an asterisk. Messrs. Keffer, Azariadis,
Cheng and Parish, Trustees of Core Trust, and Mr. Goldstein, Secretary of Core
Trust, all currently serve as Trustees and/or officers of the Trust.
Accordingly, for background information pertaining to these Trustees, see
"Management - Trustees and Officers -The Trust."
John Y. Keffer,* Chairman and President.
Costas Azariadis, Trustee, Age 53.
James C. Cheng, Trustee, Age 54.
J. Michael Parish, Trustee, Age 53.
Richard C. Butt, Treasurer
CPA, Managing Director, Operations, Forum Financial Corp. since 1996.
Prior thereto, Mr. Butt was a consultant in the financial services division of
KPMG Peat Marwick LLP ("KPMG"). Prior to his employment at KPMG, Mr. Butt was
President of 440 Financial Distributors, Inc., the distribution subsidiary of
440 Financial Group, and Senior Vice President of the parent company. Prior
thereto, he was a Vice President at Fidelity Services Company. Mr. Butt is
also treasurer of various registered investment companies for which Forum
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Administrative Services, LLC serves as administrator. His address is Two
Portland Square, Portland, Maine 04101.
David I. Goldstein, Secretary (age 35)
Sara M. Clark, Vice President, Assistant Secretary and Assistant Treasurer., Age
33.
Managing Director, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark was
Controller of Wright Express Corporation (a national credit card company)
and for six years prior thereto was employed at Deloitte & Touche LLP as an
accountant. Ms. Clark is also an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
Thomas G. Sheehan, Assistant Secretary, Age 42.
Managing Director and Counsel, Forum Financial Services, Inc., with which
he has been associated since 1993. Prior thereto, Mr. Sheehan was Special
Counsel to the Division of Investment Management of the SEC. Mr. Sheehan
is also an officer of various registered investment companies for which
Forum Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
Renee A. Walker, Assistant Secretary, Age 27.
Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, Ms. Walker was an administrator at
Longwood Partners (the manager of a hedge fund partnership) for a year.
After graduating from college, from 1991 to 1993 Ms. Walker was a sales
representative assistant at PaineWebber Incorporated (a broker-dealer).
Her address is Two Portland Square, Portland, Maine 04101.
TRUSTEES AND OFFICERS OF SCHRODER CORE. The following information relates to
the principal occupations of each Trustee and executive officer of the Schroder
Core during the past five years and shows the nature of any affiliation with
Schroder. Messrs. Keffer, Goldstein and Sheehan, officers of Schroder Core, all
currently serve as officers of the Trust or Core Trust. Accordingly, for
background information pertaining to these officers, see "Trustees and Officers
- -- The Trust" and "Trustees and Officers -- The Portfolios -- Trustees and
Officers of Core Trust above.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
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John I. Howell, Greenwich, Connecticut - Trustee of the Trust - Private
Consultant since February 1987; Honorary Director, American International Group,
Inc.; Director, American International Life Assurance Company of New York.
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.
Mark J. Smith (b), 33 Gutter Lane, London, England - President and Trustee of
the Trust - First Vice President of SCMI since April 1990; Director and Vice
President, Schroder Advisors.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton (b)(c), 787 Seventh Avenue, New York, New York -
Vice President of the Trust - Secretary of SCM since July 1995; Secretary of
Schroder Advisors since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.
Catherine S. Wooledge, Two Portland Square, Portland, Maine 04101 - Assistant
Treasurer and Assistant Secretary of the Trust - Counsel, Forum Financial
Services, Inc. since November 1996. Prior thereto, associate at Morrison &
Foerster, Washington, D.C. from October 1994 to November 1996, associate
corporate counsel at Franklin Resources, Inc. from September 1993 to September
1994, and prior thereto associate at Drinker Biddle & Reath, Philadelphia, PA.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
Robert Jackowitz(b)(c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisors since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
John Y. Keffer, Vice President of the Trust.
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Jane P. Lucas(c), 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Director and Senior Vice President SCMI; Director of SCM since September
1995; Assistant Director Schroder Investment Management Ltd. since June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the Trust.
Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
Alexandra Poe, 787 Seventh Avenue, New York, New York - Secretary and Vice
President of the Trust - Vice President of SCMI since August 1996; Fund Counsel
and Senior Vice President of Schroder Advisors since August 1996; prior thereto
an investment management attorney with Gordon Altman Butowsky Weitzen Shalov &
Wein since July 1994; prior thereto counsel and Vice President of Citibank, N.A.
since 1989.
Mary Kunkemueller, 787 Seventh Avenue, New York, New York - Assistant Secretary
of the Trust.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Advisors is a wholly owned subsidiary of SCMI, which is a wholly
owned subsidiary of Schroders Incorporated, which in turn is an indirect, wholly
owned U.S. subsidiary of Schroders plc.
(c) Schroder Capital Management, Inc. ("SCMI") is a wholly owned subsidiary of
Schroder Wertheim Holdings Incorporated which is a wholly owned subsidiary of
Schroders, Incorporated, which in turn is an indirect wholly owned U.S.
subsidiary of Schroders plc.
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INVESTMENT ADVISERS
Forum Advisors, Inc. serves as investment adviser to Investors Equity
Fund pursuant to an investment advisory agreement with the Trust. Subject to
the general control of the Board, Forum Advisors is responsible for among
other things, developing a continuing investment program for the Fund in
accordance with its investment objective and reviewing the investment
strategies and policies of the Fund. Forum Advisors was incorporated under
the laws of Delaware in 1987 and is registered under the Investment Advisers
Act of 1940. For its services, Forum Advisors receives an advisory fee at an
annual rate of 0.__% of Investor Equity Fund's average daily net assets.
Forum Advisors has entered into an investment sub-advisory agreement
with Peoples Heritage to exercise certain investment discretion over the
assets (or a portion of assets) of the Fund. Although Peoples Heritage has
certain advisory responsibility for the Fund it does not make daily
investment decisions for the Fund and does not receive an advisory fee.
Peoples Heritage, located at One Portland Square, Portland, Maine 04101, is
[an indirect subsidiary] of Peoples Heritage Financial Group, a multi-bank
holding company. As of October 31, 1997, Peoples Heritage Financial Group
had assets of $___ billion. As of ____________, Peoples Heritage and its
affiliates managed assets with a value of approximately $___ billion.
Subject to the general supervision of the Core Trust Board, Norwest
provides investment advisory services to Index Portfolio. Norwest manages the
investment and reinvestment of the assets of Index Portfolio and continuously
reviews, supervises and administers the Portfolio's investments. In this
regard, it is the responsibility of Norwest to make decisions relating to
Index Portfolio's investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For
its services with respect to the Portfolio, Norwest receives a monthly
advisory fee equal on an annual basis to 0.15% of the Portfolio's average
daily net assets, which Index Fund indirectly bears through investment in the
Portfolio. Norwest, which is located at Norwest Center, Sixth Street and
Marquette, Minneapolis, Minnesota 55479, is an indirect subsidiary of Norwest
Corporation, a multi-bank holding company that was incorporated under the
laws of Delaware in 1929. As of October 31, 1997, Norwest Corporation had
assets of $___ billion, which made it the 11th largest bank holding company
in the United States. As of October 31, 1997, Norwest and its affiliates
managed assets with a value of approximately $___ billion.
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as Adviser to the
Schroder Portfolios pursuant to an investment advisory agreement. SCMI is a
wholly-owned U.S. subsidiary of Schroders Incorporated, the wholly-owned U.S.
holding company subsidiary of Schroders plc. Schroders plc is the holding
company parent of a large worldwide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in seventeen countries worldwide. The
Schroder Group specializes in providing investment management services, with
Group funds under management currently in excess of $90 billion.
Pursuant to the investment advisory agreement, SCMI is responsible for managing
the investment and reinvestment of the assets included in each of the Schroder
Portfolios and for continuously reviewing, supervising and administering the
Portfolio's investments. In this regard, it is the responsibility of SCMI to
make decisions relating to the Portfolio's investments and to place purchase and
sale orders regarding such investments with brokers or dealers selected by it in
its discretion. SCMI also furnishes to the Board, which has overall
responsibility for the business and affairs of Schroder Core, periodic reports
on the investment performance of the Portfolio.
Under the terms of the investment advisory agreement, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.
The investment advisory agreement will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Portfolio (as defined by the 1940 Act) or
by the Schroder Core Board and (ii) by a majority of the Schroder Core Trustees
who are not parties to such agreement or "interested persons" (as defined in the
1940 Act) of any such party. The investment advisory agreement may be
terminated without penalty by vote of the Trustees of Schroder Core or the
interestholders of the Portfolio on 60 days' written notice to the Adviser, or
by the Adviser on 60 days' written notice to Schroder Core and it will terminate
automatically if assigned. The investment advisory agreement also provides
that, with respect to the Portfolio, neither SCMI nor its personnel shall be
liable for any error of judgment or mistake of law or for any act or omission in
the performance of its or their duties to the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of the SCMI's or
their duties or by reason of reckless disregard of its or their obligations and
duties under the investment advisory agreement.
For its services, each of U.S. Smaller Companies Portfolio and International
Equity Portfolio pay SCMI a fee at an annual rate of 0.45% of its average
daily net assets.
ADMINISTRATIVE SERVICES
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THE FUNDS
Forum Administrative Services, LLC ("FAS") acts as administrator to the Trust on
behalf of the Fund pursuant to an Administration Agreement with the Trust. As
administrator, FAS provides management and administrative services necessary to
the operation of the Trust (which include, among other responsibilities,
negotiation of contracts and fees with, and monitoring of performance and
billing of, the transfer agent and custodian and arranging for maintenance of
books and records of the Trust), and provides the Trust with general office
facilities. The Administration Agreement will remain in effect for a period of
twelve months with respect to the Fund and thereafter is automatically renewed
each year for an additional term of one year.
The Administration Agreement terminates automatically if it is assigned and may
be terminated without penalty with respect to the Fund by vote of the Fund's
shareholders or by either party on not more than 60 days' written notice. The
Administration Agreement also provides that FAS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of Forum's duties or by reason of
reckless disregard of its obligations and duties under the Administration
Agreement.
At the request of the Board, FAS provides persons satisfactory to the Board to
serve as officers of the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
FAS, the Adviser, the subadviser or their affiliates.
THE PORTFOLIOS
On behalf of Index Portfolio, Core Trust has entered into an administration
agreement with Forum Financial Services, Inc. For its administrative
services, FFSI receives from the Portfolios a fee at an annnual rate of ____
of Index Portfolio's average daily net assets.
On behalf of the Schroder Portfolios, the Schroder Core has entered into an
administrative services agreement with Schroder Fund Advisors Inc. ("Schroder
Advisors"), 787 Seventh Avenue, New York, New York 10019. Schroder Core and
Schroder Advisors have entered into a Sub-Administration Agreement with Forum
Financial Services, Inc. ("Forum"). Pursuant to their agreements, Schroder
Advisors and Forum provide certain management and administrative services
necessary for the Portfolio's operations, other than the investment management
and administrative services provided to the Portfolio by SCMI pursuant to the
investment advisory agreement, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and (iii) general supervision of the operation of the
Portfolio, including coordination of the services performed by the Portfolio's
investment adviser, transfer agent, custodian, independent accountants, legal
counsel and others. Schroder Advisors is a wholly-owned subsidiary of SCMI, and
is a registered broker-dealer organized to act as administrator and distributor
of mutual funds. Effective July 5, 1995, Schroder Advisors changed its name
from Schroder Capital Distributors Inc.
For these services, Schroder Advisors receives from the Portfolio's fee at the
annual rate of 0.15% of each Schroder Portfolio's average daily net assets.
Payment for FAS's services is made by Schroder Advisors and is not a separate
expense of the Portfolio.
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The administrative services agreement and sub-administration agreement are
terminable with respect to the Schroder Portfolios without penalty, at any
time, by vote of a majority of the Schroder Core Trustees who are not
"interested persons" of Schroder Core and who have no direct or indirect
financial interest in the operation of the Portfolio's Distribution Plan or
in the administrative services agreement or sub-administration agreement,
upon not more than 60 days' written notice to Schroder Advisors or Forum, as
appropriate, or by vote of the holders of a majority of the shares of the
Portfolio, or, upon 60 days' notice, by Schroder Advisors or Forum. The
administrative services agreement will terminate automatically in the event
of its assignment.
The sub-administration agreement is terminable with respect to the Portfolio
without penalty, at any time, by the Board of Schroder Core, Schroder
Advisors and the Adviser upon 60 days' written notice to Forum or by Forum
upon 60 days' written notice to the Portfolio and Schroder Advisors, and the
investment adviser, as appropriate.
CUSTODIAN
The Chase Manhattan Bank, N.A., through its Global Securities Services
division located in London, England, acts as custodian of the Schroder
Portfolio's assets, but plays no role in making decisions as to the purchase
or sale of portfolio securities for the Portfolios. Pursuant to rules
adopted under the 1940 Act, the Schroder Portfolios may maintain its foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions
is made by the Board following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Portfolios; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Portfolio assets.
DISTRIBUTOR
Forum Financial Services, Inc. ("Forum"), an affiliate of FAS, is the Trust's
distributor and acts as the agent of the Trust in connection with the
offering of shares of the Fund pursuant to a Distribution Agreement. The
Distribution Agreement will continue in effect for twelve months and will
continue in effect thereafter only if its continuance is specifically
approved at least annually by the Board or by vote of the shareholders
entitled to vote thereon, and in either case, by a majority of the Trustees
who (i) are not parties to the Distribution Agreement, (ii) are not
interested persons of any such party or of the Trust and (iii) with respect
to any class for which the Trust has adopted a distribution plan, have no
direct or indirect financial interest in the operation of that distribution
plan or in the Distribution Agreement, at a meeting called for the purpose of
voting on the Distribution Agreement. All subscriptions for shares obtained
by Forum are directed to the Trust for acceptance and are not binding on the
Trust until accepted by it. Forum receives no compensation or reimbursement
of expenses for the distribution services provided pursuant to the
Distribution Agreement and is under no obligation to sell any specific amount
of Fund shares.
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The Distribution Agreement provides that Forum shall not be liable for any
error of judgment or mistake of law or in any event whatsoever, except for
willful misfeasance, bad faith or gross negligence in the performance of
Forum's duties or by reason of reckless disregard of its obligations and
duties under the Distribution Agreement.
The Distribution Agreement is terminable with respect to the Fund without
penalty by the Trust on 60 days' written notice when authorized either by
vote of the Fund's shareholders or by a vote of a majority of the Board, or
by Forum on 60 days' written notice. The Distribution Agreement will
automatically terminate in the event of its assignment.
Forum may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These
financial institutions may charge a fee for their services and may receive
shareholders service fees even though shares of the Fund are sold without
sales charges or distribution fees. These financial institutions may
otherwise act as processing agents, and will be responsible for promptly
transmitting purchase, redemption and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the
procedures of the institution through whom they purchase shares, which may
include charges, investment minimums, cutoff times and other restrictions in
addition to, or different from, those listed herein. Information concerning
any charges or services will be provided to customers by the financial
institution. Investors purchasing shares of the Fund in this manner should
acquaint themselves with their institution's procedures and should read this
Prospectus in conjunction with any materials and information provided by
their institution. The financial institution and not its customers will be
the shareholder of record, although customers may have the right to vote
shares depending upon their arrangement with the institution.
TRANSFER AGENT
Forum Financial Corp. ("FFC") acts as transfer agent of the Trust pursuant to
a transfer agency agreement (the "Transfer Agency Agreement"). The Transfer
Agency Agreement provided, with respect to each Fund, for an initial term of
one year from its effective date and for its continuance in effect for
successive twelve-month periods thereafter, provided that the agreement is
specifically approved at least annually by the Board or, with respect to
either Fund, by a vote of the shareholders of that Fund, and in either case
by a majority of the directors who are not parties to the Transfer Agency
Agreement or interested persons of any such party at a meeting called for the
purpose of voting on the Transfer Agency Agreement.
Among the responsibilities of FFC as agent for the Trust are: (1) answering
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Fund may be effected and certain
other matters pertaining to the Fund; (2) assisting shareholders in
initiating and changing account designations and addresses; (3) providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records, assisting in processing purchase and redemption
transactions and receiving wired funds; (4)
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transmitting and receiving funds in connection with customer orders to
purchase or redeem shares; (5) verifying shareholder signatures in connection
with changes in the registration of shareholder accounts; (6) furnishing
periodic statements and confirmations of purchases and redemptions; (7)
arranging for the transmission of proxy statements, annual reports,
prospectuses and other communications from the Trust to its shareholders; (8)
arranging for the receipt, tabulation and transmission to the Trust of
proxies executed by shareholders with respect to meetings of shareholders of
the Trust; and (9) providing such other related services as the Trust or a
shareholder may reasonably request.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation as custodian, investment manager, nominee, agent or fiduciary
for its customers or clients who are shareholders of the Fund with respect to
assets invested in the Fund. FFC or any sub-transfer agent or other
processing agent may elect to credit against the fees payable to it by its
clients or customers all or a portion of any fee received from the Trust or
from FFC with respect to assets of those customers or clients invested in the
Fund. FFC, FAS or sub-transfer agents or processing agents retained by FFC
may be Processing Organizations (as defined in the Prospectus) and, in the
case of sub- transfer agents or processing agents, may also be affiliated
persons of FFC or Forum.
For its services under the Transfer Agency Agreement, FFC receives: (i) a fee
at an annual rate of 0.25 percent of the average daily net assets of the Fund
and (ii) a fee of $24,000 per year; such amounts to be computed and paid
monthly in arrears by the Fund; and (iii) Annual Shareholder Account Fees of
$25.00 for a retail and $125.00 for an institutional shareholder account;
such fees to be computed as of the last business day of the prior month.
FFC or any sub-transfer agent or processing agent may also act and receive
compensation for acting as custodian, investment manager, nominee, agent or
fiduciary for its customers or clients who are shareholders of the Fund with
respect to assets invested in the Fund.
FFC also is the Portfolio's transfer agent pursuant to a Transfer Agency
Agreement between Schroder Core and FFC. FFC is compensated for those
services in the amount of $12,000 per year plus certain interestholder
account fees.
FUND ACCOUNTING
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
services for the Funds pursuant to a Fund Accounting Agreement with the
Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of
Trustees or by a vote of the shareholders of the Trust and in either case by
a majority of the Trustees who are not parties to the Fund Accounting
Agreement or interested persons of any such party, at a meeting called for
the purpose of voting on the Fund Accounting Agreement. Under its agreement,
FAcS prepares and maintains books and records prepares and maintains books
and records of the Fund on behalf of the Trust as required under the 1940
Act, calculates the net asset value per share of each Fund and dividends and
capital gain distributions and
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prepares periodic reports to shareholders and the Securities and Exchange
Commission. For its services, FAcS receives from the Trust with respect to
the Fund a fee of $12,000.
FAcS also performs portfolio accounting services for Index Portfolio pursuant
to a Fund Accounting Agreement between Core Trust and FAcS. For its
services, FAcS receives a fee of $60,000 per year, plus additional surcharges
based upon total assets or security positions.
FFC performs portfolio accounting services for the Schroder Portfolios
pursuant to a Fund Accounting Agreement between Schroder Core and FFC. For
its services, FFC is receives a fee of $60,000 per year, plus additional
surcharges based upon total assets or security positions.
6. DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of 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 or
Portfolio listed on the recognized stock exchanges are valued at the last
reported trade price, prior to the time when the assets are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last trade prices are not
available are valued at mid-market prices. Securities traded in
over-the-counter markets, or listed securities for which no trade is reported
on the valuation date, are valued at the most recent reported mid-market
price. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith using
methods approved by the Board.
Trading in securities on European and Far Eastern Securities exchanges and
over-the-counter markets may not take place on every day that the New York
Stock Exchange is open for trading. Furthermore, trading takes place in
various foreign markets on days on which a Portfolio's NAV is not calculated.
If events materially affecting the value of foreign securities occur between
the time when their price is determined and the time when net asset value is
calculated, such securities will be valued at fair value as determined in
good faith by the Schroder Core Board or the Board.
All assets and liabilities of a Portfolio or Fund denominated in foreign
currencies are converted to U.S. dollars at the mid price of such currencies
against U.S. dollars last quoted by a major bank prior to the time when NAV
of the Portfolio is calculated.
7. PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for each Portfolio and Fund and for the other investment
advisory clients of the investment advisers are made with a view to achieving
their respective investment objectives. Investment decisions are the product
of many factors in addition to basic suitability for the
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particular client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or sold for
other clients at the same time. Likewise, a particular security may be
bought for one or more clients when one or more clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to
price and allocated between such clients in a manner which in the investment
adviser's opinion is equitable to each and in accordance with the amount
being purchased or sold by each. There may be circumstances when purchases
or sales of portfolio securities for one or more clients will have an adverse
effect on other clients.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions involve
the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different brokers. Also, a particular broker may
charge different commissions according to such factors as the difficulty and
size of the transaction. Transactions in foreign securities generally involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. Since most brokerage transactions for the
Schroder International Portfolio and Schroder Emerging Markets Fund
Institutional Portfolio will be placed with foreign broker-dealers, certain
portfolio transaction costs for the Portfolios may be higher than fees for
similar transactions executed on U.S. securities exchanges. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Portfolios usually
includes an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by the Portfolios includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
The Investment Advisory Agreements authorize and direct the investment
advisers to place orders for the purchase and sale of assets with brokers or
dealers selected by the investment advisers in their discretion and to seek
"best execution" of such portfolio transactions. An investment adviser
places all such orders for the purchase and sale of portfolio securities and
buys and sells securities for a Portfolio through a substantial number of
brokers and dealers. In so doing, the investment adviser uses its best
efforts to obtain for the Portfolio the most favorable price and execution
available. The Portfolio may, however, pay higher than the lowest available
commission rates when the investment adviser believes it is reasonable to do
so in light of the value of the brokerage and research services provided by
the broker effecting the transaction. In seeking the most favorable price
and execution, the investment adviser, having in mind the Portfolio's best
interests, considers all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market
for the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker-dealers involved and the quality of service
rendered by the broker-dealers in other transactions.
It has for many years been a common practice in the investment advisory
business as conducted in certain countries, including the United States, for
advisers of investment companies and other
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institutional investors to receive research services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, and investment adviser may receive research
services from broker-dealers with which it places the Fund's or Portfolio's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such items as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to the investment adviser in advising various of its
clients (including the Fund or Portfolio), although not all of these services
are necessarily useful and of value in managing the Portfolio. The
investment advisory fee paid by a Portfolio is not reduced because the
investment adviser and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), an investment adviser may cause a Fund or Portfolio to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the Act) to it an amount of disclosed commission for effecting a securities
transaction in excess of the commission which another broker-dealer would
have charged for effecting that transaction.
Subject to the general policies regarding allocation of portfolio brokerage
as set forth above, the Board has authorized SCMI to employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
which are affiliated with SCMI, to effect securities transactions of the
Portfolio on various foreign securities exchanges on which Schroder
Securities has trading privileges, provided certain other conditions are
satisfied as described below.
Payment of brokerage commissions to Schroder Securities for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires,
among other things, that commissions for transactions on securities exchanges
paid by a registered investment company to a broker which is an affiliated
person of such investment company or an affiliated person of another person
so affiliated not exceed the usual and customary broker's commissions for
such transactions. It is the Schoder Portfolios' policy that commissions
paid to Schroder Securities will in the judgment of the officers of SCMI
responsible for making portfolio decisions and selecting brokers, be (i) at
least as favorable as commissions contemporaneously charged by Schroder
Securities on comparable transactions for its most favored unaffiliated
customers and (ii) at least as favorable as those which would be charged on
comparable transactions by other qualified brokers having comparable
execution capability. The Board of Trustees of Schroder Core, including a
majority of the non-interested Trustees, has adopted procedures pursuant to
Rule 17e-1 promulgated by the Securities and Exchange Commission under
Section 17(e) to ensure that commissions paid to Schroder Securities by the
Schroder Portfolio satisfy the foregoing standards. The Board will review
all transactions at least quarterly for compliance with these procedures.
The Funds have no understanding or arrangement to direct any specific portion
of its brokerage to Schroder Securities and will not direct brokerage to
Schroder Securities in recognition of research services. Schroder Securities
commenced operations in 1990.
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The annual portfolio turnover rate of a Fund (or Portfolio) may exceed 50%
but will not ordinarily exceed 100%.
8. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Detailed information pertaining to the purchase of shares of each Fund,
redemption of shares and the determination of the net asset value of Fund
shares is set forth in the Prospectus under "Purchases and Redemptions of
Shares".
Shares of each Fund are sold on a continuous basis by the distributor.
Set forth below is an example of the method of computing the offering price
of a Fund's shares. The example assumes a purchase of shares of beneficial
interest aggregating less than $100,000 subject to the schedule of sales
charges set forth in the Prospectus at a price based on the net asset value
per share of the Fund on ____ __.
Net Asset Value Per Share $ X.XX
Sales Charge, 4.00% of offering
price (4.17% of net asset value
per share) $ X.XX
Offering to Public $ X.XX
In addition to the situations described in the Prospectus under "Purchases
and Redemptions of Shares," the Trust may redeem shares involuntarily, from
time to time, to reimburse a Fund for any loss sustained by reason of the
failure of a shareholder to make full payment for shares purchased by the
shareholder or to collect any charge relating to transactions effected for
the benefit of a shareholder which is applicable to a Fund's shares as
provided in the Prospectus.
The Trust has filed a formal election with the Securities and Exchange
Commission pursuant to which a Fund will only effect a redemption in
portfolio securities if a shareholder is redeeming more than $250,000 or 1%
of the Fund's total net assets, whichever is less, during any 90-day period.
REDEMPTION IN KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have
difficulty in finding a buyer for portfolio securities received in payment
for redeemed shares. Portfolio securities may decline in value between the
time of receipt by the shareholder and conversion to cash. A redemption in
kind of a Fund's portfolio securities could result in a less
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diversified portfolio of investments for the Fund and could affect adversely
the liquidity of the Fund's portfolio.
EXCHANGE PRIVILEGE
The exchange privilege permits shareholders of each Fund to exchange their
shares for shares of any other fund of the Trust or shares of certain other
portfolios of investment companies which retain FAS or its affiliates as
investment adviser or distributor and which participate in the Trust's
exchange privilege program ("Participating Fund"). For Federal income tax
purposes, exchange transactions are treated as sales on which a purchaser
will realize a capital gain or loss depending on whether the value of the
shares redeemed is more or less than his basis in such shares at the time of
the transaction.
By use of the exchange privilege, the shareholder authorizes the Transfer
Agent to act upon the instruction of any person representing himself to
either be, or to have the authority to act on behalf of, the investor and
believed by the Transfer Agent to be genuine. The records of the Transfer
Agent of such instructions are binding. Proceeds of an exchange transaction
may be invested in another Participating Fund in the name of the shareholder.
Exchange transactions will be made on the basis of relative net asset values
per share at the time of the exchange transaction plus any sales charge
applicable to the Participating Fund whose shares are being acquired. Shares
of any Participating Fund may be redeemed and the proceeds used to purchase,
without a sales charge, shares of any other Participating Fund that are
offered without a sales charge. Shares of any Participating Fund purchased
with a sales charge may be redeemed and the proceeds used to purchase,
without a sales charge, shares of any other Participating Fund otherwise sold
with the same sales charge. If the Participating Fund purchased in the
exchange transaction imposes a higher sales charge than was paid originally
on the exchanged shares, the shareholder will be responsible for the
difference between the two sales charges. 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 terms of the exchange privilege are subject to change, and the privilege
may be terminated by any of the Participating Funds or the Trust. However
the privilege will not be terminated, and no material change that restricts
the availability of the privilege to shareholders will be implemented,
without reasonable advance notice to shareholders.
9. TAXATION
The Funds intend to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
To qualify as a regulated investment company the Fund intends to distribute
to shareholders at least 90% of its net investment income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses), and to meet certain
diversification of assets, source of income, and other requirements of the
Code. By so doing, a Fund will not be subject to
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Federal income tax on its net investment income and net realized capital
gains (the excess of net long-term capital gains over net short-term capital
losses) distributed to shareholders. If a Fund does not meet all of these
Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, a Fund must distribute for each
calendar year an amount equal to the sum of (1) at least 98% its ordinary
income (excluding any capital gains or losses) for the calendar year, (2) at
least 98% of the excess of its capital gains over capital losses realized
during the one-year period ending October 31, of such year, and (3) all such
ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as paid during
the calendar year if it is declared by the Fund in October, November or
December of the year with a record date in such month and paid by the Fund
during January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues interest or other
receivable or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivable or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, gains or losses on disposition of debt securities denominated in a
foreign currency attributable to fluctuations in the value of the foreign
currency between the date of acquisition of the security and the date of
disposition as well as gains or losses from certain foreign currency
transactions and options on certain foreign currency transactions, generally
are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of the Fund's net investment income to be distributed to its
shareholders as ordinary income.
Generally, the hedging transactions undertaken by the Fund may be deemed
"straddles" for Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by a Fund which is taxed as ordinary income
when distributed to shareholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary
according to the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.
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Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund
that did not engage in such hedging transactions.
The requirements applicable to regulated investment companies such as the
Fund may limit the extent to which the Fund will be able to engage in
transactions in options and forward contracts.
Distributions of net investment income (including realized net short-term
capital gain) are taxable to shareholders as ordinary income. It is not
expected that such distributions will be eligible for the dividends received
deduction available to corporations.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the
Fund with respect to which capital gain dividends have been paid will, to the
extent of such capital gain dividends, be treated as long-term capital loss
although such shares may have been held by the shareholder for one year or
less. Further, a loss realized on a disposition will be disallowed to the
extent the shares disposed of are replaced (whether by reinvestment or
distributions or otherwise) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions
in the form of additional shares will have a cost basis for Federal income
tax purposes in each share received equal to the net asset value of a share
of the Fund on the reinvestment date. Shareholders will be notified annually
as to the Federal tax status of distributions.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a distribution which
will nevertheless be taxable to them.
Upon redemption or sale of his shares, a shareholder will realize a taxable
gain or loss depending upon his basis in his shares. Such gain or loss
generally will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands. Such gain or loss generally will be
long-term or short-term depending upon the shareholder's holding period for
the shares.
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The Funds intend to minimize foreign income and withholding taxes by
investing in obligations the payments with respect to which will be subject
to minimal or no such taxes insofar as this objective is consistent with the
Funds' income objective. However, since a Fund may incur foreign taxes, it
intends, if it is eligible to do so, to elect under Section 853 of the Code
to treat each shareholder as having received an additional distribution from
the Fund, in the amount indicated in a notice furnished to him, as his pro
rata portion of income taxes paid to or withheld by foreign governments with
respect to interest, dividends and gain on the Fund's foreign portfolio
investments. The shareholder then may take the amount of such foreign taxes
paid or withheld as a credit against his Federal income tax, subject to
certain limitations. If the shareholder finds it more to his advantage to do
so, he may, in the alternative, deduct the foreign tax withheld as an
itemized deduction, in computing his taxable income. Each shareholder is
referred to his tax adviser with respect to the availability of the foreign
tax credit.
The Funds will be required to report to the Internal Revenue Service (the
"IRS") all distributions as well as gross proceeds from the redemption of the
Fund shares, except in the case of certain exempt shareholders. All such
distributions and proceeds generally will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the case of
nonexempt shareholders if (1) the shareholder fails to furnish the Fund with
and to certify the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the Fund that the shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions or
proceeds, whether reinvested in additional shares or taken in cash, will be
reduced by the amount required to be withheld. Any amounts withheld may be
credited against the shareholder's Federal income tax liability. Investors
may wish to consult their tax advisers about the applicability of the backup
withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable
to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Distributions by the Fund
also may be subject to state and local taxes, and their treatment under state
and local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisors with respect to particular
questions of Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. and foreign tax
consequences of ownership of shares of the Fund including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate
of 30% (or a lower rate under a tax treaty).
10. OTHER INFORMATION
ORGANIZATION
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
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as a 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 16
separate series.
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.
CORE TRUST AND SCHRODER CORE
Core Trust is a business trust organized under the laws of the State of
Delaware in September 1994. Schroder Core is a business trust organized
under the laws of the State of Delaware in September 1995. Each of Core
Trust and Schroder Core is registered under the Act as an open-end management
investment company. Currently, Core Trust has __ separate portfolios and
Schroder Core has four separate portfolios. The assets of each Portfolio, a
diversified portfolio, belong only to, and the liabilities of the Portfolio
are borne solely by, the Portfolio and no other Portfolio of the respective
trust.
Under each of Core Trust's and Schroder Core's Trust Instrument, the Trustees
are authorized to issue beneficial interest in one or more separate and
distinct series. Investments in a Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as
set forth below. Each investor in a Portfolio is entitled to a vote in
proportion to the amount of its investment therein. Investors in a Portfolio
and other series (collectively, the "portfolios") of Core Trust or Schroder
Core will all vote together in certain circumstances (e.g., election of the
Trustees and ratification of auditors, as required by the 1940 Act and the
rules thereunder). One or more portfolios could control the outcome of these
votes. Investors do not have cumulative voting rights, and investors holding
more than 50% of the aggregate interests in Core Trust or in Schroder
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Core or in a Portfolio, as the case may be, may control the outcome of votes.
The Trust is not required and has no current intention to hold annual
meetings of investors, but Core Trust and Schroder Core each will hold
special meetings of investors when (1) a majority of the Trustees determines
to do so or (2) investors holding at least 10% of the interests in Core Trust
or Schroder Core (or a Portfolio) request in writing a meeting of investors
in Core Trust or Schroder Core (or Portfolio). Except for certain matters
specifically described in the Trust Instruments, the Trustees may amend the
Trust's Trust Instrument without the vote of investors.
Core Trust and Schroder Core, with respect to a Portfolio, may enter into a
merger or consolidation, or sell all or substantially all of its assets, if
approved by the respective Board (without approval of the interestholders of
the Portfolio. A Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2)
by the Trustees of Core Trust or Schroder Core on written notice to the
Portfolio's investors. Upon liquidation or dissolution of any Portfolio, the
investors therein would be entitled to share pro rata in its net assets
available for distribution to investors.
Core Trust and Schroder Core are organized as a business trust under the laws
of the State of Delaware. Each trust's interestholders are not personally
liable for the obligations of the trust under Delaware law. The Delaware
Business Trust Act provides that an interestholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private corporations for profit. However, no similar
statutory or other authority limiting business trust interestholder liability
exists in many other states, including Texas. As a result, to the extent
that Core Trust or Schroder Core or an interestholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware
law, and may thereby subject Core Trust or Schroder Core to liability. To
guard against this risk, the Trust Instruments of Core Trust and Schroder
Core disclaims liability for acts or obligations of the trust and requires
that notice of such disclaimer be given in each agreement, obligation and
instrument entered into by Core Trust, Schroder Core or their respective
Trustees, and provides for indemnification out of Trust property of any
interestholder held personally liable for the obligations of Core Trust and
Schroder Core. Thus, the risk of an interestholder incurring financial loss
beyond his investment because of shareholder liability is limited to
circumstances in which (1) a court refuses to apply Delaware law, (2) no
contractual limitation of liability is in effect, and (3) Core Trust or
Schroder Core, as applicable, itself is unable to meet its obligations. In
light of Delaware law, the nature of the trusts' business, and the nature of
its assets, the Board believes that the risk of personal liability to a Trust
interestholder is remote.
CUSTODY OF PORTFOLIO ASSETS
The Chase Manhattan Bank, N.A., through its Global Custody Division located
in London, England, acts as custodian of the Schroder Portfolio's assets, but
plays no role in making decisions as to the purchase or sale of portfolio
securities for the Schroder Portfolios. Pursuant to rules adopted under the
1940 Act, the Schroder Portfolios may maintain its foreign securities and
cash in the custody of certain eligible foreign banks and securities
depositories. Selection of these foreign custodial institutions is made by
the Board of Trustees following a consideration of
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a number of factors, including (but not limited to) the reliability and
financial stability of the institution; the ability of the institution to
perform capably custodial services for the Portfolios; the reputation of the
institution in its national market; the political and economic stability of
the country in which the institution is located; and further risks of
potential nationalization or expropriation of Portfolio assets.
PLACEMENT AGENT
Forum Financial Services, Inc., Two Portland Square, Portland, Maine 04101,
serves as Core Trust's and Schroder Core's placement agent. FFSI receives no
compensation for such placement agent services.
COUNSEL
Legal matters in connection with the issuance of shares of beneficial
interest of the Trust are passed upon by the law firm of Seward & Kissel,
1200 G Street, N.W. Washington, D.C. 20005.
Kirkpatrick & Lockhart, 1800 Massachusetts Aveneue, N.W., Washington, D.C.
20036, counsel to Index portfolio, passes upon certain legal matters in
connection with the interest in Index Portfolio.
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005,
counsel to the Schroder Portfolios, passes upon certain legal matters in
connection with the interests in the Schroder Portfolios.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, 02110,
independent auditors, act as auditors for the Trust.
Coopers & Lybrand LLP ("Coopers & Lybrand") serves as independent accountants
for the Schroder Portfolios. Coopers & Lybrand provides audit services and
consultation in connection with review of U.S. Securities and Exchange
Commission filings. Coopers & Lybrand's address is One Post Office Square,
Boston, Massachusetts 02109.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
1. CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Note: Those bonds in the Aa and A groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1 and A1.
STANDARD AND POOR'S CORPORATION ("S&P")
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Note: The ratings for AA and A may be modified by the addition of a plus (+) or
minus (-) sign to show the relative standing within the rating category.
FITCH INVESTORS SERVICE, INC. ("FITCH")
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA categories.
2. COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE, INC.
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
--- Leading market positions in well-established industries.
--- High rates of return on funds employed.
--- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
--- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S CORPORATION
S&P's two highest commercial paper ratings are A and B. Issues assigned an A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety is
not as high as for issues designated A-1. A-3 issues have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. Issues rated B are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
FITCH INVESTORS SERVICE, INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 ratings.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included in the Prospectus:
Financial Highlights.
Included in the Statement of Additional Information:
Audited financial statements for the fiscal year ended March 31, 1997
including Statements of Assets and Liabilities, Statements of Operations,
Statements of Changes in Net Assets, Notes to Financial Statements,
Financial Highlights, Portfolio of Investments and Report of Independent
Auditors were filed with the Securities and Exchange Commission via EDGAR
for: (i) Daily Assets Treasury Fund, Investors Bond Fund, TaxSavers Bond
Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Value
Fund, and Payson Balanced Fund on June 6, 1997, accession number
0000912057-97-019701; (ii) Austin Global Equity Fund on June 9, 1997,
accession number 0001004402-97-000009; and (iii) Oak Hall Equity Fund on
June 6, 1997, accession number 0000912057-97-019699 pursuant to Rule 30b2-1
under the Investment Company Act of 1940, as amended, and incorporated
herein by reference.
Unaudited financial statements for the period October 1, 1996 through
February 28, 1997 including Statements of Assets and Liabilities,
Statements of Operations, Statements of Changes in Net Assets, Notes to
Financial Statements, and Financial Highlights for Daily Assets Cash Fund
are set forth in Appendix B to the SAI.
Audited financial statements for the fiscal year ended March 31, 1997
including Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets, Notes to Financial Statements,
Financial Highlights, Portfolio of Investments and Report of Independent
Accountants for Quadra Limited Maturity Treasury Fund, filed with the
Securities and Exchange Commission on June 5, 1997 for such Fund, accession
number 0000912057-97-019598, pursuant to Rule 30b2-1 under the Investment
Company Act of 1940, as amended, and incorporated herein by reference.
Daily Assets Government Fund. Not Applicable to this filing.
12
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(b) EXHIBITS.
NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE.
ALL REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PREEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 2-67052.
(1)* Copy of the Trust Instrument of the Registrant dated August 29, 1995
(filed as Exhibit 1 to PEA No. 34 via EDGAR on May 9, 1996,
accession number 0000912057-96-008780).
(2)* Copy of By-Laws of the Registrant (filed as Exhibit (2) to PEA No.
43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707)
(3) None.
(4) (a) Sections 2.04 and 2.06 of Registrant's Trust Instrument
provide as follows:
"SECTION 2.04 TRANSFER OF SHARES. Except as otherwise
provided by the Trustees, Shares shall be transferable on
the records of the Trust only by the record holder thereof
or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a
duly executed instrument of transfer and such evidence of
the genuineness of such execution and authorization and of
such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register
of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for
all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any
notice of the proposed transfer.
"SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust
created hereby shall consist of one or more Series and
separate and distinct records shall be maintained by the
Trust for each Series and the assets associated with any
such Series shall be held and accounted for separately from
the assets of the Trust or any other Series. The Trustees
shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization
or vote of the Shareholders of any Series of the Trust, to
establish and designate and to change in any manner any such
Series of Shares or any classes of initial or additional
Series and to fix such preferences, voting powers, rights
and privileges of such Series or classes thereof as the
Trustees may from time to time determine, to divide or
combine the Shares or any Series or classes thereof into a
greater or lesser number, to classify or reclassify any
issued Shares or any Series or classes thereof into one or
more Series or classes of Shares, and to take such other
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action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series
shall be effective upon the adoption of a resolution by a
majority of the Trustees setting forth such establishment
and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of
Shares and need not issue shares. At any time that there are
no Shares outstanding of any particular Series previously
established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and
designation thereof.
"All references to Shares in this Trust Instrument
shall be deemed to be Shares of any or all Series, or
classes thereof, as the context may require. All provisions
herein relating to the Trust shall apply equally to each
Series of the Trust, and each class thereof, except as the
context otherwise requires.
"Each Share of a Series of the Trust shall represent an
equal beneficial interest in the net assets of such Series.
Each holder of Shares of a Series shall be entitled to
receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such
Shareholder shall be paid solely out of the funds and
property of such Series of the Trust."
(5) (a)* Form of Investment Advisory Agreement between Registrant and
Forum Advisors, Inc. (filed as Exhibit 5(a) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(b)* Form of Investment Advisory Agreement between Registrant and
H.M. Payson & Co. relating to the Payson Value Fund and the
Payson Balanced Fund (filed as Exhibit 5(b) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(c)* Investment Advisory Agreement between Registrant and Quadra
Capital Partners, L.P. (filed as Exhibit (5)(c) to PEA No.
41 via EDGAR on December 31, 1996, accession number
0000912057-96-030646).
(d)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and Anhalt/O'Connell, Inc. (filed as Exhibit
(5)(d) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
(e)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and Carl Domino Associates, L.P. (filed as
Exhibit (5)(e) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
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<PAGE>
(f)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and McDonald Investment Management, Inc.
(filed as Exhibit (5)(f) to PEA No. 41 via EDGAR on December
31, 1996, accession number 0000912057-96-030646).
(g)* Investment Subadvisory Agreement between Quadra Capital
Partners, L.P. and LM Capital Management, Inc. (filed as
Exhibit (5)(g) to PEA No. 41 via EDGAR on December 31, 1996,
accession number 0000912057-96-030646).
(j)* Investment Advisory Agreement between the Registrant and
Austin Investment Management, Inc. (filed as Exhibit (5)(j)
to PEA No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(k)* Investment Advisory Agreement between the Registrant and Oak
Hall Capital Advisors, Inc. (filed as Exhibit (5)(k) to PEA
No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(l)* Investment Advisory Agreement between Norwest Bank
Minnesota, N.A. and Core Trust (Delaware), relating to
Index Portfolio (filed as Exhibit 5(a) to Amendment No. 5
to the Registration Statement of Core Trust (Delaware),
File No. 811-8858 , via EDGAR on September 30, 1996,
accession number 0000912057-96-021568).
(m)* Investment Advisory Agreement between Schroder Capital
Management International Inc. and Schroder Capital Funds,
relating to Schroder U.S. Smaller Companies Portfolio,
International Equity Fund and Schroder Emerging Markets
Fund Institutional Portfolio (filed as Exhibit 5 to PEA
No. 1 to the Registration Statement of Schroder Capital
Funds, File No. 811-9130 , via EDGAR on August 9, 1996,
accession number 0000898432-96-000341).
(6) (a)* Form of Management and Distribution Agreement between
Registrant and Forum Financial Services, Inc. (filed as
Exhibit 6(a) to PEA No. 33 via EDGAR on January 5, 1996,
accession number 0000912057-96-000216).
(b)* Form of Distribution Services Agreement between Registrant
and Forum Financial Services, Inc. (filed as Exhibit 6(b) to
PEA No. 33 via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(c)* Form of Selected Dealer Agreement between Forum Financial
Services, Inc. and securities brokers (filed as Exhibit 6(c)
to PEA 21).
(d)* Form of Bank Affiliated Selected Dealer Agreement between
Forum Financial Services, Inc. and bank affiliates filed as
Exhibit 6(d) of PEA 21).
(e)* Form of Administration Agreement between Registrant and
Forum Administrative Services, LLC (filed as Exhibit 6(e) to
PEA No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
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<PAGE>
(f)* Form of Distribution Agreement between Registrant and Forum
Financial Services, Inc. (filed as Exhibit 6(f) to PEA No.
43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
(7) None.
(8) (a)* Form of Transfer Agency Agreement between Registrant and
Forum Financial Corp. (filed as Exhibit 8(a) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(b)* Form of Custodian Agreement between Registrant and the First
National Bank of Boston (filed as Exhibit 8(b) to PEA No. 33
via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(9) (a)* Form of Management Agreement between Registrant and Forum
Financial Services, Inc. (filed as Exhibit 9(a) to PEA No.
33 via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(10)* Opinion of Seward & Kissel dated January 5, 1996 (filed as Exhibit
10 of PEA No. 33 via EDGAR on January 5, 1996, accession number
0000912057-96-000216).
(11) Consent of independent auditors (filed as Exhibit 11 to PEA No. 43
via EDGAR on July 31, 1997, accession number 0000912057-97-025707).
(12) None.
(13)* Investment Representation letter of Reich & Tang, Inc. as original
purchaser of shares of registrant (filed as Exhibit 13 to
Registration Statement).
(14)* Form of Disclosure Statement and Custodial Account Agreement
applicable to individual retirement accounts (filed as Exhibit 14 of
PEA No. 21).
(15) (a)* Form of Rule 12b-1 Plan adopted by the Registrant (filed as
Exhibit 15 of PEA No. 16).
(b)* Rule 12b-1 Plan adopted by the Registrant with respect to
the Payson Value Fund and the Payson Balanced Fund (filed as
Exhibit 8(c) of PEA No. 20).
(16) Schedule of Sample Performance Calculations (filed as Exhibit 16 to
PEA No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707).
16
<PAGE>
Other Exhibits*:
Powers of Attorney (filed as Exhibit 99 to PEA No. 34 via EDGAR on
May 9, 1996, accession number 0000912057-96-008780).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF JULY 31, 1997
Title of Class Number of Holders
-------------- -----------------
Investors Bond Fund 74
TaxSaver Bond Fund 50
Daily Assets Cash Fund 14
Daily Assets Treasury Fund 65
Daily Assets Government Fund 0
Daily Assets TaxSaver Fund 0
Payson Value Fund 308
Payson Balanced Fund 376
Maine Municipal Bond Fund 389
New Hampshire Bond Fund 80
Austin Global Equity Fund 11
Oak Hall Equity Fund 204
Quadra Limited Maturity Treasury Fund 3
Quadra Value Equity Fund 15
Quadra International Equity Fund 10
Quadra Opportunistic Bond Fund 5
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act, SECTION
5.2 of the Registrant's Trust Instrument provides as follows:
"5.2. INDEMNIFICATION.
"(a) Subject to the exceptions and limitations contained in
Section (b) below:
"(i) Every Person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as a "Covered
Person") shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of
17
<PAGE>
being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
"(ii) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
"(b) No indemnification shall be provided hereunder to a
Covered Person:
"(i) Who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the
Trust or its Holders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the Covered Person's office or (B)
not to have acted in good faith in the reasonable belief that
Covered Person's action was in the best interest of the Trust;
or
"(ii) In the event of a settlement, unless there has
been a determination that such Trustee or officer did not engage
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the Trustee's
or officer's office,
"(A) By the court or other body approving the
settlement;
"(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to
the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or
"(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed
to a full trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or
by independent counsel.
"(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased
to be a Covered Person and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Covered Persons, and other persons may be entitled by contract or
otherwise under law.
"(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this
18
<PAGE>
Section 5.2 may be paid by the Trust or Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust
or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 5.2; provided, however, that either (a)
such Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any
such advance payments or (c) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a trial-type
inquiry or full investigation), that there is reason to believe that such
Covered Person will be found entitled to indemnification under this Section
5.2.
"(e) Conditional advancing of indemnification monies under this
Section 5.2 for actions based upon the 1940 Act may be made only on the
following conditions: (i) the advances must be limited to amounts used, or
to be used, for the preparation or presentation of a defense to the action,
including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds
that amount which it is ultimately determined that he is entitled to
receive from the Trust by reason of indemnification; and (iii) (a) such
promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayments may be
obtained by the Trust without delay or litigation, which bond, insurance or
other form of security must be provided by the recipient of the advance, or
(b) a majority of a quorum of the Trust's disinterested, non-party
Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the
recipient of the advance ultimately will be found entitled to
indemnification.
"(f) In case any Holder or former Holder of any Series shall be
held to be personally liable solely by reason of the Holder or former
Holder being or having been a Holder of that Series and not because of the
Holder or former Holder acts or omissions or for some other reason, the
Holder or former Holder (or the Holder or former Holder's heirs, executors,
administrators or other legal representatives, or, in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to
be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust, on behalf of the affected Series, shall,
upon request by the Holder, assume the defense of any claim made against
the Holder for any act or obligation of the Series and satisfy any judgment
thereon from the assets of the Series."
Paragraph 4 of each Investment Advisory Agreement provides in substance as
follows:
"4. We shall expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you shall
not be liable hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that nothing
19
<PAGE>
herein shall be deemed to protect, or purport to protect, you against any
liability to us or and to our security holders to which you would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder."
Paragraphs 3(f) and (g) and paragraph 5 of the Management and Distribution
Agreement provide as follows:
"(f) We agree to indemnify, defend and hold you, your several
officers and directors, and any person who controls you within the meaning
of Section 15 of the Securities Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which you, your officers and
directors or any such controlling person may incur, under the Securities
Act, or under common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in our Registration
Statement or Prospectus in effect from time to time under the Securities
Act or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make
the statements in either thereof not misleading; provided, however, that in
no event shall anything contained in this paragraph 3(f) be so construed as
to protect you against any liability to us or our security holders to which
you would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of your duties, or by reason of your
reckless disregard of your obligations and duties under this paragraph. Our
agreement to indemnify you, your officers and directors and any such
controlling person as aforesaid is expressly conditioned upon our being
notified of any action brought against you, your officers and directors or
any such controlling person, such notification to be given by letter or by
telegram addressed to us at our principal office in New York, New York, and
sent to us by the person against whom such action is brought within ten
days after the summons or other first legal process shall have been served.
The failure so to notify us of any such action shall not relieve us from
any liability which we may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission
otherwise than on account of our indemnity agreement contained in this
paragraph 3(f). We will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of good standing
chosen by us and approved by you. In the event we do elect to assume the
defense of any such suit and retain counsel of good standing approved by
you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case we
do not elect to assume the defense of any such suit, or in case you do not
approve of counsel chosen by us, we will reimburse you or the controlling
person or persons named as defendant or defendants in such suit, for the
fees and expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 3(f) and our
representations and warranties in this agreement shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of you, your officers and directors or any controlling person and
shall survive the sale of any shares of our common stock made pursuant to
subscriptions obtained by you. This agreement of
20
<PAGE>
indemnity will inure exclusively to your benefit, to the benefit of your
successors and assigns, and to the benefit of your officers and directors
and any controlling persons and their successors and assigns. We agree
promptly to notify you of the commencement of any litigation or proceeding
against us in connection with the issue and sale of any shares of our
common stock.
"(g) You agree to indemnify, defend and hold us, our several officers and
directors, and person who controls us within the meaning of Section 15 of
the Securities Act, free and harmless from and against any and all claims,
demands, liabilities, and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any reasonable counsel
fees incurred in connection therewith) which we, our officers or directors,
or any such controlling person may incur under the Act or under common law
or otherwise, but only to the extent that such liability, or expense
incurred by us, our officers or directors or such controlling person
resulting from such claims or demands shall arise out of or be based upon
any alleged untrue statement of a material fact contained in information
furnished in writing by you in your capacity as distributor to us for use
in our Registration Statement or Prospectus in effect from time to time
under the Act, or shall arise out of or be based upon any alleged omission
to state a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to make
such information not misleading. Your agreement to indemnify us, our
officers and directors, and any such controlling person as aforesaid is
expressly conditioned upon your being notified of any action brought
against us, our officers or directors or any such controlling person, such
notification to be given by letter or telegram addressed to you at your
principal office in New York, New York, and sent to you by the person
against whom such action is brought, within ten days after the summons or
other first legal process shall have been served. You shall have a right to
control the defense of such action, with counsel of your own choosing,
satisfactory to us, if such action is based solely upon such alleged
misstatement or omission on your part, and in any other event you and we,
our officers or directors or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any
such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person by reason of any such untrue
statement or omission on your part otherwise than on account of your
indemnity agreement contained in this paragraph 3(g).
"5 We shall expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you shall not be
liable hereunder for any mistake of judgment or in any event whatsoever,
except for lack of good faith, provided that nothing herein shall be deemed
to protect, or purport to protect, you against any liability to us or to
our security holders to which you would otherwise be subject by reason or
willful misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder."
21
<PAGE>
Section 9(a) of the Distribution Services Agreement provides:
"The Company agrees to indemnify, defend and hold the Underwriter, and any
person who controls the Underwriter within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Underwriter or any such controlling
person may incur, under the Securities Act or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Company's Registration Statement or the
Prospectus or Statement of Additional Information in effect from time to
time under the Securities Act and relating to the Fund or arising out of or
based upon any alleged omission to state a material fact required to be
stated in any thereof or necessary to make the statements in any thereof
not misleading; provided, however, that in no event shall anything herein
contained be so construed as to protect the Underwriter against any
liability to the Company or its security holders to which the Underwriter
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of the
Underwriter's reckless disregard of its obligations and duties under this
agreement. The Company's agreement to indemnify the Underwriter and any
controlling person as aforesaid is expressly conditioned upon the Company's
being notified of the commencement of any action brought against the
Underwriter or any such controlling person, such notification to be given
by letter or by telegram addressed to the Company at its principal office
in New York, New York, and sent to the Company by the person against whom
such action is brought within ten days after the summons or other first
legal process shall have been served. The Company will be entitled to
assume the defense of any suit brought to enforce any such claim, and to
retain counsel of good standing chosen by the Company and approved by the
Underwriter. In the event the Company elects to assume the defense of any
such suit and retain counsel of good standing approved by the Underwriter,
the defendants in the suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Company does
not elect to assume the defense of the suit or in case the Underwriter does
not approve of counsel chosen by the Company, the Company will reimburse
the Underwriter or the controlling person or persons named defendant or
defendants in the suit for the fees and expenses of any counsel retained by
the Underwriter or such person. The indemnification agreement contained in
this Section 9 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter or
any controlling person and shall survive the sale of the Fund's shares made
pursuant to subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of any
controlling persons and their successors and assigns. The Company agrees
promptly to notify the Underwriter of the Underwriter of the commencement
of any litigation or proceeding against the Company in connection with the
issue and sale of any of shares of the Fund. The failure to do so notify
the Company of the commencement of any such action shall not relieve the
Company from any liability which it may have to the person
22
<PAGE>
against whom the action is brought by reason of any alleged untrue
statement or omission otherwise than on account of the indemnity agreement
contained in this Section 9."
In so far as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
Forum Advisors, Inc.
The descriptions of Forum Advisors, Inc. under the caption
"Management-Adviser" in the Prospectus and Statement of Additional
Information relating to the Investors Bond Fund, the TaxSaver Bond Fund,
the Daily Assets Cash Fund, the Daily Assets Government Fund, the Daily
Assets Treasury Fund, the Maine Municipal Bond Fund, the New Hampshire Bond
Fund, constituting certain of Parts A and B, respectively, of the
Registration Statement are incorporated by reference herein.
The following are the directors and officers of Forum Advisors, Inc., Two
Portland Square, Portland, Maine 04101, including their business
connections which are of a substantial nature.
John Y. Keffer, President and Secretary.
Chairman and President of the Registrant; President of Forum
Financial Services, Inc. and of Forum Financial Corp., Mr. Keffer is
a director and/or officer of various registered investment companies
for which Forum Administrative Services, LLC serves as administrator
and for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor.
Sara M. Morris, Treasurer.
Treasurer of Forum Financial Services, Inc. and of Forum Financial
Corp., Ms. Morris is an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as
manager, administrator and/or distributor.
23
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David I. Goldstein, Secretary.
Secretary of Forum Financial Services, Inc. and of Forum Financial
Corp., Mr. Goldstein is an officer of various registered investment
companies for which Forum Administrative Services serves as
administrator and for which Forum Financial Services, Inc. serves as
manager, administrator and/or distributor.
Margaret J. Fenderson, Assistant Treasurer.
Ms. Fenderson is Assistant Treasurer of Forum Financial Services,
Inc. and of Forum Financial Corp.
Dana Lukens, Assistant Secretary.
Mr. Lukens is Assistant Secretary of Forum Financial Services, Inc.
and of Forum Financial Corp.
H.M. Payson & Co.
The descriptions of H.M. Payson & Co. under the caption "Management -
Adviser" in the Prospectus and Statement of Additional Information, with
respect to the Payson Value Fund and the Payson Balanced Fund, constituting
certain of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of H.M.
Payson & Co., including their business connections which are of a
substantial nature. The address of H.M. Payson & Co. is One Portland
Square, Portland, Maine 04101.
Adrian L. Asherman, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1955, General Partner
from 1964 to 1987 and Managing Director since 1987. His address is
One Portland Square, Portland, Maine 04101.
John C. Downing, Managing Director and Treasurer.
Portfolio Manger of H.M. Payson since 1983 and Managing Director
since 1992. Mr. Downing has been associated with H.M. Payson since
1983. His address is One Portland Square, Portland, Maine 04101.
William A. Macleod, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1984 and Managing
Director since 1989. His address is One Portland Square, Portland,
Maine 04101.
24
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Thomas M. Pierce, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1975, General Partner
from 1981 to 1987 and Managing Director since 1987. His address is
One Portland Square, Portland, Maine 04101.
Peter E. Robbins, Managing Director.
Portfolio Manager of H.M. Payson & Co. since 1992, except for the
period from January 1988 to October 1990. During that period, Mr.
Robbins was president of Mariner Capital Group, a real estate
development and non-financial asset management business. General
Partner of H.M. Payson & Co. from 1986 to 1987, and Managing
Director from 1987 to 1988, and since 1993.
John H. Walker, Managing Director and President.
Portfolio Manager of H.M. Payson & Co. since 1967, General Partner
from 1974 to 1987, and Managing Director since 1987. Mr. Walker is
also a Director of York Holding Company and York Insurance Company.
His address is One Portland Square, Portland, Maine 04101.
Teresa M. Esposito, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. Her address is
One Portland Square, Portland, Maine 04101.
John C. Knox, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. His address is
One Portland Square, Portland, Maine 04101.
Harold J. Dixon, Managing Director and Secretary.
Managing Director of H.M. Payson & Co. since 1995. His address is
One Portland Square, Portland, Maine 04101.
Laura McDill, Managing Director.
Managing Director of H.M. Payson & Co. since 1995. Her address is
One Portland Square, Portland, Maine 04101.
Austin Investment Management, Inc.
The description of Austin Investment Management, Inc. under the caption
"Management - Adviser" in the Prospectus and Statement of Additional
Information with respect to the
25
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Austin Global Equity Fund, constituting part of Parts A and B,
respectively, of this Registration Statement are incorporated by reference
herein.
The following is the director and principal executive officer of Austin
Investment Management, Inc. 375 Park Avenue, New York, New York 10152,
including his business connections which are of a substantial nature.
Peter Vlachos, Director, President Treasurer and Secretary
Oak Hall Capital Advisors, Inc.
The description of Oak Hall Capital Advisors, Inc. under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Oak Hall Equity Fund, constituting part of
Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of, Oak
Hall Capital Advisors, Inc. 122 East 42nd Street, New York, New York 10168,
including their business connections which are of a substantial nature.
Alexander G. Anagnos, Director and Portfolio Manager.
Consultant to American Services Corporation and Financial Advisor to
WR Family Associates.
Lewis G. Cole, Director.
Partner, the Law Firm of Strook, Strook & Lavan.
John C. Hathaway, President, director and Portfolio Manager.
John J. Hock, Executive Vice President.
Charles D. Klein, Portfolio Manager.
Director, American Securities Corporation and Financial Advisor to
WR Family Associates.
David P. Steinmann, Executive Vice President, Secretary and Treasurer.
Administrator WR Family Associates and Secretary and Treasurer of
American Securities Corporation.
Carl Domino Associates, L.P.
26
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The description of Carl Domino Associates, L.P. under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Quadra Value Equity Fund, constituting part
of Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of, Carl
Domino Associates, L.P., 580 Village Blvd., West Palm Beach, FL 33409
including their business connections which are of a substantial nature.
Carl J. Domino, Managing Partner & Portfolio Manager.
Paul Scoville, Jr., Senior Portfolio Manager.
Ann Fritts Syring, Senior Portfolio Manager.
John Wagstaff-Callahan, Senior Portfolio Manager.
Prior to joining Carl Domino Associates, L.P., Mr. Wagstaff-Callahan
was a Trustee with Batterymarch Financial Management, Boston,
Massachusetts.
Stephen Krider Kent, Jr., Senior Portfolio Manager.
Prior to joining Carl Domino Associates, L.P., Mr. Kent was a Senior
Portfolio Manager with Gamble, Jones Holbrook & Bent, Carlsbad,
California.
Anhalt/O'Connell, Inc.
The description of Anhalt/O'Connell, Inc. under the caption "Management -
Advisor" in the Prospectus and Statement of Additional Information with
respect to the Quadra Limited Maturity Treasury Fund, constituting part of
Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The following are the directors and principal executive officers of,
Anhalt/O'Connell, Inc., 345 South Figueroa Street, Suite 303, Los Angeles,
CA, including their business connections which are of a substantial nature.
Paul Edward Anhalt, Managing Director and Chairman.
Mr. Anhalt is also a partner of Anhalt/O'Connell, a partnership, and
was formerly Managing Director and Consulting Economist of Trust
Company of the West.
Michael Frederick O'Connell, Managing Director
27
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Mr. O'Connell is also a partner of Anhalt/O'Connell, a partnership,
and was formerly Managing Director of Trust Company of the West and
Vice President of Institutional Research Services, Inc., a
registered broker-dealer.
LM Capital Management, Inc.
The description of LM Capital Management, Inc., under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Quadra Opportunistic Bond Fund,
constituting part of Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.
The following are the directors and principal executive officers of, LM
Capital Management, Inc., including their business connections which are of
a substantial nature.
Luis Malzel, Managing Director.
John Chalker, Managing Director
McDonald Investment Management, Inc.
The description of McDonald Investment Management, Inc., under the caption
"Management - Advisor" in the Prospectus and Statement of Additional
Information with respect to the Quadra International Equity Fund,
constituting part of Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.
The following are the directors and principal executive officers of
McDonald Investment Management, Inc., including their business connections
which are of a substantial nature.
John McDonald, President and Chief Investment Officer.
Ron Belcot, Vice President - Research and Trading.
Bill Hallman, Vice President.
Ray DiBernardo, Vice President., Managing Director
Mr. DiBernardo was formerly a portfolio manager with Royal Trust.
Smith Asset Management Group, L.P.
The description of Smith Asset Management Group, L.P., under the caption
"Management - Investment Advisory Services" in the Prospectus and Statement
of Additional Information with respect to the Quadra Growth Fund,
constituting part of Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.
28
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The following are the directors and principal executive officers of Smith
Asset Management Group, L.P., including their business connections which
are of a substantial nature.
Mr. Stephen Smith, Chief Investment Officer
ITEM 29. PRINCIPAL UNDERWRITER.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Core Trust (Delaware), The CRM Funds, The Cutler
Trust, The Highland Family of Funds, Monarch Funds, Norwest Funds,
Norwest Select Funds, Sound Shore Fund, Inc., and Trans Adviser
Funds, Inc.
(b) John Y. Keffer, President of Forum Financial Services, Inc., is the
Chairman and President of the Registrant. Sara M. Morris is the
Treasurer of Forum Financial Services. David I. Goldstein,
Secretary of Forum Financial Services, Inc., is the Secretary of the
Registrant. Margaret J. Fenderson is the Assistant Treasurer of
Forum Financial Services, Inc. and Dana Lukens is the Assistant
Secretary of Forum Financial Services, Inc. Their business address
is Two Portland Square, Portland, Maine 04101.
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Forum Administrative Services, LLC
and Forum Financial Corp., Two Portland Square, Portland, Maine 04101. The
records required to be maintained under Rule 31a-1(b)(1) with respect to
journals of receipts and deliveries of securities and receipts and disbursements
of cash are maintained at the offices of the Registrant's custodian, The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts 02106. The
records required to be maintained under Rule 31a-1(b)(5), (6) and (9) are
maintained at the offices of the Registrant's adviser or subadviser, as listed
in Item 28 hereof.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(i) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders
relating to the portfolio or class thereof to which the prospectus relates
upon request and without charge.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(a) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Portland, and State of Maine on the 29th
day of August, 1997.
FORUM FUNDS
By:/s/ John Y. Keffer
--------------------------
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the following
persons on the 29th day of August, 1997.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ John Y. Keffer President
------------------------ and Chairman
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Robert B. Campbell Treasurer
------------------------
Robert B. Campbell
(c) A majority of the Trustees
/s/ John Y. Keffer Trustee
------------------------
John Y. Keffer
James C. Cheng* Trustee
J. Michael Parish* Trustee
Costas Azariadis* Trustee
By: /s/ John Y. Keffer
------------------------
John Y. Keffer
Attorney in Fact*
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<PAGE>
SIGNATURES
On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Forum Funds to be signed in the
City of Portland, State of Maine on the 29th day of August, 1997.
CORE TRUST (DELAWARE)
By: /s/ John Y. Keffer
----------------------
John Y. Keffer
President
This amendment to the Registration Statement of Forum Funds has been signed
below by the following persons in the capacities indicated on the 29th day of
August, 1997.
SIGNATURES TITLE
(a) Principal Executive Officer
/s/ John Y. Keffer Chairman and
------------------------ President
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Richard C. Butt Treasurer, Principal
------------------------ Financial and
Richard C. Butt Accounting Officer
(c) A Majority of the Trustees
/s/ John Y. Keffer Chairman
------------------------
John Y. Keffer
J. Michael Parish Trustee
James C. Cheng Trustee
Costas Azariadis Trustee
By: /s/ John Y. Keffer
------------------------
John Y. Keffer
Attorney in Fact
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<PAGE>
SIGNATURES
On behalf of Schroder Capital Funds, being duly authorized, I have duly caused
this amendment to the Registration Statement of Forum Funds to be signed in the
City of New York, State of New York on the 29th day of August, 1997.
SCHRODER CAPITAL FUNDS
By: /s/ Catherine A. Mazza
-----------------------
Catherine A. Mazza
This amendment to the Registration Statement of Forum Funds has been signed
below by the following persons in the capacities indicated on the 29th day of
August, 1997.
Signatures Title
---------- -----
(a) Principal Executive Officer
MARK J. SMITH
*By: /s/Thomas G. Sheehan President and
---------------------- Trustee
Thomas G. Sheehan
Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
ROBERT JACKOWITZ Treasurer
By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan
Attorney-in-Fact
(c) Majority of the Trustees
PETER E. GUERNSEY Trustee
RALPH E. HANSMANN Trustee
JOHN I. HOWELL Trustee
HERMANN C. SCHWAB Trustee
By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan
Attorney-in-Fact
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