<PAGE>
FORUM FUNDS
DAILY ASSETS TREASURY FUND,
DAILY ASSETS GOVERNMENT FUND
AND DAILY ASSETS CASH FUND
SUPPLEMENT DATED APRIL 1, 1997 TO
PROSPECTUS DATED AUGUST 1, 1996
1. Shares of Daily Assets Government Fund currently are not offered for sale.
2. Add to page 4 under the section captioned "Financial Highlights" after the
table for Daily Assets Treasury Fund the following text and table:
The following information represents selected data for a single share
outstanding of Daily Assets Cash Fund. This information is not audited. Daily
Assets Cash Fund commenced operations on October 1, 1996. The financial
statements for the period October 1, 1996 through February 28, 1997 are set
forth in Appendix B to the SAI and may be obtained from the Trust without
charge.
DAILY ASSETS CASH FUND
FOR THE PERIOD ENDING
FEBRUARY 28, 1997 (e)
----------------------
Beginning Net Asset Value per
Share (a) $1.00
Net Investment Income 0.02
Dividends from Net Investment
Income (0.02)
Ending Net Asset Value per Share $1.00
Ratios to Average Net Assets:
Expenses 0.55% (b)(c)
Net Investment Income 4.91% (b)(c)
Gross Expenses 1.21% (b)(c)
Total Return (d) 5.11% (b)
Net Assets at the End of Period
(000's Omitted) $7,572
(a) Date of commencement of operations: October 1, 1996.
(b) Annualized.
(c) Includes Daily Assets Cash Fund's proportionate share of income and
expenses of Cash Portfolio.
(d) Total Return calculation does not include sales charges.
(e) Unaudited.
<PAGE>
- -------------------------------------------------------------------------------
FORUM FUNDS
PROSPECTUS
AUGUST 1, 1996
DAILY ASSETS
TREASURY FUND
DAILY ASSETS
GOVERNMENT FUND
DAILY ASSETS CASH FUND
[LOGO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Prospectus Summary................... 2
2. Financial Highlights................. 4
3. Investment Objective and Policies.... 4
4. Management........................... 8
5. Purchases and Redemptions of 10
Shares..............................
6. Dividends and Tax Matters............ 15
7. Other Information.................... 16
Account Application
</TABLE>
i
<PAGE>
FORUM FUNDS
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT FUND [LOGO]
DAILY ASSETS CASH FUND
ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING:
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94 Forum
PROSPECTUS
August 1, 1996
- --------------------------------------------------------------------------------
This Prospectus offers shares of Daily Assets Treasury Fund, Daily Assets
Government Fund and Daily Assets Cash Fund (each a "Fund"), which are
diversified portfolios of Forum Funds (the "Trust"), an open-end, management
investment company. Each Fund's investment objective is to seek to provide its
shareholders with high current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
DAILY ASSETS TREASURY FUND invests primarily in obligations issued or
guaranteed by the United States Treasury or by certain agencies and
instrumentalities of the United States Government with a view toward
providing income that is generally considered exempt from state and local
income taxes.
DAILY ASSETS GOVERNMENT FUND invests primarily in obligations of the U.S.
Government, its agencies and instrumentalities, and in repurchase
agreements backed by these obligations.
DAILY ASSETS CASH FUND invests in a broad spectrum of high-quality money
market instruments.
EACH FUND CURRENTLY SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS
INVESTABLE ASSETS IN A SEPARATE PORTFOLIO OF A REGISTERED, OPEN-END MANAGEMENT
INVESTMENT COMPANY WITH AN IDENTICAL INVESTMENT OBJECTIVE. SEE "PROSPECTUS
SUMMARY" AND "OTHER INFORMATION - FUND STRUCTURE."
Shares of the Funds are offered to investors at a price equal to the next
determined net asset value without any sales charge.
This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission ("SEC") a Statement of
Additional Information dated August 1, 1996, as may be amended from time to time
(the "SAI"), which contains more detailed information about the Trust and the
Funds and which is incorporated into this Prospectus by reference. The SAI is
available without charge by contacting the Trust at the address listed above.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY
OTHER FEDERAL AGENCY.
THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
THE FUNDS. Each Fund seeks to achieve its investment objective by investing
all of its investable assets in a separate series of Core Trust (Delaware)
("Core Trust"), itself a registered open-end management investment company.
Daily Assets Treasury Fund, Daily Assets Government Fund and Daily Assets Cash
Fund invest in each of Treasury Portfolio, Government Cash Portfolio and Cash
Portfolio (each a "Portfolio" and collectively the "Portfolios"), respectively.
Accordingly, the investment experience of each Fund will correspond directly
with the investment experience of its corresponding Portfolio. See "Other
Information - Fund Structure."
MANAGEMENT. Forum Financial Services, Inc. ("Forum") supervises the overall
management of the Funds and is the distributor of the Funds' shares. Forum
Advisors, Inc. ("Forum Advisors") is the investment adviser of Treasury
Portfolio and provides professional management of that Portfolio's investments.
Linden Asset Management, Inc. ("Linden") is the investment adviser of Government
Cash Portfolio and Cash Portfolio and provides professional management of those
Portfolios' investments. Forum Advisors and Linden provide certain subadvisory
assistance for the Portfolio's they do not directly advise. The Trust's transfer
agent, dividend disbursing agent and shareholder servicing agent (the "Transfer
Agent") is Forum Financial Corp. See "Management."
SHAREHOLDER SERVICING. The Trust has adopted a Shareholder Service Plan
relating to Shares of each Fund under which Forum is compensated for various
shareholder servicing activities. See "Management - Shareholder Servicing."
PURCHASES AND REDEMPTIONS. Shares of the Funds may be purchased and
redeemed Monday through Friday except on customary national business holidays,
Good Friday and other days that the Federal Reserve Bank of San Francisco is
closed ("Fund Business Days"). Shares of the Funds are offered without a sales
charge and may be redeemed without charge at the next determined net asset
value. The minimum initial investment is $10,000 ($2,000 for IRAs, $2,500 for
exchanges) and the minimum subsequent investment is $500. Shareholders may elect
to have redemptions of over $5,000 transferred by bank wire to a designated bank
account. See "Purchases and Redemptions of Shares."
EXCHANGE PROGRAM. Shareholders of a Fund may exchange their shares without
charge for shares of the other Funds and for the shares of certain other funds
of the Trust not offered by this Prospectus. See "Purchases and Redemptions of
Shares - Exchanges."
DIVIDENDS. Dividends of net investment income are declared daily and paid
monthly by each Fund and are reinvested in Fund shares unless a shareholder
elects to have them paid in cash. See "Dividends and Tax Matters."
RISK FACTORS. There can be no assurance that either Fund will achieve its
investment objective, nor can there be any assurance that either Fund will
maintain a stable net asset value of $1.00 per share. Although the Funds invest
in money market instruments, an investment in any Fund involves certain risks,
depending on the types of investments made and the types of investment
techniques employed. All investments by the Funds entail some risk. Certain
investments and investment techniques, however, entail additional risks,
such as investments in variable and floating rate securities, zero-coupon
securities and forward commitment securities. The use of leverage by a
Fund through borrowings and other investment techniques involves additional
risks. For more details about each Fund and its investments and risks, see
"Investment Objective and Policies." By investing solely in Daily Assets
Government Portfolio and Daily Assets Cash Portfolio, Daily Assets Government
Fund and Daily Assets Cash Fund, respectively, may achieve certain efficiencies
and economies of scale. Nonetheless,
2
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these investments could also have potential adverse effects on the applicable
Fund. Investors in the Funds should consider these risks, as described under
"Other Information - Core Trust Structure."
EXPENSES OF INVESTING IN THE FUNDS
The purpose of the following table is to assist investors in understanding
the various expenses that an investor in a Fund will bear directly or
indirectly. The table reflects the combined expenses of each Fund and its
corresponding Portfolio. There are no transaction expenses associated with
purchases, redemptions or exchanges of Fund shares.
ANNUAL FUND OPERATING EXPENSES (1)(2)
(as a percentage of average net assets, after applicable expense reimbursements)
<TABLE>
<CAPTION>
Daily Assets
Daily Assets Government Daily Assets
Treasury Fund Fund Cash Fund
------------- ------------- -------------
<S> <C> <C> <C>
Management Fees
(after waivers)
(3)................ 0.20% 0.09% 0.07%
Rule 12b-1 Fees..... None None None
Other Expenses
(after
reimbursements).... 0.30% 0.46% 0.48%
------ ------ ------
Total Fund Operating
Expenses........... 0.50% 0.55% 0.55%
</TABLE>
(1) For a further description of the various expenses incurred in the
operation of the Funds and the Portfolios, see "Management." Expenses for Daily
Assets Treasury Fund are based on actual expenses incurred during the Fund's
most recent fiscal year ended March 31, 1996. Expenses for Daily Assets
Government Fund and Daily Assets Cash Fund are estimated annualized expenses for
the Funds' first fiscal year of operations. Absent expense reimbursement
(estimated reimbursements in the case of Daily Assets Government Fund and Daily
Assets Cash Fund), "Management Fees" for each of Daily Assets Treasury Fund,
Daily Assets Government Fund and Daily Assets Cash Fund would be 0.59%, 0.78%
and 0.81%, respectively, and "Total Fund Operating Expenses" would be 1.06%,
1.02% and 1.06%, respectively. Expense reimbursements and fee waivers are
voluntary and may be reduced or eliminated at any time.
(2) Each Fund's expenses include the Fund's pro rata portion of all
operating expenses of the corresponding Portfolio, which will be borne
indirectly by Fund shareholders. The Trust's board of trustees believes that the
aggregate per share expenses of each Fund and its respective Portfolio will be
approximately equal to the expenses the Fund would incur if its assets were
invested directly in money market securities.
(3) Management Fees include all administration fees and investment advisory
fees incurred by the Funds and the Portfolios; as long as its assets are
invested in a Portfolio, a Fund pays no investment advisory fees directly.
EXAMPLE
Following is a hypothetical example that indicates the dollar amount of
expenses that an investor in a Fund would pay assuming (i) the investment of all
of the Fund's assets in the Portfolio, (ii) a $1,000 investment in the Fund,
(iii) a 5% annual return, (iv) the reinvestment of all dividends and
distributions and (v) redemption at the end of each period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Daily Assets Treasury
Fund.................... $5 $16 $28 $63
Daily Assets Government
Fund.................... $6 $18 N/A N/A
Daily Assets Cash Fund... $6 $18 N/A N/A
</TABLE>
The example is based on the expenses listed in the Annual Fund Operating
Expenses table, which assumes the continued waiver and reimbursement of certain
fees and expenses. The five percent annual return is not predictive of and does
not represent the Fund's projected returns; rather, it is required by government
regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN INDICATED.
3
<PAGE>
2. FINANCIAL HIGHLIGHTS
The following information represents selected data for a single share
outstanding of Daily Assets Treasury Fund. This information was audited by
Deloitte & Touche LLP, independent auditors. The financial statements and
independent auditors' report thereon for the fiscal year ended March 31, 1996
are incorporated by reference into the SAI. Further information about the Fund's
performance is contained in the Fund's annual report to shareholders which may
be obtained from the Trust without charge. As of July 31, 1996, Daily Assets
Government Fund and Daily Assets Cash Fund had not commenced operations.
<TABLE>
<CAPTION>
DAILY ASSETS TREASURY FUND
Year Ended March 31,
----------------------------------------------------
1996 1995 1994 1993(1)
----------- ------- ------- -----------
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00
----------- ------- ------- -----------
Net Investment Income 0.05 0.04 0.03 0.02
Dividends from Net Investment Income (0.05) (0.04) (0.03) (0.02)
----------- ------- ------- -----------
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00
----------- ------- ------- -----------
----------- ------- ------- -----------
Ratios to Average Net Assets:
Expenses (2) 0.50%(4) 0.37% 0.33% 0.22%(3)
Net Investment Income 5.01% 4.45% 2.82% 2.92%(3)
Gross Expenses (2) 1.06%(4) 1.10% 1.17% 2.43%(3)
Total Return 5.18% 4.45% 2.83% 3.13%(3)
Net Assets at the End of Period (000's
Omitted) $43,103 $36,329 $26,505 $4,687
</TABLE>
(1) The Fund commenced operations on July 1, 1992.
(2) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had such waiver and reimbursements not occurred, the ratio of
expenses to average net assets would have been:
<TABLE>
<S> <C> <C> <C> <C>
1.06 %(4) 1.10% 1.17% 2.43 %(3)
</TABLE>
(3) Annualized.
(4) Includes expenses allocated from Treasury Portfolio of Core Trust (Delaware)
of 0.02%, net of waivers of 0.07%.
3. INVESTMENT OBJECTIVE AND POLICIES
Each Fund has a fundamental 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 substantially
identical. Therefore, although the following 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 OBJECTIVE
The investment objective of each Fund is to provide high current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity. Each Fund currently seeks to achieve its investment objective by
investing all of its investable assets in its corresponding Portfolio, which has
the same investment objective. There
4
<PAGE>
can be no assurance that any Fund or Portfolio will achieve its investment
objective or maintain a stable net asset value.
INVESTMENT POLICIES
Each Portfolio invests only in high quality, short-term money market
instruments that are determined by its investment adviser, pursuant to
procedures adopted by the Core Trust Board, to be eligible for purchase and to
present minimal credit risks. High quality instruments include those that (i)
are rated (or, if unrated, are issued by an issuer with comparable outstanding
short-term debt that is rated) in the highest rating category by two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
issued a rating, by that NRSRO or (ii) are otherwise unrated and determined by
the Adviser to be of comparable quality. A description of the rating categories
of certain NRSROs, such as Standard & Poor's and Moody's Investors Service,
Inc., is contained in the SAI.
Each Portfolio invests only in U.S. dollar-denominated instruments that have
a remaining maturity of 397 days or less (as calculated under Rule 2a-7 under
the Investment Company Act of 1940 (the "1940 Act")) and maintains a dollar-
weighted average portfolio maturity of 90 days or less. Except to the limited
extent permitted by Rule 2a-7 and except for U.S. Government Securities, each
Portfolio will not invest more than 5% of its total assets in the securities of
any one issuer. As used herein, "U.S. Government Securities" means obligations
issued or guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities.
A portfolio's yield will tend to fluctuate inversely with prevailing market
interest rates. For instance, in periods of falling market interest rates,
yields will tend to be somewhat higher than those rates. Although each Portfolio
only invests in high quality money market instruments, an investment in a
Portfolio is subject to risk even if all securities in the Portfolio's portfolio
are paid in full at maturity. All money market instruments, including U.S.
Government Securities, can change in value when there is a change in interest
rates, the issuer's actual or perceived creditworthiness or the issuer's ability
to meet its obligations.
TREASURY PORTFOLIO
Treasury Portfolio seeks to attain its investment objective by investing
primarily in obligations issued or guaranteed as to principal and interest by
the United States Treasury ("U.S. Treasury Securities"). Under normal market
conditions, the Portfolio will invest at least 65% of its total assets in U.S.
Treasury Securities, such as Treasury bills and notes. The Portfolio may also
invest up to 35% of its total assets in other U.S. Government Securities. The
Portfolio invests with a view toward providing income that is generally
considered exempt from state and local income taxes. The Portfolio will purchase
a U.S. Government Security that is not backed by the full faith and credit of
the U.S. Government only if that security has a remaining maturity of thirteen
months or less.
Among the U.S. Government Securities in which the Portfolio may invest are
obligations of the Farm Credit System, Farm Credit System Financial Assistance
Corporation, Federal Financing Bank, Federal Home Loan Banks, General Services
Administration, Student Loan Marketing Association, and Tennessee Valley
Authority. See "Investment Policies - Government Cash Portfolio." Income on
these obligations and the obligations of certain other agencies and
instrumentalities is generally not subject to state and local income taxes by
Federal law. In addition, the income received by Fund shareholders that is
attributable to these investments will also be exempt in most states from state
and local income taxes. Shareholders should determine through consultation with
their own tax advisers whether and to what extent dividends payable by the Fund
from interest received with respect to its investments will be considered to be
exempt from state and local
5
<PAGE>
income taxes in the shareholder's state. Shareholders similarly should determine
whether the capital gain and other income, if any, payable by the Fund will be
subject to state and local income taxes in the shareholder's state. See
"Dividend and Tax Matters."
U.S. GOVERNMENT ZERO COUPON SECURITIES. The Portfolio may invest in
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury under the Treasury's Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Zero coupon
securities are sold at original issue discount and pay no interest to holders
prior to maturity. Because of this, zero coupon securities may be subject to
greater fluctuation of market value than the other securities in which the
Portfolio may invest. See "Dividends and Tax Matters - Taxes."
GOVERNMENT CASH PORTFOLIO
Government Cash Portfolio seeks to attain its investment objective by
investing, under normal circumstances, at least 65% of its assets in U.S.
Government Securities and in repurchase agreements backed by U.S. Government
Securities. The U.S. Government Securities in which the Portfolio may invest
include securities issued by the U.S. Treasury and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the U.S. Government, such as those guaranteed by
the Small Business Administration. In addition, the U.S. Government Securities
in which the Portfolio may invest include securities supported primarily or
solely by the creditworthiness of the issuer, such as securities of the Federal
National Mortgage Association. There is no guarantee that the U.S. Government
will support securities not backed by its full faith and credit. Accordingly,
although these securities have historically involved little risk of loss of
principal if held to maturity, they may involve more risk than securities backed
by the U.S. Government's full faith and credit.
CASH PORTFOLIO
Cash Portfolio seeks to attain its investment objective by investing in a
broad spectrum of money market instruments. The Portfolio may invest in (i)
obligations of domestic financial institutions, (ii) U.S. Government Securities
(see "Investment Policies - Government Cash Portfolio") and (iii) corporate debt
obligations of domestic issuers.
Financial institution obligations include negotiable certificates of
deposit, bank notes, bankers' acceptances and time deposits of banks (including
savings banks and savings associations) and their foreign branches. The
Portfolio limits its investments in bank obligations to banks which at the time
of investment have total assets in excess of one billion dollars. Certificates
of deposit represent an institution's obligation to repay funds deposited with
it that earn a specified interest rate over a given period. Bank notes are debt
obligations of a bank. Bankers' acceptances are negotiable obligations of a bank
to pay a draft which has been drawn by a customer and are usually backed by
goods in international trade. Time deposits are non-negotiable deposits with a
banking institution that earn a specified interest rate over a given period.
Certificates of deposit and fixed time deposits, which are payable at the stated
maturity date and bear a fixed rate of interest, generally may be withdrawn on
demand by the Portfolio but may be subject to early withdrawal penalties which
could reduce the Portfolio's yield.
Corporate debt obligations include commercial paper (short-term promissory
notes) issued by companies to finance their, or their affiliates', current
obligations. The Portfolio may also invest in commercial paper or other
corporate securities issued in "private placements" that are restricted as to
disposition under the Federal securities laws ("restricted securities"). Any
sale of these securities may not be made absent registration under the
6
<PAGE>
Securities Act of 1933 or the availability of an appropriate exemption
therefrom. Some of these restricted securities, however, are eligible for resale
to institutional investors, and accordingly, a liquid market may exist for them.
Pursuant to guidelines adopted by the Core Trust Board, the investment adviser
will determine whether each such investment is liquid.
ADDITIONAL INVESTMENT POLICIES
Each Fund's and each Portfolio's investment objective and certain investment
limitations, as described in the SAI, are fundamental and therefore, may not be
changed without approval of the holders of a majority of the Fund's or
Portfolio's, as applicable, outstanding voting securities (as defined in the
1940 Act). Except as otherwise indicated herein or in the SAI, investment
policies of a Fund or a Portfolio may be changed by the applicable board of
trustees without shareholder approval. Each Portfolio may borrow money for
temporary or emergency purposes (including the meeting of redemption requests),
but, as a individual policy, not in excess of 33 1/3% of the value of the
Portfolio's total assets. Borrowing for purposes other than meeting redemption
requests will not exceed 5% of the value of the Portfolio's total assets. Each
Portfolio is permitted to hold cash in any amount pending investment in
securities and may invest in other investment companies that intend to comply
with Rule 2a-7 and have substantially similar investment objectives and
policies. A further description of the Funds' and the Portfolios' investment
policies is contained in the SAI.
REPURCHASE AGREEMENTS. Each of Government Cash Portfolio and Cash Portfolio
may seek additional income by entering into repurchase agreements. Repurchase
agreements are transactions in which a Portfolio purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. Core Trust holds the
underlying collateral, which is maintained at not less than 100% of the
repurchase price. Repurchase agreements involve certain credit risks not
associated with direct investment in securities. The Portfolios, however, intend
to enter into repurchase agreements only with sellers which Linden believes
present minimal credit risks in accordance with guidelines established by the
Core Trust Board. In the event that a seller defaulted on its repurchase
obligation, however, a Portfolio might suffer a loss.
LIQUIDITY. To ensure adequate liquidity, each Portfolio may not invest more
than 10% of its net assets in illiquid securities, including in the case of
Government Cash Portfolio and Cash Portfolio, repurchase agreements not
entitling the Portfolio to payment of principal within seven days. There may not
be an active secondary market for securities held by a Portfolio. Linden
monitors the liquidity of the Portfolios' investments.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of
being able to obtain securities at prices which Linden believes might not be
available at a future time, each Portfolio may purchase securities on a
when-issued or delayed delivery basis. When these transactions are negotiated,
the price or yield is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Securities so purchased
are subject to market price fluctuation and no interest on the securities
accrues to a Portfolio until delivery and payment take place. Accordingly, the
value of the securities on the delivery date may be more or less than the
purchase price. Commitments for when-issued or delayed delivery transactions
will be entered into only when a Portfolio has the intention of actually
acquiring the securities, but the Portfolio may sell the securities before the
settlement date if deemed advisable. Failure by the other party to deliver a
security purchased by a Portfolio may result in a loss or missed opportunity to
make an alternative investment. The Trust's custodian will set aside and
maintain in a segregated account cash and certain liquid, high-
7
<PAGE>
grade debt securities with a market value at all times equal to the amount of
the Fund's forward commitment obligations. As a result of entering into forward
commitments, the Funds are exposed to greater potential flucuations in the value
of their assets and net asset values per share.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which the
Portfolios invest may have variable or floating rates of interest. These
securities pay interest at rates that are adjusted periodically according to a
specified formula, usually with reference to some interest rate index or market
interest rate. The interest paid on these securities is a function primarily of
the index or market rate upon which the interest rate adjustments are based.
Those securities with ultimate maturities of greater than 397 days may be
purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term
instruments that have demand features which comply with certain requirements and
certain U.S. Government Securities may be purchased. Similar to fixed rate debt
instruments, variable and floating rate instruments are subject to changes in
value based on changes in market interest rates or changes in the issuer's
creditworthiness.
No Portfolio may purchase a variable or floating rate security whose
interest rate is adjusted based on a long-term interest rate or index, on more
than one interest rate or index, or on an interest rate or index that materially
lags behind short-term market rates (these prohibited securities are often
referred to as "derivative" securities). All variable and floating rate
securities purchased by a Portfolio will have an interest rate that is adjusted
based on a single short-term rate or index, such as the Prime Rate.
FINANCIAL INSTITUTION GUIDELINES. Government Cash Portfolio invests only in
instruments which, if held directly by a bank or bank holding company organized
under the laws of the United States or any state thereof, would be assigned to a
risk-weight category of no more than 20% under the current risk based capital
guidelines adopted by the Federal bank regulators. In addition the Portfolio
does not intend to hold in its portfolio any securities or instruments that
would be subject to restriction as to amount held by a National bank under Title
12, Section 24 (Seventh) of the United States Code. See "Investments By
Financial Institutions" in the SAI. In addition, the Portfolio limits its
investments to those permissible for Federally chartered credit unions under
applicable provisions of the Federal Credit Union Act and the applicable rules
and regulations of the National Credit Union Administration. Government Cash
Portfolio limits its investments to investments that are legally permissible for
Federally chartered savings associations without limit as to percentage and to
investments that permit Fund shares to qualify as liquid assets and as
short-term liquid assets.
4. MANAGEMENT
The business of the Trust is managed under the direction of the Board and
the business of Core Trust is managed under the direction the Core Trust Board.
The board formulates the general policies of the Funds and meets periodically to
review the results of the Funds, monitor investment activities and practices and
discuss other matters affecting the Funds and the Trust. The Core Trust Board
performs similar functions for the Portfolios and Core Trust. The SAI contains
general background information about the trustees and officers of the Trust and
Core Trust.
MANAGER AND DISTRIBUTOR
Subject to the supervision of the Board, Forum supervises the overall
management of the Trust and acts as distributor of the Trust's shares. Forum,
Forum Advisors and the Transfer Agent are members of the Forum Financial Group
of companies ("Forum") and together provide a full range of services to the
investment company and financial services industry. As of the date hereof, Forum
acted as manager and distributor of registered investment companies and
collective trust
8
<PAGE>
funds with assets of approximately $16 billion. Forum is a registered
broker-dealer and investment adviser and is a member of the National Association
of Securities Dealers, Inc. As of the date of this Prospectus, Forum, Forum
Advisors and the Transfer Agent were controlled by John Y. Keffer, President and
Chairman of the Trust.
Forum supervises all aspects of the Funds' operations, including the receipt
of services for which the Trust is obligated to pay, provides the Trust with
general office facilities and certain persons to serve as officers and provides,
at the Trust's expense, the services of persons necessary to perform such
supervisory, administrative and clerical functions as are needed to operate the
Trust effectively. Those officers, as well as certain employees and Trustees of
the Trust, may be directors, officers or employees of (and persons providing
services to the Trust may include) Forum and its affiliates. For these services
and facilities, Forum receives a fee at an annual rate of 0.10% of the daily net
assets of Daily Assets Treasury Fund and a fee at an annual rate of 0.15% of the
daily net assets of each of the Daily Assets Government Fund and Daily Assets
Cash Fund. Forum also serves as administrator of Core Trust and provides
administrative services for each Portfolio that are similar to those provided to
the Funds. For its administrative services to the Portfolios Forum receives a
fee at an annual rate of 0.10% of the daily net assets of Treasury Portfolio and
0.05% of the daily net assets of each of Government Cash Portfolio and Cash
Portfolio. As distributor of each Fund, Forum acts as the agent of the Trust in
connection with the offering of shares of the Funds. Forum receives no fee for
distribution of Fund shares.
ADVISERS
Subject to the general supervision of the Core Trust Board, Forum Advisors
makes investment decisions for Treasury Portfolio and monitors that Portfolio's
investments and Linden makes investment decisions for Government Cash Portfolio
and Cash Portfolio and monitors those Portfolios' investments. Forum Advisors,
which is located at Two Portland Square, Portland, Maine 04101, provides
investment advisory services to five other mutual funds. Linden, which is
located at 812 N. Linden Drive, Beverly Hills, California 90210, is controlled
by Anthony R. Fischer, Jr., who is its sole stockholder, director, and officer,
and provides investment advisory services to one other portfolio of Core Trust.
Forum Advisors and Linden act also as investment sub-advisers to the Portfolios
that they do not manage on a daily basis and from time to time may provide each
other with assistance regarding the other's advisory responsibilities. These
services may include management of part of or all of the Portfolios' investment
portfolios.
For its services, Forum Advisors receives an advisory fee at an annual rate
of 0.05% of Treasury Portfolio's average daily net assets. For its services,
Linden receives from each of Government Cash Portfolio and Cash Portfolio an
advisory fee based upon the total average daily net assets of those Portfolios
and the other portfolio of Core Trust that Linden advises ("Total Portfolio
Assets"). Linden's fee is calculated at an annual rate on a cumulative basis as
follows: 0.05% of the first $200 million of Total Portfolio Assets, 0.03% of the
next $300 million of Total Portfolio Assets, and 0.02% of the remaining Total
Portfolio Assets. A Fund's expenses include the Fund's pro rata portion of the
advisory fee paid by the corresponding Portfolio. To the extent Forum Advisors
or Linden has delegated its responsibilities to the other, Forum Advisors or
Linden pays its advisory fee accrued for such period of time to the other.
Currently, it is anticipated that Linden will delegate responsibility for
portfolio management infrequently to Forum Advisors.
SHAREHOLDER SERVICING
Shareholder inquiries and communications concerning the Funds may
be directed to the Transfer Agent at the address and telephone numbers on the
first page of this Prospectus. The Transfer Agent maintains for each
shareholder of record, an account (unless such accounts are maintained by
sub-transfer agents) to which all shares purchased are credited,
together with any distributions that are reinvested in additional
shares. The Transfer
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Agent also performs other transfer agency functions and acts as dividend
disbursing agent for the Trust. For its services, the Transfer Agent is
paid a transfer agent fee at an annual rate of 0.25% of the average daily
net assets of each Fund attributable to Institutional Shares plus $12,000
per year and certain account and additional class charges and is reimbursed
for certain expenses incurred on behalf of the Funds.
The Transfer Agent is authorized to subcontract any or all of its functions
to one or more qualified sub-transfer agents or processing agents, which may be
its affiliates, who agree to comply with the terms of the Transfer Agent's
agreement with the Trust. The Transfer Agent may pay those agents for their
services, but no such payment will increase the Transfer Agent's compensation
from the Trust. Forum Financial Corp. performs portfolio accounting services for
the Fund, including determination of the Fund's net asset value per share,
pursuant to a separate agreement with the Trust and is paid a fee for these
services.
EXPENSES OF THE TRUST
The Fund's expenses comprise Trust expenses attributable to the Fund, which
are charged to the Fund, and expenses not attributable to a particular fund of
the Trust, which are allocated among the Fund and all other funds of the Trust
in proportion to their average net assets. Subject to any obligations of Forum
or Forum Advisors to reimburse the Trust for excess expenses, the Trust pays for
all of its expenses. Each service provider in its sole discretion may elect to
waive (or continue to waive) all or any portion of its fees, which are accrued
daily and paid monthly, and may reimburse a Fund for certain expenses. Any such
waivers or reimbursements would have the effect of increasing a Fund's
performance for the period during which the waiver was in effect and would not
be recouped at a later date.
5. PURCHASES AND REDEMPTIONS OF SHARES
GENERAL INFORMATION
All transactions in Fund shares are effected through the Transfer Agent,
which accepts orders for purchases and redemptions from shareholders of record
and new investors. Shareholders of record will receive from the Trust periodic
statements listing all account activity during the statement period. The Trust
reserves the right in the future to modify, limit or terminate any shareholder
privilege, upon appropriate notice to shareholders, and may charge a fee for
certain shareholder services, although no such fees are currently contemplated.
PURCHASES. Fund shares are sold at a price equal to their net asset value
next-determined after acceptance of an order, on all weekdays except customary
national business holidays and Good Friday ("Fund Business Day"). Fund shares
are issued immediately after an order for the shares in proper form, accompanied
by funds on deposit at a Federal Reserve Bank ("Federal Funds"), is accepted by
the Transfer Agent. Daily Assets Treasury Fund's net asset value is calculated
at 12:00 p.m., Eastern time, and Daily Assets Government Fund's and Daily Assets
Cash Fund's net asset value is calculated at 2:00 p.m., Eastern time. Fund
shares become entitled to receive dividends on the next Fund Business Day after
the order is accepted.
Each Fund reserves the right to reject any subscription for the purchase of
Fund shares. Stock certificates are issued only to shareholders of record upon
their written request and no certificates are issued for fractional shares.
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
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of the redemption order in proper form (and any supporting documentation
which the Transfer Agent may require). Shares redeemed are not entitled
to receive dividends declared on or after the day on which the
redemption becomes effective.
Normally, redemption proceeds are paid immediately, but in no event later
than seven days, following acceptance of a redemption order. Proceeds of
redemption requests (and exchanges), however, will not be paid unless any check
used to purchase the shares has been cleared by the shareholder's bank, which
may take up to 15 calendar days. This delay may be avoided by investing through
wire transfers. Unless otherwise indicated, redemption proceeds normally are
paid by check mailed to the shareholder's record address. The right of
redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the Shares to the Fund except when the New York
Stock Exchange is closed (or when trading thereon is restricted) for any reason
other than its customary weekend or holiday closings or under any emergency or
other circumstance as determined by the SEC.
Proceeds of redemptions normally are paid in cash. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund. The
Trust will only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's net assets,
whichever is less, during any 90-day period.
The Trust employs reasonable procedures to ensure that telephone orders are
genuine (which include recording certain transactions and the use of shareholder
security codes). If the Trust did not employ such procedures, it could be liable
for any losses due to unauthorized or fraudulent telephone instructions.
Shareholders should verify the accuracy of telephone instructions immediately
upon receipt of confirmation statements. During times of drastic economic or
market changes, telephone redemption and exchange privileges may be difficult to
implement. In the event that a shareholder is unable to reach the Transfer Agent
by telephone, requests may be mailed or hand-delivered to the Transfer Agent.
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.
PURCHASE AND REDEMPTION PROCEDURES
Investors may open an account by completing the application at the back of
this Prospectus or by contacting the Transfer Agent at the address on the first
page of this prospectus. For those shareholder services not referenced on the
account application and to change information regarding a share-
holder's account (such as addresses), investors should request an Optional
Services Form from the Transfer Agent.
INITIAL PURCHASE OF SHARES
There is a $10,000 minimum for initial investments in the Fund ($2,000 for
individual retirement accounts, $2,500 for exchanges).
BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application to the address on the cover page of this
Prospectus. Checks are accepted at full value subject to collection. Payment by
a check drawn on any member of the Federal Reserve System can normally be
converted into Federal Funds within two business days after receipt of the
check. Checks drawn on some non-member banks may take longer.
BY BANK WIRE. To make an initial investment in the Fund using the wire
system for transmittal of money among banks, an investor should first telephone
the Trust at 800-94FORUM (800-943-6786)
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or (207) 879-0001 to obtain an account number. The investor should then
instruct a bank to wire the investor's money immediately to:
First National Bank of Boston
Boston, Massachusetts
ABA# 011000390
For Credit To: Forum Financial Corp.
Account #: 541-54171
Re: [Name of Fund]
Account #: ______________
Account Name: __________
The investor should then promptly complete and mail the account application.
Any investor planning to wire funds should instruct a bank early in the day so
the wire transfer can be accomplished the same day. There may be a charge
imposed by the bank for transmitting payment by wire, and there also may be a
charge for the use of Federal Funds.
THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed
through certain brokers, banks or other financial institutions ("Processing
Organizations"), including affiliates of the Transfer Agent. Processing
Organizations may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Fund. The Trust is not responsible for the failure of any institution to
promptly forward these requests.
Investors who purchase or redeem shares in this manner will be subject to
the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in the Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase Fund shares
through a Processing Organization may or may not be the shareholder of record
and, subject to their institution's and the Fund's procedures, may have Fund
shares transferred into their name. Certain Processing Organizations may enter
purchase orders with payment to follow. Certain states permit shares to be
purchased and redeemed only through registered broker-dealers, including Forum.
The Trust may confirm purchases and redemptions of a Processing
Organization's customers directly to the Processing Organization, which in turn
will provide its customers with such confirmations and periodic statements as
may be required by law or agreed to between the Processing Organization and its
customers.
SUBSEQUENT PURCHASES OF SHARES
There is a $500 minimum for subsequent purchases. Subsequent purchases may
be made by mailing a check, by sending a bank wire or through a financial
institution as indicated above. Shareholders using the wire system for purchase
should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001
to notify it of the wire transfer. All payments should clearly indicate the
shareholder's name and account number.
Shareholders may purchase Fund shares at regular, preselected intervals by
authorizing the automatic transfer of funds from a designated bank account
maintained with a United States banking institution which is an Automated
Clearing House member. Under the program, existing shareholders may authorize
amounts of $250 or more to be debited from their bank account and invested in
the Fund monthly or quarterly. Shareholders may terminate their automatic
investments or change the amount to be invested at any time by written
notification to the Transfer Agent.
REDEMPTION OF SHARES
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
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be available until several weeks after a shareholder's application is received.
Shares for which certificates have been issued may not be redeemed by telephone
or check.
BY MAIL. Shareholders may make a redemption in any amount by sending a
written request to the Transfer Agent accompanied by any stock certificate that
may have been issued to the shareholder. All written requests for redemption
must be signed by the shareholder with signature guaranteed and all certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed.
BY TELEPHONE. A shareholder that has elected telephone redemption
privileges may make a telephone redemption request by calling the Transfer Agent
at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number. In
response to the telephone redemption instruction, the Fund will mail a check to
the shareholder's record address or, if the shareholder has elected wire
redemption privileges, wire the proceeds.
BY BANK WIRE. For redemptions of more than $5,000, a shareholder that has
elected wire redemption privileges may request the Fund to transmit the
redemption proceeds by Federal Funds wire to a bank account designated on the
shareholder's account application. To request bank wire redemptions by
telephone, the shareholder also must have elected the telephone redemption
privilege. Redemption proceeds are transmitted by wire on the day the redemption
request in proper form is received by the Transfer Agent.
AUTOMATIC REDEMPTIONS. Shareholders may redeem Fund shares at regular,
preselected intervals by authorizing the automatic redemption of shares from
their Fund account. Redemption proceeds will be sent either by check or by
automatic transfer to a designated bank account maintained with a United States
banking institution which is an Automated Clearing House member. Under this
program, shareholders may authorize the redemption of shares in amounts of $250
or more from their account monthly or quarterly. Shareholders may terminate
their automatic redemptions or change the amount to be redeemed at any time by
written notification to the Transfer Agent.
OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. In addition,
a signature guarantee is required for instructions to change a shareholder's
record name or address, designated bank account for wire redemptions or
automatic investment or redemption, dividend election, telephone redemption or
exchange option election or any other option election in connection with the
shareholder's account. Signature guarantees may be provided by any eligible
institution acceptable to the Transfer Agent, including a bank, a broker, a
dealer, a national securities exchange, a credit union, or a savings association
that is authorized to guarantee signatures. Whenever a signature guarantee is
required, the signature of each person required to sign for the account must be
guaranteed.
The Transfer Agent will deem a shareholder's account "lost" if
correspondence to the shareholder's address of record is returned for six
months, unless the Transfer Agent determines the shareholder's new address. When
an account is deemed lost all distributions on the account will be reinvested in
additional shares of the Fund. In addition, the amount of any outstanding
(unpaid for six months or more) checks for distributions that have been returned
to the Transfer Agent will be reinvested and the checks will be canceled.
EXCHANGES
Shareholders may exchange their shares for shares of any other fund of the
Trust or any other mutual fund managed by Forum that participates with the Funds
in the exchange program (currently, Sound Shore Fund, Inc.). Exchanges are
subject to
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the fees charged by, and the restrictions listed in the prospectus
for, and the fund into which a shareholder is exchanging, including minimum
investment requirements. The minimum amount required to open an account in a
Fund through an exchange from another fund is $2,500. The Funds do not charge
for exchanges, and there is currently no limit on the number of exchanges a
shareholder may make, but each Fund reserves the right to limit excessive
exchanges by any shareholder. See "Additional Purchase and Redemption
Information" in the SAI.
Exchanges may only be made between accounts registered in the same name. A
completed account application must be submitted to open a new account in a Fund
through an exchange if the shareholder requests any shareholder privilege not
associated with the new account. Shareholders may only exchange into a fund if
that fund's shares may legally be sold in the shareholder's state of residence.
The Trust (and Federal tax law) treats an exchange as a redemption of the
shares owned and the purchase of the shares of the fund being acquired.
Accordingly, a shareholder may realize a capital gain or loss with respect to
the shares redeemed. Redemptions and purchases are effected at the respective
net asset values of the two funds as next determined following receipt of proper
instructions and all necessary supporting documents by the fund whose shares are
being exchanged.
If a shareholder exchanges into a fund that imposes a sales charge, that
shareholder is required to pay the difference between that fund's sales charge
and any sales charge the shareholder has previously paid in connection with the
shares being exchanged. For example, if a shareholder paid a 2% sales charge in
connection with the purchase of the shares of a fund and then exchanged those
shares into another fund with a 3% sales charge, that shareholder would pay an
additional 1% sales charge on the exchange. Shares acquired through the
reinvestment of dividends and distributions are deemed to have been acquired
with a sales charge rate equal to that paid on the shares on which the dividend
or distribution was paid. The exchange privilege may be modified materially or
terminated by the Trust at any time upon 60 days' notice to shareholders.
BY MAIL. Exchanges may be accomplished by written instruction to the
Transfer Agent accompanied by any stock certificate that may have been issued to
the shareholder. All written requests for exchanges must be signed by the
shareholder (a signature guaranteed is not required) and all certificates
submitted for exchange must be endorsed by the shareholder with signature
guaranteed.
BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder
that has elected telephone exchange privileges by calling the Transfer Agent at
800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's
account number, the exact name in which the shareholder's shares are registered
and the shareholder's social security or taxpayer identification number.
INDIVIDUAL RETIREMENT ACCOUNTS
Each of Daily Assets Government Fund and Daily Assets Cash Fund may be
a suitable investment vehicle for part or all of the assets held in
individual retirement accounts ("IRAs"). The minimum initial investment for
IRAs is $2,000, and the minimum subsequent investment is $500.
Individuals may make tax-deductible IRA contributions of up to a maximum
of $2,000 annually. However, this deduction will be reduced if the
individual or, in the case of a married individual filing jointly either the
individual or the individual's spouse, is an active participant in an
employer-sponsored retirement plan and has adjusted gross income above
certain levels.
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6. DIVIDENDS AND TAX MATTERS
DIVIDENDS
Dividends of each Fund's net investment income are declared daily and paid
monthly following the close of the last Fund Business Day of the month. Net
capital gain realized by a Fund, if any, will be distributed annually. Fund
shares become entitled to receive dividends on the day the shares are issued.
Shares redeemed are not entitled to receive dividends declared on or after the
day on which the redemption becomes effective.
Shareholders may choose to have all dividends reinvested in additional
shares of the Fund or received in cash. In addition, shareholders may have
dividends of net capital gain reinvested in additional shares of the Fund and
dividends of net investment income paid in cash. All dividends are treated in
the same manner for Federal income tax purposes whether received in cash or
reinvested in shares of the Fund.
All dividends will be reinvested at the Fund's net asset value as of the
payment date of the dividend. All dividends are reinvested unless another option
is selected. All dividends not reinvested will be paid to the shareholder in
cash and may be paid more than seven days following the date on which dividends
would otherwise be reinvested.
TAXES
TAX STATUS OF THE FUNDS. Each Fund intends to qualify or continue to
qualify to be taxed as a "regulated investment company" under the Internal
Revenue Code of 1986. Accordingly, each Fund will not be liable for Federal
income taxes on the net investment income and capital gain distributed to its
shareholders. Because the Funds intend to distribute all of their net investment
income and net capital gain each year, the Funds should also avoid Federal
excise taxes.
Dividends paid by each Fund out of its net investment income (including
realized net short-term capital gain) are taxable to the shareholders of the
Fund as ordinary income. Distributions of net long-term capital gain, if any,
realized by a Fund are taxable to shareholders as long-term capital gain,
regardless of the length of time the Fund shares were held by the shareholder at
the time of distribution.
THE PORTFOLIOS. The Portfolios are not required to pay Federal income taxes
on their net investment income and capital gain, as they are treated as
partnerships for Federal income tax purposes. All interest, dividends and gains
and losses of a Portfolio are deemed to have been "passed through" to the
respective Fund in proportion to the Fund's holdings of the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio or losses have been realized by the Portfolio.
STATE AND LOCAL. Daily Assets Treasury Fund's investment policies are
structured to provide shareholders, to the extent permissible by Federal and
state law, with income that is exempt or excluded from income taxation at the
state and local level. Many states (by statute, judicial decision or
administrative action) do not tax dividends from a regulated investment company
that are attributable to interest on obligations of the U.S. Treasury and
certain U.S. Government agencies and instrumentalities if the interest on those
obligations would not be taxable to a shareholder that held the obligation
directly. As a result, substantially all dividends paid by this Fund to
shareholders residing in certain states will be exempt or excluded from state
income taxes. A portion of the dividends paid by Daily Assets Government Fund
and Daily Assets Cash Fund to shareholders may be exempt or excluded from state
income taxes, but
these Funds are not managed to provide any specific amount of state tax-free
income to shareholders.
Shortly after the close of each year, a statement is sent to each
shareholder of the Funds advising the shareholder of the portions of total
dividends paid into the shareholder's account that
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is derived from each type of obligation in which the Funds have invested.
These portions are determined for the entire year and on a monthly basis
and, thus, are an annual or monthly average, rather than a day-by-day
determination for each shareholder.
GENERAL. Each Fund may be required by Federal law to withhold 31% of
reportable payments (which may include taxable dividends, capital gain
distributions and redemption proceeds) paid to individuals and certain other
non-corporate shareholders. Withholding is not required if a shareholder
certifies that the shareholder's social security or tax identification number
provided to a Fund is correct and that the shareholder is not subject to backup
withholding.
Zero coupon securities are sold at original issue discount and pay no
interest to holders prior to maturity, but the Fund must include a portion of
the original issue discount of the security as income. Because Daily Assets
Treasury Fund distributes all of its net investment income, the Fund may have to
sell portfolio securities to distribute imputed income, which may occur at a
time when Forum Advisors would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Reports containing appropriate information with respect to the Federal
income tax status of dividends and distributions paid during the year by the
Funds will be mailed to shareholders shortly after the close of each year.
The foregoing is only a summary of some of the important Federal and state
tax considerations generally affecting the Fund and its shareholders. There may
be other Federal, state or local tax considerations applicable to a particular
investor. Prospective investors are urged to consult their tax advisors.
7. OTHER INFORMATION
PERFORMANCE INFORMATION
The performance of Institutional Shares of a Fund may be quoted in
advertising in terms of yield or total return. All performance information is
based on historical results, may vary, is not intended to indicate future
performance and, unless otherwise indicated, is net of all expenses. A Fund's
yield is a way of showing the rate of income earned by the Fund as a percentage
of the Fund's share price. Yield is calculated by dividing the net investment
income of a Fund for a seven day period by the average number of shares entitled
to receive dividends and expressing the result as an annualized percentage rate
based on the Fund's share price at the beginning of the seven day period.
Performance information may in part be based upon the performance of the
Portfolio in which a Fund invests.
The Funds' advertisements may also reference ratings and rankings among
similar funds by independent evaluators such as Morningstar, Lipper Analytical
Services, Inc. or IBC/Donoghue, Inc. In addition, the performance of the Funds
may be compared to recognized indices of market performance. The comparative
material found in a Fund's advertisements, sales literature, or reports to
shareholders may contain performance rankings. This material is not to be
considered representative or indicative of future performance.
BANKING LAW MATTERS
Banking laws and regulations generally permit a bank or bank affiliate to
purchase shares of an investment company as agent for and upon the order of a
customer and permit a bank or bank affiliate to serve as a Processing
Organization or perform sub-transfer agent or similar services for
the Trust and its shareholders. If a bank or bank affiliate were prohibited from
performing all or a
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part of the foregoing services, its shareholder customers would be
permitted to remain shareholders of the Trust and alternative means for
continuing to service them would be sought.
DETERMINATION OF NET ASSET VALUE
The Trust determines the net asset value per share of Daily Assets Treasury
Fund as of 12:00 p.m., eastern time, and of Daily Assets Government Fund and
Daily Assets Cash Fund as of 2:00 p.m., eastern time, on each Fund Business Day
by dividing the value of the Fund's net assets (I.E., the value of its portfolio
securities and other assets less its liabilities) by the number of the Fund's
shares outstanding at the time the determination is made.
In order to more easily maintain a stable net asset value per share, each
Portfolio's portfolio securities are valued at their amortized cost (acquisition
cost adjusted for amortization of premium or accretion of discount) in
accordance with Rule 2a-7. The Portfolios will only value their portfolio
securities using this method if the Board and the Core Trust Board believes that
it fairly reflects the market-based net asset value per share. If the market
value of a Fund's portfolio deviates more than 1/2 of 1% form the value
determined on the basis of amortized cost, the Board will consider whether any
action should be initiated to prevent any material dilutive effect on
shareholders.
THE TRUST AND ITS SHARES
The Trust is registered with the SEC as an open-end management investment
company and was organized as a business trust under the laws of the State of
Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the
assets and liabilities of Forum Funds, Inc. The Board has the authority to issue
an unlimited number of shares of beneficial interest of separate series with no
par value per share and to create classes of shares within each series. There
are currently fifteen series of the Trust.
Each share of each fund of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertain to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular portfolio or class, except if
the matter affects only one portfolio or class or voting by portfolio or class
is required by law, in which case shares will be voted separately by portfolio
or class, as appropriate. Delaware law does not require the Trust to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
have available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Trust. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a portfolio is entitled to the shareholder's pro rata
share of all dividends and distributions arising from that portfolio's assets
and, upon redeeming shares, will receive the portion of the portfolio's net
assets represented by the redeemed shares.
From time to time certain shareholders may own a large percentage of shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of any shareholder vote.
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FUND STRUCTURE
CORE TRUST STRUCTURE. Each Fund invests all of its assets in its
corresponding Portfolio of Core Trust, a business trust organized under the laws
of the State of Delaware in September 1994 and registered under the 1940 Act as
an open-end management investment company. Accordingly, a Portfolio directly
acquires its own securities and its corresponding Fund acquires an indirect
interest in those securities. The assets of each Portfolio belong only to, and
the liabilities of the Portfolio are borne solely by, the Portfolio and no other
portfolio of Core Trust. Upon liquidation of a Portfolio, investors in the
Portfolio would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
THE PORTFOLIOS. The investment objective and fundamental investment
policies of the Funds and the Portfolios can be changed only with
shareholder approval. See "Prospectus Summary," "Investment Objective and
Policies," and "Management" for a description of the Portfolio's investment
objective, policies, restrictions, management, and expenses. A Fund's investment
in a Portfolio is in the form of a non-transferable beneficial interest. As of
the date of this Prospectus, Daily Assets Treasury Fund is the only investor
that has invested all of its assets in Treasury Portfolio. There are other
investors in Government Cash Portfolio and Cash Portfolio in addition to Daily
Assets Government Fund and Daily Assets Cash Fund. See "Additional Information"
below. All investors in a Portfolio invest on the same terms and conditions as
the Funds and will pay a proportionate share of the Portfolio's expenses.
The Portfolios normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Portfolio will be entitled to vote
in proportion to the relative value of its interest in the Portfolio. On most
issues subject to a vote of investors, as required by the 1940 Act and other
applicable law, a Fund will solicit proxies from shareholders of the Fund and
will vote its interest in a Portfolio in proportion to the votes cast by its
shareholders. There can be no assurance that any issue that receives a majority
of the votes cast by a Fund's shareholders will receive a majority of votes cast
by all investors in the Portfolio.
CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. If a large investor other than a Fund redeemed its interest
in a Portfolio, the Portfolio's remaining investors (including the Fund) might,
as a result, experience higher pro rata operating expenses, thereby producing
lower returns. A Fund may withdraw its entire investment from a Portfolio at any
time, if the Board determines that it is in the best interests of the Fund and
its shareholders to do so. The Fund might withdraw, for example, if other
investors in the Portfolio, by a vote of shareholders, changed the investment
objective or policies of the Portfolio in a manner not acceptable to the Board
or not permissible by the Fund. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio. If the Fund decided to convert those securities to cash, it usually
would incur transaction costs. If the Fund withdrew its investment from the
Portfolio, the Board would consider what action might be taken, including the
management of the Fund's assets in accordance with its investment objective and
policies by Forum Advisors or the investment of all of the Fund's investable
assets in another pooled investment entity having substantially the same
investment objective as the Fund. The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the Adviser
to manage the Fund's assets, could have a significant impact on shareholders of
the Fund. Forum's experience in managing funds that utilize its "Core and
Gateway" structure began in 1994.
ADDITIONAL INFORMATION. Any other investment company that invests in a
Portfolio may have a different expense ratio and different sales
18
<PAGE>
charges, including distribution fees, and each investment company's performance
will be affected by its expenses and sales charges. Therefore, Fund shareholders
may have different yields than shareholders in another investment company that
invests exclusively in the Portfolio. For more information on any other
investment companies that invest in a Portfolio, investors may contact Forum at
207-879-1900. If an investor invests in a Fund through a financial institution,
the investor also may contact their financial institution to obtain information
about any other investment company investing in a Portfolio.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS'
SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER
MAY NOT LAWFULLY BE MADE.
19
<PAGE>
FORUM FUNDS
[LOGO] ACCOUNT APPLICATION ACCOUNT NUMBER__________
1. INITIAL INVESTMENT ($10,000 minimum)
/ / Check enclosed for $______________________ / / Daily Assets Treasury
/ / I have telephoned the Transfer Agent / / Daily Asset Government
to make wire arrangements (see
instructions on reverse).
/ / My initial investment wire is $___________ / / Daily Assets Cash
2. REGISTRATION (please print)
/ / INDIVIDUALS
-----------------------------------------------------------------
Investor's Name
-----------------------------------------------------------------
Social Security Number
-----------------------------------------------------------------
Joint Investor's Name (right of survivorship
presumed unless tenancy in common is indicated)
-----------------------------------------------------------------
Social Security Number
/ / GIFTS TO MINORS
as custodian for
----------------------------- ----------------------------
Custodian's Name (only one Minor's Name (only one
permitted) permitted)
under the _______________ Uniform Gifts to Minors Act
State
-----------------------------------------------------------------
Minor's Social Security Number
/ / CORPORATIONS, PARTNERSHIPS & OTHERS (additional documentation required for
investors in any representative capacity)
-----------------------------------------------------------------
Name of Entity (indicate type of business, e.g., partnership)
-----------------------------------------------------------------
Taxpayer Identification Number
/ / TRUSTS (including corporate pension plans)
as trustee(s) for
----------------------------- ---------------------------
Trustee(s) Name(s) Name of Trust
-----------------------------------------------------------------
Full date of trust instrument
-----------------------------------------------------------------
Taxpayer Identification Number
3. ADDRESS
CITIZENSHIP: / / U.S. / / Resident Alien / / Non-Resident Alien___________
Country
-----------------------------------------------------------------
Number and Street
--------------------------------------------------------------------------
City State Zip Code
-------------------------------- ------------------ --------------------
Contact Person Telephone (Day) Telephone (Evening)
4. TELEPHONE AND WIRE REDEMPTION PRIVILEGES (subject to the terms set forth in
the Prospectus)
/ / Telephone Redemption/Exchange Privilege
The Fund and Forum Financial Corp. ("Forum") are hereby authorized to honor
verbal instructions for the (i) redemption of any and all Fund shares held
in the undersigned's account provided that proceeds are mailed to the
shareholders address of record or to the bank account indicated below and
(ii) exchange of Fund shares into another account. The Fund and Forum are
authorized to honor any verbal instructions for purposes of redemption or
exchange purporting to be from the shareholder and believed by the Fund or
Forum to be genuine, and neither the Fund nor Forum shall be liable for any
loss, cost or expense for acting upon such instructions.
/ / Wire Redemption Privilege
The Fund and Forum are authorized to honor written instructions with
signature guaranteed or, if Telephone Redemption Privileges are elected,
verbal instructions, to redeem any and all Fund shares held in the
undersigned's account provided that the proceeds are transmitted to the
bank account indicated below. Complete the following if either privilege is
elected:
------------------------------------------------------ -----------------
Name of Bank (attach a voided check or deposit slip) Account Number
------------------------------------------------------ -----------------
Address and Branch of Bank ABA #
<PAGE>
ACCOUNT APPLICATION (CONTINUED)
5. DIVIDEND AND CAPITAL GAIN DISTRIBUTION PAYMENT OPTIONS (check one)
/ / Full Reinvestment: Reinvest all income dividends and capital gain
distributions when paid.
/ / Capital Gain Reinvestment: Reinvest capital gain distributions when paid;
pay income dividends in cash.
/ / Cash: Pay all income dividends and capital gain distributions in cash.
(Note: If none of the above boxes are checked, shareholders are assigned the
Full Reinvestment option.)
6. DUPLICATE STATEMENT ADDRESS (optional)
-----------------------------------------------------------------
Company Name Contact Person
-----------------------------------------------------------------
Number and Street
-----------------------------------------------------------------
City State Zip Code
-------------------------------- -------------------------------
Telephone (Day) Telephone (Evening)
7. DEALER INFORMATION (for broker/dealer use only)
-----------------------------------------------------------------
Firm Name NSCC Code
-----------------------------------------------------------------
Representative's Name Representative's #
-----------------------------------------------------------------
Branch Address Branch Code
-----------------------------------------------------------------
Dealer's Authorized Signature Source of Business Code
8. SIGNATURE
I am (We are) of legal age in the state of my (our) residence and wish to
purchase shares of the Fund(s) indicated as described in the current Prospectus
(a copy of which I (we) have received). By the execution of this Account
Application, the undersigned represent(s) and warrant(s) that I (we) have full
right, power and authority to make this investment and the undersigned is (are)
duly authorized to sign this Account Application and to purchase or redeem
shares of the Fund on behalf of the Investor.
-----------------------------------------------------------------
Signature of Investor/Custodian Trustee Date
-----------------------------------------------------------------
Signature of Joint Investor/Co-Trustee Date
-----------------------------------------------------------------
Corporate Officer (Name) Title
-----------------------------------------------------------------
Signature of Corporate Officer Title
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
(check appropriate box, if applicable).
Under the penalties of perjury, I certify:
/ / That the number shown on this form is my correct taxpayer identification
number and that I am not subject to backup withholding because (a) I am
exempt from backup withholding, (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup withholding as
a result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
/ / That I have not provided a taxpayer identification number because I have
not been issued a number, but I have applied for one or will do so in the
near future. I understand that if I do not provide my number to the Fund
within 60 days, the Fund will be required to begin backup withholding.
-----------------------------------------------------------------
Signature of Investor/Custodian/Trustee Date
-----------------------------------------------------------------
Signature of Joint Investor/Co-Trustee Date
-----------------------------------------------------------------
Corporate Officer (Name) Title
-----------------------------------------------------------------
Signature of Corporate Officer Title
9. INITIAL INVESTMENT AND MAILING INSTRUCTIONS
(1) If making your initial investment by check, complete the Account
Application and mail it with your check, payable to "Forum Funds" to:
FORUM FINANCIAL CORP.
ATTN: TRANSFER AGENT
P.O. BOX 446
PORTLAND, ME 04112
(2) If making your initial investment by bank wire, call the Transfer Agent
(Forum Financial Corp.) at 800-94FORUM (800-943-6786) to obtain an account
number. Then instruct your bank to wire Federal Funds to:
FIRST NATIONAL BANK OF BOSTON
BOSTON, MA
ABA # 011000390
CREDIT TO: FORUM FINANCIAL CORP.
ACCOUNT NUMBER: 541-54171
FOR FURTHER CREDIT TO: (FUND NAME)
ACCOUNT NAME / ACCOUNT NUMBER
Complete the Account Application and mail it to the address listed above.
Be sure to indicate the account number assigned to you on this Account
Application.
<PAGE>
[LOGO]
SHAREHOLDER INFORMATION:
Forum Financial Corp.
P.O. Box 446
Portland, ME 04112
207-879-0001 (IN PORTLAND, ME)
800-94FORUM (ELSEWHERE)
<PAGE>
FORUM FUNDS
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH 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
August 1, 1996
as amended April 1, 1997
This Statement of Additional Information supplements the Prospectus offering
Shares of Daily Assets Treasury Fund, Daily Assets Government Fund and Daily
Assets Cash Fund, three 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 3
3. Investment Limitations 7
4. Investment by Financial Institutions 10
5. Performance Data 11
6. Management 13
7. Determination of Net Asset Value 21
8. Portfolio Transactions 21
9. Additional Purchase and
Redemption Information 22
10. Taxation 23
11. Other Information 24
12. Financial statements 27
Appendix A - Description of Securities Ratings
23
<PAGE>
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.
24
<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. There are currently
fifteen series of the Trust as follows:
Investors Stock Fund
Investors Bond Fund
TaxSavers 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
Sportsfund
Austin Global Equity Fund
Oak Hall Equity Fund
Core Portfolio Plus
DEFINITIONS. As used in this Statement of Additional Information, the following
terms shall have the meanings listed:
"Advisers" means Forum Advisors and Linden.
"FFC" means Forum Financial Corp.
"Forum" means Forum Financial Services, Inc.
"Forum Advisors" means Forum Advisors, Inc.
"Fund" means Daily Assets Treasury Fund, Daily Assets Government Fund or Daily
Assets Cash Fund.
"Fund Business Day" shall have the meaning ascribed thereto in the Prospectuses
of the Funds.
"Linden" means Linden Asset Management, Inc.
"NRSRO" means a nationally recognized statistical rating organization.
"Portfolio" means the Treasury Portfolio, Government Cash Portfolio or Cash
Portfolio, portfolios of Core Trust.
"SAI" means this Statement of Additional Information.
"SEC" means the U.S. Securities and Exchange Commission.
"Trust" means Forum Funds, a Delaware business trust.
"U.S. Government Securities" means obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
25
<PAGE>
"1940 Act" means the Investment Company Act of 1940, as amended.
26
<PAGE>
2. INVESTMENT POLICIES
Each Fund currently seeks to achieve its investment objective by investing all
of its investable assets in its corresponding Portfolio of Core Trust.
Following is information pertaining to the investment policies of each
Portfolio, which supplements the investment policy information contained in the
Funds' Prospectus.
Each Fund has a fundamental 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 discuss the investment policies of the
Portfolios (and the responsibilities of the Core Trust Board), it applies
equally to the Funds (and 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 invested 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 (as defined in the Prospectus) 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 the
Advisers to be of comparable quality.
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. An
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 Treasury
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).
27
<PAGE>
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 or, in the case of Treasury Cash Portfolio, that
are U.S. Treasury Securities. These securities directly or indirectly represent
a participation in, or are secured by and payable from, adjustable rate mortgage
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 U.S. Government 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. Government Cash Portfolio and
Cash Portfolio will only invest in adjustable rate MBSs that are U.S. Government
Securities. MBSs represent an interest in a pool 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.
Interests in pools of 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 contrast, 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.
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
28
<PAGE>
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
custodian will set aside and maintain in a segregated account cash, U.S.
Government Securities or other liquid, high-grade debt securities with a market
value at all times at least equal to the amount of its commitment.
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 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.
LENDING OF PORTFOLIO SECURITIES 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, Government Cash Portfolio and Cash Portfolio, may not
29
<PAGE>
lend portfolio securities in an amount greater than 33 1/3% of the value of
their total assets. The Portfolios intend to enter securities loans only with
those companies that the Advisers, under the general supervision of the Core
Trust Board, believes present minimal credit risks.
In connection with entering into repurchase agreements and securities loans, the
Portfolios require continual maintenance by the 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 Advisers monitor 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 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 Advisers believe
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.
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 two interest
rates or indexes, on an interest rate or index that materially lags short-term
market rates. All variable and floating rate securities purchased by a
Portfolio have an interest rate that is adjusted based on a single short-term
rate or index, such as the Prime Rate.
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.
30
<PAGE>
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 an 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 Daily Assets Treasury Fund's Prospectus and which may not be
changed without shareholder approval. The Portfolio may not:
(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.
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<PAGE>
(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.
(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.
(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 GOVERNMENT FUND, DAILY ASSETS CASH FUND/GOVERNMENT CASH PORTFOLIO,
CASH PORTFOLIO. Government Cash Portfolio and Cash Portfolio have adopted the
following fundamental investment limitations which are in addition to those
contained in the Daily Assets Government Fund's and Daily Assets Cash Fund's
Prospectus and which may not be changed without shareholder approval. Each of
these Portfolios may not:
(1) With respect to 75% 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.
(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.
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<PAGE>
(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.
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.
Government Cash Portfolio and 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 or hold securities of any issuer other than the Portfolio if, to
the Portfolio's knowledge, those Trustees and officers of the Trust or the
Portfolio's investment 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.
33
<PAGE>
(g) 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.
(h) 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.
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.
34
<PAGE>
INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - DAILY ASSETS GOVERNMENT
FUND. Government Cash Portfolio limits its 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
Portfolio limits its investments to U.S. Government Securities (including
Treasury STRIPS) and repurchase agreements fully collateralized by U.S.
Government Securities. Certain U.S. Government Securities owned by Government
Cash 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 Government Cash Portfolio 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). Government Cash Portfolio has no current
intention to make any such investment. The Portfolio 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 - GOVERNMENT CASH
PORTFOLIO. Government Cash Portfolio limits its 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 Portfolio limits its 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 the Portfolio's and
Fund's shareholders, as applicable.
5. PERFORMANCE DATA
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
indexes. 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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<PAGE>
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.
For the seven day period ended March 31, 1996, the annualized yields of each of
the classes of the Funds that were then operating were as follows:
Current Yield Effective Yield
------------- ---------------
Daily Assets Treasury Fund
Institutional Shares 4.66% 4.77%
Investor Shares NA NA
Daily Assets Government Fund
Institutional Shares NA NA
Investor Shares NA NA
Daily Assets Cash Fund
Institutional Shares NA NA
Investor Shares NA NA
For the seven day period ended February 28, 1997, the annualized yields of each
of the class of Daily Assets Cash Fund were as follows:
Current Yield Effective Yield
------------- ---------------
Daily Assets Cash Fund
Institutional Shares 4.96% 4.95%
Investor Shares NA NA
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
36
<PAGE>
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 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 their advertisements.
Information included in the Fund's advertisements may include, but is not
limited to (i) 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 Funds or the
Portfolios and the portfolio management staff of the Adviser 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
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, Core Trust's or any of the Trust's of
Core Trust's service provider's policies or business practices.
6. MANAGEMENT
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 53)
President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), 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 Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
Costas Azariadis, Trustee (age 52)
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 53)
Managing Director, Forum Financial Services, Inc. since September 1991.
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.
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<PAGE>
J. Michael Parish, Trustee (age 52)
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 40)
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.
Richard C. Butt, Treasurer (age 40)
Managing Director, Forum Financial Corp. with which he has been associated
since 1995. Prior thereto, Mr. Butt served as 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. Before joining 440
Financial, he as a Vice President at Fidelity Services Company. Mr. Butt
is also treasurer 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.
David I. Goldstein, Secretary (age 34)
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
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
Don L. Evans, Assistant Secretary (age 47)
Assistant Counsel, Forum Financial Services, Inc., with which he has been
associated since August 1995. Prior thereto, Mr. Evans was associated with
the law firm of Bisk & Lutz and prior thereto the law firm of Weiner &
Strother. Mr. Evans is also Assistant Secretary 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.
M. Paige Miles, Assistant Secretary (age 27).
Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1995. Ms. Miles 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 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.
James C. Cheng, Trustee.
J. Michael Parish, Trustee.
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<PAGE>
Richard C. Butt, Treasurer
David I. Goldstein, Secretary
Renee A. Walker, Assistant Secretary (age 25).
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 for 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
32).
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 41)
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) plus $100 per active
portfolio of the Trust and is paid $1,000 for each committee meeting attended on
a date when a Board meeting is not held. 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, 1996.
<TABLE>
<CAPTION>
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Mr. Keffer $4,000 None None $4,000
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>
COMBINED TABLE FOR CORE
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 (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
39
<PAGE>
portfolios. Core Trust trustees are also reimbursed for travel and related
expenses incurred in attending meetings of the Core Trust Board.
INVESTMENT ADVISERS -Forum Advisors, Inc. ("Forum Advisors"), Treasury
Portfolio's investment adviser, furnishes 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 Forum Advisors and Core (the "Forum
Advisory Agreement"). Subject to the general supervision of the Core Trust
Board, Linden Asset Management, Inc. ("Linden") makes investment decisions for
Government Cash Portfolio and Cash Portfolio and monitors those Portfolios'
investments. Linden furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the investments of Government
Cash Portfolio and Cash Portfolio and effecting portfolio transactions for the
Portfolios, pursuant to an investment advisory agreement between Linden and Core
(the "Linden Advisory Agreement" and collectively with the Forum Advisory
Agreement the "Advisory Agreements"). The Advisory Agreements provide, with
respect to each 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 agreements are specifically approved at least annually
by the Core Trust Board or by vote of the shareholders of the relevant
Portfolios, and in either case by a majority of the Trustees who are not parties
to the Advisory Agreements or interested persons of any such party.
Each Advisory Agreement is terminable without penalty by Core 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 Forum Advisors on not more than 60 days' nor less than 30 days' written
notice, and will automatically terminate in the event of its assignment. Each
Advisory Agreement also provides that, with respect to the relevant Portfolio,
the investment 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 investment adviser's duties or by reason of reckless
disregard of its obligations and duties under the Advisory Agreement. The
Advisory Agreements provide that the investment adviser may render services to
others.
For its services under the Forum Advisory Agreement, Forum Advisors receives
with respect to Treasury Portfolio a fee at an annual rate of 0.05% of the
average daily net assets of the Portfolio. Prior to January 15, 1996, Forum
Advisors acted as Daily Assets Treasury Fund's investment adviser under an
investment advisory agreement between Forum Funds, Inc. and Forum Advisors.
Under this investment advisory agreement, Forum Advisors received a fee at an
annual ratio of 0.20% of the average daily net assets of the Fund.
For its services, Linden receives from each of Government Cash Portfolio and
Cash Portfolio an advisory fee based upon the total average daily net assets of
those Portfolios and another portfolio of Core Trust that Linden advises ("Total
Portfolio Assets"). Linden's fee is calculated at an annual rate on a
cumulative basis as follows: 0.05% of the first $200 million of Total Portfolio
Assets, 0.03% of the next $300 million of Total Portfolio Assets, and 0.02% of
the remaining Total Portfolio Assets.
A Fund's expenses include the Fund's pro rata portion of the advisory fee paid
by the corresponding Portfolio.
Fees payable under the Advisory Agreements with respect to the Funds during the
past three fiscal years of Daily Assets Treasury Fund and during the five months
since inception of Daily Assets Cash Fund are outlined in the following tables:
Daily Assets Treasury Fund
FISCAL YEAR ENDED GROSS FEE WAIVED FEE NET FEE
March 31, 1996 $69,466 $0 $69,466
March 31, 1995 $59,382 $53,382 $6,000
March 31, 1994 $51,098 $51,098 $0
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Daily Assets Cash Fund
PERIOD ENDED GROSS FEE WAIVED FEE NET FEE
February 28, 1997 $836 0 $836
In addition to receiving its advisory fee from the Portfolio, Forum Advisors 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 Forum Advisors
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 Forum Advisors or any affiliate of Forum Advisors from
the Portfolio with respect to the client's assets invested in the Portfolio.
Forum Advisors has agreed to reimburse Core Trust for certain of the Treasury
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. Forum Advisors believes
that currently the most restrictive expense ratio limitation imposed by any
state is 2-1/2% of the first $30 million of the Portfolio's average net assets,
2% of the next $70 million of its average net assets and 1-1/2% of its average
net assets in excess of $100 million. For the purpose of this obligation to
reimburse expenses, the Portfolio's annual expenses are estimated and accrued
daily, and any appropriate estimated payments will be made by Forum Advisors
monthly.
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, respective 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 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; Securities and Exchange Commission registration fees and
related expenses; state securities laws registration fees and related expenses;
and fees payable to Forum Advisors under the Investment Advisory Agreement.
INVESTMENT ADVISERS - SUBADVISERS. Forum Advisors and Linden also act as
investment subadvisers 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. The subadviser serves as an investment
subadviser to a Portfolio under an Investment Subadvisory Agreement with Forum
Advisors and Core Trust or with Linden and Core Trust (the "Investment
Subadvisory Agreements"). Pursuant to the Investment Subadvisory Agreements,
from time to time the subadviser provides the investment adviser with assistance
regarding certain of the investment adviser's responsibilities to the relevant
Portfolio, including management of all or part of the Portfolio investment
portfolios. Each Investment Subadvisory Agreement will remain in effect with
respect to a Portfolio 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 Advisory Agreement.
To the extent Forum Advisors or Linden has delegated its responsibilities to the
other, Forum Advisors or Linden pays its advisory fee accrued for such period of
time to the other. Currently, it is anticipated that Linden will delegate
responsibility for portfolio management infrequently to Forum Advisors.
Each Investment Subadvisory Agreement is terminable with respect to a 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
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its assignment. The Investment Subadvisory Agreements also provide that, with
respect to a 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. Linden has not been retained as
an advisor or subadvisor by the Trust or Forum with respect to the Funds. No
fee is payable for investment advisory services under these agreements as long
as a Fund is invested in the Portfolio or a similar investment.
FORUM AND DISTRIBUTOR
Forum was incorporated under the laws of the State of Delaware on February 7,
1986 and 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), provides the Trust with
general office facilities and serves as distributor of shares of the Portfolio
pursuant to a management and distribution agreement between Forum and the Trust
(the "Trust Management and Distribution Agreement"). The Trust Management and
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 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 Management and Distribution Agreement or interested persons of any
such party.
The Trust Management and 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 not more than 60 days' nor
less than 30 days' written notice. The Trust Management and Distribution
Agreement also provides that Forum shall not be liable for any error of judgment
or mistake of law or for any act or omission in the administration or management
of the Trust, except for willful misfeasance, bad faith or gross negligence in
the performance of Forum's duties or by reason of reckless disregard of its
obligations and duties under the Trust Management and Distribution Agreement.
Forum also 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 pursuant to a management agreement between Forum and
the Trust (the "Core Trust Management Agreement"). The Core Trust Management
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 agreement is specifically approved
at least annually by the Core Trust Board or by the shareholders of the
Portfolio, 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.
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
the Portfolio's shareholders or by either party on not more than 60 days' nor
less than 30 days' written notice. The Core Trust Management Agreement also
provides that Forum shall not be liable for any error of judgment or mistake of
law or for any act or omission in the administration or management of 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.
For its services under the Trust Management and Distribution Agreement and the
Core Trust Management Agreement, Forum receives with respect to each of the
Funds and Portfolio a fee at an annual rate of 0.10% of the average daily net
assets of each Fund and the Portfolio, respectively. Fees payable under the
Trust Management and
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Distribution Agreement and Core Trust Management Agreement with respect to each
Fund during the past three fiscal years, if applicable, are outlined in the
following table:
Daily Assets Treasury Fund
FISCAL YEAR ENDED
MARCH 31 GROSS FEE WAIVED FEE NET FEE
1996 108,685 101,548 7,137
1995 $89,073 $89,073 $0
1994 $76,647 $76,647 $0
Daily Assets Cash Fund
PERIOD ENDED
FEBRUARY 28 GROSS FEE WAIVED FEE NET FEE
1997 $3,443 $2,457 $986
For the fiscal years ended March 31, 1995, 1994 and 1993, the Core Trust
Management Agreement with respect to Treasury Portfolio was not in effect.
Forum provides persons satisfactory to the Board to serve as officers of the
Trust. Similarly, at the request of the Core Trust Board, Forum provides
persons satisfactory to the Core Trust Board to serve as officers of Core 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) Forum, its affiliates or affiliates of Forum Advisors.
Forum acts as sole placement agent for interests in the Portfolios and receives
no compensation for those services from the portfolios.
TRANSFER AGENT
Forum Financial Corp. acts as transfer agent of the Trust pursuant to a
transfer agency agreement (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 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 the Transfer Agent 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 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.
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The Transfer Agent 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. The Transfer Agent 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. The Transfer Agent, Forum or sub-transfer
agents or processing agents retained by the Transfer Agent 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 the Transfer
Agent or Forum.
For its services under the Transfer Agency Agreement, Forum receives, with
respect to each Series: (i) a fee at an annual rate of 0.25 percent of the
average daily net assets of the Series and (ii) a fee of $12,000 per year; such
amounts to be computed and paid monthly in arrears by the Fund; and (iii) Annual
Shareholder Account Fees of $18.00 per shareholder account; such fees to be
computed as of the last business day of the prior month. Fees payable under the
Transfer Agent Agreement with respect to each Fund are outlined in the following
tables:
Daily Assets Treasury Fund
FISCAL YEAR ENDED
MARCH 31 GROSS FEE WAIVED FEE NET FEE
1996 $110,792 $96,881 13,911
1995 $74,227 $62,206 $12,021
1994 $63,873 $63,873 $0
Daily Assets Cash Fund
PERIOD ENDED
FEBRUARY 28 GROSS FEE WAIVED FEE NET FEE
1997 $10,764 $5,188 $5,576
Pursuant to a Fund Accounting Agreement, the Transfer Agent also provides each
Fund with portfolio accounting, including the calculation of the Fund's net
asset value. For these services, the Transfer Agent receives an annual fee
ranging from $36,000 to $60,000 depending upon the amount and type of the Fund's
portfolio transactions and positions. Fees payable under the Fund Accounting
Agreement with respect to fund accounting services for the Funds are outlined in
the following tables:
Daily Assets Treasury Fund
FISCAL YEAR ENDED
MARCH 31 GROSS FEE WAIVED FEE NET FEE
1996 $33,379 $0 $33,379
1995 $36,000 $0 $36,000
1994 $36,000 $0 $36,000
Daily Assets Cash Fund
PERIOD ENDED
FEBRUARY 28 GROSS FEE WAIVED FEE NET FEE
1997 $5,662 $0 $5,662
7. DETERMINATION OF NET ASSET VALUE
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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, Veterans' Day, Thanksgiving and Christmas. The
net asset value of each Portfolio is determined as of 2:00 P.M., Eastern time
("Valuation Time"), on all weekdays, except Federal holidays, Good Friday and
other days that the Federal reserve bank of San Francisco is closed ("Business
Day"). 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 Fund Business day. 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.
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.
For the fiscal years ended March 31, 1994, 1995 and 1996, no brokerage fees were
paid by Daily Assets Treasury Fund (during the period the Funds invested
directly in securities) or Treasury Portfolio.
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Allocations of transactions to dealers and the frequency of transactions are
determined for each Portfolio by Forum Advisorss 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 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 Securities and Exchange
Commission pursuant to which the Funds 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.
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 investor and believed by the Transfer Agent to be genuine. The records of
the Transfer Agent of such instructions are binding.
EXCHANGE PRIVILEGE
The exchange privilege permits shareholders of the Funds to exchange their
shares for shares of any Participating Fund, which includes (i) all other funds
of the Trust 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. 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.
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 of net asset value after the exchange order in
proper form (including any necessary supporting documents 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.
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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.
Shares of any Participating Fund purchased with a sales charge may be exchanged
without a sales charge for shares of any other Participating Fund otherwise sold
with the same sales charge. If the Participating Fund whose shares are
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. 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 Forum to be contrary to the best interests
of the Fund's other shareholders and, at the discretion of Forum, 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 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 use a Fund's IRA should contact the Transfer Agent for
further details and 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 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.
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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 the Portfolio's assets. The custodian's responsibilities include
safeguarding and controlling the Portfolio' cash and securities, determining
income and collecting interest on Fund investments. Core Trust pays the
custodian a fee at an annual rate of 0.025% of the Portfolio's average daily
assets.
COUNSEL
Legal matters in connection with the issuance of shares of stock of the Trust
are passed upon by Seward & Kissel, One Battery Park Plaza, New York, New York
10004.
AUDITORS
Deloitte & Touche LLP, Two Financial Center, New York, New York 10281-1438,
independent auditors, act as auditors for the Trust.
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 limitation of liability was in effect and the portfolio is
unable to meet its obligations. Forum believes that, in view of the above,
there is no risk of personal liability to shareholders.
The Trust Instrument further provides that the Trustees shall not be liable to
any person other than the Trust or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise 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,
48
<PAGE>
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.
SHAREHOLDINGS
As of July 8, 1996, the officers and Trustees of the Trust as a group owned less
than 1% of the outstanding shares of the Funds. Also as of that date, the
shareholders listed below owned more than 5% of a 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.
DAILY ASSETS TREASURY FUND
PERCENTAGE OF
SHAREHOLDER FUND
SHARES OWNED
H.M. Payson & Co. Custody Account
P.O. Box 31
Portland, ME 04112 52.60%
H.M. Payson & Co. Trust Account
P.O. Box 31
Portland, ME 04112 38.29%
DAILY ASSETS CASH FUND
(As of March 24, 1997, the shareholders listed below owned more than 5% of
Daily Assets Cash Fund)
PERCENTAGE OF
FUND
SHAREHOLDER SHARES OWNED
H.M. Payson & Co. Custody Account
FBO Customer Funds Under Management
P.O. Box 31
Portland, ME 04112 49.71%
H.M. Payson & Co. Trust Account
FBO Trust Funds Under Management
P.O. Box 31
Portland, ME 04112 45.67%
FUND STRUCTURE
CORE AND GATEWAY. The Funds may 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
49
<PAGE>
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
would permit 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. In the event a Fund invested all of its assets in
a Core Portfolio, its methods of operation and shareholder services would not be
materially affected by its investment in a corresponding Core Portfolio, except
that the assets of the Fund may be managed as part of a larger pool. If a Fund
invested all of its assets in a Core Portfolio, it would hold only investment
securities issued by the Core Portfolio; the Core Portfolio would directly
invest in individual securities of other issuers. The Fund would otherwise
continue its normal operation. The Board would retain the right to withdraw the
Fund's investments from the 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.
The Board will authorize investing the Funds' assets in a Core Portfolio only if
it first determines that pooling is in the best interests of a Fund and its
shareholders. In determining whether to invest in a Core Portfolio, the Board
will consider, among other things, the opportunity to reduce costs and achieve
operational efficiencies. The Board will not authorize investment in a Core
Portfolio if it would materially increase costs to a Fund's shareholders,
unless, of course, there were perceived to be a corresponding increase in
benefits to shareholders.
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 would be 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 director or 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 election of directors or 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 directors
or 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 a 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 usually would incur
transaction costs. If a Fund withdrew its investment from a 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 Linden, as applicable, 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.
50
<PAGE>
12. FINANCIAL STATEMENTS
The audited Schedule of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, notes thereto and
Financial Highlights of Daily Assets Treasury Fund for the fiscal year ended
March 31, 1996 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.
The unaudited financial statements of Daily Assets Cash Fund for the period
October 1, 1996 through February 28, 1997, including Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net Assets, notes
thereto and Financial Highlights, are set forth in Appendix B to this SAI.
As Daily Assets Government Fund had not as of the date hereof commenced
operations, no financial statements are available.
51
<PAGE>
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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<PAGE>
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.
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<PAGE>
APPENDIX B: FINANCIAL STATEMENTS (UNAUDITED)
DAILY ASSETS CASH FUND
(FOR THE PERIOD OCTOBER 1, 1997 THROUGH FEBRUARY 28, 1997)
- --------------------------------------------------------------------------------
FORUM FUNDS
DAILY ASSETS CASH FUND
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
ASSETS:
Investments in Cash Portfolio of Core Trust
(Delaware)(Note 2)(cost $7,601,196) $ 7,601,196
------------
LIABILITIES:
Dividends payable 27,323
Accrued fees and other expenses 2,061
------------
TOTAL LIABILITIES 29,384
------------
NET ASSETS $ 7,571,812
------------
------------
COMPONENTS OF NET ASSETS:
Paid in capital 7,571,806
Accumulated net realized gains (losses) 6
------------
NET ASSETS $ 7,571,812
------------
------------
SHARES OF BENEFICIAL INTEREST 7,571,806
------------
------------
NET ASSET VALUE PER SHARE
(OFFERING AND REDEMPTION PRICE PER SHARE) $ 1.00
------------
------------
54
<PAGE>
FORUM FUNDS
DAILY ASSETS CASH FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED FEBRUARY 28, 1997 (UNAUDITED)
INVESTMENT INCOME ALLOCATED FROM CASH PORTFOLIO
OF CORE TRUST (DELAWARE):
Interest Income $ 125,432
Expenses 3,441
----------
NET INVESTMENT INCOME ALLOCATED FROM CASH PORTFOLIO OF
CORE TRUST (DELAWARE)(NOTE 2) 121,991
----------
EXPENSES:
Management (Note 3) 2,296
Transfer agent (Note 3) 10,764
Accounting (Note 3) 5,000
Legal (Note 3) 602
Registration 1,406
Audit 3,000
Miscellaneous 1,209
----------
TOTAL EXPENSES 24,277
----------
Expenses reimbursed and fees waived (Note 4) (15,095)
----------
NET EXPENSES 9,182
----------
NET INVESTMENT INCOME 112,809
----------
NET REALIZED GAIN ON INVESTMENTS SOLD 6
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 112,815
----------
----------
55
<PAGE>
FORUM FUNDS
DAILY ASSETS CASH FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED FEBRUARY 28, 1997 (UNAUDITED)
NET ASSETS (A) $ -
------------
OPERATIONS:
Net investment income 112,809
Net realized gain (loss) on investments sold 6
------------
Net increase (decrease) in net assets resulting
from operations 112,815
------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (112,809)
------------
CAPITAL SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Sale of shares 15,141,761
Reinvestment of distributions 291
Redemption of shares (7,570,246)
------------
Net increase (decrease) in capital transactions 7,571,806
------------
Net increase (decrease) 7,571,812
------------
NET ASSETS - FEBRUARY 28, 1997 $ 7,571,812
------------
------------
(a) See Notes to Financial Statements for commencement of operations.
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<PAGE>
FORUM FUNDS
DAILY ASSETS CASH FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Forum Funds (the "Trust") is an open-end management investment company organized
as a Delaware business trust. The Trust currently has eleven active investment
portfolios. The Trust Instrument of the Trust authorizes each Fund to issue an
unlimited number of shares of beneficial interest without par value. Included
in this report is Daily Assets Cash Fund (the "Fund"), a diversified portfolio
that commenced operations on October 1, 1996.
MASTER FEEDER ARRANGEMENT - The Fund currently seeks to achieve its investment
objective by investing all of its investable assets in a separate portfolio of
Core Trust (Delaware)("Core Trust"). Core Trust is an open-end, management
investment company and the portfolio in which the Fund invests is the Cash
Portfolio, a diversified portfolio that has the same investment objective and
policies as the Fund. The value of the Fund's investment in the Cash Portfolio
reflects the Fund's proportionate interest in the net assets of the Cash
Portfolio. The Fund accounts for its investment in Cash Portfolio as a
partnership investment and records its share of the Portfolio's income, expense
and realized gain and loss daily. This is commonly referred to as a master-
feeder arrangement.
The performance of the Fund is directly affected by the performance of the Cash
Portfolio. The financial statements of the Cash Portfolio, including the
schedule of investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. The percentage of the
Cash Portfolio owned by the Daily Assets Cash Fund at February 28, 1997, was
approximately 4.0%.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates but are expected to be immaterial.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION - The Fund records its investment in the Portfolio at value.
Valuation of securities held by the Portfolio is discussed in Note 2 of the
Portfolio Notes to Financial Statements, which are included elsewhere in this
report.
INVESTMENT INCOME AND EXPENSES - The Trust records daily its pro rata share of
the Portfolio's income, expenses and realized gain and loss. In addition, the
Fund accrues its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders of net investment
income are declared daily and paid monthly. Net capital gain, if any, is
distributed to shareholders at least annually. Distributions are based on
amounts calculated in accordance with applicable income tax regulations.
FEDERAL TAXES - The Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, the Fund will not be
subject to a federal excise tax. Therefore, no Federal income or excise tax
provision is required.
REALIZED GAIN AND LOSS - Security transactions are recorded on trade date.
Realized gain and loss on investments sold are recorded on the basis identified.
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS
INVESTMENT ADVISER - The investment adviser of the Portfolio is Linden Asset
Management, Inc. (the "Adviser"). Pursuant to investment advisory agreements
with respect to the Portfolio among Core Trust, the Adviser and Forum Advisors,
Inc. ("Forum Advisors"), the Adviser may delegate responsibility for portfolio
management to Forum Advisors. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interest of
the Fund and its shareholders to do so. In the event the Fund were to make such
a withdrawal, the Trust has retained the Adviser and Forum Advisors to act as
investment advisers to the Fund. Neither the Adviser nor Forum Advisors receive
any advisory fees with respect to the Fund as long as the Fund remains
completely invested in the Portfolio.
MANAGEMENT AND OTHER SERVICES - Forum Financial Corp. ("FFC"), an affiliate of
Forum Advisors, serves as the Funds transfer agent and dividend disbursing
agent, and for those services receives an annual rate of 0.25% of the average
daily net assets of the Fund and an annual fee of $12,000 plus account and
series charges, plus certain amounts based upon the number and types of
portfolio transactions within the Fund.
The manager of the Trust is Forum Financial Services, Inc. ("the Manager"), an
affiliate of Forum Advisors, a registered broker-dealer and a member of the
National Association of Securities Dealers, Inc. The Manager receives a
management fee for its services to the Fund at an annual rate of 0.10% of the
average daily net assets of the Fund. In addition, certain legal expenses were
charged to the Trust by the Manager. The Manager also acts as the distributor
of the Fund's shares.
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Manager and FFC have voluntarily waived a portion of their fees and assumed
certain expenses of the Fund so that total expenses of the Fund would not exceed
a certain limitation including its allocation of expenses from the Portfolio.
For the period ended February 28, 1997, the Manager and FFC waived fees were
$2,296 and $5,188, respectively, and the Manager reimbursed expenses were
$7,445.
58
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NOTES TO FINANCIAL HIGHLIGHTS (CONTINUED)
NOTE 5. FINANCIAL HIGHLIGHTS
DAILY ASSETS CASH FUND
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
DAILY ASSETS CASH FUND
For the period ending
February 28, 1997 (e)
----------------------
Beginning Net Asset Value per Share (a) $1.00
Net Investment Income 0.02
Dividends from Net Investment Income (0.02)
Ending Net Asset Value per Share $1.00
Ratios to Average Net Assets:
Expenses 0.55% (b)(c)
Net Investment Income 4.91% (b)(c)
Gross Expenses 1.21% (b)(c)
Total Return (d) 5.11% (b)
Net Assets at the End of Period (000's Omitted) $7,572
(a) Date of commencement of operations: October 1, 1996.
(b) Annualized.
(c) Includes Daily Assets Cash Fund's proportionate share of income and
expenses of Cash Portfolio.
(d) Total Return calculation does not include sales charges.
(e) Unaudited
59
<PAGE>
CORE TRUST (DELAWARE)
CASH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
ASSETS:
Investments: (Note 2)
Investments at cost $ 125,930,001
Repurchase agreements at cost 59,690,000
-----------------
Total investments at value 185,620,001
Cash 25,504
Interest and other receivables 380,158
Organization costs, net of amortization (Note 2) 4,155
-----------------
TOTAL ASSETS 186,029,818
-----------------
LIABILITIES:
Payable to Adviser (Note 3) 5,938
Payable to other related parties (Note 3) 13,876
-----------------
TOTAL LIABILITIES 19,814
-----------------
NET ASSETS $ 186,010,004
-----------------
-----------------
COMPONENTS OF NET ASSETS:
Investors' capital 186,012,104
Accumulated net realized gain (loss) (2,100)
-----------------
NET ASSETS $ 186,010,004
-----------------
-----------------
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CORE TRUST (DELAWARE)
CASH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
INVESTMENT INCOME:
Interest income $ 4,549,861
-----------------
EXPENSES:
Investment advisory (Note 3) 30,314
Administration (Note 3) 41,595
Custodian 20,798
Accounting (Note 3) 24,000
Audit 5,496
Trustee and Officer Insurance 3,611
Legal (Note 3) 1,857
Trustees 1,505
Miscellaneous 1,453
-----------------
TOTAL EXPENSES 130,629
-----------------
Expenses reimbursed and fees waived (Note 4) (5,830)
-----------------
NET EXPENSES 124,799
-----------------
NET INVESTMENT INCOME 4,425,062
-----------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS SOLD (8,520)
-----------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,416,542
-----------------
-----------------
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<PAGE>
CORE TRUST (DELAWARE)
CASH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31, 1996
AND THE SIX MONTHS ENDED FEBRUARY 28, 1997
NET ASSETS - SEPTEMBER 1, 1995 $ -
-----------------
OPERATIONS:
Net investment income 6,173,705
Net realized gain (loss) on investments sold 6,420
-----------------
Net increase in net assets resulting
from operations 6,180,125
-----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 466,894,348
Withdrawals (346,791,550)
-----------------
Net Transactions in Investors' Beneficial Interests 120,102,798
-----------------
Net increase (decrease) 126,282,923
-----------------
NET ASSETS - AUGUST 31, 1996 $ 126,282,923
-----------------
OPERATIONS:
Net investment income 4,425,062
Net realized gain (loss) on investments sold (8,520)
-----------------
Net increase in net assets resulting
from operations 4,416,542
-----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 295,447,184
Withdrawals (240,136,645)
-----------------
Net Transactions in Investors' Beneficial Interests 55,310,539
-----------------
Net increase (decrease) 59,727,081
-----------------
NET ASSETS - FEBRUARY 28, 1997 (UNAUDITED) $ 186,010,004
-----------------
-----------------
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CORE TRUST (DELAWARE)
CASH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Core Trust (Delaware) ("Core Trust") was formed as a Delaware business trust on
September 1, 1994. Core Trust, which is registered as an open-end, management
investment company under the Investment Company Act of 1940 (the "Act"),
currently has eight separate investment portfolios. This financial statements
relates to Cash Portfolio (the "Portfolio"), a diversified portfolio of Core
Trust which commenced operations on September 1, 1995. Interest in Cash
Portfolio are sold in private placement transactions without any sales charge to
institutional clients, including open-end management investment companies.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statement and the
reported amounts of increase and decrease in net assets from operations during
the fiscal period. Actual results could differ from those estimates but any
differences are expected to be immaterial.
PORTFOLIO VALUATION - Core Trust determines the net asset value per share as of
1:00 p.m., Pacific time, on each Portfolio business day utilizing the amortized
cost method pursuant to Rule 2a-7 under the Act. Under this method, all
investments purchased at a discount or premium are valued by accreting or
amortizing, respectively, the difference between the original purchase price and
the maturity value of the investment over the period to the investment's
maturity.
REPURCHASE AGREEMENTS - The Portfolio may invest in repurchase agreements. The
Portfolio, through its custodian, receives delivery of the underlying
securities, whose market value must always equal or exceed the repurchase price
plus accrued interest. The investment adviser is responsible for determining
the value of the underlying securities at all times. In the event of default,
the Portfolio may have difficulties with the disposition of such securities.
ORGANIZATIONAL COSTS - The costs incurred by the Portfolio in connection with
its organization have been capitalized and are being amortized using the
straight-line method over a five year period beginning on the commencement of
the Portfolio's operations. These costs were paid by Forum Financial Corp. and
were reimbursed by the Portfolio.
FEDERAL TAXES - The Portfolio is not required to pay Federal income taxes on its
net investment income and net capital gain as it is treated as a partnership for
Federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been "passed through" to the partners in proportion
to their holdings of the Portfolio regardless of whether such interest,
dividends or gain have been distributed by the Portfolio.
SECURITIES TRANSACTIONS, INTEREST INCOME AND REALIZED GAIN AND LOSS - Security
transactions are recorded on a trade date basis, interest income is accrued as
earned and realized gain and loss on investments sold are recorded on the basis
of identified cost. The cost basis of investments for Federal income tax
purposes at February 28, 1997 is the same as for financial accounting purposes.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS
63
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INVESTMENT ADVISER - The investment adviser of the Portfolio is Linden Asset
Management, Inc. (the "Adviser"). Effective January 1, 1997, pursuant to
investment advisory agreement, the Adviser receives from the Portfolio an
advisory fee based upon the total average daily net assets ("Total Portfolio
Assets") that is calculated on a
64
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
cumulative basis as follows: 0.06% for 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. The minimum total annual
advisory fee is $50,000.
Prior to January 1, 1997, the Adviser received from the Portfolio an advisory
fee based upon Total Portfolio Assets that was calculated on a cumulative basis
as follows: 0.05% for the first $200 million of Total Portfolio Assets, 0.03%
of the next $300 million of Total Portfolio Assets, and 0.02% of the remaining
Total Portfolio Assets.
Pursuant to an investment advisory agreement among the Trust, the Adviser and
Forum Advisors, Inc. ("Forum Advisors"), the Adviser may delegate responsibility
for portfolio management to Forum Advisors. To the extent the Adviser has so
delegated its responsibilities, the Adviser pays its advisory fee to Forum
Advisors.
ADMINISTRATOR - The administrator of Core Trust is Forum Financial Services,
Inc. ("Forum"), a registered broker-dealer and a member of the National
Association of Securities Dealers, Inc. For its administrative services and
facilities, Forum receives from the Portfolio an administration fee at an annual
rate of 0.10% of the average daily net assets of the Portfolio. In addition,
certain legal expenses were charged to the Portfolio by Forum for the period
ended February 28, 1997 in the amount of $1,227.
OTHER SERVICE PROVIDERS - The interestholder record keeper and fund accountant
of the Portfolio is Forum Financial Corp. ("FFC"). FFC is paid an annual
accounting fee of the lesser of 0.05% of the average daily net assets of the
Portfolio on an annualized basis or $48,000, plus certain additional charges for
each interestholder in the Portfolio.
PLACEMENT AGENT - Forum acts as Core Trust's placement agent pursuant to a
separate agreement with Core Trust and receives no compensation for these
services.
NOTE 4. WAIVER OF FEES
Forum has voluntarily waived a portion of its fees and assumed certain expenses
of the Portfolio so that total expenses of the Portfolio would not exceed
certain limitations. For the period ended February 28, 1997, the Administrator
waived management fees in the amount of $5,830.
NOTE 5. SPECIAL MEETING OF INTERESTHOLDERS
The following matter was submitted to a vote of interestholders of the Portfolio
at a special meeting held December 27, 1996: To approve an amendment to the
Investment Advisory Agreement between Core Trust (Delaware) and Linden Asset
Management, Inc. to increase the investment advisory fee with respect to the
Portfolio. Interests in the Portfolio were voted as follows: 58.63% For;
41.37% Against; 0% Abstained.
65
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NOTES TO FINANCIAL HIGHLIGHTS (CONTINUED)
NOTE 6. FINANCIAL HIGHLIGHTS
Portfolio performance for the period ended February 28, 1997.
RATIOS TO AVERAGE NET ASSETS
----------------------------
NET
INVESTMENT GROSS
EXPENSES INCOME EXPENSES(a)
----------- ----------- -----------
Cash Portfolio 0.07% 2.64% 0.08%
(a) During the period, various fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio excluding any waivers and reimbursements.
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CORE TRUST (DELAWARE)
CASH PORTFOLIO
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------------------------ --------------
U.S. GOVERNMENT SECURITIES (43.2%)
Federal Farm Credit Bank (A) (4.3%)
8,000,000 Federal Farm Credit Bank (A) (4.3%)
5.415% yield, due 5/16/97 . . . . . . . . . . 7,914,490
--------------
Total Federal Farm Credit Bank 7,914,490
--------------
Federal Home Loan Bank (A) (16.4%)
5,000,000 Federal Home Loan Bank
5.441% yield, due 3/31/97 . . . . . . . . . . 4,979,661
10,000,000 Federal Home Loan Bank
5.483% yield, due 7/31/97 . . . . . . . . . . 9,780,625
11,065,000 Federal Home Loan Bank
5.413% yield, due 8/13/97 . . . . . . . . . . 10,804,482
5,000,000 Federal Home Loan Bank
5.378% yield, due 8/14/97 . . . . . . . . . . 4,882,240
--------------
Total Federal Home Loan Bank 30,447,008
--------------
Federal National Mortgage Association (A) (8.0%)
10,000,000 Federal National Mortgage Association
5.364% yield, due 3/5/97. . . . . . . . . . . 9,997,100
5,000,000 Federal National Mortgage Association
5.45% yield, due 6/30/97. . . . . . . . . . . 4,913,065
--------------
Total Federal National Mortgage Association 14,910,165
--------------
Small Business Administration (10.2%)
383,953 Small Business Administration
Pool# 500536, 7.25% yield,
due 5/25/13 (B) . . . . . . . . . . . . . . . 391,127
716,594 Small Business Administration
Pool# 500730, 8.125% yield,
due 2/25/04 (B) . . . . . . . . . . . . . . . 734,234
48,764 Small Business Administration
Pool# 500737, 7.50% yield,
due 12/25/97 (B). . . . . . . . . . . . . . . 48,764
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FACE SECURITY
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------------------------ --------------
Small Business Administration (10.2%)(continued)
96,166 Small Business Administration
Pool# 501256, 7.20% yield,
due 7/25/98 (B) . . . . . . . . . . . . . . . 96,166
1,553,412 Small Business Administration
Pool# 501733, 6.25% yield,
due 2/25/17 (B) . . . . . . . . . . . . . . . 1,579,383
1,622,937 Small Business Administration
Pool# 501989, 6.375% yield,
due 10/25/12 (B). . . . . . . . . . . . . . . 1,634,080
442,137 Small Business Administration
Pool# 502914, 6.25% yield,
due 3/25/15 (B) . . . . . . . . . . . . . . . 442,722
1,933,086 Small Business Administration
Pool# 503121, 6.125% yield,
due 8/25/15 (B) . . . . . . . . . . . . . . . 1,933,086
6,076,987 Small Business Administration
Pool# 503429, 6.00% yield,
due 6/25/16 (B) . . . . . . . . . . . . . . . 6,076,987
935,412 Small Business Administration
Pool# 503461, 6.00% yield,
due 9/25/21 (B) . . . . . . . . . . . . . . . 936,011
4,992,503 Small Business Administration
Pool# 503553, 5.875% yield,
due 11/25/21 (B). . . . . . . . . . . . . . . 4,980,096
--------------
Total Small Business Administration 18,852,656
--------------
Student Loan Marketing Association (4.3%)
6,000,000 Student Loan Marketing Association
5.49% yield, due 1/21/98 (B). . . . . . . . . 6,000,000
2,000,000 Student Loan Marketing Association
5.44% yield, due 2/17/98 (B). . . . . . . . . 2,000,000
--------------
Total Student Loan Marketing Association 8,000,000
--------------
Total U.S. Government Securities 80,124,319
--------------
Banker's Acceptances (A)(4.3%)
8,000,000 Bank of America, 5.385% yield, due 4/17/97. . . 7,947,100
--------------
Total Banker's Acceptances 7,947,100
--------------
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FACE SECURITY
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------------------------ --------------
Commercial Paper (A)(14.1%)
5,810,000 Banca CRT Financial Corporation,
5.583% yield, due 3/27/97 . . . . . . . . . . 5,788,929
2,500,000 Duff & Phelps Utility and Corporate Bond
Trust, Inc., 5.628% yield, due 6/12/97. . . . 2,461,986
10,000,000 Ford Motor Credit Corporation,
5.481% yield, due 4/2/97. . . . . . . . . . . 9,955,667
8,000,000 General Electric Capital Corporation,
5.461% yield, due 3/3/97. . . . . . . . . . . 8,000,000
--------------
Total Commercial Paper 26,206,582
--------------
Corporate Notes (5.4%)
5,000,000 Bear, Stearns & Co., Inc., 5.468% yield, due
5/14/97 (B) . . . . . . . . . . . . . . . . . 5,000,000
5,000,000 Bear, Stearns & Co., Inc., 5.438% yield, due
1/6/98 (B). . . . . . . . . . . . . . . . . . 5,000,000
--------------
Total Corporate Notes 10,000,000
--------------
REPURCHASE AGREEMENTS (32.1%)
9,690,000 Bank of America, 5.35%, 3/3/97, to be
repurchased at $9,694,320; Collateralized
by $10,190,000 U.S. Treasury Strip Notes,
0%, due 5/15/06 . . . . . . . . . . . . . . . 9,690,000
20,000,000 Nomura Securities, 5.43%, 3/3/97, to be
repurchased at $20,009,050; Collateralized
by $15,000,000 Federal Home Loan Mortgage
Corporation 1569 C, 0%, due 1/15/22;
$18,665,000 Federal National Mortgage
Association 1993-132 A, 0%, due 10/25/22. . . 20,000,000
30,000,000 Smith Barney, 5.37%, 3/3/97, to be repurchased
at $30,013,425; Collateralized by $50,800,000,
Federal National Mortgage Association 273 PO,
0%, due 7/1/26. . . . . . . . . . . . . . . . 30,000,000
--------------
Total Repurchase Agreements 59,690,000
--------------
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FACE SECURITY
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------------------------ --------------
Other (0.9%)
1,652,000 Dreyfus Cash Management Plus Fund . . . . . . . 1,652,000
--------------
Total Other 1,652,000
--------------
Total Investments (100.0%) 185,620,001
--------------
--------------
70
