FORUM FUNDS INC, 497, 1998-06-22

FORUM FUNDS INC
497, 1998-06-22

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FORUM FUNDS

DAILY ASSETS TREASURY OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
(FORMERLY DAILY ASSETS TREASURY FUND)
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
(FORMERLY DAILY ASSETS GOVERNMENT FUND)
DAILY ASSETS CASH FUND
DAILY ASSETS MUNICIPAL FUND
(FORMERLY DAILY ASSETS TAX-EXEMPT FUND)

Account Information and
Shareholder Servicing: Distributor:
Forum Shareholder Services, LLC 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
May 27, 1998 as amended June 19, 1998

This Statement of Additional Information supplements the Prospectuses dated May
27, 1998, offering Investor Shares, Institutional Service Shares and
Institutional Shares of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash
Fund and Daily Assets Municipal Fund, five portfolios of the Trust, and should
be read only in conjunction with the applicable Prospectus, a copy of which may
be obtained by an investor without charge by contacting the Trust's Distributor
at the address listed above.
<TABLE>
<S> <C>
TABLE OF CONTENTS
Page
----
1. General 2
2. Investment Policies 3
3. Investment Limitations 8
4. Investment by Financial Institutions 11
5. Performance Data 12
6. Management 14
7. Determination of Net Asset Value 23
8. Portfolio Transactions 23
9. Additional Purchase and Redemption Information 24
10. Taxation 26
11. Other Information 26
12. Financial Statements 29
Appendix A - Description of Securities Ratings A-1
Appendix B - Performance Information B-1
Appendix C - Miscellaneous Tables C-1
Appendix D - Additional Advertising Materials D-1
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.

<PAGE>

1. GENERAL

THE TRUST

The Trust is registered with the SEC as an open-end, management, investment
company and was organized as a business trust under the laws of the State of
Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the
assets and liabilities of Forum Funds, Inc. Forum Funds, Inc. was incorporated
on March 24, 1980 and assumed the name of Forum Funds, Inc. on March 16, 1987.
The Board has the authority to issue an unlimited number of shares of beneficial
interest of separate series with no par value per share and to create separate
classes of shares within each series. The Trust currently offers shares of 23
series. The series of the Trust are as follows:

Daily Assets Treasury Obligations Fund Payson Value Fund
Daily Assets Government Fund Payson Balanced Fund.
Daily Assets Government Obligations Fund Polaris Global Value Fund
Daily Assets Cash Fund Austin Global Equity Fund
Daily Assets Municipal Fund Oak Hall Equity Fund

Investors Bond Fund Quadra Growth Fund
TaxSaver Bond Fund Quadra Value Equity Fund
Investors High Grade Bond Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund

Investors Index Fund
Investors Equity Fund
Investors Growth Fund
Small Company Opportunities Fund
International Fund
Emerging Markets Fund

DEFINITIONS

As used in this Statement of Additional Information, the following terms shall
have the meanings listed:

"FIA" means Forum Investment Advisors, LLC.

"Board" means the Board of Trustees of the Trust.

"Core Trust" means Core Trust (Delaware).

"Core Trust Board" means the Board of Trustees of Core Trust.

"FAdS" means Forum Administrative Services, LLC.

"FSS" means Forum Forum Shareholder Services, LLC

"FFSI" means Forum Financial Services, Inc.

"FAcS" means Forum Accounting Services, LLC.

"Fund" means Daily Assets Treasury Obligations Fund, Daily Assets Government
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund or Daily
Assets Municipal Fund.

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"Fund Business Day" has the meaning ascribed thereto in the current Prospectus
of the Funds.

"NRSRO" means a nationally recognized statistical rating organization.

"Portfolio" means Treasury Cash Portfolio, Government Portfolio, Government Cash
Portfolio, Cash Portfolio or Municipal Cash Portfolio, each a portfolio of Core
Trust.

"SAI" means this Statement of Additional Information.

"SEC" means the U.S. Securities and Exchange Commission.

"Treasury Securities" has the meaning ascribed thereto by the current Prospectus
of the Funds.

"Trust" means Forum Funds.

"U.S. Government Securities" has the meaning ascribed thereto by the current
Prospectus of the Funds.

"1940 Act" means the Investment Company Act of 1940, as amended.

2. INVESTMENT POLICIES

Each Fund currently seeks to achieve its investment objective by investing all
of its investable assets in its corresponding Portfolio. The corresponding
Portfolios of each Fund are:

Fund Portfolio
---- ---------
Daily Assets Treasury Obligations Fund Treasury Cash Portfolio
Daily Assets Government Fund Government Portfolio
Daily Assets Government Obligations Fund Government Cash Portfolio
Daily Assets Cash Fund Cash Portfolio
Daily Assets Municipal Fund Municipal Cash Portfolio

Each Fund has an investment policy that allows it to invest all of its
investable assets in its corresponding Portfolio. All other investment policies
of each Fund and its corresponding Portfolio are identical. Therefore, although
this and the following sections provide supplemental information regarding the
investment policies of the Portfolios (and the responsibilities of the Core
Trust Board), they apply equally to the investment policies of the Funds (and
the responsibilities of the Board). Information with respect to Daily Assets
Government Fund for periods prior to December 5, 1995 (for instance, investment
advisory fees paid), the date that Fund began investing in Treasury Portfolio,
reflects information with respect to the Fund and the Fund's direct investment
in securities.

Debt securities with longer maturities tend to produce higher yields and are
generally subject to greater price movements than obligations with shorter
maturities. An increase in interest rates will generally reduce the market value
of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments.

Each Portfolio invests at least 95% of its total assets in securities in the
highest rating category (as determined pursuant to Rule 2a-7 under the 1940
Act).

Government Cash Portfolio and Cash Portfolio currently are prohibited from
purchasing any security issued by the Federal Home Loan Mortgage Corporation.
This does not prohibit the Portfolios from entering into repurchase agreements
collateralized with securities issued by the Federal Home Loan Mortgage
Corporation.

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Except for U.S. Government Securities and to the limited extent otherwise
permitted by Rule 2a-7 under the 1940 Act, the Portfolios may not invest more
than five percent of their total assets in (i) the securities of any one issuer
or (ii) securities that are rated (or are issued by an issuer with comparable
outstanding short-term debt that is rated) in the second highest rating category
or are unrated and determined by an Adviser to be of comparable quality.

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. FIA , 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.

ADJUSTABLE RATE MORTGAGE/ASSET BACKED SECURITIES

The Portfolios may purchase adjustable rate mortgage backed or other asset
backed securities that are U.S. Government Securities. Treasury Cash Portfolio
may purchase mortgage backed or asset backed securities that are U.S. Treasury
Securities. These types of securities directly or indirectly represent a
participation in, or are secured by and payable from, adjustable rate mortgages
or other loans which may be secured by real estate or other assets. Unlike
traditional debt instruments, payments on these securities include both interest
and a partial payment of principal. Prepayments of the principal of underlying
loans may shorten the effective maturities of these securities. Some adjustable
rate securities (or the underlying loans) are subject to caps or floors that
limit the maximum change in interest rate during a specified period or over the
life of the security.

Adjustable rate mortgage backed securities ("MBSs") are securities that have
interest rates that are reset at periodic intervals, usually by reference to
some interest rate index or market interest rate. MBSs represent interests in
pools of mortgages made by lenders such as commercial banks, savings
associations, mortgage bankers and mortgage brokers and may be issued by
governmental or government-related entities or by non-governmental entities such
as commercial banks, savings associations, mortgage bankers and other secondary
market issuers.

MBSs differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates in that MBSs provide periodic payments which
consist of interest and, in most cases, principal. In effect, these payments are
a "pass-through" of the periodic payments and optional prepayments made by the
individual borrowers on their mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Additional payments to holders of MBSs are
caused by prepayments resulting from the sale of the underlying property or the
refinancing or foreclosure of the underlying mortgage loans. Such prepayments
may significantly shorten the effective maturities of MBSs, and occur more often
during periods of declining interest rates.

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

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<PAGE>

the underlying mortgages) are subject to caps or floors that limit the maximum
change in interest rate during a specified period or over the life of the
security.

During periods of declining interest rates, income to the Portfolios derived
from mortgages which are not prepaid will decrease as the coupon rate resets
along with the decline in interest rates in contrast to the income on fixed-rate
mortgages, which will remain constant. At times, some of the MBSs in which the
Portfolios will invest will have higher-than-market interest rates, and will
therefore be purchased at a premium above their par value. Unscheduled
prepayments, which are made at par, will cause the Portfolios to suffer a loss
equal to the unamortized premium, if any.

During periods of rising interest rates, changes in the coupon rates of the
mortgages underlying the Portfolios' investments may lag behind changes in
market interest rates. This may result in a slightly lower value until the
coupons reset to market rates. Many MBSs in the Portfolios' portfolios will have
"caps" that limit the maximum amount by which the interest rate paid by the
borrower may change at each reset date or over the life of the loan and
fluctuation in interest rates above these levels could cause these securities to
"cap out" and to behave more like fixed-rate debt securities.

The Portfolios may purchase collateralized mortgage obligations ("CMOs"), which
are collateralized by MBSs or by pools of conventional mortgages. CMOs are
typically structured with a number of classes or series that have different
maturities and are generally retired in sequence. Each class of bonds receives
periodic interest payments according to the coupon rate on the bonds. However,
all monthly principal payments and any prepayments from the collateral pool are
paid first to the "Class 1" bondholders. The principal payments are such that
the Class 1 bonds will be completely repaid no later than, for example, five
years after the offering date. Thereafter, all payments of principal are
allocated to the next most senior class of bonds until that class of bonds has
been fully repaid. Although full payoff of each class of bonds is contractually
required by a certain date, any or all classes of bonds may be paid off sooner
than expected because of an acceleration in pre-payments of the obligations
comprising the collateral pool.

Since the inception of the mortgage-related pass-through security in 1970, the
market for these securities has expanded considerably. The size of the primary
issuance market and active participation in the secondary market by securities
dealers and many types of investors make government and government-related
pass-through pools highly liquid.

Governmental or private entities may create new types of MBSs in response to
changes in the market or changes in government regulation of such securities. As
new types of these securities are developed and offered to investors, the FAI
may, consistent with the investment objective and policies of a Portfolio,
consider making investments in such new types of securities.

SMALL BUSINESS ADMINISTRATION SECURITIES. Government Cash Portfolio and Cash
Portfolio may purchase securities issued by the Small Business Administration
("SBA"). SBA securities are variable rate securities that carry the full faith
and credit of the United States Government, and generally have an interest rate
that resets monthly or quarterly based on a spread to the Prime rate. SBA
securities generally have maturities at issue of up to 30 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).

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

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<PAGE>

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 assets with
a market value at all times at least equal to the amount of its commitment.

Core Trust's custodian will set aside and maintain in a segregated account cash
and securities with a market value at all times equal to the amount of each
Portfolio's forward commitment obligations.

ILLIQUID SECURITIES

Each Portfolio may invest up to 10% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means repurchase agreements not
entitling the holder to payment of principal within seven days and securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market.

The Core Trust Board has ultimate responsibility for determining whether
specific securities are liquid or illiquid. The Core Trust Board has delegated
the function of making day-to-day determinations of liquidity to the FAI and,
with respect to certain types of restricted securities which may be deemed to be
liquid, has adopted guidelines to be followed by the FAI. FAI takes into account
a number of factors in reaching liquidity decisions, including but not limited
to (1) the frequency of trades and quotations for the security; (2) the number
of dealers willing to purchase or sell the security and the number of other
potential buyers; (3) the willingness of dealers to undertake to make a market
in the security; (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. FAI monitors the liquidity of the
securities in each Portfolio's portfolio and report periodically to the Core
Trust Board.

Certificates of deposit and other fixed time deposits that carry an early
withdrawal penalty or mature in greater than seven days are treated by the
Portfolio as illiquid securities if there is no readily available market for the
instrument.

REPURCHASE AGREEMENTS AND SECURITIES LENDING

In order to obtain additional income, the Portfolios may from time to time lend
securities from their portfolio to brokers, dealers and financial institutions.
Securities loans must be callable at any time and must be continuously secured
by collateral from the borrower in the form of cash or U.S. Government
Securities. The Portfolios receive fees in respect of securities loans from the
borrower or interest from investing the cash collateral. The Portfolios may pay
fees to arrange the loans. The Portfolios may not lend portfolio securities in
an amount greater than 33 1/3% of the value of their total assets.

In connection with entering into repurchase agreements and securities loans, the
Portfolios require continual maintenance by Core Trust's custodian of the market
value of the underlying collateral in amounts equal to, or in excess of, the
repurchase price plus the transaction costs (including loss of interest) that
the Portfolios could expect to incur upon liquidation of the collateral if the
counterparty defaults. The Portfolios' use of securities lending entails certain
risks not associated with direct investments in securities. For instance, in the
event that bankruptcy or similar proceedings were commenced against a
counterparty in these transactions or a counterparty defaulted on its
obligations, a Portfolio might suffer a loss. Failure by the other party to
deliver a security purchased by a Portfolio may result in a missed opportunity
to make an alternative investment. FAI monitors the creditworthiness of
counterparties to these transactions under the Core Trust Board's general
supervision and pursuant to specific Core Trust Board adopted procedures

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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,
FAI believes that the Portfolios may be able to take advantage of the higher
yield that is usually paid on long-term securities.

Cash Portfolio also may purchase variable and floating rate master notes of
corporations, which are unsecured obligations redeemable upon notice that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. These obligations include
master demand notes that permit investment of fluctuating amounts at varying
rates of interest pursuant to direct arrangement with the issuer of the
instrument. The issuer of these obligations often has the right, after a given
period, to prepay their outstanding principal amount of the obligations upon a
specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations. To
the extent a demand note does not have a seven day or shorter demand feature and
there is no readily available market for the obligation, it is treated as an
illiquid security.

INVESTMENT COMPANY SECURITIES

In connection with managing their cash position, the Portfolios may invest in
the securities of other investment companies that are money market funds within
the limits proscribed by the 1940 Act. Under normal circumstances, each
Portfolio may invest up to 15% of its assets in money market funds. The
Portfolio only invests in money market funds when it has excess cash and FAI
believes that the investment is in the best interest of the Portfolio. In
addition to the Portfolio's expenses (including the various fees), as a
shareholder in another investment company, the Portfolio bears its pro rata
portion of the other investment company's expenses (including fees). Those
expenses are not part of the Portfolio's (or Fund's) expense ratio, but rather
are reflected in the yield of the investment in the money market fund.

ZERO-COUPON SECURITIES

Government Portfolio may invest in zero-coupon securities such as Treasury bills
and separately traded principal and interest components of Treasury Securities
issued or guaranteed under the U.S. Treasury's Separate Trading of Registered
Interest and Principal of Securities ("STRIPS") program. These securities are
sold at original issue discount and pay no interest to holders prior to
maturity. Because of this, zero-coupon securities may be subject to greater
fluctuation of market value than the other securities in which the Portfolios
may invest. All zero-coupon securities in which the Portfolio invests will have
a maturity of less than 13 months.

The Portfolio (and thus the Fund) must include a portion of the original issue
discount of zero-coupon securities, if any, as income even though these
securities do not pay any interest until maturity. Because the 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 FAI would not have
chosen to sell such securities and which may result in a taxable gain or loss.

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3. INVESTMENT LIMITATIONS

Fundamental investment limitations of a Fund or of a Portfolio cannot be changed
without the affirmative vote of the lesser of (i) more than 50% of the
outstanding interests of the respective Fund or Portfolio or (ii) 67% of the
shares of the Fund or Portfolio present or represented at a shareholders or
interestholders meeting at which the holders of more than 50% of the outstanding
interests of the Fund or Portfolio are present or represented.

Except as required by the 1940 Act, if a percentage restriction on investment or
utilization of assets is adhered to at the time an investment is made, a later
change in percentage resulting from a change in the market values of a
Portfolio's assets, the change in status of a security or purchases and
redemptions of shares will not be considered a violation of the limitation.

Each Fund has adopted the same fundamental and nonfundamental investment
limitations as its corresponding Portfolio. In addition, the Portfolios and the
Funds have adopted a fundamental policy which provides that, notwithstanding any
other investment policy or restriction (whether fundamental), the Portfolio or
Fund, as applicable, may invest all of its assets in the securities of a single
pooled investment fund having substantially the same investment objectives,
policies and restrictions as the Fund or Portfolio, as applicable.

GOVERNMENT PORTFOLIO

Government Portfolio has adopted the following fundamental investment
limitations which are in addition to those contained in the Prospectus of Daily
Assets Government Fund. The Portfolio may not:

(1) DIVERSIFICATION. 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) CONCENTRATION. 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) UNDERWRITING. 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) REAL ESTATE. Purchase or sell real estate or any interest therein
(including limited partnership interests), 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) COMMODITIES. 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) BORROWING. 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 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.

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(7) SENIOR SECURITIES. 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) LENDING. 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, but not in
an amount greater than 33 1/3% of the value of the Portfolio's total
assets.

(9) PLEDGING. 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.

(10) OPTIONS. Write put and call options.

(11) INVESTING FOR CONTROL. Invest for the purpose of exercising control
over any person.

(12) RESTRICTED SECURITIES. Purchase restricted securities.

Government Portfolio has adopted the following nonfundamental investment
limitations that may be changed by the Core Trust Board without shareholder
approval. The Portfolio may not:

(a) DIVERSIFICATION. 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) SECURITIES WITH VOTING RIGHTS. Purchase securities having voting
rights, except the Portfolio may invest in securities of other
investment companies to the extent permitted by the 1940 Act.

(c) MARGIN; SHORT SALES. 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.

(d) LIQUIDITY. 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.

For purposes of limitation (2): (i) loan participations are considered to be
issued by both the issuing bank and the underlying corporate borrower; (ii)
utility companies are divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (iii) financial service companies will be classified according to
the end users of their services, for example, automobile finance, bank finance
and diversified finance will each be considered a separate industry.

TREASURY CASH PORTFOLIO, GOVERNMENT CASH PORTFOLIO, CASH PORTFOLIO
AND MUNICIPAL CASH PORTFOLIO

Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal
Cash Portfolio have adopted the following fundamental investment limitations
which are in addition to those contained in the Prospectuses offering Daily
Assets Treasury Obligations Fund, Daily Assets Government Obligations Fund,
Daily Assets Cash Fund and Daily Assets Municipal Fund. No Portfolio may:

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(1) DIVERSIFICATION. 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) CONCENTRATION. 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) UNDERWRITING. 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) REAL ESTATE. 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.

(6) BORROWING. 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) SENIOR SECURITIES. 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) LENDING. 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) THRIFT INVESTOR LIMITATIONS. 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.

Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal
Cash Portfolio have adopted the following nonfundamental investment limitations
that may be changed by the Core Trust Board without shareholder approval. Each
Portfolio may not:

(b) BORROWING. 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.

10
<PAGE>

(c) SECURITIES WITH VOTING RIGHTS. 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) MARGIN; SHORT SALES. 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) LIQUIDITY. 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 OBLIGATIONS
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. FIA 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.

11
<PAGE>

Fund shares held by National banks are generally required to be revalued
periodically and reported at the lower of cost or market value. Such shares may
also be subject to special regulatory reporting, accounting and tax treatment.
In addition, a bank may be required to obtain specific approval from its board
of directors before acquiring Fund shares, and thereafter may be required to
review its investment in a Fund for the purpose of verifying compliance with
applicable Federal banking laws, regulations and policies.

National banks generally must review their holdings of shares of a Fund at least
quarterly to ensure compliance with established bank policies and legal
requirements. Upon request, the Portfolios will make available to the Funds
investors information relating to the size and composition of their portfolio
for the purpose of providing Fund shareholders with this information.

INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - DAILY ASSETS TREASURY
OBLIGATIONS FUND AND DAILY ASSETS GOVERNMENT OBLIGATIONS FUND

Treasury Cash Portfolio and Government Cash Portfolio limit their investments to
investments that are legally permissible for Federally chartered credit unions
under applicable provisions of the Federal Credit Union Act (including 12 U.S.C.
Section 1757(7), (8) and (15)) and the applicable rules and regulations of the
National Credit Union Administration (including 12 C.F.R. Part 703, Investment
and Deposit Activities), as such statutes and rules and regulations may be
amended. The Portfolios limit their investments to U.S. Government Securities
(including Treasury STRIPS) and repurchase agreements fully collateralized by
U.S. Government Securities. Certain U.S. Government Securities owned by a
Portfolio may be mortgage or asset backed, but, except to reduce interest rate
risk, no such security will be (i) a stripped mortgage backed security ("SMBS"),
(ii) a collateralized mortgage obligation ("CMO") or real estate mortgage
investment conduit ("REMIC") that meets any of the tests outlined in 12 C.F.R.
Section 703.5(g) or (iii) a residual interest in a CMO or REMIC. In order to
reduce interest rate risk, the Portfolios may purchase a SMBS, CMO, REMIC or
residual interest in a CMO or REMIC but only in accordance with 12 C.F.R.
Section 703.5(i). Treasury Cash Portfolio and Government Cash Portfolio have no
current intention to make any such investment. The Portfolios also may invest in
reverse repurchase agreements in accordance with 12 C.F.R. 703.4(e) to the
extent otherwise permitted herein and in the Prospectus.

INVESTMENTS BY SHAREHOLDERS THAT ARE SAVINGS ASSOCIATIONS - DAILY ASSETS
TREASURY OBLIGATIONS FUND AND DAILY ASSETS GOVERNMENT OBLIGATIONS PORTFOLIO

Treasury Cash Portfolio and Government Cash Portfolio limit their investments to
investments that are legally permissible for Federally chartered savings
associations without limit as to percentage under applicable provisions of the
Home Owners' Loan Act (including 12 U.S.C. Section 1464) and the applicable
rules and regulations of the Office of Thrift Supervision, as such statutes and
rules and regulations may be amended. In addition, the Portfolios limit their
investments to investments that are permissible for an open-end investment
company to hold and would permit shares of the investment company to qualify as
liquid assets under 12 C.F.R. Section 566.1(g) and as short-term liquid assets
under 12 C.F.R. Section 566.1(h). These policies may be amended only by approval
of a Portfolio's interestholders or Fund's shareholders, as applicable.

5. PERFORMANCE DATA

For a listing of certain performance data as of August 31, 1997, see Appendix B.

YIELD INFORMATION

Each Fund may provide current annualized and effective annualized yield
quotations for each class based on its daily dividends. These quotations may
from time to time be used in advertisements, shareholder reports or other
communications to shareholders. All performance information supplied by a Fund
is historical and is not intended to indicate future returns.

12
<PAGE>

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 Financial Data, Inc. or CDA/Wiesenberger
or other companies which track the investment performance of investment
companies ("Fund Tracking Companies"). The Funds may also compare any of their
performance information with the performance of recognized stock, bond and other
indices. The Funds may also refer in such materials to mutual fund performance
rankings and other data published by Fund Tracking Companies. Performance
advertising may also refer to discussions of a Fund and comparative mutual fund
data and ratings reported in independent periodicals, such as newspapers and
financial magazines.

Any current yield quotation of a class of a Fund which is used in such a manner
as to be subject to the provisions of Rule 482(d) under the Securities Act of
1933, as amended, shall consist of an annualized historical yield, carried at
least to the nearest hundredth of one percent, based on a specific
seven-calendar-day period and shall be calculated by dividing the net change
during the seven-day period in the value of an account having a balance of one
share at the beginning of the period by the value of the account at the
beginning of the period, and multiplying the quotient by 365/7. For this
purpose, the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses from the sale of securities or any
unrealized appreciation or depreciation on portfolio securities. In addition,
any effective annualized yield quotation used by a Fund shall be calculated by
compounding the current yield quotation for such period by adding 1 to the
product, raising the sum to a power equal to 365/7, and subtracting 1 from the
result.

Although published yield information is useful to investors in reviewing a
class' performance, investors should be aware that each Fund's yield fluctuates
from day to day and that the class' yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Also, Participating Organizations (as that term is used in
the Prospectus) may charge their customers direct fees in connection with an
investment in a Fund, which will have the effect of reducing the class' net
yield to those shareholders. The yields of a class are not fixed or guaranteed,
and an investment in the Fund is not insured or guaranteed. Accordingly, yield
information may not necessarily be used to compare shares of the Fund with
investment alternatives which, like money market instruments or bank accounts,
may provide a fixed rate of interest. Also, it may not be appropriate directly
to compare a Fund's yield information to similar information of investment
alternatives which are insured or guaranteed.

Income calculated for the purpose of determining a class' yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a class may differ from the rate of
distribution the class paid over the same period or the rate of income reported
in the Fund's financial statements.

OTHER PERFORMANCE AND SALES LITERATURE MATTERS

Total returns quoted in sales literature reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions.
Average annual returns generally are calculated by determining the growth or
decline in value of a hypothetical historical investment in a Fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that the performance
is not constant over time but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Funds.

Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over such periods
according to the following formula:

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<PAGE>

P(1+T)n = ERV

Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 payment made
at the beginning of the applicable period.

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 these factors
and their contributions to total return. Any performance information may be
presented numerically or in a table, graph or similar illustration.

A Fund may also include various information in its advertisements. Information
included in the Fund's advertisements may include, but is not limited to: (i)
the Fund's (or the Fund's corresponding Portfolios) portfolio holdings and
portfolio allocation as of certain dates, such as portfolio diversification by
instrument type, by instrument or by maturity, (ii) descriptions of the
portfolio managers of the Fund or the Fund's corresponding Portfolio and the
portfolio management staff of FIA 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, the Core Trust's or any of the Trust's or
the Core Trust's service providers' policies or business practices.

Appendix D contains further information on matters that may be advertised.

6. MANAGEMENT

TRUSTEES AND OFFICERS OF THE TRUST

The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.

John Y. Keffer,* Chairman and President (age 55)

President, Forum Financial Group, LLC (mutual fund services company
holding company). Mr. Keffer is also a director and/or officer of
various registered investment companies for which the various Forum
Financial Group of Companies provides services. His address is Two
Portland Square, Portland, Maine 04101.

Costas Azariadis, Trustee (age 55)

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

14
<PAGE>

Department of Economics, University of California, Los Angeles, 405
Hilgard Avenue, Los Angeles, California 90024.

James C. Cheng, Trustee (age 55)

President of Technology Marketing Associates (a marketing consulting
company) since September 1991. Prior thereto, Mr. Cheng was President
and Chief Executive Officer of Network Dynamics, Incorporated (a
software development company). His address is 27 Temple Street,
Belmont, Massachusetts 02178.

J. Michael Parish, Trustee (age 54)

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 (age 42)

Director, Investments, Forum Financial Group, LLC with which he has
been associated 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.

Stacey Hong, Treasurer (age 32)

Director, Fund Accounting, Forum Financial Group, LLC, with which he
has been associated since April 1992. Prior thereto, Mr. Hong was as
Senior Accountant with Ernst and Young. His address is Two Portland
Square, Portland, Maine 04101.

Max Berueffy, Secretary (age 46)

Senior Counsel, Forum Financial Group, LLC, with which he has been
associated since 1994. Prior thereto, Mr. Berueffy was on the staff of
the U.S. Securities and Exchange Commission for seven years, first in
the appellate branch of the Office of the General Counsel, then as a
counsel to Commissioner Grundfest and finally as a senior special
counsel in the Division of Investment Management. Mr. Berueffy also
serves as an officer of other registered investment companies for
which the Forum Financial Group of Companies provides services. His
address is Two Portland Square, Portland, Maine 04101.

Leslie K. Klenk, Assistant Secretary (age 33)

Assistant Counsel, Forum Financial Group, LLC, with which she has been
associated since April 1998. Prior thereto, Ms. Klenk was Vice
President and Associate General Counsel at Smith Barney Inc. . Her
address is Two Portland Square, Portland, Maine 04101.

Pamela Stutch, Assistant Secretary (age 30)

Fund Administrator, Forum Financial Group, LLC, with which she has
been associated since May 1998. Prior thereto, Ms. Stutch attended
Temple University School of Law and graduated in 1997. Ms. Stutch was
as a legal intern for the Maine Department of the Attorney General.

15
<PAGE>

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.

Thomas G. Sheehan, Vice President (age 44)

Director, Relationship Management, Forum Financial Group, LLC, with
which he has been associated 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.

Stacey Hong, Treasurer

Pamela J. Wheaton, Assistant Treasurer (age 38)

Manager, Tax and Compliance, Forum Financial Group, LLC, with which
she has been associated since 1989. Ms. Wheaton is also an officer of
other registered investment companies for which the Forum Financial
Group of Companies provides services. Her address is Two Portland
Square, Portland, Maine 04101.

David I. Goldstein, Vice President and Secretary (age 37)

General Counsel, Forum Financial Group, LLC, with which he has been
associated since 1991. Mr. Goldstein also serves as an officer of
other registered investment companies for which the Forum Financial
Group of Companies provides services. His address is Two Portland
Square, Portland, Maine 04101.

Max Berueffy, Vice President and Assistant Secretary

Leslie K. Klenk, Assistant Secretary.

Pam Stutch, Assistant Secretary

TRUSTEE COMPENSATION

THE TRUST. Each Trustee of the Trust (other than John Y. Keffer, who is an
interested person of the Trust) is paid $1,000 for each Board meeting attended
(whether in person or by electronic communication) and $1,000 for each committee
meeting attended on a date when a Board meeting is not held. As of March 31,
1997, in addition to the $1,000 for each Board meeting attended, each Trustee is
paid $100 per active portfolio of the Trust. To the extent a meeting relates to
only certain portfolios of the Trust, Trustees are

16
<PAGE>

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 six months ended February 28, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
Mr. Keffer None None None None
Mr. Azariadis $5,219 None None $5,219
Mr. Cheng $5,219 None None $5,219
Mr. Parish $5,219 None None $5,219
</TABLE>

CORE TRUST. Each of the Trustees of the Trust is also a Trustee of Core Trust.
Each Trustee of Core Trust is paid $1,000 for each meeting of the Core Trust
Board attended (whether in person or by electronic communication) plus $100 for
each active portfolio of Core Trust and is paid $1000 for each committee meeting
attended on a date when the Core Trust Board meeting is not held. As of August
31, 1997, there were fifteen active portfolios of Core Trust (including certain
of the Portfolios). Trustees are also reimbursed for travel and related expenses
incurred in attending meetings of the Core Trust Board. No officer of Core Trust
is compensated or reimbursed for expenses by Core Trust. Since commencement of
the Trust's operations, Mr. Keffer has not accepted any fees for his services as
Trustee.

The following table provides the aggregate compensation paid to each trustee of
Core Trust for the six months ended February 28, 1998. Core Trust has not
adopted any form of retirement plan covering trustees or officers of Core Trust.
<TABLE>
<S> <C> <C> <C> <C>
Accrued Annual
Aggregate Pension Benefits Upon Total
Trustee Compensation Benefits Retirement Compensation
------- ------------ -------- ---------- ------------
Mr. Keffer None None None None
Mr. Azariadis $1,044 None None $1,044
Mr. Parish $1,044 None None $1,044
Mr. Cheng $1,044 None None $1,044
</TABLE>

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 portfolios. Core Trust trustees are also reimbursed
for travel and related expenses incurred in attending meetings of the Core Trust
Board

INVESTMENT ADVISERS

FIA furnishes to the Portfolios at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolios' investments and
effecting portfolio transactions for the Portfolios, pursuant to an investment
advisory agreement between FIA and Core Trust (an "Advisory Agreement"). The
Advisory Agreement provides, 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 Advisory Agreement is
specifically approved at least annually by the Core Trust Board or by vote of
the interestholders of the Portfolios, and in either case by a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party.

17
<PAGE>

Prior to January 2, 1998, Linden Asset Management, Inc. ("Linden") served as
investment adviser to Treasury Cash Portfolio, Government Cash Portfolio and
Cash Portfolio, and Forum Advisors, Inc. served as investment adviser to
Government Portfolio. Linden and Forum Advisors, Inc. also acted as investment
subadvisors to each Portfolio that they did not manage on a daily basis. On
January 2, 1998, Forum Advisors, Inc. acquired Linden and reorganized into a new
company named Forum Investment Advisors, LLC. These transactions have not
effected any change in advisory staff, portfolio managers, or advisory fees, or
any other material change.

Table 1 in Appendix C shows the dollar amount of fees paid under the investment
advisory agreements between Core Trust and Linden and between Core Trust and
Forum Advisors, Inc., as applicable, with respect to each Portfolio or, prior to
Daily Assets Government Fund investing in Government Portfolio, the dollar
amount of fees paid under the Investment Advisory Agreement between the Trust
and Forum Advisors, Inc. with respect to the Fund. This information is provided
for the past three years (or shorter time a Fund or Portfolio has been
operational).

The Advisory Agreement is terminable without penalty by Core Trust with respect
to the Portfolio on 60 days' written notice when authorized either by vote of
the Portfolio's interestholders or by a vote of a majority of the Core Trust
Board, or by FIA on not more than 60 days' nor less than 30 days' written
notice, and will automatically terminate in the event of its assignment. The
Advisory Agreement also provides that, with respect to a Portfolio, FIA 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 FIA's duties or
by reason of reckless disregard of its obligations and duties under the Advisory
Agreement. The Advisory Agreement provides that FIA may render services to
others.

For its services, FIA receives an advisory fee at an annual rate of 0.05% of
Government Portfolio's and Municipal Cash Portfolio's average daily net assets
For services provided to Treasury Cash Portfolio, Government Cash Portfolio and
Cash Portfolio, FIA receives an advisory fee based upon the total average daily
net assets of those Portfolios ("Total Portfolio Assets"). FIA's fee is
calculated at an annual rate on a cumulative basis as follows: 0.06% of the
first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of
Total Portfolio Assets, and 0.03% of the remaining Total Portfolio Assets.

Prior to January 15, 1996, Forum Advisors, Inc. acted as Daily Assets Government
Fund's investment adviser under an investment advisory agreement with Forum
Funds, Inc. Under that investment advisory agreement, Forum Advisors, Inc.
received a fee at an annual rate of 0.20% of the average daily net assets of the
Fund.

In addition to receiving an advisory fee from a Portfolio it advises, FIA 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, FIA 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 FIA or any affiliate of FIA from the Portfolio with respect to
the client's assets invested in the Portfolio.

The Trust has confirmed its obligation to pay all of its 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 trust 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 the
Funds; costs of reproduction, stationery and supplies; compensation of Trustees,
officers and employees of the Trust and costs of other personnel performing
services for the Trust; costs of corporate meetings; SEC registration fees and
related expenses; state

18
<PAGE>

securities laws registration fees and related expenses; and fees payable to an
investment adviser under an investment advisory agreement.

Anthony R. Fischer, Jr., is primarily responsible for the day-to-day management
of the Portfolios. Mr. Fischer was the sole stockholder, director and officer of
Linden from 1992 until its acquisition by FIA. He has been primarily responsible
for the day-to-day management of Treasury Cash Portfolio, Government Cash
Portfolio and Cash Portfolio since their inception. Mr. Fischer has over
twenty-five years experience in the money market industry. From 1984 through
1989, Mr. Fischer served as Senior Vice President and Treasurer of United
California Savings Bank, Santa Ana, California, and prior thereto, as a Manager
for five years at PaineWebber Jackson & Curtis, New York, New York.

ADMINISTRATION

Table 2 in Appendix C shows the dollar amount of fees paid for administrative
services by the Funds and the Portfolios. This information is provided for the
past three years (or shorter time a Fund or Portfolio has been operational).

THE TRUST. Pursuant to an administration agreement (the "Trust Administration
Agreement"), FAdS supervises the overall management of the Trust (which
includes, among other responsibilities, negotiation of contracts and fees with,
and monitoring of performance and billing of, the transfer agent and custodian
and arranging for maintenance of books and records of the Trust) and provides
the Trust with general office facilities. The Trust Administration Agreement may
be terminated by either party without penalty on 60 days' written notice and may
not be assigned except upon written consent by both parties. The Trust
Administration Agreement also provides that FAdS 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 FAdS's duties or by reason of
reckless disregard of its obligations and duties under the Trust Administration
Agreement. Prior to June 19, 1997, FFSI provided administration services to the
Trust.

FAdS provides persons satisfactory to the Board to serve as officers of the
Trust. Those officers, as well as certain other employees and Trustees of the
Trust, may be Trustees, officers or employees of (and persons providing services
to the Trust may include) FAdS, FFSI, their affiliates or affiliates of FIA.

CORE TRUST. Pursuant to a management agreement with Core Trust (the "Core Trust
Management Agreement"), FAdS supervises the overall management of Core Trust
(which includes, among other responsibilities, negotiation of contracts and fees
with, and monitoring of performance and billing of, the custodian and arranging
for maintenance of books and records of Core Trust) and provides Core Trust with
general office facilities. The Core Trust Management Agreement provides, with
respect to the Portfolios, for an initial term of one year from its effective
date and for its continuance in effect for successive twelve-month periods
thereafter, provided the agreement is specifically approved at least annually by
the Core Trust Board or by the interestholders of the Portfolios, and in either
case by a majority of the Trustees who are not parties to the Core Trust
Management Agreement or interested persons of any such party. Prior to November
15, 1997, FFSI provided administration services to Core Trust.

The Core Trust Management Agreement terminates automatically if it is assigned
and may be terminated without penalty with respect to the Portfolio by vote of a
Portfolio's shareholders or by either party on 60 days' written notice. The Core
Trust Management Agreement also provides that FAdS 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.

At the request of the Core Trust Board, FAdS provides persons satisfactory to
the Core Trust Board to serve as officers of Core Trust.

19
<PAGE>

DISTRIBUTION

FFSI was incorporated under the laws of the State of Delaware on February 7,
1986 and serves as distributor of shares of the Funds pursuant to a Distribution
Agreement between FFSI and the Trust (the "Distribution Agreement"). The
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 Distribution Agreement
is specifically approved at least annually by the Board or by the shareholders
of the Fund, and in either case by a majority of the Trustees who are not
parties to the Distribution Agreement or interested persons of any such party.

The Distribution Agreement terminates automatically if it is assigned and may be
terminated without penalty with respect to each Fund by vote of the Fund's
shareholders or by either party on 60 days' written notice. The Distribution
Agreement also provides that FFSI shall not be liable for any error of judgment
or mistake of law or for any act or omission in the performance of services to
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of FFSI's duties or by reason of reckless disregard of its
obligations and duties under the Distribution Agreement.

With respect to any class that has adopted a distribution plan, the Distribution
Agreement is also terminable upon similar notice by a majority of the Trustees
who (i) are not interested persons of the Trust and (ii) have no direct or
indirect financial interest in the operation of that distribution plan or in the
Distribution Agreement ("Qualified Trustees").

FFSI acts as sole placement agent for interests in the Portfolios and receives
no compensation for those services from the portfolios.

INVESTOR CLASS DISTRIBUTION PLAN. In accordance with Rule 12b-1 under the 1940
Act, with respect to the Investor Class of each Fund, the Trust adopted a
distribution plan (the "Investor Class Plan") which provides for the payment to
Forum of a Rule 12b-1 fee at the annual rate of 0.15% of the average daily net
assets of the Investor class of each Fund as compensation for Forum's services
as distributor.

The Investor Class Plan provides that all written agreements relating to that
plan must be approved by the Board, including a majority of the Qualified
Trustees. In addition, the Investor Class Plan (as well as the Distribution
Agreement) requires the Trust and Forum to prepare and submit to the Board, at
least quarterly, and the Board will review, written reports setting forth all
amounts expended under the Investor Class Plan and identifying the activities
for which those expenditures were made.

The Investor Class Plan provides that it will remain in effect for one year from
the date of its adoption and thereafter shall continue in effect provided it is
approved at least annually by the shareholders or by the Board, including a
majority of the Qualified Trustees. The Investor Class Plan further provides
that it may not be amended to increase materially the costs which may be borne
by the Trust for distribution pursuant to the Investor Class Plan without
shareholder approval and that other material amendments of the Investor Class
Plan must be approved by the Qualified Trustees. The Investor Class Plan may be
terminated at any time by the Board, by a majority of the Qualified Trustees, or
by a Fund's Investor class shareholders.

Table 3 in Appendix C shows the dollar amount of fees payable under the Investor
Class Plan with respect to each Fund. This information is provided for the past
three years (or shorter time a Fund has been operational).

TRANSFER AGENT

FSS acts as transfer agent of the Trust pursuant to a transfer agency agreement
with the Trust (the "Transfer Agency Agreement"). The Transfer Agency Agreement
provides, with respect to the Funds, for an initial term of one year from its
effective date and for its continuance in effect for successive twelve-

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month periods thereafter, provided that the Transfer Agency Agreement is
specifically approved at least annually by the Board or by a vote of the
shareholders of each Fund, and in either case by a majority of the Trustees who
are not parties to the Transfer Agency Agreement or interested persons of any
such party at a meeting called for the purpose of voting on the Transfer Agency
Agreement.

Among the responsibilities of FSS as transfer agent for the Trust are: (1)
answering customer inquiries regarding account status and history, the manner in
which purchases and redemptions of shares of each Fund may be effected and
certain other matters pertaining to each Fund; (2) assisting shareholders in
initiating and changing account designations and addresses; (3) providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records, assisting in processing purchase and redemption
transactions and receiving wired funds; (4) transmitting and receiving funds in
connection with customer orders to purchase or redeem shares; (5) verifying
shareholder signatures in connection with changes in the registration of
shareholder accounts; (6) furnishing periodic statements and confirmations of
purchases and redemptions; (7) arranging for the transmission of proxy
statements, annual reports, prospectuses and other communications from the Trust
to its shareholders; (8) arranging for the receipt, tabulation and transmission
to the Trust of proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and (9) providing such other related services as the
Trust or a shareholder may reasonably request.

FSS 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. FSS 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.
FSS, FAdS or sub-transfer agents or processing agents retained by the FSS 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 FSS
or FAdS.

For its services under the Transfer Agency Agreement, FSS receives an annual fee
from each Fund of (i) 0.05% of each Fund's average daily net assets attributable
to institutional Shares,0.10% of each Fund's average daily net assets
attributable to institutional service shares and 0.25% of each Fund's average
daily net assets attributable to Investor Shares (computed and paid monthly in
arrears by the Fund), (ii) $12,000 per year (computed and paid monthly in
arrears by the Fund) and (iii) Annual Shareholder Account Fees of $18 per
shareholder account in Institutional Shares, Institutional Service Shares and
Investor Shares (computed as of the last business day of the prior month).

Table 4 in Appendix C shows the dollar amount of fees paid for transfer agency
services by the Funds. This information is provided for the past three years (or
shorter time a Fund has been operational).

SHAREHOLDER SERVICE PLAN AND AGREEMENTS

The Trust has adopted a shareholder service plan ("Shareholder Service Plan")
with respect to the Institutional Service class and the Investor class of each
Fund which provides that FAdS may obtain the services of financial institutions
to act as shareholder servicing agents for their customers invested in those
classes. The Shareholder Service Plan was effective on November 15, 1997 for the
Institutional Service class of those Funds then operating.

The Shareholder Service Plan provides that all written agreements relating to
that plan must be approved by the Board, including a majority of the Qualified
Trustees. In addition, the Shareholder Service Plan (as well as the various
shareholder service agreements) requires the Trust and FAdS to prepare and
submit to the Board, at least quarterly, and the Board will review written
reports setting forth all amounts expended under the plan and identifying the
activities for which those expenditures were made.

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<PAGE>

The Shareholder Service Plan provides that it will remain in effect for one year
from the date of its adoption and thereafter shall continue in effect provided
it is approved at least annually by the shareholders or by the Board. The
Shareholder Service Plan further provides material amendments of the plan must
be approved by the Qualified Trustees. The Shareholder Service Plan may be
terminated at any time by the Board or by a majority of the Qualified Trustees.

The Trust may enter into shareholder servicing agreements with various
Shareholder Servicing Agents pursuant to which those agents, as agent for their
customers, may agree among other things to: (i) answer shareholder inquiries
regarding the manner in which purchases, exchanges and redemptions of shares of
the Trust may be effected and other matters pertaining to the Trust's services;
(ii) provide necessary personnel and facilities to establish and maintain
shareholder accounts and records; (iii) assist shareholders in arranging for
processing purchase, exchange and redemption transactions; (iv) arrange for the
wiring of funds; (v) guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
(vi) integrate periodic statements with other shareholder transactions; and
(vii) provide such other related services as the shareholder may request.

As Participating Organizations, some Shareholder Servicing Agents also may
impose certain conditions on their customers, subject to the terms of the
Trust's Prospectus, in addition to or different from those imposed by the Trust,
such as requiring a minimum initial investment or by charging their customers a
direct fee for their services. Some Shareholder Servicing Agents may also act
and receive compensation for acting as custodian, investment manager, nominee,
agent or fiduciary for its customers or clients who are shareholders of the
Funds with respect to assets invested in the Funds. These Shareholder Servicing
Agents may elect to credit against the fees payable to it by its clients or
customers all or a portion of any fee received from the Trust with respect to
assets of those customers or clients invested in the Funds.

Table 5 in Appendix C shows the dollar amount of fees paid under the Shareholder
Service Plan with respect to Institutional Service Shares and Investor Shares of
each Fund services by the Funds. This information is provided for the past three
years (or shorter time a Fund has been operational).

FUND ACCOUNTING

Pursuant to a Fund Accounting Agreement, FAcS provides the Funds with accounting
services, including the calculation of the Fund's net asset value. For these
services, FAcS receives an annual fee of$36,000 per Fund plus surcharges
depending on the amount and type of each Fund's portfolio transactions and
positions. Pursuant to a Fund Accounting Agreement with Core Trust, FAcS also
provides portfolio accounting services to each Portfolio, including the
calculation of each Portfolio's net asset value. For these services, FAcS
receives an annual fee of $48,000 per Portfolio plus surcharges depending upon
the amount and type of thePortfolio's portfolio transactions and positions. The
annual fee for each of the Treasury Cash Portfolio, Government Cash Portfolio
and Cash Portfolio with up to five unitholders (excluding FAcS and its
affiliates) is the lesser of 0.05% of the average daily net assets of the
Portfolio or $48,000.

FAcS is required to use its best judgment and efforts in rendering fund
accounting services and is not liable to Core Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FAcS is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and Core Trust has agreed to
indemnify and hold harmless FAcS, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FAcS's
actions taken or failures to act with respect to a Portfolio or based, if
applicable, upon information, instructions or requests with respect to a
Portfolio given or made to FAcS by an officer of the Trust duly authorized. This
indemnification does not apply to FAcS actions taken or failures to act in cases
of FAcS's own bad faith, willful misconduct or gross negligence.

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<PAGE>

Table 6 in Appendix C shows the dollar amount of fees paid for accounting
services by the Funds and the Portfolios. This information is provided for the
past three years (or shorter time a Fund or Portfolio has been operational).

FORUM FINANCIAL GROUP

FIA, FFSI, FSS and FAcS are members of the Forum Financial Group of Companies.
Each of these companies are affiliated through the common control by John Y.
Keffer.

7. DETERMINATION OF NET ASSET VALUE

The Funds do not determine net asset value on the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas. Purchases and redemptions are effected at the time of the next
determination of net asset value following the receipt of any purchase or
redemption order.

Pursuant to the rules of the SEC, both the Board and the Core Trust Board have
established procedures to stabilize each Fund's and each Portfolio's, as
applicable, net asset value at $1.00 per share. These procedures include a
review of the extent of any deviation of net asset value per share as a result
of fluctuating interest rates, based on available market rates, from each Fund's
and Portfolio's, as applicable, $1.00 amortized cost price per share. Should
that deviation exceed 1/2 of 1%, the Board and the Core Trust Board,
respectively, will consider whether any action should be initiated to eliminate
or reduce material dilution or other unfair results to shareholders. Such action
may include redemption of shares in kind, selling portfolio securities prior to
maturity, reducing or withholding dividends and utilizing a net asset value per
share as determined by using available market quotations.

In determining the approximate market value of portfolio investments, the
Portfolios may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value.

Each investor in a Portfolio, including the Funds, may add to or reduce its
investment in that Portfolio on each business day of the Portfolios (which
corresponds to Fund Business Days). The Portfolios maintain the same Business
Days as do the Funds. As of the close of regular trading on any Fund Business
Day, the value of a Fund's beneficial interest in a Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents the Fund's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of the close of the Fund Business Day, are then effected. The Fund's
percentage of the aggregate beneficial interests in the Portfolio are then
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of the Fund's investment in the Portfolio as of the close of the Fund
Business Day plus or minus, as the case may be, the amount of net additions to
or reductions from the Fund's investment in the Portfolio effected as of that
time, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the close of the Fund Business Day plus or minus, as the case
may be, the amount of net additions to or reductions from the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
determined is then applied to determine the value of the Fund's interest in the
Portfolio as of the close of the next Fund Business Day.

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

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<PAGE>

brokerage commissions or other transaction-related compensation, the payments
may be made to broker-dealers who pay expenses of the Portfolio that it would
otherwise be obligated to pay itself. Any transaction for which the Portfolio
pays transaction-related compensation will be effected at the best price and
execution available, taking into account the amount of any payments made on
behalf of the Portfolio by the broker-dealer effecting the transaction.
Purchases from underwriters of portfolio securities include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and asked prices.

Since each Fund's and Portfolio's inception, no brokerage fees were paid by any
Fund (during those periods of the Funds invested directly in securities), nor
any Portfolio.

Allocations of transactions to dealers and the frequency of transactions are
determined for each Portfolio by FIA in its best judgment and in a manner deemed
to be in the best interest of shareholders of that Portfolio rather than by any
formula. The primary consideration is prompt execution of orders in an effective
manner and at the most favorable price available to the Portfolio.

Investment decisions for the Portfolios will be made independently from those
for any other account or investment company that is or may in the future become
managed by FIA or its respective affiliates. If, however, a Portfolio and other
investment companies or accounts managed by FIA is 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 FIA 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 FIA or any of its 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, the Trust may redeem
shares involuntarily to reimburse a Fund for any loss sustained by reason of the
failure of a shareholder to make full payment for shares purchased by the
shareholder or to collect any charge relating to transactions effected for the
benefit of a shareholder which is applicable to a Fund's shares as provided in
the Prospectus from time to time.

The Trust has filed a formal election with the SEC pursuant to which the Funds
will only effect a redemption in portfolio securities in kind if a shareholder
is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever
is less, during any 90-day period.

The Funds may wire proceeds of redemptions to shareholders that have elected
wire redemption privileges only if the wired amount is greater than $5,000. In
addition, the Funds will only wire redemption proceeds to financial institutions
located in the United States.

By use of the telephone redemption or exchange privilege, the shareholder
authorizes FSS 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 FSS to be genuine. The records of FSS of such instructions are
binding.

FSS 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 FSS will be reinvested and
the checks will be canceled.

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EXCHANGE PRIVILEGE

The exchange privilege permits shareholders of the Funds to exchange their
shares for shares of any Participating Fund, which includes (i) the same class
of the other Funds and (ii) any other mutual fund for which Forum or its
affiliates act as investment adviser, manager or distributor and which
participates in the Trust's exchange privilege program. The following table
summarizes the current exchange opportunities associated with class of each
shares of the Funds.

Class of Shares Exchange Opportunities
--------------- ----------------------

Investor Shares Other Funds (Investor Shares)
Other series of the Trust
Sound Shore Fund, Inc.
The CRM Funds (Investor Shares)
The Cutler Trust
Memorial Funds (Trust Shares)

Institutional Shares Other Funds (Institutional Shares)

Institutional Service Shares Other Funds (Institutional Service Shares)
The CRM Funds (Institutional Shares)
Memorial Funds (Institutional Shares)

Exchange transactions are made on the basis of relative net asset values per
share at the time of the exchange transaction plus any applicable sales charge
of the Participating Fund whose shares are acquired. Exchanges are accomplished
by (i) a redemption of the shares of the Fund exchanged at the next
determination of that Fund's net asset value after the exchange order in proper
form (including any necessary supporting documents required by the Fund whose
shares are being exchanged) is accepted by the Transfer Agent and (ii) a
purchase of the shares of the fund acquired at the next determination of that
fund's net asset value after (or occurring simultaneously with) the time of
redemption.

Shares of any Participating Fund may be exchanged without a sales charge for
shares of any Participating Fund that are offered without a sales charge. If the
Participating Fund whose shares are purchased in the exchange transaction
imposes a higher sales charge the shareholder will be required to pay the sales
charge on the purchased shares. Shareholders are entitled to any reduced sales
charges of the Participating Fund into which they are exchanging to the extent
those reduced sales charges would be applicable to that shareholder's purchase
of shares.

The Funds do not charge for the exchange privilege and there is currently no
limit on the number of exchanges a shareholder may make, but each Fund reserves
the right to limit excessive exchanges by any shareholder. A pattern of frequent
exchanges may be deemed by the Transfer Agent to be contrary to the best
interests of the Fund's other shareholders and, at the discretion of the
Transfer Agent, may be limited by that Fund's refusal to accept additional
exchanges from the investor.

The terms of the exchange privilege are subject to change, and the privilege may
be terminated by any Participating Fund or the Trust. However the privilege will
not be terminated, and no material change that restricts the availability of the
privilege to shareholders will be implemented, without 60 days' advance notice
to shareholders. No notice need be given of an amendment whose only material
effect is to reduce amount of sales charge required to be paid on the exchange
and no notice need be given if redemptions of shares of a Fund are suspended or
a Fund temporarily delays or ceases the sale of its shares.

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<PAGE>

INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT

The Funds (other than Daily Assets Municipal Fund) offer an individual
retirement plan (the "IRA") for individuals who wish to use shares of a Fund as
a medium for funding individual retirement savings. Under the IRA, distributions
of net investment income and capital gain will be automatically reinvested in
the IRA established for the investor. The Funds' custodian furnishes custodial
services to the IRAs for a service fee. Shareholders wishing to invest in a Fund
through an IRA should contact the Transfer Agent for further information.

10. TAXATION

Qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, does not involve governmental supervision of management or
investment practices or policies. The information set forth in the Prospectuses
and the following discussion relate solely to Federal income taxes on
distributions and other distributions by the Funds and assumes that the Funds
each qualify for treatment as a regulated investment company. Investors should
consult their own counsel for further details and for the application of
Federal, state and local tax laws to the investor's particular situation.

In order to continue to qualify for treatment as a regulated investment company
under the Internal Revenue Code, a Fund must distribute to its shareholders for
each taxable year at least 90% of its net investment income and must meet
several additional requirements. Among these requirements are the following: (1)
the Fund must derive at least 90% of its gross income each taxable year from
distributions, interest, payments with respect to securities loans, gains from
the sale or other disposition of securities and certain other income; (2)
subject to certain exceptions, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, securities of investment companies, U.S. Government
Securities and other securities, with these other securities limited, in respect
of any one issuer, to an amount that does not exceed 5% of the value of the
Fund's total assets; and (3) subject to certain exceptions, at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than securities of investment
companies and U.S. Government Securities) of any one issuer.

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.

Distributions declared by the Fund in October, November, or December of any year
and payable to shareholders of record on a date in such a month will be deemed
to have been paid by the Fund and received by the shareholders on December 31 of
the year declared if paid by the Fund during the following January.

11. OTHER INFORMATION

CUSTODIAN

Pursuant to a Custodian Agreement with Core Trust, BankBoston N.A., 100 Federal
Street, Boston, Massachusetts 02106, acts as the custodian of Government
Portfolio's assets. Pursuant to a Custodian Agreement with Core Trust, Imperial
Trust Company, 201 North Figueroa Street, Suite 610, Los Angeles, California
90012, acts as the custodian of each other Portfolio's assets. The custodians'
responsibilities include safeguarding and controlling the Portfolios cash and
securities and determining income payable on and collecting interest on
Portfolio investments.

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<PAGE>

COUNSEL

Legal matters in connection with the issuance of beneficial interest of the
Trust are passed upon by Seward & Kissel, 1200 G Street, N.W., Washington, D.C.
20005.

AUDITORS

KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, independent
auditors, acts as auditors for the Funds and as auditors for the Portfolios.

THE TRUST AND ITS SHARES

The Trust is a business trust organized under Delaware law. Delaware law
provides that shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
securities regulators of some states, however, have indicated that they and the
courts in their state may decline to apply Delaware law on this point.

The Trust Instrument contains an express disclaimer of shareholder liability for
the debts, liabilities, obligations, and expenses of the Trust and requires that
a disclaimer be given in each contract entered into or executed by the Trust or
the Trustees. The Trust Instrument provides for indemnification out of each
series' property of any shareholder or former shareholder held personally liable
for the obligations of the series. The Trust Instrument also provides that each
series shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the series and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Delaware law does not
apply, no contractual limitation of liability was in effect and the portfolio is
unable to meet its obligations. FAdS believes that, in view of the above, there
is no risk of personal liability to shareholders.

The Trust Instrument further provides that the Trustees shall not be liable to
any person other than the Trust or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise by subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

The Board is required to call a meeting of shareholders for the purpose of
voting upon the removal of any trustee when so requested in writing by the
shareholders of record holding at least 10% of the Trust's outstanding shares.

Each series' capital consists of shares of beneficial interest. Shares are fully
paid and nonassessable, except as set forth above with respect to Trustee and
shareholder liability. Shareholders representing 10% or more of the Trust or a
series may, as set forth in the Trust Instrument, call meetings of the Trust or
series for any purpose related to the Trust or series, as the case may be,
including, in the case of a meeting of the entire Trust, the purpose of voting
on removal of one or more Trustees. The Trust or any series may be terminated
upon the sale of its assets to, or merger with, another open-end management
investment company or series thereof, or upon liquidation and distribution of
its assets. Generally such terminations must be approved by the vote of the
holders of a majority of the outstanding shares of the Trust or the series;
however, the Trustees may, without prior shareholder approval, change the form
of organization of the Trust by merger, consolidation or incorporation. If not
so terminated or reorganized, the Trust and its series will continue
indefinitely. Under the Trust Instrument, the Trustees may, without shareholder
vote, cause the Trust to merge or consolidate into one or more trusts,
partnerships or corporations or cause the Trust to merge or consolidate into one
or more trusts, partnerships or corporations or cause the Trust to be
incorporated under Delaware law, so long as the surviving entity is an open-end
management investment company that will succeed to or assume the Trust's
registration statement.

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FUND STRUCTURE

CORE AND GATEWAY. The Funds seek to achieve their objective by investing all of
their investable assets in a separate portfolio of a registered, open-end
management investment company with substantially the same investment objective
and policies as the Fund. This "Core and Gateway" fund structure is an
arrangement whereby one or more investment companies or other collective
investment vehicles that share investment objectives -- but offer their shares
through distinct distribution channels -- pool their assets by investing in a
single investment company having substantially the same investment objective and
policies (a "Core Portfolio"). This means that the only investment securities
that will be held by a Fund will be the Fund's interest in the Core Portfolio.
This structure permits other collective investment vehicles to invest
collectively in a Core Portfolio, allowing for greater economies of scale in
managing operations of the single Core Portfolio. The Board retains the right to
withdraw a Fund's investments from a Core Portfolio at any time; the Fund would
then resume investing directly in individual securities of other issuers or
could re-invest all of its assets in another Core Portfolio.

FUND SHAREHOLDERS' VOTING RIGHTS. A Core Portfolio normally will not hold
meetings of its investors except as required under the 1940 Act. As a
shareholder in a Core Portfolio, a Fund is entitled to vote in proportion to its
relative interest in the Core Portfolio. On any issue, a Fund will vote its
shares in a Core Portfolio in proportion to the votes cast by its shareholders.
If there are other investors in a Core Portfolio, there can be no assurance that
any issue that receives a majority of the votes cast by the Fund's shareholders
will receive a majority of votes cast by all Core Portfolio shareholders.
Generally, a Fund will hold a meeting of its shareholders to obtain instructions
on how to vote its interest in a Core Portfolio when the Core Portfolio is
conducting a meeting of its shareholders. However, subject to applicable
statutory and regulatory requirements, a Fund will not seek instructions from
its shareholders with respect to (i) any proposal relating to a Core Portfolio
that, if made with respect to the Fund, would not require the vote of Fund
shareholders, or (ii) any proposal relating to the Core Portfolio that is
identical to a proposal previously approved by the Fund's shareholders.

In addition to a vote to remove a trustee or change a fundamental policy,
examples of matters that will require approval of shareholders of a Core
Portfolio include, subject to applicable statutory and regulatory requirements:
the election of trustees; approval of an investment advisory contract; the
dissolution of a Core Portfolio; certain amendments of the organizational
documents for the Core Portfolio; a merger, consolidation or sale of
substantially all of a Core Portfolio's assets; or any additional matters
required or authorized by the charter or trust instrument and by-laws of a Core
Portfolio or any registration statement of a Core Portfolio, or as the directors
or trustees of the Core Portfolio may consider desirable. The board of trustees
of a Core Portfolio will typically reserve the power to change nonfundamental
policies without prior shareholder approval.

CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Core
Portfolio may be affected by the actions of other large investors in the Core
Portfolio, if any. For example, if the Core Portfolio had a large investor other
than the Fund that redeemed its interest in the Core Portfolio, the Core
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
A Fund may withdraw its entire investment from the Core Portfolio at any time,
if the Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if other investors in
the Core Portfolio, by a vote of shareholders, changed the investment objective
or policies of the Core Portfolio in a manner not acceptable to the Board. A
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Core Portfolio. That distribution could
result in a less diversified portfolio of investments for the Fund and could
affect adversely the liquidity of the Fund's portfolio. If the Fund decided to
convert those securities to cash, it normally would incur transaction costs. If
a Fund withdrew its investment from the Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets in
accordance with its investment objective and policies by FIA 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.

28
<PAGE>

12. FINANCIAL STATEMENTS

AUGUST 31, 1997 ANNUAL REPORT

The Statements of Assets and Liabilities, Statements of Operations, Statements
of Changes in Net Assets, Financial Highlights and Notes Thereto of Daily Assets
Government Fund (formerly known as Daily Assets Treasury Fund) and Daily Assets
Cash Fund for the fiscal year ended August 31, 1997 and the Independent
Auditors' Report thereon (included in the Annual Report to Shareholders), which
are delivered along with this SAI, are incorporated herein by reference. Also
incorporated by reference into this SAI are the Schedules of Investments,
Statements of Assets and Liabilities, Statements of Operations, Statements of
Changes in Net Assets, and notes thereto, of Government Portfolio (formerly
known as Treasury Portfolio) and Cash Portfolio for the fiscal year ended August
31, 1997 and the Independent Auditors' Report thereon.

FEBRUARY 28, 1998 SEMI-ANNUAL REPORT

The Statements of Assets and Liabilities, Statements of Operations, Statements
of Changes in Net Assets, Financial Highlights and Notes Thereto of Daily Assets
Government Fund (formerly known as Daily Assets Treasury Fund), Daily Assets
Treasury Obligations Fund, Daily Assets Government Obligations Fund (formerly
known as Daily Assets Government Fund) and Daily Assets Cash Fund for the
semi-annual period ended February 28, 1998 (included in the Semi-Annual Report
to Shareholders), which are delivered along with this SAI, are incorporated
herein by reference. Also incorporated by reference into this SAI are the
Schedules of Investments, Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, and notes thereto, of
Government Portfolio (formerly known as Treasury Portfolio) and Cash Portfolio
for the semi-annual period ended February 28, 1998.

DAILY ASSETS MUNICIPAL FUND

As Daily Assets Municipal Fund and Municipal Cash Portfolio had not as of
February 28, 1998 commenced operations, no financial statements will be
available until after August 31, 1998.

29
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES RATINGS

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.

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.

A-1
<PAGE>

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.

A-2
<PAGE>

APPENDIX B - PERFORMANCE INFORMATION

For the seven day period ended August 31, 1997, the annualized yields of each of
the classes of the Funds that were then operating were as follows:
<TABLE>
<S> <C> <C> <C> <C>
TAX EQUIVALENT TAX EQUIVALENT
CURRENT YIELD EFFECTIVE YIELD CURRENT YIELD EFFECTIVE YIELD
DAILY ASSETS TREASURY
OBLIGATIONS FUND
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
DAILY ASSETS GOVERNMENT FUND
Investor Shares -- -- -- --
Institutional Service Shares 4.76% 4.87% -- --
Institutional Shares -- -- -- --
DAILY ASSETS GOVERNMENT
OBLIGATIONS FUND
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
DAILY ASSETS CASH FUND
Investor Shares -- -- -- --
Institutional Service Shares 5.19% 5.33% -- --
Institutional Shares -- -- -- --
DAILY ASSETS MUNICIPAL FUND
Investor Shares -- -- -- --
Institutional Service Shares -- -- -- --
Institutional Shares -- -- -- --
</TABLE>

As of August 31, 1997, there were no outstanding Institutional Shares, Investor
Shares or Institutional Service Shares of each Fund other than Daily Assets
Government Fund and Daily Assets Cash Fund.

B-1
<PAGE>

APPENDIX C- MISCELLANEOUS TABLES

TABLE 1 - INVESTMENT ADVISORY FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1997 0
Year ended August 31, 1996 12,930 0 12,930
GOVERNMENT PORTFOLIO
Period ended August 31, 1997 9,064 0 9,064
Year ended March 31, 1997 20,637 0 20,637
Year ended March 31, 1996 69,466 0 69,466
Year ended March 31, 1995 59,382 53,382 6,000
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997 196,857 0 196,857
Year ended August 31, 1996 156,552 0 156,552
CASH PORTFOLIO
Year ended August 31, 1997 72,872 0 72,872
Year ended August 31, 1996 38,083 0 38,083
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --
</TABLE>

C-1
<PAGE>

TABLE 2 - ADMINISTRATION FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1997 24,287 14,346 9,941
Year ended August 31, 1996 19,198 9,307 9,891
GOVERNMENT PORTFOLIO
Period ended August 31, 1997 18,128 18,128 0
Year ended March 31, 1997 41,274 41,274 0
Year ended March 31, 1996(1)
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997 252,821 0 252,821
Year ended August 31, 1996 230,547 104,558 125,989
CASH PORTFOLIO
Year ended August 31, 1997 92,652 7,621 85,031
Year ended August 31, 1996 56,125 3,719 52,406
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --

DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Period ended August 31, 1997 18,123 0 18,123
Year ended March 31, 1997 41,232 7,453 33,779
Year ended March 31, 1996
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1997 7,453 7,453 0
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1997 -- -- --
</TABLE>

C-2
<PAGE>

TABLE 3 - INVESTOR SHARES RULE 12B-1 FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Period ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Period ended August 31, 1997 -- -- --
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1997 -- -- --
</TABLE>

For the fiscal year ended August 31, 1997, no Investor Shares were outstanding
and, accordingly, no fees were payable under the Investor Class Plan.

C-3
<PAGE>

TABLE 4 - TRANSFER AGENCY FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Period ended August 31, 1997 50,810 44,054 6,756
Year ended March 31, 1997 116,051 101,485 14,566
Year ended March 31, 1996 110,792 96,881 13,911
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Institutional Service Shares
Period ended August 31, 1997 29,772 17,766 12,006
DAILY ASSETS MUNICIPAL FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
</TABLE>

As of August 31, 1997, there were no outstanding Institutional Shares, Investor
Shares or Institutional Service Shares of each Fund other than Daily Assets
Government Fund and Daily Assets Cash Fund.

C-4
<PAGE>

TABLE 5 - SHAREHOLDER SERVICE FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Period ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
DAILY ASSETS MUNICIPAL FUND
Institutional Service Shares
Year ended August 31, 1997 -- -- --
Investor Shares
Period ended August 31, 1997 -- -- --
</TABLE>

As of August 31, 1997, there were no outstanding Investor Shares and no
effective Shareholder Plan with respect to Institutional Service Shares of any
Fund.

C-5
<PAGE>

TABLE 6 - FUND ACCOUNTING FEES ($)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1997 24,279 0 24,279
Year ended August 31, 1996 28,518 19,955 8,563
GOVERNMENT PORTFOLIO
Period ended August 31, 1997 20,000 0 20,000
Year ended March 31, 1997 48,000 0 48,000
Year ended March 31, 1996(1)
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1997 48,000 0 48,000
Year ended August 31, 1996 42,000 0 42,000
CASH PORTFOLIO
Year ended August 31, 1997 48,000 0 48,000
Year ended August 31, 1996 42,000 14,957 27,043
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Period ended August 31, 1997 5,000 0 5,000
Year ended March 31, 1997 12,000 0 12,000
Year ended March 31, 1996
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1997
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1997 -- -- --
</TABLE>

C-6
<PAGE>

TABLE 7 - 5% SHAREHOLDERS

As of May 1, 1998, the officers and Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. Also as of that date, the
following table lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares, as well as their percentage holding of
all shares of the Fund
<TABLE>
<S> <C> <C>
PERCENTAGE OF SHARES PERCENTAGE OF SHARES
OF CLASS OWNED OF FUND OWNED
DAILY ASSETS TREASURY OBLIGATIONS FUND
Investor Shares
Forum Administrative Services, LLC 100.00 0.00
Two Portland Square, Portland, ME 04101
Institutional Shares
Babb & Co., C/O Bank of New Hampshire 99.90 96.97
P.O. Box 477, Concord, NH 03302
Institutional Service Shares
Allagash & Co., C/O Bank of New Hampshire 100.00 2.93
P.O. Box 477, Concord, NH 03302
DAILY ASSETS GOVERNMENT FUND
Institutional Shares
Forum Financing 100.00 0.00
Two Portland Square, Portland, ME 04101
Institutional Service Shares
H.M. Payson & Co. Custody Account 54.07 54.07
P.O. Box 31, Portland, ME 04112
H.M. Payson & Co. Custody Account 25.71 25.71
P.O. Box 31, Portland, ME 04112
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Investor Shares
Forum Administrative Services, LLC 100.00 0.00
Two Portland Square, Portland, ME 04101
Institutional Shares
Allagash & Co., C/O Bank of New Hampshire 61.79 61.77
P.O. Box 477, Concord, NH 03302
Babb & Co., C/O Bank of New Hampshire 38.21 38.20
P.O. Box 477, Concord, NH 03302
Institutional Service Shares
Mike Stone, C/O Peoples Heritage Bank 99.85 0.03
P.O. Box 9540, Portland, ME04112
DAILY ASSETS CASH FUND
Investor Shares
Forum Administrative Services, LLC 100.00 0.00
Two Portland Square, Portland, ME 04101
Institutional Shares 100.00 34.66
Allagash & Co., C/O Bank of New Hampshire
P.O. Box 477, Concord, NH 03302
Institutional Service Shares
H.M. Payson & Co. Custody Account 58.43 38.17
P.O. Box 31, Portland, ME 04112
H.M. Payson & Co. Trust Account 37.29 24.36
P.O. Box 31, Portland, ME 04112
</TABLE>

C-7
<PAGE>

APPENDIX D- ADDITIONAL ADVERTISING MATERIALS

TEXT OF PEOPLES HERITAGE NEWS RELEASE

Peoples Heritage Financial Group, Inc. (NASDAQ:PHBK) announced today that it has
formed an alliance with a major mutual fund provider and an investment advisory
firm to expand its mutual fund offerings. The alliance with Forum Financial
Group and H.M. Payson & Company will result in 18 funds, including the unique
Maine Municipal Bond Fund and New Hampshire Bond Fund, being offered through the
branches of Peoples' affiliate banks in Maine, New Hampshire and northern
Massachusetts and the Company's trust and investment subsidiaries

'There is no secret to where financial services are moving, under one roof,"
said William J. Ryan, Chairman, President and Chief Executive Officer of Peoples
Heritage. "One only has to watch the virtually daily announcements of
consolidations in the financial sector to understand that customers are
demanding and receiving 'one-stop' financial services.

"We think we are adding the additional competitive advantage of funds that are
managed and administered close to home."

Eighteen Forum funds will be offered including two Payson funds. The tax-free
Maine and New Hampshire state bond funds are the only two such funds available
and usually invest 80% of total assets in municipal securities. Other funds
being provided by the alliance include money market, fixed income and equity
funds.

Forum Financial, based in Portland, Maine since 1987, administers 146 funds with
more than $36 billion in assets. Forum manages mutual funds for independent
investment advisors such as Payson and for banks. Forum Investment Advisors, LLC
an affiliate, is the largest Maine-based investment advisor with approximately
$1.7 billion in fund assets under management.

"We are providing a great product set to the customers served by Peoples' nearly
200 branches in northern New England," said John Y. Keffer, Forum Financial
president, "The key today is to link a wide variety of investment options with
convergent, easy access for customers. I believe this alliance does just that."

H.M. Payson & Co., founded in 1854, is one of the nation's oldest investment
firms with nearly $1 billion in assets under management and $300 million in
non-managed custodial accounts. The Payson value Fund and Payson Balanced Fund
are among the 18 offerings.

"I believe we have all the ingredients of a tremendous alliance," said John
Walker, Payson president and managing director. "We have the region's premier
community banking company, a community-based investment advisor, and a local
mutual fund company that operates nationally and specializes in working with
banks. We are poised to provide solid investment performance and service."

Peoples Heritage Financial Group is a $10 billion multi-state bank and financial
services holding company headquartered in Portland, Maine. Its Maine banking
affiliate, Peoples Heritage Bank, has the state's leading deposit market share.
Its New Hampshire banking affiliate, Bank of New Hampshire, has the state's
leading deposit market share. Family Bank, the Company's Massachusetts banking
subsidiary, has the state's tenth largest deposit market share and the leading
market share in many of the northern Massachusetts communities it serves.
Peoples affiliate banks also operate subsidiaries in leasing, trust and
investment services and insurance.

D-1
<PAGE>

FORUM FINANCIAL GROUP:
- ----------------------

Headquarters: Two Portland Square, Portland, Maine 04101
President: John Y. Keffer
Offices: Portland, Seattle, Warsaw, Bermuda
*Established in 1986 to administer mutual funds for independent investment
advisors and banks
*Among the nation's largest third-party fund administrators
*Uses proprietary in-house systems and custom programming capabilities
*ADMINISTRATION AND DISTRIBUTION SERVICES: Regulatory, compliance,
expense accounting, budgeting for all funds
*FUND ACCOUNTING SERVICES: Portfolio valuation, accounting, dividend
declaration, and tax advice
*SHAREHOLDER SERVICES: Preparation of statements, distribution
support, inquiries and processing of trades
*CLIENT ASSETS UNDER ADMINISTRATION AND DISTRIBUTION: $36.9 billion
*CLIENT ASSETS PROCESSED BY FUND ACCOUNTING: $47.6 billion
*CLIENT FUNDS UNDER ADMINISTRATION AND DISTRIBUTION: 146 mutual funds with 219
share classes
*INTERNATIONAL VENTURES:
Joint venture with Bank Handlowy in Warsaw, Poland, using Forum's
proprietary transfer agency and distribution systems
Off-shore investment fund administration, using Bermuda as Forum's
center of operations
*FORUM EMPLOYEES: United States -198, Poland - 61, Bermuda - 3

FORUM CONTACTS:

Mark Kaplan, Managing Director and Portfolio Manager, Forum Investment
Advisors, LLC,
(207) 879-1900 X 6123
Tony Santaniello, Director of Marketing, (207) 879-1900 X 6175

D-2
<PAGE>

H.M. PAYSON & CO.:
- ------------------

Headquarters: One Portland Square, Portland, Maine
President and Managing Director: John Walker
Quality investment services and conservative wealth management since 1854
*Assets under Management: $1 Billion
*Custody Income Assets: $300 Million
*Client Base: 85% individuals; 15% institutional
*Owned by 11 shareholders; 11 managing directors
*Payson Balanced Fund and Payson Value Fund (administrative and shareholder
services provided by Forum Financial Group)
*Employees: 45

H.M. PAYSON & CO. CONTACT:
Joel Harris, Portfolio/Marketing Coordinator, (207) 772-3761

D-3
<PAGE>

TEXT OF FORUM BROCHURE

In connection with its advertisements, a Fund may provide a description of the
Fund's investment adviser and its affiliates, which are service providers to the
Fund. Text which is currently in use is set forth below.

"FORUM FINANCIAL GROUP OF COMPANIES

Forum Financial Group of Companies represent more than a decade of diversified
experience with every aspect of mutual funds. The Forum Family of Funds has
benefited from the informed, sharply focused perspective on mutual funds that
experience makes possible.

The Forum Family of Funds has been created and managed by affiliated companies
of Portland-based Forum Financial Group, among the nation's largest mutual fund
administrators providing clients with a full line of services for every type of
mutual fund.

The Forum Family of Funds is designed to give investment representatives and
investors a broad choice of carefully structured and diversified portfolios,
portfolios that can satisfy a wide variety of immediate as well as long-term
investment goals.

Forum Financial Group has developed its "brand name" family of mutual funds and
has made them available to the investment public and to institutions on both the
national and regional levels.

For more than a decade Forum has had direct experience with mutual funds from a
different perspective, a perspective made possible by Forum's position as a
leading designer and full-service administrator and manager of mutual funds of
all types.

Today Forum Financial Group administers and provides services for over 120
mutual funds for 17 different fund managers, with more than $30 billion in
client assets. Forum has its headquarters in Portland, Maine, and has offices in
Seattle, Bermuda, and Warsaw, Poland. In a joint venture with Bank Handlowy, the
largest and oldest commercial bank in Poland, Forum operates the only
independent transfer agent and mutual fund accounting business in Poland. Forum
directs an off-shore and hedge fund administration business through its Bermuda
office. It employs more than 230 professionals worldwide.

From the beginning, Forum developed a plan of action that was effective with
both start- up funds, and funds that needed restructuring and improved services
in order to live up to their potential. The success of its innovative approach
is evident in Forum's growth rate over the years, a growth rate that has
consistently outstripped that of the mutual fund industry as a whole, as well as
that of the fund service outsource industry.

Forum has worked with both domestic and international mutual fund sponsors,
designing unique mutual fund structures, positioning new funds within the
sponsors' own corporate planning and targeted markets.

Forum's staff of experienced lawyers, many of whom have been associated with the
Securities and Exchange Commission, have been available to work with fund
sponsors to customize fund components and to evaluate the potential of various
fund structures.

Forum has introduced fund sponsors to its unique proprietary Core and Gateway(R)
partnership, helping them to take advantage of this full-service master/feeder
structure.

Fund sponsors understand that even the most efficiently and creatively designed
fund can disappoint shareholders if it is inadequately serviced. That is the
reason why fund sponsors have relied on Forum to meet all of a fund's complex
compliance, regulatory, and filing needs.

D-4
<PAGE>

Forum's full service commitment includes providing state-of- the-art accounting
support (Forum has 8 CPAs on staff, as well as senior accountants who have been
associated with Big 6 accounting firms). Forum's proprietary accounting system
is continually upgraded and can provide custom-built modules to satisfy a fund's
specific requirements. This service is joined with transfer agency and
shareholder service groups that draw their strength both from the high caliber
of the people staffing each unit and from Forum's advanced technology support
system.

More than a decade of experience with mutual funds has given Forum practical
hands-on experience and knowledge of how mutual funds function "from the inside
out."

Forum has put that experience to work by creating the Forum Family of Funds, a
family where each member is designed and positioned for your best investment
advantage, and where each fund is serviced with the utmost attention to the
delivery of timely, accurate, and comprehensive shareholder information.

INVESTMENT ADVISERS

Forum Investment Advisors, LLC offers the services of portfolio managers with
the highest qualifications--because without such direction, a comprehensive and
goal-oriented investment program and ongoing investment strategy are not
possible. Serving as portfolio managers for the Forum Family of Funds are
individuals with decades of experience with some of the country's major
financial institutions.

Individual funds in the Forum Family of Funds invest in portfolios that have as
their investment adviser nationally recognized institutions, including Schroder
Capital Management International, Inc., a major figure in worldwide mutual funds
that, with its affiliates, managed over $175 billion as of September 30, 1997.

Forum Funds are also managed by the portfolio managers of H.M. Payson & Co.,
founded in Portland, Maine in 1854 and one of the oldest investment firms in the
country. Payson has approximately $1 billion in assets under management, with
clients that include pension plans, endowment funds, and institutional and
individual accounts.

FORUM INVESTMENT ADVISORS, LLC

Forum Investment Advisors, LLC is the largest Maine based investment adviser
with approximately $1.4 billion in assets under management. The portfolio
managers have decades of combined experience in a cross section of the country's
financial markets. The managers have specific, day-to-day experience in the
asset class portfolios they manage, bringing critical focus to meeting each
fund's explicit investment objectives. The portfolio managers have been involved
in investing the assets of large insurance companies, banks, pension plans,
individuals, and of course mutual funds. Forum Investment Advisors, LLC has a
staff of analysts and investment administrators to meet the demands of serving
shareholders in our funds.

FORUM FAMILY OF FUNDS

It has been said that mutual fund investment offerings--of which there are
nearly 10,000, with assets spread across stock, bond, and money market funds
worth more than $4 trillion--come in a rainbow of varieties. A better
description would be a "spectrum" of varieties, the spectrum graded from green
through amber and on to red. In simpler terms, from low risk investments,
through moderate to high risk. The lower the risk, the lower the possible reward
- -- the higher the risk, the higher the potential reward.

The Forum Family of Funds provides conservative investment opportunities that
reduce the risk of loss of capital, using underlying money market investments
U.S. Government securities (although the shares of the Forum Funds are neither
insured nor guaranteed by the U.S. Government or its agencies), thus

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cushioning the investment against market volatility. These funds offer regular
income, ready access to your money, and flexibility to buy or sell at any time.

In the less conservative but still not aggressive category are funds in the
Forum Family that seek to provide steady income and, in certain cases, tax-free
earnings. Such investments provide important diversification to an investment
portfolio.

Growth funds in the Forum Family more aggressively pursue a high return at the
risk of market volatility. These funds include domestic and international stock
mutual funds."

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