-------------------------
OMB APPROVAL
-------------------------
OMB Number:3235-0307
Expires:May 31, 2000
Estimated average
burden hours per
response:212.95
-------------------------
As filed with the Securities and Exchange Commission on November 1, 1999
File Nos. 2-67052 and 811-3023
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 76
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 78
FORUM FUNDS
(Formerly "Forum Funds, Inc.")
Two Portland Square
Portland, Maine 04101
(207) 879-1900
Leslie K. Klenk, Esq.
Forum Fund Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485, paragraph (b
on _________________ pursuant to Rule 485, paragraph (b)
60 days after filing pursuant to Rule 485, paragraph (a)(1)
X on December 31, 1999 pursuant to Rule 485, paragraph (a)(1)
75 days after filing pursuant to Rule 485, paragraph (a)(2)
on _________________ pursuant to Rule 485, paragraph (a)(2)
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Investor Shares, Institutional Shares and
Institutional Service 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. Each Fund is structured as a
master-feeder fund and this amendment is also executed by Core Trust (Delaware).
<PAGE>
[LOGO]
PROSPECTUS
INVESTOR SHARES
JANUARY 1, 2000
DAILY ASSETS TREASURY OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS CASH FUND
DAILY ASSETS MUNICIPAL FUND
EACH FUND, EXCEPT DAILY ASSETS MUNICIPAL FUND, SEEKS TO PROVIDE HIGH CURRENT
INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF
LIQUIDITY. DAILY ASSETS MUNICIPAL FUND SEEKS TO PROVIDE HIGH CURRENT INCOME
THAT IS EXEMPT FROM FEDERAL INCOME
TAX AND THAT IS CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE
OF LIQUIDITY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUNDS' SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY
PERFORMANCE
FEE TABLES
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MANAGEMENT
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
GENERAL INFORMATION
BUYING SHARES
SELLING SHARES
EXCHANGE PRIVILEGES
RETIREMENT ACCOUNTS
OTHER INFORMATION
FINANCIAL HIGHLIGHTS
1
<PAGE>
RISK/RETURN SUMMARY
This Prospectus offers Investor 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 (each a "Fund"). Investor
Shares are designed for retail investors.
Each Fund also offers Institutional Shares and Institutional Service Shares. You
may obtain prospectuses describing these classes by contacting Forum Shareholder
Services, LLC, the Funds' transfer agent ("Transfer Agent").
INVESTMENT STRATEGY
Each Fund seeks to provide high current income consistent with the preservation
of capital and the maintenance of liquidity. In the case of Daily Assets
Municipal Fund, the Fund seeks to provide income which is exempt from Federal
income taxes.
INVESTMENT POLICIES
[Margin callout: Concepts to Understand
MONEY MARKET SECURITY means a high quality, short-term, U.S. dollar
denominated debt security
TREASURY SECURITY means a securities that is issued or guaranteed by the
U.S. Treasury Government Security means a security that is issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
GOVERNMENT SECURITY means a security issued or guaranteed by the U.S.
Government, its agencies or instrumentalities
REPURCHASE AGREEMENT means a transaction in which a Fund purchases
securities and simultaneously commits to resell the securities to the other
party at an agreed-upon date and at a price reflecting a market rate of
interest
MUNICIPAL SECURITY means a security the interest on which is exempt from
Federal income tax
Each Fund is a money market mutual fund. As such, each Fund
o seeks to maintain a stable net asset value of $1.00 per share
o invests in a diversified portfolio of Money Market Securities and
o maintains a dollar weighted average maturity of its investments of 90 days
or less.
Each Fund invests substantially all of its assets in another mutual fund (a
"Portfolio"). Each Fund and its corresponding Portfolio have the same investment
objective and substantially similar investment policies.
The Portfolios in which the Funds invest and their primary investments are:
2
<PAGE>
<TABLE>
<S> <C> <C>
FUND PORTFOLIO PRIMARY INVESTMENT
Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Treasury Securities and related
repurchase agreements
Daily Assets Government Fund Government Portfolio Government Securities
Daily Assets Government Obligations Fund Government Cash Portfolio Government Securities and related
repurchase agreements
Daily Assets Cash Fund Cash Portfolio A broad spectrum of Money Market
Securities
Daily Assets Municipal Fund Municipal Cash Portfolio Municipal Securities
</TABLE>
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
[Margin callout: Money Market Fund Disclosure
An investment in a Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although each Fund seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.]
There is no assurance that any Fund will achieve its investment objective.
The principal risks of investing in a Fund are
o changes in interest rates,
o the lowering of the credit rating or credit quality of a security,
o the default of an issuer of a security or repurchase agreement counterparty
and
o the potential for the Fund's investment adviser to make poor investment
decisions.
In addition, another principal risk for Daily Assets Municipal Fund
is local economic and political changes in geographic areas where the Fund is
invested.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance.
3
<PAGE>
PERFORMANCE
The following charts and tables provide some indication of the risks of
investing in Daily Assets Government Fund and Daily Assets Cash Fund by showing
changes in the performance of the Fund from year to year and that Fund's
returns. Because the Investor Shares of each of these Fund commenced operations
in late 1998, the information is for the Fund's Institutional Service Shares.
The returns for Institutional Service Shares are similar to that of Investor
Shares. The returns of the classes differ only to the extent that the classes
have different expenses. Performance information for the Investor Shares of each
other Fund is not included in this Prospectus. Each other Fund has an operating
history of less than a full calendar. PERFORMANCE INFORMATION PRESENTED HERE
REPRESENTS ONLY PAST PERFORMANCE AND DOES NOT NECESSARILY INDICATE FUTURE
RESULTS.
DAILY ASSETS GOVERNMENT FUND
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1993 2.83%
1994 3.80%
1995 5.36%
1996 4.82%
1997 4.87%
1998 4.97%
The calendar year-to-date total return as of September 30, 1999 was
3.47%.
During the periods shown in the chart, the highest quarterly return was 5.56%
(for the quarter ended March 31, 1995) and the lowest return was 2.78% (for the
quarter ended June 30, 1993).
The following table lists the Institutional Service Shares' average annual total
return as of December 31, 1998.
4
<PAGE>
DAILY ASSETS
YEAR(S) GOVERNMENT FUND
1 Year 4.97%
5 Year 4.76%
Since Inception (7/1/92) 4.34%
DAILY ASSETS CASH FUND
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1997 5.23%
1998 5.26%
The calendar year-to-date total return as of September 30, 1999 was
3.51%.
During the periods shown in the chart, the highest quarterly return was 5.39%
(for the quarter ended March 31, 1998) and the lowest return was 5.01% (for the
quarter ended December 31, 1998).
The following table lists the Institutional Service Shares average annual total
returns as of December 31, 1998.
DAILY ASSETS
YEAR(S) CASH FUND
1 Year 5.26%
Since Inception (10/1/96) 5.22%
5
<PAGE>
FEE TABLES
The following tables describe the various fees and expenses that you will pay if
you invest in Investor Shares of a Fund. There are no charges to purchase or
redeem Fund shares.
Annual Fund Operating Expenses(1) (expenses that are deducted from Fund assets)
Daily Assets Treasury Obligations Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees 0.27%
Other Expenses 99.64%
Total Annual Fund Operating Expenses (3) 100.05%
Daily Assets Government Fund
Management Fees (2) 0.15%
Distribution (12b-1) Fees 0.15%
Other Expenses 5.15%
Total Annual Fund Operating Expenses(3) 5.45%
Daily Assets Government Obligations Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees 0.25%
Other Expenses 148.55%
Total Annual Fund Operating Expenses (3) 148.94%
Daily Assets Cash Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees 0.30%
Other Expenses 8.81%
Total Annual Fund Operating Expenses (3) 9.24%
Daily Assets Municipal Fund
Management Fees (2) 0.07%
Distribution (12b-1) Fees 0.29%
Other Expenses 33.15%
Total Annual Fund Operating Expenses (3) 33.51%
(1) BASED ON AMOUNTS INCURRED DURING EACH FUND'S LAST FISCAL YEAR ENDED
AUGUST 31, 1999 STATED AS A PERCENTAGE OF ASSETS PRIOR TO FEE WAIVERS
AND REIMBURSEMENTS. EACH CLASS'S EXPENSES INCLUDE ITS PRO RATA SHARE OF
THE EXPENSES OF THE CORRESPONDING PORTFOLIO.
(2) INCLUDES ALL ADVISORY AND ADMINISTRATION FEES.
(3) DURING EACH FUND'S LAST FISCAL YEAR, CERTAIN SERVICE PROVIDERS
VOLUNTARILY WAIVED A PORTION OF THEIR FEES AND REIMBURSED CERTAIN
EXPENSES OF EACH FUND TO LIMIT TOTAL ANNUAL FUND OPERATING EXPENSES OF
INVESTORS SHARES TO 0.87% FOR DAILY ASSETS TREASURY OBLIGATIONS FUND,
0.75% FOR DAILY ASSETS GOVERNMENT FUND, 0.84% FOR DAILY ASSETS
GOVERNMENT OBLIGATIONS FUND, 0.90% FOR DAILY ASSETS CASH FUND, AND
0.88% FOR DAILY ASSETS MUNICIPAL FUND. THESE WAIVERS AND REIMBURSEMENTS
MAY BE REDUCED OR ELIMINATED AT ANY TIME.
6
<PAGE>
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Investor Shares of a Fund to the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in Investor Shares of a Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% annual
return, that the operating expenses of a Fund's Investor Shares remain the same
as stated in the above table, and that distributions are reinvested. Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
<TABLE>
<S> <C> <C> <C> <C> <C>
DAILY ASSETS DAILY ASSETS
TREASURY DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
OBLIGATIONS FUND GOVERNMENT OBLIGATIONS FUND CASH MUNICIPAL FUND
Fund Fund
1 year $5,250 $544 $4,175 $904 $2,874
3 years $5,523 $1,625 $3,147 $2,599 $6,396
5 years $5,524 $2,696 $2,948 $4,153 $8,196
10 years $5,524 $5,332 $2,900 $7,498 $9,727
</TABLE>
7
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund and Daily Assets Cash Fund:
The investment objective of each Fund is to provide high current income
to the extent consistent with the preservation of capital and the
maintenance of liquidity.
Daily Assets Municipal Fund:
The investment objective of the Fund is provide high current income
which is exempt from federal income taxes to the extent consistent with
the preservation of capital and the maintenance of liquidity.
INVESTMENT STRATEGIES
The investment adviser for the Portfolios (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates in combination with the stated objective of a
Portfolio to determine an appropriate maturity profile for the Portfolio's
investments. The Adviser searches for securities that satisfy the maturity
profile of a Portfolio and that provide the greatest potential return relative
to the risk of the security.
The Adviser may sell a Money Market Security if (i) revised economic forecasts
or interest rate outlook requires a repositioning of the Portfolio, (ii) the
security subsequently fails to meet the Adviser's investment criteria or (iii)
funds are needed for another purpose.
PRIMARY INVESTMENTS
Each Portfolio invests only in Money Market Securities that have remaining
maturities of 397 days or less and maintains a dollar weighted average maturity
of its investments of 90 days or less. All Money Market Securities will be rated
in one of the two highest short-term rating categories (by companies such as
Standard & Poor's) or unrated and determined by the Adviser to be of comparable
quality.
The Portfolios' primary investments are:
TREASURY CASH PORTFOLIO Treasury Securities and repurchase agreements backed by
Treasury Securities.
8
<PAGE>
GOVERNMENT PORTFOLIO Government Securities exempt from state and local income
taxes. The Government Securities in which the Portfolio invests include Treasury
Securities and securities supported primarily by the creditworthiness of the
issuer, including securities of the Farm Credit System, Farm Credit System
Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan
Banks, General Services Administration, Student Loan Marketing Association and
Tennessee Valley Authority.
GOVERNMENT CASH PORTFOLIO Government Securities and in repurchase agreements
backed by Government Securities. The Government Securities in which the
Portfolio invests include Treasury Securities and securities supported primarily
by the creditworthiness of the issuer, such as securities of the Federal
National Mortgage Association, Federal Home Loan Banks and Student Loan
Marketing Association.
CASH PORTFOLIO A broad array of Money Market Securities, including (i)
securities issued by financial institutions, such as certificates of deposits,
bank notes, bankers' acceptances and time deposits of banks and their foreign
branches, (ii) securities issued by domestic companies, such as commercial
paper, (iii) Government Securities and (iv) repurchase agreements.
MUNICIPAL CASH PORTFOLIO Municipal Securities. The Portfolio may invest up to
20% of its total assets in Municipal Securities or other Money Market Securities
whose interest is subject to Federal income tax.
Municipal Securities are issued by or on behalf of the states, territories and
possessions of the U.S. and their local governments and public financing
authorities. The Portfolio invests a significant portion of its assets in
Municipal Securities supported by credit and liquidity enhancements. These
investments are often comprised of long term Municipal Securities structured to
allow the Portfolio the option to sell the security back to the issuer and with
interest rates that are reset periodically. There are many different structures
which Municipal Securities may take. The Adviser reviews and considers a
security's structure and will only purchase a Municipal Security if it believes
that third party credit and liquidity supporters possess minimal credit risk.
The Portfolio may invest up to 35% of its total assets in Municipal Securities
the issuers of which are located in one state or territory.
OTHER INVESTMENT POLICIES
The Funds and Portfolios operate in accordance with "Rule 2a-7" under the
Investment Company Act of 1940 ("1940 Act"). All restrictions relating to
maturity, credit and diversification are interpreted under that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions and invest in cash
and Money Market Securities. Each Portfolio may invest in other money market
mutual funds that have substantially similar policies.
9
<PAGE>
Securities in which the Portfolios invest may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The Portfolios limit these securities to those
with an interest rate that is adjusted based solely on a single short-term rate
or index, such as the Prime Rate.
INVESTMENT RISKS
There is no assurance that a Fund will achieve its investment objective. An
investment in a Fund is not by itself a complete or balanced investment program.
The principal risks of investing in a Fund are:
INTEREST RATE RISK Interest rates affect the value of the Portfolio's
investments. Increases in interest rates may cause a decline in value. In
addition, those increases will result in the Fund's investment performance to
underperform currently available investments.
CREDIT RISK The value of a security held by a Portfolio may decline if the
security's credit rating is downgraded or credit quality otherwise falls. In the
worst case, an issuer of a security or a repurchase agreement counterparty may
be unable to make timely payments of interest or principal.
LOCAL ECONOMIC/POLITICAL RISK Changes in state or regional economies or politics
can impact the value of the Municipal Securities issued in that location.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance. Other
risks, such as Year 2000 risk, are described in the Statement of Additional
Information ("SAI").
MANAGEMENT
Each Fund is a series of Forum Funds (the "Trust"), an open-end, management
investment company. The business of the Trust and of each Fund is managed under
the direction of the Board of Trustees (the "Board"). The Board formulates the
general policies of each Fund and meets periodically to review each Fund's
performance, monitor investment activities and practices and discuss other
matters affecting each Fund. Additional information about the Board and the
Trust's executive officers is in the SAI.
10
<PAGE>
THE ADVISER
Each Portfolio's Adviser is Forum Investment Advisors, LLC, Two Portland Square,
Portland, Maine 04101. The Adviser concentrates on two other money market funds
and fixed income investment management and, in addition to the Portfolios,
advises five taxable and tax-free bond funds. The Adviser is a privately owned
company controlled by John Y. Keffer, who is Chairman of the Board of the Trust.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the Adviser received advisory fees at the following annual
rates as a percentage of average net assets:
PORTFOLIO ADVISORY FEE
Treasury Cash Portfolio 0.030%
Government Portfolio 0.050%
Government Cash Portfolio 0.030%
Cash Portfolio 0.030%
Municipal Cash Portfolio 0.050%
Since their inception, Anthony R. Fischer, Jr., has been the portfolio manager
responsible for the day to day management of the Portfolios. Mr. Fischer has
over 25 years of experience in the money market industry.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides services to each Fund.
As of September 30, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $__ billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of the Funds' shares.
The Trust has adopted a plan under Rule 12b-1 of the 1940 Act that allows the
Fund to pay fees for the distribution of Investor Shares and the servicing of
shareholder accounts. Because these fees are paid out of the assets of the
Investor Shares on an on-going basis, over time, they will increase the cost of
your investment and may cost you more than paying other types of sales charges.
11
<PAGE>
Forum Administrative Services, LLC ("FAdS") provides administrative services to
each Fund, Forum Accounting Services, LLC is each Fund's fund accountant, and
Forum Shareholder Services, LLC is each Fund's Transfer Agent.
The Trust has adopted a shareholder servicing plan that allows the Trust to pay
FAdS a fee for providing service activities for Investor Shares that are not
otherwise provided by the Transfer Agent. FAdS may pay this fee to various
financial institutions that provide shareholder servicing to their customers
invested in Investor Shares.
FUND EXPENSES
Each Fund and each class of the Fund pays for all of its expenses. Each Fund's
and each class' expenses include its own expenses as well as Trust expenses that
are allocated among the Funds, their classes and the other funds of the Trust.
The Adviser or other service providers may voluntarily waive all or any portion
of their fees and/or reimburse certain expenses of a Fund. Any fee waiver or
expense reimbursement increases a Fund's or a class's performance for the period
during which the waiver is in effect.
Certain service providers of each Fund have undertaken to waive a portion of
their fees in order to limit the average daily net asset expenses (excluding
taxes, interest, portfolio transaction expenses and extraordinary expenses) of
Investor Shares to 0.75% or lower for Daily Assets Government Fund and 0.90% or
lower for each other Fund.
12
<PAGE>
YOUR ACCOUNT
[Margin call out: HOW TO CONTACT THE FUNDS
Write to us at:
Forum Shareholder Services, LLC
Attn: (Name of Your Fund)
P.O. Box 446
Portland, Maine 04112
Telephone us at:
(800) 94FORUM or (800) 943-6786 (Toll Free)
(207) 879-0001
Wire investments (or ACH payments) to us at:
Bankers Trust Company
New York, New York
ABA #021001033 For Credit to:
Forum Shareholder Services, LLC
Account # 01-465-547
Re: (Name of Your Fund)
(Your Name)
(Your Account Number)]
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form. For instance, if the Transfer Agent receives your purchase or redemption
request in proper form after 4:00 p.m., Eastern time, your purchase will be
priced at the next day's NAV. A Fund cannot accept orders that request a
particular day or price for the transaction or any other special conditions. On
days that the New York Stock Exchange or San Francisco Federal Reserve Bank
closes early or the Public Securities Association recommends that the government
securities markets close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
Shares become entitled to receive distributions on the day of purchase if the
order and payment are received in proper form by the Transfer Agent as follows:
13
<PAGE>
TIMES INDICATED ARE EASTERN TIME
Order must be Payment must be
received by received by
Daily Assets Government Fund 12:00 p.m. 4:00 p.m.
Daily Assets Municipal Fund 12:00 p.m. 4:00 p.m.
Each Other Fund 2:00 p.m. 4:00 p.m.
The Funds do not issue share certificates.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations.
Each Fund reserves the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may change in case of an emergency. In order to maintain a stable NAV
of $1.00 per share, each Fund values the securities in its portfolio on an
amortized cost basis.
TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees (other than sales charges) charged
by that institution may be different than those of a Fund. Financial
institutions may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. These institutions also
may provide you with certain shareholder services such as periodic account
statements and trade confirmations summarizing your investment activity.
Consult a representative of your financial institution for more information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, Uniform Gift to Minors Act ("UGMA") or Uniform
Transfer to Minors Act ("UTMA") accounts, the check must be made
payable to "Forum Funds" or to one or more owners of the account and
endorsed to "Forum Funds." For all other accounts, the check must be
made payable on its face to "Forum Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
14
<PAGE>
ACH PAYMENT Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days to settle. Your financial institution may charge you a fee for
this service.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
MINIMUM INVESTMENTS Each Fund accepts payments in the following minimum amounts:
MINIMUM INITIAL MINIMUM ADDITIONAL
INVESTMENT INVESTMENT
Standard Accounts $10,000 $500
Traditional and Roth IRA Accounts $2,000 $250
Accounts With Systematic Investment Plans $250 $250
Exchanges $2,000 $2,500
15
<PAGE>
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENT
............................................................................................................................
Individual, Sole Proprietorship and Joint Accounts: o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear on
proprietorship accounts. Joint accounts can have two or the account
more owners (tenants)
............................................................................................................................
Gifts or Transfers to a Minor (UGMA, UTMA): o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the Uniform Gift to Minors
child and obtain tax benefits. An individual can give up Act or the Uniform Transfers to Minors Act
to $10,000 a year per child without paying Federal gift tax o The trustee must sign instructions in a manner
indicating trustee capacity
.............................................................................................................................
Business Entities o For entities with officers, provide an
original or certified copy of a resolution that
identifies the authorized signers for the account
o For entities with partners or other interested parties,
provide a certified partnership agreement or
organizational document, or certified pages from the
partnership agreement or organizational document, that
identify the partners or interested parties
..............................................................................................................................
Trusts o The trust must be established before an
account can be opened
o Provide a certified trust document, or the
pages from the trust document, that identify the
trustees
</TABLE>
16
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
........................................................................................................................
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation or write us a letter
o Mail us your application and a check o Write your account number on your check
o Mail us the slip (or your letter) and the check
........................................................................................................................
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and we will assign you an account number
o Mail us your application
o Instruct your bank to wire your money to us
.........................................................................................................................
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete the systematic investment section of
o Complete the application the application
o Call us and we will assign you an account number o Attach a voided check to your application
o Mail us your application o Mail us the completed application
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Systematic investments must be for at least $250.
LIMITATIONS ON PURCHASES Each Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
a Fund or its operations. This includes requests from any individual or group
who, in a Fund's view, is likely to engage in excessive trading (usually defined
as more than four redemptions or exchanges out of a Fund within a calendar
year).
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH transfers at full
value, subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or ACH transfer that does not clear, your purchase will
be canceled. You will be responsible for any losses or expenses incurred by a
Fund or the Transfer Agent, and a Fund may redeem shares you own in the account
(or another identically registered account maintained with the Transfer Agent)
17
<PAGE>
as reimbursement. Each Fund and its agents have the right to reject or cancel
any purchase or exchange due to nonpayment.
SELLING SHARES
Each Fund processes redemption orders promptly. Generally, a Fund will send
redemption proceeds to you within a week of receiving your request in proper
form. Delays may occur in cases of very large redemptions, excessive trading or
during unusual market conditions. Each Fund may delay sending redemption
proceeds until it has collected payment for the shares you are selling, which
may take up to 15 calendar days. Shares are not entitled to receive
distributions declared on or after the day on which a redemption order is
accepted by the Transfer Agent.
18
<PAGE>
TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if your redemption is for $5,000
or more and you did not decline wire redemption privileges on your
account application
o Call us with your request (unless you declined telephone redemption
privileges - See "By Telephone") or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges -
See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 12:00 P.M., Eastern time, for Daily Assets
19
<PAGE>
Government Fund and Daily Assets Municipal Fund, or after 2:00 P.M., Eastern
time, for each other Fund, the Transfer Agent will wire proceeds to you on the
next Fund business day.
SYSTEMATIC WITHDRAWALS You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Systematic withdrawals must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name or address
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, distribution,
telephone redemption or exchange option or any other election in
connection with your account
SMALL ACCOUNTS If the value of your account falls below $1,000 ($500 for IRA
accounts), a Fund may ask you to increase your balance. If the account value is
still below $1,000 ($500 for IRAs) after 60 days, a Fund may close your account
and send you the proceeds. A Fund will not close your account if it falls below
this amount solely as a result of a reduction in your account's market value.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions "in kind" usually occur
if the amount to be redeemed is large enough to affect a Fund's operations (for
example, if the redemption represents more than 1% of the Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional Fund shares. In
addition, the amount of any outstanding (unpaid for six months or more) checks
for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
20
<PAGE>
EXCHANGE PRIVILEGES
You may exchange your Investor Shares of a Fund for Investor Shares of another
fund of the Trust by telephone or in writing. For a list of other funds
available for exchange, you may call the Transfer Agent. If you exchange into a
fund that has a sales charge, you will have to pay that fund's sales charge. If
you exchange into a fund that has no sales charge, you will not have to pay a
sales charge at the time of exchange. Because exchanges are a sale and purchase
of shares, they may have tax consequences.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but each Fund reserves the right to limit exchanges. You may exchange
your shares by mail or by telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
HOW TO EXCHANGE
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account numbers
o The names of the funds from which you are selling and into which
you are exchanging
o The dollar amount or number of shares you want to sell (and
exchange
o Open a new account and complete an account application if you are
requesting different shareholder privileges
o Mail us request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
RETIREMENT ACCOUNTS
Each Fund (except Daily Assets Municipal Fund) offers IRA accounts, including
traditional and Roth IRAs. Before investing in any IRA or other retirement plan,
you should consult your tax adviser. Whenever making an investment in an IRA, be
sure to indicate the year for which the contribution is made.
21
<PAGE>
OTHER INFORMATION
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway(R)" structure. Each Fund
invests substantially all of its assets in a corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
Each Fund invests in its corresponding Portfolio to enhance its investment
opportunities and to reduce its operating expenses by sharing the costs of
managing a large pool of assets. A Fund may withdraw its entire investment from
a Portfolio at anytime that the Board of Trustees of Forum Funds (the "Board")
decides it is in the Fund's best interest to do so.
The Board of Trustees of Core Trust formulates the general policies of each
Portfolio and meets periodically to review each Portfolio's performance, monitor
investment activities and practices and discuss other matters affecting each
Portfolio. Additional Information about the Core Trust Board and Core Trust's
executive officers is in the SAI.
CLASSES OF SHARES
This Prospectus offers Investors Shares of each Fund. Investor Shares are
designed for retail investors.
Each Fund also offers Institutional Shares and Institutional Service Shares. You
may obtain prospectuses describing these classes by contacting the Transfer
Agent. Institutional Shares are designed for institutional investors and
Institutional Service Shares are sold to banks, trust companies and certain
other financial institutions for their own and their customer accounts.
Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions daily and pays investment income monthly and
net capital gain at least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested.
22
<PAGE>
TAXES
GENERAL
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
Generally, a Fund's distribution of net income (including short-term capital
gain) is taxable to you as ordinary income. A Fund's distribution of long-term
capital gain is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year.
For further information about the tax effects of investing in a Fund, including
state and local tax matters, please see the SAI and consult your tax adviser.
DAILY ASSETS GOVERNMENT FUND
Generally, you are not subject to state and local income taxes on the Fund's
distribution of tax exempt interest income. Many states do not tax investment
income from a mutual fund generated by investments in U.S. Treasury and certain
U.S. Government Securities if the interest on these obligations would not be
taxable to you if you held the obligations directly.
DAILY ASSETS MUNICIPAL FUND
Generally, you are not subject to Federal income tax on the Fund's distribution
of tax-exempt interest income. The Fund's distribution of taxable interest,
other investment income and short-term capital gain is taxable to you as
ordinary income. It is anticipated that substantially all of the Fund's net
income will be exempt from Federal income tax. Distributions, including
distributions that are exempt from Federal income tax, may be subject to certain
state and local taxes
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay Federal income tax on your pro rata share of the net income generated from
these securities. Distributions of interest income on certain private activity
bonds is an item of tax preference for purposes of individual and corporate
Federal Alternative Minimum Tax ("AMT").
23
<PAGE>
ORGANIZATION
The Trust is a Delaware business trust. No Fund expects to hold shareholders'
meetings unless required by Federal or Delaware law. Shareholders of each series
are entitled to vote at shareholders' meetings unless a matter relates only to a
specific series or class (such as approval of an advisory agreement for a Fund
or a distribution plan). From time to time, large shareholders may control
Investors Shares of a Fund, the Fund or the Trust.
24
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand the performance of
Investor Share Class of each Fund. Daily Assets Government Fund and Daily Assets
Cash Fund commenced operations before the offering of Investors Shares and
performance information for the Funds' Institutional Service Shares is also
included in the table. Total return in the table represents the rate an investor
would have earned (or lost) on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by
________________. Each Fund's financial statements and the auditor's report are
included in the Annual Report dated August 31, 1999, which is available upon
request, without charge.
<TABLE>
<S> <C> <C> <C> <C>
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Daily Assets Treasury Obligations Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.02 (0.02) $1.00
Daily Assets Government Fund
Investor Shares
Year ended August 31, 1999
Institutional Service Shares
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00
Daily Assets Government Obligations Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.02 (0.02) $1.00
RATIO TO AVERAGE NET
ASSETS
...................................................................... ............ ............ ............
......................................................... ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Period to Average
Expenses Income Total (000s Net Assets
Return Omitted) (1)
......................................................... ............ ............ ............ ............
......................................................... ............ ............ ............ ............
Daily Assets Treasury Obligations Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.78%(3) 5.06%(3) 0.89% $ 10 727.11%(3)
Daily Assets Government Fund
Investor Shares
Year ended August 31, 1999
Institutional Service Shares
Year ended August 31, 1998 0.46% 4.93% 5.04% $ 9,485 0.91%
April 1, 1997 to August 31, 1997 0.50%(3) 4.76%(3) 2.01% 44,116 0.95%(3)
Year Ended March 31, 1997 0.50% 4.70% 4.80% 43,975 0.99%
Year Ended March 31, 1996 0.50% 5.01% 5.18% 43,103 1.06%
Year Ended March 31, 1995 0.37% 4.45% 4.45% 36,329 1.10%
Daily Assets Government Obligations Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.78%(3) 5.06%(3) 0.90% $ 766.21%(3)
25
<PAGE>
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ...........
Daily Assets Cash Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.02 (0.02) $1.00
Institutional Service Shares
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
October 1, 1996 to August 31, 1997 1.00 0.05 (0.05) 1.00
Daily Assets Municipal Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) $1.00 0.01 (0.01) $1.00
RATIO TO AVERAGE NET
ASSETS
.............................................. ......................... ............ ............ ............
.............................................. ............ ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Period to Average
Expenses Income Total (000s Net Assets
Return Omitted) (1)
.............................................. ............ ............ ............ ............ ............
Daily Assets Cash Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.78%(3) 5.25%(3) 5.91% $ 10 709.02%(3)
Institutional Service Shares
Year ended August 31, 1998 0.46% 5.22% 5.34% $ 5,235 0.90%
October 1, 1996 to August 31, 1997 0.52%(3) 5.06%(3)% 4.70% 12,076 1.22%(3)
Daily Assets Municipal Fund
Investor Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) 0.78%(3) 2.53%(3) 0.06% $ 10 749.30%(3)
</TABLE>
(1) The ratio of Gross Expenses to Average Net Assets reflects the expense
ratio excluding any waivers and expense reimbursements for the Fund and
its respective Portfolio.
(2) The Trust commenced the offering of the Investor Share class of Daily
Assets Treasury Obligations Fund, Daily Assets Government Obligations
Fund, Daily Assets Cash Fund, and Daily Assets Municipal Fund on August
6, 1998.
(3) Annualized.
26
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION [LOGO]
The following documents are available free upon request: INVESTOR SHARES
ANNUAL/SEMI-ANNUAL REPORTS DAILY ASSETS
TREASURY
OBLIGATIONS FUND
Additional information about each Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In each Fund's annual report, you will find a DAILY ASSETS
discussion of the market conditions and investment GOVERNMENT FUND
strategies that significantly affected the Fund's
performance during its last fiscal year. DAILY ASSETS
GOVERNMENT
STATEMENT OF ADDITIONAL INFORMATION ("SAI") OBLIGATIONS FUND
The SAI provides more detailed information about each Fund
and is incorporated by reference into this Prospectus. DAILY ASSETS
CASH FUND
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund DAILY ASSETS
by contacting the Funds at: MUNICIPAL FUND
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
800-94FORUM or 800-943-6786
207-879-0001
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission. You can get copies, for a fee, by
writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
The scheduled hours of operation of the Public Reference
Room may be 800-94FORUM or obtained by calling the
Commission at 1-800-SEC-0330. Free copies of the Forum Funds
800-943-6786 reports and SAIs are available from the P.O. Box 446
Commission's Internet website at Portland, Maine 04112
800-94FORUM or
http://www.sec.gov. 800-943-6786
207-879-0001
Investment Company Act File No. 811-3023
</TABLE>
<PAGE>
[LOGO]
PROSPECTUS
INSTITUTIONAL SHARES
JANUARY 1, 2000
DAILY ASSETS TREASURY OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS CASH FUND
DAILY ASSETS MUNICIPAL FUND
EACH FUND, EXCEPT DAILY ASSETS MUNICIPAL FUND, SEEKS TO PROVIDE HIGH
CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE
MAINTENANCE OF LIQUIDITY. DAILY ASSETS MUNICIPAL FUND SEEKS TO PROVIDE
HIGH CURRENT INCOME THAT IS EXEMPT FROM FEDERAL INCOME
TAX AND THAT IS CONSISTENT WITH THE PRESERVATION OF CAPITAL
AND THE MAINTENANCE OF LIQUIDITY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUNDS' SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY
PERFORMANCE
FEE TABLES
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MANAGEMENT
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
GENERAL INFORMATION
BUYING SHARES
SELLING SHARES
EXCHANGE PRIVILEGES
RETIREMENT ACCOUNTS
OTHER INFORMATION
FINANCIAL HIGHLIGHTS
1
<PAGE>
RISK/RETURN SUMMARY
This Prospectus offers 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 (each a "Fund").
Institutional Shares are designed for institutional investors.
Each Fund also offers Investor Shares and Institutional Service Shares. You may
obtain a prospectus describing these additional classes by contacting the Forum
Shareholder Services, LLC, the Fund's transfer agent ("Transfer Agent").
INVESTMENT OBJECTIVES
Each Fund seeks to provide high current income consistent with the preservation
of capital and the maintenance of liquidity. In the case of Daily Assets
Municipal Fund, the Fund seeks to provide income which is exempt from Federal
income taxes.
INVESTMENT POLICIES
[Margin callout: Concepts to Understand
MONEY MARKET SECURITY means a high quality, short-term, U.S. dollar
denominated debt security
TREASURY SECURITY means a security that is issued or guaranteed by the
U.S. Treasury
GOVERNMENT SECURITY means a security that is issued or guaranteed by
the U.S. Government, its agencies or instrumentalities
REPURCHASE AGREEMENT means a transaction in which a Fund purchases
securities and simultaneously commits to resell the securities to the
other party at an agreed-upon date and at a price reflecting a market
rate of interest
MUNICIPAL SECURITY means a security the interest on which is exempt
from Federal income tax]
Each Fund is a money market mutual fund. As such, each Fund
o seeks to maintain a stable net asset value of $1.00 per share,
o invests in a diversified portfolio of Money Market Securities and
o maintains a dollar weighted average maturity of its investments of 90 days
or less.
Each Fund invests substantially all of its assets in another mutual fund (a
"Portfolio"). Each Fund and its corresponding Portfolio have the same investment
objective and substantially similar investment policies.
The Portfolios in which the Funds invest and their primary investments are:
2
<PAGE>
<TABLE>
<S> <C> <C>
FUND PORTFOLIO PRIMARY INVESTMENT
Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Treasury Securities and related
repurchase agreements
Daily Assets Government Fund Government Portfolio Government Securities
Daily Assets Government Obligations Fund Government Cash Portfolio Government Securities and related
repurchase agreements
Daily Assets Cash Fund Cash Portfolio A broad spectrum of Money Market
Securities
Daily Assets Municipal Fund Municipal Cash Portfolio Municipal Securities
</TABLE>
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
[Margin callout: Money Market Fund Disclosure
An investment in a Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although each Fund seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Funds.]
There is no assurance that any Fund will achieve its investment objective.
The principal risks of investing in a Fund are
o changes in interest rates,
o the lowering of the credit rating or credit quality of a security,
o the default of an issuer of a security or repurchase agreement counterparty
and
o the potential for the Fund's investment adviser to make poor investment
decisions.
In addition, another principal risk for Daily Assets Municipal Fund is local
economic and political changes in geographic areas where the Fund is invested.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance.
3
<PAGE>
PERFORMANCE
The following charts and tables provide some indication of the risks of
investing in Daily Assets Government Fund and Daily Assets Cash Fund by showing
changes in the performance of the Fund from year to year and that Fund's
returns. Because the Institutional Shares of each Fund commenced operations in
1998, the information in the bar chart and performance table is for the Fund's
Institutional Service Shares. The returns for Institutional Service Shares are
similar to that of Investor Shares. The returns of the classes differ only to
the extent that the classes have
different expenses. Performance information for
the Institutional Shares of each other Fund is not included in this Prospectus.
Each other Fund has an operating history of less than a full calendar.
PERFORMANCE INFORMATION PRESENTED HERE REPRESENTS ONLY PAST PERFORMANCE AND DOES
NOT NECESSARILY INDICATE FUTURE RESULTS.
DAILY ASSETS GOVERNMENT FUND
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1993 2.83%
1994 3.80%
1995 5.36%
1996 4.82%
1997 4.87%
1998 4.97%
The calendar year-to-date total return as of September 30, 1999 was
3.47%.
During the periods shown in the chart, the highest quarterly return was 5.56%
(for the quarter ended March 31, 1995) and the lowest return was 2.78% (for the
quarter ended June 30, 1993).
The following table lists the Institutional Service Shares' average annual total
return as of December 31, 1998.
4
<PAGE>
....................................... ........................................
Daily Assets
Year(s) Government Fund
....................................... ........................................
....................................... ........................................
1 Year 4.97%
5 Year 4.76%
Since Inception (7/1/92) 4.34%
Daily Assets Cash Fund
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1997 5.23%
1998 5.26%
The calendar year-to-date total return as of September 30, 1999 was
3.51%.
During the periods shown in the chart, the highest quarterly return was 5.39%
(for the quarter ended March 31, 1998) and the lowest return was 5.01% (for the
quarter ended December 31, 1998).
The following table lists the Institutional Service Shares average annual total
returns as of December 31, 1998.
....................................................... ..................
Daily Assets
Year(s) Cash Fund
....................................................... ..................
....................................................... ..................
1 Year 5.26%
Since Inception (10/1/96) 5.22%
5
<PAGE>
FEE TABLES
The following tables describe the various fees and expenses that you will pay if
you invest in Institutional Shares of a Fund. There are no charges to purchase
or redeem Fund shares.
Annual Fund Operating Expenses(1) (expenses that are deducted from Fund assets)
Daily Assets Treasury Obligations Fund
Management Fees (2) 0.14%
Distribution (12b-1) Fees None
Other Expenses 0.19%
Total Annual Fund Operating Expenses (3) 0.32%
Daily Assets Government Fund
Management Fees (2) 0.15%
Distribution (12b-1) Fees None
Other Expenses 0.46%
Total Annual Fund Operating Expenses(3) 0.61%
Daily Assets Government Obligations Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees None
Other Expenses 0.27%
Total Annual Fund Operating Expenses (3) 0.40%
Daily Assets Cash Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees None
Other Expenses 0.22%
Total Annual Fund Operating Expenses (3) 0.35%
Daily Assets Municipal Fund
Management Fees (2) 0.17%
Distribution (12b-1) Fees None
Other Expenses 0.56%
Total Annual Fund Operating Expenses (3) 0.72%
(1) BASED ON AMOUNTS INCURRED DURING EACH FUND'S LAST FISCAL YEAR ENDED AUGUST
31, 1999 STATED AS A PERCENTAGE OF ASSETS PRIOR TO FEE WAIVERS AND
REIMBURSEMENTS. EACH CLASS'S EXPENSES INCLUDE ITS PRO RATA SHARE OF THE
EXPENSES OF THE CORRESPONDING PORTFOLIO.
(2) INCLUDES ALL ADVISORY AND ADMINISTRATION FEES.
(3) DURING EACH FUND'S LAST FISCAL YEAR, CERTAIN SERVICE PROVIDERS VOLUNTARILY
WAIVED AND/OR REIMBURSED A PORTION OF THEIR FEES OF EACH FUND TO LIMIT
TOTAL ANNUAL FUND OPERATING EXPENSES OF INSTITUTIONAL SHARES TO 0.05% FOR
DAILY ASSETS MUNICIPAL FUND AND 0.20% FOR EACH OTHER FUND. THESE WAIVERS OR
REIMBURSEMENTS MAY BE REDUCED OR ELIMINATED AT ANY TIME.
6
<PAGE>
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in the Institutional Shares of a Fund to the cost of investing in
other mutual funds. The example assumes that you invest $10,000 in Institutional
Shares of a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% annual return, that the operating expenses of a Fund's
Institutional Shares remain the same as stated in the above table, and that
distributions are reinvested. Although your actual costs may be higher or lower,
under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C> <C>
DAILY ASSETS DAILY ASSETS
TREASURY DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
OBLIGATIONS FUND GOVERNMENT OBLIGATIONS FUND CASH MUNICIPAL FUND
FUND FUND
1 year $33 $62 $41 $36 $73
3 years $104 $195 $129 $114 $229
5 years $182 $340 $226 $199 $399
10 years $410 $762 $508 $449 $891
</TABLE>
7
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund and Daily Assets Cash Fund:
The investment objective of each Fund is to provide high current income
to the extent consistent with the preservation of capital and the
maintenance of liquidity.
Daily Assets Municipal Fund:
The investment objective of the Fund is provide high current income
which is exempt from federal income taxes to the extent consistent with
the preservation of capital and the maintenance of liquidity.
INVESTMENT STRATEGIES
The investment adviser for the Portfolios (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates in combination with the stated objective of a
Portfolio to determine an appropriate maturity profile for the Portfolio's
investments. The Adviser searches for securities that satisfy the maturity
profile of a Portfolio and that provide the greatest potential return relative
to the risk of the security.
The Adviser may sell a Money Market Security if (i) revised economic forecasts
or interest rate outlook requires a repositioning of the Portfolio, (ii) the
security subsequently fails to meet the Adviser's investment criteria or (iii)
funds are needed for another purpose.
PRIMARY INVESTMENTS
Each Portfolio invests only in Money Market Securities that have remaining
maturities of 397 days or less and maintains a dollar weighted average maturity
of its investments of 90 days or less. All Money Market Securities will be rated
in one of the two highest short-term rating categories (by companies such as
Standard & Poor's) or unrated and determined by the Adviser to be of comparable
quality.
The Portfolios' primary investments are:
TREASURY CASH PORTFOLIO Treasury Securities and repurchase agreements backed by
Treasury Securities.
8
<PAGE>
GOVERNMENT PORTFOLIO Government Securities exempt from state and local income
taxes. The Government Securities in which the Portfolio invests include Treasury
Securities and securities supported primarily by the creditworthiness of the
issuer, including securities of the Farm Credit System, Farm Credit System
Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan
Banks, General Services Administration, Student Loan Marketing Association and
Tennessee Valley Authority.
GOVERNMENT CASH PORTFOLIO Government Securities and in repurchase agreements
backed by Government Securities. The Government Securities in which the
Portfolio invests include Treasury Securities and securities supported primarily
by the creditworthiness of the issuer, such as securities of the Federal
National Mortgage Association, Federal Home Loan Banks and Student Loan
Marketing Association.
CASH PORTFOLIO A broad array of Money Market Securities, including (i)
securities issued by financial institutions, such as certificates of deposits,
bank notes, bankers' acceptances and time deposits of banks and their foreign
branches, (ii) securities issued by domestic companies, such as commercial
paper, (iii) Government Securities and (iv) repurchase agreements.
MUNICIPAL CASH PORTFOLIO Municipal Securities. The Portfolio may invest up to
20% of its total assets in Municipal Securities or other Money Market Securities
whose interest is subject to Federal income tax.
Municipal Securities are issued by or on behalf of the states, territories and
possessions of the U.S. and their local governments and public financing
authorities. The Portfolio invests a significant portion of its assets in
Municipal Securities supported by credit and liquidity enhancements. These
investments are often comprised of long term Municipal Securities structured to
allow the Portfolio the option to sell the security back to the issuer and with
interest rates that are reset periodically. There are many different structures
which Municipal Securities may take. The Adviser reviews and considers a
security's structure and will only purchase a Municipal Security if it believes
that third party credit and liquidity supporters possess minimal credit risk.
The Portfolio may invest up to 35% of its total assets in Municipal Securities
the issuers of which are located in one state or territory.
OTHER INVESTMENT POLICIES
The Funds and Portfolios operate in accordance with "Rule 2a-7" under the
Investment Company Act of 1940 ("1940 Act"). All restrictions relating to
maturity, credit and diversification are interpreted under that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions and invest in cash
and Money Market Securities. For instance, the Portfolios may hold cash in any
9
<PAGE>
amount. Each Portfolio may invest in other money market mutual funds that have
substantially similar policies.
Securities in which the Portfolios invest may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The Portfolios limit these securities to those
with an interest rate that is adjusted based solely on a single short-term rate
or index, such as the Prime Rate.
INVESTMENT RISKS
There is no assurance that a Fund will achieve its investment objective. An
investment in a Fund is not by itself a complete or balanced investment program.
The principal risks of investing in a Fund are:
INTEREST RATE RISK Interest rates affect the value of the Portfolio's
investments. Increases in interest rates may cause a decline in value. In
addition, those increases will result in the Fund's investment performance to
underperform currently available investments.
CREDIT RISK The value of a security held by a Portfolio may decline if the
security's credit rating is downgraded or credit quality otherwise falls. In the
worst case, an issuer of a security or a repurchase agreement counterparty may
be unable to make timely payments of interest or principal.
LOCAL ECONOMIC/POLITICAL RISK Changes in state or regional economies or politics
can impact the value of the Municipal Securities issued in that location.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance. Other
risks, such as Year 2000 risk, are described in the Statement of Additional
Information ("SAI").
MANAGEMENT
Each Fund is a series of Forum Funds (the "Trust"), an open-end, management
investment company. The business of the Trust and of each Fund is managed under
the direction of the Board of Trustees (the "Board"). The Board formulates the
general policies of each Fund and meets periodically to review each Fund's
performance, monitor investment activities and practices and discuss other
matters affecting each Fund. Additional information about the Board and the
Trust's executive officers is in the SAI.
10
<PAGE>
THE ADVISER
Each Portfolio's Adviser is Forum Investment Advisors, LLC, Two Portland Square,
Portland, Maine 04101. The Adviser concentrates on two other money market funds
and fixed income investment management and, in addition to the Portfolios,
advises five taxable and tax-free bond funds. The Adviser is a privately owned
company controlled by John Y. Keffer, who is Chairman of the Board of the Trust.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the Adviser received advisory fees at the following annual
rates as a percentage of average net assets:
PORTFOLIO ADVISORY FEE
Treasury Cash Portfolio 0.035%
Government Portfolio 0.050%
Government Cash Portfolio 0.035%
Cash Portfolio 0.035%
Municipal Cash Portfolio 0.050%
Since their inception, Anthony R. Fischer, Jr., has been the portfolio manager
responsible for the day to day management of the Portfolios. Mr. Fischer has
over 25 years of experience in the money market industry.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides services to each Fund.
As of September 30, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $__ billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of the Funds' shares.
Forum Administrative Services, LLC ("FAdS") provides administrative services to
each Fund, Forum Accounting Services, LLC is each Fund's fund accountant, Forum
Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer agent.
11
<PAGE>
FUND EXPENSES
Each Fund and each class pays for all of its expenses. Each Fund's and each
class's expenses include its own expenses as well as Trust expenses that are
allocated among the Funds, their classes and the other funds of the Trust. The
Adviser or other service providers may voluntarily waive all or any portion of
their fees and/or reimburse certain expenses of a Fund. Any fee waiver or
expense reimbursement increases a Fund's or class's performance for the period
during which the waiver is in effect.
Certain service providers of each Fund have undertaken to waive a portion of
their fees in order to limit the average daily net asset expenses (excluding
taxes, interest, portfolio transaction expenses and extraordinary expenses) of
Institutional Shares to 0.05% for Daily Assets Municipal Fund and 0.20% for each
other Fund.
<PAGE>
YOUR ACCOUNT
[Margin call out: HOW TO CONTACT THE FUNDS
Write to us at:
Forum Shareholder Services, LLC
Attn: (Name of Your Fund)
P.O. Box 446
Portland, Maine 04112
Telephone us at:
(800) 94FORUM or (800) 943-6786 (Toll Free)
(207) 879-0001
Wire investments (or ACH payments) to us at:
Bankers Trust Company
New York, New York
ABA #021001033 For Credit to:
Forum Shareholder Services, LLC
Account # 01-465-547
Re: (Name of Your Fund)
(Your Name)
(Your Account Number)]
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form. For instance, if the Transfer Agent receives your purchase request in
proper form after 4:00 p.m., Eastern time, your purchase or redemption will be
priced at the next day's NAV. A Fund cannot accept orders that request a
particular day or price for the transaction or any other special conditions. On
days that the New York Stock Exchange or San Francisco Federal Reserve Bank
closes early or the Public Securities Association recommends that the government
securities markets close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
Shares become entitled to receive distributions on the day of purchase if the
order and payment are received by the Transfer Agent as follows:
12
<PAGE>
TIMES INDICATED ARE EASTERN TIME
Order must be Payment must be
received by received by
Daily Assets Government Fund 12:00 p.m. 4:00 p.m.
Daily Assets Municipal Fund 12:00 p.m. 4:00 p.m.
Each Other Fund 2:00 p.m. 4:00 p.m.
The Funds do not issue share certificates.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations.
Each Fund reserves the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may change in case of an emergency. In order to maintain a stable NAV
of $1.00 per share, each Fund values the securities in its portfolio on an
amortized cost basis.
TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees (other than sales charges) charged
by that institution may be different than those of a Fund. Financial
institutions may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. These institutions also
may provide you with certain shareholder services such as periodic account
statements and trade confirmations summarizing your investment activity.
Consult a representative of your financial institution for more information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, Uniform Gift to Minors Act ("UGMA") or Uniform
Transfer to Minors Act ("UTMA") accounts, the check must be made
payable to "Forum Funds" or to one or more owners of the account and
endorsed to "Forum Funds." For all other accounts, the check must be
made payable on its face to "Forum Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
13
<PAGE>
ACH PAYMENT Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days to settle. Your financial institution may charge you a fee for
this service.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
Minimum Investments Each Fund accepts payments in the following minimum amounts:
.................................................................................
Minimum Initial Minimum Additional
Investment Investment
.................................................................................
Standard Accounts $1,000,000 $250
Accounts With Systematic Investment Plans $250 $250
Exchanges
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENT
............................................................................................................................
Individual, Sole Proprietorship and Joint Accounts: o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear on
proprietorship accounts. Joint accounts can have two or the account
more owners (tenants)
............................................................................................................................
Gifts or Transfers to a Minor (UGMA, UTMA): o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the Uniform Gift to Minors
child and obtain tax benefits. An individual can give up Act or the Uniform Transfers to Minors Act
to $10,000 a year per child without paying Federal gift tax o The trustee must sign instructions in a manner
indicating trustee capacity
.............................................................................................................................
Business Entities o For entities with officers, provide an
original or certified copy of a resolution that
identifies the authorized signers for the account
o For entities with partners or other interested parties,
provide a certified partnership agreement or
organizational document, or certified pages from the
partnership agreement or organizational document, that
identify the partners or interested parties
..............................................................................................................................
Trusts o The trust must be established before an
account can be opened
o Provide a certified trust document, or the
pages from the trust document, that identify the
trustees
</TABLE>
14
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
........................................................................................................................
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation or write us a letter
o Mail us your application and a check o Write your account number on your check
o Mail us the slip (or your letter) and the check
........................................................................................................................
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and we will assign you an account number
o Mail us your application
o Instruct your bank to wire your money to us
.........................................................................................................................
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete the systematic investment section of
o Complete the application the application
o Call us and we will assign you an account number o Attach a voided check to your application
o Mail us your application o Mail us the completed application
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Systematic investments must be for at least $250.
LIMITATIONS ON PURCHASES Each Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
a Fund or its operations. This includes requests from any individual or group
who, in a Fund's view, is likely to engage in excessive trading (usually defined
as more than four redemptions or exchanges out of a Fund within a calendar
year).
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH transfers at full
value, subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or ACH transfer that does not clear, your purchase will
be canceled. You will be responsible for any losses or expenses incurred by a
Fund or the Transfer Agent, and a Fund may redeem shares you own in the account
(or another identically registered account maintained with the Transfer Agent)
15
<PAGE>
as reimbursement. Each Fund and its agents have the right to reject or cancel
any purchase or exchange due to nonpayment.
SELLING SHARES
Each Fund processes redemption orders promptly. Generally, a Fund will send
redemption proceeds to you within a week of receiving your request in proper
form. Delays may occur in cases of very large redemptions, excessive trading or
during unusual market conditions. Each Fund may delay sending redemption
proceeds until it has collected payment for the shares you are selling, which
may take up to 15 calendar days. Shares are not entitled to receive
distributions declared on or after the day in which a redemption order is
accepted by the Transfer Agent.
16
<PAGE>
TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if your redemption is for $5,000
or more and you did not decline wire redemption privileges on your
account application
o Call us with your request (unless you declined telephone redemption
privileges - See "By Telephone") or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges -
See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 12:00 p.m., Eastern Time, for Daily Assets
Government Fund and Daily Assets Municipal Fund, or after 2:00 p.m., Eastern
Time, for each other Fund, the Transfer Agent will wire proceeds to you on the
next Fund business day.
17
<PAGE>
SYSTEMATIC WITHDRAWALS You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Systematic withdrawals must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name or address
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, distribution,
telephone redemption or exchange option or any other election in
connection with your account
SMALL ACCOUNTS If the value of your account falls below $1,000 ($500 for IRA
accounts), a Fund may ask you to increase your balance. If the account value is
still below $1,000 ($500 for IRAs) after 60 days, a Fund may close your account
and send you the proceeds. A Fund will not close your account if it falls below
this amount solely as a result of a reduction in your account's market value.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions "in kind" usually occur
if the amount to be redeemed is large enough to affect a Fund's operations (for
example, if the redemption represents more than 1% of the Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional Fund shares. In
addition, the amount of any outstanding (unpaid for six months or more) checks
for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
18
<PAGE>
EXCHANGE PRIVILEGES
You may exchange your Fund shares for shares of another fund of the Trust by
telephone or in writing. For a list of funds available for exchange, you may
call the Transfer Agent. If you exchange into a fund that has a sales charge,
you will have to pay that fund's sales charge. If you exchange into a fund that
has no sales charge, you will not have to pay a sales charge at the time of
exchange. Because exchanges are a sale and purchase of shares, they may have tax
consequences.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but each Fund reserves the right to limit exchanges. You may exchange
your shares by mail or by telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
HOW TO EXCHANGE
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account numbers
o The names of the funds from which you are selling and into which
you are exchanging
o The dollar amount or number of shares you want to sell (and
exchange
o Open a new account and complete an account application if you are
requesting different shareholder privileges
o Mail us request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
19
<PAGE>
OTHER INFORMATION
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway(R)" structure. Each Fund
invests substantially all of its assets in a corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund..
Each Fund invests in its corresponding Portfolio to enhance its investment
opportunities and to reduce its operating expenses by sharing the costs of
managing a large pool of assets. A Fund may withdraw its entire investment from
a Portfolio at anytime that the Board of Trustees of Forum Funds (the "Board")
decides it is in the Fund's best interest to do so.
The Board of Trustees of Core Trust formulates the general policies of each
Portfolio and meets periodically to review each Portfolio's performance, monitor
investment activities and practices and discuss other matters affecting each
Portfolio. Additional Information about the Core Trust Board and Core Trust's
executive officers is in the SAI.
CLASSES OF SHARES
This Prospectus offers Institutional Shares of each Fund. Institutional Shares
are designed for institutional investors.
Each Fund also offers Investor Shares and Institutional Service Shares. You may
obtain a prospectus describing these additional classes by contacting the
Transfer Agent. Investor Shares are designed for retail investors and
Institutional Service Shares are sold to banks, trust companies and certain
other financial institutions for their own and their customer accounts.
Each class has different fees or investment minimums.
DISTRIBUTIONS
Each Fund distributes its net investment income monthly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested.
20
<PAGE>
TAXES
GENERAL
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
Generally, a Fund's distribution of net income (including short-term capital
gain) is taxable to you as ordinary income. A Fund's distribution of long-term
capital gain is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year.
For further information about the tax effects of investing in a Fund, including
state and local tax matters, please see the SAI and consult your tax adviser.
DAILY ASSETS GOVERNMENT FUND
Generally, you are not subject to state and local income taxes on the Fund's
distribution of tax exempt interest income. Many states do not tax investment
income from a mutual fund generated by investments in U.S. Treasury and certain
U.S. Government Securities if the interest on these obligations would not be
taxable to you if you held the obligations directly.
DAILY ASSETS MUNICIPAL FUND
Generally, you are not subject to Federal income tax on the Fund's distribution
of tax-exempt interest income. The Fund's distribution of taxable interest,
other investment income and short-term capital gain is taxable to you as
ordinary income. It is anticipated that substantially all of the Fund's net
income will be exempt from Federal income tax. Distributions, including
distributions that are exempt from Federal income tax, may be subject to certain
state and local taxes
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay Federal income tax on your pro rata share of the net income generated from
these securities. Distributions of interest income on certain private activity
bonds is an item of tax preference for purposes of individual and corporate
Federal Alternative Minimum Tax ("AMT").
21
<PAGE>
ORGANIZATION
The Trust is a Delaware business trust. No Fund expects to hold shareholders'
meetings unless required by Federal or Delaware law. Shareholders of each series
are entitled to vote at shareholders' meetings unless a matter relates only to a
specific series or class (such as approval of an advisory agreement for a Fund).
From time to time, large shareholders may control a Fund's Institutional Shares,
the Fund or the Trust.
22
<PAGE>
FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the performance of the
Institutional Shares of each Fund. Total return in the table represents the rate
an investor would have earned (or lost) on an investment in the Institutional
Share Class of a Fund (assuming the reinvestment of all distributions). Prior to
the operation of Institutional Shares, Daily Assets Government Fund and Daily
Assets Cash Fund offered Institutional Shares and return information for these
class is also included in the following table. This information has been audited
by ________________. Each Fund's financial statements and the auditor's report
are included in the Annual Report dated August 31, 1999, which is available upon
request, without charge.
<TABLE>
<S> <C> <C> <C> <C> <C>
.............................................. ............ ............ ............. ..........
.............................................. ............ ............ ............. ..........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ..........
.............................................. ............ ............ ............. ..........
Daily Assets Treasury Obligations Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.03 (0.03) $1.00
Daily Assets Government Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998 $1.00 0.01 (0.01) $1.00
Institutional Service Shares
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00
Daily Assets Government Obligations Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.03 (0.03) $1.00
RATIO TO AVERAGE NET
ASSETS
.............................................. . ......................... ............ ............ ............
.............................................. . ............ ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Total Period to Average
Expenses Income Return (000s Net Assets
Omitted) (1)
.............................................. . ............ ............ ............ ............ ............
.............................................. . ............ ............ ............ ............ ............
Daily Assets Treasury Obligations Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.20%(3) 5.41%(3) 3.34% $ 110,561 0.47%(3)
Daily Assets Government Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998 0.20%(3) 5.26%(3) 0.89% $ 36,095 0.69%(3)
Institutional Service Shares
Year ended August 31, 1998 0.46% 4.93% 5.04% $ 9,485 0.91%
April 1, 1997 to August 31, 1997 0.50%(3) 4.76%(3) 2.01% 44,116 0.95%(3)
Year Ended March 31, 1997 0.50% 4.70% 4.80% 43,975 0.99%
Year Ended March 31, 1996 0.50% 5.01% 5.18% 43,103 1.06%
Year Ended March 31, 1995 0.37% 4.45% 4.45% 36,329 1.10%
Daily Assets Government Obligations Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.20%(3) 5.43%(3) 3.24% $ 15,352 0.74%(3)
23
<PAGE>
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ...........
Daily Assets Cash Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.03 (0.03) $1.00
Institutional Service Shares
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
October 1, 1996 to August 31, 1997 1.00 0.05 (0.05) 1.00
Daily Assets Municipal Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) $1.00 0.01 (0.01) $1.00
RATIO TO AVERAGE NET
ASSETS
.............................................. ......................... ............ ............ ............
.............................................. ............ ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Period to Average
Expenses Income Total (000s Net Assets
Return Omitted) (1)
.............................................. ............ ............ ............ ............ ............
Daily Assets Cash Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.20%(3) 5.46%(3) 2.70% $ 28,396 0.68%(3)
Institutional Service Shares
Year ended August 31, 1998 0.46% 5.22% 5.34% $ 5,235 0.90%
October 1, 1996 to August 31, 1997 0.52%(3) 5.06%(3)% 4.70% 12,076 1.22%(3)
Daily Assets Municipal Fund
Institutional Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) 0.12%(3) 3.16%(3) 0.59% $ 20,773 1.26%(3)
</TABLE>
(1) THE RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS REFLECTS THE EXPENSE
RATIO EXCLUDING ANY WAIVERS AND EXPENSE REIMBURSEMENTS FOR THE FUND AND
ITS RESPECTIVE PORTFOLIO.
(2) THE TRUST COMMENCED THE OFFERING OF THE INVESTOR SHARE CLASS OF DAILY
ASSETS TREASURY OBLIGATIONS FUND, DAILY ASSETS GOVERNMENT OBLIGATIONS
FUND, DAILY ASSETS CASH FUND, AND DAILY ASSETS MUNICIPAL FUND ON AUGUST
6, 1998.
(3) ANNUALIZED.
24
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION [LOGO]
The following documents are available free upon request: INSTITUTIONAL SHARES
ANNUAL/SEMI-ANNUAL REPORTS DAILY ASSETS
TREASURY
OBLIGATIONS FUND
Additional information about each Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In each Fund's annual report, you will find a DAILY ASSETS
discussion of the market conditions and investment GOVERNMENT FUND
strategies that significantly affected the Fund's
performance during its last fiscal year. DAILY ASSETS
GOVERNMENT
STATEMENT OF ADDITIONAL INFORMATION ("SAI") OBLIGATIONS FUND
The SAI provides more detailed information about each Fund
and is incorporated by reference into this Prospectus. DAILY ASSETS
CASH FUND
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund DAILY ASSETS
by contacting the Funds at: MUNICIPAL FUND
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
800-94FORUM or 800-943-6786
207-879-0001
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission. You can get copies, for a fee, by
writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
The scheduled hours of operation of the Public Reference
Room may be 800-94FORUM or obtained by calling the
Commission at 1-800-SEC-0330. Free copies of the Forum Funds
800-943-6786 reports and SAIs are available from the P.O. Box 446
Commission's Internet website at Portland, Maine 04112
800-94FORUM or
http://www.sec.gov. 800-943-6786
207-879-0001
Investment Company Act File No. 811-3023
</TABLE>
<PAGE>
[LOGO]
PROSPECTUS
INSTITUTIONAL SERVICE SHARES
JANUARY 1, 2000
DAILY ASSETS TREASURY OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS CASH FUND
DAILY ASSETS MUNICIPAL FUND
EACH FUND, EXCEPT DAILY ASSETS MUNICIPAL FUND, SEEKS TO
PROVIDE HIGH CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY. DAILY ASSETS
MUNICIPAL FUND SEEKS TO PROVIDE HIGH
CURRENT INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAX AND
THAT IS CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE
MAINTENANCE OF LIQUIDITY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUNDS' SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY
PERFORMANCE
FEE TABLES
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MANAGEMENT
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
GENERAL INFORMATION
BUYING SHARES
SELLING SHARES
EXCHANGE PRIVILEGES
RETIREMENT ACCOUNTS
OTHER INFORMATION
Financial highlights
1
<PAGE>
RISK/RETURN SUMMARY
This Prospectus offers Institutional Service 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 (each a
"Fund"). Institutional Service Shares are sold to banks, trust companies and
certain other financial institutions for their own and customer accounts.
Each Fund also offers Investor Shares and Institutional Shares. You may obtain a
prospectus describing these additional classes by contacting the Forum
Shareholder Services, LLC, the Fund's transfer agent ("Transfer Agent").
INVESTMENT OBJECTIVES
Each Fund seeks to provide high current income consistent with the preservation
of capital and the maintenance of liquidity. In the case of Daily Assets
Municipal Fund, the Fund seeks to provide income which is exempt from Federal
income taxes.
INVESTMENT POLICIES
[Margin callout: Concepts to Understand
MONEY MARKET SECURITY means a high quality, short-term U.S. dollar
denominated debt security
TREASURY SECURITY means a securities that is issued or guaranteed by
the U.S. Treasury
GOVERNMENT SECURITY means a security that is issued or guaranteed by
the U.S. Government, its agencies or instrumentalities
REPURCHASE AGREEMENT means a transaction in which a Fund purchases
securities and simultaneously commits to resell the securities to the
other party at an agreed-upon date and at a price reflecting a market
rate of interest
MUNICIPAL SECURITY means a security the interest on which is exempt
from Federal income tax]
Each Fund is a money market mutual fund. As such, each Fund
o seeks to maintain a stable net asset value of $1.00 per share
o invests in a diversified portfolio of Money Market Securities and
o maintains a dollar weighted average maturity of its investments of 90 days
or less.
Each Fund invests substantially all of its assets in another mutual fund (a
"Portfolio"). Each Fund and its corresponding Portfolio have the same investment
objective and substantially similar investment policies.
The Portfolios in which the Funds invest and their primary investments are:
2
<PAGE>
<TABLE>
<S> <C> <C>
FUND PORTFOLIO PRIMARY INVESTMENT
Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Treasury Securities and related
repurchase agreements
Daily Assets Government Fund Government Portfolio Government Securities
Daily Assets Government Obligations Fund Government Cash Portfolio Government Securities and related
repurchase agreements
Daily Assets Cash Fund Cash Portfolio A broad spectrum of Money Market
Securities
Daily Assets Municipal Fund Municipal Cash Portfolio Municipal Securities
</TABLE>
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
[Margin callout: Money Market Fund Disclosure
An investment in a Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although each Fund seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
There is no assurance that any Fund will achieve its investment objective.
The principal risks of investing in a Fund are
o changes in interest rates,
o the lowering of the credit rating or credit quality of a security,
o the default of an issuer of a security or repurchase agreement counterparty
and
o the potential for the Fund's investment adviser to make poor investment
decisions.
In addition, another principal risk for Daily Assets Municipal Fund is local
economic and political changes in geographic areas where the Fund is invested.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance.
3
<PAGE>
PERFORMANCE
The following charts and tables provide some indication of the risks of
investing in the Institutional Service Shares of each of Daily Assets Government
Fund and Daily Assets Cash Fund by showing changes in the performance of that
class from year to year and the class's returns. Performance information for the
Institutional Service Shares of each other Fund is not included in this
Prospectus. Each other Fund has an operating history of less than a full
calendar. PERFORMANCE INFORMATION PRESENTED HERE REPRESENTS ONLY PAST
PERFORMANCE AND DOES NOT NECESSARILY INDICATE FUTURE RESULTS.
DAILY ASSETS GOVERNMENT FUND
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1993 2.83%
1994 3.80%
1995 5.36%
1996 4.82%
1997 4.87%
1998 4.97%
The calendar year-to-date total return as of September 30, 1999 was
3.47%.
During the periods shown in the chart, the highest quarterly return was 5.56%
(for the quarter ended March 31, 1995) and the lowest return was 2.78% (for the
quarter ended June 30, 1993).
The following table lists the Institutional Service Shares' average annual total
return as of December 31, 1998.
..................................................... ..........................
Daily Assets
Year(s) Government Fund
..................................................... ..........................
..................................................... ..........................
1 Year 4.97%
5 Year 4.76%
Since Inception (7/1/92) 4.34%
4
<PAGE>
DAILY ASSETS CASH FUND
The following chart shows the annual total returns for each full calendar year
that the Institutional Service Shares have operated.
[EDGAR Representation of Bar Chart]
PAST PERFORMANCE CHART
ANNUAL TOTAL RETURN
1997 5.23%
1998 5.26%
The calendar year-to-date total return as of September 30, 1999 was
3.51%.
During the periods shown in the chart, the highest quarterly return was 5.39%
(for the quarter ended March 31, 1998) and the lowest return was 5.01% (for the
quarter ended December 31, 1998).
The following table lists the Institutional Service Shares average annual total
returns as of December 31, 1998.
...................................................... .........................
Daily Assets
Year(s) Cash Fund
...................................................... .........................
...................................................... .........................
1 Year 5.26%
Since Inception (10/1/96) 5.22%
5
<PAGE>
FEE TABLES
The following tables describe the various fees and expenses that you will pay if
you invest in the Institutional Service Shares of a Fund. There are no charges
to purchase or redeem Fund shares.
Annual Fund Operating Expenses(1) (expenses that are deducted from Fund assets)
Daily Assets Treasury Obligations Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees None
Other Expenses 0.76%
Total Annual Fund Operating Expenses (3) 0.89%
Daily Assets Government Fund
Management Fees (2) 0.15%
Distribution (12b-1) Fees None
Other Expenses 1.00%
Total Annual Fund Operating Expenses(3) 1.15%
Daily Assets Government Obligations Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees None
Other Expenses 0.67%
Total Annual Fund Operating Expenses (3) 0.80%
Daily Assets Cash Fund
Management Fees (2) 0.13%
Distribution (12b-1) Fees None
Other Expenses 0.56%
Total Annual Fund Operating Expenses (3) 0.70%
Daily Assets Municipal Fund
Management Fees (2) 0.05%
Distribution (12b-1) Fees None
Other Expenses 1.16%
Total Annual Fund Operating Expenses (3) 1.21%
(1) BASED ON AMOUNTS INCURRED DURING EACH FUND'S LAST FISCAL YEAR ENDED AUGUST
31, 1999 STATED AS A PERCENTAGE OF ASSETS PRIOR TO FEE WAIVERS AND
REIMBURSEMENTS. EACH CLASS'S EXPENSES INCLUDE ITS PRO RATA SHARE OF
EXPENSES OF THE CORRESPONDING PORTFOLIO.
(2) INCLUDES ALL ADVISORY AND ADMINISTRATION FEES.
(3) DURING EACH FUND'S LAST FISCAL YEAR, CERTAIN SERVICE PROVIDERS VOLUNTARILY
WAIVED A PORTION OF THEIR FEES OF EACH FUND TO LIMIT TOTAL ANNUAL FUND
OPERATING EXPENSES OF INSTITUTIONAL SERVICE SHARES TO 0.45% FOR EACH FUND.
THESE WAIVERS MAY BE REDUCED OR ELIMINATED AT ANY TIME.
6
<PAGE>
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in the Institutional Service Shares of a Fund to the cost of investing
in other mutual funds. The example assumes that you invest $10,000 in
Institutional Shares of a Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that
your investment has a 5% annual return, that the operating expenses of a Fund's
Institutional Service Shares remain the same as stated in the above table, and
that distributions are reinvested. Although your actual costs may be higher or
lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C> <C>
DAILY ASSETS DAILY ASSETS
TREASURY DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
OBLIGATIONS FUND GOVERNMENT OBLIGATIONS FUND CASH MUNICIPAL FUND
FUND FUND
1 year $91 $117 $82 $71 $123
3 years $285 $365 $255 $223 $383
5 years $495 $632 $444 $388 $664
10 years $1,099 $1,396 $990 $867 $1,463
</TABLE>
7
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily
Assets Government Obligations Fund and Daily Assets Cash Fund:
The investment objective of each Fund is to provide high current income
to the extent consistent with the preservation of capital and the
maintenance of liquidity.
Daily Assets Municipal Fund:
The investment objective of the Fund is provide high current income
which is exempt from federal income taxes to the extent consistent with
the preservation of capital and the maintenance of liquidity.
INVESTMENT STRATEGIES
The investment adviser for the Portfolios (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates in combination with the stated objective of a
Portfolio to determine an appropriate maturity profile for the Portfolio's
investments. The Adviser searches for securities that satisfy the maturity
profile of a Portfolio and that provide the greatest potential return relative
to the risk of the security.
The Adviser may sell a Money Market Security if (i) revised economic forecasts
or interest rate outlook requires a repositioning of the Portfolio, (ii) the
security subsequently fails to meet the Adviser's investment criteria or (iii)
funds are needed for another purpose.
PRIMARY INVESTMENTS
Each Portfolio invests only in Money Market Securities that have remaining
maturities of 397 days or less and maintains a dollar weighted average maturity
of its investments of 90 days or less. All Money Market Securities will be rated
in one of the two highest short-term rating categories (by companies such as
Standard & Poor's) or unrated and determined by the Adviser to be of comparable
quality.
The Portfolios' primary investments are:
TREASURY CASH PORTFOLIO Treasury Securities and repurchase agreements backed by
Treasury Securities.
8
<PAGE>
GOVERNMENT PORTFOLIO Government Securities exempt from state and local income
taxes. The Government Securities in which the Portfolio invests include Treasury
Securities and securities supported primarily by the creditworthiness of the
issuer, including securities of the Farm Credit System, Farm Credit System
Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan
Banks, General Services Administration, Student Loan Marketing Association and
Tennessee Valley Authority.
GOVERNMENT CASH PORTFOLIO Government Securities and in repurchase agreements
backed by Government Securities. The Government Securities in which the
Portfolio invests include Treasury Securities and securities supported primarily
by the creditworthiness of the issuer, such as securities of the Federal
National Mortgage Association, Federal Home Loan Banks and Student Loan
Marketing Association.
CASH PORTFOLIO A broad array of Money Market Securities including (i) securities
issued by financial institutions, such as certificates of deposits, bank notes,
bankers' acceptances and time deposits of banks and their foreign branches, (ii)
securities issued by domestic companies, such as commercial paper, (iii)
Government securities and (iv) repurchase agreements.
MUNICIPAL CASH PORTFOLIO Municipal Securities. The Portfolio may invest up to
20% of its total assets in Municipal Securities or other Money Market Securities
whose interest is subject to Federal income tax.
Municipal Securities are issued by or on behalf of the states, territories and
possessions of the U.S. and their local governments and public financing
authorities. The Portfolio invests a significant portion of its assets in
Municipal Securities supported by credit and liquidity enhancements. These
investments are often comprised of long term Municipal Securities structured to
allow the Portfolio the option to sell the security back to the issuer and with
interest rates that are reset periodically. There are many different structures
which Municipal Securities may take. The Adviser reviews and considers a
security's structure and will only purchase a Municipal Security if it believes
that third party credit and liquidity supporters possess minimal credit risk.
The Portfolio may invest up to 35% of its total assets in Municipal Securities
the issuers of which are located in one state or territory.
OTHER INVESTMENT POLICIES
The Funds and Portfolios operate in accordance with "Rule 2a-7" under the
Investment Company Act of 1940. All restrictions relating to maturity and credit
are interpreted under that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions and invest in cash
and Money Market Securities. For instance, the Portfolios may hold cash in any
9
<PAGE>
amount. Each Portfolio may invest in other money market mutual funds that have
substantially similar policies.
Securities in which the Portfolios invest may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The Portfolios limit these securities to those
with an interest rate that is adjusted based solely on a single short-term rate
or index, such as the Prime Rate.
INVESTMENT RISKS
There is no assurance that a Fund will achieve its investment objective. An
investment in a Fund is not by itself a complete or balanced investment program.
The principal risks of investing in a Fund are:
INTEREST RATE RISK Interest rates affect the value of the Fund's investments.
Increases in interest rates may cause a decline in value. In addition, those
increases will result in the Fund's investment performance to underperform
currently available investments.
CREDIT RISK The value of a security held by a Portfolio may decline if the
security's credit rating is downgraded or credit quality otherwise falls. In its
worst case, an issuer of a security or repurchase agreement counterparty may be
unable to make timely payments of interest or principal.
LOCAL ECONOMIC/POLITICAL RISK Changes in state or regional economies or politics
can impact the value of the Municipal Securities issued in that location.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, a change in the Fund's $1.00 per
share value. These risks also can result in lower investment performance. Other
risks, such as Year 2000 risk, are disclosed in the Statement of Additional
Information ("SAI").
MANAGEMENT
Each Fund is a series of Forum Funds (the "Trust"), an open-end, management
investment company. The business of the Trust and of each Fund is managed under
the direction of the Board of Trustees (the "Board"). The Board formulates the
general policies of each Fund and meets periodically to review each Fund's
performance, monitor investment activities and practices and discuss other
matters affecting each Fund. Additional information about the Board and the
Trust's executive officers is in the SAI.
10
<PAGE>
THE ADVISER
Each Portfolio's Adviser is Forum Investment Advisors, LLC, Two Portland Square,
Portland, Maine 04101. The Adviser concentrates on fixed income investment
management and, in addition to the Portfolios, advises five taxable and tax-free
bond funds. The Adviser is a privately owned company controlled by John Y.
Keffer, who is Chairman of the Board of the Trust.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the Adviser received advisory fees at the following annual
rates as a percentage of average net assets:
PORTFOLIO ADVISORY FEE
Treasury Cash Portfolio 0.030%
Government Portfolio 0.050%
Government Cash Portfolio 0.030%
Cash Portfolio 0.030%
Municipal Cash Portfolio 0.050%
Since their inception, Anthony R. Fischer, Jr., has been the portfolio manager
responsible for the day to day management of the Portfolios. Mr. Fischer has
over 25 years of experience in the money market industry.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides services to each Fund.
As of September 30, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $__ billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of the Funds' shares.
Forum Administrative Services, LLC ("FAdS") provides administrative services to
each Fund, Forum Accounting Services, LLC is each Fund's fund accountant, Forum
Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer agent.
The Trust has adopted a shareholder servicing plan that allows the Trust to pay
FAdS a fee for providing service activities for Institutional Service Shares
11
<PAGE>
that are not otherwise provided by the Transfer Agent. FAdS may pay this fee to
various financial institutions that provide shareholder servicing to their
customers invested in Institutional Service Shares.
FUND EXPENSES
Each Fund and each class pays for all of its expenses. Each Fund's and each
class's expenses include its own expenses as well as Trust expenses that are
allocated among the Funds, their classes and the other funds of the Trust. The
Adviser or other service providers may voluntarily waive all or any portion of
their fees and/or reimburse certain expenses of a Fund. Any fee waiver or
expense reimbursement increases a Fund's performance for the period during which
the waiver is in effect.
Certain service providers of each Fund have undertaken to waive a portion of
their fees in order to limit expenses (excluding taxes, interest, portfolio
transaction expenses and extraordinary expenses) to 0.45% of each Fund.
12
<PAGE>
YOUR ACCOUNT
[Margin call out: HOW TO CONTACT THE FUNDS
Write to us at:
Forum Shareholder Services, LLC
Attn: (Name of Your Fund)
P.O. Box 446
Portland, Maine 04112
Telephone us at:
(800) 94FORUM or (800) 943-6786 (Toll Free)
(207) 879-0001
Wire investments (or ACH payments) to us at:
Bankers Trust Company
New York, New York
ABA #021001033 For Credit to:
Forum Shareholder Services, LLC
Account # 01-465-547
Re: (Name of Your Fund)
(Your Name)
(Your Account Number)]
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form. For instance, if the Transfer Agent receives your purchase request in
proper form after 4:00 p.m., Eastern time, your purchase or redemption will be
priced at the next day's NAV. A Fund cannot accept orders that request a
particular day or price for the transaction or any other special conditions. On
days that the New York Stock Exchange or San Francisco Federal Reserve Bank
closes early or the Public Securities Association recommends that the government
securities markets close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
Shares become entitled to receive distributions on the day of purchase if the
order and payment are received by the Transfer Agent as follows:
13
<PAGE>
TIMES INDICATED ARE EASTERN TIME
Order must be Payment must be
received by received by
Daily Assets Government Fund 12:00 p.m. 4:00 p.m.
Daily Assets Municipal Fund 12:00 p.m. 4:00 p.m.
Each Other Fund 2:00 p.m. 4:00 p.m.
The Funds do not issue share certificates.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations.
Each Fund reserves the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may change in case of an emergency. In order to maintain a stable NAV
of $1.00 per share, each Fund values the securities in its portfolio on an
amortized cost basis.
TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees (other than sales charges) charged
by that institution may be different than those of a Fund. Financial
institutions may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. These institutions also
may provide you with certain shareholder services such as periodic account
statements and trade confirmations summarizing your investment activity. Consult
a representative of your financial institution for more information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, Uniform Gift to Minors Act ("UGMA") or Uniform
Transfer to Minors Act ("UTMA") accounts, the check must be made
payable to "Forum Funds" or to one or more owners of the account and
endorsed to "Forum Funds." For all other accounts, the check must be
made payable on its face to "Forum Funds." No other method of check
payment is acceptable (for instance, you may not pay by travelers
check).
14
<PAGE>
ACH PAYMENT Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days to settle. Your financial institution may charge you a fee for
this service.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
Minimum Investments Each Fund accepts payments in the following minimum amounts:
Minimum Initial Minimum Additional
Investment Investment
Standard Accounts $100,000 $250
Accounts With Systematic Investment Plans $250 $250
Exchanges $100,000 $100,000
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENT
............................................................................................................................
Individual, Sole Proprietorship and Joint Accounts: o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear on
proprietorship accounts. Joint accounts can have two or the account
more owners (tenants)
............................................................................................................................
Gifts or Transfers to a Minor (UGMA, UTMA): o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the Uniform Gift to Minors
child and obtain tax benefits. An individual can give up Act or the Uniform Transfers to Minors Act
to $10,000 a year per child without paying Federal gift tax o The trustee must sign instructions in a manner
indicating trustee capacity
.............................................................................................................................
Business Entities o For entities with officers, provide an
original or certified copy of a resolution that
identifies the authorized signers for the account
o For entities with partners or other interested parties,
provide a certified partnership agreement or
organizational document, or certified pages from the
partnership agreement or organizational document, that
identify the partners or interested parties
..............................................................................................................................
Trusts o The trust must be established before an
account can be opened
o Provide a certified trust document, or the
pages from the trust document, that identify the
trustees
</TABLE>
15
<PAGE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
........................................................................................................................
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation or write us a letter
o Mail us your application and a check o Write your account number on your check
o Mail us the slip (or your letter) and the check
........................................................................................................................
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and we will assign you an account number
o Mail us your application
o Instruct your bank to wire your money to us
.........................................................................................................................
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete the systematic investment section of
o Complete the application the application
o Call us and we will assign you an account number o Attach a voided check to your application
o Mail us your application o Mail us the completed application
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Systematic investments must be for at least $250.
LIMITATIONS ON PURCHASES Each Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
a Fund or its operations. This includes requests from any individual or group
who, in a Fund's view, is likely to engage in excessive trading (usually defined
as more than four redemptions or exchanges out of a Fund within a calendar
year).
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH transfers at full
value, subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or ACH transfer that does not clear, your purchase will
be canceled. You will be responsible for any losses or expenses incurred by a
Fund or the Transfer Agent, and a Fund may redeem shares you own in the account
(or another identically registered account maintained with the Transfer Agent)
16
<PAGE>
as reimbursement. Each Fund and its agents have the right to reject or cancel
any purchase or exchange due to nonpayment.
SELLING SHARES
Each Fund processes redemption orders promptly. Generally, a Fund will send
redemption proceeds to you within a week of receiving your request in proper
form. Delays may occur in cases of very large redemptions, excessive trading or
during unusual market conditions. Each Fund may delay sending redemption
proceeds until it has collected payment for the shares you are selling, which
may take up to 15 calendar days. Shares are not entitled to receive
distributions declared on or after the day in which a redemption order is
accepted by the Transfer Agent.
17
<PAGE>
TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send the redemption proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire redemptions are only available if your redemption is for $5,000
or more and you did not decline wire redemption privileges on your
account application
o Call us with your request (unless you declined telephone redemption
privileges - See "By Telephone") or
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges -
See "By Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 12:00 p.m., Eastern time, for Daily Assets
Government Fund and Daily Assets Municipal Fund, or after 2:00 p.m., Eastern
18
<PAGE>
time, for each other Fund, the Transfer Agent will wire proceeds to you on the
next Fund business day.
SYSTEMATIC WITHDRAWALS You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Systematic withdrawals must
be for at least $250.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name or address
o Redemptions from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
o Changes to systematic investment or withdrawal, distribution,
telephone redemption or exchange option or any other election in
connection with your account
SMALL ACCOUNTS If the value of your account falls below $1,000 ($500 for IRA
accounts), a Fund may ask you to increase your balance. If the account value is
still below $1,000 ($500 for IRAs) after 60 days, a Fund may close your account
and send you the proceeds. A Fund will not close your account if it falls below
this amount solely as a result of a reduction in your account's market value.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions "in kind" usually occur
if the amount to be redeemed is large enough to affect a Fund's operations (for
example, if the redemption represents more than 1% of the Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional Fund shares. In
addition, the amount of any outstanding (unpaid for six months or more) checks
for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
19
<PAGE>
EXCHANGE PRIVILEGES
You may exchange your Institutional Service Shares for Institutional Service
Shares of another Fund by telephone or in writing. For a list of other funds
available for exchange, you may call the Transfer Agent. If you exchange into a
fund that has a sales charge, you will have to pay that Fund's sales charge. If
you exchange into a fund that has no sales charge, you will not have to pay a
sales charge at the time of exchange. Because exchanges are a sale and purchase
of shares, they may have tax consequences.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but each Fund reserves the right to limit exchanges. You may exchange
your shares by mail or by telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
HOW TO EXCHANGE
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account numbers
o The names of the funds from which you are selling and into which
you are exchanging
o The dollar amount or number of shares you want to sell (and
exchange
o Open a new account and complete an account application if you are
requesting different shareholder privileges
o Mail us request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
20
<PAGE>
OTHER INFORMATION
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway(R)" structure. Each Fund
invests substantially all of its assets in a corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
Each Fund invests in its corresponding Portfolio to enhance its investment
opportunities and to reduce its operating expenses by sharing the costs of
managing a large pool of assets. A Fund may withdraw its entire investment from
a Portfolio at anytime that the Board of Trustees of Forum Funds (the "Board")
decides it is in the Fund's best interest to do so.
The Board of Trustees of Core Trust formulates the general policies of each
Portfolio and meets periodically to review each Portfolio's performance, monitor
investment activities and practices and discuss other matters affecting each
Portfolio. Additional Information about the Core Trust Board and Core Trust's
executive officers is in the SAI.
CLASSES OF SHARES
This Prospectus offers Institutional Service Shares of each Fund. Institutional
Service Shares are sold to banks, trust companies and certain other financial
institutions for their own and their customer accounts.
Each Fund also offers Investor Shares and Institutional Shares. You may obtain a
prospectus describing these additional classes by contacting the Transfer Agent.
Investor Shares are designed for retail investors and Institutional Shares are
designed for institutional investors.
Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund distributes its net investment income monthly and net capital gain at
least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested.
21
<PAGE>
TAXES
GENERAL
Each Fund generally intends to operate in a manner such that it will not be
liable for Federal income or excise tax.
Generally, a Fund's distribution of net income (including short-term capital
gain) is taxable to you as ordinary income. A Fund's distribution of long-term
capital gain is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year.
For further information about the tax effects of investing in a Fund, including
state and local tax matters, please see the SAI and consult your tax adviser.
DAILY ASSETS GOVERNMENT FUND
Generally, you are not subject to state and local income taxes on the Fund's
distribution of tax exempt interest income. Many states do not tax investment
income from a mutual fund generated by investments in U.S. Treasury and certain
U.S. Government Securities if the interest on these obligations would not be
taxable to you if you held the obligations directly.
DAILY ASSETS MUNICIPAL FUND
Generally, you are not subject to Federal income tax on the Fund's distribution
of tax-exempt interest income. The Fund's distribution of taxable interest,
other investment income and short-term capital gain is taxable to you as
ordinary income. It is anticipated that substantially all of the Fund's net
income will be exempt from Federal income tax. Distributions, including
distributions that are exempt from Federal income tax, may be subject to certain
state and local taxes
If you are a "substantial user" or a "related person" of a substantial user of
facilities financed by private activity bonds held by the Fund, you may have to
pay Federal income tax on your pro rata share of the net income generated from
these securities. Distributions of interest income on certain private activity
bonds is an item of tax preference for purposes of individual and corporate
Federal Alternative Minimum Tax ("AMT"). The Fund's distribution of long-term
capital gain is taxable to you as long-term capital gain regardless of how long
you have held your Fund shares.
22
<PAGE>
ORGANIZATION
The Trust is a Delaware business trust. No Fund expects to hold shareholders'
meetings unless required by Federal or Delaware law. Shareholders of each series
are entitled to vote at shareholders' meetings unless a matter relates only to a
specific series or class (such as approval of an advisory agreement for a Fund
or a distribution plan). From time to time, large shareholders may control
Institutional Service Shares of a Fund, the Fund or the Trust.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand the performance of the
Institutional Service Shares of each Fund. Total return in the table represents
the rate an investor would have earned (or lost) on an investment in a Fund
(assuming the reinvestment of all distributions). This information has been
audited by ________________. Each Fund's financial statements and the auditor's
report are included in the Annual Report dated August 31, 1999, which is
available upon request, without charge.
<TABLE>
<S> <C> <C> <C> <C> <C>
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Daily Assets Treasury Obligations Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.02 (0.02) $1.00
Daily Assets Government Fund
Institutional Service Shares
Year ended August 31, 1999
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00
Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00
Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00
Daily Assets Government Obligations Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) $1.00 0.02 (0.02) $1.00
RATIO TO AVERAGE NET
ASSETS
.............................................. ......................... ............ ............ ............
.............................................. ............ ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Period to Average
Expenses Income Total (000s Net Assets
Return Omitted) (1)
.............................................. ............ ............ ............ ............ ............
.............................................. ............ ............ ............ ............ ............
Daily Assets Treasury Obligations Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.45%(3) 5.16%(3) 2.19% $ 4,448 1.53%(3)
Daily Assets Government Fund
Institutional Service Shares
Year ended August 31, 1999
Year ended August 31, 1998 0.46% 4.93% 5.04% $ 9,485 0.91%
April 1, 1997 to August 31, 1997 0.50%(3) 4.76%(3) 2.01% 44,116 0.95%(3)
Year Ended March 31, 1997 0.50% 4.70% 4.80% 43,975 0.99%
Year Ended March 31, 1996 0.50% 5.01% 5.18% 43,103 1.06%
Year Ended March 31, 1995 0.37% 4.45% 4.45% 36,329 1.10%
Daily Assets Government Obligations Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998(2) 0.45%(3) 5.16%(3) 2.22% $ 2,390 2.13%(3)
24
<PAGE>
.............................................. ............ ............ ............. ...........
.............................................. ............ ............ ............. ...........
Beginning Distributions Ending
Net Asset Net From Net Net Asset
Value Per Investment Investment Value Per
Share Income Income Share
.............................................. ............ ............ ............. ...........
Daily Assets Cash Fund
Institutional Service Shares
Year ended August 31, 1999
Year ended August 31, 1998 $1.00 0.05 (0.05) $1.00
October 1, 1996 to August 31, 1997 1.00 0.05 (0.05) 1.00
Daily Assets Municipal Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) $1.00 - - $1.00
RATIO TO AVERAGE NET
ASSETS
.............................................. ......................... ............ ............ ............
.............................................. ............ ............ ............ ............ ............
Ratio of
Net Assets Gross
Net End of Expenses
Net Investment Period to Average
Expenses Income Total (000s Net Assets
Return Omitted) (1)
.............................................. ............ ............ ............ ............ ............
Daily Assets Cash Fund
Institutional Service Shares
Year ended August 31, 1999
Year ended August 31, 1998 0.46% 5.22% 5.34% $ 5,235 0.90%
October 1, 1996 to August 31, 1997 0.52%(3) 5.06%(3)% 4.70% 12,076 1.22%(3)
Daily Assets Municipal Fund
Institutional Service Shares
Year ended August 31, 1999
Period ended August 31, 1998 (2) 0.59%(3) 2.76%(3) 0.20% $ 10 721.84%(3)
</TABLE>
(1) THE RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS REFLECTS THE EXPENSE
RATIO EXCLUDING ANY WAIVERS AND EXPENSE REIMBURSEMENTS FOR THE FUND AND
ITS RESPECTIVE PORTFOLIO.
(2) THE TRUST COMMENCED THE OFFERING OF THE INVESTOR SHARE CLASS OF DAILY
ASSETS TREASURY OBLIGATIONS FUND, DAILY ASSETS GOVERNMENT OBLIGATIONS
FUND, DAILY ASSETS CASH FUND, AND DAILY ASSETS MUNICIPAL FUND ON
AUGUST 6, 1998.
(3) ANNUALIZED.
25
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION [LOGO]
The following documents are available free upon request: INSTITUTIONAL
SERVICE SHARES
ANNUAL/SEMI-ANNUAL REPORTS DAILY ASSETS
TREASURY
OBLIGATIONS FUND
Additional information about each Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In each Fund's annual report, you will find a DAILY ASSETS
discussion of the market conditions and investment GOVERNMENT FUND
strategies that significantly affected the Fund's
performance during its last fiscal year. DAILY ASSETS
GOVERNMENT
STATEMENT OF ADDITIONAL INFORMATION ("SAI") OBLIGATIONS FUND
The SAI provides more detailed information about each Fund
and is incorporated by reference into this Prospectus. DAILY ASSETS
CASH FUND
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund DAILY ASSETS
by contacting the Funds at: MUNICIPAL FUND
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
800-94FORUM or 800-943-6786
207-879-0001
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission. You can get copies, for a fee, by
writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
The scheduled hours of operation of the Public Reference
Room may be 800-94FORUM or obtained by calling the
Commission at 1-800-SEC-0330. Free copies of the Forum Funds
800-943-6786 reports and SAIs are available from the P.O. Box 446
Commission's Internet website at Portland, Maine 04112
800-94FORUM or
http://www.sec.gov. 800-943-6786
207-879-0001
Investment Company Act File No. 811-3023
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2000
FORUM FUNDS
Daily Assets Treasury Obligations Fund
Daily Assets Government Fund
Daily Assets Government Obligations Fund
Daily Assets Cash Fund
Daily Assets Municipal Cash Fund
FUND INFORMATION:
Forum Funds
Two Portland Square
Portland, Maine 04101
(207) 879-0001
(800) 94FORUM
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 94FORUM
This Statement of Additional Information or "SAI" supplements the Prospectuses
dated January 1, 2000, as may be amended from time to time, offering
Institutional Shares, Institutional Service Shares and Investors 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 (the "Funds"). This SAI is not a prospectus and should only be read in
conjunction with a prospectus. The Prospectuses may be obtained without charge
by contacting shareholder services at the address or telephone number listed
above.
<PAGE>
TABLE OF CONTENTS
Glossary ........................................................... 1
1. Investment Policies and Risks....................................... 2
2. Investment Limitations.............................................. 11
3. Performance Data and Advertising.................................... 12
4. Management.......................................................... 16
5. Portfolio Transactions.............................................. 24
6. Additional Purchase and Redemption Information...................... 26
7. Taxation ........................................................... 29
8. Other Matters....................................................... 33
Appendix A - Description of Securities Ratings...............................A-1
Appendix B - Miscellaneous Tables............................................B-1
Appendix C - Performance Data................................................C-1
Appendix D - Additional Advertising Materials................................D-1
<PAGE>
GLOSSARY
"Adviser" means Forum Investment Advisors, LLC
"Board" means the Board of Trustees of the Trust.
"CFTC" means the U.S. Commodities Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Core Trust" means Core Trust (Delaware).
"Core Trust Board" means the Board of Trustees of Core Trust.
"Custodian" means the custodian of each Fund's assets.
"FAdS" means Forum Administrative Services, LLC, administrator of each
Fund.
"FAcS" means Forum Accounting Services, LLC, the fund accountant of
each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's
shares.
"FSS" means Forum Shareholder Services, LLC, transfer agent of each
Fund.
"Fund" means each of Daily Assets Treasury Obligations Fund, Daily
Assets Government Fund, Daily Assets Government Obligations Fund,
Daily Assets Cash Fund and Daily Assets Municipal Fund.
"Fitch" means Fitch IBCA, Inc.
"Moody's" means Moody's Investors Service.
"NAV" means net asset value.
"NRSRO" means a nationally recognized statistical rating organization.
"Portfolio" means each of Treasury Cash Portfolio, Government
Portfolio, Government Cash Portfolio, Cash Portfolio or Municipal Cash
Portfolio, series of Core Trust.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent and distribution disbursing agent of each Fund.
"Trust" means Forum Funds.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"U.S. Treasury Securities" means obligations issued or guaranteed by
the U.S. Treasury.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
1
<PAGE>
1. GENERAL INFORMATION
Each Fund is a "gateway" fund in a Core and Gateway(R) structure. Each Fund
invests substantially all of its assets in separate Portfolios of Core Trust
(each "a Portfolio"), another open-end, management investment company with
substantially similar investment objectives and policies, as follows:
Daily Assets Treasury Fund Treasury Cash Portfolio
Daily Assets Government Fund Government Portfolio
Daily Assets Government Cash Fund GovernmentCash Portfolio
Daily Assets Cash Fund Cash Portfolio
Daily Assets Municipal Fund Municipal Cash Portfolio
2. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the prospectuses about
each Portfolio's investment techniques, strategies and risks.
A. SECURITY RATINGS INFORMATION
Under Rule 2a-7, each Portfolio must normally invest at least 95% of its total
assets in securities that are rated in the highest short-term rating category
for debt obligations, or are unrated and determined to be of comparable quality.
The lowest ratings for high quality short-term debt obligations, including
commercial paper, are Prime-2 (P-2) in the case of Moody's, "A-2" in the case of
S&P and "F-2" in the case of Fitch.
Unrated securities may not be as actively traded as rated securities. A
Portfolio may retain securities whose rating has been lowered below the lowest
permissible rating category (or that are unrated and determined by the Adviser
to be of comparable quality to securities whose rating has been lowered below
the lowest permissible rating category) if the Adviser determines that retaining
such security is in the best interests of the Portfolio. Because a downgrade
often results in a reduction in the market price of the security, sale of a
downgraded security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The
Portfolios may use these ratings to determine whether to purchase, sell or hold
a security. Ratings are general and are not absolute standards of quality.
Securities with the same maturity, interest rate and rating may have different
market prices. If an issue of securities ceases to be rated or if its rating is
reduced after it is purchased by a Portfolio, the Adviser will determine whether
the Portfolio should continue to hold the obligation. To the extent that the
ratings given by a NRSRO may change as a result of changes in such organizations
or their rating systems, the Adviser will attempt to substitute comparable
ratings. Credit ratings attempt to evaluate the safety of principal and interest
payments and do not evaluate the risks of fluctuations in market value. Also,
rating agencies may fail to make timely changes in credit ratings. An issuer's
current financial condition may be better or worse than a rating indicates.
B. FIXED INCOME SECURITIES
1. VARIABLE AND FLOATING RATE SECURITIES
Each Portfolio may invest in fixed income securities with variable or floating
rates. 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.
2
<PAGE>
To the extent that a Portfolio invests in long-term variable or floating rate
securities, the Adviser believes that the Portfolio may be able to take
advantage of the higher yield that is usually paid on long-term securities.
Each Portfolio will only purchase variable or floating rate securities, whose
interest rate is adjusted based on a single short-term rate or index such as the
Prime Rate. Under Rule 2a-7 of the 1940 Act, the Portfolio may only purchase
securities with maturities of greater than 397 days if they have demand features
that meet certain requirements or they are certain long-term U.S. Government
Securities.
Cash Portfolio also may purchase variable and floating rate corporate master
notes. Master notes with variable or floating interest rates are unsecured
obligations that are redeemable upon notice. You may invest fluctuating amounts
in these instruments at varying rates of interest under a direct arrangement
with the issuer. These obligations include master demand notes. The issuer of
these obligations often has the right, after a given period, to prepay its
outstanding principal obligations upon a specified number of days' notice. These
obligations generally are not traded and there is generally no 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.
2. MORTGAGE AND ASSET BACKED SECURITIES
A Portfolio may purchase adjustable rate mortgage backed or other asset backed
securities (such as Small Business Association Securities) that are U.S.
Government Securities. Treasury Cash Portfolio may only purchase mortgage backed
or asset backed securities that are U.S. Treasury Securities. These 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. Most mortgage-related securities, however, are
pass-through securities, which means that investors receive payments consisting
of a pro-rata share of both principal and interest (less servicing and other
fees), as well as unscheduled prepayments, as loans in the underlying mortgage
pool are paid off by the borrowers. Additional prepayments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans. Prepayments of
the principal of underlying loans may shorten the effective maturities of these
securities.
ADJUSTABLE RATE MORTGAGE BACKED SECURITIES Adjustable rate mortgage securities
("ARMs") are pass-through securities representing interests in pools of mortgage
loans with adjustable interest rates that are reset at periodic intervals,
usually by reference to some interest rate index or market interest rate, and
that may be subject to certain limits. Although the rate adjustment feature may
reduce sharp changes in the value of adjustable rate securities, these
securities can change in value based on changes in market interest rates or
changes in the issuer's creditworthiness. Changes in the interest rates on ARMs
may lag behind changes in prevailing market interest rates. This may result in a
slightly lower net value until the interest rate resets to market rates. Thus, a
Portfolio could suffer some principal loss if the Portfolio sold the securities
before the interest rates on the underlying mortgages were adjusted to reflect
current market rates. Some adjustable rate securities (or the underlying
mortgages) are subject to caps or floors, that limit the maximum change in
interest rates during a specified period or over the life of the security.
Government Cash Portfolio and Cash Portfolio only invest in ARMs that are U.S.
Government Securities.
SMALL BUSINESS ADMINISTRATION SECURITIES Small Business Administration
Securities ("SBA") are variable rate securities that are backed by the full
faith and credit of the United States Government, and generally have an interest
rate that resets monthly or quarterly based on a spread to the Prime rate. SBA
securities generally have maturities at issue of up to 25 years. No Portfolio
may purchase an SBA security if, immediately after the purchase, (1) the
Portfolio would have more than 15% of its net assets invested in SBA securities
or (2) the total unamortized premium (or the total unaccreted discount) on SBA
securities would exceed 0.25% of the Portfolio's net assets.
COLLATERALIZED MORTGAGE OBLIGATIONS Each Portfolio may purchase collateralized
mortgage obligations ("CMOs"), which are collateralized by MBSs or by pools of
conventional mortgages. CMOs are typically have a number of classes or series
with different maturities and are generally retired in sequence. Each class of
3
<PAGE>
bonds receives periodic interest payments according to the coupon rate on the
bonds. However, all monthly principal payments and any prepayments from the
collateral pool are paid first to the "Class 1" bondholders. The principal
payments are such that the Class 1 bonds will be completely repaid no later
than, for example, five years after the offering date. Thereafter, all payments
of principal are allocated to the next most senior class of bonds until that
class of bonds has been fully repaid. Although full payoff of each class of
bonds is contractually required by a certain date, any or all classes of bonds
may be paid off sooner than expected because of an acceleration in pre-payments
of the obligations comprising the collateral pool.
Since the inception of the mortgage-related pass-through security in 1970, the
market for these securities has expanded considerably. The size of the primary
issuance market and active participation in the secondary market by securities
dealers and many types of investors make government and government-related
pass-through pools highly liquid.
Governmental or private entities may create new types of MBSs in response to
changes in the market or changes in government regulation of such securities. As
new types of these securities are developed and offered to investors, the
Adviser may, consistent with the investment objective and policies of each
Portfolio, consider making investments in such new types of securities.
3. MUNICIPAL SECURITIES
Municipal Cash Portfolio may invest in municipal securities. Municipal
securities are issued by the states, territories and possessions of the United
States, their political subdivisions (such as cities, counties and towns) and
various authorities (such as public housing or redevelopment authorities),
instrumentalities, public corporations and special districts (such as water,
sewer or sanitary districts) of the states, territories and possessions of the
United States or their political subdivisions. In addition, municipal securities
include securities issued by or on behalf of public authorities to finance
various privately operated facilities, such as industrial development bonds,
that are backed only by the assets and revenues of the non-governmental user
(such as hospitals and airports).
BONDS AND NOTES Municipal securities are issued to obtain funds for a variety of
public purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities are
classified as general obligation bonds, revenue bonds and notes. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable from revenue derived from a particular facility, class of
facilities or the proceeds of a special excise tax or other specific revenue
source but not from the issuer's general taxing power. Private activity bonds
and industrial revenue bonds do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity on
whose behalf they are issued.
LEASES State and local governments and authorities enter into municipal leases
to acquire equipment and facilities such as fire and sanitation vehicles,
telecommunications equipment and other assets. Municipal leases permit
governmental issuers to acquire property and equipment without meeting
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes do not apply
to municipal leases that do not require the governmental issuer to satisfy
underlying obligations unless money is appropriated for that purpose by the
state legislature on a yearly or periodic basis.
PUTS AND STANDBY COMMITMENTS ON MUNICIPAL SECURITIES The Portfolio may acquire
"puts" on municipal securities. A put gives the Portfolio the right to sell the
municipal security at a specified price at any time on or before a specified
date. The Portfolio may sell, transfer or assign a put only with the sale,
transfer or assignment of the underlying security or securities. The amount
payable to the Portfolio upon its exercise of a "put" is normally: (1) the
Portfolio's acquisition cost of the municipal securities (excluding any accrued
interest which the Portfolio paid on their acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Portfolio owned the securities, plus (2) all interest accrued on
the securities since the last interest payment date during that period.
4
<PAGE>
Puts may be acquired by the Portfolio to facilitate the liquidity of its
portfolio assets. Puts may also be used to facilitate the reinvestment of the
Portfolio's assets at a rate of return more favorable than that of the
underlying security. Puts may, under certain circumstances, also be used to
shorten the maturity of underlying variable rate or floating rate securities for
purposes of calculating the remaining maturity of those securities and the
dollar-weighted average portfolio maturity of the Portfolio's assets. The
Portfolio intends to enter into puts only with dealers, banks and broker-dealers
which, in the Adviser's opinion, present minimal credit risks.
The Portfolio may purchase municipal securities together with the right to
resell them to the seller or a third party at an agreed-upon price or yield
within specified periods prior to their maturity dates. Such a right to resell
is commonly known as a "stand-by commitment," and the aggregate price which the
Portfolio pays for securities with a stand-by commitment may be higher than the
price which otherwise would be paid. The primary purpose of this practice is to
permit the Portfolio to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, the Portfolio acquires stand-by
commitments solely to facilitate portfolio liquidity and does not exercise its
rights thereunder for trading purposes. Stand-by commitments involve certain
expenses and risks, including the inability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised,
non-marketability of the commitment, and differences between the maturity of the
underlying security and the maturity of the commitment. The Portfolio's policy
is to enter into stand-by commitment transactions only with municipal securities
dealers which are determined to present minimal credit risks.
The acquisition of a stand-by commitment does not affect the valuation or
maturity of the underlying municipal securities which continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Portfolio are valued at zero in determining net asset value. When the Portfolio
pays directly or indirectly for a stand-by commitment, its cost is reflected as
unrealized depreciation for the period during which the commitment is held.
Stand-by commitments do not affect the average weighted maturity of the
Portfolio's portfolio of securities.
OTHER MUNICIPAL OBLIGATIONS Variable Rate Demand Notes ("VRDN") are municipal
bonds with maturities of up to 40 years. These instruments have a demand feature
that permits the holder to sell the instruments back to the issuer. A holder of
these instruments may exercise the demand feature at predetermined intervals,
usually daily or weekly. The interest rate on these securities mirror prevailing
interest rates. Tender option bonds have relatively long maturities and fixed
rates of interest. Under an agreement with a third party financial institution,
a holder of these bonds may tender them to the institution and receive the face
value of the bonds. A holder may exercise this option at periodic intervals,
usually six months to a year.
ALTERNATIVE MINIMUM TAX Municipal securities are also categorized according to
(1) whether the interest is or is not included in the calculation of alternative
minimum taxes for individuals and corporations, (2) whether the costs of
acquiring or carrying the bonds are or are not deductible in part by banks and
other financial institutions, and (3) other criteria relevant for Federal income
tax purposes. Due to the increasing complexity of the Code and related
requirements governing the issuance of tax-exempt bonds, industry practice has
uniformly required as a condition to the issuance of such bonds, but
particularly for revenue bonds, an opinion of nationally recognized bond counsel
as to the tax-exempt status of interest on the bonds.
4. 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 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 Portfolio distributes all of its
5
<PAGE>
net investment income, the Portfolio may have to sell portfolio securities to
distribute imputed income, which may occur at a time when the Adviser would not
have chosen to sell such securities and which may result in a taxable gain or
loss.
5. FEDERAL HOME LOAN MORTGAGE CORPORATION SECURITIES
Treasury Cash Portfolio, 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.
6. GENERAL RISKS
INTEREST RATE RISK Changes in interest rates affects the market value of the
interest-bearing fixed income securities held by a Portfolio. There is normally
an inverse relationship between the market value of securities sensitive to
prevailing interest rates and actual changes in interest rates. The longer the
remaining maturity (and duration) of a security, the more sensitive the security
is to changes in interest rates. All fixed income securities, including U.S.
Government Securities, can change in value when there is a change in interest
rates.
CREDIT RISK A Portfolio's investment in fixed income securities is subject to
credit risk relating to the financial condition of the issuers of the securities
that each Portfolio holds. Credit risk is the risk that a counterparty to a
transaction will be unable to honor its financial obligation. To limit credit
risk, each Portfolio only invests in securities rated in the highest rating
category of an NRSRO or those that are unrated and deemed to be of comparable
credit quality by the Adviser.
MORTGAGE AND ASSET BACKED SECURITIES The value of mortgage-related securities
may be significantly affected by changes in interest rates, the markets'
perception of issuers, the structure of the securities and the creditworthiness
of the parties involved. The ability of a Portfolio to successfully utilize
mortgage-related securities depends in part upon the ability of the Adviser to
forecast interest rates and other economic factors correctly. Some
mortgage-related securities have structures that make their reaction to interest
rate changes and other factors difficult to predict.
Prepayments of principal of mortgage-related securities by mortgagors or
mortgage foreclosures affect the average life of the mortgage-related
securities. Mortgage prepayments may be triggered by various factors, including
the level of interest rates, general economic conditions, the location and age
of the mortgages and other social and demographic conditions. In periods of
rising interest rates, the prepayment rate tends to decrease, lengthening the
average life of a pool of mortgage-related securities. In periods of falling
interest rates, the prepayment rate tends to increase, shortening the average
life of a pool. The volume of prepayments of principal on the mortgages
underlying a particular mortgage-related security will influence the yield of
that security and a Portfolio's yield. Because prepayments of principal
generally occur when interest rates are declining, a Portfolio may have to
reinvest the proceeds of prepayments at lower interest rates then those of their
previous investments. If this occurs, a Portfolio's yield will decline. Thus,
mortgage-related securities may have less potential for capital appreciation in
periods of falling interest rates (when prepayment of principal is more likely)
than other fixed income securities of comparable duration, although they may
have a comparable risk of decline in market value in periods of rising interest
rates. A decrease in the rate of prepayments may extend the effective maturities
of mortgage-related securities, increasing their sensitivity to changes in
market interest rates. To the extent that a Portfolio purchase mortgage-related
securities at a premium, unscheduled prepayments, which are made at par, result
in a loss equal to any unamortized premium.
C. REPURCHASE AGREEMENTS AND SECURITIES LENDING
1. GENERAL
Each Portfolio may enter into repurchase agreements. Repurchase agreements are
transactions in which a Portfolio purchases securities from a bank or securities
dealer and simultaneously commits to resell the securities to the bank or dealer
6
<PAGE>
at an agreed-upon date and at a price reflecting a market rate of interest
unrelated to the purchased security. During the term of a repurchase agreement,
the Portfolios' custodian maintains possession of the purchased securities and
any underlying collateral, which is maintained at not less than 100% of the
repurchase price. Repurchase agreements allow a Portfolio to earn income on its
uninvested cash for periods as short as overnight, while retaining the
flexibility to pursue longer-term investments.
Securities loans must be continuously collateralized and the collateral must
have market value at least equal to the value of a Portfolio's loaned
securities, plus accrued interest. In a portfolio securities lending
transaction, a Portfolio receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any fees
(such as finders or administrative fees) the Portfolio pays in arranging the
loan. The Portfolio may share the interest it receives on the collateral
securities with the borrower. The terms of a Portfolio's loans permit the
Portfolio to reacquire loaned securities on five business days' notice or in
time to vote on any important matter. Loans are subject to termination at the
option of a Portfolio or the borrower at any time, and the borrowed securities
must be returned when the loan is terminated. A Portfolio must limit securities
lending to 33 1/3% of the value of its total assets.
2. RISKS
Repurchase agreements and securities lending involve credit risk. Credit risk is
the risk that a counterparty to a transaction will be unable to honor its
financial obligation. In the event that bankruptcy, insolvency or similar
proceedings are commenced against a counterparty, a Portfolio may have
difficulties in exercising its rights to the underlying securities. A Portfolio
may incur costs and expensive time delays in disposing of the underlying
securities and it may suffer a loss. Failure by the other party to deliver a
security or currency purchased by or lent by a Portfolio may result in a missed
opportunity to make an alternative investment. Favorable insolvency laws that
allow a Portfolio, among other things, to liquidate the collateral held in the
event of the bankruptcy of the counterparty reduce counterparty insolvency risk
with respect to repurchase agreements. A Portfolio will only enter a repurchase
agreement with a seller that the Adviser believes present minimal credit risk.
D. BORROWING
1. GENERAL
Each Portfolio may borrow money from banks for temporary or emergency purposes
in an amount up to 33 1/3% of a Portfolio's total assets. Each Portfolio may
borrow money for other purposes so long as such borrowings do not exceed 5% of a
Portfolio's total assets. The purchase of securities is prohibited if a
Portfolio's borrowing exceeds 5% or more of a Portfolio's total assets.
2. RISKS
The use of borrowing involves special risks, including magnified capital losses.
If a Portfolio buys securities with borrowed Portfolios and the value of the
securities declines, a Portfolio may be required to provide the lender with
additional funds or liquidate its position in these securities to continue to
secure or repay the loan. A Portfolio may also be obligated to liquidate other
portfolio positions at an inappropriate time in order to pay off the loan or any
interest payments associated with the loan.
To the extent that the interest expense involved in a borrowing transaction
approaches the net return on a Portfolio's investment portfolio, the benefit of
borrowing will be reduced. If the interest expense due to a borrowing
transaction exceeds the net return on a Portfolio's investment portfolio, a
Portfolio's use of borrowing would result in a lower rate of return than if the
Portfolio did not borrow. The size of any loss incurred by a Portfolio due to
borrowing will depend on the amount borrowed. The greater the percentage
borrowed, the greater potential of gain or loss to a Portfolio.
7
<PAGE>
E. WHEN-ISSUED SECURITIES
1. GENERAL
Each Portfolio may purchase securities offered on a when-issued or
delayed-delivery basis. When these transactions are negotiated, the price, which
is generally expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the transaction,
but delayed settlements beyond two months may be negotiated. During the period
between a commitment and settlement, no payment is made for the securities
purchased by the purchaser and thus, no interest accrues to the purchaser from
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 transaction as a purchase and thereafter reflect the value each day of such
securities in determining its net asset value.
2. RISKS
At the time a Portfolio makes a commitment to purchase securities in this
manner, the Portfolio immediately assumes the risk of ownership, including the
risk that the value of the security may decline. The use of when-issued
transactions and forward commitments enables a Portfolio to protect against
anticipated changes in interest rates and prices, but may also increase the
volatility of the Portfolio's asset value per unit. Failure by a counterparty to
deliver a security purchased by a Portfolio on a when-issued or delayed delivery
basis may result in a loss the Portfolio or a missed opportunity to make an
alternative investment.
E. ILLIQUID SECURITIES
1. GENERAL
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, except as
otherwise determined by the Adviser, securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market.
2. RISKS
Limitations on resale may have an adverse effect on the marketability of a
security and a Portfolio might also have to register a restricted security in
order to dispose of it, resulting in expense and delay. A Portfolio might not be
able to dispose of restricted or illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions. There can
be no assurance that a liquid market will exist for any security at any
particular time. Any security, including securities determined by the Adviser to
be liquid, can become illiquid.
3. DETERMINATION OF LIQUIDITY
The Core Trust Board has the ultimate responsibility for determining whether
specific securities are liquid or illiquid and has delegated the function of
making determinations of liquidity to the Adviser, pursuant to guidelines
approved by the Board. The Adviser determines and monitors the liquidity of the
portfolio securities and reports periodically on its decisions to the Board. The
Adviser takes into account a number of factors in reaching liquidity decisions,
including but not limited to: (1) the frequency of trades and quotations for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
8
<PAGE>
Certificates of deposit and other fixed time deposits that carry an early
withdrawal penalty or mature in greater than seven days are treated as illiquid
securities if there is no readily available market for the instrument.
2. INVESTMENT LIMITATIONS
Each Fund has adopted the fundamental and nonfundamental investment limitations
and the investment objective of its corresponding Portfolio. The investment
objective of a Fund or Portfolio is fundamental. Each Porfolio and Fund have
also 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.
A fundamental policy of a Fund cannot be changed without the affirmative vote of
the lesser of: (1) 50 percent of the outstanding shares of the Fund (or
interests of a Portfolio); or (2) 67 percent of the shares of the Fund (or
interests of a Portfolio) present or represented at a shareholders meeting at
which the holders of more than 50 percent of the outstanding shares of the Fund
(or interests of a Portfolio) are present or represented. The Board may change a
nonfundamental policy of a Fund without shareholder approval and the Core Trust
Board nay change a nonfundmental policy of a Portfolio without interestholder
consent..
For purposes of all investment policies of the Funds and Portfolios (1) the term
1940 Act includes the rules thereunder, SEC interpretations and any exemptive
order upon which the Fund or Portfolio may rely; and (2) the term Code includes
the rules thereunder, IRS interpretations and any private letter ruling or
similar authority upon which the Fund or Portfolio may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's or Portfolio's assets or purchases and redemptions of shares will
not be considered a violation of the limitation.
A. FUNDAMENTAL LIMITATIONS
GOVERNMENT PORTFOLIO
The Portfolio may not:
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.
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.
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.
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.
9
<PAGE>
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.
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.
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.
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.
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.
OPTIONS. Write put and call options.
INVESTING FOR CONTROL. Invest for the purpose of exercising control over any
person.
RESTRICTED SECURITIES. Purchase restricted securities.
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
The Portfolios may not:
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.
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.
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.
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.
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.
10
<PAGE>
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.
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.
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.
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 Fund not to be deemed to be
short term liquid assets when owned by Federally chartered savings associations.
B. NONFUNDAMENTAL LIMITATIONS
GOVERNMENT CASH PORTFOLIO
The Portfolio may not:
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.
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.
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.
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.
TREASURY CASH PORTFOLIO, GOVERNMENT CASH PORTFOLIO, CASH PORTFOLIO AND MUNICIPAL
CASH PORTFOLIO
Each Portfolio may not:
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.
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.
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.
11
<PAGE>
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.
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 concentration: (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.
C. INVESTMENTS BY FINANCIAL INSTITUTIONS
1. INVESTMENT BY SHAREHOLDERS THAT ARE BANKS - GOVERNMENT CASH PORTFOLIO
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 investment 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 investment portfolio includes any
instruments that would be subject to a restriction as to amount held by a
National bank, investment in the Portfolio may be limited.
The Guidelines provide that shares of an investment fund are generally assigned
to the risk-weight category applicable to the highest risk-weighted security or
instrument that the fund is permitted to hold. Accordingly, Portfolio shares
should qualify for a 20% risk weighting under the Guidelines. The Guidelines
also provide that, in the case of an investment fund whose shares should qualify
for a risk weighting below 100% due to limitations on the assets which it is
permitted to hold, bank examiners may review the treatment of the shares to
ensure that they have been assigned an appropriate risk-weight. In this
connection, the Guidelines provide that, regardless of the composition of an
investment fund's assets, shares of a fund may be assigned to the 100%
risk-weight category if it is determined that the fund engages in activities
that appear to be speculative in nature or has any other characteristics that
are inconsistent with a lower risk weighting. The Adviser has no reason to
believe that such a determination would be made with respect to the Portfolio.
There 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 Portfolio 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 Portfolio shares is permissible and in
compliance with any applicable investment or other limits.
Portfolio 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 Portfolio shares, and thereafter may be required
to review its investment in a Portfolio for the purpose of verifying compliance
with applicable Federal banking laws, regulations and policies.
12
<PAGE>
National banks generally must review their holdings of shares of a Portfolio 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.
2. INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - TREASURY CASH PORTFOLIO
AND GOVERNMENT CASH PORTFOLIO
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 Funds 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, 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
does not meet all of the tests outlined in 12 C.F.R. Section 703.100(e) or (iii)
a residual interest in a CMO or REMIC. The Portfolios also may invest in reverse
repurchase agreements in accordance with 12 C.F.R. 703.100(j) to the extent
otherwise permitted herein and in the Prospectus.
3. INVESTMENTS BY SHAREHOLDERS THAT ARE SAVINGS ASSOCIATIONS - GOVERNMENT CASH
PORTFOLIO
Government Cash Portfolio limits its investments to investments that are legally
permissible for Federally chartered savings associations without limit as to
percentage under applicable provisions of the Home Owners' Loan Act (including
12 U.S.C. Section 1464) and the applicable rules and regulations of the Office
of Thrift Supervision, as such statutes and rules and regulations may be
amended. In addition, the Portfolio limit its investments to investments that
are permissible for an open-end investment company to hold and would permit
shares of the investment company to qualify as liquid assets under 12 C.F.R.
Section 566.1(g) and as short-term liquid assets under 12 C.F.R. Section
566.1(h). These policies may be amended only by approval of a Portfolio's
shareholders.
4. FORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
A Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
A Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper, Inc., IBC Financial Data, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment
companies ("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including
but not limited to the Standard & Poor's 500(R) Index, the Russell
2000(R) Index, the Russell MidcapTM Index, the Russell 1000(R) Value
Index, the Russell 2500(R) Index, the Morgan Stanley - Europe,
Australia, Far East Index, the Dow Jones Industrial Average, the
Salomon Brothers Bond Index, the Lehman Bond Index, U.S. Treasury
bonds, bills or notes and changes in the Consumer Price Index as
published by the U.S. Department of Commerce.
13
<PAGE>
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of a Fund but rather are standards by
which a Fund's Adviser and shareholders may compare the performance of the Fund
to an unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
A Fund may refer to: (1) general market performances over past time periods such
as those published by Ibbotson Associates (for instance, its "Stocks, Bonds,
Bills and Inflation Yearbook"); (2) mutual fund performance rankings and other
data published by Fund Tracking Companies; and (3) material and comparative
mutual fund data and ratings reported in independent periodicals, such as
newspapers and financial magazines.
A Funds' performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
A Fund's performance may be quoted in terms of yield or total return. Appendix B
includes performance information for each Fund.
1. SEC YIELD
Yield quotations for a Fund or class will include an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a
specific seven-calendar-day period and are 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 reflects 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 Fund is 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. The standardized tax
equivalent yield is the rate an investor would have to earn from a fully taxable
investment in order to equal a Fund's yield after taxes. Tax equivalent yields
are calculated by dividing the Fund's yield by one minus the stated Federal or
combined Federal and state tax rate. If a portion of a Fund's yield is
tax-exempt, only that portion is adjusted in the calculation.
2. TOTAL RETURN CALCULATIONS
A Fund's or class's total return shows its overall change in value, including
changes in share price and assuming that all of the Fund's or class's
distributions are reinvested.
Total return figures may be based on amounts invested in a Fund net of sales
charges that may be paid by an investor. A computation of total return that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns a Fund: (1) determines the growth or decline in value of a hypothetical
historical investment in a Fundor class over a stated period; and (2) calculates
the annually compounded percentage rate that would have produced the same result
if the rate of growth or decline in value had been constant over the period. For
example, a cumulative return of 100% over ten years would produce an average
annual total return of 7.18%. While average annual returns are a convenient
means of comparing investment alternatives, investors should realize that
performance is not constant over time but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund or class.
14
<PAGE>
Average annual total return is calculated according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000
payment made at the beginning of the applicable period
Because average annual returns tend to smooth out variations in a Fund's or
class's returns, shareholders should recognize that they are not the same as
actual year-by-year results.
OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
A Fund or class may quote unaveraged or cumulative total returns that
reflect a Fund's or class's performance over a stated period of time.
Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period. Total returns may be quoted with or without
taking into consideration a Fund's or class's front-end sales charge or
contingent deferred sales charge (if applicable).
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual
total return above
B. OTHER MATTERS
A Fund or class may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of a Fund's portfolio managers and the
portfolio management staff of a Fund's Adviser, summaries of the views of the
portfolio managers with respect to the financial markets, or descriptions of the
nature of the Adviser's and its staff's management techniques; (7) the results
of a hypothetical investment in a Fund or class over a given number of years,
including the amount that the investment would be at the end of the period; (8)
the effects of investing in a tax-deferred account, such as an individual
retirement account or Section 401(k) pension plan; (9) the net asset value, net
assets or
15
<PAGE>
number of shareholders of a Fund or class as of one or more dates; and (10) a
comparison of a Fund's or class's operations to the operations of other funds or
similar investment products, such as a comparison of the nature and scope of
regulation of the products and the products' weighted average maturity,
liquidity, investment policies, and the manner of calculating and reporting
performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,188 at the end
of the second year (an increase of $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of a Fund's or class's performance.
A Fund or class may advertise information regarding the effects of systematic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in a Fund at periodic intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month in a Fund for
a period of six months the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
SYSTEMATIC SHARE SHARES
PERIOD INVESTMENT PRICE PURCHASED
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
TOTAL AVERAGE TOTAL
INVESTED $600 PRICE $15.17 SHARES 41.81
In connection with its advertisements, a Fund or class may provide
"shareholder's letters" that serve to provide shareholders or investors with an
introduction to the Fund's, the Trust's or any of the Trust's service provider's
policies or business practices.
With respect to a Fundor class that invests in municipal securities and
distributes Federally tax-exempt (and in certain cases state tax-exempt)
dividends, the Fund may advertise the benefits of and other effects of investing
in municipal securities. For instance, the Fund's or class's advertisements may
note that municipal bonds have historically offered higher after tax yields than
comparable taxable alternatives for those persons in the higher tax brackets,
that municipal bond yields may tend to outpace inflation and that changes in tax
law have eliminated many of the tax advantages of other investments. The
combined Federal and state income tax rates for a particular state may also be
described and advertisements may indicate equivalent taxable and tax-free yields
at various approximate combined marginal Federal and state tax bracket rates.
All yields so advertised are for illustration only and not necessarily
representative of a Fund's or class's yield.
16
<PAGE>
5. MANAGEMENT
A. TRUSTEES AND OFFICERS OF THE TRUST
The names of the Trustees and officers of the Trust, their position with the
Trust, address, date of birth and 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 (*). The Board
supervises each Fund's activities, monitors its contractual arrangements with
various service providers and decides upon matters of general policy.
<TABLE>
<S> <C>
- -------------------------------------------- ----------------------------------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
DATE OF BIRTH AND ADDRESS PAST 5 YEARS
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
John Y. Keffer*, Chairman and President President, Forum Financial Group, LLC (a mutual fund services
Born: July 15, 1942 holding company)
Two Portland Square President, Forum Fund Services, LLC (Trust's underwriter)
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
Costas Azariadis, Trustee Professor of Economics, University of California-Los Angeles
Born: February 15, 1943
Department of Economics
University of California
Los Angeles, CA 90024
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
James C. Cheng, Trustee President, Technology Marketing Associates
Born: July 26, 1942 (marketing company for small and medium size businesses in New
27 Temple Street England)
Belmont, MA 02718
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
J. Michael Parish, Trustee Partner, Thelen Reid & Priest LLP (law firm) since 1995
Born: November 9, 1943 Partner, Winthrop Stimson Putnam & Roberts (law firm) from 1989-1995
40 West 57th Street
New York, NY 10019
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
David I. Goldstein, Vice President General Counsel, Forum Financial Group, LLC
Born: August 3, 1961 Secretary, Forum Fund Services, LLC (Trust's underwriter)
Two Portland Square
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
Stacey Hong, Treasurer Director, Fund Accounting, Forum Financial Group, LLC
Born: May 10, 1966
Two Portland Square
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
Dawn Taylor, Asst. Treasurer Manager/Senior Tax Specialist, Tax Department, Forum Financial
Born: May 14, 1964 Group, LLC since 1997
Two Portland Square Senior Tax Accountant, Pardy Bingham & Burrell during 1997
Portland, Maine 04101 Senior Tax Specialist, Forum Financial Group, LLC from 1994 to 1997
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
Leslie K. Klenk, Secretary Counsel, Forum Financial Group, LLC since 1998
Born: August 24, 1964 Vice President/Associate General Counsel, Smith Barney Inc.
Two Portland Square (brokerage firm) from 1993 through 1998
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
- -------------------------------------------- ----------------------------------------------------------------------
Heidi A. Hoefler, Asst. Secretary Staff Attorney, Forum Financial Group since 1998
Born: October 23, 1963 Legal Intern, Unum from 1996-1997
Two Portland Square Law Student, University of Maine School of Law from 1994-1997
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
17
<PAGE>
- -------------------------------------------- ----------------------------------------------------------------------
Pamela Stutch, Asst. Secretary Senior Fund Specialist, Forum Financial Group, LLC since 1998
Born: June 29, 1967 Law Student, Temple University from 1994-1997
Two Portland Square
Portland, Maine 04101
- -------------------------------------------- ----------------------------------------------------------------------
</TABLE>
The following trustees and officers hold the same positions with other
investment companies that are considered part of a "Fund Complex." A Fund
Complex is comprised of two or more investment companies that (1) hold
themselves out to investors as related for purposes of investment and investor
services (2) share a common investment adviser or (3) have an investment adviser
that is an affiliate of an adviser to another investment company.
TRUSTEE OR OFFICER POSITION
John Y. Keffer Trustee and President, The Cutler Trust
Chairman and President, Core Trust (Delaware)
Trustee, The Cutler Trust
Costas Azariadas Trustee, Core Trust (Delaware)
James C. Cheng Trustee, Core Trust (Delaware)
J. Michael Parish Trustee, Core Trust (Delaware)
David I. Goldstein Vice President, Core Trust (Delaware)
Stacey Hong Treasurer, Core Trust (Delaware)
B. COMPENSATION OF TRUSTEES AND OFFICERS
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 audit committee
meeting attended on a date when a Board meeting is not held. In addition to the
$1,000 for each Board meeting attended, each Trustee is paid $100 per active
portfolio of the Trust. To the extent a meeting relates to only certain
portfolios of the Trust, Trustees are paid the $100 fee only with respect to
those portfolios. Trustees are also reimbursed for travel and related expenses
incurred in attending meetings of the Board.
Trustees that are affiliated with the Adviser receive no compensation for their
services or reimbursement for their associated expenses. No officer of the Trust
is compensated by the Trust.
The following table sets forth the fees to paid to each Trustee by the Trust for
the fiscal year ended August 31, 1999.
TOTAL COMPENSATION
TRUST AND
TRUSTEE COMPENSATION FROM TRUST FUND COMPLEX(1)
John Y. Keffer $0 $0
Costas Azariadis $9,500 $13,000
James C. Cheng $9,500 $14,500
J. Michael Parish $9,500 $14,500
(1) These figures include fees paid to the Core Trust Trustees by the
Portfolios.
C. TRUSTEES AND OFFICERS OF CORE TRUST
The names of the Trustees and officers of Core Trust, their positions with Core
Trust, address, date of birth and principal occupations during the past five
years are set forth below. Each Trustee who is an "interested person" (as
18
<PAGE>
defined by the 1940 Act) of Core Trust is indicated by an asterisk (*). The Core
Trust Board supervises the Portfolios' activities, monitors its contractual
arrangements with various service providers and decides upon matters of general
policy.
<TABLE>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------------------
NAME, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION(S) DURING
AGE AND ADDRESS PAST 5 YEARS
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
John Y. Keffer*,Chairman & President
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Costas Azariadas, Trustee
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
James C. Cheng, Trustee
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
J. Michael Parish, Trustee
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Thomas G. Sheehan, Vice President Managing Director-Forum Financial Group
Born: July 15, 1954 Vice President/Asst. Secretary, Norwest Advantage Funds
Two Portland Square
Portland, Maine 04101
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Stacey Hong, Treasurer
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Dawn Taylor, Asst. Treasurer
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
David I. Goldstein, Vice President & Secretary
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Don Evans, Asst. Secretary Counsel, Forum Financial Group, since 1995 Associate, Bisk
Born: August 12, 1948 & Lutz during 1995
Two Portland Square Associate, Weiner & Strother from 1990 to 1995.
Portland, Maine 04101 Assistant Secretary, Norwest Advantage Funds
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Heidi A. Hoefler, Asst. Secretary
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Leslie K. Klenk, Asst. Secretary
- --------------------------------------------------- ---------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------------------
Pamela Stutch, Asst. Secretary
- --------------------------------------------------- ---------------------------------------------------------------
</TABLE>
D. INVESTMENT ADVISER
1. SERVICES OF THE ADVISER
Forum Investment Advisors, LLC is the Adviser to the Portfolios in which the
Funds invests pursuant to an investment advisory agreement (the "Agreement")
with Core Trust. Under the Agreement, the Adviser furnishes at its own expense
all services, facilities and personnel necessary in connection with managing a
Portfolio's investments and effecting portfolio transactions for the Portfolio.
2. OWNERSHIP OF ADVISER
The Adviser is 99% owned by Forum Trust LLC and 1% owned by Forum Holdings Corp.
I. Forum Investment Advisors, LLC is registered as an investment adviser with
the SEC under the 1940 Act.
3. FEES
The Adviser's fees are calculated as a percentage of a Portfolio's average net
assets. The fee is accrued daily by each Portfolio and is paid monthly based on
average net assets for the previous month. Each Fund pays its pro-rate portion
of its corresponding Portfolio's investment advisory fee.
In addition to receiving its advisory fee from a Portfolio, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets they invested in the Portfolio. If you have a separately managed account
with the Adviser with assets invested in the Fund, the Adviser will credit an
amount equal to all or a portion of the fees received by the Adviser against any
investment management fee received from the client.
Table 1 in Appendix C shows the dollar amount payable by each Portfolio to the
Adviser, the amount of fees waived by the Adviser, and the actual fee paid by
each Portfolio. The data are for the past three fiscal years.
19
<PAGE>
4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Agreement remains in effect for a period of two years from the date of its
effectiveness. Subsequently, the Agreement must be approved at least annually by
the Board or by majority vote of the shareholders, and in either case by a
majority of the Trustees who are not parties to the agreement or interested
persons of any such party ("Disinterested Trustees").
The Agreement is terminable without penalty by the Trust regarding the Fund on
30 days' written notice when authorized either by vote of the Fund's
shareholders or by a majority vote of the Board, or by the Adviser on 90 days'
written notice to the Trust. The Agreement terminates immediately upon
assignment.
Under the Agreement, the Adviser is not liable for any action or inaction in the
absence of bad faith, willful misconduct or gross negligence in the performance
of its duties.
E. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of each
Fund, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Prior to March 1, 1999, Forum Financial Services, Inc.
(FFSI) was the distributor of each Fund pursuant to similar terms and
compensation.
FFS, FAdS, FAcS and the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC. John Y. Keffer controls Forum Financial Group, LLC.
Under a distribution agreement (the "Distribution Agreement") with the Trust,
FFS acts as the representative of the Trust in connection with the offering of
shares of the Funds. FFS continually distributes shares of the Funds on a best
effort basis. FFS has no obligation to sell any specific quantity of Fund
shares.
FFS may enter into arrangements with various financial institutions through
which you may purchase or redeem shares. FFS may, at its own expense and from
its own resources, compensate certain persons who provide services in connection
with the sale or expected sale of shares of the Funds.
FFS may enter into agreements with selected broker-dealers, banks or other
financial institutions for distribution of shares of the Funds. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Funds are sold with sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Funds.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through which they purchase shares, which may include
charges, investment minimums, cutoff times and other restrictions in addition
to, or different from, those listed herein. Information concerning any charges
or services will be provided to customers by the financial institution.
Investors purchasing shares of a Fund in this manner should acquaint themselves
with their institution's procedures and should read the Prospectus in
conjunction with any materials and information provided by their institution.
The financial institution and not its customers will be the shareholder of
record, although customers may have the right to vote shares depending upon
their arrangement with the institution.
FFS does not receive a fee for any distribution services performed under the
Distribution Agreement.
20
<PAGE>
2. OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT
The Distribution Agreement must be approved at least annually by the Board or by
majority vote of the shareholders, and in either case by a majority of the
Disinterested Trustees.
The Distribution Agreement is terminable without penalty by the Trust with
respect to a Fund on 60 days' written notice when authorized either by vote of
the Fund's shareholders or by a majority vote of the Board, or by FFS on 60
days' written notice to the Trust.
Under the Distribution Agreement, FFS is not liable to the Trust or the Trust's
shareholders for any error of judgment or mistake of law, for any loss arising
out of any investment or for any act or omission in the performance of its
duties to a Fund, except for willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of reckless disregard of its
obligations and duties under the agreement.
Under the Distribution Agreement, FFS and certain related parties (such as FFS's
officers and persons that control FFS) are indemnified by the Trust against all
claims and expenses in any way related to alleged untrue statements of material
fact contained in the Funds' Registration Statement or any alleged omission of a
material fact required to be stated in the Registration Statement to make
statements contained therein not misleading. The Trust, however, will not
indemnify FSS for any such misstatements or omissions if they were made in
reliance upon information provided in writing by FSS in connection with the
preparation of the Registration Statement.
3. DISTRIBUTION PLAN - INVESTOR SHARE CLASS
In accordance with Rule 12b-1 under the 1940 Act, with respect to the Investor
Class of each Fund, the Trust has adopted a distribution plan (the "Plan") which
provides for the payment to FFS (to FFSI until February 28, 1999) of a Rule
12b-1 fee at the annual rate of up to 0.50% of the average daily net assets of
the Investor class of each Fund (except Daily Assets Government Fund) as
compensation for Forum's services as distributor. Under the Plan, FFS also
receives a fee as an annual rate of 0.15% of the average daily net assets of the
Investor Shares of Daily Assets Government Fund as compensation for its services
under the Plan. The Board's approval of the Plan was contingent on the Trust
limiting any payments under the Plan to 0.30% of the average daily net assets of
the Investor Share Class of each Fund (except Daily Assets Government Fund)
without further Board approval.
The 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 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 Plan
and identifying the activities for which those expenditures were made.
The 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 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 Plan without shareholder approval and that other material
amendments of the Plan must be approved by the Qualified Trustees. The 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 2 in Appendix C shows the dollar amount of fees payable under the Plan
with respect to each Fund. This information is provided for the past three years
(or shorter time a Fund has been operational).
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
The Trust As administrator, pursuant to an agreement with the Trust (the
"Administration Agreement"), FAdS is responsible for the supervision of the
overall management of the Trust, providing the Trust with general office
facilities and providing persons satisfactory to the Board to serve as officers
of the Trust.
21
<PAGE>
For its services, FAdS receives a fee from each Fund at an annual rate of 0.05%
of the average daily net assets of each Fund. The fee is accrued daily by each
Fund and is paid monthly based on average net assets for the previous month.
The Administration Agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Disinterested Trustees. The Administration Agreement is terminable without
penalty by the Trust or by FAdS with respect to a Fund on 60 days' written
notice.
Under the Administration Agreement, FAdS is not liable to the Trust or the
Trust's shareholders for any act or omission, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the agreement. Under the
Administration Agreement, FAdS and certain related parties (such as FAdS's
officers and persons who control FAdS) are indemnified by the Trust against any
and all claims and expenses related to FAdS's actions or omissions that are
consistent with FAdS's contractual standard of care.
CORE TRUST FAdS also manages all aspects of Core Trust's operations with respect
to the Portfolios. With respect to each Portfolio, FAdS has entered into an
administration agreement ("Core Administration Agreement") that will continue in
effect only if such continuance is specifically approved at least annually by
the Core Trust Board or by the shareholders and, in either case, by a majority
of the Disinterested Trustees. Under the Core Administration Agreement, FAdS
performs similar services for each Portfolio to those provided to each Fund.
The Core Administration Agreement provides that FAdS shall not be liable to Core
Trust or any of Core Trust's interestholders for any action or inaction of FAdS
relating to any event whatsoever in the absence of bad faith, willful
misfeasance or gross negligence in the performance of FAdS' duties or
obligations under the Agreement or by reason of FAdS' reckless disregard of its
duties and obligations under this Agreement. The Administration Agreement may be
terminated with respect to a Portfolio at anytime, without the payment of any
penalty: (1) by the Core Board on 60 days' written notice to FadS; or (2) by
FAdS on 60 days' written notice to Core Trust.
Table 3 in Appendix C shows the dollar amount of the fees payable by each Fund
to FAdS, the amount of the fee waived by FAdS, and the actual fees received by
FAdS. The table provides similar information for the Portfolios. The data are
for the past fiscal year (or shorter period depending on a Fund's commencement
of operations).
2. FUND ACCOUNTANT
THE TRUST As fund accountant, pursuant to an accounting agreement with the Trust
(the "Accounting Agreement"), FAcS provides fund accounting services to each
Fund. These services include calculating the NAV per share of each Fund and
preparing the Fund's financial statements and tax returns.
For its services, FAcS receives a fee from each Fund at an annual rate of
$36,000 plus $2,200 for the preparation of tax returns and certain surcharges
based upon the number and type of the Fund's portfolio transactions and
positions. The fee is accrued daily by the Funds and is paid monthly based on
the transactions and positions for the previous month.
22
<PAGE>
The Accounting Agreement must be approved at least annually by the Board or by
majority vote of the shareholders, and in either case by a majority of the
Disinterested Trustees. The Accounting Agreement is terminable without penalty
by the Trust or by FAcS with respect to a Fund on 60 days' written notice.
Under the Accounting Agreement, FAcS is not liable for any action or omission in
the performance of its duties to a Fund, except for willful misfeasance, bad
faith, gross negligence or by reason of reckless disregard of its obligations
and duties under the agreement. Under the Accounting Agreement, FAcS and certain
related parties (such as FAcS's officers and persons who control FAcS) are
indemnified by the Trust against any and all claims and expenses related to
FAcS's actions or omissions that are consistent with FAcS's contractual standard
of care.
Under the Accounting Agreement, in calculating a Fund's NAV per share, FAcS is
deemed not to have committed an error if the NAV per share it calculates is
within 1/10 of 1% of the actual NAV per share (after recalculation). The
Accounting Agreement also provides that FAcS will not be liable to a shareholder
for any loss incurred due to an NAV difference if such difference is less than
or equal 1/2 of 1% or less than or equal to $10.00. In addition, FAcS is not
liable for the errors of others, including the companies that supply securities
prices to FAcS and the Funds.
CORE TRUST FAcS performs similar services for the Portfolios and, in addition,
acts as the Portfolios' placement agent pursuant to a Portfolio and Unitholder
Accounting Agreement ("Core Accounting Agreement"). The Core Portfolio
Accounting Agreement shall continue in effect with respect to a Portfolio until
terminated; provided, that continuance is specifically approved at least
annually by the Board. The Portfolio and Unitholder Accounting Agreement may be
terminated with respect to a Portfolio at any time, without the payment of any
penalty (i) by the Board on 60 days' written notice to FAcS or (ii) by FAcS on
60 days' written notice to the Trust. 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.
Table 4 in Appendix C shows the dollar amount of the fees payable by the Funds
to FAcS, the amount of the fee waived by FAcS, and the actual fees received by
FAcS. The table also includes similar information for the Portfolios. The data
are for the past three fiscal years (or shorter period depending on a Fund's
commencement of operations).
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to a transfer agency
agreement with the Trust (the "Transfer Agency Agreement"), the Transfer Agent
maintains an account for each shareholder of record of a Fund and is responsible
for processing purchase and redemption requests and paying distributions to
shareholders of record. The Transfer Agent is located at Two Portland Square,
Portland, Maine 04101 and is registered as a transfer agent with the SEC.
For its services, the Transfer Agent receives with respect to each Fund 0.25% of
the average daily net assets of the Fund, an annual fee of $12,000 and $18 per
shareholder account. The fee is accrued daily by each Fund and is paid monthly
based on the average net assets for the previous month.
The Transfer Agency Agreement must be approved at least annually by the Board or
by majority vote of the shareholders, and in either case by a majority of the
Disinterested Trustees. The Transfer Agency Agreement is terminable without
penalty by the Trust or by the Transfer Agent with respect to the Fund on 60
days' written notice.
Under the Transfer Agency Agreement, the Transfer Agent is not liable for any
act in the performance of its duties to a Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties under the
agreement. Under the Transfer Agency Agreement, the Transfer Agent and certain
related parties (such as the Transfer Agent's officers and persons who control
the Transfer Agent) are indemnified by the Trust against any and all claims and
23
<PAGE>
expenses related to the Transfer Agent's actions or omissions that are
consistent with the Transfer Agent's contractual standard of care.
Table 5 in Appendix C shows the dollar amount of the fees payable by the Funds
to FSS, the amount of the fee waived by FSS, and the actual fees received by
FSS. The data are for the past three fiscal years (or shorter period depending
on a Fund's commencement of operations.).
4. 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 under which the Trust may pay FAdS a shareholder servicing fee at an annual
rate of 0.25% of the average daily net assets of each of the Institutional
Service class and the Investor class. FAdsS may pay any or all amounts of these
payments to various institutions that provide shareholder servicing to their
customers holding Institutional Services shares or Investsor shares. The
Shareholder Service Plan was effective on December 5, 1997 for the Institutional
Service class of those Funds then operating.
Any material amendment to the Shareholder Service Plan must be approved by a
majority of the Disinterested Trustees pursuant to a vote cast in person at a
meeting called for the purpose of voting on the amendment to the Plan. The Plan
may be terminated without penalty at any time by a vote of a majority of the
Disinterested Trustees.
FAdS 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.
In offering or redeeming Fund shares, 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 6 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).
5. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Forum Trust LLC
safeguards and controls the Funds' cash and securities, determines income and
collects interest on Fund investments. The Custodian may employ subcustodians to
provide custody of a Fund's domestic and foreign assets. The Custodian is
located at Two Portland Square, Portland, Maine 04101.
24
<PAGE>
For its services, the Custodian receives an annualized percentage of the average
daily net assets of a Fund. Each Fund also pays an annual domestic custody fee
as well as certain other transaction fees. These fees are accrued daily by the
Funds and are paid monthly based on average net assets and transactions for the
previous month.
6. LEGAL COUNSEL
Seward & Kissel LLP, 1200 G Street, N.W., Washington, D.C. 20005 passes upon
legal matters in connection with the issuance of shares of the Trust.
7. INDEPENDENT AUDITORS
____________, __________________________, have been selected as auditors for the
Funds and the Portfolios. The auditors audit the annual financial statements of
the Funds and provide the Funds with an audit opinion. The auditors also review
certain regulatory filings of the Funds and the Funds' tax returns.
6. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom a
Portfolio purchases or to whom the Portfolio sells is acting on its own behalf
(and not as the agent of some other party such as its customers). These
securities normally are purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid for these securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected: (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
In the case of fixed income securities traded in the over-the-counter markets,
there is generally no stated commission, but the price usually includes an
undisclosed commission or markup.
B. COMMISSIONS PAID
Each Fund invests substantially all of its assets in a corresponding Portfolio
of Core Trust and not directly in portfolio securities. Therefore, the Funds and
do not pay brokerage commissions directly.
Purchases and sales of portfolio securities for each Portfolio usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
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 price.
There usually are no brokerage commissions paid for any purchases. While the
Trust does not anticipate that the Portfolios will pay any amounts of brokerage
commissions, in the event a Portfolio pays brokerage commissions or other
transaction-related compensation, the payments may be made to broker-dealers who
pay expenses of the Portfolio that it would otherwise be obligated to pay
itself. Any transaction for which a Portfolio pays transaction-related
25
<PAGE>
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.
Allocations of transactions to dealers and the frequency of transactions are
determined for each Portfolio by the Adviser 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. The Adviser monitors the creditworthiness of counterparties to its
Fund's transactions and intends to enter into a transaction only when it
believes that the counterparty presents minimal and appropriate credit risks. No
portfolio transactions are executed with FIA or any of its affiliates.
For the Portfolios' fiscal years ended August 31, 1997, 1998, and 1999, no
Portfolio paid any brokerage commissions.
C. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for a Portfolio are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser or its affiliates. Investment decisions are the product of many
factors, including basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. In addition, two or more clients may
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which, in the Adviser's opinion,
is equitable to each and in accordance with the amount being purchased or sold
by each. There may be circumstances when purchases or sales of a portfolio
security for one client could have an adverse effect on another client that has
a position in that security. When purchases or sales of the same security for a
Portfolio and other client accounts managed by the Adviser occurs
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
D. SECURITIES OF REGULAR BROKER-DEALERS
As of the fiscal year ended August 31, 1999, several Portfolios maintained
investments in dealers (or their parent companies) with whom they conduct
portfolio transactions. Table 7 of Appendix C provides details of these
investments.
7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
You may purchase or redeem shares or request any shareholder privilege in person
at the offices of Forum Shareholder Services, LLC located at Two Portland
Square, Portland, Maine 04101.
The Funds accept orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
B. ADDITIONAL PURCHASE INFORMATION
Shares of each Fund are sold on a continuous basis by the distributor.
Each Fund reserves the right to refuse any purchase request.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, a Fund may accept portfolio securities that meet the investment
objective and policies of a Fund as payment for Fund shares. A Fund will only
accept securities that: (1) are not restricted as to transfer by law and are not
illiquid; and (2) have a value that is readily ascertainable (and not
established only by valuation procedures).
26
<PAGE>
1. IRAS
All contributions into an IRA through systematic investments are treated as IRA
contributions made during the year the investment is received.
Each Fund, except Daily Assets Municipal Fund, may be a suitable investment
vehicle for part or all of the assets held in Traditional or Roth individual
retirement accounts (collectively, "IRAs"). Call the Funds at 1-800-94FORUM to
obtain an IRA account application. Generally, all contributions and investment
earnings in an IRA will be tax-deferred until withdrawn. If certain requirements
are met, investment earnings held in a Roth IRA will not be taxed even when
withdrawn. You may contribute up to $2,000 annually to an IRA. Only
contributions to Traditional IRAs are tax-deductible. However, that deduction
may be reduced if you or your spouse is an active participant in an
employer-sponsored retirement plan and you have adjusted gross income above
certain levels. Your ability to contribute to a Roth IRA also may be restricted
if you or, if you are married, you and your spouse have adjusted gross income
above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
This information on IRAs is based on regulations in effect as of January 1, 1998
and summarizes only some of the important federal tax considerations affecting
IRA contributions. These comments are not meant to be a substitute for tax
planning. Consult your tax advisors about your specific tax situation.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Funds.
If you purchase shares through a financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in a Fund directly. When you purchase a Fund's shares
through a financial institution, you may or may not be the shareholder of record
and, subject to your institution's procedures; you may have Fund shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your institution for further
information. If you hold shares through a financial institution, the Funds may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Funds are not
responsible for the failure of any financial institution to carry out its
obligations.
Investors purchasing shares of the Funds through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
27
<PAGE>
C. ADDITIONAL REDEMPTION INFORMATION
A Fund may redeem shares involuntarily to reimburse the Fund for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to
transactions effected for the benefit of a shareholder which is applicable to a
Fund's shares as provided in the Prospectus.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted; (2) an emergency (as determined by the SEC) exists as a result of
which disposal by a Fund of its securities is not reasonably practicable or as a
result of which it is not reasonably practicable for a Fund fairly to determine
the value of its net assets; or (3) the SEC may by order permit for the
protection of the shareholders of a Fund.
2. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of a
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
shareholders may incur brokerage costs by converting the securities to cash. The
Trust has filed an election with the SEC pursuant to which a Fund may only
effect a redemption in portfolio securities if the particular shareholder is
redeeming more than $250,000 or 1% of the Fund's total net assets, whichever is
less, during any 90-day period.
D. NAV DETERMINATION
Pursuant to the rules of the SEC, the Board has established procedures to
stabilize a Fund's 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 a Fund's
$1.00 amortized cost price per share. Should that deviation exceed 1/2 of 1%,
the Board 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. Each Fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less, will
not purchase any instrument with a remaining maturity greater than 397 days or
subject to a repurchase agreement having a duration of greater than 397 days,
will limit portfolio investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that the Board has determined present minimal
credit risks and will comply with certain reporting and recordkeeping
procedures. The Trust has also established procedures to ensure that portfolio
securities meet a Fund's high quality criteria.
As described in the Prospectuses, under certain circumstances a Fund may close
early and advance the time by which the Fund must receive a purchase or
redemption order and payments. In this case, if an investor places an order
after the cut-off time, the order will be processed on the follow-up business
day and your access to the fund would be temporarily limited.
E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at a Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of a
Fund on the payment date for the distribution. Cash payments may be made more
than seven days following the date on which distributions would otherwise be
reinvested.
28
<PAGE>
8. TAXATION
The tax information set forth in the Prospectuses and the information in this
section relates solely to U.S. federal income tax law and assumes that each Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting each Fund and its shareholders that are not described in the
prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Funds or the implications to shareholders. The
discussions here and in the prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Funds and
their shareholders. Any of these changes or court decisions may have a
retroactive effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISER AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of a Fund.
The tax year-end of each Fund is August 31 (the same as the Fund's fiscal year
end).
1. MEANING OF QUALIFICATION
As a regulated investment company, a Fund will not be subject to federal income
tax on the portion of its net investment income (that is, taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (that is, the excess of long-term capital gains over long-term
capital losses) that it distributes to shareholders. In order to qualify as a
regulated investment company a Fund must satisfy the following requirements:
o The Fund must distribute at least 90% of its investment company
taxable income (that is, net investment income and capital gain net
income) for the tax year. (Certain distributions made by a Fund after
the close of its tax year are considered distributions attributable to
the previous tax year for purposes of satisfying this requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of an issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
29
<PAGE>
2. FAILURE TO QUALIFY
If for any tax year a Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of a Fund's current and accumulated earnings and profits. A
portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on a Fund's income and performance. It is possible that a Fund will not
qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its net investment
income for each tax year. Each Fund expects to derive substantially all of its
gross income (exclusive of capital gain) from sources other than dividends.
Accordingly, it is expected that none of a Fund's dividends or distributions
will qualify for the dividends-received deduction for corporations.
Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but a Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to you
as long-term capital gain, regardless of how long you have held shares.
These distributions do not qualify for the dividend-received deduction.
Each Fund may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
All capital loss carryovers are listed in the Funds' financial statements. Any
such losses may not be carried back.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce your tax basis in the shares and are treated as gain from
the sale of the shares to the extent your basis would be reduced below zero.
All distributions by a Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another Fund). If you receive a
distribution in the form of additional shares, it will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
You may purchase shares whose net asset value at the time reflects undistributed
net investment income or recognized capital gain, or unrealized appreciation in
the value of the assets of a Fund. Distributions of these amounts are taxable to
you in the manner described above, although the distribution economically
constitutes a return of capital to you.
Ordinarily, you are required to take distributions by a Fund into account in the
year in which they are made. A distribution declared in October, November or
December of any year and payable to you on a specified date in those months,
however, is deemed to be received by you (and made by the Fund) on December 31
of that calendar year even if the distribution is actually paid in January of
the following year.
You will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year.
30
<PAGE>
C. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 of the calendar year. The
balance of each Fund's income must be distributed during the next calendar year.
Each Fund will be treated as having distributed any amount on which it is
subject to income tax for any tax year.
For purposes of calculating the excise tax, each Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year; and (2) excludes foreign currency gains and
losses incurred after October 31 of any year (or November 30 or December 31 if
it has made the election described above) in determining the amount of ordinary
taxable income for the current calendar year. Each Fund will include foreign
currency gains and losses incurred after October 31 in determining ordinary
taxable income for the succeeding calendar year.
Each Fund intends to make sufficient distributions of its ordinary taxable
income and capital gain net income prior to the end of each calendar year to
avoid liability for the excise tax. Investors should note, however, that a Fund
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
D. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases (for example, by reinvesting dividends) other shares of the Fund
within 30 days before or after the sale or redemption (a so called "wash sale").
In general, any gain or loss arising from the sale or redemption of shares of a
Fund will be considered capital gain or loss and will be long-term capital gain
or loss if the shares were held for longer than one year. Any capital loss
arising from the sale or redemption of shares held for six months or less,
however, is treated as a long-term capital loss to the extent of the amount of
capital gain distributions received on such shares. In determining the holding
period of such shares for this purpose, any period during which a shareholder's
risk of loss is offset by means of options, short sales or similar transactions
is not counted. Capital losses in any year are deductible only to the extent of
capital gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary
income.
E. BACKUP WITHHOLDING
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide a correct tax payer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to a Fund that it is not subject to backup withholding
or that it is a corporation or other "exempt recipient." Backup withholding is
not an additional tax; any amounts so withheld may be credited against a
shareholder's federal income tax liability or refunded.
F. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from a Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income distributions paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower applicable treaty rate) upon the gross amount of the distribution.
The foreign shareholder generally would be exempt from U.S. federal income tax
on gain realized on the sale of shares of a Fund, capital gain distributions
from a Fund, and amounts retained by a Fund that are designated as undistributed
capital gain.
31
<PAGE>
In the case of a noncorporate foreign shareholder, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein.
The tax rules of other countries with respect to distributions from a Fund can
differ from the rules from the U.S. federal income taxation rules described
above. These foreign rules are not discussed herein. Foreign shareholders are
urged to consult their own tax advisers as to the consequences of foreign tax
rules with respect to an investment in a Fund.
G. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from a Fund can differ from the U.S. federal
income taxation rules described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in a
Fund, distributions from each Fund and the applicability of state and local
taxes and related matters.
8. OTHER MATTERS
A. THE TRUST AND ITS SHAREHOLDERS
1. GENERAL INFORMATION
The Trust was organized as a business trust under the laws of the State of
Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the
assets and liabilities of Forum Funds, Inc.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in its series. As of
the date hereof, the Trust consisted of the following shares of beneficial
interest:
Austin Global Equity Fund Investors Equity Fund
BIA Growth Equity Fund Investors Growth Fund
BIA Small-Cap Growth Fund Investors High Grade Bond Fund
Daily Assets Cash Fund(1) Maine Municipal Bond Fund
Daily Assets Government Fund(1) New Hampshire Bond Fund
Daily Assets Government Obligations Fund(1) Payson Balanced Fund
Daily Asset Municipal Fund(1) Payson Value Fund
Daily Assets Treasury Obligations Fund(1) Polaris Global Value Fund
Equity Index Fund TaxSaver Bond Fund
Investors Bond Fund
(1) The Trust offers shares of beneficial interest in an institutional,
institutional service, and investor share class of these series.
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate series and may divide series into classes of
shares; the costs of doing so will be borne by the Trust.
The Trust and each Fund will continue indefinitely until terminated.
32
<PAGE>
2. SERIES AND CLASSES OF THE TRUST
Each series or class of the Trust may have a different expense ratio and its
expenses will affect each class' performance. For more information on any other
class of shares of a Fund, investors may contact the Transfer Agent.
3. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency, shareholder service and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted separately by individual series except if: (1) the 1940 Act
requires shares to be voted in the aggregate and not by individual series; and
(2) when the Trustees determine that the matter affects more than one series and
all affected series must vote. The Trustees may also determine that a matter
only affects certain classes of the Trust and thus only those classes are
entitled to vote on the matter. Delaware law does not require the Trust to hold
annual meetings of shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by federal or state law. There are
no conversion or preemptive rights in connection with shares of the Trust.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
Shareholders representing 10% or more of the Trust's (or a series) shares may,
as set forth in the Trust Instrument, call meetings of the Trust (or series) for
any purpose related to the Trust (or series), including, in the case of a
meeting of the Trust, the purpose of voting on removal of one or more Trustees.
4. CERTAIN REORGANIZATION TRANSACTIONS
The Trust or any 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 a Fund. The Trustees may, without prior shareholder
approval, change the form of organization of the Trust by merger, consolidation
or incorporation. Under the Trust Instrument, the Trustees may, without
shareholder vote, cause the Trust or certain series to merge or consolidate into
one or more trusts, partnerships or corporations or cause the Trust to be
incorporated under Delaware law, so long as the surviving entity is an open-end,
management investment company that will succeed to or assume the Trust's
registration statement.
B. FUND OWNERSHIP
As of December __, 1999, the Trustees and officers of the Trust in the aggregate
owned less than 1% of the outstanding Shares of each Fund or class.
Also as of that date, certain shareholders of record owned 5% or more of a Fund
or Class. These shareholders and any shareholder known by a Fund to own
beneficially 5% or more of the Fund are listed in Table 8 in Appendix C.
From time to time, certain shareholders may own a large percentage of the shares
of a Fund or Class. Accordingly, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote. As of December ___,
1999, the following persons beneficially or of record owned 25% or more of the
shares of a Fund or Class (or of the Trust) and may be deemed to control the
Fund or the Class (or the Trust). For each person listed that is a company, the
33
<PAGE>
jurisdiction under the laws of which the company is organized (if applicable)
and the company's parents are listed.
<TABLE>
<S> <C> <C>
CONTROLLING PERSON INFORMATION
PERCENTAGE OF SHARES PERCENTAGE OF SHARES
OF CLASS OWNED OF FUND OWNED
DAILY ASSETS TREASURY OBLIGATIONS FUND
Investor Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS GOVERNMENT FUND
Investor Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS GOVERNMENT OBLIGATIONS
Investor Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS CASH FUND
Investors Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS MUNICIPAL FUND
Investors Shares
Institutional Shares
Institutional Service Shares
</TABLE>
D. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the Trust believes that the securities
regulators of some states, however, have indicated that they and the courts in
their states may decline to apply Delaware law on this point. The Forum Fund's
Trust Instrument (the document that governs the operation of the Trust) contains
an express disclaimer of shareholder liability for the debts, liabilities,
obligations and expenses of the Trust. 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
34
<PAGE>
liability was in effect, and a Fund is unable to meet its obligations. FAdS
believes that, in view of the above, there is no risk of personal liability to
shareholders.
The Trust Instrument provides that the Trustees shall not be liable to any
person other than the Trust and its shareholders. In addition, the Trust
Instrument provides that the Trustees shall not be liable for any conduct
whatsoever, provided that a Trustee is not protected against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by reference to the copy of such contract or other documents filed
as exhibits to the registration statement.
E. FINANCIAL STATEMENTS
The financial statements of the Institutional Shares, Institutional Service
Shares and Investors 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 and their corresponding Portfolios for
the year ended May 31, 1999 which are included in the Funds' Annual Report to
Shareholders dated May 31, 1999 are incorporated herein by reference These
financial statements include the schedules of investments, statement of assets
and liabilities, statements of operations, statements of changes in net assets,
financial highlights, notes and independent auditors' reports.
35
<PAGE>
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
Aaa Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds that 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 that make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Ca Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Note Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
A-1
<PAGE>
2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Note Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least
degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, large
uncertainties or major exposures to adverse conditions may outweigh
these.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Note Plus (+) or minus (-). The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
The `r' symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns that are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
risk-such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse
floaters.
A-2
<PAGE>
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest but may
AA vary slightly from time to time because of economic conditions.
A+,A,Protection factors are average but adequate. However, risk factors are
A- more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according
BB- to industry conditions. Overall quality may move up or down frequently
within this category.
B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
A-3
<PAGE>
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% - 90%
of such outstandings, and `D' the lowest recovery potential, i.e.
below 50%.
PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
aaa An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
aa An issue that is rated "aa" is considered a high- grade preferred
stock. This rating indicates that there is a reasonable assurance
the earnings and asset protection will remain relatively well
maintained in the foreseeable future.
a An issue that is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat
greater then in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
Ba An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings
and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
B An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of
time may be small.
caa An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
A-4
<PAGE>
ca An issue that is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
c This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for
issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
BB, B, CCC Preferred stock rated BB, B, and CCC is regarded, on balance,
as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. BB indicates the lowest degree
of speculation and CCC the highest. While such issues will likely
have some quality and protective characteristics, large
uncertainties or major risk exposures to adverse conditions outweigh
these.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard
& Poor's does not rate a particular type of obligation as a matter
of policy.
Note Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
A-5
<PAGE>
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by
many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime
Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
A-6
<PAGE>
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse change sin business, economic, or financial
conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
APPENDIX B - MISCELLANEOUS TABLES
APPENDIX B - PERFORMANCE INFORMATION
For the seven-day period ended August 31, 1999, the annualized yields of each of
the classes of the Funds that were then operating were as follows:
CURRENT YIELD EFFECTIVE YIELD
DAILY ASSETS TREASURY OBLIGATIONS FUND
Investor Shares 4.19% 4.28%
Institutional Service Shares 4.64% 4.75%
Institutional Shares 4.89% 5.01%
DAILY ASSETS GOVERNMENT FUND
Investor Shares 4.54% 4.65%
Institutional Service Shares 4.84% 4.96%
Institutional Shares 5.09% 5.22%
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Investor Shares 4.32% 4.42%
Institutional Service Shares 4.75% 4.87%
Institutional Shares 5.00% 5.13%
DAILY ASSETS CASH FUND
Investor Shares 4.44% 4.53%
Institutional Service Shares 4.89% 5.01%
Institutional Shares 5.14% 5.27%
DAILY ASSETS MUNICIPAL FUND
Investor Shares 2.30% 2.33%
Institutional Service Shares 2.75% 2.79%
Institutional Shares 3.20% 3.25%
B-1
<PAGE>
APPENDIX C- MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1999 105,930 0 105,930
Year ended August 31, 1998 55,735 0 55,735
Year ended August 31, 1997 0
GOVERNMENT PORTFOLIO
Year ended August 31, 1999 20,157 0 20,157
Year ended August 31, 1998 23,813 0 23,813
Period ended August 31, 1997 9,064 0 9,064
Year ended March 31, 1997 20,637 0 20,637
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1999 303,532 0 303,532
Year ended August 31, 1998 238,860 0 238,860
Year ended August 31, 1997 196,857 0 196,857
CASH PORTFOLIO
Year ended August 31, 1999 266,660 0 266,660
Year ended August 31, 1998 158,716 0 158,716
Year ended August 31, 1997 72,872 0 72,872
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1999 14,330 0 14,330
Year ended August 31, 1998 1,937 0 0
Year ended August 31, 1997 -- -- --
C-1
<PAGE>
TABLE 2 - INVESTOR SHARES RULE 12B-1 FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1999 49 49 0
Year ended August 31, 1998 0 0 0
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1999 712 712 0
Period ended August 31, 1998 0 0 0
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1999 26 26 0
Year ended August 31, 1998 0 0 0
DAILY ASSETS CASH FUND
Year ended August 31, 1999 640 640 0
Period ended August 31, 1998 0 0 0
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1999 139 139 0
Year ended August 31, 1998 0 0 0
C-2
<PAGE>
TABLE 3 - ADMINISTRATION FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1999 153,011 0 153,011
Year ended August 31, 1998 74,964 29,678 45,286
Year ended August 31, 1997 24,287 14,346 9,941
GOVERNMENT PORTFOLIO
Year ended August 31, 1999 20,197 20,197 0
Year ended August 31, 1998 28,796 28,796 0
Period ended August 31, 1997 18,128 18,128 0
Year ended March 31, 1997 41,274 41,274 0
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1999 438,060 0 438,060
Year ended August 31, 1998 317,754 0 317,754
Year ended August 31, 1997 252,821 0 252,821
CASH PORTFOLIO
Year ended August 31, 1999 385,799 0 385,799
Year ended August 31, 1998 212,800 0 212,800
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, 1999 14,330 14,330 0
Year ended August 31, 1998 1,937 1,937 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1999 52,465 52,465 0
Year ended August 31, 1998 24,549 24,549 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1999 20,109 20,109 0
Year ended August 31, 1998 28,110 2,864 25,246
Period ended August 31, 1997 18,123 0 18,123
Year ended March 31, 1997 41,232 7,453 33,779
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1999 22,179 22,179 0
Year ended August 31, 1998 4,115 4,115 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1999 35,746 35,746 0
Year ended August 31, 1998 10,505 10,505 0
Year ended August 31, 1997 7,453 7,453 0
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1999 14,310 14,310 0
Year ended August 31, 1998 1,934 1,934 0
Year ended August 31, 1997 -- -- --
C-3
<PAGE>
TABLE 4 - TRANSFER AGENCY FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1999 12,229 295 11,934
Year ended August 31, 1998 6,071 6,069 2
Year ended August 31, 1997 -- -- --
Institutional Shares
Year ended August 31, 1999 14,163 0 14,163
Year ended August 31, 1998 31,381 31,036 345
Investor Shares
Year ended August 31, 1999 12,053 12,053 0
Year ended August 31, 1998 843 843 0
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Year ended August 31, 1999 14,088 4,011 10,077
Year ended August 31, 1998 68,534 53,276 15,258
Period ended August 31, 1997 50,810 44,054 6,756
Year ended March 31, 1997 116,051 101,485 14,566
Institutional Shares
Year ended August 31, 1999 12,878 12,058 820
Year ended August 31, 1998 4,874 4,853 21
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1999 12,666 0 12,666
Year ended August 31, 1998 6,869 6,866 3
Year ended August 31, 1997 -- -- --
Institutional Shares
Year ended August 31, 1999 12,641 5,158 7,483
Year ended August 31, 1998 10,816 10,762 54
Investor Shares
Year ended August 31, 1999 12,036 12,036 0
Year ended August 31, 1998 843 843 0
DAILY ASSETS CASH FUND
Institutional Service Shares
Year ended August 31, 1999 13,503 0 13,503
Year ended August 31, 1998 27,955 15,294 12,661
Period ended August 31, 1997 29,772 17,766 12,006
Institutional Shares
Year ended August 31, 1999 12,939 0 12,939
Year ended August 31, 1998 9,362 9,311 51
Investor Shares
Year ended August 31, 1999 12,555 540 12,015
Year ended August 31, 1998 843 843 0
C-4
<PAGE>
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS MUNICIPAL FUND
Institutional Service Shares
Year ended August 31, 1999 12,122 5,989 6,133
Year ended August 31, 1998 842 842 0
Year ended August 31, 1997 -- -- --
Institutional Shares
Year ended August 31, 1999 12,597 12,084 513
Year ended August 31, 1998 4,150 4,126 24
Investor Shares
Year ended August 31, 1999 12,053 120 11,933
Year ended August 31, 1998 843 843 0
C-5
<PAGE>
TABLE 5 - SHAREHOLDER SERVICE FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
DAILY ASSETS TREASURY OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1999 17,320 17,320 0
Year ended August 31, 1998 2,600 2,600 0
Investor Shares
Year ended August 31, 1999 45 45 0
Period ended August 31, 1998 0 0 0
DAILY ASSETS GOVERNMENT FUND
Institutional Service Shares
Year ended August 31, 1999 17,533 17,533 0
Period ended August 31, 1998 78,274 78,274 0
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Institutional Service Shares
Year ended August 31, 1999 33,862 29,859 4,033
Year ended August 31, 1998 2,018 2,018 0
Investor Shares
Year ended August 31, 1999 26 26 0
Period ended August 31, 1998 0 0 0
DAILY ASSETS CASH FUND
Institutional Service Shares
Year ended August 31, 1999 77,200 46,584 30,616
Year ended August 31, 1998 22,439 22,439 0
Investor Shares
Year ended August 31, 1999 540 540 0
Period ended August 31, 1998 0 0 0
DAILY ASSETS MUNICIPAL FUND
Institutional Service Shares
Year ended August 31, 1999 6,491 6,491 0
Year ended August 31, 1998 0 0 0
Investor Shares
Year ended August 31, 1999 120 120 0
Period ended August 31, 1998 0 0 0
C-6
<PAGE>
TABLE 6 - FUND ACCOUNTING FEES ($)
GROSS FEE FEE WAIVED NET FEE PAID
TREASURY CASH PORTFOLIO
Year ended August 31, 1999 49,500 0 49,500
Year ended August 31, 1998 48,000 0 48,000
Year ended August 31, 1997 24,279 0 24,279
Year ended August 31, 1996 28,518 19,955 8,563
GOVERNMENT PORTFOLIO
Year ended August 31, 1999 49,500 39,899 9,601
Year ended August 31, 1998 48,000 37,946 10,054
Period ended August 31, 1997 20,000 0 20,000
Year ended March 31, 1997 48,000 0 48,000
Year ended March 31, 1996(1) 5,241 0 5,241
GOVERNMENT CASH PORTFOLIO
Year ended August 31, 1999 49,500 0 49,500
Year ended August 31, 1998 48,000 0 48,000
Year ended August 31, 1997 48,000 0 48,000
Year ended August 31, 1996 42,000 0 42,000
CASH PORTFOLIO
Year ended August 31, 1999 49,500 49,500 0
Year ended August 31, 1998 48,000 0 48,000
Year ended August 31, 1997 48,000 0 48,000
Year ended August 31, 1996 42,000 14,957 27,043
MUNICIPAL CASH PORTFOLIO
Year ended August 31, 1999 49,500 46,497 3,003
Year ended August 31, 1998 8,800 8,800 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS TREASURY OBLIGATIONS FUND
Year ended August 31, 1999 37,250 37,250 0
Year ended August 31, 1998 13,323 13,323 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS GOVERNMENT FUND
Year ended August 31, 1999 37,250 37,250 0
Year ended August 31, 1998 14,000 4,000 10,000
Period ended August 31, 1997 5,000 0 5,000
Year ended March 31, 1997 12,000 0 12,000
Year ended March 31, 1996 38,621 0 38,621
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Year ended August 31, 1999 37,250 37,250 0
Year ended August 31, 1998 14,064 14,064 0
Year ended August 31, 1997 -- -- --
DAILY ASSETS CASH FUND
Year ended August 31, 1999 37,250 37,250 0
Year ended August 31, 1998 18,999 12,999 6,000
Year ended August 31, 1997
DAILY ASSETS MUNICIPAL FUND
Year ended August 31, 1999 37,250 37,250 0
Year ended August 31, 1998 4,198 4,198 0
Year ended August 31, 1997 -- -- --
C-7
<PAGE>
TABLE 7 - PORTFOLIO HOLDINGS IN DEALERS ($)
VALUE
CASH PORTFOLIO
Goldman Sachs $39,984,000
C-8
<PAGE>
TABLE 8 - 5% SHAREHOLDERS
As of December ___, 1999, 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
Institutional Shares
Institutional Service Shares
DAILY ASSETS GOVERNMENT FUND
Investor Shares
Institutional Shares
Institutional Service Shares
C-9
<PAGE>
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Investor Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS CASH FUND
Investor Shares
Institutional Shares
Institutional Service Shares
DAILY ASSETS MUNICIPAL FUND
Investor Shares
Institutional Shares
Institutional Service Shares
</TABLE>
C-10
<PAGE>
APPENDIX D - ADDITIONAL ADVERTISING MATERIALS
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 181
mutual funds for 17 different fund managers, with more than $70 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 390 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.
D-1
<PAGE>
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.
Forum's full service commitment includes providing state-of-the-art accounting
support (Forum has 7 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 wit decades of experience with some of the country's major financial
institutions.
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 $1.25 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 $1.95 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.
D-2
<PAGE>
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 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."
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, debt and equity funds.
Forum Financial, based in Portland, Maine since 1987, administers 124 funds with
more than $29 billion in assets. Forum manages mutual funds for independent
investment advisers such as Payson and for banks. Forum Investment Advisors, LLC
an affiliate, is the largest Maine-based investment adviser with approximately
$1.95 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."
D-3
<PAGE>
H.M. Payson & Co., founded in 1854, is one of the nation's oldest investment
firms with nearly $1.25 billion in assets under management and $412 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 adviser, 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.
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
advisers 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: $73 billion
*Client Assets Processed by Fund Accounting: $53 billion
*Client Funds under Administration and Distribution: 181 mutual funds with 89
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 -215, Poland - 180, Bermuda - 4
FORUM CONTACTS: John Burns, Director, Forum Investment Advisors, LLC, (207)
879-1900 X 6132
Tony Santaniello, Director of Marketing, (207) 879-1900 X 6175
D-4
<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: $1.25 Billion
*Non-managed Custody Assets: $412 Million
*Client Base: 85% individuals; 15% institutional
*Owned by 11 shareholders; 10 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, Marketing Coordinator, (207) 772-3761
D-5
<PAGE>
Part C
Other Information
Item 23. Exhibits
(a) Trust Instrument of Registrant dated August 29, 1995 as amended on June 25,
1999 (see Note 1).
(b) By-Laws of Registrant (see Note 2).
(c) See the Sections 2.04 and 2.07 of the Trust Instrument filed as Exhibit
(a).
(d) (1) Investment Advisory Agreement between Registrant and H.M. Payson &
Co. relating to Payson Value Fund and Payson Balanced Fund dated
December 18, 1995 (see Note 3).
(2) Investment Advisory Agreement between Registrant and Austin Investment
Management, Inc. relating to Austin Global Equity Fund dated as of
June 14, 1996 (see Note 3).
(3) Investment Advisory Agreement between Registrant and Forum Investment
Advisors, LLC relating to Investors Bond Fund, Investors Growth Fund,
Investors High Grade Bond Fund, Maine Municipal Bond Fund, New
Hampshire Bond Fund and TaxSaver Bond Fund dated as of January 2, 1998
(see Note 4).
(4) Investment Advisory Agreement between Registrant and Polaris Capital
Management, Inc. dated as of June 1, 1998 (see Note 5).
(5) Investment Advisory Agreement between Registrant and H.M. Payson & Co.
relating to Investors Equity Fund dated as of December 5, 1997 (see
Note 6).
(6) Investment Subadvisory Agreement between H.M. Payson & Co. and Peoples
Heritage Bank relating to Investors Equity Fund dated as of December
5, 1997 (see Note 7).
(7) Investment Advisory Agreement between Registrant and Brown Investment
Advisory & Trust Company relating to BIA Small-Cap Growth Fund and BIA
Growth Equity Fund, as of dated June 29, 1999 (see Note 1).
(e) (1) Form of Selected Dealer Agreement between Forum Financial
Services, Inc. and securities brokers (see Note 3).
(2) Form of Bank Affiliated Selected Dealer Agreement between Forum
Financial Services, Inc. and bank affiliates (see Note 3).
(3) Distribution Agreement between Registrant and Forum Fund Services, LLC
relating to Austin Global Value Fund, BIA Growth Equity Fund, BIA
Small-Cap Growth Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Investor Shares, Institutional Shares and Institutional
Service Shares of Daily Assets Government Fund, Daily Assets Treasury
Obligations Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund, Maine Municipal Bond
Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value
Fund, Polaris Global Value Fund and TaxSaver Bond Fund dated as of
February 28, 1999 (filed herewith).
(4) Sub-Distribution Agreement between Forum Fund Services, LLC and Forum
Financial Services, Inc. dated March 1, 1999 (see Note 8)
(f) None.
1
<PAGE>
(g) (1) Custodian Agreement between Registrant and Forum Trust dated May
12, 1999 relating to Austin Global Equity Fund, BIA Small-Cap Growth
Fund, BIA Growth Equity Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson
Balanced Fund, Payson Value Fund, Polaris Global Value Fund and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Government Fund, Daily Assets Treasury Obligations
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund, undated (see Note 8).
(2) Master Custodian Agreement between Forum Trust and Bankers Trust
Company relating to Austin Global Equity Fund, BIA Small-Cap Growth
Fund, BIA Growth Equity Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson
Balanced Fund, Payson Value Fund, Polaris Global Value Fund and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Government Fund, Daily Assets Treasury Obligations
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund, dated April 20, 1999 (see Note 8).
(h) (1) Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Austin Global Equity Fund,
BIA Growth Equity Fund, BIA Small-Cap Growth Fund, Equity Index Fund,
Investors Bond Fund, Investors Equity Fund, Investors Growth Fund,
Investors High Grade Bond Fund, Maine Municipal Bond Fund, New
Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Polaris
Global Value Fund and Investor Shares, Institutional Shares and
Institutional Service Shares of Daily Assets Government Fund, Daily
Assets Treasury Obligations Fund, Daily Assets Government Obligations
Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund dated as
of June 19, 1997 and amended as of December 5, 1997 (see Note 8).
(2) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC relating to Austin Global Equity Fund, BIA Growth Equity
Fund, BIA Small-Cap Growth Fund, Equity Index Fund, Investors Bond
Fund, Investors Equity Fund, Investors Growth Fund, Investors High
Grade Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund,
Payson Balanced Fund, Payson Value Fund, Polaris Global Value Fund and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Government Fund, Daily Assets Treasury Obligations
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund dated as of June 19, 1997, as amended
December 5, 1997 (see Note 8).
(3) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC relating to Austin Global Equity Fund, BIA
Growth Equity Fund, BIA Small-Cap Growth Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson
Balanced Fund, Payson Value Fund, Polaris Global Value Fund and
Investor Shares, Institutional Shares and Institutional Service Shares
of Daily Assets Government Fund, Daily Assets Treasury Obligations
Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund
and Daily Assets Municipal Fund dated as of May 19, 1998, as amended
May 21, 1999 (See Note 8).
(4) Shareholder Service Plan of Registrant dated December 5, 1997 and Form
of Shareholder Service Agreement relating to the Daily Assets
Government Obligations Fund, Daily Assets Cash Fund, Daily Assets
Government Fund, Daily Assets Municipal Fund and Daily Assets Treasury
Obligations Fund (see Note 9).
(5) Shareholder Service Plan of Registrant dated March 18, 1998 and Form
of Shareholder Service Agreement relating to Polaris Global Value Fund
(see Note 6).
(i) Opinion of Seward & Kissel LLP dated January 5, 1996 (see Note 10).
(j) None.
(k) None.
2
<PAGE>
(l) Investment Representation letter of Reich & Tang, Inc. as original
purchaser of shares of Registrant (see Note 2).
(m) Rule 12b-1 Plan effective January 1, 1999 adopted by the Investor
Shares of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily Asset
Cash Fund and Daily Assets Municipal Fund (see Note 11).
(n) Not Required.
(o) 18f-3 plan adopted by Registrant (see Note 4).
Other Exhibits:
Power of Attorney for James C. Cheng (see Note 12).
Power of Attorney for Costas Azariadis (see Note 12).
Power of Attorney for J. Michael Parish (see Note 12).
Power of Attorney for John Y. Keffer (see Note 6).
- ---------------
Note:
(1) Exhibit incorporated by reference as filed in post-effective amendment
No. 73 via EDGAR on July 30, 1999, accession number
0001004402-99-000341.
(2) Exhibit incorporated by reference as filed in post-effective amendment
No. 43 via EDGAR on July 31, 1997, accession number
0000912057-97-025707.
(3) Exhibit incorporated by reference as filed in post-effective amendment
No. 62 via EDGAR on May 26, 1998, accession number
0001004402-98-000307.
(4) Exhibit incorporated by reference as filed in post-effective amendment
No. 56 via EDGAR on December 31, 1997, accession number
0001004402-97-000281.
(5) Exhibit incorporated by reference as filed in post-effective amendment
No. 63 via EDGAR on June 8, 1998, accession number
0001004402-98-000339.
(6) Exhibit incorporated by reference as filed in post-effective amendment
No. 65 via EDGAR on September 30, 1998, accession number
0001004402-98-000530.
(7) Exhibit incorporated by reference as filed in post-effective amendment
No. 64 via EDGAR on July 31, 1998, accession number
0001004402-98-000421.
(8) Exhibit incorporated by reference as filed in post-effective amendment
No. 72 via EDGAR on June 16, 1999, accession number
0001004402-99-000308.
(9) Exhibit incorporated by reference as filed in post-effective amendment
No. 75 via EDGAR on September 30, 1999, accession number
0001004402-99-000395.
(10) Exhibit incorporated by reference as filed in post-effective amendment
No. 33 via EDGAR on January 5, 1996, accession number
0000912057-96-000216.
(11) Exhibit incorporated by reference as filed in post-effective amendment
No. 69 via EDGAR on December 15, 1998, accession number
0001004402-98-000648.
(12) Exhibit incorporated by reference as filed in post-effective amendment
No. 34 via EDGAR on May 9, 1996, accession number
0000912057-96-008780.
3
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUNDS
Daily Assets Treasury Obligations Fund, Daily Assets Government Fund,
and Daily Assets Municipal Fund may be deemed to control Treasury Cash
Portfolio, Government Portfolio, and Municipal Cash Portfolio,
respectively, each a series of Core Trust (Delaware).
ITEM 25. INDEMNIFICATION
In accordance with Section 3803 of the Delaware Business Trust Act,
Section 10.02 of Registrant's Trust Instrument provides as follows:
"10.02. INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Sectio
(b) below:
"(i) Every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of being or having
been a Trustee or officer and against amounts paid or incurred by him
in the settlement thereof;
(ii) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) Who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
Covered Person's office or (B) not to have acted in good faith in the
reasonable belief that Covered Person's action was in the best interest
of the Trust; or
(ii) In the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Trustee's or officer's office,
(A) By the court or other body approving the settlement;
(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or
(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full
trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
4
<PAGE>
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 5.2 may be paid by the Trust
or Series from time to time prior to final disposition thereof upon
receipt of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust or Series if it is
ultimately determined that he is not entitled to indemnification under
this Section 5.2; provided, however, that either (a) such Covered
Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance
payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Section 5.2.
(e) Conditional advancing of indemnification monies under this Section
5.2 for actions based upon the 1940 Act may be made only on the
following conditions: (i) the advances must be limited to amounts used,
or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or
on behalf of, the recipient to repay that amount of the advance which
exceeds that amount which it is ultimately determined that he is
entitled to receive from the Trust by reason of indemnification; and
(iii) (a) such promise must be secured by a surety bond, other suitable
insurance or an equivalent form of security which assures that any
repayments may be obtained by the Trust without delay or litigation,
which bond, insurance or other form of security must be provided by the
recipient of the advance, or (b) a majority of a quorum of the Trust's
disinterested, non-party Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
(f) In case any Holder or former Holder of any Series shall be held to
be personally liable solely by reason of the Holder or former Holder
being or having been a Holder of that Series and not because of the
Holder or former Holder acts or omissions or for some other reason, the
Holder or former Holder (or the Holder or former Holder's heirs,
executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust, on behalf of
the affected Series, shall, upon request by the Holder, assume the
defense of any claim made against the Holder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the
Series."
With respect to indemnification of an adviser to the Trust, the
Investment Advisory Agreements between the Trust and Austin Investment
Management, Inc., H.M. Payson & Co. and Forum Investment Advisers, LLC
(Investors Bond Fund, Investors High Grade Bond Fund, TaxSaver Bond
Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund and Investors
Growth Fund) include language similar to the following:
"Section 4. We shall expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us,
and we agree as an inducement to your undertaking these services that
you shall not be liable hereunder for any mistake of judgment or in any
event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, you against
any liability to us or and to our security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder."
With respect to indemnification of an adviser to the Trust, the
Investment Advisory Agreements between the Trust and Polaris Capital
Management, Inc. and Brown Investment Advisors & Trust Company provide
as follows:
5
<PAGE>
"SECTION 5. STANDARD OF CARE. (a) The Trust shall expect of the
Adviser, and the Adviser will give the Trust the benefit of, the
Adviser's best judgment and efforts in rendering its services to the
Trust. The Adviser shall not be liable hereunder for error of judgment
or mistake of law or in any event whatsoever, except for lack of good
faith, provided that nothing herein shall be deemed to protect, or
purport to protect, the Adviser against any liability to the Trust or
to the Trust's security holders to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of the Adviser's duties hereunder, or by reason of
the Adviser's reckless disregard of its obligations and duties
hereunder. (b) The Adviser shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control including, without limitation, acts of
civil or military authority, national emergencies, labor difficulties
(other than those related to the Adviser's employees), fire, mechanical
breakdowns, flood or catastrophe, acts of God, insurrection, war, riots
or failure of the mails, transportation, communication or power supply.
With respect to indemnification of the underwriter of the Trust,
Section 8 of the Distribution Agreement provides:
"(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls
the Distributor within the meaning of section 15 of the Securities Act
or section 20 of the 1934 Act ("Distributor Indemnitees") free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims, demands,
actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectuses or arising
out of or based upon any alleged omission to state a material fact
required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection with the preparation of
the Registration Statement or exhibits to the Registration Statement by
or on behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Trust shall indemnify and hold each Distributor Indemnitee
free and harmless from and against any Distributor Claim; provided,
that the term Distributor Claim for purposes of this sentence shall
mean any Distributor Claim related to the matters for which the
Distributor has requested amendment to the Registration Statement and
for which the Trust has not filed a Required Amendment, regardless of
with respect to such matters whether any statement in or omission from
the Registration Statement was made in reliance upon, or in conformity
with, information furnished to the Trust by or on behalf of the
Distributor.
(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the
Trust and approved by the Distributor, which approval shall not be
withheld unreasonably. The Trust shall advise the Distributor that it
will assume the defense of the suit and retain counsel within ten (10)
days of receipt of the notice of the claim. If the Trust assumes the
defense of any such suit and retains counsel, the defendants shall bear
the fees and expenses of any additional counsel that they retain. If
the Trust does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Trust or has been
advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust
will reimburse any Distributor Indemnitee named as defendant in such
suit for the reasonable fees and expenses of any counsel that person
retains. A Distributor Indemnitee shall not settle or confess any claim
without the prior written consent of the Trust, which consent shall not
be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"),
free and harmless from and against any and all claims, demands,
6
<PAGE>
actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable
counsel fees incurred in connection therewith), but only to the extent
that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other
expenses result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus or any alleged omission of a
material fact required to be stated or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust in writing in connection with the preparation of the Registration
Statement or Prospectus by or on behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement ("Trust Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Trust Claim and may retain counsel of good standing chosen
by the Distributor and approved by the Trust, which approval shall not
be withheld unreasonably. The Distributor shall advise the Trust that
it will assume the defense of the suit and retain counsel within ten
(10) days of receipt of the notice of the claim. If the Distributor
assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel
that they retain. If the Distributor does not assume the defense of any
such suit, or if Trust does not approve of counsel chosen by the
Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to
the Distributor, the Distributor will reimburse any Trust Indemnitee
named as defendant in such suit for the reasonable fees and expenses of
any counsel that person retains. A Trust Indemnitee shall not settle or
confess any claim without the prior written consent of the Distributor,
which consent shall not be unreasonably withheld or delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a
Distributor Indemnitee or Trust Indemnitee, respectively, by the person
against whom such action is brought within twenty (20) days after the
summons or other first legal process is served. Such notice shall refer
to the person or persons against whom the action is brought. The
failure to provide such notice shall not relieve the party entitled to
such notice of any liability that it may have to any Distributor
Indemnitee or Trust Indemnitee except to the extent that the ability of
the party entitled to such notice to defend such action has been
materially adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Distributor Indemnitee or Trust Indemnitee and shall survive the sale
and redemption of any Shares made pursuant to subscriptions obtained by
the Distributor. The indemnification provisions of this Section will
inure exclusively to the benefit of each person that may be a
Distributor Indemnitee or Trust Indemnitee at any time and their
respective successors and assigns (it being intended that such persons
be deemed to be third party beneficiaries under this Agreement).
(g) Each party agrees promptly to notify the other party of the
commencement of any litigation or proceeding of which it becomes aware
arising out of or in any way connected with the issuance or sale of
Shares.
(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organic Documents or any applicable
statute or regulation or shall require the Distributor to take any
action contrary to any provision of its Articles of Incorporation or
Bylaws or any applicable statute or regulation; provided, however, that
neither the Trust nor the Distributor may amend their Organic Documents
7
<PAGE>
or Articles of Incorporation and Bylaws, respectively, in any manner
that would result in a violation of a representation or warranty made
in this Agreement.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or its security holders
to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Forum Investment Advisors, LLC
The description of Forum Investment Advisors, LLC (investment adviser
to Investors High Grade Bond Fund, Investors Bond Fund, TaxSaver Bond
Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund,, Investors
Growth Fund, and the Institutional, Institutional Service, and Investor
classes of Daily Assets Treasury Obligations Fund, Daily Assets
Government Fund, Daily Assets Government Obligations Fund, Daily Assets
Cash Fund, and Daily Assets Municipal Fund) contained in Parts A and B
of this filing and in Parts A and B of post-effective amendment #73 to
the Trust's Registration Statement (accession number 0001004402-99-000)
is incorporated by reference herein.
The following are the members of Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101, including their business
connections, which are of a substantial nature.
Forum Holdings Corp. I., Member.
Forum Trust, LLC, Member.
Both Forum Holdings Corp. I. and Forum Trust are controlled indirectly
by John Y. Keffer, Chairman and President of the Registrant. Mr.
Keffer is President of Forum Trust and Forum Financial Group, LLC. Mr.
Keffer is also a director and/or officer of various registered
investment companies for which the various Forum Financial Group's
operating subsidiaries provide services.
The following are the officers of Forum Investment Advisors, LLC,
including their business connections that are of a substantial nature.
Each officer may serve as an officer of various registered investment
companies for which the Forum Financial Group provides services.
<TABLE>
<S> <C> <C>
Name Title Business Connection
.................................... ................................... ..................................
David I. Goldstein Assistant Secretary Forum Investment Advisors, LLC
................................... ..................................
................................... ..................................
General Counsel Forum Financial Group, LLC
................................... ..................................
................................... ..................................
Officer other Forum affiliated companies
.................................... ................................... ..................................
John Burns Director Forum Investment Advisors, LLC
................................... ..................................
................................... ..................................
Director Forum Financial Group, LLC
................................... ..................................
................................... ..................................
Officer other Forum affiliated companies
.................................... ................................... ..................................
Marc Keffer Assistant Secretary Forum Investment Advisors, LLC
................................... ..................................
................................... ..................................
Corporate Counsel Forum Financial Group, LLC
................................... ..................................
................................... ..................................
Officer other Forum affiliated companies
</TABLE>
(b) H.M. Payson & Co.
The description of H.M. Payson & Co. (investment adviser to Payson
Value Fund, Payson Balanced Fund and Investors Equity Fund) contained
in Parts A and B of post-effective amendment #73 to the Trust's
Registration Statement (accession number 0001004402-99-000341) is
incorporated by reference herein.
The following are the directors and principal executive officers of
H.M. Payson & Co., including their business connections, which are of
a substantial nature. The address of H.M. Payson & Co. is One Portland
Square, Portland, Maine 04101.
8
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Adrian L. Asherman Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John C. Downing Managing Director, Treasurer H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Thomas M. Pierce Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Peter E. Robbins Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John H. Walker Managing Director, President H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Teresa M. Esposito Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John C. Knox Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Harold J Dixon Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Michael R. Currie Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
William O. Hall, III Managing Director H.M. Payson & Co.
----------------------------------- ------------------------------------- ----------------------------------
</TABLE>
(c) Austin Investment Management, Inc.
The description of Austin Investment Management, Inc. (investment
adviser to Austin Global Equity Fund) contained in Parts A and B of
post-effective amendment #73 to the Trust's Registration Statement
(accession number 0001004402-99-000341), is incorporated by reference
herein.
The following is the director and principal executive officer of Austin
Investment Management, Inc. 375 Park Avenue, New York, New York 10152,
including his business connections, which are of a substantial nature.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Peter Vlachos Director, President, Treasurer, Austin Investment Management Inc.
Secretary
----------------------------------- ------------------------------------- ----------------------------------
</TABLE>
(d) Peoples Heritage Bank
The description of Peoples Heritage Bank ("Peoples") (investment
sub-adviser to Investors Equity Fund) contained in Parts A and B of
post-effective amendment #75 to the Trust's Registration Statement
(accession number 0001004402-99-000395) is incorporated by reference
herein.
The following are the officers of Peoples Trust and Investment Group,
including their business connections, which are of a substantial
nature, who provide investment advisory related services. Unless
otherwise indicated below, the principal business address of Peoples
with which these are connected is One Portland Square, Portland, Maine
04101.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Gary L. Robinson Executive Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
9
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Dorothy M. Wentworth Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Stephen L. Eddy Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Dana R. Mitiguy Chief Investment Officer Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Larry D. Pelletier Vice President Peoples
217 Main Street
Lewiston, Maine 04240
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Carolyn B. May Vice President Peoples
217 Main Street
Lewiston, Maine 04240
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Kevin K. Brown Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Donald W. Smith Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John W. Gibbons Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Joseph M. Pratt Vice President Peoples
74 Hammond Street
Bangor, Maine 04401
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Lucy L. Tucker Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Nancy W. Bard Assistant Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Douglas P. Adams Trust Officer Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Melanie L. Bishop Trust Officer Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Jeffrey Oldfield Vice President Peoples
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Janet E. Milley Assistant Vice President Peoples
74 Hammond Street
Bangor, Maine 04401
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Kathryn Dion Vice President Peoples
217 Main Street
Lewiston, Maine 04240
----------------------------------- ------------------------------------- ----------------------------------
</TABLE>
(e) Brown Investment Advisory & Trust Company
The description of Brown Investment Advisory & Trust Company
("Brown")(investment adviser to BIA Small-Cap Growth Fund and BIA
Growth Equity Fund) contained in Parts A and B of post-effective
amendment No. 72 (accession number 0001004402-99-000308) is
incorporated by reference herein.
The following are the directors and principal executive officers of
Brown, including their business connections, which are of a substantial
nature. The address of Brown is Furness House, 19 South Street,
Baltimore, Maryland 21202 and, unless otherwise indicated below, that
address is the principal business address of any company with which the
directors and principal executive officers are connected.
10
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael D. Hankin President, Chief Executive Brown
Officer, Trustee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
President The Maryland Zoological Society
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Valleys Planning Council
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David L. Hopkins, Jr. Chairman Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Westvaco Corporation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Metropolitan Opera Association
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Chairman, Finance Episcopal Church Foundation
Committee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Maryland Historical Society
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Charles W. Cole, Jr. Vice Chairman of the Board of Brown
Trustees
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Flag Investors Mutual Funds
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Provident Bankshares Corporation
and Provident Bank of Maryland
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director, Chairman of Investment The University of Maryland
Committee Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Regents The University of Maryland
Systems
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Member The Governor's Committee on
School Funding
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Member Investment Committee of Helix
Health System
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman of Investment Committee France-Merrick Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Chairman Baltimore Council on Foreign
Affairs
------------------------------------ ------------------------------------ ----------------------------------
11
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Truman T. Semans Vice Chairman of the Board of Brown
Trustees
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee, Member and Former Duke University
Chairman of Investment Committee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee, Chairman of Finance Lawrenceville School
Committee and Member of Investment
and Executive Committees
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors, Member of Chesapeake Bay Foundation
Investment and Executive Committees
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Flag Investors Mutual Funds
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Committee Member Mercy Medical Center
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Committee Member St. Mary's Seminary
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Committee Member Archdiocese of Baltimore
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Committee Member Robert E. Lee Memorial Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Committee Member W. Alton Jones Foundation
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
William C. Baker Trustee Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
President and Chief Executive Chesapeake Bay Foundation
Officer
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee John Hopkins Hospital
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Member Washington College Board of
Visitors and Governors
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Baltimore Community Foundation
------------------------------------ ------------------------------------ ----------------------------------
12
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Jack S. Griswold Trustee Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Managing Director Armata Partners
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Alex. Brown Realty
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Baltimore Community
Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Chesapeake Bay Foundation
Living Classrooms
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Maryland Historical Society
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Member Washington College Board of
Visitors and Governors
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Treasurer Washington College
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chair Campaign for Washington's College
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Earl L. Linehan Trustee Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
President Woodbrook Capital, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Strescon Industries
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman UMBC Board of Visitors
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Investment Committee Gilman School
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member Stoneridge, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member Sagemaker, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member Medical Mutual Liability
Insurance Society of Maryland
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member Heritage Properties, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member St. Mary's Seminary & University
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member St. Ignatius Loyola Academy
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member University of Notre Dame
Advisory Council
------------------------------------ ------------------------------------ ----------------------------------
13
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Walter D. Pinkard, Jr. Trustee Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
President and Chief Executive Colliers Pinkard
Officer
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman The Americas Region of Colliers
International
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Vice President France Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman The Baltimore Community
Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Directors Member France-Merrick Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The John Hopkins University
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Greater Baltimore Committee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Gilman School
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Calvert School
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Baltimore Community
Foundation
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The East Baltimore Community
Development Bank
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Greater Baltimore Alliance
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Baltimore Reads, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Downtown Baltimore District
Authority
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Yale University Development
Board
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee The Maryland Business Roundtable
for Education
------------------------------------ ------------------------------------ ----------------------------------
14
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
John J.F. Sherrerd Trustee Brown
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Provident Mutual Life Insurance
Company
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director C. Brewer and Company
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee, Vice Chairman of Princeton University
Executive Committee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee, Chairman of Investment The Robertson Foundation
Committee
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee GESU School
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director and Executive Committee Princeton Investment Management
Member
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Board of Overseers University of Pennsylvania
Wharton School.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David M. Churchill, CPA Chief Financial Officer Brown
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael D. Hankin Chief Executive Officer Brown
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
Item 27. Principal Underwriters
(a) Forum Financial Services, Inc., Registrant's underwriter, or its
affiliate, Forum Fund Services, LLC, serve as underwriter for the
following investment companies registered under the Investment Company
Act of 1940,as amended:
The Cutler Trust Monarch Funds
Memorial Funds Norwest Advantage Funds
Forum Funds Sound Shore Fund, Inc.
The following officers of Forum Fund Services, LLC, the Registrant's
underwriter, hold the following positions with the Registrant. Their
business address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
John Y. Keffer President Chairman, President
David I. Goldstein Secretary Vice President
</TABLE>
Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained at the offices of Forum
Administrative Services, LLC and Forum Shareholder Services, LLC, Two
Portland Square, Portland, Maine 04101. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts
and deliveries of securities and receipts and disbursements of cash are
maintained at the offices of the Registrant's custodian, BankBoston,
100 Federal Street, Boston, Massachusetts 02106. The records required
to be maintained under Rule 31a-1(b)(5), (6) and (9) are maintained at
the offices of the Registrant's adviser or subadviser, as listed in
Item 26 hereof.
15
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Registrant undertakes to furnish each person, to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof, to which the
prospectus relates upon request and without charge.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
post-effective amendment number 76 to Registrant's registration statement to be
signed on its behalf by the undersigned, duly authorized in the City of
Portland, State of Maine on November 1, 1999.
FORUM FUNDS
By: /s/ John Y. Keffer
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on
November 1, 1999.
Principal Executive Officer
/s/ John Y. Keffer
John Y. Keffer
President and Chairman
Principal Financial Officer
/s/ Stacey Hong
Stacey Hong
Treasurer
A majority of the Trustees
/s/ John Y. Keffer
John Y. Keffer
Trustee
James C. Cheng, Trustee
J. Michael Parish, Trustee
Costas Azariadis, Trustee
By: /s/ John Y. Keffer
John Y. Keffer
Attorney in Fact*
*Pursuant to powers of attorney filed as Other Exhibits to this Registration
Statement.
17
<PAGE>
SIGNATURES
On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Forum Funds to be signed in the
City of Portland, State of Maine on November 1, 1999.
CORE TRUST (DELAWARE)
By:/s/ John Y. Keffer
John Y. Keffer, President
On behalf of Core Trust (Delaware), this amendment to the Registration Statement
of Monarch Funds has been signed below by the following persons in the
capacities indicated on November 1, 1999.
(a) Principal Executive Officer
/s/ John Y. Keffer
John Y. Keffer, Chairman and President
(b) Principal Financial Officer
/s/ Stacey E. Hong
Stacey E. Hong, Treasurer
(c) A majority of the Trustees
/s/ John Y. Keffer
John Y. Keffer, Chairman
Costas Azariadis, Trustee
J. Michael Parish, Trustee
James C. Cheng, Trustee
By:/s/ John Y. Keffer
John Y. Keffer, Attorney in fact*
* Pursuant to powers of attorney previously filed as an Exhibit to this
Registration Statement.
18
<PAGE>
INDEX TO EXHIBITS
(e) (3) Distribution Agreement between Registrant and Forum Fund Services, LLC
relating to Austin Global Value Fund, BIA Growth Equity Fund, BIA
Small-Cap Growth Fund, Equity Index Fund, Investors Bond Fund,
Investors Equity Fund, Investors Growth Fund, Investors High Grade
Bond Fund, Investor Shares, Institutional Shares and Institutional
Service Shares of Daily Assets Government Fund, Daily Assets Treasury
Obligations Fund, Daily Assets Government Obligations Fund, Daily
Assets Cash Fund and Daily Assets Municipal Fund, Maine Municipal Bond
Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value
Fund, Polaris Global Value Fund and TaxSaver Bond Fund dated as of
February 28, 1999.
18
<PAGE>
FORUM FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 28th day of February 1999, by and between
Forum Funds, a Delaware business trust, with its principal office and place of
business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum
Fund Services, LLC, a Delaware limited liability company with its principal
office and place of business at Two Portland Square, Portland, Maine 04101
("Distributor").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company and
may issue its shares of beneficial interest, no par value ("Shares") in separate
series and classes; and
WHEREAS, the Distributor is registered under the Securities Exchange
Act of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly to
purchasers or through other financial intermediaries;
WHEREAS, the Trust offers shares in various series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement being herein
referred to as a "Fund," and collectively as the "Funds") and the Trust may in
the future offer shares of various classes of each Fund as listed in Appendix A
hereto (each such class together with all other classes subsequently established
by the Trust in a Fund being herein referred to as a "Class," and collectively
as the "Classes"); and
WHEREAS, the Trust desires that the Distributor offer, as principal
underwriter, the Shares of each Fund and Class thereof to the public and the
Distributor is willing to provide those services on the terms and conditions set
forth in this Agreement in order to promote the growth of the Funds and
facilitate the distribution of the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Distributor do hereby agree as
follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints the Distributor, and the Distributor
hereby agrees, to act as distributor of the Shares for the period and on the
terms set forth in this Agreement.
(b) In connection therewith, the Trust has delivered to the Distributor
copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended
from time to time, "Organic Documents"), (ii) the Trust's Registration Statement
and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended
("Securities Act"), or the 1940 Act ("Registration Statement"), (iii) the
current prospectuses and statements of additional information of each Fund and
Class thereof (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), (iv) each current plan of distribution or
similar document adopted by the Trust under Rule 12b-1 under the 1940 Act
("Plan") and each current shareholder service plan or similar document adopted
by the Trust ("Service Plan"); and (iv) all procedures adopted by the Trust with
respect to the Funds (e.g., repurchase agreement procedures), and shall promptly
furnish the Distributor with all amendments of or supplements to the foregoing.
The Trust shall deliver to Forum a certified copy of the resolution of the Board
of Trustees of the Trust (the "Board") appointing Forum and authorizing the
execution and delivery of this Agreement.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Trust to
act distributor of the Funds except that the rights given under this Agreement
to the Distributor shall not apply to: (i) Shares issued in connection with the
merger, consolidation or reorganization of any other investment company or
series or class thereof with a Fund or Class thereof; (ii) a Fund's acquisition
by purchase or otherwise of all or substantially all of the assets or stock of
any other investment company or series or class thereof; (iii) the reinvestment
in Shares by a Fund's shareholders of dividends or other distributions; or (iv)
any other offering by the Trust of securities to its shareholders (collectively
"exempt transactions").
SECTION 3. OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Trust the
Shares needed to fill unconditional orders for unsold Shares of the Funds as
shall then be effectively registered under the Securities Act placed with the
Distributor by investors or selected dealers or selected agents (each as defined
in Section 11 hereof) acting as agent for their customers or on their own
behalf. Alternatively, the Distributor may act as the Trust's agent, to offer,
and to solicit offers to subscribe to, unsold Shares of the Funds as shall then
be effectively registered under the Securities Act. The Distributor will
promptly forward all orders and subscriptions to the Trust. The price that the
Distributor shall pay for Shares purchased from the Trust shall be the net asset
value per Share, determined as set forth in Section 3(c) hereof, used in
determining the public offering price on which the orders are based. Shares
purchased by the Distributor are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(b) hereof, or to selected
dealers or selected agents acting as agent for their customers that have entered
into agreements with the Distributor pursuant to Section 11 hereof or acting on
their own behalf. The Trust reserves the right to sell Shares directly to
investors through subscriptions received by the Trust, but no such direct sales
shall affect the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of a Fund, i.e., the price
per Share at which the Distributor or selected dealers or selected agents may
sell Shares to the public or to those persons eligible to invest in Shares as
described in the applicable Prospectus, shall be the public offering price
determined in accordance with the then currently effective Prospectus of the
Fund or Class thereof under the Securities Act relating to such Shares. The
public offering price shall not exceed the net asset value at which the
Distributor, when acting as principal, is to purchase such Shares, plus, in the
case of Shares for which an initial sales charge is assessed, an initial charge
equal to a specified percentage or percentages of the public offering price of
the Shares as set forth in the current Prospectus relating to the Shares. In the
case of Shares for which an initial sales charge may be assessed, Shares may be
sold to certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus relating to the
Shares. The Trust will advise the Distributor of the net asset value per Share
at each time as the net asset value per Share shall have been determined by the
Trust and at such other times as the Distributor may reasonably request.
(c) The net asset value per Share of each Fund or Class thereof shall
be determined by the Trust, or its designated agent, in accordance with and at
the times indicated in the applicable Prospectus on each Fund business day in
accordance with the method set forth in the Prospectus and guidelines
established by the Trust's Board of Trustees (the "Board").
(d) The Trust reserves the right to suspend the offering of Shares of a
Fund or of any Class thereof at any time in the absolute discretion of the
Board, and upon notice of such suspension the Distributor shall cease to offer
Shares of the Funds or Classes thereof specified in the notice.
(e) The Trust, or any agent of the Trust designated in writing to the
Distributor by the Trust, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Trust for
acceptance and shall not be binding until accepted by the Trust. Any order or
subscription may be rejected by the Trust; provided, however, that the Trust
will not arbitrarily or without reasonable cause refuse to accept or confirm
orders or subscriptions for the purchase of Shares. The Trust or its designated
agent will confirm orders and subscriptions upon their receipt, will make
appropriate book entries and, upon receipt by the Trust or its designated agent
of payment thereof, will issue such Shares in certificated or uncertificated
form pursuant to the instructions of the Distributor. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Trust
or its designated agent.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES BY THE TRUST
(a) Any of the outstanding Shares of a Fund or Class thereof may be
tendered for redemption at any time, and the Trust agrees to redeem or
repurchase the Shares so tendered in accordance with its obligations as set
forth in the Organic Documents and the Prospectus relating to the Shares. The
price to be paid to redeem or repurchase the Shares of a Fund of Class thereof
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(b) hereof less, in the case of Shares for which a
deferred sales charge is assessed, a deferred sales charge equal to a specified
percentage or percentages of the net asset value of those Shares as from time to
time set forth in the Prospectus relating to those Shares or their cost,
whichever is less. Shares of a Fund or Class thereof for which a deferred sales
charge may be assessed and that have been outstanding for a specified period of
time may be redeemed without payment of a deferred sales charge as from time to
time set forth in the Prospectus relating to those Shares.
(b) The Trust or its designated agent shall pay (i) the total amount of
the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii) except
as may be otherwise required by the Rules of Fair Practice (the "Rules") of the
National Association of Securities Dealers Regulation, Inc. (the "NASD") and any
interpretations thereof, any applicable deferred sales charges to the
Distributor in accordance with the Distributor's instructions on or before the
fifth business day (or such other earlier business day as is customary in the
investment company industry) subsequent to the Trust or its agent having
received the notice of redemption in proper form.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings, when trading thereon is restricted, when
an emergency exists as a result of which disposal by the Trust of securities
owned by a Fund is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of a Fund's net assets,
or during any other period when the SEC so requires or permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Funds upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Trust hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.
(b) In selling Shares of the Funds, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Trust to give any information or to make any representations
other than as is contained in a Fund's Prospectus or any advertising materials
or sales literature specifically approved in writing by the Trust or its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents, the
collection of amounts payable by investors and selected dealers or selected
agents on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD.
(d) The Distributor represents and warrants to the Trust that:
(i) It is a limited liability company duly organized and existing and
in good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its Operating
Agreement to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Distributor, enforceable
against the Distributor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
secured parties;
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify the
Trust if its membership in the NASD is terminated or suspended; and
(vii) The performance by the Distributor of its obligations hereunder
does not and will not contravene any provision of its Operating
Agreement.
(e) Notwithstanding anything in this Agreement, including the
Appendices, to the contrary, the Distributor makes no warranty or representation
as to the number of selected dealers or selected agents with which it has
entered into agreements in accordance with Section 11 hereof, as to the
availability of any Shares to be sold through any selected dealer, selected
agent or other intermediary or as to any other matter not specifically set forth
herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE TRUST
(a) The Trust shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other papers
or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Trust shall make available to
the Distributor the number of copies of the Funds' Prospectuses as the
Distributor shall reasonably request.
(b) The Trust shall take, from time to time, subject to the approval of
the Board and any required approval of the shareholders of the Trust, all action
necessary to fix the number of authorized Shares (if such number is not limited)
and to register the Shares under the Securities Act, to the end that there will
be available for sale the number of Shares as reasonably may be expected to be
sold pursuant to this Agreement.
(c) The Trust shall execute any and all documents, furnish to the
Distributor any and all information, otherwise use its best efforts to take all
actions that may be reasonably necessary and cooperate with the Distributor in
taking any action as may be necessary to register or qualify Shares for sale
under the securities laws of the various states of the United States and other
jurisdictions ("States") as the Distributor shall designate (subject to approval
by the Trust); provided that the Distributor shall not be required to register
as a broker-dealer or file a consent to service of process in any State and
neither the Trust nor any Fund or Class thereof shall be required to qualify as
a foreign corporation, trust or association in any State. Any registration or
qualification may be withheld, terminated or withdrawn by the Trust at any time
in its discretion. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Trust
in connection with such registration or qualification.
(d) The Trust represents and warrants to the Distributor that:
(i) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware;
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have been taken
to authorize it to enter into and perform its duties under this
Agreement;
(iv) It is an open-end management investment company registered with
the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Trust, enforceable against
the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties;
(vii) The performance by the Distributor of its obligations hereunder
does not and will not contravene any provision of its Articles of
Incorporation.
(viii) The Registration statement is currently effective and will
remain effective with respect to all Shares of the Funds and Classes
thereof being offered for sale;
(ix) The Registration Statement and Prospectuses have been or will be,
as the case may be, carefully prepared in conformity with the
requirements of the Securities Act and the rules and regulations
thereunder;
(x) The Registration Statement and Prospectuses contain or will contain
all statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder; all statements
of fact contained or to be contained in the Registration Statement or
Prospectuses are or will be true and correct at the time indicated or
on the effective date as the case may be; and neither the Registration
Statement nor any Prospectus, when they shall become effective or be
authorized for use, will include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser
of Shares;
(xi) It will from time to time file such amendment or amendments to the
Registration Statement and Prospectuses as, in the light of
then-current and then-prospective developments, shall, in the opinion
of its counsel, be necessary in order to have the Registration
Statement and Prospectuses at all times contain all material facts
required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to the Registration Statement or
Prospectuses without giving the Distributor reasonable advance notice
thereof; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such
amendments to the Registration Statement or Prospectuses, of whatever
character, as the Trust may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) Any amendment to the Registration Statement or Prospectuses
hereafter filed will, when it becomes effective, contain all statements
required to be stated therein in accordance with the 1940 Act and the
rules and regulations thereunder; all statements of fact contained in
the Registration Statement or Prospectuses will, when be true and
correct at the time indicated or on the effective date as the case may
be; and no such amendment, when it becomes effective, will include an
untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and reasonable efforts
in rendering services to the Trust under this Agreement but shall be under no
duty to take any action except as specifically set forth herein or as may be
specifically agreed to by the Distributor in writing. The Distributor shall not
be liable to the Trust or any of the Trust's shareholders for any error of
judgment or mistake of law, for any loss arising out of any investment, or for
any action or inaction of the Distributor in the absence of bad faith, willful
misfeasance or gross negligence in the performance of the Distributor's duties
or obligations under this Agreement or by reason or the Distributor's reckless
disregard of its duties and obligations under this Agreement
(b) The Distributor shall not be liable for any action taken or failure
to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel to the
Trust or counsel to the Distributor;
(ii) any oral instruction which it receives and which it reasonably
believes in good faith was transmitted by the person or persons
authorized by the Board to give such oral instruction (the Distributor
shall have no duty or obligation to make any inquiry or effort of
certification of such oral instruction);
(iii) any written instruction or certified copy of any resolution of
the Board, and the Distributor may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by the
Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
the Distributor to be genuine and to have been signed or presented by
the Trust or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply. In addition, to the extent the
Distributor's obligations hereunder are to oversee or monitor the activities of
third parties, the Distributor shall not be liable for any failure or delay in
the performance of the Distributor's duties caused, directly or indirectly, by
the failure or delay of such third parties in performing their respective duties
or cooperating reasonably and in a timely manner with the Distributor.
SECTION 8. INDEMNIFICATION
(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section 20
of the 1934 Act ("Distributor Indemnitees") free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectuses or arising out of or based upon any
alleged omission to state a material fact required to be stated in any one
thereof or necessary to make the statements in any one thereof not misleading,
unless such statement or omission was made in reliance upon, and in conformity
with, information furnished in writing to the Trust in connection with the
preparation of the Registration Statement or exhibits to the Registration
Statement by or on behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Trust shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested amendment to the
Registration Statement and for which the Trust has not filed a Required
Amendment, regardless of with respect to such matters whether any statement in
or omission from the Registration Statement was made in reliance upon, or in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Trust
and approved by the Distributor, which approval shall not be withheld
unreasonably. The Trust shall advise the Distributor that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Trust assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Trust does not assume the defense of
any such suit, or if Distributor does not approve of counsel chosen by the Trust
or has been advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust will
reimburse any Distributor Indemnitee named as defendant in such suit for the
reasonable fees and expenses of any counsel that person retains. A Distributor
Indemnitee shall not settle or confess any claim without the prior written
consent of the Trust, which consent shall not be unreasonably withheld or
delayed.
(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus or any alleged omission of a
material fact required to be stated or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust in writing in connection with the preparation of the Registration
Statement or Prospectus by or on behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement ("Trust Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Trust Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Trust, which approval shall not be withheld
unreasonably. The Distributor shall advise the Trust that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if Trust does not approve of counsel chosen by the
Distributor or has been advised that it may have available defenses or claims
that are not available to or conflict with those available to the Distributor,
the Distributor will reimburse any Trust Indemnitee named as defendant in such
suit for the reasonable fees and expenses of any counsel that person retains. A
Trust Indemnitee shall not settle or confess any claim without the prior written
consent of the Distributor, which consent shall not be unreasonably withheld or
delayed.
(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Trust Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first legal
process is served. Such notice shall refer to the person or persons against whom
the action is brought. The failure to provide such notice shall not relieve the
party entitled to such notice of any liability that it may have to any
Distributor Indemnitee or Trust Indemnitee except to the extent that the ability
of the party entitled to such notice to defend such action has been materially
adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Trust Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Trust Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).
(g) Each party agrees promptly to notify the other party of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares.
(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organic Documents or any applicable statute or
regulation or shall require the Distributor to take any action contrary to any
provision of its Operating Agreement or any applicable statute or regulation;
provided, however, that neither the Trust nor the Distributor may amend their
Organic Documents or Operating Agreement and Bylaws, respectively, in any manner
that would result in a violation of a representation or warranty made in this
Agreement.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or its security holders to which
the Distributor would otherwise be subject by reason of its failure to satisfy
the standard of care set forth in Section 7 of this Agreement.
SECTION 9. NOTIFICATION BY THE TRUST
The Trust shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Trust's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Trust's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Trust's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Trust's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with
the distribution of Shares of each Fund and Class thereof, the Distributor shall
receive: (i) any applicable sales charge assessed upon investors in connection
with the purchase of Shares; (ii) from the Trust, any applicable contingent
deferred sales charge ("CDSC") assessed upon investors in connection with the
redemption of Shares; (iii) from the Trust, the distribution service fees with
respect to the Shares of those Classes as designated in Appendix A for which a
Plan is effective (the "Distribution Fee"); and (iv) from the Trust, the
shareholder service fees with respect to the Shares of those Classes as
designated in Appendix A for which a Service Plan is effective (the "Shareholder
Service Fee"). The Distribution Fee and Shareholder Service Fee shall be accrued
daily by each applicable Fund or Class thereof and shall be paid monthly as
promptly as possible after the last day of each calendar month but in any event
on or before the fifth (5th) Fund business day after month-end, at the rate or
in the amounts set forth in Appendix A and, as applicable, the Plan(s). The
Trust grants and transfers to the Distributor a general lien and security
interest in any and all securities and other assets of a Fund now or hereafter
maintained in an account at the Fund's custodian on behalf of the Fund to secure
any Distribution Fees and Shareholder Service Fees owed the Distributor by the
Trust under this Agreement.
(b) The Trust shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Funds and
the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after the settlement date for each redemption of Shares.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall
be entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement.
(d) The Trust shall be responsible and assumes the obligation for
payment of all the expenses of the Funds, including fees and disbursements of
its counsel and auditors, in connection with the preparation and filing of the
Registration Statement and Prospectuses (including but not limited to the
expense of setting in type the Registration Statement and Prospectuses and
printing sufficient quantities for internal compliance, regulatory purposes and
for distribution to current shareholders).
(e) The Trust shall bear the cost and expenses (i) of the registration
of the Shares for sale under the Securities Act; (ii) of the registration or
qualification of the Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Trust, the Funds or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Trust and the Distributor pursuant to Section 6(c) hereof; and (iv) payable to
each State for continuing registration or qualification therein until the Trust
decides to discontinue registration or qualification pursuant to Section 6(c)
hereof. The Distributor shall pay all expenses relating to the Distributor's
broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") and
selected agent agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the sale of Shares and to
fix therein the portion of the sales charge, if any, that may be allocated to
the selected dealers or selected agents; provided, that the Trust shall approve
the forms of agreements with selected dealers or selected agents and shall
review the compensation set forth therein. Shares of each Fund or Class thereof
shall be resold by selected dealers or selected agents only at the public
offering price(s) set forth in the Prospectus relating to the Shares. Within the
United States, the Distributor shall offer and sell Shares of the Funds only to
such selected dealers as are members in good standing of the NASD.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information
related to the Trust as proprietary information of the Trust and, on behalf of
itself and its employees, to keep confidential all such information, except that
the Distributor may:
(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(iii) release such other information as approved in writing by the
Trust, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Trust without the consent of the Trust if the Distributor reasonably
believes that it may be exposed to civil or criminal legal proceedings for
failure to comply, when requested to release any information by duly constituted
authorities or when so requested by the Trust.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
later of (i) the date first above written or (ii) the date on which the Trust's
Registration Statement relating to Shares of a Fund becomes effective. Upon
effectiveness of this Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter hereof insofar as such
Agreement may have been deemed to relate to the Funds.
(b) This Agreement shall continue in effect with respect to a Fund for
a period of one year from its effectiveness and thereafter shall continue in
effect with respect to a Fund until terminated; provided, that continuance is
specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and (ii) by a vote of
a majority of Trustees of the Trust (I) who are not parties to this Agreement or
interested persons of any such party (other than as Trustees of the Trust) and
(II) with respect to each class of a Fund for which there is an effective Plan,
who do not have any direct or indirect financial interest in any such Plan
applicable to the class or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on such approval.
(c) This Agreement may be terminated at any time with respect to a
Fund, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund or, with respect to
each class of a Fund for which there is an effective Plan, a majority of
Trustees of the Trust who do not have any direct or indirect financial interest
in any such Plan or in any agreements related to the Plan, on 60 days' written
notice to the Distributor or (ii) by the Distributor on 60 days' written notice
to the Trust.
(d) This Agreement shall automatically terminate upon its assignment
and upon the termination of the Distributor's membership in the NASD.
(e) If the Trust shall not file a Required Amendment within fifteen
days following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(d), 6(d), 8, 9 and 10 shall survive
any termination of this Agreement.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by either party
to the other shall be deemed sufficiently given if personally delivered or sent
by telegram, facsimile or registered, certified or overnight mail, postage
prepaid, addressed by the party giving such notice to the other party at the
last address furnished by the other party to the party giving such notice, and
unless and until changed pursuant to the foregoing provisions hereof each such
notice shall be addressed to the Trust or the Distributor, as the case may be,
at their respective principal places of business.
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a trustee, officer or employee of the Trust, or
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.
SECTION 16. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Distributor agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Distributor's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Funds.
SECTION 17. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of New York.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(h) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund are separate and distinct
from the assets and liabilities of each other Fund and that no Fund shall be
liable or shall be charged for any debt, obligation or liability of any other
Fund, whether arising under this Agreement or otherwise.
(i) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(j) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.
(k) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
FORUM FUNDS
By: /s/ Mark D. Kaplan
Mark D. Kaplan
Vice President
FORUM FUND SERVICES, LLC
By: /s/ John Y. Keffer
John Y. Keffer
President
NOTE: THIS AGREEMENT NOT TO BE USED
FOR CDSC FUNDING (B SHARE) FINANCING
<PAGE>
FORUM FUNDS
DISTRIBUTION AGREEMENT
Appendix A
Funds and Classes of the Trust
as of October 1, 1999
Austin Global Equity Fund
BIA Equity Growth Fund
BIA Small-Cap Growth Fund
Equity Index Fund
Investors Bond Fund
Investors Equity Fund
Investors Growth Fund
Investors High Grade Bond Fund
Maine Municipal Bond Fund
New Hampshire Bond Fund
Payson Balanced Fund
Payson Value Fund
Polaris Global Value Fund
TaxSaver Bond Fund
Investors Shares
Daily Assets Treasury Obligations Fund
Daily Assets Government Fund
Daily Assets Government Obligations Fund
Daily Assets Cash Fund
Daily Assets Municipal Fund
Institutional Shares
Daily Assets Treasury Obligations Fund
Daily Assets Government Fund
Daily Assets Government Obligations Fund
Daily Assets Cash Fund
Daily Assets Municipal Fund
Institutional Service Shares
Daily Assets Treasury Obligations Fund
Daily Assets Government Fund
Daily Assets Government Obligations Fund
Daily Assets Cash Fund
Daily Assets Municipal Fund
