MONARCH FUNDS
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PROSPECTUS
January 1, 2000
As Amended January 8, 2000
UNIVERSAL SHARES
Three money market funds
that each seek to provide Treasury Cash Fund
high current income to the Government Cash Fund
extent consistent with the Cash Fund
preservation of capital and
the maintenance of liquidity.
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Table of Contents
Summary................................2 Your Account.........................6
Performance............................4 Other Information...................10
Fee Tables.............................5 Financial Highlights................11
Management.............................5 For More Information................12
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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.
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MONARCH FUNDS
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................................................................................
SUMMARY
................................................................................
DEFINITIONS This Prospectus offers Universal Shares of three
money market funds -- Treasury Cash Fund,
MONEY MARKET SECURITY Government Cash Fund and Cash Fund (the "Funds").
means a high credit Universal Shares are designed for institutional
quality, short-term, U.S. investors and have a $1,000,000 minimum initial
dollar denominated debt investment.
security
INVESTMENT OBJECTIVES
TREASURY SECURITY means a
security that is issued or The investment objective of each Fund is to
guaranteed by the U.S. provide high current income to the extent
Treasury consistent with the preservation of capital and
the maintenance of liquidity.
GOVERNMENT SECURITY
means a security that is PRINCIPAL INVESTMENT STRATEGIES
issued or guaranteed by
the U.S. Government, its Each Fund invests in a diversified portfolio of
agencies or Money Market Securities and:
instrumentalities o seeks to maintain a stable net asset
value of $1.00 per share
REPURCHASE AGREEMENT o invests in securities with remaining
means a transaction in maturities of 397 days or less
which a Fund purchases o maintains a dollar weighted average maturity
securities and of its investments of 90 days or less.
simultaneously commits to
resell the securities to the Each Fund invests substantially all of its assets
other party at an agreed- in another mutual fund (a "Portfolio") which has
upon date and at a price the same investment objective and substantially
reflecting a market rate of similar investment policies. The Portfolios in
interest which the Funds invest and their primary
investments are:
FUND/PORTFOLIO PRIMARY INVESTMENTS
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o securities issued by financial
institutions, such as certificates of deposit,
bankers' acceptances and time deposits
o securities issued by domestic companies,
such as commercial paper
o Government Securities
o Repurchase Agreements
The investment adviser for each Portfolio (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates and Federal Reserve policy 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 security if:
o revised economic forecasts or interest rate outlook requires a
repositioning of the Portfolio
o the security subsequently fails to meet the Adviser's investment
criteria
o funds are needed for another purpose.
2
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MONARCH FUNDS
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PRINCIPAL RISKS OF INVESTING IN A FUND
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 government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
There is no assurance that any 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 described below. 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.
INTEREST RATE RISK Interest rates affect the value of the Portfolios'
investments. Increases in interest rates may cause a decline in value. In
addition, those increases may cause 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 its credit quality otherwise falls. In
the worst case, an issuer of a security or a Repurchase Agreement counterparty
may default or otherwise be unable to make timely payments of interest or
principal. Not all Government Securities are supported by the full faith and
credit of the U.S. Government as are Treasury Securities.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
3
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PERFORMANCE
................................................................................
The following charts and table provide some indication of the risks of investing
in a Fund's Universal Shares by showing changes in performance from year to year
and investment returns. Because Universal Shares of Treasury Cash Fund have
operated less than a year, the information provided below is for Treasury Cash
Fund's Institutional Shares. The returns for Universal Shares will be higher
than those of Institutional Shares because of the lower expenses of Universal
Shares. To obtain current yield information, call toll-free (800) 754-8757.
PERFORMANCE INFORMATION PRESENTED HERE REPRESENTS ONLY PAST PERFORMANCE AND DOES
NOT NECESSARILY INDICATE FUTURE RESULTS.
The following charts show the annual total returns for each full calendar year
that the Funds have operated.
[EDGAR representatiion of bar charts]
YEAR ENDED 12/31 1993 1994 1995 1996 1997 1998 1999
TREASURY CASH FUND 3.75% 5.54% 4.99% 5.05% 4.96% 4.57%
Best Quarter: 1.39%
(quarter ended 6/30/95)
Worst Quarter: 0.67%
(quarter ended 3/31/94)
GOVERNMENT CASH FUND 3.24% 4.29% 6.01% 5.44% 5.56% 5.49% 5.06%
Best Quarter: 1.51%
(quarter ended 6/30/95)
Worst Quarter: 0.78%
(quarter ended 3/31/94)
CASH FUND 3.32% 4.32% 5.96% 5.36% 5.56% 5.55% 5.17%
Best Quarter: 1.50%
(quarter ended 6/30/95)
Worst Quarter: 0.79%
(quarter ended 3/31/94)
The following table lists the average annual total return for each Fund as of
December 31, 1999.
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
TREASURY CASH FUND 4.57% 5.02% 4.66% 7/12/93
GOVERNMENT CASH FUND 5.06% 5.52% 4.97% 10/29/92
CASH FUND 5.17% 5.35% 5.02% 12/1/92
4
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FEE TABLES
................................................................................
The following tables describe the various fees and expenses that you will pay if
you invest in Universal Shares of a Fund. Expenses for Treasury Cash Fund are
estimated for the fiscal year ending August 31, 2000 and expenses for each other
Fund are based on amounts incurred during the fiscal year ended August 31, 1999.
Expenses are stated as a percentage of average net assets. There are no charges
for purchasing or redeeming Fund shares.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
TREASURY GOVERNMENT CASH
CASH FUND CASH FUND FUND
Management Fees(2) 0.13% 0.13% 0.13%
Distribution (Rule 12b-1) Fees None None None
Other Expenses 0.12% 0.12% 0.12%
Total Annual Fund Operating Expenses(3) 0.25% 0.25% 0.25%
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees for
Government Cash Fund and Cash Fund. Actual Total Annual Fund Operating
Expenses for Government Cash Fund and for Cash Fund were 0.18%.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Universal Shares of a Fund to the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in 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 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:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
TREASURY CASH FUND $26 $80 $141 $318
GOVERNMENT CASH FUND $26 $80 $141 $318
CASH FUND $26 $80 $141 $318
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MANAGEMENT
................................................................................
Each Fund is a series of Monarch 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.
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser's primary business is fixed
income investment management and, in addition to the Portfolios, advises two
other money market funds and 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.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the advisory fees paid to the Adviser for each Portfolio were
0.03% of the Portfolio's average daily net assets.
5
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OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 1999, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $94 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
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.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Universal Shares include the
Shares' own expenses as well as Trust expenses that are allocated among the
Funds, their classes of shares and any 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. Any fee waiver or expense reimbursement
increases investment performance for the period during which the waiver or
reimbursement is in effect.
................................................................................
YOUR ACCOUNT
................................................................................
HOW TO CONTACT THE FUNDS
You may contact the Trust for an account application or for further information
regarding the Funds.
WRITE TO US AT: WIRE INVESTMENTS TO US AT:
Monarch Funds Imperial Bank
P.O. Box 446 ABA #122201444
Portland, Maine 04112 FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US AT: (Name of Your Fund)
(800) 754-8757 (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 accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not be accepted or invested by a Fund during the period
before the receipt of Federal Funds.
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:
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
11:00 a.m., Pacific time 1:00 p.m., Pacific time
On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
6
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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 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). 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 Portfolio 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 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. 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 Checks must be made payable on their face to "Monarch Funds." No
other method of check payment is acceptable.
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 The minimum initial investment in Universal Shares is
$1,000,000.
ACCOUNT REQUIREMENTS
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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 the
proprietorship accounts. Joint accounts can have two or more account.
owners.
BUSINESS ENTITIES o Submit a Corporate/Organization Resolution form or similar
document.
TRUSTS o The trust must be established before an account
can be opened.
o Submit a Corporate/Organization Resolution form or similar
document.
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INVESTMENT PROCEDURES
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HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application and/or a o Fill out an investment slip from a confirmation
Corporate/Organization Resolution form. or write us a letter.
o Complete the application. o Write your account number on your check.
o Mail us your application and a 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 and/or a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form. o Instruct your bank to wire your money to us.
o Complete the application.
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.
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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.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
HOW 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 on your account application) (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 on your
account application) (See "By Wire").
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MONARCH FUNDS
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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 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
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.
Specific requirements are listed in the SAI or may be obtained by calling the
Transfer Agent.
SMALL ACCOUNTS If the value of your account falls below $100,000, a Fund may ask
you to increase your balance. If the account value is still below $100,000 after
60 days, a Fund may close your account and send you the proceeds.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Universal Shares of a Fund for Universal Shares of another
Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. 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 your 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.
9
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MONARCH FUNDS
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................................................................................
OTHER INFORMATION
................................................................................
ADDITIONAL 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, credit
quality and diversification are interpreted in accordance with that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions. For instance, the
Portfolios may hold cash in any 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.
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway" structure. Each Fund
invests substantially all of its assets in its corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
A Fund may withdraw its entire investment from a Portfolio at anytime that 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 Core Trust's board and executive
officers is in the SAI.
CLASSES OF SHARES
In addition to Universal Shares, each Fund offers Institutional Shares and
Investor Shares. You may obtain prospectuses describing these classes of shares
from the Funds' distributor by contacting the Transfer Agent. Institutional
Shares are sold to banks, trust companies and certain other financial
institutions for their own and their customer accounts and Investor Shares are
sold to retail investors. Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions from net investment income daily and pays those
distributions monthly. In addition, each Fund pays capital gain distributions,
if any, 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.
TAXES
Each Fund intends to operate in a manner such that it will not be liable for
Federal income or excise tax.
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, if any, is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
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.
10
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MONARCH FUNDS
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FINANCIAL HIGHLIGHTS
................................................................................
The following table is intended to help you understand the performance of
Universal Shares of the Funds. Data for Institutional Shares of Treasury Cash
Fund is included in the table as Universal Shares of that Fund had not commenced
operations as of August 31, 1999. Total return in the table represents the rate
an investor would have earned on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
LLP. Each Fund's financial statements and the independent auditor's report are
included in the Annual Report dated August 31, 1999, which is available upon
request, without charge.
As of August 31, 1999 the net assets of Treasury Cash Portfolio were
$287,758,076, of Government Cash Portfolio were $732,787,465 and of Cash
Portfolio were $937,534,839.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
--------------------------------------------- ---------------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of ----------------------------------
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Share Income Income Share Return Omitted) Expenses Income Expenses(a)
Year Ended August 31
TREASURY CASH FUND
INSTITUTIONAL SHARES
1999 $ 1.00 $0.04 $ (0.04) $ 1.00 4.50% $ 55,134 0.45% 4.43% 0.62%
1998 1.00 0.05 (0.05) 1.00 5.11% 91,122 0.45% 5.00% 0.67%
1997 1.00 0.05 (0.05) 1.00 4.98% 40,830 0.45% 4.89% 0.66%
1996 1.00 0.05 (0.05) 1.00 5.15% 79,259 0.45% 5.01% 0.69%
1995 1.00 0.05 (0.05) 1.00 5.28% 28,530 0.42% 5.18% 0.86%
GOVERNMENT CASH FUND
UNIVERSAL SHARES
1999 1.00 0.05 (0.05) 1.00 5.00% 277,548 0.18% 4.88% 0.25%
1998 1.00 0.05 (0.05) 1.00 5.63% 253,644 0.18% 5.48% 0.26%
1997 1.00 0.05 (0.05) 1.00 5.49% 230,410 0.17% 5.35% 0.26%
1996 1.00 0.05 (0.05) 1.00 5.59% 248,986 0.19% 5.43% 0.28%
1995 1.00 0.06 (0.06) 1.00 5.78% 182,546 0.24% 5.46% 0.52%
CASH FUND
UNIVERSAL SHARES
1999 1.00 0.05 (0.05) 1.00 5.09% 98,705 0.18% 4.99% 0.25%
1998 1.00 0.06 (0.06) 1.00 5.65% 91,671 0.18% 5.48% 0.29%
1997 1.00 0.05 (0.05) 1.00 5.43% 8,453 0.23% 5.32% 0.47%
1996 1.00 0.05 (0.05) 1.00 5.53% 3,272 0.27% 5.48% 0.43%
1995 1.00 0.06 (0.06) 1.00 5.75% 26,525 0.27% 5.59% 0.56%
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in the absence of any waivers and reimbursements.
11
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For More Information
The following documents are available free upon request: MONARCH FUND
Annual/Semi-Annual Reports Universal Shares
Additional information about each Fund's investments is Treasury
available in the Fund's annual and semi-annual reports to Cash Fund
shareholders.
Governmen
Statement of Additional Information ("SAI") Cash Fund
The SAI provides more detailed information about each Fund Cash Fund
and is incorporated by reference into this Prospectus.
Contacting the Funds
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund
by contacting the Funds at:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 754-8757
Securities and Exchange Commission Information
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). You can get copies, for a fee,
by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
E-mail address: [email protected]
The scheduled hours of operation of the Public Reference
Room may be obtained by calling the SEC at (202) 942-8090.
Free copies of the reports and SAIs are available from the
SEC's Internet Web Site at http://www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
(800) 754-8757
Investment Company Act File No. 811-6742
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MONARCH FUNDS
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PROSPECTUS
January 1, 2000
As Amended January 8, 2000
INSTITUTIONAL SHARES
Three money market funds
that each seek to provide Treasury Cash Fund
high current income to the Government Cash Fund
extent consistent with the Cash Fund
preservation of capital and
the maintenance of liquidity.
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Table of Contents
Summary................................2 Your Account.........................6
Performance............................4 Other Information...................10
Fee Tables.............................5 Financial Highlights................11
Management.............................5 For More Information................12
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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.
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MONARCH FUNDS
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................................................................................
SUMMARY
................................................................................
DEFINITIONS This Prospectus offers Institutional Shares of
three money market funds -- Treasury Cash Fund,
MONEY MARKET SECURITY Government Cash Fund and Cash Fund (the "Funds").
means a high credit Institutional Shares are sold to banks, trust
quality, short-term, U.S. companies and certain other financial
dollar denominated debt institutions for their own and their customer
security accountsand have a $100,000 minimum initial
investment.
TREASURY SECURITY means a
security that is issued or INVESTMENT OBJECTIVES
guaranteed by the U.S.
Treasury The investment objective of each Fund is to
provide high current income to the extent
GOVERNMENT SECURITY consistent with the preservation of capital and
means a security that is the maintenance of liquidity.
issued or guaranteed by
the U.S. Government, its PRINCIPAL INVESTMENT STRATEGIES
agencies or
instrumentalities Each Fund invests in a diversified portfolio of
Money Market Securities and:
REPURCHASE AGREEMENT o seeks to maintain a stable net asset
means a transaction in value of $1.00 per share
which a Fund purchases o invests in securities with remaining
securities and maturities of 397 days or less
simultaneously commits to o maintains a dollar weighted average maturity
resell the securities to the of its investments of 90 days or less.
other party at an agreed-
upon date and at a price Each Fund invests substantially all of its assets
reflecting a market rate of in another mutual fund (a "Portfolio") which has
interest the same investment objective and substantially
similar investment policies. The Portfolios in
which the Funds invest and their primary
investments are:
FUND/PORTFOLIO PRIMARY INVESTMENTS
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o securities issued by financial
institutions, such as certificates of deposit,
bankers' acceptances and time deposits
o securities issued by domestic companies,
such as commercial paper
o Government Securities
o Repurchase Agreements
The investment adviser for each Portfolio (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates and Federal Reserve policy 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 security if:
o revised economic forecasts or interest rate outlook requires a
repositioning of the Portfolio
o the security subsequently fails to meet the Adviser's investment
criteria
o funds are needed for another purpose.
2
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PRINCIPAL RISKS OF INVESTING IN A FUND
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 government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
There is no assurance that any 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 described below. 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.
INTEREST RATE RISK Interest rates affect the value of the Portfolios'
investments. Increases in interest rates may cause a decline in value. In
addition, those increases may cause 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 its credit quality otherwise falls. In
the worst case, an issuer of a security or a Repurchase Agreement counterparty
may default or otherwise be unable to make timely payments of interest or
principal. Not all Government Securities are supported by the full faith and
credit of the U.S. Government as are Treasury Securities.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
3
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................................................................................
PERFORMANCE
................................................................................
The following charts and table provide some indication of the risks of investing
in a Fund's Institutional Shares by showing changes in performance from year to
year and investment returns. To obtain current yield information, call toll-free
(800) 754-8757. PERFORMANCE INFORMATION PRESENTED HERE REPRESENTS ONLY PAST
PERFORMANCE AND DOES NOT NECESSARILY INDICATE FUTURE RESULTS.
The following charts show the annual total returns for each full calendar year
that the Funds have operated.
[EDGAR representatiion of bar charts]
YEAR ENDED 12/31 1994 1995 1996 1997 1998 1999
TREASURY CASH FUND 3.75% 5.54% 4.99% 5.05% 4.96% 4.57%
Best Quarter: 1.39%
(quarter ended 6/30/95)
Worst Quarter: 0.67%
(quarter ended 3/31/94)
GOVERNMENT CASH FUND 4.01% 5.65% 5.03% 5.15% 5.08% 4.65%
Best Quarter: 1.42%
(quarter ended 6/30/95)
Worst Quarter: 0.71%
(quarter ended 3/31/94)
CASH FUND 4.03% 5.67% 5.05% 5.17% 5.14% 4.76%
Best Quarter: 1.43%
(quarter ended 6/30/95)
Worst Quarter: 0.73%
(quarter ended 3/31/94)
The following table lists the average annual total return for each Fund as of
December 31, 1999.
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
TREASURY CASH FUND 4.57% 5.02% 4.66% 7/12/93
GOVERNMENT CASH FUND 4.65% 5.11% 4.78% 7/15/93
CASH FUND 4.76% 5.16% 4.83% 7/15/93
4
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MONARCH FUNDS
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................................................................................
FEE TABLES
................................................................................
The following tables describe the various fees and expenses that you will pay if
you invest in Institutional Shares of a Fund. Expenses for each Fund are based
on amounts incurred during the fiscal year ended August 31, 1999. Expenses are
stated as a percentage of average net assets. There are no charges for
purchasing or redeeming Fund shares.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
TREASURY GOVERNMENT CASH
CASH FUND CASH FUND FUND
Management Fees(2) 0.13% 0.13% 0.13%
Distribution (Rule 12b-1) Fees None None None
Other Expenses 0.49% 0.46% 0.47%
Total Annual Fund Operating Expenses(3) 0.62% 0.59% 0.60%
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees.
Actual Total Annual Fund Operating Expenses for Treasury Cash Fund were
0.45% and for Government Cash Fund and for Cash Fund were 0.57%.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Universal Shares of a Fund to the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in 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 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:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
TREASURY CASH FUND $63 $199 $346 $774
GOVERNMENT CASH FUND $60 $189 $329 $738
CASH FUND $61 $192 $335 $750
................................................................................
MANAGEMENT
................................................................................
Each Fund is a series of Monarch 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.
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser's primary business is fixed
income investment management and, in addition to the Portfolios, advises two
other money market funds and 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.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the advisory fees paid to the Adviser for each Portfolio were
0.03% of the Portfolio's average daily net assets.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 1999, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $94 billion.
5
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MONARCH FUNDS
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Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
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.
Each Fund has entered into a shareholder service agreement under which the Fund
pays for the servicing of shareholder accounts. The fees paid under the
shareholder service agreement may be paid to various financial institutions that
provide services to their customers invested in Institutional shares.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Institutional Shares include
the Shares' own expenses as well as Trust expenses that are allocated among the
Funds, their classes of shares and any 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. Any fee waiver or expense reimbursement
increases investment performance for the period during which the waiver or
reimbursement is in effect.
................................................................................
YOUR ACCOUNT
................................................................................
HOW TO CONTACT THE FUNDS
You may contact the Trust for an account application or for further information
regarding the Funds.
WRITE TO US AT: WIRE INVESTMENTS TO US AT:
Monarch Funds Imperial Bank
P.O. Box 446 ABA #122201444
Portland, Maine 04112 FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US AT: (Name of Your Fund)
(800) 754-8757 (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 accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not be accepted or invested by a Fund during the period
before the receipt of Federal Funds.
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:
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
11:00 a.m., Pacific time 1:00 p.m., Pacific time
On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
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.
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WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). 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 Portfolio 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 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. 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 Checks must be made payable on their face to "Monarch Funds." No
other method of check payment is acceptable.
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 The minimum initial investment in Universal Shares is
$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 the
proprietorship accounts. Joint accounts can have two or more account.
owners.
BUSINESS ENTITIES o Submit a Corporate/Organization Resolution form or similar
document.
TRUSTS o The trust must be established before an account
can be opened.
o Submit a Corporate/Organization Resolution form or similar
document.
</TABLE>
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INVESTMENT PROCEDURES
<TABLE>
<S> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application and/or a o Fill out an investment slip from a confirmation
Corporate/Organization Resolution form. or write us a letter.
o Complete the application. o Write your account number on your check.
o Mail us your application and a 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 and/or a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form. o Instruct your bank to wire your money to us.
o Complete the application.
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.
</TABLE>
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.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
HOW 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 on your account application) (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 on your
account application) (See "By Wire").
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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 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
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.
Specific requirements are listed in the SAI or may be obtained by calling the
Transfer Agent.
SMALL ACCOUNTS If the value of your account falls below $100,000, a Fund may ask
you to increase your balance. If the account value is still below $100,000 after
60 days, a Fund may close your account and send you the proceeds.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Universal Shares of a Fund for Universal Shares of another
Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. 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 your 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.
9
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MONARCH FUNDS
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................................................................................
OTHER INFORMATION
................................................................................
ADDITIONAL 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, credit
quality and diversification are interpreted in accordance with that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions. For instance, the
Portfolios may hold cash in any 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.
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway" structure. Each Fund
invests substantially all of its assets in its corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
A Fund may withdraw its entire investment from a Portfolio at anytime that 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 Core Trust's board and executive
officers is in the SAI.
CLASSES OF SHARES
In addition to Institutional Shares, each Fund offers Universal Shares and
Investor Shares. You may obtain prospectuses describing these classes of shares
from the Funds' distributor by contacting the Transfer Agent. Universal Shares
are sold to institutional investors and Investor Shares are sold to retail
investors. Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions from net investment income daily and pays those
distributions monthly. In addition, each Fund pays capital gain distributions,
if any, 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.
TAXES
Each Fund intends to operate in a manner such that it will not be liable for
Federal income or excise tax.
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, if any, is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
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.
10
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MONARCH FUNDS
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................................................................................
FINANCIAL HIGHLIGHTS
................................................................................
The following table is intended to help you understand the performance of
Institutional Shares of the Funds. Total return in the table represents the rate
an investor would have earned on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
LLP. Each Fund's financial statements and the independent auditor's report are
included in the Annual Report dated August 31, 1999, which is available upon
request, without charge.
As of August 31, 1999 the net assets of Treasury Cash Portfolio were
$287,758,076, of Government Cash Portfolio were $732,787,465 and of Cash
Portfolio were $937,534,839.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
--------------------------------------------- ---------------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of ----------------------------------
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Share Income Income Share Return Omitted) Expenses Income Expenses(a)
Year Ended August 31
TREASURY CASH FUND
1999 $ 1.00 $0.04 $ (0.04) $ 1.00 4.50% $ 55,134 0.45% 4.43% 0.62%
1998 1.00 0.05 (0.05) 1.00 5.11% 91,122 0.45% 5.00% 0.67%
1997 1.00 0.05 (0.05) 1.00 4.98% 40,830 0.45% 4.89% 0.66%
1996 1.00 0.05 (0.05) 1.00 5.15% 79,259 0.45% 5.01% 0.69%
1995 1.00 0.05 (0.05) 1.00 5.28% 28,530 0.42% 5.18% 0.86%
GOVERNMENT CASH FUND
1999 1.00 0.05 (0.05) 1.00 4.59% 455,239 0.57% 4.50% 0.59%
1998 1.00 0.05 (0.05) 1.00 5.22% 443,618 0.57% 5.09% 0.58%
1997 1.00 0.05 (0.05) 1.00 5.06% 245,157 0.57% 4.95% 0.57%
1996 1.00 0.05 (0.05) 1.00 5.18% 256,244 0.57% 5.06% 0.57%
1995 1.00 0.05 (0.05) 1.00 5.46% 186,620 0.54% 5.39% 0.66%
CASH FUND
1999 1.00 0.05 (0.05) 1.00 4.68% 569,409 0.57% 4.56% 0.60%
1998 1.00 0.05 (0.05) 1.00 5.24% 299,220 0.57% 5.11% 0.61%
1997 1.00 0.05 (0.05) 1.00 5.07% 152,041 0.57% 4.97% 0.60%
1996 1.00 0.05 (0.05) 1.00 5.22% 89,733 0.57% 5.10% 0.60%
1995 1.00 0.06 (0.06) 1.00 5.23% 73,802 0.54% 5.33% 0.69%
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in the absence of any waivers and reimbursements.
11
<PAGE>
For More Information
The following documents are available free upon request: MONARCH FUND
Annual/Semi-Annual Reports Institutional Shares
Additional information about each Fund's investments is Treasury
available in the Fund's annual and semi-annual reports to Cash Fund
shareholders.
Governmen
Statement of Additional Information ("SAI") Cash Fund
The SAI provides more detailed information about each Fund Cash Fund
and is incorporated by reference into this Prospectus.
Contacting the Funds
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund
by contacting the Funds at:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 754-8757
Securities and Exchange Commission Information
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). You can get copies, for a fee,
by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
E-mail address: [email protected]
The scheduled hours of operation of the Public Reference
Room may be obtained by calling the SEC at (202) 942-8090.
Free copies of the reports and SAIs are available from the
SEC's Internet Web Site at http://www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
(800) 754-8757
Investment Company Act File No. 811-6742
<PAGE>
MONARCH FUNDS
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PROSPECTUS
January 1, 2000
As Amended January 8, 2000
INVESTOR SHARES
Three money market funds
that each seek to provide Treasury Cash Fund
high current income to the Government Cash Fund
extent consistent with the Cash Fund
preservation of capital and
the maintenance of liquidity.
- --------------------------------------------------------------------------------
Table of Contents
Summary................................2 Your Account.........................6
Performance............................4 Other Information...................10
Fee Tables.............................5 Financial Highlights................11
Management.............................5 For More Information................12
- --------------------------------------------------------------------------------
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>
MONARCH FUNDS
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................................................................................
SUMMARY
................................................................................
DEFINITIONS This Prospectus offers Investor Shares of three
money market funds -- TreasuryCash Fund,
MONEY MARKET SECURITY Government Cash Fund and Cash Fund (the "Funds").
means a high credit Investor Shareshave a $5,000 minimum initial
quality, short-term, U.S. investment.
dollar denominated debt
security
INVESTMENT OBJECTIVES
TREASURY SECURITY means a
security that is issued or The investment objective of each Fund is to
guaranteed by the U.S. provide high current income to the extent
Treasury consistent with the preservation of capital and
the maintenance of liquidity.
GOVERNMENT SECURITY
means a security that is PRINCIPAL INVESTMENT STRATEGIES
issued or guaranteed by
the U.S. Government, its Each Fund invests in a diversified portfolio of
agencies or Money Market Securities and:
instrumentalities o seeks to maintain a stable net asset
value of $1.00 per share
REPURCHASE AGREEMENT o invests in securities with remaining
means a transaction in maturities of 397 days or less
which a Fund purchases o maintains a dollar weighted average maturity
securities and of its investments of 90 days or less.
simultaneously commits to
resell the securities to the Each Fund invests substantially all of its assets
other party at an agreed- in another mutual fund (a "Portfolio") which has
upon date and at a price the same investment objective and substantially
reflecting a market rate of similar investment policies. The Portfolios in
interest which the Funds invest and their primary
investments are:
FUND/PORTFOLIO PRIMARY INVESTMENTS
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o securities issued by financial
institutions, such as certificates of deposit,
bankers' acceptances and time deposits
o securities issued by domestic companies,
such as commercial paper
o Government Securities
o Repurchase Agreements
The investment adviser for each Portfolio (the "Adviser") continuously monitors
economic factors such as interest rate outlooks and technical factors such as
prevailing interest rates and Federal Reserve policy 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 security if:
o revised economic forecasts or interest rate outlook requires a
repositioning of the Portfolio
o the security subsequently fails to meet the Adviser's investment
criteria
o funds are needed for another purpose.
2
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MONARCH FUNDS
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PRINCIPAL RISKS OF INVESTING IN A FUND
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 government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
There is no assurance that any 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 described below. 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.
INTEREST RATE RISK Interest rates affect the value of the Portfolios'
investments. Increases in interest rates may cause a decline in value. In
addition, those increases may cause 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 its credit quality otherwise falls. In
the worst case, an issuer of a security or a Repurchase Agreement counterparty
may default or otherwise be unable to make timely payments of interest or
principal. Not all Government Securities are supported by the full faith and
credit of the U.S. Government as are Treasury Securities.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
3
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MONARCH FUNDS
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................................................................................
PERFORMANCE
................................................................................
The following charts and table provide some indication of the risks of investing
in a Fund's Investor Shares by showing changes in performance from year to year
and investment returns. Because Investor Shares of Government Cash Fund have
operated less than a year, the information provided below is for Government Cash
Fund's Universal Shares. The returns for Investor Shares will be lower than
those of Universal Shares because of the higher expenses of Investor Shares. To
obtain current yield information, call toll-free (800) 754-8757. PERFORMANCE
INFORMATION PRESENTED HERE REPRESENTS ONLY PAST PERFORMANCE AND DOES NOT
NECESSARILY INDICATE FUTURE RESULTS.
The following charts show the annual total returns for each full calendar year
that the Funds have operated.
[EDGAR representatiion of bar charts]
YEAR ENDED 12/31 1993 1994 1995 1996 1997 1998 1999
TREASURY CASH FUND 4.60% 4.65% 4.57% 4.17%
Best Quarter: 1.18%
(quarter ended 12/31/97)
Worst Quarter: 1.03%
(quarter ended 6/30/99)
GOVERNMENT CASH FUND 3.24% 4.29% 6.01% 5.44% 5.56% 5.49% 5.06%
Best Quarter: 1.51%
(quarter ended 6/30/95)
Worst Quarter: 0.78%
(quarter ended 3/31/94)
CASH FUND 4.78% 4.90% 4.87% 4.49%
Best Quarter: 1.24%
(quarter ended 12/31/97)
Worst Quarter: 0.95%
(quarter ended 3/31/99)
The following table lists the average annual total return for each Fund as of
December 31, 1999.
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
TREASURY CASH FUND 4.17% N/A 4.52% 10/25/95
GOVERNMENT CASH FUND 5.06% 5.36% 4.97% 10/29/92
CASH FUND 4.49% N/A 4.83% 6/16/95
4
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MONARCH FUNDS
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................................................................................
FEE TABLES
................................................................................
The following tables describe the various fees and expenses that you will pay if
you invest in Investor Shares of a Fund. Expenses for Government Cash Fund are
estimated for the fiscal year ending August 31, 2000 and expenses for each other
Fund are based on amounts incurred during the fiscal year ended August 31, 1999.
Expenses are stated as a percentage of average net assets. There are no charges
for purchasing or redeeming Fund shares.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
TREASURY GOVERNMENT CASH
CASH FUND CASH FUND FUND
Management Fees(2) 0.13% 0.13% 0.13%
Distribution (Rule 12b-1) Fees 0.25% 0.25% 0.25%
Other Expenses 0.51% 0.46% 0.47%
Total Annual Fund Operating Expenses(3) 0.89% 0.84% 0.85%
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees for
Treasury Cash Fund and Cash Fund. Actual Total Annual Fund Operating
Expenses for Treasury Cash Fund and for Cash Fund were 0.83%.
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 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 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:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
TREASURY CASH FUND $91 $284 $493 $1,096
GOVERNMENT CASH FUND $86 $268 $466 $1,037
CASH FUND $87 $271 $471 $1,049
................................................................................
MANAGEMENT
................................................................................
Each Fund is a series of Monarch 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.
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser's primary business is fixed
income investment management and, in addition to the Portfolios, advises two
other money market funds and 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.
The Adviser makes investment decisions for each Portfolio. During the Funds'
last fiscal year, the advisory fees paid to the Adviser for each Portfolio were
0.03% of the Portfolio's average daily net assets.
5
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MONARCH FUNDS
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OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 1999, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $94 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
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.
Each Fund has adopted a distribution or "Rule 12b-1" plan under which the Fund
pays the distributor for the sale and distribution of Investor Shares. Each Fund
has also entered into a shareholder service agreement under which the Fund pays
for the servicing of shareholder accounts. The fees paid under the distribution
plan and shareholder service agreement may be paid to various financial
institutions that provide services to their customers invested in Investor
Shares. Because Investor Shares pay distribution fees on an on-going basis, your
investment cost over time may be higher than paying other types of sales
charges.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Investor Shares include the
Shares' own expenses as well as Trust expenses that are allocated among the
Funds, their classes of shares and any 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. Any fee waiver or expense reimbursement
increases investment performance for the period during which the waiver or
reimbursement is in effect.
................................................................................
YOUR ACCOUNT
................................................................................
HOW TO CONTACT THE FUNDS
You may either contact the Trust or Imperial Securities Corp. for an account
application or for further information regarding the Funds. Imperial Securities
Corp. is located at 9920 South La Cienega Boulevard, 14th Floor, Inglewood, CA
90301.
WRITE TO US AT: WIRE INVESTMENTS TO US AT:
Monarch Funds Imperial Bank
P.O. Box 446 ABA #122201444
Portland, Maine 04112 FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US AT: (Name of Your Fund)
(800) 754-8757 (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 accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not be accepted or invested by a Fund during the period
before the receipt of Federal Funds.
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:
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
11:00 a.m., Pacific time 1:00 p.m., Pacific time
6
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MONARCH FUNDS
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On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
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 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). 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 Portfolio 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 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. 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, sole proprietorship, joint and gifts or
transfers to minors accounts, the check must be made payable to
"Monarch Funds" or to one or more owners of the account and endorsed to
"Monarch Funds." For all other accounts, the check must be made payable
on its face to "Monarch Funds." No other method of check payment is
acceptable (for instance, you may not pay by travelers check).
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 The minimum initial investment in Investor Shares is $5,000.
The minimum additional investment is $100.
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 the
proprietorship accounts. Joint accounts can have two or more account.
owners.
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 UGMA or the UTMA.
child and obtain tax benefits. o The custodian must sign instructions in a manner
indicating trustee capacity.
BUSINESS ENTITIES o Submit a Corporate/Organization Resolution form or similar
document.
TRUSTS o The trust must be established before an account
can be opened.
o Submit a Corporate/Organization Resolution form or similar
document.
</TABLE>
7
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MONARCH FUNDS
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INVESTMENT PROCEDURES
<TABLE>
<S> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application and/or a o Fill out an investment slip from a confirmation
Corporate/Organization Resolution form. or write us a letter.
o Complete the application. o Write your account number on your check.
o Mail us your application and a 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 and/or a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form. o Instruct your bank to wire your money to us.
o Complete the application.
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.
</TABLE>
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.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
HOW 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 on your account application) (See "By Telephone") or
o Mail us your request (See "By Mail").
BY CHECK
o Write a check against your account balance (See "Check Writing
Privileges").
o Your investment will continue to earn distributions until your check is
presented to the Fund for payment.
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 on your
account application) (See "By Wire").
8
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MONARCH FUNDS
- --------------------------------------------------------------------------------
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 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
CHECK WRITING PRIVILEGES You may redeem shares by writing checks provided by the
Funds against your account balance. Contact the Transfer Agent for information
on applying for check writing privileges. When your check is presented for
payment, the Trust will deduct shares from your shareholder account in an amount
equal to the amount of the check. The Trust charges a $10 fee for all checks
presented in amounts less than $500. The Trust deducts this fee directly from
your shareholder account.
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.
Specific requirements are listed in the SAI or may be obtained by calling the
Transfer Agent.
SMALL ACCOUNTS If the value of your account falls below $5,000, a Fund may ask
you to increase your balance. If the account value is still below $5,000 after
60 days, a Fund may close your account and send you the proceeds.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Investor Shares of a Fund for Investor Shares of another Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. 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 your 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.
9
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MONARCH FUNDS
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................................................................................
OTHER INFORMATION
................................................................................
ADDITIONAL 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, credit
quality and diversification are interpreted in accordance with that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions. For instance, the
Portfolios may hold cash in any 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.
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway" structure. Each Fund
invests substantially all of its assets in its corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
A Fund may withdraw its entire investment from a Portfolio at anytime that 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 Core Trust's board and executive
officers is in the SAI.
CLASSES OF SHARES
In addition to Investor Shares, each Fund offers Universal Shares and
Institutional Shares. You may obtain prospectuses describing these classes of
shares from the Funds' distributor by contacting the Transfer Agent. Universal
Shares are sold to institutional investors and Institutional 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 from net investment income daily and pays those
distributions monthly. In addition, each Fund pays capital gain distributions,
if any, 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.
TAXES
Each Fund intends to operate in a manner such that it will not be liable for
Federal income or excise tax.
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, if any, is taxable to you as long-term capital gain regardless of how long
you have held Fund shares.
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.
10
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MONARCH FUNDS
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................................................................................
FINANCIAL HIGHLIGHTS
................................................................................
The following table is intended to help you understand the performance of
Investor Shares of the Funds. Data for Universal Shares of Government Cash Fund
is included in the table as Investor Shares of that Fund had not commenced
operations as of August 31, 1999. Total return in the table represents the rate
an investor would have earned on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
LLP. Each Fund's financial statements and the independent auditor's report are
included in the Annual Report dated August 31, 1999, which is available upon
request, without charge.
As of August 31, 1999 the net assets of Treasury Cash Portfolio were
$287,758,076, of Government Cash Portfolio were $732,787,465 and of Cash
Portfolio were $937,534,839.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
--------------------------------------------- ---------------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of ----------------------------------
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Share Income Income Share Return Omitted) Expenses Income Expenses(a)
Year Ended August 31
TREASURY CASH FUND
INVESTOR SHARES
1999 $ 1.00 $0.04 $(0.04) $ 1.00 4.10% $232,624 0.83% 4.02% 0.89%
1998 1.00 0.05 (0.05) 1.00 4.72% 57,957 0.82% 4.62% 0.91%
1997 1.00 0.05 (0.05) 1.00 4.58% 30,118 0.83% 4.55% 0.97%
1996(c) 1.00 0.04 (0.04) 1.00 4.00% 3,980 0.83%(b) 4.50%(b) 1.33%(b)
GOVERNMENT CASH FUND
UNIVERSAL SHARES
1999 1.00 0.05 (0.05) 1.00 5.00% 277,548 0.18% 4.88% 0.25%
1998 1.00 0.05 (0.05) 1.00 5.63% 253,644 0.18% 5.48% 0.26%
1997 1.00 0.05 (0.05) 1.00 5.49% 230,410 0.17% 5.35% 0.26%
1996 1.00 0.05 (0.05) 1.00 5.59% 248,986 0.19% 5.43% 0.28%
1995 1.00 0.06 (0.06) 1.00 5.78% 182,546 0.24% 5.46% 0.52%
CASH FUND
INVESTOR SHARES
1999 1.00 0.04 (0.04) 1.00 4.41% 269,421 0.83% 4.30% 0.85%
1998 1.00 0.05 (0.05) 1.00 4.97% 181,754 0.83% 4.86% 0.86%
1997 1.00 0.05 (0.05) 1.00 4.81% 76,480 0.83% 4.72% 0.85%
1996 1.00 0.05 (0.05) 1.00 4.95% 32,731 0.83% 4.68% 0.96%
1995(c) 1.00 0.01 (0.01) 1.00 5.14% 4,665 0.84%(b) 5.32%(b) 3.76%(b)
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in the absence of any waivers and reimbursements.
(b) Annualized.
(c) Investors Shares of Treasury Cash Fund and Cash Fund commenced operations
on October 25, 1995 and June 16, 1995, respectively.
11
<PAGE>
For More Information
The following documents are available free upon request: MONARCH FUND
Annual/Semi-Annual Reports Investor Shares
Additional information about each Fund's investments is Treasury
available in the Fund's annual and semi-annual reports to Cash Fund
shareholders.
Governmen
Statement of Additional Information ("SAI") Cash Fund
The SAI provides more detailed information about each Fund Cash Fund
and is incorporated by reference into this Prospectus.
Contacting the Funds
You can get a free copy of both reports and the SAI, request
other information and discuss your questions about each Fund
by contacting the Funds at:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(207) 879-0001
(800) 754-8757
Securities and Exchange Commission Information
You can also review the Funds' reports (when available) and
SAIs at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). You can get copies, for a fee,
by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
E-mail address: [email protected]
The scheduled hours of operation of the Public Reference
Room may be obtained by calling the SEC at (202) 942-8090.
Free copies of the reports and SAIs are available from the
SEC's Internet Web Site at http://www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
(800) 754-8757
Investment Company Act File No. 811-6742
<PAGE>
MONARCH FUNDS
Statement of Additional Information
January 1, 2000
As Amended January 8, 2000
Fund Information: Treasury Cash Fund
Government Cash Fund
Cash Fund
Monarch Funds
Two Portland Square
Portland, Maine 04101
(800) 754-8757
Account Information and
Shareholder Services:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 754-8757
This Statement of Additional Information or "SAI" supplements the Prospectuses
dated January 1, 2000, as may be amended from time to time, offering Universal
Shares, Institutional Shares and Investor Shares of Treasury Cash Fund,
Government Cash Fund and Cash Fund. 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 Forum Shareholder Services, LLC at the address or
telephone number listed above.
Financial Statements for the Funds for the year ended August 31, 1999 included
in the Annual Report to shareholders, are incorporated into this SAI by
reference. Copies of the Annual Report may be obtained, without charge, upon
request by contacting Forum Shareholder Services, LLC at the address or
telephone number listed above.
<PAGE>
MONARCH FUNDS
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TABLE OF CONTENTS
Glossary..................................................................2
1. General Information.......................................................3
2. Investment Policies and Risks.............................................3
3. Investment Limitations....................................................7
4. Performance Data and Advertising.........................................10
5. Management...............................................................13
6. Portfolio Transactions...................................................20
7. Additional Purchase and Redemption Information...........................21
8. Taxation.................................................................23
9. Other Matters............................................................26
Appendix A Description of Certain Securities Ratings..................A-1
Appendix B Performance Data...........................................B-1
Appendix C Miscellaneous Tables.......................................C-1
1
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MONARCH FUNDS
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GLOSSARY
"Adviser" means Forum Investment Advisors, LLC.
"Board" means the Board of Trustees of the Trust.
"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, fund accountant of each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's shares.
"Fund" means each of Treasury Cash Fund, Government Cash Fund and Cash Fund.
"Fitch" means Fitch IBCA, Inc.
"Government Securities" means securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (See prospectus).
"Moody's" means Moody's Investors Service.
"NAV" means net asset value per share (See prospectus).
"NRSRO" means a nationally recognized statistical rating organization.
"Portfolio" means each of Treasury Cash Portfolio, Government Cash Portfolio and
Cash Portfolio, series of Core Trust.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P"means Standard & Poor's Corporation, a Division of the McGraw Hill
Companies.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer agent and
distribution disbursing agent of each Fund.
"Treasury Securities" means securities issued or guaranteed by the U.S. Treasury
(See prospectus).
"Trust" means Monarch Funds.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
2
<PAGE>
MONARCH FUNDS
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GENERAL INFORMATION
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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
identical investment objectives and substantially similar investment policies,
as follows:
Treasury Cash Fund Treasury Cash Portfolio
Government Cash Fund Government Cash Portfolio
Cash Fund Cash Portfolio
CONSIDERATIONS OF INVESTING IN A PORTFOLIO
A Fund's investment in a Portfolio may be affected by the actions of other
investors in the Portfolio. A Fund may withdraw its entire investment from a
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. A withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
by the Portfolio. That distribution could result in a less diversified portfolio
of investments for the Fund, resulting in increased risk, and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it would incur transaction costs. If a Fund withdrew
its investment from a Portfolio, the Board would consider what action might be
taken, including the management of the Fund's assets in accordance with its
investment objective and policies by the Adviser or the investment of all of the
Fund's investable assets in another pooled investment entity having
substantially the same investment objective as the Fund.
ADDITIONAL INFORMATION Each class of a Fund (and any other investment company
that invests in a Portfolio) may have a different expense ratio and different
sales charges, including distribution fees, and each class' (and investment
company's) performance will be affected by its expenses and sales charges. For
more information on any other class of shares of the Funds or concerning any
other investment companies that invest in a Portfolio, investors may contact FFS
at 800-754-8757. If an investor invests through a financial institution, the
investor may also contact their financial institution to obtain information
about the other classes or any other investment company investing in a
Portfolio.
INVESTMENT POICIES AND RISKS
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The following discussion supplements the disclosure in the prospectuses about
each Fund's investment techniques, strategies and risks. Unless otherwise
indicated below, the discussion of the investment policies of a Fund also refers
to the investment policies of the Core Portfolio in which the Fund invests.
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
(by companies such as S&P) for debt obligations, or are unrated
and determined to be of comparable quality.
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) 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 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. 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.
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FIXED INCOME SECURITIES
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 appreciation or
depreciation may be less on these obligations than for fixed rate obligations.
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, a 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 may purchase variable and floating rate corporate master notes
and similar securities. 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.
ASSET BACKED SECURITIES
Each Portfolio may purchase adjustable rate mortgage backed or other asset
backed securities (such as Small Business Association securities) that are
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 that may be secured by
real estate or other assets. Most mortgage-related securities 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.
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 40 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.
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COLLATERALIZED MORTGAGE OBLIGATIONS Each Portfolio may purchase collateralized
mortgage obligations ("CMOs"), which are collateralized by ARMs 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
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.
FEDERAL HOME LOAN MORTGAGE CORPORATION SECURITIES
Each Portfolio is currently 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.
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.
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. When this occurs, a Portfolio's yield will decline. 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 purchases mortgage-related
securities at a premium, unscheduled prepayments, which are made at par, result
in a loss equal to any unamortized premium.
REPURCHASE AGREEMENTS
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
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 Portfolio's custodian or subcustodian maintains possession of the purchased
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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 for periods as short as overnight, while retaining the flexibility to
pursue longer-term investments.
RISKS
Repurchase Agreements involve credit risk. In the event that bankruptcy,
insolvency or similar proceedings are commenced against a counterparty, a Fund
may have difficulties in exercising its rights to the underlying securities. A
Fund 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 purchased by a Fund may result in a missed opportunity to make an
alternative investment. Favorable insolvency laws that allow a Fund, 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 Fund will only enter into a Repurchase Agreement with a seller
that the Adviser believes presents minimal credit risk.
BORROWING
GENERAL
Each Portfolio may borrow money from banks for temporary or emergency purposes
in an amount up to 33 1/3% of a Fund's total assets. Each Fund may borrow money
for other purposes so long as such borrowings do not exceed 5% of a Fund's total
assets. The purchase of securities is prohibited if a Fund's borrowing exceeds
5% or more of a Fund's total assets.
RISKS
The use of borrowing involves special risks, including magnified capital losses.
If a Fund buys securities with borrowed funds and the value of the securities
declines, a Fund 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 Fund 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 Fund'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 Fund's investment portfolio, a Fund's
use of borrowing would result in a lower rate of return than if the Fund did not
borrow. The size of any loss incurred by a Fund due to borrowing will depend on
the amount borrowed. The greater the percentage borrowed, the greater potential
of gain or loss to a Fund.
WHEN-ISSUED SECURITIES
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.
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 to the Portfolio or a missed opportunity to make an
alternative investment.
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ILLIQUID SECURITIES
GENERAL
Each Portfolio may invest up to 10% of its net assets in illiquid securities.
The term "illiquid securities" 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.
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.
DETERMINATION OF LIQUIDITY
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.
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.
INVESTMENT LIMITATIONS
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Each Fund has adopted the same investment limitations. The investment objective
of a Fund or Portfolio is fundamental. Each Portfolio and Fund have also adopted
a fundamental policy which provides that, notwithstanding any other investment
policy or restriction (whether fundamental or not), 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 Portfolio or Fund cannot be changed without the
affirmative vote of the lesser of: (1) 50 % of the outstanding shares of the
Fund (or interests in case of a Portfolio); or (2) 67 % of the shares of the
Fund (or interests in the case of a Portfolio) present or represented at a
shareholders meeting at which the holders of more than 50 % of the outstanding
shares of the Fund (or interests in case of a Portfolio) are present or
represented. The Board may change a nonfundamental policy of a Fund without
shareholder approval.
For purposes of all investment policies of a Portfolio or Fund: (1) the term
1940 Act includes the rules thereunder, SEC interpretations and any exemptive
order upon which the Portfolio or Fund may rely; and (2) the term Code includes
the rules thereunder, Internal Revenue Service interpretations and any private
letter ruling or similar authority upon which the Portfolio or Fund 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 assets or purchases and redemptions of shares will not be considered
a violation of the limitation.
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FUNDAMENTAL LIMITATIONS
Each Portfolio may not:
DIVERSIFICATION With respect to 75% of its assets, purchase a security other
than a 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 Government
Securities.
For purposes of concentration: (1) loan participations are considered to be
issued by both the issuing bank and the underlying corporate borrower; (2)
utility companies are divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (3) 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.
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.
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 (1) 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 (2) pursuant to
12 C.F.R. Section 566.1 would cause shares of the Portfolio not to be deemed to
be short term liquid assets when owned by Federally chartered savings
associations.
NONFUNDAMENTAL LIMITATIONS
Each Portfolio may not:
DIVERSIFICATION With respect to 100% of its assets, purchase a security other
than a 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 otherwise permitted 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.
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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.
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.
INVESTMENTS BY FINANCIAL INSTITUTIONS
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 interests
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 Portfolio 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 Fund shares, prospective investors that are banks or bank
holding companies, particularly those that are organized under the laws of any
country other than the United States or of any state, territory or other
political subdivision of the United States, and prospective investors that are
U.S. branches and agencies of foreign banks or Edge Corporations, should consult
all applicable laws, regulations and policies, as well as appropriate regulatory
bodies, to confirm that an investment in Fund shares is permissible and in
compliance with any applicable investment or other limits.
Fund shares held by national banks are generally required to be revalued
periodically and reported at the lower of cost or market value. Such shares may
also be subject to special regulatory reporting, accounting and tax treatment.
In addition, a bank may be required to obtain specific approval from its board
of directors before acquiring Fund shares, and thereafter may be required to
review its investment in a Fund for the purpose of verifying compliance with
applicable Federal banking laws, regulations and policies.
National banks generally must review their holdings of shares of a Fund at least
quarterly to ensure compliance with established bank policies and legal
requirements. Upon request, the Portfolios will make available to the Funds'
investors' information relating to the size and composition of their portfolio
for the purpose of providing Fund shareholders with this information.
INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - GOVERNMENT CASH PORTFOLIO
AND TREASURY CASH PORTFOLIO
Government Cash Portfolio and Treasury 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
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amended. The Portfolios limit their investments to Government Securities
(including Treasury STRIPS) and Repurchase Agreements fully collateralized by
Government Securities. Certain Government Securities owned by a Portfolio may be
mortgage or asset backed, but, no such security will be (1) a stripped mortgage
backed security ("SMBS"), (2) 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 (3) a residual interest in a
CMO or REMIC. Each Portfolio may also invest in reverse Repurchase Agreements in
accordance with 12 C.F.R. 703.100(j) to the extent otherwise permitted herein
and in the Prospectuses.
INVESTMENTS BY SHAREHOLDERS THAT ARE SAVINGS ASSOCIATIONS - GOVERNMENT CASH
PORTFOLIO
Government Cash Portfolio limits its investments to those legally permissible
for Federally chartered savings associations without limit as to percentage
under applicable provisions of the Home Owners' Loan Act (including 12 U.S.C.
Section 1464) and the applicable rules and regulations of the Office of Thrift
Supervision, as such statutes and rules and regulations may be amended. In
addition, the Portfolio limits its investments to investments that are
permissible for an open-end investment company to hold and would permit shares
of the investment company to qualify as liquid assets under 12 C.F.R. Section
566.1(g) and as short-term liquid assets under 12 C.F.R. Section 566.1(h).
PERFORMANCE DATA AND ADVERTISING
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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 U.S. Treasury bonds, bills or notes and changes in the
Consumer Price Index as published by the U.S. Department of Commerce.
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 the 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.
PERFORMANCE CALCULATIONS
A Fund's performance may be quoted in terms of yield or total return. Appendix B
includes performance information for each Fund.
SEC YIELD
Yield quotations for a Fund 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
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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.
TOTAL RETURN CALCULATIONS
A Fund's total return shows its overall change in value, assuming that all of
the Fund's distributions are reinvested.
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 Fund 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 a Fund.
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
returns, shareholders should recognize that they are not the same as actual
year-to-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 may quote unaveraged or cumulative total returns that reflect a Fund'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 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
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OTHER MATTERS
A Fund 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) biographical descriptions of a Portfolio's portfolio
manager and the portfolio management staff of a Portfolio'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; (6) the results of a hypothetical investment in a Fund over a given
number of years, including the amount that the investment would be at the end of
the period; (7) the effects of investing in a tax-deferred account, such as an
individual retirement account or Section 401(k) pension plan; (8) the net asset
value, net assets or number of shareholders of a Fund as of one or more dates;
and (9) a comparison of a Fund'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.
In connection with its advertisements, a Fund may provide "shareholders'
letters" that 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.
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MANAGEMENT
- ----------
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> <C>
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S)
BIRTH AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
John Y. Keffer* Chairman and President, Forum Financial Group, LLC (a mutual fund services
Born: July 15, 1942 President holding company)
Two Portland Square
Portland, Maine 04101
Maurice J. DeWald Trustee Chairman and CEO, Verity Financial Group (financial advisory
Born: March 20, 1940 firm)
19200 Von Karman Avenue Director, Tenet Healthcare Corporation, ARV Assisted Living,
Suite 400 Inc., since November 1995, Dai-Ichi Kangyo Bank & Advanced
Irvine, California 92612 Materials Group, Inc. of California since January 1998
Christine M. McCarthy Trustee Senior Vice President and Treasurer, The Walt Disney Company since
Born: June 24, 1955 December 1999
500 S. Buena Vista Boulevard Executive Vice President and CFO, Imperial Bank/Imperial Bancorp
Burbank, California 91521 April 1997 to December 1999
Executive Vice President, First Interstate Bancorp prior to
April 1997
Jack J. Singer Trustee Senior Vice President and Investment Department Manager,
Born: May 24, 1944 Imperial Bank
9920 S. LaCienega Boulevard President, Imperial Securities Corp.
Inglewood, California 90301 Chairman and President, Imperial Asset Management since August
1997
David I. Goldstein Vice President Counsel and General Counsel, Forum Financial Group, LLC since
Born: August 3, 1961 1995
Two Portland Square
Portland, Maine 04101
Anthony R. Fischer, Jr. Vice President Portfolio Manager, Forum Investment Advisors, LLC since 1998
Born: April 15, 1948 President, Linden Asset Management, Inc. prior to 1998
Two Portland Square
Portland, Maine 04101
Stacey E. Hong Treasurer Director, Fund Accounting, Forum Financial Group, LLC
Born: May 10, 1966
Two Portland Square
Portland, Maine 04101
Beth P. Hanson Vice President Corporate Administrator and Fund Administration Manager,
Born: July 15, 1966 and Assistant Forum Financial Group, LLC since June 1995
Two Portland Square Secretary English Language Instructor, Overseas Training Center, Inc.
Portland, Maine 04101 (Osaka, Japan) prior thereto
Leslie K. Klenk Secretary Assistant Counsel and Counsel, Forum Financial Group, LLC since
Born: August 24, 1964 1998
Two Portland Square Vice President/Associate General Counsel, Smith Barney Inc.
Portland, Maine 04101 (brokerage firm) from 1995 through 1998
</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.
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TRUSTEE OR OFFICER POSITION
John Y. Keffer Chairman and President, Core Trust (Delaware)
David I. Goldstein Vice President, Core Trust (Delaware)
Stacey E. Hong Treasurer, Core Trust (Delaware)
COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee of the Trust is paid $3,000 for each Board meeting attended
(whether in person or by electronic communication) and $3,000 for each committee
meeting attended on a date when a Board meeting is not held. Trustees are also
reimbursed for travel and related expenses incurred in attending meetings of the
Board. No officer of the Trust is compensated by the Trust, but officers are
reimbursed for travel and related expenses incurred in attending meetings of the
Board. Messrs. Keffer and Singer and Ms. McCarthy have not in the past accepted
any fees (other than reimbursement for travel and related expenses) for their
services as Trustees.
The following table sets forth the fees to paid to each Trustee by the Trust for
the fiscal year ended August 31, 1999.
COMPENSATION TOTAL COMPENSATION
TRUSTEE FROM TRUST TRUST AND FUND COMPLEX
Maurice J. DeWald $12,000 $12,000
Rudolph I. Estrada $12,000 $12,000
Robert M. Franko $12,000 $12,000
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
defined by the 1940 Act) of Core Trust is indicated by an asterisk (*). The Core
Trust Board supervises the Portfolios' activities, monitors their contractual
arrangements with various service providers and decides upon matters of general
policy.
<TABLE>
<S> <C> <C>
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S)
BIRTH AND ADDRESS WITH THE TRUST, DURING PAST 5 YEARS
John Y. Keffer* Chairman and
President
Costas Azariadis Trustee Professor of Economics, University of California-Los Angeles
Born: February 15, 1943 Trustee, Core Trust (Delaware)
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 Trustee, Core Trust (Delaware)
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
40 West 57th Street 1989-1995
New York, NY 10019 Trustee, Core Trust (Delaware)
Thomas G. Sheehan Vice President Director, Forum Financial Group
Born: July 15, 1954
Two Portland Square
Portland, Maine 04101
Stacey E. Hong Treasurer
Dawn Taylor Assistant Manager/Senior Tax Specialist, Tax Department, Forum Financial
Born: May 14, 1964 Treasurer 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 1995 to
1997
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NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S)
BIRTH AND ADDRESS WITH THE TRUST, DURING PAST 5 YEARS
David I. Goldstein Vice President and
Secretary
Don L. Evans Secretary Assistant Counsel and Counsel, Forum Financial Group, LLC
Born: August 12, 1948 since August 1995
Two Portland Square Associate, Weiner & Strother PC and Bisk & Lutz (law firms)
Portland, Maine 04101 during 1995
</TABLE>
INVESTMENT ADVISER
SERVICES OF THE ADVISER
Forum Investment Advisors, LLC acts as the investment adviser to the Portfolios
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. 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.
FEES
The Adviser's fees are calculated as a percentage of the Trust's average net
assets.
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 is for the past three fiscal years.
OTHER PROVISIONS OF ADVISORY AGREEMENT
Subsequently, the Advisory 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.
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.
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
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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 except the distribution service fees from the Trust with
respect to the Shares of those Classes for which a Plan is effective.
OTHER PROVISIONS OF DISTRIBUTION 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.
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 of a Rule 12b-1 fee at the annual rate of up to
0.25% of the average daily net assets of the Investor Class of each Fund. The
Plan obligates the Funds to pay as compensation for FFS's services and not as
reimbursement for certain expenses incurred.
The Plan provides that FFS may incur expenses for such activities including (1)
any sales, marketing and other activities primarily intended to result in the
sale of Investor Class shares and (2) responding to Investor Class shareholder
inquiries regarding the Funds' investment objectives, policies and other
operational features. Expenses for such activities include compensation to
employees, and expenses, including overhead and telephone and other
communication expenses, of Forum and various financial institutions or other
persons who engage in or support the distribution of Investor Class shares, or
who respond to Investor Class shareholder inquiries regarding the Funds'
operations; the incremental costs of printing (excluding typesetting) and
distributing prospectuses, statements of additional information, annual reports
and other periodic reports for use in connection with the offering or sale of
Investor Class shares to any prospective investors; and the costs of preparing,
printing and distributing sales literature and advertising materials used by
Forum or others in connection with the offering of Investor Class shares for
sale to the public. During the fiscal year ended August 31, 1999, fees were paid
pursuant to a service and marketing agreement for distribution and service
activities with respect to Treasury Cash Fund and Cash Fund in the amount of
$326,815 and $599,096, respectively.
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The Plan provides that all written agreements relating to that plan must be
approved by the Board, including a majority of the Disinterested 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
to 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
Disinterested Trustees. The Plan further provides that it may not be amended to
materially increase the costs which the Trust bears for distribution pursuant to
the Plan without shareholder approval and that other material amendments of the
Plan must be approved by the Disinterested Trustees. The Plan may be terminated
at any time by the Board, by a majority of the Disinterested 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).
OTHER FUND SERVICE PROVIDERS
ADMINISTRATOR
THE TRUST As administrator, pursuant to an agreement with the Trust (the
"Administration Agreement"), FAdS is responsible for supervising 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.
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' actions or omissions that are
consistent with FAdS' 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 a majority vote of the outstanding voting securities
of the Portfolio and, in either case, by a majority of the Trustees who are not
interested persons of any party to the Core Administration Agreement. Under the
Core Administration Agreement, FAdS performs similar services to those provided
to each Fund.
The Core Administration Agreement provides that FAdS shall not be liable for any
action or inaction in the administration of Core Trust, except for willful
misfeasance, bad faith, or gross negligence in the performance of FAdS' duties
or by reason of reckless disregard of FAdS' and obligations under this
Agreement. The Administration Agreement may be terminated with respect to a
Portfolio at any time, without the payment of any penalty: (1) by the Core Trust
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 three fiscal years (or shorter period depending on a Fund's
commencement of operations).
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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.
FAcS is currently not paid a fee for services provided to the Funds. A fee may
be charged in the future, subject to Board approval.
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' officers and persons who control FAcS) are
indemnified by the Trust against any and all claims and expenses related to
FAcS' 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. 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 pursuant to a
Portfolio and Unitholder Accounting Agreement ("Core Accounting Agreement"). The
Core 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 Core Portfolio Accounting Agreement may be terminated
with respect to a Portfolio at any time, without the payment of any penalty (1)
by the Board on 60 days' written notice to FAcS or (2) 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
Portfolios to FAcS, the amount of the fee waived by FAcS, and the actual fees
received by FAcS. The data is for the past three fiscal years (or shorter period
depending on a Fund's commencement of operations).
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 an
annual fee of $12,000 plus $6,000 for each class above one. The Transfer Agent
also receives a fee based on the average daily net assets of each class as
follows: Universal Shares - 0.05%, Institutional Shares - 0.20% and Investor
Shares - 0.20%. Certain shareholder account fees are also charged. 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
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the Transfer Agent) are indemnified by the Trust against any and all claims and
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).
SHAREHOLDER SERVICE AGREEMENT
The Trust has adopted a shareholder service agreement ("Shareholder Service
Agreement") with respect to Institutional Shares and Investor Shares of each
Fund under which the Trust may pay FAdS a shareholder servicing fee at an annual
rate of 0.20% of the average daily net assets of each of the Institutional
Shares and the Investor Shares. FAdS may pay any or all amounts of these
payments to various institutions that provide shareholder servicing to their
customers holding Institutional Services shares or Investor shares.
The Shareholder Service Agreement shall remain in effect for a period of one
year from the date of its effectiveness and thereafter shall continue in effect
for successive annual periods, provided that such continuance is specifically
approved at least annually by the Board and a majority of the Disinterested
Trustees. Any material amendment to the Shareholder Service Plan must be
approved by a majority of the Disinterested Trustees. The Plan may be terminated
without penalty at any time by a vote of a majority of the Disinterested
Trustees or FAdS.
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: (1) 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; (2) provide
necessary personnel and facilities to establish and maintain shareholder
accounts and records; (3) assist shareholders in arranging for processing
purchase, exchange and redemption transactions; (4) arrange for the wiring of
funds; (5) guarantee shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; (6) integrate
periodic statements with other shareholder transactions; and (7) 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 Agreement with respect to Institutional Shares and Investor Shares of
each Fund. This information is provided for the past three years (or shorter
time a Fund has been operational).
CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Union Bank of California,
N.A. 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 350 California Street, San Francisco, California 94104.
For its services, the Custodian receives an annualized percentage of the average
daily net assets of the Portfolios in which the Funds invest. Each Portfolio
also pays an annual domestic custody fee as well as certain other transaction
fees. These fees are accrued daily by the Portfolios and are paid monthly based
on average net assets and transactions for the previous month.
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LEGAL COUNSEL
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C.
20036 passes upon legal matters in connection with the issuance of shares of the
Trust.
INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, MA 02110, is the independent auditor of the
Funds and the Portfolios. The auditor audits the annual financial statements of
the Funds and Portfolios. The auditor also reviews certain regulatory filings of
the Funds and Portfolios and the Funds' tax returns.
PORTFOLIO TRANSACTIONS
- ----------------------
Each Fund invests substantially all of its assets in a corresponding Portfolio
and not directly in portfolio securities. Therefore, the Funds 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 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 the Portfolio would otherwise be obligated to pay itself. All
transactions for which a Portfolio pays transaction-related compensation are
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 interest holders 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.
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 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.
SECURITIES OF REGULAR BROKER-DEALERS
As of 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.
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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
- ----------------------------------------------
GENERAL INFORMATION
You may purchase or redeem shares or request any shareholder privilege in person
at the offices of the Transfer Agent located at Two Portland Square, Portland,
Maine 04101.
The Funds accept orders for the purchase or redemption of shares on each weekday
except on Federal holidays and other days that the Federal Reserve Bank of San
Francisco is closed ("Fund Business Days"). A Fund cannot accept orders that
request a particular day or price for the transaction or any other special
conditions.
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. There is currently
no limit on exchanges, but each Fund reserves the right to limit exchanges.
Fund shares are normally issued for cash only. At 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).
UGMAs/UTMAs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. Depending on state laws, you can set up a custodial account under the
UGMA or the UTMA. If the trustee's name is not in the account registration of a
gift or transfer to minor ("UGMA/UTMA") account, the custodian must sign
instructions in a manner indicating trustee capacity.
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.
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SIGNATURE GUARANTEES
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
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
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 cancelled.
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 or herein.
A delay may occur in cases of very large redemptions, excessive trading or
during unusual market conditions. Normally, redemption proceeds are paid
immediately following receipt of a redemption order in proper form. In any
event, you will be paid within 7 days, unless: (1) your bank has not cleared the
check to purchase the shares (which may take up to 15 days); (2) the Federal
Reserve Bank of San Francisco is closed for any reason other than normal weekend
or holiday closings; (3) there is an emergency in which it is not practical for
the Fund to sell its portfolio securities or for the Fund to determine its net
asset value; or (4) the SEC deems it inappropriate for redemption proceeds to be
paid. You can avoid the delay of waiting for your bank to clear your check by
paying for shares with wire transfers. Unless otherwise indicated, redemption
proceeds normally are paid by check mailed to your record address.
SUSPENSION OF REDEMPTION RIGHT
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.
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
Portfolio or if the amount to be redeemed is large enough to affect a
Portfolio's operations. 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.
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NAV DETERMINATION
Pursuant to Rule 2a-7, 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 distributions 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.
DISTRIBUTIONS
Distributions of net investment income will be reinvested at a Fund's NAV per
share as of the last business 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.
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. 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.
The tax year-end of each Fund is August 31 (the same as the Fund's fiscal year
end).
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes. All investors should consult their own tax adviser as to the
federal, state, local and foreign tax provisions applicable to them.
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.
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 and
other taxable ordinary income, net of expenses) and capital gain net income
(that is, the excess of long-term capital gain over long-term capital loss) that
it distributes to shareholders. In order to qualify as a regulated investment
company a Fund must satisfy the following requirements:
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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,
Government Securities, securities of other regulated investment
companies, and securities of other issuers; 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 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.
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 distributions 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 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.
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 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, 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.
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).
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.
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.
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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: 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.
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.
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.
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.
In the case of a non-corporate 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.
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.
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OTHER MATTERS
- -------------
THE TRUST AND ITS SHAREHOLDERS
GENERAL INFORMATION
The Trust was organized as a business trust under the laws of the State of
Delaware on July 10, 1992. No Fund expects to hold shareholders' meetings unless
required by Federal or Delaware law. Shareholders of each Fund 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 a class of a Fund, a
Fund or the Trust.
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 a Treasury Cash Fund, Government Cash
Fund and Cash Fund.
The Trust offers shares of beneficial interest in an institutional, universal
and investor share class of these series. Each class of a Fund may have a
different expense ratio and its expenses will affect each class' performance.
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.
SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
distribution, liquidation and voting rights. Fractional shares have these 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. 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.
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 to merge or consolidate into one or more
trusts, partnerships or corporations or cause the Trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end, management
investment company that will succeed to or assume the Trust's registration
statement.
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FUND OWNERSHIP
As of December 28, 1999, the Trustees and officers of the Trust in the aggregate
owned less than 1% of the outstanding Shares of each Fund and 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 a Fund are listed in Table 7 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 require the
Trust to hold a shareholder meeting to vote on certain issues and may be able to
greatly affect (if not determine) the outcome of a shareholder vote. As of
December 28, 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 jurisdiction under the laws of which the company is organized (if
applicable) and the company's parents are listed.
CONTROLLING PERSON INFORMATION
<TABLE>
<S> <C> <C> <C> <C>
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
TREASURY CASH FUND
Institutional Shares Union Bank of California
P.O. Box 85602
San Diego, CA 92186-5602 27,590,678 79.51 9.44
Investor Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 243,682,296 94.55 83.33
CASH FUND
Universal Shares Coastcast Corporation
3025 East Victoria St
Rancho Dominguez, CA 90221 42,351,954 86.52 2.90
Investor Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 557,656,897 99.72 38.25
</TABLE>
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. The Trust'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 Fund's property of any
shareholder or former shareholder held personally liable for the obligations of
the Fund. The Trust Instrument also provides that each Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the series and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which Delaware law does not apply, no contractual
limitation of liability was in effect, and 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. However, 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.
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REGISTRATION STATEMENT
This SAI and the Prospectuses 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 Prospectuses 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.
FINANCIAL STATEMENTS
The financial statements of the Funds and their corresponding Portfolios for the
year ended August 31, 1999, which are included in the Funds' Annual Report to
Shareholders, are incorporated herein by reference. These financial statements
are copies of schedules of investments, statements of assets and liabilities,
statements of operations, statements of changes in net assets, financial
highlights, notes and independent auditors' reports.
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APPENDIX A - DESCRIPTION OF CERTAIN SECURITIES RATINGS
CORPORATE BONDS
MOODY'S
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.
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.
S&P
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.
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.
Note Plus (+) or minus (-). The ratings from AA to A 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. "R" numbers highlight 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-1
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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
AA may vary slightly from time to time because of economic conditions.
A+,A, Protection factors are average but adequate. However, risk factors
A- are more variable in periods of greater economic stress.
FITCH
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.
SHORT - TERM RATINGS
MOODY'S
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
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.
Not Prime
Issuers rated Not Prime do not fall within any of the Prime
rating categories.
A-2
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2. S&P
A-1 A short-term obligation rated A-1 is rated in the highest
category by S&P. 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.
3. FITCH
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch'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.
A-3
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APPENDIX B - PERFORMANCE DATA
For the seven-day period ended August 31, 1999, the annualized yields of each
Class of the Funds that were then operating were as follows:
<TABLE>
<S> <C> <C> <C> <C>
7 Day 7 Day Effective Yield 30 Day 30 Day Effective Yield
Yield 30 Day Yield
Treasury Cash Fund
Institutional Shares 4.72% 4.83% 4.55% 4.65%
Investor Shares 4.33% 4.43% 4.16% 4.24%
Government Cash Fund
Universal Shares 5.00% 5.13% 4.91% 5.02%
Institutional Shares 4.62% 4.72% 4.52% 4.61%
Cash Fund
Universal Shares 5.14% 5.27% 4.99% 5.11%
Institutional Shares 4.75% 4.86% 4.60% 4.70%
Investor Shares 4.49% 4.59% 4.34% 4.43%
</TABLE>
For the periods ended August 31, 1999, the total return of each Class of the
Funds were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar
One Three Year to One Three Five Since
Month Months Date Year Years Years Inception
Cumulative Cumulative Cumulative Cumulative Annualized Annualized Cumulative Annualized
Treasury Cash Fund
Institutional 0.38% 1.16% 3.31% 4.47% 4.86% 5.02% 32.64% 4.65%
Shares
Investor Shares 0.35% 1.06% 3.01% 4.08% 4.46% N/A 19.00% 4.52%
Government Cash Fund
Universal Shares 0.42% 1.25% 3.65% 4.97% 5.37% 5.50% 39.69% 4.95%
Institutional 0.39% 1.15% 3.36% 4.57% 4.95% 5.11% 36.64% 4.61%
Shares
Cash Fund
Universal Shares 0.43% 1.27% 3.71% 5.07% 5.39% 5.50% 39.47% 4.99%
Institutional 0.40% 1.18% 3.41% 4.66% 5.00% 5.14% 36.67% 4.68%
Shares
Investor Shares 0.38% 1.11% 3.21% 4.39% 4.73% N/A 22.38% 4.82%
</TABLE>
Inception dates are listed in the Funds' annual report.
B-1
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APPENDIC C - MISCILLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
Prior to January 1, 1998, the Portfolios paid advisory fees to Linden Asset
Management, Inc., the Portfolios' prior investment adviser.
TREASURY CASH GOVERNMENT CASH CASH
PORTFOLIO PORTFOLIO PORTFOLIO
Year ended August 31, 1999 $105,930 $303,532 $266,660
Year ended August 31, 1998 $44,687 $167,904 $122,199
Period ended January 1, 1998 $11,048 $70,957 $36,516
Year ended August 31, 1997 $19,083 $196,857 $72,872
TABLE 2 - INVESTOR CLASS DISTRIBUTION FEES
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Fund $326,815 $0 $326,815
Government Cash Fund n/a n/a n/a
Cash Fund $599,096 $0 $599,096
YEAR ENDED AUGUST 31, 1998
Treasury Cash Fund $114,707 $126 $114,581
Government Cash Fund n/a n/a n/a
Cash Fund $350,059 $0 $350,059
YEAR ENDED AUGUST 31, 1997
Treasury Cash Fund $28,718 $0 28,718
Government Cash Fund n/a n/a n/a
Cash Fund $142,750 $0 $142,750
TABLE 3 - ADMINISTRATION FEES
The fees payable by the Funds under the Administration Agreement were:
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Fund $100,224 $0 $100,224
Government Cash Fund $414,926 $45,529 $369,397
Cash Fund $349,221 $12,269 $336,952
YEAR ENDED AUGUST 31, 1998
Treasury Cash Fund $50,255 $30,532 $19,723
Government Cash Fund $312,844 $107,575 $205,269
Cash Fund $203,477 $25,795 $177,682
YEAR ENDED AUGUST 31, 1997
Treasury Cash Fund $24,300 $24,300 $0
Government Cash Fund $252,810 $123,045 $129,765
Cash Fund $89,942 $2,893 $87,049
C-1
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The fees payable by the Portfolios under the Core Administrative Agreement were:
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Portfolio $153,011 $0 $153,011
Government Cash Portfolio $438,060 $0 $438,060
Cash Portfolio $385,799 $0 $385,799
YEAR ENDED AUGUST 31, 1998
Treasury Cash Portfolio $49,866 $33,171 $16,695
Government Cash Portfolio $313,973 $0 $313,973
Cash Portfolio $203,628 $0 $203,628
YEAR ENDED AUGUST 31, 1997
Treasury Cash Portfolio $24,287 $14,346 $9,941
Government Cash Portfolio $252,821 $0 $252,821
Cash Portfolio $92,652 $7,621 $85,031
TABLE 4 - TRANSFER AGENT FEES
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
TREASURY CASH FUND
Institutional Shares $149,403 $0 $149,403
Investor Shares $273,259 $0 $273,259
GOVERNMENT CASH FUND
Universal Shares $187,820 $148,197 $39,623
Institutional Shares $1,084,918 $0 $1,084,918
CASH FUND
Universal Shares $40,499 $12,269 $28,230
Institutional Shares $803,870 $0 $803,870
Investor Shares $488,963 $0 $488,963
YEAR ENDED AUGUST 31, 1998
TREASURY CASH FUND
Institutional Shares $119,247 $32,971 $86,276
Investor Shares $101,975 $101 $101,874
GOVERNMENT CASH FUND
Universal Shares $144,599 $61,758 $82,841
Institutional Shares $815,003 $0 $815,003
CASH FUND
Universal Shares $34,429 $31,621 $2,808
Institutional Shares $441,229 $0 $441,229
Investor Shares $289,208 $0 $289,208
YEAR ENDED AUGUST 31, 1997
TREASURY CASH FUND
Institutional Shares $32,593 $22,400 $10,193
Investor Shares $84,369 $2 $84,367
GOVERNMENT CASH FUND
Universal Shares $145,679 $89,267 $56,412
Institutional Shares $536,252 $0 $536,252
CASH FUND
Universal Shares $11,015 $7,247 $3,768
Institutional Shares $123,240 $7 $123,233
Investor Shares $244,861 $0 $244,861
C-2
<PAGE>
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TABLE 5 - SHAREHOLDER SERVICE FEES
INSTITUTIONAL SHARES
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Fund $139,443 $118,445 $20,998
Government Cash Fund $1,066,916 $73,895 $993,021
Cash Fund $791,359 $114,258 $677,101
YEAR ENDED AUGUST 31, 1998
Treasury Cash Fund $99,026 $50,048 $48,978
Government Cash Fund $726,580 $48,347 $678,233
Cash Fund $396,602 $78,293 $318,309
YEAR ENDED AUGUST 31, 1997
Treasury Cash Fund $17,231 $22,277 $5,046
Government Cash Fund $389,295 $0 $389,295
Cash Fund $85,650 $29,315 $56,335
INVESTOR SHARES
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Fund $261,452 $75,916 $185,536
Cash Fund $479,276 $32,940 $446,336
YEAR ENDED AUGUST 31, 1998
Treasury Cash Fund $83,999 $26,709 $57,290
Cash Fund $256,286 $43,447 $212,839
YEAR ENDED AUGUST 31, 1997
Treasury Cash Fund $55,668 $2,875 $52,793
Cash Fund $175,845 $10,704 $165,141
TABLE 6 - FUND ACCOUNTING FEES
CONTRACTUAL FEE FEE
FEE WAIVED PAID
YEAR ENDED AUGUST 31, 1999
Treasury Cash Portfolio $49,500 $0 $49,500
Government Cash Portfolio $49,500 $0 $49,500
Cash Portfolio $49,500 $0 $49,500
YEAR ENDED AUGUST 31, 1998
Treasury Cash Portfolio $48,000 $0 $48,000
Government Cash Portfolio $48,000 $0 $48,000
Cash Portfolio $48,000 $0 $48,000
YEAR ENDED AUGUST 31, 1997
Treasury Cash Portfolio $24,279 $0 $24,279
Government Cash Portfolio $48,000 $0 $48,000
Cash Portfolio $48,000 $0 $48,000
C-3
<PAGE>
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TABLE 7 - 5% SHAREHOLDERS
As of December 28, 1999, the shareholders listed below owned of record 5% or
more of the outstanding shares of each class of shares of the Trust. As noted,
certain of these shareholders are known to the Trust to hold their shares of
record only and have no beneficial interest, including the right to vote, in the
shares.
As of the same date, no shareholder beneficially owned more than 25% of the
outstanding shares of the Trust as a whole.
Holders of record only are noted as such.
<TABLE>
<S> <C> <C> <C> <C>
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
TREASURY CASH FUND
Institutional Shares Union Bank of California 27,590,679 79.51 9.44
P.O. Box 85602
San Diego, CA 92186-5602
Cruttenden Roth, Inc. 2,094,904 6.04 0.72
18301 Von Karman Avenue
Irvine, CA 92612
Sullivan Kelly & Associates, Inc. 1,914,000 5.52 0.65
301 North Lake Avenue
Pasadena, CA 91101
Investor Shares Imperial Bank (recordholder) 243,682,296 94.55 14.94
9920 S. La Cienega Blvd.
Inglewood, CA 90301
GOVERNMENT CASH FUND
Universal Shares Imperial Bancorp (recordholder) 24,332,000 13.14 4.65
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Hill Physicians Medical Group, Inc. 19,138,421 10.34 3.66
P.O. Box 5080
San Ramon, CA 94583-0980
IMPAC Mortgage Holdings 15,996,904 8.64 3.06
1401 Dove Street
Newport Beach, CA 92660
IMPAC Commercial Holdings, Inc. 15,133,565 8.17 2.89
1401 Dove Street
Newport Beach, CA 92660
First Federal Savings and Loan 14,000,000 7.56 2.68
San Gabriel Valley
225 North Barranca Avenue
West Covina, CA 91791
Los Angeles Lakers 12,708,801 6.86 2.43
P.O. Box 10
Inglewood, CA 90306
Imperial Trust Company (recordholder) 10,278,457 5.55 1.97
201 N Figueroa Street
Los Angeles, CA 90012
Superior Bank 10,000,000 5.40 1.91
One Lincoln Centre
Oakbrook Terrace, IL 60181
Allied Grape Growers 9,360,199 5.06 1.79
3475 West Shaw
Fresno, CA 93711
C-4
<PAGE>
MONARCH FUNDS
- --------------------------------------------------------------------------------
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
GOVERNMENT CASH FUND
Institutional Shares Legato Systems, Inc. 76,391,016 22.59 14.60
3145 Porter Drive
Palo Alto, CA 94304
Union Bank of California 55,677,169 16.47 10.64
P.O. Box 85602
San Diego, CA 92186-5602
Pointone Telecommunications, Inc. 41,917,976 12.40 8.01
701 S. Capital of Texas Hwy.
Austin, TX 78746
Saban Entertainment, Inc. 28,043,371 8.29 5.36
10960 Wilshire Blvd.
Los Angeles, CA 90024
CASH FUND
Universal Shares Coastcast Corporation 42,351,954 86.52 2.90
3025 East Victoria Street
Rancho Dominguez, CA 90221
Imperial Securities Corp. (recordholder) 6,143,705 12.55 0.42
9920 S La Cienega Blvd
Inglewood, CA 90301
Institutional Shares Cobalt Microserver, Inc. 139,154,641 16.38 9.54
555 Ellis Street
Mountain View, CA 94043
E-Stamp Corporation 125,695,707 14.79 8.62
2855 Campus Drive
San Mateo, CA 94403-2510
Telocity Inc 65,048,859 7.65 4.46
992 S. De Anza Blvd.
San Jose, CA 95129
Union Bank of California 51,528,121 6.06 3.53
P.O. Box 58602
San Diego, CA 92186-5602
Mother Nature.com, Inc. 45,500,000 5.35 3.12
One Concord Farms
490 Virginia Road
Concord, MA 01742
Egroups Inc. 42,522,376 5.00 2.92
350 Brannan Street
San Francisco, CA 94107
Investor Shares Imperial Bank (recordholder) 557,656,898 99.72 38.25
9920 S. La Cienega Blvd.
Inglewood, CA 90301
</TABLE>
C-5
