MONARCH FUNDS
PROSPECTUS
September 1, 2000
SERVICE SHARES
Three money market funds that each
seek to provide high current income TREASURY CASH FUND
to the extent consistent with the GOVERNMENT CASH FUND
preservation of capital and the CASH FUND
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.
SERVICE SHARES ARE DESIGNED TO
REPLICATE A STANDARD CHECKING
ACCOUNT OR TO BE USED AS PART
OF A DAILY SWEEP PRODUCT.
SERVICE SHARES INCLUDE
CERTAIN EXPENSES THAT MAKE
THEM INAPPROPRIATE FOR YOU IF
YOU DO NOT INTEND TO USE YOUR
ACCOUNT IN EITHER OF THESE WAYS.
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.
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SUMMARY
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DEFINITIONS This Prospectus offers Service Shares of three money market funds -- Treasury
Cash Fund, Government Cash Fund and Cash Fund (the "Funds"). Service Shares have
Money Market Security a $1,000 minimum initial investment.
means a high credit
quality, short-term, INVESTMENT OBJECTIVES
U.S. dollar denominated
debt security. The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
Treasury Security means liquidity.
a security that is issued
or guaranteed by the U.S. PRINCIPAL INVESTMENT STRATEGIES
Treasury.
Each Fund invests in a diversified portfolio of Money Market Securities and:
Government Security means o Seeks to maintain a stable net asset value of $1.00 per share
a security that is issued o Invests in securities with remaining maturities of 397 days or less
or guaranteed by the U.S. o Maintains a dollar weighted average maturity of its investments of 90
Government, its agencies days or less
or instrumentalities.
Each Fund invests substantially all of its assets in another mutual fund (a
Repurchase Agreement means "Portfolio"), which has the same investment objective and substantially similar
a transaction in which investment policies. The Portfolios in which the Funds invest and their primary
securities are purchased and investments are:
simultaneously committed
to be resold to the other FUND/PORTFOLIO PRIMARY INVESTMENTS
party at an agreed-upon date Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
and at a price reflecting a Treasury Cash Portfolio by Treasury Securities
market rate of interest. Government Cash Fund/ Government Securities and Repurchase Agreement
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 dep
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
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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.
You should not invest in the Funds unless you intend to use the checkwriting
privileges or your Fund account is used as part of a daily sweep product.
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.
MANAGEMENT RISK As with all mutual funds, the Adviser may make poor investment
decisions.
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PERFORMANCE
The following charts and table provide some indication of the risks of investing
in a Fund's Service Shares by showing changes in performance from year to year
and investment returns. Because Service Shares have operated less than a year,
the information provided below is for Cash Fund and Treasury Cash Fund's
Investor Shares and Government Cash Fund's Institutional Shares, which are not
offered in this prospectus. Service Shares will invest in the same Portfolio as
these other classes but, the returns for Service Shares will be lower than those
of the other classes because of the higher expenses of Service 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.
TREASURY CASH FUND (INVESTOR SHARES)
[EDGAR Representation of Bar Chart]
Year Ended 12/31
1996 4.60%
1997 4.65%
1998 4.57%
1999 4.17%
Best Quarter: 1.18% (quarter ended 12/31/97)
Worst Quarter: 0.95% (quarter ended 3/31/99)
The calendar year-to-date total return as of June 30, 2000 was 2.55%.
GOVERNMENT CASH FUND (INSTITUTIONAL SHARES)
[EDGAR Representation of Bar Chart]
Year Ended 12/31
1994 4.01%
1995 5.65%
1996 5.03%
1997 5.15%
1998 5.08%
1999 4.65%
Best Quarter: 1.42% (quarter ended 6/30/95)
Worst Quarter: 0.71% (quarter ended 3/31/94)
The calendar year-to-date total return as of June 30, 2000 was 2.77%.
CASH FUND (INVESTOR SHARES)
[EDGAR Representation of Bar Chart]
Year Ended 12/31
1996 4.78%
1997 4.90%
1998 4.87%
1999 4.49%
Best Quarter: 1.24% (quarter ended 12/31/97)
Worst Quarter: 1.03% (quarter ended 6/30/99)
The calendar year-to-date total return as of June 30, 2000 was 2.67%.
The following table lists the average annual total return as of December 31,
1999.
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ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
TREASURY CASH FUND 4.17% N/A 4.52% 10/25/95
GOVERNMENT CASH FUND 4.65% 5.11% 4.78% 7/15/93
CASH FUND 4.49% N/A 4.83% 6/16/95
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FEE TABLES
The following table describes the various fees and expenses that you will pay if
you invest in Service Shares. Expenses are estimated for the fiscal year ending
August 31, 2001. 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) 0.18% 0.18% 0.18%
Distribution (Rule 12b-1) Fees 0.75% 0.75% 0.75%
Other Expenses 0.77% 0.77% 0.77%
Total Annual Fund Operating Expenses 1.70% 1.70% 1.70%
(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.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Service 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 $173 $536 $923 $2,009
GOVERNMENT CASH FUND $173 $536 $923 $2,009
CASH FUND $173 $536 $923 $2,009
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 June 30, 2000, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $85 billion.
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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 adopted a distribution or "Rule 12b-1" plan under which the Fund
pays the distributor 0.75% of the average daily net assets of Service Shares for
the sale and distribution of the shares. Each Fund has also entered into a
shareholder service agreement under which the Fund pays 0.25% of the average
daily net assets of Service Shares 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 Service Shares. Because Service 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 Service 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 your financial intermediary for an account
application or for further information regarding the Funds.
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WRITE TO US AT: WIRE INVESTMENTS TO:
Imperial Securities Corporation Imperial Bank
9920 South La Cienega Boulevard ABA #122201444
14th Floor FOR CREDIT TO:
Inglewood, California 90301 Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US TOLL-FREE AT: (Name of Fund) - Service Shares
(800) 754-8757 (Your Name)
(Your Account Number)
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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 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 your 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. 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, Uniform Gift to
Minors Act ("UGMA") or Uniform Transfer to Minors Act ("UTMA")
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 traveler's check).
ACH Refers to the "Automated Clearing House" system maintained by the
Federal Reserve Bank, which allows banks to process checks, transfer
funds and perform other tasks.
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 Service Shares is $1,000.
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 have two or more account.
owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA): o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to a custodial account under the UGMA or the UTMA.
child and obtain tax benefits. o The custodian must sign instructions in a manner
indicating custodial 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 Provide a certified trust document, or the pages
from the trust document that identifies the trustees.
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INVESTMENT PROCEDURES
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 to fax the completed application 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 The Funds reserve the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations.
SELLING SHARES
Generally, the Funds 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 [Fund Name] - Service Shares
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 $1,000 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").
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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 $1,000. 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. 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, as long as you have a sufficient number of shares to
cover the amount of the check.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee may be 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
SMALL ACCOUNTS If the value of your account falls below $1,000, a Fund may ask
you to increase your balance. If the account value is still below $1,000 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.
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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 any time 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 Service Shares, each Fund offers Universal Shares, Institutional
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, 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.
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FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the performance of
Service Shares of the Funds. Data for Investor Shares of Treasury Cash Fund and
Cash Fund and Institutional Shares of Government Cash Fund is included in the
table as Service Shares 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 Investor Shares or Institutional Shares of the applicable Fund
(assuming the reinvestment of all distributions). The total return of Service
shares would have been lower than that of Investor or Institutional Shares. The
information for the fiscal years ended August 31 from 1995 to 1999 has been
audited by KPMG LLP. The information for the six months ended February 29, 2000
has not 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 February 29, 2000 the net assets of Treasury Cash Portfolio were
$418,856,575, of Government Cash Portfolio were $757,281,681 and of Cash
Portfolio were $1,871,539,716.
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SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
----------------------------------------- -----------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distribution Ending End of
Net Asset Net from Net Net Asset Period Net
Value Per InvestmentInvestment Value per Total (000's Net Investment Gross
Share Income Income Share Return Omitted Expenses Income Expenses(a)
TREASURY CASH FUND
INVESTOR SHARES
Six Months Ended February 29,2000 $1.00 $0.02 $(0.02) $1.00 2.27% $205,857 0.85%(b) 4.52%(b) 0.85%(b)
Year Ended August 31
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
INSTITUTIONAL SHARES
Six Months Ended February 29,2000 1.00 0.02 (0.02) 1.00 2.51% 437,720 0.58%(b) 5.00%(b) 0.58%(b)
Year Ended August 31
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
INVESTOR SHARES
Six Months Ended February 29,2000 1.00 0.02 (0.02) 1.00 2.46% 580,164 0.84%(b) 4.94%(b) 0.84%(b)
Year Ended August 31
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 1.13% 4,665 0.84%(b) 5.32%(b) 3.76%(b)
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(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) Investor Shares of Treasury Cash Fund and Cash Fund commenced operations on
October 25, 1995 and June 16, 1995, respectively. Institutional Shares of
Government Cash Fund commenced operations on July 15, 1993.
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FOR MORE INFORMATION MONARCH FUNDS
The following documents are available free upon request: SERVICE SHARES
ANNUAL/SEMI-ANNUAL REPORTS TREASURY
The Funds will provide annual and semi-annual reports to shareholders that CASH FUND
will provide additional information about each Fund's investments. In the
Funds' annual report, you will find a discussion of the market conditions and GOVERNMENT
investment strategies that significantly affected each Fund's performance CASH FUND
during its preceding fiscal year.
CASH FUND
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about each Fund and is incorporated
by reference into this Prospectus.
CONTACTING THE FUNDS
You can get copies of both reports (when available) and the SAI, request other
information and discuss your questions about the Funds by contacting:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 754-8757
(207) 879-0001
SECURITIES AND EXCHANGE COMMISSION INFORMATION
You can also review a Fund's reports and SAI at the Public Reference Room of the
Securities and Exchange Commission ("SEC"). The scheduled hours of operation of
the Public Reference Room may be obtained by calling the SEC at (202) 942-8090.
You can get copies, for a fee, by e-mail or by writing to:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
E-mail address: [email protected]
Free copies of the reports (when available) and the SAI are available from the
SEC's Internet Web Site at http://www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
Investment Company Act File No. 811-6742 (800) 754-8757
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
July 1, 2000
As Amended September 1, 2000
FUND INFORMATION: TREASURY CASH FUND
GOVERNMENT CASH FUND
Monarch Funds CASH FUND
Two Portland Square
Portland, Maine 04101
(800) 754-8757
SERVICE SHARES
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 September 1, 2000, as may be amended from time to time, offering Service
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. You
may obtain a Prospectus without charge by contacting Forum Shareholder Services,
LLC at the address or telephone number listed above.
Certain information for the Funds included in the prospectuses and the Annual
Report to shareholders, and is 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>
TABLE OF CONTENTS
Glossary......................................................................2
Core and Gateway(R)Structure..................................................3
Investment Policies and Risks.................................................3
Investment Limitations........................................................8
Investments by Financial Institutions.........................................9
Performance Data and Advertising..............................................10
Management....................................................................13
Portfolio Transactions........................................................20
Purchase and Redemption Information...........................................21
Taxation......................................................................23
Other Matters.................................................................26
Appendix A - Description of Certain Securities Ratings.......................A-1
Appendix B - Performance Data................................................B-1
Appendix C - Miscellaneous Tables............................................C-1
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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.
"FAcS" means Forum Accounting Services, LLC, fund accountant of each Fund.
"FAdS" means Forum Administrative Services, LLC, administrator of each Fund.
"FFS" means Forum Fund Services, LLC, distributor of each Fund's shares.
"FSS" means Forum Shareholder Services, LLC, the transfer agent and distribution
disbursing agent of each Fund.
"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.
"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.
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CORE AND GATEWAY(R) STRUCTURE
Each Fund is a "gateway" fund in a Core and Gateway(R) structure. Under this
structure each Fund invests substantially all of its assets in a separate
Portfolio of Core Trust, another open-end, management investment company with
identical investment objectives and substantially similar investment policies as
the investing Fund, 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 concerning any other investment companies that invest in a
Portfolio, investors may contact FFS at 800-754-8757.
INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the prospectuses about
each Fund's investment objectives, principal investment strategies and principal
risks. Unless otherwise indicated below, the discussion of the investment
policies of a Fund also refers to the investment policies of the Portfolio in
which the Fund invests.
SEC RULE 2A-7
Under Rule 2a-7, each Portfolio normally must invest at least 95% of its total
assets in securities that are rated in the highest short-term rating category
(by NRSROs such as S&P) for debt obligations, or are unrated and determined to
be of comparable quality.
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 record keeping
procedures. The Trust has also established procedures to ensure that portfolio
securities meet a Fund's high quality criteria.
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<PAGE>
SECURITY RATINGS INFORMATION
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. 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. 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.
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.
GENERAL RISKS
INTEREST RATE RISK
Changes in interest rates affect 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.
ASSET BACKED SECURITIES
The value of asset backed securities may be significantly affected by changes in
interest rates, the markets' perception of the issuers, the structure of the
securities and the creditworthiness of the parties involved. The ability of a
Portfolio to successfully utilize asset backed securities depends in part upon
the ability of the Adviser to forecast interest rates and other economic factors
correctly. Some asset backed securities have structures that make their reaction
to interest rate changes and other factors difficult to predict.
Prepayments of principal of asset backed securities by borrowers or foreclosures
on the borrowers affect the average life of asset backed securities. Prepayments
may be triggered by various factors, including the level of interest rates,
general economic conditions, the location and age of the assets underlying the
security 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 asset backed securities. A decrease in the rate of prepayments
may extend the effective maturities of asset backed securities, increasing their
sensitivity to changes in market interest rates. In periods of falling interest
rates, the prepayment rate tends to increase, shortening the average life of a
pool and a Portfolio may have to reinvest the proceeds of prepayments at lower
interest rates than those of its previous investments. When this occurs, the
Portfolio's yield will decline. The volume of prepayments of principal in the
assets underlying a particular asset backed security will influence the yield of
that security and a Portfolio's yield. To the extent that a Portfolio purchases
asset backed securities at a premium, unscheduled prepayments, which are made at
par, result in a loss equal to any unamortized premium.
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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. 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. 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, 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 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 or other asset backed
securities (such as Small Business Association securities) that are
GovernmentSecurities. Treasury Cash Portfolio may only purchase mortgage or
asset backed securities that are 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 backed 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 asset backed 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 principal
loss if the Portfolio sold the securities before the interest rates on the
underlying mortgages were adjusted to reflect current market rates. Some ARMs
(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.
COLLATERALIZED MORTGAGE OBLIGATIONS
Each Portfolio may purchase collateralized mortgage obligations ("CMOs"), which
are collateralized by ARMs or by pools of conventional mortgages. CMOs typically
have a number of classes or series with different maturities that 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
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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.
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.
FEDERAL HOME LOAN MORTGAGE CORPORATION SECURITIES
Each Portfolio currently may not purchase 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.
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, subcustodian or other third party custodian maintains
possession of the purchased securities and any underlying collateral, which is
maintained at not less than 100% of the repurchase price. Repurchase agreements
allow a Portfolio to earn income 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
Portfolio may have difficulties in exercising its rights to the underlying
securities. A Portfolio may incur costs and expensive time delays in disposing
of the underlying securities and it may suffer a loss. Failure by the other
party to deliver a security purchased by a Portfolio may result in a missed
opportunity to make an alternative investment. Favorable insolvency laws that
allow a Portfolio, among other things, to liquidate the collateral held in the
event of the bankruptcy of the counterparty reduce counterparty insolvency risk
with respect to repurchase agreements. A Portfolio will only enter 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 Portfolio's total assets. Each Portfolio may
borrow money for other purposes so long as such borrowings do not exceed 5% of a
Portfolio's total assets. The purchase of securities is prohibited if a
Portfolio's borrowing exceeds 5% or more of a Portfolio's total assets.
RISKS
Interest costs on borrowing may offset or exceed the return earned on borrowed
funds (or on the assets that were retained rather than sold to meet the needs
for which funds were borrowed). Under adverse market conditions, a Fund might
have to sell portfolio securities to meet interest or principle payments at a
time when investment considerations would not favor such
6
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sales. Reverse repurchase agreements and other similar investments that involve
a form of leverage have characteristics similar to borrowings but are not
considered borrowings if the Fund maintains a segregated account.
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 a certain period of time after the
transaction, but delayed settlements beyond that period 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 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.
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 securities with legal or
contractual restrictions on resale or the absence of a readily available market.
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.
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.
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.
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INVESTMENT LIMITATIONS
Each Fund has adopted the same investment limitations as the Portfolio in which
it invests. The investment objective of a Portfolio and Fund 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 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 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 of a Portfolio) are present or represented. The Board may change a
nonfundamental policy of a Fund without shareholder approval and the Core Trust
Board may change a nonfundamental policy of a Portfolio without interestholder
consent.
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, IRS 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.
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 classes that the Core Trust Board may
establish.
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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.
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
INVESTMENTS 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.
9
<PAGE>
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.
Portfolio shares held by national banks are generally required to be revalued
periodically and reported at the lower of cost or market value. Such shares may
also be subject to special regulatory reporting, accounting and tax treatment.
In addition, a bank may be required to obtain specific approval from its board
of directors before acquiring Portfolio shares, and thereafter may be required
to review its investment in a Portfolio for the purpose of verifying compliance
with applicable federal banking laws, regulations and policies.
National banks generally must review their holdings of shares of a Portfolio at
least quarterly to ensure compliance with established bank policies and legal
requirements. Upon request, the Portfolios will make available to the Funds'
investors' information relating to the size and composition of their portfolio
for the purpose of providing Fund shareholders with this information.
INVESTMENTS 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
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 those 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
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., iMoneyNet, 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.
10
<PAGE>
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 performance 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 certain 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
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 a 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.
11
<PAGE>
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
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 "shareholder 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.
12
<PAGE>
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
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.
<TABLE>
<S> <C> <C>
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S) DURING
BIRTH AND ADDRESS WITH THE TRUST PAST 5 YEARS
.................................... ................. .....................................................................
John Y. Keffer* Chairman and Member and Director, Forum Financial Group, LLC (a mutual fund
Born: July 15, 1942 President services holding company)
Two Portland Square Director, Forum Fund Services, LLC (Trust's underwriter)
Portland, Maine 04101 Officer of six other investment companies for which Forum Financial
Group, LLC provides services
.................................... ................. .....................................................................
Maurice J. DeWald Trustee Chairman and CEO, Verity Financial Group (financial advisory firm)
Born: March 20, 1940 Director, Tenet Healthcare Corporation
19200 Von Karman Avenue Director, Dai-Ichi Kangyo Bank
Suite 400 Director, ARV Assisted Living, Inc., since November 1995
Irvine, California 92612 Director, Advanced Materials Group, Inc. since January 1998
.................................... ................. .....................................................................
Rudolph I. Estrada Trustee President and Chief Executive Officer of Summit Group (banking and
Born: February 28, 1948 business consulting company)
625 Fair Oaks Ave., Suite 101 Professor (Adjunct), Finance and Management, California State
South Pasadena, CA 91030 University
Director, Pacific Crest Bank
Director, Tel Star Communication Systems since June 1998
Director, Univboz since March 2000 (telecommunications company)
Director, e-viva.com since March 2000 (technology company)
Board Member, womeninc.org since August 2000 (non-profit
organization)
.................................... ................. .....................................................................
Christine M. McCarthy Trustee Senior Vice President and Treasurer, The Walt Disney Company since
Born: June 24, 1955 January 2000
500 S. Buena Vista Street Executive Vice President and CFO, Imperial Bank/Imperial Bancorp
Burbank, California 91521-0964 April 1997 - December 1999
Executive Vice President, First Interstate Bancorp prior to April
1997
.................................... ................. .....................................................................
Robert M. Franko Trustee President, Generations Trust Bank, N.A. since August 1999
Born: 1947 President, Imperial Financial Group, Inc.- February 1997 --
111 West Ocean Boulevard August 1999
23rd Floor Chairman, Imperial Trust Company - March 1995- August 1999
P.O. Box 1070 President, Imperial Trust Company - February 1997- September 1998
Long Beach, CA 90802 Executive Vice President and CFO of Imperial Bank/Imperial Bancorp
- February 1995 - April 1997
.................................... ................. .....................................................................
Jack J. Singer Trustee Senior Vice President and Treasurer, Imperial Bank
Born: May 24, 1944 President, Imperial Securities Corp.
9920 S. LaCienega Boulevard Chairman and President, Imperial Asset Management since November
Inglewood, California 90301 1997
.................................... ................. .....................................................................
David I. Goldstein Vice President General Counsel, Forum Financial Group, LLC
Born: August 3, 1961 Officer of five other investment companies for which Forum
Two Portland Square Financial Group, LLC provides services
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
.................................... ................. .....................................................................
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<PAGE>
.................................... ................. .....................................................................
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S) DURING
BIRTH AND ADDRESS WITH THE TRUST PAST 5 YEARS
.................................... ................. .....................................................................
Ronald H. Hirsch Treasurer Managing Director, Operations and Sales, Forum Financial Group, LLC
Born: October 14, 1943 since 1999
Two Portland Square Member of the Board, Citibank Germany 1991-1998
Portland, Maine 04101 Officer of six other investment companies for which Forum Financial
Group, LLC provides services
.................................... ................. .....................................................................
Beth P. Hanson Vice President Senior Manager of Fund Administration, Forum Financial Group, LLC
Born: July 15, 1966 and Assistant
Two Portland Square Secretary
Portland, Maine 04101
.................................... ................. .....................................................................
Don L. Evans Secretary Counsel, Forum Financial Group, LLC
Born: August 12, 1948 Officer of two other investment companies for which Forum Financial
Two Portland Square Group, LLC provides services.
Portland, Maine 04101
</TABLE>
COMPENSATION OF TRUSTEES AND OFFICERS
As of April 12, 2000, each Trustee of the Trust is paid a quarterly retainer of
$1,500. In addition, each Trustee is paid $1,500 for each Board meeting attended
(whether in person or by telephone) and $500 for each Nominating or Audit
Committee meeting attended (whether in person or by telephone). 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 paid to each Trustee by the Trust and
the Fund Complex for the fiscal year ended August 31, 1999.
<TABLE>
<S> <C> <C>
COMPENSATION TOTAL COMPENSATION FROM
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
</TABLE>
* There is one investment company in the fund complex.
TRUSTEES AND OFFICERS OF CORE TRUST
The names of the Trustees and officers of Core Trust, their position 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 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 .
<TABLE>
<S> <C> <C>
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S) DURING
BIRTH AND ADDRESS WITH THE TRUST PAST 5 YEARS
.................................... .................... .................................................................
John Y. Keffer* Chairman and
President
.................................... .................... .................................................................
Costas Azariadis Trustee Professor of Economics, University of California - Los Angeles
Born: February 15, 1943 Visiting Professor of Economics, Athens University of Economics
Department of Economics and Business 1998 - 1999
University of California Trustee of one other investment company for which Forum
Los Angeles, CA 90024 Financial Group, LLC provides services
.................................... .................... .................................................................
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 of one other investment company for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
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<PAGE>
.................................... .................... .................................................................
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S) DURING
BIRTH AND ADDRESS WITH THE TRUST PAST 5 YEARS
.................................... .................... .................................................................
J. Michael Parish Trustee Partner, Thelen Reid & Priest LLP (law firm) since 1995
Born: November 9, 1943 Partner, Winthrop Stimson Putnam & Roberts (law firm) 1989 -
40 West 57th Street 1995
New York, NY 10019 Trustee of one other investment company for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
David I. Goldstein Vice President
.................................... .................... .................................................................
Ronald H. Hirsch Treasurer
.................................... .................... .................................................................
Don L. Evans Assistant Secretary
.................................... .................... .................................................................
</TABLE>
INVESTMENT ADVISER
SERVICES
Forum Investment Advisors, LLC serves as the investment adviser to each
Portfolio pursuant to an investment advisory agreement with Core Trust. Under
its 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 inception of each
Portfolio, 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 Portfolio'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. This information is for the past three fiscal years.
OTHER
The Advisers' agreement with respect to a Portfolio must be approved at least
annually by the Core Trust Board or by majority vote of the interestholders of a
Portfolio, and in either case by a majority of the Core Trust 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 Core Trust Board with respect
to a Portfolio on 60 days' written notice when authorized either by vote of the
Portfolio's interestholders or by a majority vote of the Core Trust Board, or by
the Adviser on 90 days' written notice to Core 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
Forum Fund Services, LLC serves as the distributor (also known as principal
underwriter) of the shares of each Fund pursuant to a distribution agreement
with the Trust. FFS is located at Two Portland Square, Portland, Maine 04101, is
a registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
Under its agreement, FFS acts as the representative of the Trust in connection
with the offering of shares of the Funds. FFS continually distributes shares of
the Funds on a best effort basis. FFS has no obligation to sell any specific
quantity of Fund shares.
FFS may enter into arrangements with various financial institutions through
which you may purchase or redeem shares. FFS may, at its own expense and from
its own resources, compensate certain persons who provide services in connection
with the sale or expected sale of shares of the Funds.
FFS may enter into agreements with selected broker-dealers, banks or other
financial institutions for distribution of shares of the Funds. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even
15
<PAGE>
though shares of the Funds are sold with sales charges or distribution fees.
These financial institutions may otherwise act as FFS's agent, and will be
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.
FEES
FFS does not receive a fee for any distribution services performed except the
distribution service fees with respect to the Shares of those Classes for which
a Plan is effective.
OTHER
FFS's agreement with respect to a Fund must be approved at least annually by the
Board or by majority vote of the shareholders of that Fund, and in either case
by a majority of the Disinterested Trustees.
FFS's 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 agreement, FFS 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.
Under the 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 Trust's 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 - SERVICE SHARE CLASS
In accordance with Rule 12b-1 under the 1940 Act, with respect to the Service 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 0.75% of the
average daily net assets of the Service of the Fund.
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 Service shares; and (2) responding to Service 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
FFS and various financial institutions or other persons who engage in or support
the distribution of Service shares, or who respond to Service 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 Service shares to any prospective investors; and
the costs of preparing, printing and distributing sales literature and
advertising materials used by FFS or others in connection with the offering of
Service shares for sale to the public.
The Plan provides that all written agreements relating to the plan must be
approved by the Board, including a majority of the Disinterested Trustees. In
addition, the Plan requires the Trust and FFS 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 Board may terminate the
Plan at any time, by a majority of the Disinterested Trustees, or by a Fund's
Service shareholders.
16
<PAGE>
OTHER FUND SERVICE PROVIDERS
ADMINISTRATOR - THE TRUST
Forum Administrative Services, LLC serves as administrator pursuant to an
administration agreement with the Trust. Under its 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.
Table 2 in Appendix C shows the dollar amount payable by each Fund to FAdS, the
amount of fees waived by FAdS, and the actual fee paid by each Fund. This
information is for the past three fiscal years.
The agreement must be approved at least annually by the Board or by majority
vote of the shareholders, and in either case by a majority of the Disinterested
Trustees. The 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 for any action or
inaction in the absence of bad faith, willful misconduct or gross negligence in
the performance of its duties. Under the agreement, FAdS and certain related
parties (such as FAdS' 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's contractual standard of care.
ADMINISTRATOR - 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 Core 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 2 in Appendix C shows the dollar amount payable by each Portfolio to FAdS,
the amount of the fee waived by FAdS, and the actual fees received by FAdS. The
information is for the past three fiscal years.
FUND ACCOUNTANT - THE TRUST
Forum Accounting Services, LLC serves as fund accountant, pursuant to an
accounting agreement with the Trust. Under its agreement, FAcS provides fund
accounting services to each Fund. These services include calculating the NAV 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 Fund. A fee may be
charged in the future, subject to Board approval.
The agreement must be approved at least annually by the Board or by majority
vote of the shareholders, and in either case by a majority of the Disinterested
Trustees. The agreement is terminable without penalty by the Trust or by FAcS
with respect to a Fund on 60 days' written notice.
17
<PAGE>
Under the agreement, FAcS 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. Under the 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' contractual standard of care.
Under the agreement, in calculating a Fund's NAV, FAcS is deemed not to have
committed an error if the NAV it calculates is within 1/10 of 1% of the actual
NAV (after recalculation). The 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.
FUND ACCOUNTANT - 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 the Board specifically approves continuance at least
annually. The Core 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 3 in Appendix C shows the dollar amount payable by the Portfolios to FAcS,
the amount of the fee waived by FAcS, and the actual fees received by FAcS. The
information is for the past three fiscal years.
TRANSFER AGENT
Forum Shareholder Services, LLC serves as transfer agent and distribution paying
agent pursuant to a transfer agency agreement with the Trust. Under its
agreement, FSS 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. FSS is located at Two Portland Square,
Portland, Maine 04101 and is registered as a transfer agent with the SEC.
For its services, FSS receives with respect to each Fund an annual fee of
$12,000 plus $6,000 for each class above one. FSS also receives a fee based on
the average daily net assets of each class as follows: Universal Shares - 0.05%,
Institutional Shares, Investor Shares and Service 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 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 agreement is terminable without penalty by the Trust or by FSS
with respect to the Fund on 60 days' written notice.
Under the agreement, FSS 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 agreement, FSS
and certain related parties (such as FSS's officers and persons who control FSS)
are indemnified by the Trust against any and all claims and expenses related to
FSS's actions or omissions that are consistent with FSS's contractual standard
of care.
Table 4 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 information is for the past three fiscal years.
SHAREHOLDER SERVICE AGREEMENT
The Trust has adopted a shareholder service agreement ("Shareholder Service
Agreement") with respect to Institutional Shares, Investor Shares and Service
Shares of each Fund under which the Trust may pay FAdS a shareholder servicing
fee at an annual rate of 0.20%, 0.20% and 0.25%, respectively of the average
daily net assets of each class. FAdS may pay any or all amounts of these
payments to various institutions that provide shareholder servicing to their
customers holding Institutional shares, Investor shares or Service shares.
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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 5 in Appendix C shows the dollar amount of the fees payable by the Fund to
FAdS, the amount of the fee waived by FAdS, and the actual fees received by
FAdS. The information is for the past three fiscal years.
CUSTODIAN
As custodian, pursuant to an agreement with Core Trust, Forum Trust, LLC
safeguards and controls the Portfolios' cash and securities, determines income
and collects interest on Fund investments. The Custodian may employ
subcustodians to provide custody of a Fund's domestic and foreign assets. The
Custodian is located at Two Portland Square, Portland, Maine 04101.
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.
SUBCUSTODIAN
Union Bank of California, N.A. serves as subcustodian of the Portfolio. The
Subcustodian is located at 445 South Figueroa Street, 5th Floor, Los Angeles,
California 90071.
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 the tax returns and certain
regulatory filings of the Funds and Portfolios.
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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 engage in
portfolio transactions.
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. The
broker-dealer effecting the transaction effects all transactions for which a
Portfolio pays transaction-related compensation at the best price and execution
available, taking into account the amount of any payments made on behalf of the
Portfolio.
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 the
Portfolios 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 advised
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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PURCHASE AND REDEMPTION INFORMATION
GENERAL INFORMATION
Shareholders of record may purchase or redeem shares or request any shareholder
privilege in person at the offices of the FSS 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.
Not all classes or funds of the Trust may be available for sale in the state in
which you reside. Please check with your investment professional to determine a
class or fund's availability.
ADDITIONAL PURCHASE INFORMATION
The distributor sells shares of each Fund on a continuousbasis.
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 custodian'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 custodial 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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LOST ACCOUNTS
FSS will consider your account lost if correspondence to your address of record
is returned as undeliverable, unless FSS 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 FSS 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.
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.
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.
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). This
information is only a summary of certain key federal income tax considerations
affecting each Fund and its shareholders. No attempt has been
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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 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:
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.
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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.
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 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.
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 Internal
Revenue Service 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
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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.
Not all classes or funds of the Trust may be available in the state in which you
reside. Please check with your investment professional to determine a class or
fund's availability.
The Funds are not required to maintain a code of ethics pursuant to Rule 17j-1,
as amended, of the 1940 Act (the "Rule"). However, the Portfolios' investment
adviser and the Funds' distributor have adopted codes of ethics under the Rule;
these codes permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the Portfolios.
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.
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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.
FUND OWNERSHIP
As of August 1, 2000, 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 8 in Appendix C.
From time to time, certain shareholders may own a large percentage of the shares
of a Fund or Class. Accordingly, those shareholders may be able to 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
August 1 , 2000, 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>
TREASURY CASH FUND NAME AND ADDRESS SHARES % OF CLASS % OF FUND
Univeral Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 40,800,491 100.00 11.25
Institutional Shares Union Bank of California
(recordholder)
P.O. Box 85602
San Diego, CA 92186-5602 14,478,764 48.08 8.30
Investor Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 273,789,211 93.81 75.47
GOVERNMENT CASH FUND
Investor Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 41,080,155 100.00 5.75
CASH FUND
Universal Shares Coastcast Corporation
3025 East Victoria St
Rancho Dominguez, CA 90221 46,655,181 77.15 2.13
Investor Shares Imperial Bank (recordholder)
9920 S La Cienega Blvd.
Investment Dept - 14th Floor
Inglewood, CA 90301 927,692,8450 99.87 48.58
</TABLE>
27
<PAGE>
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.
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. A Trustee is not, however, 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.
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 the schedules of investments, statements of assets and liabilities,
statements of operations, statements of changes in net assets, financial
highlights, notes and independent auditors' reports.
28
<PAGE>
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
<PAGE>
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
AA but 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
<PAGE>
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.
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
<PAGE>
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 YIELD
TREASURY CASH FUND
CASH FUND
Universal Shares % % % %
Institutional Shares % % % %
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%
Investor Shares % % % %
</TABLE>
For the period ended August 31, 1999, the total return of each Class of the Fund
that were then operating were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CALENDAR SINCE
ONE THREE YEAR TO ONE THREE FIVE INCEPTION
MONTH MONTHS DATE YEAR YEARS* YEARS* CUMULATIVE ANNUALIZED
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%
For the period ended August 31, 1999, the total return of each Class of the
Funds that were then operating were as follows:
CALENDAR
ONE THREE YEAR TO ONE THREE FIVE SINCE
MONTH MONTHS DATE YEAR YEARS* YEARS* INCEPTION
CUMULATIVE ANNUALIZED
TREASURY CASH FUND
Institutional Shares 0.38% 1.16% 3.31% 4.50% 4.86% 5.02% 32.64% 4.65%
Investor Shares 0.35% 1.06% 3.01% 4.10% 4.46% N/A 19.00% 4.52%
GOVERNMENT CASH FUND
Universal Shares 0.42% 1.25% 3.65% 5.00% 5.37% 5.50% 39.69% 4.95%
Institutional Shares 0.39% 1.15% 3.36% 4.59% 4.95% 5.11% 36.64% 4.61%
CASH FUND
Universal Shares 0.43% 1.27% 3.71% 5.09% 5.39% 5.50% 39.47% 4.99%
Institutional Shares 0.40% 1.18% 3.41% 4.68% 5.00% 5.14% 36.67% 4.68%
Investor Shares 0.38% 1.11% 3.21% 4.41% 4.73% N/A 22.38% 4.82%
CASH FUND
Universal Shares % % % % % % % %
(Inception 12/1/92)
Institutional Shares % % % % % % % %
(Inception 7/15/93)
Investor Shares % % % % % % % %
(Inception. 6/16/95)
* Annualized return.
</TABLE>
Inception dates are listed in the Funds' annual report.
B-1
<PAGE>
APPENDIX C - MISCELLANEOUS 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. The fees payable by
the Portfolios under the Investment Advisory Agreement were:
<TABLE>
<S> <C> <C> <C>
TREASURY CASH GOVERNMENT CASH PORTFOLIO CASH
PORTFOLIO PORTFOLIO
CONTRACTUAL FEE FEE
CASH PORTFOLIO FEE WAIVED PAID
Year ended August 31, 1999 $105,930 $303,532 $266,660
Year ended August 31, 1999 $266,660
Year ended August 31, 1998 $44,687 $167,904 $122,199
Year ended August 31, 1998 $122,199
Period ended January 1, 1998 $11,048 $70,957 $36,516
Period ended January 1, 1998 $36,516
Year ended August 31, 1997 $19,083 $196,857 $72,872
Year ended August 31, 1997 $72,872
TABLE 2 - ADMINISTRATION FEES
The fees payable by the Fund under the Administration Agreement were:
CONTRACTUAL FEE FEE
CASH FUND FEE WAIVED PAID
Year Ended August 31, 1999 $349,221 $12,269 $336,952
Year Ended August 31, 1998 $203,477 $25,795 $177,682
Year Ended August 31, 1997 $89,942 $2,893 $87,049
The fees payable by the Portfolio under the Core Administrative Agreement were:
CONTRACTUAL FEE FEE
CASH PORTFOLIO FEE WAIVED PAID
Year Ended August 31, 1999 $385,799 $0 $385,799
Year Ended August 31, 1998 $203,628 $0 $203,628
Year Ended August 31, 1997 $92,652 $7,621 $85,031
TABLE 3 - INVESTOR CLASS DISTRIBUTION - FUND ACCOUNTING FEES
The fees payable by the FundsPortfolio under the DistributionAccounting
Agreement were:
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
C-1
<PAGE>
TABLE 4 - 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
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 5 - FUND ACCOUNTING FEES
The fees payable by the Portfolios under the Accounting Agreement were:
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-2
<PAGE>
TABLE 6 - TRANSFER AGENT FEES
The fees payable by the Funds under the Transfer Agency Agreement were:
CONTRACTUAL FEE FEE
CASH FUND 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-3
<PAGE>
TABLE 7 - SHAREHOLDER SERVICE FEES
The fees payable by the Funds under the Shareholder Services Agreement were:
CONTRACTUAL FEE FEE
INSTITUTIONAL SHARES 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
CONTRACTUAL FEE FEE
INVESTOR SHARES 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>
TABLE 8 - PORTFOLIO HOLDINGS IN BROKER/DEALERS
CASH PORTFOLIO VALUE
Goldman Sachs & Co. $39,984,000
C-4
<PAGE>
TABLE 9 - 5% SHAREHOLDERS
As of August 1, 2000, 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.
<TABLE>
<S> <C> <C> <C> <C>
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
TREASURY CASH FUND
Universal Shares Imperial Bank (recordholder) 40,800,491 100.00 11.25
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Institutional Shares Union Bank of California (recordholder) 14,478,764 48.08 3.99
P.O. Box 85602
San Diego, CA 92186-5602
Physicians Interindemnity Trust 5,339,974 17.73 1.47
2029 Century Park East
Los Angeles, CA 90067
Roth Capital Partners 3,896,367 12.94 1.07
24 Corporate Plaza Dr. Suite 200
Newport Beach, CA 92660-7968
Sullivan Kelly & Associates 1,698,573 5.64 0.47
301 N. Lake Ave. 9th Floor
Pasedena, CA 91101
Investor Shares Imperial Bank (recordholder) 273,789,211 93.81 75.47
9920 S. La Cienega Blvd.
Inglewood, CA 90301
GOVERNMENT CASH FUND
Universal Shares Superior Bank 40,204,391 23.50 5.62
One Lincoln Centre
Oakbrook Terrace, IL 60181
Hill Physicians Medical Group, Inc. 20,404,410 11.92 2.85
P.O. Box 5080
San Ramon, CA 94583-0980
Gemisys Corporation 13,179,012 7.70 1.84
7103 S. Revere Parkway
Englewood, CO 80112
Imperial Bancorp (recordholder) 12,582,000 7.35 1.76
9920 S. La Cienega Blvd.
Inglewood, CA 90301
PFF Bank & Trust 9,100,000 5.32 1.27
399 N. Garey Ave.
Pomona, CA 91767
County of Alameda 9,000,000 5.26 1.26
1221 Oak Street
Room 137
Oakland, CA 94612
Los Angeles Lakers 8,592,101 5.02 1.20
P.O. Box 10
Inglewood, CA 90306
C-5
<PAGE>
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
GOVERNMENT CASH FUND
Insitutional Shares Union Bank of California (recordholder) 83,159,161 16.54 11.63
P.O. Box 85602
San Diego, CA 92186-5602
Legato Systems, Inc. 74,237,080 14.76 10.38
3145 Porter Drive
Palo Alto, CA 94304
RPM Investments 36,000,000 7.16 5.03
1545 Wilshire Blvd Suite 600
Los Angeles, CA 90017
Mother Lode Holding Co. 30,000,000 5.97 4.20
189 Fulweller Ave.
Auburn, CA 95603
AxSun Technologies 29,315,152 5.86 4.10
One Fortune Drive
Billerica, MA 01821
LandAmerica Financial Group, Inc. 27,000,000 5.37 3.78
101 Gateway Centre
Richmond, VA 23235
Investor Shares Imperial Securities Corp. 41,080,155 100.00 5.75
9920 S La Cienega Blvd
Inglewood, CA 90301
CASH FUND
Universal Shares Coastcast Corporation 46,655,181 77.15 2.44
3025 East Victoria Street
Rancho Dominguez, CA 90221
Imperial Securities Corp. 10,206,702 16.88 0.53
9920 S La Cienega Blvd
Inglewood, CA 90301
Institutional Shares Union Bank of California (recordholder) 82,845,023 8.98 4.33
P.O. Box 58602
San Diego, CA 92186-5602
Cobalt Microserver, Inc. 76,193,280 8.26 3.98
555 Ellis Street
Mountain View, CA 94043
E-Stamp Corporation 55,483,527 6.01 2.90
2855 Campus Drive
San Mateo, CA 94403-2510
Investor Shares Imperial Bank (recordholder) 927,692,845 99.87 48.52
9920 S. La Cienega Blvd.
Inglewood, CA 90301
</TABLE>
C-6
