MONARCH FUNDS
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PROSPECTUS
January 5, 2001
THREE MONEY MARKET FUNDS THAT EACH INSTITUTIONAL SHARES
SEEK TO PROVIDE HIGH CURRENT INCOME
TO THE EXTENT CONSISTENT WITH THE TREASURY CASH FUND
PRESERVATION OF CAPITAL AND THE GOVERNMENT CASH FUND
MAINTENANCE OF LIQUIDITY. CASH FUND
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TABLE OF CONTENTS
Summary.............................2 Your Account............................6
Performance.........................4 Other Information......................10
Fee Tables..........................5 Financial Highlights...................11
Management..........................5 For More Information...................12
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THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE FUNDS'
SHARES OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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MONARCH FUNDS
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SUMMARY
DEFINITIONS
MONEY MARKET SECURITY means a high credit quality, short-term, U.S. dollar
denominated debt security.
TREASURY SECURITY means a security that is issued or guaranteed by the U.S.
Treasury.
GOVERNMENT SECURITY means a security that is issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
REPURCHASE AGREEMENT means a transaction in which securities are purchased and
simultaneously committed to be resold to another party at an agreed-upon date
and at a price reflecting a market rate of interest.
This Prospectus offers Institutional Shares of three money market funds --
Treasury Cash Fund, Government Cash Fund and Cash Fund (each a "Fund," and
collectively, the "Funds"). Institutional Shares are sold to banks, trust
companies and certain other financial institutions for their own and their
customer accounts and have a $100,000 minimum initial investment.
INVESTMENT OBJECTIVES
The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Each Fund invests in a diversified portfolio of Money Market Securities and:
o Seeks to maintain a stable net asset value of $1.00 per share
o Invests in securities with remaining maturities of 397 days or less
o Maintains a dollar weighted average maturity of its investments of 90 days
or less
Each Fund invests substantially all of its assets in another mutual fund (each a
"Portfolio," and collectively, the "Portfolios") which has the same investment
objective and substantially similar investment policies. Each Portfolio in which
a Fund invests and its primary investments are:
<TABLE>
<S> <C>
Fund/Portfolio Primary Investments
-------------- -------------------
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o Securities issued by financial institutions,
such as certificates of deposit, bankers'
acceptances and time deposits
o Securities issued by domestic companies,
such as commercial paper
o Government Securities
o Repurchase Agreements
</TABLE>
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 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 a 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 in 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:
INTEREST RATE RISK Interest rates affect the value of a Portfolio's investments.
Increases in interest rates may cause a decline in value. In addition, those
increases may cause a 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.
These risks can result in a decrease in the value of a security or all the
securities owned by a Portfolio and Fund and, therefore, cause a change in the
Fund's $1.00 per share value. These risks also can result in lower investment
performance.
3
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PERFORMANCE
The following charts and table provide some indication of the risks of investing
in a Fund's Institutional Shares by showing changes in performance and
investment returns from year to year. 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 chart shows the annual total returns for each full calendar year
that each Fund has operated.
YEAR ENDED 12/31
TREASURY CASH FUND
Best Quarter: 1.53% (quarter ended 9/30/00)
Worst Quarter: 0.67% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1994 - 3.75%
1995 - 5.54%
1996 - 4.99%
1997 - 5.05%
1998 - 4.96%
1999 - 4.57%
2000 - 5.91%
GOVERNMENT CASH FUND
Best Quarter: 1.54% (quarter ended 9/30/00)
Worst Quarter: 0.71% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1994 - 4.01%
1995 - 5.65%
1996 - 5.03%
1997 - 5.15%
1998 - 5.08%
1999 - 4.65%
2000 - 5.96%
CASH FUND
Best Quarter: 1.56% (quarter ended 9/30/00)
Worst Quarter: 0.73% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1994 - 4.03%
1995 - 5.67%
1996 - 5.05%
1997 - 5.17%
1998 - 5.14%
1999 - 4.76%
2000 - 6.03%
The following table lists the average annual total return as of December 31,
2000.
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------------- --------------
TREASURY CASH FUND 5.91% 5.10% 4.82% 7/12/93
GOVERNMENT CASH FUND 5.96% 5.17% 4.94% 7/15/93
CASH FUND 6.03% 5.23% 4.99% 7/15/93
</TABLE>
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FEE TABLES
The following table describes the various fees and expenses that you will pay if
you invest in Institutional Shares of a Fund. Expenses for each Fund are based
on amounts incurred during the fiscal year ended August 31, 2000. Expenses are
stated as a percentage of average net assets. There is no charge to purchase or
redeem Fund shares.
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
TREASURY GOVERNMENT CASH
CASH FUND CASH FUND FUND
--------- ---------- ----
Management Fees(2) 0.13% 0.13% 0.13%
Distribution(Rule 12b-1)Fees None None None
Other Expenses 0.49% 0.45% 0.45%
Total Annual Fund Operating Expenses(3) 0.62% 0.58% 0.58%
</TABLE>
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees. For
the year ended August 31, 2000, actual Total Annual Fund Operating Expenses
for Treasury Cash Fund were 0.45% and for Government Cash Fund and Cash
Fund were 0.57%.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Institutional Shares of a Fund to the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in a Fund's
Institutional Shares 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 Total Annual Fund Operating Expenses
remain as stated in the above table and that distributions are reinvested.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
TREASURY CASH FUND $63 $199 $346 $774
GOVERNMENT CASH FUND $59 $186 $324 $726
CASH FUND $59 $186 $324 $726
</TABLE>
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 Statement of Additional Information
("SAI").
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser is a privately owned company
controlled by John Y. Keffer. The Adviser makes investment decisions for each
Portfolio. In addition to the Portfolios, the Adviser manages two other money
market funds and two taxable and three tax-free bond funds.
During each Fund's last fiscal year, the advisory fees paid to the Adviser from
each Portfolio were 0.03% of the Portfolio's average daily net assets.
Each Fund pays its pro-rata share of its corresponding Portfolio's advisory fee,
which is based on the percentage of the Portfolio's assets held by the Fund.
5
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OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 2000, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $123 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of each Fund's shares.
Each Fund has entered into a shareholder service agreement under which the Fund
pays 0.20% of the average daily net assets of Institutional Shares for the
servicing of shareholder accounts. The fees paid under the shareholder service
agreement may be paid to various financial institutions that provide services to
their customers invested in Institutional Shares.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Institutional Shares include
the shares' own expenses as well as Trust expenses that are allocated among each
Fund, its classes of shares and any other funds of the Trust. The Adviser or
other service providers may waive all or any portion of their fees and/or
reimburse certain expenses of a Fund. Any fee waiver or expense reimbursement
increases investment performance of a Fund and its applicable share classes for
the period during which the waiver or reimbursement is in effect.
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
You may contact the Trust for an account application or for further information
regarding the Funds.
WRITE TO US AT: ACH OR WIRE INVESTMENTS TO:
Monarch Funds Imperial Bank
P.O. Box 446 ABA #122201444
Portland, Maine 04112 FOR CREDIT TO:
Forum Shareholder Services, LLC
TELEPHONE US TOLL-FREE AT: Account # 09075-933
(800) 754-8757 (Name of Fund) - Institutional Shares
(Your Name)
(Your Account Number)
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not 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:
<TABLE>
<S> <C>
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
-------------------------- ----------------------------
11:00 a.m., Pacific time 1:00 p.m., Pacific time
</TABLE>
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 Fund (and the Portfolio in which
it invests) 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 share-holder 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 Make a check payable to "Monarch Funds." No other method of
check payment is acceptable.
AUTOMATED CLEARING HOUSE ("ACH") Instruct your financial institution to
transfer funds through the "Automated Clearing House" system.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us.
Your financial institution may charge you a fee for ACH or wire services.
MINIMUM INVESTMENTS The minimum initial investment in Institutional Shares is
$100,000.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
Type of Account Requirement
--------------- -----------
INDIVIDUAL, SOLE PROPRIETORSHIP AND o Instructions must be signed by all
JOINT ACCOUNTS Individual accounts persons required to sign exactly as
are owned by one person, as are sole their names appear on the account.
proprietorship accounts. Joint accounts
have two or more owners (tenants)
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 identify the trustees.
</TABLE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
---------------------- --------------------------
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
(and a Corporate/Organization Resolution form, confirmation or write us a letter.
if applicable). o Write your account number on your
o Complete the application (and resolution form). check.
o Mail us your application (and resolution form) o Mail us the slip (or your letter)
and a check. and the check.
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming
(and a Corporate/Organization Resolution form, wire.
if applicable). o Instruct your bank to wire your
o Complete the application (and resolution form). money to us.
o Call us to fax the completed application
(and resolution form) and we will assign
you an account number.
o Mail us your application (and resolution form).
o Instruct your financial institution to wire your
money to us.
BY ACH PAYMENT
o Call or write us for an account application (and
Corporate/Organization Resolution form, if
applicable).
o Complete the application (and resolution form).
o Call us to fax the completed application
(and resolution form) and we will assign
you an account number.
o Mail us your original application (and
resolution form).
o Instruct your financial institution to
send an ACH payment to us.
</TABLE>
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LIMITATIONS ON PURCHASES A Fund reserves the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations.
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH payment at full
value subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or by ACH that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund,
the Transfer Agent or distributor and the Fund may redeem shares you own in the
account (or another identically registered account that you maintain with the
Transfer Agent) as reimbursement.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
<TABLE>
<S> <C>
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] - Institutional 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 $5,000 or
more and you did not decline wire redemption privileges on your account
application.
o Call us with your request (unless you declined telephone redemption
privileges on your account application) (See "By Telephone")
OR
o Mail us your request (See "By Mail").
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application).
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification.
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges on your account
application) (See "By Wire").
</TABLE>
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
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.
8
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SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
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 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 $100,000, a Fund may ask
you to increase your balance. If the account value is still below $100,000 after
60 days, a Fund may close your account and send you the proceeds.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Institutional Shares of a Fund for Institutional Shares of
another Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. You may
exchange your shares by mail or by telephone, unless you declined telephone
redemption privileges on your account application. You may be responsible for
any fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
<TABLE>
<S> <C>
HOW TO EXCHANGE
---------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number(s)
o The names of each Fund and share class from which you are selling and
into which you are exchanging
o The dollar amount or number of shares you want to sell (and exchange).
o Open a new account and complete an account application if you are requesting
different shareholder privileges.
o Obtain a signature guarantee, if required.
o Mail us your request and documentation.
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application).
o Provide the following information:
o Your account number(s)
o Exact name(s) in which account is registered
o Additional form of identification.
</TABLE>
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ADDITIONAL INVESTMENT POLICIES
Each Fund and Portfolio operates 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 Institutional Shares, each Fund offers Universal Shares, Investor
Shares and Service 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, Investor Shares are sold
to retail investors and Service Shares are designated to replicate a standard
checking account or to be used as part of a daily sweep product. Each class has
different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions from its 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 investment 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. Distributions may also be subject to certain
state and local taxes.
Each Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year. For further
information about the tax effects of investing in a Fund, including state and
local tax matters, please see the SAI and consult your tax adviser.
10
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FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the performance of
Institutional Shares of each Fund. Total return in the table represents the rate
an investor would have earned on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
LLP. Each Fund's financial statements and independent auditors' report are
included in the Annual Report dated August 31, 2000, which is available upon
request, without charge.
As of August 31, 2000, the net assets of Treasury Cash Fund were $467,447,000,
of Government Cash Fund were $756,628,000 and of Cash Fund were $2,028,881,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
--------------------------------------------- ---------------------------------------------
Net Ratios To
Assets at Average Net Assets
Beginning Distributions Ending End of ----------------------------------
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Year Ended August 31 Share Income Income Share Return Omitted) Expenses Income Expenses(a)
TREASURY CASH FUND
2000 $1.00 $0.05 $(0.05) $1.00 5.47% $30,480 0.45% 5.30% 0.62%
1999 1.00 0.04 (0.04) 1.00 4.50% 55,134 0.45% 4.43% 0.62%
1998 1.00 0.05 (0.05) 1.00 5.11% 91,122 0.45% 5.00% 0.67%
1997 1.00 0.05 (0.05) 1.00 4.98% 40,830 0.45% 4.89% 0.66%
1996 1.00 0.05 (0.05) 1.00 5.15% 79,259 0.45% 5.01% 0.69%
GOVERNMENT CASH FUND
2000 1.00 0.05 (0.05) 1.00 5.54% 400,418 0.57% 5.41% 0.58%
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%
CASH FUND
2000 1.00 0.06 (0.06) 1.00 5.65% 863,603 0.58% 5.55% 0.58%
1999 1.00 0.05 (0.05) 1.00 4.68% 569,409 0.57% 4.56% 0.60%
1998 1.00 0.05 (0.05) 1.00 5.24% 299,220 0.57% 5.11% 0.61%
1997 1.00 0.05 (0.05) 1.00 5.07% 152,041 0.57% 4.97% 0.60%
1996 1.00 0.05 (0.05) 1.00 5.22% 89,733 0.57% 5.10% 0.60%
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in the absence of any waivers and reimbursements.
11
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FOR MORE INFORMATION MONARCH FUNDS
The following documents are available
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS Institutional Shares
Additional information about each Fund's
investments is available in the Fund's Treasury
annual and semi-annual reports to Cash Fund
shareholders
Government
STATEMENT OF ADDITIONAL INFORMATION ("SAI") Cash Fund
The SAI provides more detailed information about
each Fund and is incorporated by reference into
this Prospectus. Cash Fund
CONTACTING THE FUNDS
You can get copies of both reports 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
(207) 879-0001
(800) 754-8757
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-mailing or by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
E-mail address: [email protected]
Free copies of the reports and SAI are available
from the SEC's Web site at www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
Investment Company Act File No. 811-6742 (800) 754-8757
<PAGE>
Monarch Funds
--------------------------------------------------------------------------------
PROSPECTUS
January 5, 2001
THREE MONEY MARKET FUNDS THAT EACH INVESTOR SHARES
SEEK TO PROVIDE HIGH CURRENT INCOME
TO THE EXTENT CONSISTENT WITH THE TREASURY CASH FUND
PRESERVATION OF CAPITAL AND THE GOVERNMENT CASH FUND
MAINTENANCE OF LIQUIDITY. CASH FUND
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary...............................2 Your Account..........................6
Performance...........................4 Other Information....................10
Fee Tables............................5 Financial Highlights.................11
Management............................5 For More Information.................12
--------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUNDS' SHARES OR
DETERMINED WHETHER THIS PROSPECTUS
IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
MONARCH FUNDS
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SUMMARY
DEFINITIONS
MONEY MARKET SECURITY means a high credit quality, short-term, U.S. dollar
denominated debt security.
TREASURY SECURITY means a security that is issued or guaranteed by the U.S.
Treasury.
GOVERNMENT SECURITY means a security that is issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
REPURCHASE AGREEMENT means a transaction in which securities are purchased and
simultaneously committed to be resold to another party at an agreed-upon date
and at a price reflecting a market rate of interest.
This Prospectus offers Investor Shares of three money market funds - Treasury
Cash Fund, Government Cash Fund and Cash Fund (each a "Fund," and collectively,
the "Funds"). Investor Shares have a $5,000 minimum initial investment.
INVESTMENT OBJECTIVES
The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Each Fund invests in a diversified portfolio of Money Market Securities and:
o Seeks to maintain a stable net asset value of $1.00 per share
o Invests in securities with remaining maturities of 397 days or less
o Maintains a dollar weighted average maturity of its investments of 90 days
or less
Each Fund invests substantially all of its assets in another mutual fund (each a
"Portfolio," and collectively, the "Portfolios") which has the same investment
objective and substantially similar investment policies. Each Portfolio in which
a Fund invests and its primary investments are:
<TABLE>
<S> <C>
FUND/PORTFOLIO PRIMARY INVESTMENTS
-------------- -------------------
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase
Government Cash Portfolio Agreementsbacked by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o Securities issued by financial
institutions, such as certificates of
deposit, bankers' acceptances and time
deposits
o Securities issued by domestic
companies, such as commercial paper
o Government Securities
o Repurchase Agreements
</TABLE>
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 a Portfolio
o The security subsequently fails to meet the Adviser's investment criteria
o Funds are needed for another purpose
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<PAGE>
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PRINCIPAL RISKS OF INVESTING IN A FUND
An investment in a Fund is not a deposit in 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 Portfolio and Fund are:
INTEREST RATE RISK Interest rates affect the value of a Portfolio's investments.
Increases in interest rates may cause a decline in value. In addition, those
increases may cause a 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.
These risks can result in a decrease in the value of a security or all the
securities owned by a Fund and, therefore, cause a change in the Fund's $1.00
per share value. These risks also can result in lower investment performance.
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PERFORMANCE
The following charts and table provide some indication of the risks of investing
in a Fund's Investor Shares by showing changes in performance and investment
returns from year to year. 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 chart shows the annual total returns for each full calendar year
that each Fund has operated.
<TABLE>
<S> <C>
YEAR ENDED 12/31
TREASURY CASH FUND
Best Quarter: 1.43% (quarter ended 9/30/00)
Worst Quarter: 0.95% (quarter ended 3/31/99)
[EDGAR Representation of Bar Chart]
1996 - 4.60%
1997 - 4.65%
1998 - 4.57%
1999 - 4.17%
2000 - 5.50%
GOVERNMENT CASH FUND
Best Quarter: 1.47% (quarter ended 9/30/00)
Worst Quarter: 0.78% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1996 -
1997 -
1998 -
1999 -
2000 - 5.67%
CASH FUND
Best Quarter: 1.49% (quarter ended 9/30/00)
Worst Quarter: 1.03% (quarter ended 6/30/99)
[EDGAR Representation of Bar Chart]
1996 - 4.78%
1997 - 4.90%
1998 - 4.87%
1999 - 4.49%
2000 - 5.75%
</TABLE>
The following table lists the average annual total return as of December 31,
2000.
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------------- --------------
TREASURY CASH FUND 5.50% 4.70% 4.71% 10/25/95
GOVERNMENT CASH FUND 5.67% N/A 5.68% 12/30/99
CASH FUND 5.75% 4.96% 5.00% 6/16/95
</TABLE>
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FEE TABLES
The following table describes the various fees and expenses that you will pay if
you invest in Investor Shares of a Fund. Expenses for each Fund are based on
amounts incurred during the fiscal year ended August 31, 2000. Expenses are
stated as a percentage of average net assets. There is no charge to purchase or
redeem Fund shares.
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES TREASURY GOVERNMENT CASH
(expenses that are deducted from Fund assets)(1) CASH FUND CASH FUND FUND
------------------------------------------------------------------------------------------------------------------
Management Fees(2) 0.13% 0.13% 0.13%
Distribution (Rule 12b-1) Fees 0.25% 0.25% 0.25%
Other Expenses 0.47% 0.59% 0.47%
Total Annual Fund Operating Expenses(3) 0.85% 0.97% 0.85%
</TABLE>
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees. For
the year ended August 31, 2000, actual Total Annual Fund Operating Expenses
were 0.84% for Treasury Cash Fund, 0.85% for Government Cash Fund and 0.83%
for Cash Fund.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Investor Shares of a Fund to the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in a Fund's Investor Shares
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 gross and net operating expenses remain as stated in the above
table and that distributions are reinvested. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
TREASURY CASH FUND $87 $271 $471 $1,049
GOVERNMENT CASH FUND $99 $309 $536 $1,190
CASH FUND $87 $271 $471 $1,049
</TABLE>
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 Statement of Additional Information
("SAI").
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser is a privately owned company
controlled by John Y. Keffer. The Adviser makes investment decisions for each
Portfolio. In addition to the Portfolios, the Adviser manages two other money
market funds and two taxable and three tax-free bond funds.
During each Fund's last fiscal year, the advisory fees paid to the Adviser from
each Portfolio were 0.03% of the Portfolio's average daily net assets.
Each Fund pays its pro-rata share of its corresponding Portfolio's advisory fee,
which is based on the percentage of the Portfolio's assets held by the Fund.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 2000, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $ 123 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or
5
<PAGE>
other financial institutions through which investors may purchase or redeem
shares and may, at its own expense, compensate persons who provide services in
connection with the sale or expected sale of each Fund's shares.
Each Fund has adopted a distribution or "Rule 12b-1" plan under which the Fund
pays the distributor 0.25% of the average daily net assets of Investor Shares
for the sale and distribution of Investor Shares. Each Fund has also entered
into a shareholder service agreement under which the Fund pays 0.20% of the
average daily net assets of Investor 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 Investor Shares. Because Investor Shares pay
distribution fees on an on-going basis, your investment cost over time may be
higher than paying other types of sales charges.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Investor Shares include the
shares' own expenses as well as Trust expenses that are allocated among each
Fund, its classes of shares and any other funds of the Trust. The Adviser or
other service providers may waive all or any portion of their fees and/or
reimburse certain expenses of a Fund. Any fee waiver or expense reimbursement
increases investment performance of a Fund and its applicable share classes for
the period during which the waiver or reimbursement is in effect.
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Contact the Trust or Imperial Securities Corp. for an account application or for
further information regarding the Funds.
Write to us at: OR: ACH OR WIRE INVESTMENTS TO:
Monarch Funds Imperial Securities Corp. Imperial Bank
P.O. Box 446 9920 South LaCienega Boulevard ABA #122201444
Portland, Maine 14th Floor FOR CREDIT TO:
04112 Inglewood, California 90301 Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US TOLL-FREE AT: (Name of Fund)-Investor Shares
(800) 754-8757 (Your Name)
(Your Account Number)
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not 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:
<TABLE>
<S> <C> <C>
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
-------------------------- ----------------------------
11:00 a.m., Pacific time 1:00 p.m., Pacific time
</TABLE>
On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations. Each
Fund reserves the right to waive minimum investment amounts and may temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). The time
at which NAV is calculated may change in case of an emergency. In order to
maintain a stable NAV of $1.00 per share, each Fund (and the Portfolio in which
it invests) 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 share-holder services such
as periodic account statements. Consult a representative of your financial
institution for more information.
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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, make a
check payable to "Monarch Funds" or to one or more owners of the account
and endorsed to "Monarch Funds." For all other accounts, your 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).
AUTOMATED CLEARING HOUSE ("ACH") Instruct your financial institution to
transfer funds through the "Automated Clearing House" system.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us.
Your financial institution may charge you a fee for ACH or wire services.
MINIMUM INVESTMENTS The minimum initial investment in Investor Shares is $5,000.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C> <C>
TYPE OF ACCOUNT REQUIREMENT
--------------- -----------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons required
Individual accounts are owned by one person, as are sole to sign exactly as their names appear on the account.
proprietorship accounts. Joint accounts have two or more
owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give money to custodial account under the UGMA or the UTMA.
a 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 identify the
trustees.
</TABLE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
---------------------- --------------------------
BY CHECK BY CHECK
o Call or write us for an account application (and a o Fill out an investment slip from a
Corporate/Organization Resolution form, if applicable). confirmation or write us a letter.
o Complete the application (and resolution form). o Write your account number on your check.
o Mail us your application (and resolution form) and a o Mail us the slip (or your letter) and
check. the check.
BY WIRE BY WIRE
o Call or write us for an account application (and a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form, if applicable). o Instruct your bank to wire your money to us.
o Complete the application (and resolution form).
o Call us to fax the completed application (and resolution
form) and we will assign you an account number.
o Mail us your application (and resolution form).
o Instruct your financial institution to wire your money
to us.
BY ACH PAYMENT
o Call or write us for an account application (and
Corporate/Organization Resolution form, if applicable).
o Complete the application (and resolution form).
o Call us to fax the completed application (and resolution
form) and we will assign you an account number.
o Mail us your original application (and resolution form).
o Instruct your financial institution to send an ACH
payment to us.
</TABLE>
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LIMITATIONS ON PURCHASES A Fund reserves the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations.
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH payments at full
value subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or by ACH that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund,
the Transfer Agent or distributor and the Fund may redeem shares you own in the
account (or another identically registered account that you maintain with the
Transfer Agent) as reimbursement.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
<TABLE>
<S> <C>
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] - Investor 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 $5,000 or more
and you did not decline wire redemption privileges on your account application.
o Call us with your request (unless you declined telephone redemption privileges
on your account application)(See "By Telephone")
OR
o Mail us your request (See "By Mail").
BY CHECK
o Write a check against your account balance (See "Check Writing Privileges").
o Your investment will continue to earn distributions until your check is
presented to the Fund for payment.
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application).
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification.
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges on your account
application) (See "By Wire").
</TABLE>
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
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.
CHECK WRITING PRIVILEGES You may redeem shares by writing checks provided by the
Funds against your account balance. Contact the Transfer Agent for information
on applying for check writing privileges. When your check is presented for
payment, the Trust will deduct shares from your shareholder account in an amount
equal to the amount of the check as long as you have a sufficient number of
shares to cover the amount of the check. The Trust charges a $10 fee for all
checks presented in amounts less than $500. The Trust deducts this fee directly
from your shareholder account.
Signature Guarantee Requirements To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
8
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
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 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 $5,000, a Fund may ask
you to increase your balance. If the account value is still below $5,000 after
60 days, a Fund may close your account and send you the proceeds.
REDEMPTIONS IN KIND Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Investor Shares of a Fund for Investor Shares of another Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. You may
exchange your shares by mail or by telephone, unless you declined telephone
redemption privileges on your account application. You may be responsible for
any fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
<TABLE>
<S> <C>
How To Exchange
---------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number(s)
o The names of each Fund and share class from which you are selling and into
which you are exchanging
o The dollar amount or number of shares you want to sell (and exchange).
o Open a new account and complete an account application if you are requesting different
shareholder privileges.
o Obtain a signature guarantee, if required.
o Mail us your request and documentation.
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges on your
account application).
o Provide the following information:
o Your account number(s)
o Exact name(s) in which account is registered
o Additional form of identification.
</TABLE>
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--------------------------------------------------------------------------------
OTHER INFORMATION
ADDITIONAL INVESTMENT POLICIES
The Funds and Portfolios operate in accordance with "Rule 2a-7" under the
Investment Company Act of 1940. All restrictions relating to maturity, credit
quality and diversification are interpreted in accordance with that rule.
A Portfolio may from time to time take temporary defensive positions in response
to adverse market, economic, political or other conditions. For instance, the
Portfolios may hold cash in any amount. Each Portfolio may invest in other money
market mutual funds that have substantially similar policies.
Securities in which the Portfolios invest may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The Portfolios limit these securities to those
with an interest rate that is adjusted based solely on a single short-term rate
or index, such as the Prime Rate.
CORE AND GATEWAY(R)
Each Fund is a "gateway" fund in a "Core and Gateway" structure. Each Fund
invests substantially all of its assets in its corresponding Portfolio, each of
which is a series of Core Trust (Delaware) ("Core Trust"), another mutual fund.
A Fund may withdraw its entire investment from a Portfolio at anytime that the
Board decides it is in the Fund's best interest to do so.
The board of trustees of Core Trust formulates the general policies of each
Portfolio and meets periodically to review each Portfolio's performance, monitor
investment activities and practices and discuss other matters affecting each
Portfolio. Additional information about Core Trust's board and executive
officers is in the SAI.
CLASSES OF SHARES
In addition to Investor Shares, each Fund offers Universal Shares, Institutional
Shares and Service 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 Service Shares are designated to
replicate a standard checking account or to be used as part of a daily sweep
product. Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions from its 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 investment 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. Distributions may also be subject to certain
state and local taxes.
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
Investor Shares of each Fund. Data for Universal Shares of Government Cash
Fund's Universal Shares is included in the table as Investor Shares of that Fund
had not commenced operations as of August 31, 1999. The total return for
Investor Shares of Government Cash Fund would have been lower than that of
Universal Shares because of the higher expenses of Investor Shares. Total return
in the table represents the rate an investor would have earned on an investment
in a Fund (assuming the reinvestment of all distributions). This information has
been audited by KPMG LLP. Each Fund's financial statements and independent
auditors' report are included in the Annual Report dated August 31, 2000, which
is available upon request, without charge.
As of August 31, 2000, the net assets of Treasury Cash Fund were $467,447,000,
of Government Cash Fund were $756,628,000 and of Cash Fund were $2,028,881,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Data for a Single Share Ratios/Supplemental Data
--------------------------------------------- ---------------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of ----------------------------------
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Year Ended August 31 Share Income Income Share Return Omitted) Expenses Income Expenses(a)
TREASURY CASH FUND
INVESTOR SHARES
2000 $1.00 $0.05 $(0.05) $1.00 5.06% $314,305 0.84% 5.01% 0.85%
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
INVESTOR SHARES
2000(d) 1.00 0.04 (0.04) 1.00 3.68% 36,091 0.85%(b) 5.70%(b) 0.97%(b)
UNIVERSAL SHARES
2000 1.00 0.06 (0.06) 1.00 5.94% 225,697 0.20% 5.73% 0.24%
1999 1.00 0.05 (0.05) 1.00 5.00% 277,548 0.18% 4.88% 0.25%
1998 1.00 0.05 (0.05) 1.00 5.63% 253,644 0.18% 5.48% 0.26%
1997 1.00 0.05 (0.05) 1.00 5.49% 230,410 0.17% 5.35% 0.26%
1996 1.00 0.05 (0.05) 1.00 5.59% 248,986 0.19% 5.43% 0.28%
CASH FUND
INVESTOR SHARES
2000 1.00 0.05 (0.05) 1.00 5.38% 994,191 0.83% 5.40% 0.85%
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%
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in absence of any fee waivers and expense reimbursements.
(b) Annualized.
(c) Commenced operations on October 25, 1995.
(d) Commenced operations on December 30, 1999.
11
<PAGE>
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--------------------------------------------------------------------------------
FOR MORE INFORMATION MONARCH FUNDS
The following documents are available
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS INVESTOR SHARES
Additional information about each Fund's
investments is available in the Fund's annual TREASURY
and semi-annual reports to shareholders CASH FUND
STATEMENT OF ADDITIONAL INFORMATION ("SAI") GOVERNMENT
The SAI provides more detailed information about each CASH FUND
Fund and is incorporated by reference into this Prospectus.
CASH FUND
CONTACTING THE FUNDS
You can get copies of both reports 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
(207) 879-0001
(800) 754-8757
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-mailing or by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
E-mail address: [email protected]
Free copies of the reports and SAI are available
from the SEC's Web site at www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
Investment Company Act File No. 811-6742 (800) 754-8757
<PAGE>
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PROSPECTUS
January 5, 2001
THREE MONEY MARKET FUNDS THAT EACH UNIVERSAL SHARES
SEEK TO PROVIDE HIGH CURRENT INCOME
TO THE EXTENT CONSISTENT WITH THE TREASURY CASH FUND
PRESERVATION OF CAPITAL AND THE GOVERNMENT CASH FUND
MAINTENANCE OF LIQUIDITY. CASH FUND
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary...............................2 Your Account..........................6
Performance...........................4 Other Information....................10
Fee Tables............................5 Financial Highlights.................11
Management............................5 For More Information.................12
--------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUNDS' SHARES OR
DETERMINED WHETHER THIS PROSPECTUS
IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
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SUMMARY
DEFINITIONS
MONEY MARKET SECURITY means a high credit quality, short-term, U.S. dollar
denominated debt security.
TREASURY SECURITY means a security that is issued or guaranteed by the U.S.
Treasury.
GOVERNMENT SECURITY means a security that is issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
REPURCHASE AGREEMENT means a transaction in which securities are purchased and
simultaneously committed to be resold to another party at an agreed-upon date
and at a price reflecting a market rate of interest.
This Prospectus offers Universal Shares of three money market funds - Treasury
Cash Fund, Government Cash Fund and Cash Fund (each a "Fund," and collectively,
the "Funds"). Universal Shares are designed for institutional investors and have
a $1,000,000 minimum initial investment.
INVESTMENT OBJECTIVES
The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Each Fund invests in a diversified portfolio of Money Market Securities and:
o Seeks to maintain a stable net asset value of $1.00 per share
o Invests in securities with remaining maturities of 397 days or less
o Maintains a dollar weighted average maturity of its investments of 90 days
or less.
Each Fund invests substantially all of its assets in another mutual fund (each a
"Portfolio," and collectively, the "Portfolios") which has the same investment
objective and substantially similar investment policies. Each Portfolio in which
a Fund invests and its primary investments are:
<TABLE>
<S> <C> <C>
FUND/PORTFOLIO PRIMARY INVESTMENTS
-------------- -------------------
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o Securities issued by financial institutions, such as
certificates of deposit, bankers' acceptances
and time deposits
o Securities issued by domestic companies, such as
commercial paper
o Government Securities
o Repurchase Agreements
</TABLE>
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 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 a 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 in 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 Portfolio and Fund are:
INTEREST RATE RISK Interest rates affect the value of a Portfolio's investments.
Increases in interest rates may cause a decline in value. In addition, those
increases may cause a 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.
These risks can result in a decrease in the value of a security or all the
securities owned by a Portfolio and Fund and, therefore, cause a change in the
Fund's $1.00 per share value. These risks also can result in lower investment
performance.
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PERFORMANCE
The following charts and table provide some indication of the risks of investing
in a Fund's Universal Shares by showing changes in performance and investment
returns from year to year. 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 chart shows the annual total returns for each full calendar year
that each Fund has operated.
<TABLE>
<S> <C>
YEAR ENDED 12/31
TREASURY CASH FUND
Best Quarter: 1.62% (quarter ended 12/31/00)
Worst Quarter: 1.37% (quarter ended 3/31/00)
[EDGAR Representation of Bar Chart]
1993 -
1994 -
1995 -
1996 -
1997 -
1998 -
1999 -
2000 - 6.23%
GOVERNMENT CASH FUND
Best Quarter: 1.63% (quarter ended 9/30/00)
Worst Quarter: 0.78% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1993 - 3.24%
1994 - 4.29%
1995 - 6.01%
1996 - 5.44%
1997 - 5.56%
1998 - 5.49%
1999 - 5.06%
2000 - 6.35%
CASH FUND
Best Quarter: 1.65% (quarter ended 9/30/00)
Worst Quarter: 0.79% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1993 - 3.32%
1994 - 4.32%
1995 - 5.96%
1996 - 5.36%
1997 - 5.56%
1998 - 5.55%
1999 - 5.17%
2000 - 6.41%
</TABLE>
The following table lists the average annual total return as of December 31,
2000.
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------------- --------------
TREASURY CASH FUND 6.23% N/A 6.24% 12/30/99
GOVERNMENT CASH FUND 6.35% 5.58% 5.13% 10/29/92
CASH FUND 6.41% 5.61% 5.19% 12/1/92
</TABLE>
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FEE TABLES
The following table describes the various fees and expenses that you will pay if
you invest in Universal Shares of a Fund. Expenses for each Fund are based on
amounts incurred during the fiscal year ended August 31, 2000. Expenses are
stated as a percentage of average net assets. There is no charge to purchase or
redeem Fund shares.
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
TREASURY GOVERNMENT CASH
CASH FUND CASH FUND FUND
--------- ---------- ----
Management Fees(2) 0.13% 0.13% 0.13%
Distribution (Rule 12b-1) Fees None None None
Other Expenses 0.25% 0.11% 0.10%
Total Annual Fund Operating Expenses(3) 0.38% 0.24% 0.23%
</TABLE>
(1) Each Fund's expenses include its pro-rata share of the expenses of its
corresponding Portfolio.
(2) Includes all investment advisory and administration fees.
(3) Certain service providers voluntarily waived a portion of their fees. For
the year ended August 31, 2000, actual Total Annual Fund Operating Expenses
for each Fund were 0.20%.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in Universal Shares of a Fund to the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in a Fund's Universal Shares
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 as stated in the above table and that
distributions are reinvested. Although your actual costs may be higher or lower,
under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
TREASURY CASH FUND $39 $122 $213 $480
GOVERNMENT CASH FUND $25 $77 $135 $306
CASH FUND $24 $74 $130 $293
</TABLE>
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 Statement of Additional Information
('SAI").
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser is a privately owned company
controlled by John Y. Keffer. The Adviser makes investment decisions for each
Portfolio. In addition to the Portfolios, the Adviser manages two other money
market funds and two taxable and three tax-free bond funds.
During each Fund's last fiscal year, the advisory fees paid to the Adviser from
each Portfolio were 0.03% of the Portfolio's average daily net assets.
Each Fund pays its pro-rata share of its corresponding Portfolio's advisory fee,
which is based on the percentage of the Portfolio's assets held by the Fund.
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OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 2000, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $123 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of each Fund's shares.
FUND EXPENSES
Each Fund pays for all of its expenses. Expenses of Universal Shares include the
shares' own expenses as well as Trust expenses that are allocated among each
Fund, its classes of shares and any other funds of the Trust. The Adviser or
other service providers may waive all or any portion of their fees and/or
reimburse certain expenses of a Fund. Any fee waiver or expense reimbursement
increases investment performance of a Fund and its applicable share classes for
the period during which the waiver or reimbursement is in effect.
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
You may contact the Trust for an account application or for further information
regarding the Funds.
WRITE TO US AT: ACH OR WIRE INVESTMENTS TO:
Monarch Funds Imperial Bank
P.O. Box 446 ABA #122201444
Portland, Maine 04112 FOR CREDIT TO:
Forum Shareholder Services, LLC
Account # 09075-933
TELEPHONE US TOLL-FREE AT: (Name of Fund) - Universal Shares
(800) 754-8757 (Your Name)
(Your Account Number)
GENERAL INFORMATION
You may purchase or sell (redeem) shares at the net asset value of a share
("NAV") next calculated after the Transfer Agent receives your request in proper
form accompanied by funds on deposit at a Federal Reserve Bank ("Federal
Funds"). Investments are not 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:
<TABLE>
<S> <C> <C>
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
-------------------------- ----------------------------
11:00 a.m., Pacific time 1:00 p.m., Pacific time
</TABLE>
On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations. Each
Fund reserves the right to waive minimum investment amounts and may temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). The time
at which NAV is calculated may change in case of an emergency. In order to
maintain a stable NAV of $1.00 per share, each Fund (and the Portfolio in which
it invests) values the securities in its portfolio on an amortized cost basis.
6
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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 share-holder 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 Checks must be made payable on their face to "Monarch Funds."
No other method of check payment is acceptable.
AUTOMATED CLEARING HOUSE ("ACH") Instruct your financial institution to
transfer funds through the "Automated Clearing
House" system.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us.
Your financial institution may charge you a fee for ACH or wire services.
MINIMUM INVESTMENTS The minimum initial investment in Universal Shares is
$1,000,000.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C> <C>
Type of Account Requirement
--------------- -----------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons
Individual accounts are owned by one person, as are sole required to sign exactly as their names appear
proprietorship accounts. Joint accounts have two or more on the account.
owners (tenants).
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 identify the trustees.
</TABLE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
---------------------- --------------------------
BY CHECK BY CHECK
o Call or write us for an account application (and a o Fill out an investment slip from a confirmation
Corporate/Organization Resolution form, if applicable). or write us a letter.
o Complete the application (and resolution form). o Write your account number on your check.
o Mail us your application (and resolution form) 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 a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form, if applicable). o Instruct your bank to wire your money to us.
o Complete the application (and resolution form).
o Call us to fax the completed application (and
resolution form) and we will assign you an account number.
o Mail us your application (and resolution form).
o Instruct your financial institution to wire your money
to us.
BY ACH PAYMENT
o Call or write us for an account application (and
Corporate/Organization Resolution form, if applicable).
o Complete the application (and resolution form).
o Call us to fax the completed application (and
resolution form) and we will assign you an account number.
o Mail us your original application (and resolution form).
o Instruct your financial institution to send an ACH
payment to us.
</TABLE>
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LIMITATIONS ON PURCHASES A Fund reserves the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations.
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH payments at full
value subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or by ACH that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund,
the Transfer Agent or distributor and the Fund may redeem shares you own in the
account (or another identically registered account that you maintain with the
Transfer Agent) as reimbursement.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
<TABLE>
<S> <C>
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] - Universal 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 $5,000 or more
and you did not decline wire redemption privileges on your account application.
o Call us with your request (unless you declined telephone redemption privileges
on your account application) (See "By Telephone")
OR
o Mail us your request (See "By Mail").
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application).
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional form of identification.
o Redemption proceeds will be:
o Mailed to you or
o Wired to you (unless you declined wire redemption privileges on your account
application) (See "By Wire").
</TABLE>
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount that may be redeemed by wire is $5,000. If the Transfer Agent receives
your wire redemption order after 11:00 a.m., Pacific time (or other time as may
be determined), the Transfer Agent will wire proceeds to you on the next Fund
Business Day.
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.
8
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SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
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 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 $100,000, a Fund may ask
you to increase your balance. If the account value is still below $100,000 after
60 days, a Fund may close your account and send you the proceeds.
Redemptions in Kind Each Fund reserves the right to pay redemption proceeds in
portfolio securities rather than cash.
EXCHANGE PRIVILEGES
You may exchange Universal Shares of a Fund for Universal Shares of another
Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. You may
exchange your shares by mail or by telephone, unless you declined telephone
redemption privileges on your account application. You may be responsible for
any fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
<TABLE>
<S> <C>
HOW TO EXCHANGE
---------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number(s)
o The names of each Fund and share class from which you are selling and into which you are exchanging
o The dollar amount or number of shares you want to sell (and exchange).
o Open a new account and complete an account application if you are requesting different
shareholder privileges.
o Obtain a signature guarantee, if required.
o Mail us your request and documentation.
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges
on your account application).
o Provide the following information:
o Your account number(s)
o Exact name(s) in which account is registered
o Additional form of identification.
</TABLE>
9
<PAGE>
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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 Universal Shares, each Fund offers Institutional Shares, Investor
Shares and Service Shares. You may obtain prospectuses describing these classes
of shares from the Funds' distributor by contacting the Transfer Agent.
Institutional Shares are sold to banks, trust companies and certain other
financial institutions for their own and their customer accounts, Investor
Shares are sold to retail investors and Service Shares are designated to
replicate a standard checking account or to be used as part of a daily sweep
product. Each class has different fees and investment minimums.
DISTRIBUTIONS
Each Fund declares distributions from its 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 investment 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. Distributions may also be subject to certain
state and local taxes.
Each Fund will send you information about the income tax status of distributions
paid during the year shortly after December 31 of each year. For further
information about the tax effects of investing in a Fund, including state and
local tax matters, please see the SAI and consult your tax adviser.
10
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the performance of
Universal Shares of each Fund. Data for of Treasury Cash Fund's Institutional
Shares is included in the table as Universal Shares of that Fund had not
commenced operations as of August 31, 1999. Total return in the table represents
the rate an investor would have earned on an investment in a Fund (assuming the
reinvestment of all distributions). This information has been audited by KPMG
LLP. Each Fund's financial statements and independent auditors' report are
included in the Annual Report dated August 31, 2000, which is available upon
request, without charge.
As of August 31, 2000, the net assets of Treasury Cash Fund were $467,447,000,
of Government Cash Fund were $756,628,000 and of Cash Fund were $2,028,881,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
--------------------------------------------- ---------------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of
Net Asset Net From Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Year Ended August 31 Share Income Income Share Return Omitted) Expenses Income Expenses(a)
TREASURY CASH FUND
UNIVERSAL SHARES
2000(c) $1.00 $0.04 $(0.04) $1.00 4.02% $5,976 0.20%(b) 5.86%(b) 0.38%(b)
INSTITUTIONAL SHARES
2000 $1.00 $0.05 $(0.05) $1.00 5.47% $30,480 0.45% 5.30% 0.62%
1999 1.00 0.04 (0.04) 1.00 4.50% 55,134 0.45% 4.43% 0.62%
1998 1.00 0.05 (0.05) 1.00 5.11% 91,122 0.45% 5.00% 0.67%
1997 1.00 0.05 (0.05) 1.00 4.98% 40,830 0.45% 4.89% 0.66%
1996 1.00 0.05 (0.05) 1.00 5.15% 79,259 0.45% 5.01% 0.69%
GOVERNMENT CASH FUND
UNIVERSAL SHARES
2000 1.00 0.06 (0.06) 1.00 5.94% 225,697 0.20% 5.73% 0.24%
1999 1.00 0.05 (0.05) 1.00 5.00% 277,548 0.18% 4.88% 0.25%
1998 1.00 0.05 (0.05) 1.00 5.63% 253,644 0.18% 5.48% 0.26%
1997 1.00 0.05 (0.05) 1.00 5.49% 230,410 0.17% 5.35% 0.26%
1996 1.00 0.05 (0.05) 1.00 5.59% 248,986 0.19% 5.43% 0.28%
CASH FUND
UNIVERSAL SHARES
2000 1.00 0.06 (0.06) 1.00 6.04% 70,451 0.20% 5.84% 0.23%
1999 1.00 0.05 (0.05) 1.00 5.09% 98,705 0.18% 4.99% 0.25%
1998 1.00 0.06 (0.06) 1.00 5.65% 91,671 0.18% 5.48% 0.29%
1997 1.00 0.05 (0.05) 1.00 5.43% 18,453 0.23% 5.32% 0.47%
1996 1.00 0.05 (0.05) 1.00 5.53% 3,272 0.27% 5.48% 0.43%
</TABLE>
(a) During each period, certain fees and expenses were waived and
reimbursed, respectively. The ratio of Gross Expenses to Average Net Assets
reflects the expense ratio in the absence of any waivers and reimbursements.
(b) Annualized.
(c) Commenced operations on December 30, 1999.
11
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
FOR MORE INFORMATION MONARCH FUNDS
The following documents are available
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS UNIVERSAL SHARES
Additional information about each Fund's
investments is available in the Fund's annual TREASURY
and semi-annual reports to shareholders CASH FUND
STATEMENT OF ADDITIONAL INFORMATION ("SAI") GOVERNMENT
The SAI provides more detailed information about each CASH FUND
Fund and is incorporated by reference into this Prospectus.
CASH FUND
CONTACTING THE FUNDS
You can get copies of both reports 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
(207) 879-0001
(800) 754-8757
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-mailing or by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
E-mail address: [email protected]
Free copies of the reports and SAI are available
from the SEC's Web site at www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
Investment Company Act File No. 811-6742 (800) 754-8757
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
PROSPECTUS
January 5, 2001
THREE MONEY MARKET FUNDS THAT EACH SERVICE SHARES
SEEK TO PROVIDE HIGH CURRENT INCOME
TO THE EXTENT CONSISTENT WITH THE TREASURY CASH FUND
PRESERVATION OF CAPITAL AND THE GOVERNMENT CASH FUND
MAINTENANCE OF LIQUIDITY. CASH FUND
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary...............................2 Your Account..........................6
Performance...........................4 Other Information....................10
Fee Tables............................5 Financial Highlights.................11
Management............................5 For More Information.................12
--------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE FUNDS' SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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 IN A BANK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
SUMMARY
DEFINITIONS
MONEY MARKET SECURITY means a high credit quality, short-term, U.S. dollar
denominated debt security.
TREASURY SECURITY means a security that is issued or guaranteed by the U.S.
Treasury.
GOVERNMENT SECURITY means a security that is issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
REPURCHASE AGREEMENT means a transaction in which securities are purchased and
simultaneously committed to be resold to another party at an agreed-upon date
and at a price reflecting a market rate of interest.
This Prospectus offers Service Shares of three money market funds - Treasury
Cash Fund, Government Cash Fund and Cash Fund (each a "Fund," and collectively,
the "Funds"). Service Shares have a $1,000 minimum initial investment.
INVESTMENT OBJECTIVES
The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Each Fund invests in a diversified portfolio of Money Market Securities and:
o Seeks to maintain a stable net asset value of $1.00 per share
o Invests in securities with remaining maturities of 397 days or less
o Maintains a dollar weighted average maturity of its investments of 90 days
or less
Each Fund invests substantially all of its assets in another mutual fund (each a
"Portfolio," and collectively, the "Portfolios"), which has the same investment
objective and substantially similar investment policies. Each Portfolio in which
a Fund invests and its primary investments are:
<TABLE>
<S> <C> <C>
FUND/PORTFOLIO PRIMARY INVESTMENTS
-------------- -------------------
Treasury Cash Fund/ Treasury Securities and Repurchase Agreements
Treasury Cash Portfolio backed by Treasury Securities
Government Cash Fund/ Government Securities and Repurchase Agreements
Government Cash Portfolio backed by Government Securities
Cash Fund/ A broad spectrum of Money Market Securities
Cash Portfolio including:
o Securities issued by financial
institutions, such as certificates of deposit,
bankers' acceptances and time deposits
o Securities issued by domestic companies,
such as commercial paper
o Government Securities
o Repurchase Agreements
</TABLE>
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 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 a Portfolio
o The security subsequently fails to meet the Adviser's investment criteria
o Funds are needed for another purpose
2
<PAGE>
Monarch Funds
--------------------------------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN A FUND
An investment in a Fund is not a deposit in 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.
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.
The principal risks of investing in a Fund are:
INTEREST RATE RISK Interest rates affect the value of a Portfolio's investments.
Increases in interest rates may cause a decline in value. In addition, those
increases may cause a 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.
These risks can result in a decrease in the value of a security or all the
securities owned by a Portfolio and Fund and, therefore, cause a change in the
Fund's $1.00 per share value. These risks also can result in lower investment
performance.
3
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
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 and investment
returns from year to year. Because Service Shares have operated less than a
year, the information provided below is for each Fund's Investor Shares which
are not offered in this prospectus. The returns for Service Shares are 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 chart shows the annual total returns for each full calendar year
that each Fund has operated.
YEAR ENDED 12/31
TREASURY CASH FUND (INVESTOR SHARES)
Best Quarter: 1.43% (quarter ended 9/30/00)
Worst Quarter: 0.95% (quarter ended 3/31/99)
[EDGAR Representation of Bar Chart]
1996 - 4.60%
1997 - 4.65%
1998 - 4.57%
1999 - 4.17%
2000 - 5.50%
GOVERNMENT CASH FUND (INVESTOR SHARES)
Best Quarter: 1.47% (quarter ended 9/30/00)
Worst Quarter: 0.78% (quarter ended 3/31/94)
[EDGAR Representation of Bar Chart]
1996 -
1997 -
1998 -
1999 -
2000 - 5.17%
CASH FUND (INVESTOR SHARES)
Best Quarter: 1.49% (quarter ended 9/30/00)
Worst Quarter: 1.03% (quarter ended 6/30/99)
[EDGAR Representation of Bar Chart]
1996 - 4.78%
1997 - 4.90%
1998 - 4.87%
1999 - 4.49%
2000 - 5.75%
The following table lists the average annual total return as of December 31,
2000.
<TABLE>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------------- --------------
TREASURY CASH FUND 5.50% 4.70% 4.71% 10/25/95
GOVERNMENT CASH FUND 5.67% N/A 5.68% 12/30/99
CASH FUND 5.75% 4.96% 5.00% 6/16/95
</TABLE>
4
<PAGE>
MONARCH FUNDS
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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 of a Fund. Expenses are estimated for the fiscal
year ending August 31, 2001. Expenses are stated as a percentage of average net
assets. There is no charge to purchase or redeem Fund shares.
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES TREASURY GOVERNMENT CASH
(expenses that are deducted from Fund assets)(1) 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%
</TABLE>
(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's Service Shares
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 gross and net operating expenses remain as stated in the above
table and that distributions are reinvested. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
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
</TABLE>
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 Statement of Additional Information
('SAI').
THE ADVISER
Each Portfolio's investment adviser is Forum Investment Advisors, LLC, Two
Portland Square, Portland, Maine 04101. The Adviser is a privately owned company
controlled by John Y. Keffer. The Adviser makes investment decisions for each
Portfolio. In addition to the Portfolios, the Adviser manages two other money
market funds and two taxable and three tax-free bond funds.
During each Fund's last fiscal year, the advisory fees paid to the Adviser from
each Portfolio were 0.03% of the Portfolio's average daily net assets.
Each Fund pays its pro-rata share of its corresponding Portfolio's advisory fee,
which is based on the percentage of the Portfolio's assets held by the Fund.
OTHER SERVICE PROVIDERS
The Forum Financial Group ("Forum") of companies provides various services to
each Fund. As of October 31, 2000, Forum provided administration and
distribution services to investment companies and collective investment funds
with assets of approximately $123 billion.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the representative
of the Trust in connection with the offering of each Fund's shares. The
distributor may enter into arrangements with banks, broker-dealers or other
financial institutions through which investors may purchase or redeem shares and
may, at its own expense, compensate persons who provide services in connection
with the sale or expected sale of each Fund's shares.
5
<PAGE>
Each Fund has adopted a distribution or "Rule 12b-1" plan under which the Fund
pays the distributor 0.25% 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 0.20% 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 each
Fund, its classes of shares and any other funds of the Trust. The Adviser or
other service providers may waive all or any portion of their fees and/or
reimburse certain expenses of a Fund. Any fee waiver or expense reimbursement
increases investment performance of a Fund and its applicable share classes for
the period during which the waiver or reimbursement is in effect and may not be
recouped at a later date.
YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
Contact the Trust or Imperial Securities Corp. for an account application or for
further information regarding the Funds.
WRITE TO US AT: OR: ACH OR WIRE INVESTMENTS TO:
Monarch Funds Imperial Securities Corp. Imperial Bank
P.O. Box 446 9920 South La Cienega Boulevard ABA #122201444
Portland, Maine 14th Floor For credit to:
04112 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)
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:
<TABLE>
<S> <C> <C>
ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY:
-------------------------- ----------------------------
11:00 a.m., Pacific time 1:00 p.m., Pacific time
</TABLE>
On days that the Bond Market Association recommends an early close of the
government securities market or that those markets or the Federal Reserve Bank
of San Francisco close early, the Trust may advance the time by which the
Transfer Agent must receive completed purchase and redemption orders.
If you purchase shares directly from a Fund, you will receive monthly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmations. Each
Fund reserves the right to waive minimum investment amounts and may temporarily
suspend (during unusual market conditions) or discontinue any service or
privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of 1:00 p.m.,
Pacific time on each weekday except on Federal holidays and other days that the
Federal Reserve Bank of San Francisco is closed ("Fund Business Days"). The time
at which NAV is calculated may change in case of an emergency. In order to
maintain a stable NAV of $1.00 per share, each Fund (and the Portfolio in which
it invests) 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 share-holder services such
as periodic account statements. Consult a representative of your financial
institution for more information.
6
<PAGE>
MONARCH FUNDS
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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, make a
check payable to "Monarch Funds" or to one or more owners of the account
and endorsed to 'Monarch Funds." For all other accounts, your 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).
AUTOMATED CLEARING HOUSE ("ACH") Instruct your financial institution to
transfer funds through the "Automated Clearing House" system.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us.
Your financial institution may charge you a fee for ACH or wire services.
MINIMUM INVESTMENTS The minimum initial investment in Service Shares is $1,000.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C> <C>
TYPE OF ACCOUNT REQUIREMENT
--------------- -----------
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS: o Instructions must be signed by all persons required
Individual accounts are owned by one person, as are to sign exactly as their names appear on the account.
sole proprietorship accounts. Joint accounts have
two or more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA): o Depending on state laws, you can set up a
These custodial accounts provide a way to give money custodial account under the UGMA or the UTMA.
to a 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.
</TABLE>
INVESTMENT PROCEDURES
<TABLE>
<S> <C> <C>
HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT
---------------------- --------------------------
BY CHECK BY CHECK
o Call or write us for an account application (and a o Fill out an investment slip from a confirmation
Corporate/Organization Resolution form, if applicable). or write us a letter.
o Complete the application (and resolution form). o Write your account number on your check.
o Mail us your application (and resolution form) and o Mail us the slip (or your letter) and the check.
a check.
BY WIRE BY WIRE
o Call or write us for an account application (and a o Call to notify us of your incoming wire.
Corporate/Organization Resolution form, if applicable). o Instruct your bank to wire your money to us.
o Complete the application (and resolution form).
o Call us to fax the completed application (and resolution
form) and we will assign you an account number.
o Mail us your application (and resolution form).
o Instruct your financial institution to wire your money
to us.
BY ACH PAYMENT
o Call or write us for an account application (and
Corporate/Organization Resolution form, if applicable).
o Complete the application (and resolution form).
o Call us to fax the completed application (and
resolution form) and we will assign you an account
number.
o Mail us your original application (and resolution form).
Instruct your financial institution to send an ACH
payment to us.
</TABLE>
7
<PAGE>
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LIMITATIONS ON PURCHASES A Fund reserves the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations.
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH payment at full
value subject to collection. If a Fund does not receive your payment for shares
or you pay with a check or by ACH that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund,
the Transfer Agent or distributor and the Fund may redeem shares you own in the
account (or another identically registered account that you maintain with the
Transfer Agent) as reimbursement.
SELLING SHARES
Generally, a Fund will send redemption proceeds to you immediately after
receiving your redemption request in proper form. Shares are not entitled to
receive distributions declared on or after the day on which a redemption order
is accepted by the Transfer Agent.
<TABLE>
<S> <C>
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").
</TABLE>
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.
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
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.
8
<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
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 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.
EXCHANGE PRIVILEGES
You may exchange Service Shares of a Fund for Service Shares of another Fund.
You may exchange only between identically registered accounts (name(s), address
and taxpayer ID number). New accounts opened through an exchange will be
assigned the same shareholder privileges as the initial account. You may
exchange your shares by mail or by telephone, unless you declined telephone
redemption privileges on your account application. You may be responsible for
any fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
<TABLE>
<S> <C>
HOW TO EXCHANGE
---------------
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number(s)
o The names of each Fund and share class from which you are selling and into which
you are exchanging
o The dollar amount or number of shares you want to sell (and exchange).
o Open a new account and complete an account application if you are requesting
different shareholder privileges.
o Obtain a signature guarantee, if required.
o Mail us your request and documentation.
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption privileges on
your account application).
o Provide the following information:
o Your account number(s)
o Exact name(s) in which account is registered
o Additional form of identification.
</TABLE>
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OTHER INFORMATION
ADDITIONAL INVESTMENT POLICIES
Each Fund and Portfolio operates 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 its 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 investment 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. Distributions may also be subject to certain
state and local taxes.
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 each Fund. Data for Treasury Cash Fund's and Cash Fund's
Investor Shares and Government Cash Fund's Institutional Shares is included in
the table, as Service Shares had not commenced operations as of August 31, 2000.
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 reinvest-ment of all distributions). The total return of Service
Shares would have been lower than that of Investor or Institutional Shares
because of the higher expenses of Service Shares. The information has been
audited by KPMG LLP. Each Fund's financial statements and independent auditors'
report are included in the Annual Report dated August 31, 2000, which is
available upon request, without charge.
As of August 31, 2000, the net assets of Treasury Cash Fund were $467,447,000,
of Government Cash Fund were $756,628,000 and of Cash Fund were $2,028,881,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA
------------------------------------------------- -----------------------------------------
Net Ratios to
Assets at Average Net Assets
Beginning Distributions Ending End of
Net Asset Net from Net Net Asset Period Net
Value Per Investment Investment Value per Total (000's Net Investment Gross
Year Ended August 31 Share Income Income Share Return Omitted) Expenses Income Expenses(a)
TREASURY CASH FUND
INVESTOR SHARES
2000 $1.00 $0.05 $(0.05) $1.00 5.06% $314,305 0.84% 5.01% 0.85%
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
2000 1.00 0.05 (0.05) 1.00 5.54% 400,418 0.57% 5.41% 0.58%
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%
CASH FUND
INVESTOR SHARES
2000 1.00 0.05 (0.05) 1.00 5.38% 994,191 0.83% 5.40% 0.85%
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%
</TABLE>
(a) During each period, certain fees and expenses were waived and reimbursed,
respectively. The ratio of Gross Expenses to Average Net Assets reflects
the expense ratio in the absence of any waivers and reimbursements.
(b) Annualized.
(c) Investor Shares of Treasury Cash Fund commenced operations on October 25,
1995.
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FOR MORE INFORMATION MONARCH FUNDS
The following documents are available
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS SERVICE SHARES
Additional information about each Fund's
investments is available in the Fund's annual TREASURY
and semi-annual reports to shareholders CASH FUND
STATEMENT OF ADDITIONAL INFORMATION ("SAI") GOVERNMENT
The SAI provides more detailed information about each CASH FUND
Fund and is incorporated by reference into this Prospectus.
CASH FUND
CONTACTING THE FUNDS
You can get copies of both reports 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
(207) 879-0001
(800) 754-8757
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-mailing or by writing to the following:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
E-mail address: [email protected]
Free copies of the reports and SAI are available
from the SEC's Web site at www.sec.gov.
Monarch Funds
Two Portland Square
Portland, Maine 04101
Investment Company Act File No. 811-6742 (800) 754-8757
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STATEMENT OF ADDITIONAL INFORMATION
January 5, 2001
FUND INFORMATION:
Monarch Funds TREASURY CASH FUND
Two Portland Square GOVERNMENT CASH FUND
Portland, Maine 04101 CASH FUND
(800) 754-8757
ACCOUNT INFORMATION AND
SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 754-8757
This Statement of Additional Information or "SAI" supplements the Prospectuses
dated January 1, 2001, as may be amended from time to time, offering Universal
Shares, Institutional Shares, Investor Shares and 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 the Prospectus. You may obtain the
Prospectuses 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, is incorporated into this SAI by reference. Copies of
the Annual Report may be obtained, without charge by contacting Forum
Shareholder Services, LLC at the address or telephone number listed above.
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TABLE OF CONTENTS
Glossary.......................................................................3
Core and Gateway(R) Structure..................................................4
Investment Policies and Risks..................................................4
Investment Limitations.........................................................9
Investments by Financial Institutions.........................................10
Performance Data and Advertising..............................................11
Management....................................................................13
Portfolio Transactions........................................................21
Purchase and Redemption Information...........................................22
Taxation......................................................................25
Other Matters.................................................................27
Appendix A - Description of 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,
series of the Trust.
"Fitch" means Fitch IBCA, Inc.
"Government Securities" means securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (see Prospectuses).
"Moody's" means Moody's Investors Service.
"NAV" means net asset value per share (see Prospectuses).
"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 Prospectuses).
"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 which
has the same 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 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 techniques, strategies and risks. Unless otherwise
indicated below, the discussion of the investment policies of a Portfolio also
refers to the investment policies of a Fund that invests therein.
SEC RULE 2A-7
Under Rule 2a-7 of the 1940 Act, each Portfolio normally must invest at least
95% of its total assets in securities that are rated (by NRSROs such as S&P) in
the highest short-term rating category for debt obligations, or are unrated and
determined to be of comparable quality. Each Portfolio 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 Core Trust Board has determined present
minimal credit risks and will comply with certain reporting and record keeping
procedures. Core Trust has also established procedures to ensure that portfolio
securities meet a Portfolio's high quality criteria.
Pursuant to Rule 2a-7, the Core Trust Board and the Board have established
procedures to stabilize a Portfolio's and a Fund's net asset value,
respectively, 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 Portfolio's or Fund's
$1.00 amortized cost price per share. Should that deviation exceed 1/2 of 1%,
the respective board of trustees of a Portfolio and a Fund 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.
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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. If an issue of
securities ceases to be rated or if its rating is reduced after it is purchased
by a Portfolio, the Adviser will determine whether the Portfolio should continue
to hold the security. 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. To the extent that the ratings given by a NRSRO may change as a result of
changes in such organizations or their rating systems, the Adviser will attempt
to substitute securities with comparable ratings. Credit ratings attempt to
evaluate the safety of principal and interest payments, and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings. An issuer's current financial condition may be
better or worse than a rating indicates. Unrated securities may not be as
actively traded as rated securities.
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. These changes are reflected in adjustments
to the yield of the variable and floating rate securities and different
securities may have different adjustable rates. Accordingly, as interest rates
increase or decrease, the appreciation or depreciation may be less on these
obligations than for fixed rate obligations. To the extent that a Portfolio
invests in long-term variable or floating rate securities, the Adviser believes
that the Portfolio may be able to take advantage of the higher yield that is
usually paid on long-term securities.
Each Portfolio will only purchase variable or floating rate securities, whose
interest rate is adjusted based on a single short-term rate or index such as the
Prime Rate. Under Rule 2a-7 of the 1940 Act, a Portfolio may only purchase
securities with maturities of greater than 397 days if they have demand features
that meet certain requirements or they are certain long-term Government
Securities.
Cash Portfolio may purchase variable and floating rate corporate master notes.
Master notes with variable or floating interest rates are unsecured obligations
that are redeemable upon notice. You may invest fluctuating amounts in these
instruments at varying rates of interest under a direct arrangement with the
issuer. These obligations include master demand notes. The issuer of these
obligations often has the right, after a given period, to prepay its outstanding
principal obligations upon a specified number of days' notice. These obligations
generally are not traded and there is generally no established secondary market
for these obligations. To the extent a demand note does not have a seven-day or
shorter demand feature and there is no readily available market for the
obligation, it is treated as an illiquid security.
ASSET BACKED SECURITIES
Each Portfolio may purchase adjustable rate mortgage or other asset backed
securities (such as Small Business Association securities) that are Government
Securities. 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.
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ADJUSTABLE RATE MORTGAGE BACKED SECURITIES
Adjustable rate mortgage securities ("ARMs") are pass-through securities
representing interests in pools of mortgage loans with adjustable interest rates
that are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate, and that may be subject to certain limits.
Although the rate adjustment feature may reduce sharp changes in the value of
adjustable rate securities, these securities can change in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
Changes in the interest rates on ARMs may lag behind changes in prevailing
market interest rates. This may result in a slightly lower net value until the
interest rate resets to market rates. Thus, a Portfolio could suffer some
principal loss if the Portfolio sold the securities before the interest rates on
the underlying mortgages were adjusted to reflect current market rates. Some
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.
SMALL BUSINESS ADMINISTRATION SECURITIES
Small Business Administration ("SBA") securities 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.
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 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 prepayments of the obligations comprising the
collateral pool.
FEDERAL HOME LOAN MORTGAGE CORPORATION SECURITIES
Each Portfolio is currently prohibited from purchasing any security issued by
the Federal Home Loan Mortgage Corporation. This does not prohibit the
Portfolios from entering into repurchase agreements collateralized with
securities issued by the Federal Home Loan Mortgage Corporation.
GENERAL RISKS OF FIXED INCOME SECURITIES
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.
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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.
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 tri-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 or currency 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 the Portfolio's total assets. Each Portfolio may
borrow money for other purposes so long as such borrowings do not exceed 5% of
the Portfolio's total assets. The purchase of securities is prohibited if a
Portfolio's borrowing exceeds 5% or more of its 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 Portfolio
might have to sell portfolio securities to meet interest or principle payments
at a time when investment considerations would not favor
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such sales. Reverse repurchase agreements and other similar investments that
involve a form of leverage have characteristics similar to borrowing but are not
considered borrowing if a Portfolio 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 for the security, 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 of a Portfolio); or (2) 67% of the shares of the Fund (or
interests of a Portfolio) present or represented at a shareholders (or
interestholders in the case of a Portfolio) 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 consent, 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 or Portfolio'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 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.
LIQUIDITY Acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 10% of the Portfolio's net assets
(taken at current value) would be invested in repurchase agreements not
entitling the holder to payment of principal within seven days and in securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market.
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 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 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 Portfolio 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.
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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 interests will be evaluated by bank examiners.
Before acquiring Government Cash 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.
Shares of Government Cash Fund held by national banks are generally required to
be revalued periodically and reported at the lower of cost or market value. Such
shares may also be subject to special regulatory reporting, accounting and tax
treatment. In addition, a bank may be required to obtain specific approval from
its board of directors before acquiring Fund shares, and thereafter may be
required to review its investment in the Fund for the purpose of verifying
compliance with applicable federal banking laws, regulations and policies.
National banks generally must review their investment holdings of Government
Cash Fund at least quarterly to ensure compliance with established bank policies
and legal requirements. Upon request, Government Cash Portfolio will make
available to Government Cash Fund's investors information relating to the size
and composition of its portfolio.
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) 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., CDA/Wiesenberger or other companies that
track the investment performance of investment companies ("Fund
Tracking Companies").
o The performance of other mutual funds.
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o The performance of recognized stock, bond and other indices, including
but not limited to U.S. Treasury bonds, bills or notes and changes in
the Consumer Price Index as published by the U.S. Department of
Commerce.
Performance information may be presented numerically or in a table, graph or
similar illustration.
Indices are not used in the management of a Fund but rather are standards by
which the Adviser and shareholders may compare the performance of the Fund to an
unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
A Fund may refer to: (1) general market 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 Fund's 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 or class will include an annualized historical
yield, carried at least to the nearest hundredth of one percent. Yield
quotations are based on a specific seven-calendar-day period and are calculated
by: (1) dividing the net change in the value of a Fund during the seven-day
period 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 (2) multiplying the quotient
by 365/7. The net change in account value reflects the value of additional
shares purchased with dividends declared on both the original share and any
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 or class' total return shows its overall change in value, assuming that
all of the Fund's or class' 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 or class: (1) determines the growth or decline in value of a
hypothetical historical investment in the Fund or class over a stated period;
and (2) calculates the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual total return of 7.18%. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that performance is not constant over time but changes
from year-to-year, and that average annual returns represent averaged figures as
opposed to the actual year to year performance of a Fund or class.
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Average annual total return is calculated according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 payment made at the
beginning of the applicable period
Because average annual returns tend to smooth out variations in a Fund's or
class' return, shareholders should recognize that they are not the same as
actual year-to-year results.
OTHER MEASURES OF TOTAL RETURN Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
A Fund or class 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.
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 or class may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar. (For example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively.); (5) biographical descriptions of a Portfolio's portfolio
manager and the portfolio management staff of the Adviser, summaries of the
views of the portfolio manager 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 or class 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 or class as of
one or more dates; and (9) a comparison of a Fund's or class' 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 or class 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.
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MANAGEMENT
TRUSTEES AND OFFICERS OF THE TRUST
The names of the Trustees and officers of the Trust, their position with the
Trust, address, date of birth and principal occupations during the past five
years are set forth below. Each Trustee who is an "interested person" (as
defined by the 1940 Act) of the Trust is indicated by an asterisk (*). The Board
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> <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, ME 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, CA 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
S. 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, CA 91521-0964 April 1997 to 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. from February 1997 to
111 West Ocean Boulevard August 1999
23rd Floor Chairman, Imperial Trust Company from March 1995 to August 1999
P.O. Box 1070 President, Imperial Trust Company from February 1997 to September
Long Beach, CA 90802 1998
Executive Vice President and CFO of Imperial Bank/Imperial Bancorp
from February 1995 to 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, CA 90301 1997
.................................... ................. .....................................................................
.................................... ................. .....................................................................
David I. Goldstein Vice President Director, Forum Administrative Services, LLC and
Born: August 3, 1961 Secretary, Forum Financial Group, LLC
Two Portland Square Managing Director and General Counsel, Forum Financial Group, LLC
Portland, ME 04101 1991 to 2000
.................................... ................. .....................................................................
</TABLE>
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<TABLE>
<S> <C> <C> <C>
NAME, DATE OF POSITION PRINCIPAL OCCUPATION(S) DURING
BIRTH AND ADDRESS WITH THE TRUST PAST 5 YEARS
.................................... ................. .....................................................................
.................................... ................. .....................................................................
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, ME 04101
............................................................................................................................
.................................... ................. .....................................................................
Ronald H. Hirsch Treasurer Managing Director, Operations/Finance and Operations/Sales, Forum
Born: October 14, 1943 Financial Group, LLC since 1999
Two Portland Square Member of the Board, Citibank Germany 1991-1998
Portland, ME 04101 Officer of six other investment companies for which Forum Financial
Group, LLC provides services
.................................... ................. .....................................................................
.................................... ................. .....................................................................
Beth P. Hanson Vice President Senior Manager , U.S. Business Development/Client Service, Forum
Born: July 15, 1966 and Assistant Financial Group, LLC
Two Portland Square Secretary
Portland, ME 04101
.................................... ................. .....................................................................
.................................... ................. .....................................................................
Leslie K. Klenk Secretary Counsel, Forum Financial Group, LLC since 1998
Born: August 24, 1964 Associate General Counsel, Smith Barney Inc. (brokerage firm) from
Two Portland Square 1993 to 1998
Portland, ME 04101 Officer of two other investment companies for which Forum Financial
Group, LLC provides services
...........................................................................................................................
</TABLE>
COMPENSATION OF TRUSTEES AND OFFICERS
Effective July 20, 2000, each Trustee of the Trust is paid a quarterly retainer
of $3,000 for his service to the Trust. In addition, each Trustee is paid a fee
of $1,000 for each Board meeting attended (whether in person or by electronic
communications) and $500 for each Nominating or Audit Committee meeting attended
(whether in person or by electronic communication) that is held on a day when a
Board meeting is not scheduled. Trustees are also reimbursed for travel and
related expenses incurred in attending Board meetings. 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
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, 2000.
<TABLE>
<S> <C> <C> <C>
COMPENSATION TOTAL COMPENSATION FROM
TRUSTEE FROM TRUST TRUST AND FUND COMPLEX
.......................................... ........................................ ........................................
.......................................... ........................................ ........................................
Maurice J. DeWald $13,500 $13,500
.......................................... ........................................ ........................................
.......................................... ........................................ ........................................
Rudolph I. Estrada $13,500 $13,500
.......................................... ........................................ ........................................
.......................................... ........................................ ........................................
Robert M. Franko $ 7,000 $ 7,000
.......................................... ........................................ ........................................
.......................................... ........................................ ........................................
Christine M. McCarthy $ 7,500 $ 7,500
............................................................................................................................
</TABLE>
TRUSTEES AND OFFICERS OF CORE TRUST
The names of the Trustees and officers of Core Trust, their positions with Core
Trust, address, date of birth and principal occupations during the past five
years are set forth below. Each Trustee who is an "interested person" (as
defined by the 1940 Act) of Core Trust is indicated by an asterisk (*). The Core
Trust Board supervises each Portfolio's activities, monitors its contractual
arrangements with various service providers and decides upon matters of general
policy.
<TABLE>
<S> <C> <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, ME 04101 Officer of six other investment companies for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Name, Date of Position Principal Occupation(s) during
Birth and Address with the Trust Past 5 Years
.................................... .................... .................................................................
.................................... .................... .................................................................
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 sized businesses in New
27 Temple Street England)
Belmont, MA 02718 Trustee of one other investment company for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
.................................... .................... .................................................................
J. Michael Parish Trustee Partner, Thelen Reid & Priest LLP (law firm) since 1995
Born: November 9, 1943 Trustee of one other investment company for which Forum
40 West 57th Street Financial Group, LLC provides services
New York, NY 10019
.................................... .................... .................................................................
.................................... .................... .................................................................
David I. Goldstein Vice President Director, Forum Administrative Services, LLC and
Born: August 3, 1961 Secretary, Forum Financial Group, LLC
Two Portland Square Managing Director and General Counsel, Forum Financial Group,
Portland, ME 04101 LLC 1991 to 2000
.................................... .................... .................................................................
.................................... .................... .................................................................
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, ME 04101
.................................... .................... .................................................................
.................................... .................... .................................................................
Ronald H. Hirsch Treasurer Managing Director, Operations/Finance and Operations/Sales,
Born: October 14, 1943 Forum Financial Group, LLC since 1999
Two Portland Square Member of the Board, Citibank Germany 1991-1998
Portland, ME 04101 Officer of six other investment companies for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
.................................... .................... .................................................................
Leslie K. Klenk Secretary Counsel, Forum Financial Group, LLC since 1998
Born: August 24, 1964 Associate General Counsel, Smith Barney Inc. (brokerage firm)
Two Portland Square from 1993 to 1998
Portland, ME 04101 Officer of two other investment companies for which Forum
Financial Group, LLC provides services
.................................... .................... .................................................................
</TABLE>
INVESTMENT ADVISER
SERVICES
Forum Investment Advisors, LLC serves as the Adviser to each Portfolio pursuant
to an investment advisory agreement with Core Trust. Under its agreement, the
Adviser furnishes, at its own expense, all necessary services, facilities and
personnel in connection with managing a Portfolio's investments and effecting
portfolio transactions for the Portfolio. Anthony R. Fischer, Jr., has been the
portfolio manager responsible for the day-to-day management of each Portfolio
since its inception. 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 for the past three fiscal years 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.
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OTHER
The Adviser's 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 with respect to each Portfolio without penalty by
the Core Trust Board 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
FFS serves as the distributor (also known as principal underwriter) of each
Fund's shares pursuant to a distribution agreement with the Trust. FFS is
located at Two Portland Square, Portland, Maine 04101 and is a registered
broker-dealer and member of the National Association of Securities Dealers, Inc.
FFS acts as the representative of the Trust in connection with the offering of a
Fund's shares. FFS continually distributes shares of each Fund 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 Fund shares.
FFS may enter into agreements with selected broker-dealers, banks or other
financial institutions for distribution of Fund shares. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though Fund shares are sold with sales charges or distribution
fees. These financial institutions may otherwise act as FFS's agents, 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 FFS for any such misstatements or omissions if they were made in
reliance upon information provided in writing by FFS in connection with the
preparation of the Registration Statement.
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DISTRIBUTION PLAN - INVESTOR SHARE AND SERVICE SHARE CLASSES
In accordance with Rule 12b-1 under the 1940 Act the Trust has adopted a
distribution plans (collectively, the "Plans") for Investor Shares and Service
Shares (each a "Class") of each Fund. The Plans provides for the payment to FFS
of a Rule 12b-1 fee at the annual rate of 0.25% for Investor Shares and 0.75% of
Service Shares of the average daily net assets of each Class.
The Plans provide that FFS may incur expenses for activities including, but not
limited to: (1) expenses of sales employees or agents of the distributor,
including salary, commissions, travel and related expense for services in
connection with the distribution of shares; (2) payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker-dealer or institution receiving such fees; (3)
costs of printing prospectuses and other materials to be given or sent to
prospective investors; and (4) the costs of preparing, printing and distributing
sales literature and advertising materials used by FFS or others in connection
with the offering of Investor Shares for sale to the public.
The Plans provide that all written agreements relating to the Plans must be
approved by the Board, including a majority of the Disinterested Trustees. In
addition, the Plans require 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 Plans and identifying the activities for which
those expenditures were made.
The Plans provide that they will remain in effect for one year from the date of
adoption and thereafter shall continue in effect provided they are approved at
least annually by the shareholders or by the Board, including a majority of the
Qualified Trustees. The Plans further provide that they may not be amended to
materially increase the costs which the Trust bears for distribution pursuant to
the Plans without shareholder approval and that other material amendments of the
Plans must be approved by the Qualified Trustees. The Board may terminate the
Plans at any time by a majority of the Qualified Trustees, or by the
shareholders of a Fund's Investor or Service Class.
Table 2 in Appendix C shows the dollar amount of fees payable under the Plans
with respect to each Fund. This information is for the past three fiscal years.
OTHER FUND SERVICE PROVIDERS
ADMINISTRATOR - THE TRUST
FAdS serves as administrator pursuant to an administration agreement with the
Trust. 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 class of each Fund at an annual
rate of 0.05% of the average daily net assets of each Fund, except for Service
Shares which pays a fee of 0.10%.
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 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. 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' contractual standard of care.
ADMINISTRATOR - CORE TRUST
FAdS also manages all aspects of Core Trust's operations of the Portfolios. FAdS
has entered into an administration agreement ("Core Administration Agreement")
that will continue in effect only if such continuance is specifically approved
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at least annually by the Core Trust Board or by a majority vote of
interstholders 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 services for each Portfolio similar
to those provided to each Fund.
The Core Administration Agreement provides that FAdS shall not be liable to Core
Trust (or any of Core Trust's interestholders) for any action or inaction in the
administration of Core Trust, except for willful misfeasance, bad faith, or
gross negligence in the performance of duties or by reason of FAdS' reckless
disregard of its duties and obligations under the agreement. The Core
Administration Agreement is terminable with respect to a Portfolio at any time,
without penalty, by the Core Trust Board or FAdS on 60 days' written notice.
Table 3 in Appendix C shows the dollar amount of the fees payable by each Fund
to FAdS, the amount of the fee waived by FAdS, and the actual fees paid by each
Fund. The table provides similar information for each Portfolio. This
information is for the past three fiscal years.
FUND ACCOUNTANT - THE TRUST
FAcS serves as fund accountant pursuant to an accounting agreement with the
Trust. 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 Funds. 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.
FAcS is not liable to the Trust or any of the Trust's shareholders for any
action or inaction in the absence of bad faith, willful misconduct or gross
negligence in the performance of its duties. 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.
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 to 1/2 of 1% or less than or equal to $10. 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 each Portfolio pursuant to a portfolio and
unitholder accounting agreement ("Core Accounting Agreement"). The Core
Accounting Agreement must be approved annually by the Core Trust Board. The Core
Accounting Agreement may be terminated with respect to a Portfolio without
penalty by the Board or by FAcS on 60 days' written notice. 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.
Under its agreement, FAcS prepares and maintains books and records of each
Portfolio on behalf of the Trust that are required to be maintained under the
1940 Act, calculates the net asset value per share of each Portfolio (and each
investor therein) and prepares periodic reports to interestholders of the
Portfolios and the SEC. For services rendered to Treasury Cash Portfolio,
Government Cash Portfolio, and Cash Portfolio, FAcS receives a fee at an annual
rate of the lesser of 0.05% of the average daily net assets of each Portfolio or
$48,000. For services rendered to Government Portfolio and Municipal Cash
Portfolio, FAcS receives a fee of $48,000 per portfolio. Should a Portfolio have
greater than five interestholders, FAcS will receive an annual fee of $6,000 per
every five additional interestholders. In addition, FAcS is paid an additional
$1,000 per month with respect to tax-free money market portfolios such as
Municipal Cash Portfolio, Portfolios with more than 25% of their total assets
invested in asset backed securities, Portfolios that have more than 100 security
positions and Portfolios that have a monthly portfolio turnover rate of 10% or
greater.
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Table 4 in Appendix C shows for the past three fiscal years the dollar amount
payable by the Portfolios to FAcS, the amount of the fee waived by FAcS, and the
actual fees received by FAcS.
TRANSFER AGENT
FSS serves as transfer agent and distribution paying agent pursuant to a
transfer agency agreement with the Trust. 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, each Fund pays FSS an annual fee of $12,000 plus $6,000 for
each additional class. FSS also receives a fee based on the average daily net
assets of each class as follows: 0.05% for Universal Shares and 0.20% for each
of Institutional Shares, Investor Shares and Service Shares. 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 a 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 bad faith, willful misconduct, or gross negligence
in the performance of its duties. FSS and certain related parties (such as FSS'
officers and persons who control FSS) are indemnified by the Trust against any
and all claims and expenses related to FSS' actions or omissions that are
consistent with FSS' contractual standard of care.
Table 5 in Appendix C shows for the past three fiscal years 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.
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 the Shareholder Service Agreement, 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 Institutional Shares, Investor
Shares and Service Shares. FAdS may pay any or all amounts of these payments to
various institutions that provide shareholder servicing to their customers
holding Institutional, Investor and Service Shares.
The Shareholder Service Agreement shall 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 Agreement must be approved by a majority of
the Disinterested Trustees. The agreement 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
Prospectuses, 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.
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Table 6 in Appendix C shows the dollar amount of fees payable by each class of
each Fund to FAdS, the amount of the fees waived by FAdS and the actual fees
paid by each class.
CUSTODIAN
As custodian, pursuant to an agreement with Core Trust, Forum Trust, LLC
("Custodian") safeguards and controls each Portfolio's cash and securities,
determines income and collects interest on Portfolio investments. The Custodian
may employ subcustodians to provide custody of a Portfolio's domestic and
foreign assets. The Custodian is located at Two Portland Square, Portland, ME
04101.
For its services, the Custodian receives an annualized percentage of the average
daily net assets of the Portfolios. Each Portfolio also pays an annual domestic
custody fee as well as certain other transaction fees. The 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 Portfolios. The
Subcustodian is located at 445 South Figueroa Street, 5th Floor, Los Angeles, CA
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
each Fund and Portfolio. The auditor also reviews the tax returns and certain
regulatory filings of each Fund and Portfolio.
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 are usually no
brokerage commissions paid for any purchases. Core Trust does not anticipate
that the Portfolios will pay brokerage commissions, however, 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. Any transaction
for which a Portfolio pays transaction-related compensation will be effected at
the best price and execution available, taking into account the amount of any
payments made on behalf of the Portfolio by the broker-dealer effecting the
transaction.
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 interestholders 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. 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 the Adviser or any of its affiliates.
No Portfolio paid brokerage commissions during fiscal years ended August 31,
1998, 1999 and 2000.
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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
Table 7 of Appendix C details a Portfolio's investments in securities of dealers
(or their parent companies) with whom it conducted portfolio transactions as of
August 31, 2000.
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 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 Funds or classes may be available for sale in the state in which you
reside. Please check with your investment professional to determine a Fund's or
class' availability.
ADDITIONAL PURCHASE INFORMATION
The distributor sells shares of each Fund on a continuous basis.
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).
IRAS
All contributions into an IRA through systematic investments are treated as IRA
contributions made during the year the investment is received.
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Each Fund may be a suitable investment vehicle for part or all of the assets
held in Traditional or Roth Individual Retirement Accounts (collectively,
"IRAs"). Call the Funds at 1-800-754-8757 to obtain an IRA account application.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. If certain requirements are met, investment
earnings held in a Roth IRA will not be taxed even when withdrawn. You may
contribute up to $2,000 annually to an IRA. Only contributions to Traditional
IRAs are tax-deductible (subject to certain requirements). However, that
deduction may be reduced if you or your spouse is an active participant in an
employer-sponsored retirement plan and you have adjusted gross income above
certain levels. Your ability to contribute to a Roth IRA also may be restricted
if you or, if you are married, you and your spouse have adjusted gross income
above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
This information on IRAs is based on regulations in effect on the date of this
SAI and summarizes only some of the important federal tax considerations
affecting IRA contributions. These comments are not meant to be a substitute for
tax planning. Consult your tax advisors about your specific tax situation.
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
Uniform Gift to Minors Act ("UFMA") or Uniform Transfer to Minors Act ("UTMA").
If the custodian's name is not in the account registration of a UGMA or 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 a Fund.
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 Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
Investors purchasing shares of a Fund 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.
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.
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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.
Normally, redemption proceeds are paid immediately following receipt of a
redemption order in proper form. A delay may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. 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 Core Trust 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, payment in portfolio securities may be denied.
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 will be temporarily limited.
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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 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 Prospectuses are
not intended as substitutes for careful tax planning.
The tax year-end of each Fund is August 31 (the same as the Funds' fiscal year
end).
This section is based on the Code and applicable regulations in effect on the
date of this SAI. 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 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 taxable income (that is, taxable
interest, short-term capital gains and other taxable ordinary income, net of
expenses) and net capital gain (that is, the excess of its net long-term capital
gain over its net 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 (and 90% of its tax-exempt interest income, net of
expenses) 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.
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FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its net investment
income for each tax year.
Each Fund anticipates distributing substantially all of its net capital gain, if
any, 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.
All distributions by a Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another Fund). If you receive a
distribution in the form of additional shares, it will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
Ordinarily, you are required to take distributions by a Fund into account in the
year in which they are made. A distribution declared in October, November or
December of any year and payable to you on a specified date in those months,
however, is deemed to be received by you (and made by the Fund) on December 31
of that calendar year even if the distribution is actually paid in January of
the following year.
You will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year.
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 taxpayer
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
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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 will be exempt from U.S. Federal income tax on
gain realized on the sale of shares of a Fund, capital gain distributions from a
Fund, and amounts retained by a Fund that are designated as undistributed
capital gain.
In the case of a non-corporate foreign shareholder, a Fund may be required to
withhold U.S. Federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein.
The tax rules of other countries, with respect to distributions from a Fund, can
differ from the 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 foreign tax consequences of 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
state and local tax consequences of an investment in a Fund.
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 and is registered as an open-end, management
investment company under the 1940 Act. 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.
As of the date hereof, the Trust's series consisted of Treasury Cash Fund,
Government Cash Fund and Cash Fund. Each Fund offers shares of beneficial
interest in an Institutional, Universal, Investor and Service 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 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 Fund 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
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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. Shareholders representing 10% or more of the
Trust's (or a series) shares may, as set forth in the Trust Instrument, call a
meeting of shareholders 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. 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.
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.
FUND OWNERSHIP
As of December 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
December 27, 2000, the following persons beneficially or of record owned 25% or
more of the shares of a Fund or Class and may be deemed to control the Fund or
the class.
CONTROLLING PERSON INFORMATION
<TABLE>
<S> <C> <C> <C> <C>
TREASURY CASH FUND NAME AND ADDRESS SHARES % OF CLASS % OF FUND
------------------ ---------------- ------ ---------- ---------
Universal Shares Imperial Bank (recordholder) 478.19 100.00 0.00
P.O. Box 92911
Los Angeles, CA 90009
Institutional Shares Union Bank of California 11,966,903.360 38.95 4.27
Omnibus Sweep Account
P.O. Box 85602
San Diego, CA 92186
Investor Shares Imperial Bank (recordholder) 226,617,052.160 90.84 80.88
9920 S. La Cienega Blvd.
Inglewood, CA 90301
GOVERNMENT CASH FUND
--------------------
Investor Shares Imperial Bank (recordholder) 68,285,435.480 96.54 7.63
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Service Shares Imperial Bank (recordholder) 3,755,605.120 100.00 0.42
9920 S. La Cienega Blvd.
Inglewood, CA 90301
CASH FUND
---------
Universal Shares Coastcast Corporation 50,992,185.230 75.78 2.64
3025 East Victoria Street
Rancho Dominguez, CA 90221
Investor Shares Imperial Bank (recordholder) 973,095,970.460 98.70 50.46
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Service Shares Imperial Bank (recordholder) 16,985,082.510 100.00 0.88
9920 S. La Cienega Blvd.
Inglewood, CA 90301
</TABLE>
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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 bad faith, willful misfeasible, 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. You may also review the registration statement at the SEC's
internet website at www.sec.gov.
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, 2000, which are included in the Funds' Annual Report to
Shareholders, are incorporated herein by reference. These financial statements
include 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.
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APPENDIX A - DESCRIPTION OF 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.
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.
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. It highlights risks to principal or volatility of expected
returns that are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
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-1
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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.
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
changes in business, economic, or financial conditions.
A-2
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Appendix B - Performance Data
For the period ended August 31, 2000, the annualized yields of each Class of the
Funds that were then operating were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
7 DAY 7 DAY EFFECTIVE 30 DAY 30 DAY EFFECTIVE
YIELD YIELD YIELD YIELD
----- --------------- ------- ---------------
TREASURY CASH FUND
Universal 6.43% 6.63% 6.37% 6.56%
Institutional Shares 6.06% 6.25% 6.04% 6.21%
Investor Shares 5.69% 5.85% 5.66% 5.81%
GOVERNMENT CASH FUND
Universal Shares 6.44% 6.65% 6.43% 6.63%
Institutional Shares 6.07% 6.26% 6.07% 6.24%
Investor 5.80% 5.97% 5.80% 5.95%
CASH FUND
Universal Shares 6.52% 6.73% 6.50% 6.70%
Institutional Shares 6.16% 6.35% 6.13% 6.31%
Investor Shares 5.91% 6.08% 5.88% 6.05%
</TABLE>
For the period ended August 31, 2000, the total return of each Class of the
Funds that were then operating were as follows:
<TABLE>
<S> <C> <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
TREASURY CASH FUND
Universal Shares 0.54% 1.60% 3.99% N/A N/A N/A 4.02% N/A
Institutional Shares 0.51% 1.53% 3.80% 5.47% 5.03% 5.04% 39.36% 4.76%
Investor Shares 0.48% 1.43% 3.54% 5.06% 4.63% N/A 24.59% 4.63%
GOVERNMENT CASH FUND
Universal Shares 0.55% 1.62% 4.09% 5.94% 5.52% 5.53% 47.36% 5.07%
Institutional Shares 0.52% 1.53% 3.83% 5.54% 5.12% 5.12% 40.44% 4.88%
Investor Shares 0.49% 1.46% 3.65% N/A N/A N/A 3.68% N/A
CASH FUND
Universal Shares 0.55% 1.64% 4.13% 6.04% 5.59% 5.55% 47.26% 5.12%
Institutional Shares 0.52% 1.55% 3.88% 5.65% 5.19% 5.17% 40.88% 4.92%
Investor Shares 0.50% 1.48% 3.70% 5.38% 4.92% 4.90% 28.48% 4.93%
</TABLE>
* Annualized return.
Inception dates are listed in the Funds' annual report.
B-1
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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> <C>
TREASURY CASH GOVERNMENT CASH CASH
PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------------- ---------
Year ended August 31, 2000 $140,443 $288,058 $565,516
Year ended August 31, 1999 $105,930 $303,532 $266,660
Year ended August 31, 1998 $44,687 $167,904 $122,199
</TABLE>
TABLE 2 - DISTRIBUTION FEES*
The fees payable by the Funds under the Distribution Agreement were:
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
Treasury Cash Fund $651,655 $0 $651,655
Government Cash Fund $27,030 $0 $27,030
Cash Fund $1,537,581 $0 $1,537,581
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
</TABLE>
* Fee information for Service Shares is not provided because the class had not
commenced operations prior to the Funds' August 31, 2000 fiscal year end.
TABLE 3 - ADMINISTRATION FEES
The fees payable by the Funds under the Administration Agreement were:
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
Treasury Cash Fund $154,605 $2,907 $151,698
Government Cash Fund $400,243 $0 $400,243
Cash Fund $810,821 $0 $810,871
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
</TABLE>
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The fees payable by the Portfolios under the Core Administrative Agreement were:
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
Treasury Cash Portfolio $212,726 $0 $212,726
Government Cash Portfolio $436,043 $0 $436,043
Cash Portfolio $857,926 $0 $857,926
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 $74,964 $29,678 $45,286
Government Cash Portfolio $317,754 $0 $317,754
Cash Portfolio $212,800 $0 $212,800
</TABLE>
TABLE 4 - FUND ACCOUNTING FEES - CORE TRUST
The fees payable by the Portfolios under the Core Accounting Agreement were:
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
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, 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
</TABLE>
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TABLE 5 - TRANSFER AGENT FEES*
The fees payable by the Funds under the Transfer Agency Agreement were:
<TABLE>
<S> <C> <C> <C> <C>
Contractual Fee Fee
Fee Waived Paid
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
TREASURY CASH FUND
Universal Shares $8,514 $7,148 $1,366
Institutional Shares $94,681 $0 $94,681
Investor Shares $537,569 $0 $537,569
GOVERNMENT CASH FUND
Universal Shares $148,735 $85,484 $63,251
Institutional Shares $1,111,098 $0 $1,111,098
Investor Shares $27,109 $0 $27,109
CASH FUND
Universal Shares $47,620 $25,231 $22,389
Institutional Shares $1,882,030 $0 $1,882,030
Investor Shares $1,244,656 $0 $3,174,305
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
</TABLE>
* Fee information for Service Shares is not provided because the class had not
commenced operations prior to the Funds' August 31, 2000 fiscal year end.
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<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
TABLE 6 - SHAREHOLDER SERVICE FEES
The fees payable by the Funds under the Shareholder Services Agreement were:
INSTITUTIONAL SHARES
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
Treasury Cash Fund $85,467 $69,880 $15,587
Government Cash Fund $1,092,034 $29,151 $1,062,839
Cash Fund $1,860,497 $41,949 $1,818,548
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
</TABLE>
INVESTOR SHARES
<TABLE>
<S> <C> <C> <C> <C>
CONTRACTUAL FEE FEE
FEE WAIVED PAID
----------- ------ ----
YEAR ENDED AUGUST 31, 2000
Treasury Cash Fund $521,324 $24,074 $497,250
Government Cash Fund $21,624 $13,504 $8,120
Cash Fund $1,230,065 $99,907 $1,130,158
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
</TABLE>
SERVICE SHARES
Fee information for Service Share class is not provided because the class had
not commenced operations prior to the Funds' August 31, 2000 fiscal year end.
TABLE 7 - SECURITIES OF REGULAR BROKER-DEALERS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CASH PORTFOLIO VALUE
-------------- -----
Bank of America $95,000,000
Bear Stearns $75,000,000
</TABLE>
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<PAGE>
Table 8 - 5% Shareholders
As of December 27, 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.
<TABLE>
<S> <C> <C> <C> <C> <C>
Name and Address Shares % Of Class % of Fund
---------------- ------ ---------- ---------
TREASURY CASH FUND
Universal Shares Imperial Bank 478 100.00 0.00
P.O. Box 92911
Los Angeles, CA 90009
Institutional Shares Union Bank of California 11,966,903 38.95 4.27
(recordholder)
P.O. Box 85602
San Diego, CA 92186
Physicians Interindemnity Trust 5,353,776 17.43 1.91
2029 Century Park East
Third Floor
Los Angeles, CA 90067
Verticom, Inc. 5,007,832 16.30 1.79
2230 Circadian Way
Santa Rosa, CA 95407
Net Compliance Inc. 3,007,253 9.79 1.07
911 Western Ave #207
Seattle, WA 98104
Sullivan Kelly & Associates Inc. 1,623,573 5.28 0.58
301 North Lake Avenue 9th Floor
Pasadena, CA 91101
Investor Shares Imperial Bank (recordholder) 226,617,052 90.84 80.88
9920 S. La Cienega Blvd.
Inglewood, CA 90301
GOVERNMENT CASH FUND
Universal Shares County of Alameda 28,000,000 16.33 3.13
1221 Oak Street
Room 137
Oakland, CA 94612
Gemisys Corp 22,322,926 13.02 2.49
7103 S Revere Parkway
Englewood, CO 80112
Hill Physicians Medical Group, Inc. 21,378,258 12.47 2.39
P.O. Box 5080
San Ramon, CA 94583-0980
J & J Properties 18,180,879 10.61 2.39
401 South Prairie Avenue
Inglewood, CA 90301
PFF Bank & Trust 16,000,000 9.33 1.79
399 N Garey Avenue
Pomona, CA 91767
Imperial Bancorp 14,657,000 8.55 1.64
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Los Angeles Lakers 10,686,334 6.23 1.19
555 N Nash Street
El Segundo, CA 90245
</TABLE>
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<PAGE>
MONARCH FUNDS
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NAME AND ADDRESS SHARES % OF CLASS % OF FUND
---------------- ------ ---------- ---------
GOVERNMENT CASH FUND
Institutional Shares Legato Systems, Inc. 77,808,823 11.98 8.69
2350 W El Camino Real
Mountain View, CA 94040
Mother Lode Holding Co 75,000,000 11.55 8.38
189 Fulweller Avenue
Auburn, CA 95603
Landamerica Financial Group, Inc. 70,000,000 10.78 7.82
101 Gateway Centre
Gateway One
Richmond, VA 23235
Axsun Technologies Securities Corp 69,000,000 10.63 7.70
One Fortune Drive
Billerica, MA 01821
Nations Holding Group 60,000,000 9.24 6.70
514 Shatto Place
Los Angeles, CA 90020
Union Bank of California 47,527,126 7.32 5.31
(recordholder)
P.O. Box 85602
San Diego, CA 92186-5602
RPM Investments 35,000,000 5.39 3.91
1545 Wilshire Blvd - Suite 600
Los Angeles, CA 90017
Investor Shares Imperial Bank (recordholder) 68,285,435 96.54 7.63
9920 S. La Cienega Blvd.
Inglewood, CA 90301
Service Shares Imperial Bank (recordholder) 3,755,605 100.00 0.42
9920 S. La Cienega Blvd.
Inglewood, CA 90301
CASH FUND
Universal Shares Coastcast Corporation 50,992,185 75.78 2.64
3025 East Victoria Street
Rancho Dominguez, CA 90221
Imperial Securities Corp. 11,879,775 17.66 0.62
9920 S La Cienega Blvd
Inglewood, CA 90301
Institutional Shares Union Bank of California 164,495,298 19.17 8.53
(recordholder)
P.O. Box 58602
San Diego, CA 92186-5602
Investor Shares Imperial Securities Corp. 973,095,970 98.70 50.46
9920 S La Cienega Blvd
Inglewood, CA 90301
Service Shares Imperial Bank (recordholder) 16,985,082 100.00 0.88
9920 S. La Cienega Blvd.
Inglewood, CA 90301
</TABLE>
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<PAGE>
