-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R31gEBnpvKSsZp5Z7HPk31egp1nqMjVgqVtbtmL2X6my+nDk04913wvNxuXS9WEG WnnU04TRjoRyiAMdMXpKLw== 0001004402-01-500066.txt : 20010509 0001004402-01-500066.hdr.sgml : 20010509 ACCESSION NUMBER: 0001004402-01-500066 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20010508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH FUNDS CENTRAL INDEX KEY: 0000889509 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 033-49570 FILM NUMBER: 1625317 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQ CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 2123633300 MAIL ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 485APOS 1 mo01-069.txt PEA 26 As filed with the Securities and Exchange Commission on May 8, 2001 File Nos. 33-49570 and 811-6742 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 26 AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 27 MONARCH FUNDS Two Portland Square Portland, Maine 04101 (207) 879-1900 Leslie K. Klenk, Esq. Forum Administrative Services, LLC Two Portland Square Portland, Maine 04101 Copies to: R. Darrell Mounts, Esq. Kirkpatrick & Lockhart LLP 100 Pine Street Suite 3200 San Francisco, CA 94111 - -------------------------------------------------------------------------------- It is proposed that this filing become effective: immediately upon filing pursuant to Rule 485, paragraph (b) on ________________ pursuant to Rule 485, paragraph (b) 60 days after filing pursuant to Rule 485, paragraph (a)(1) on ________________ pursuant to Rule 485, paragraph (a)(1) X 75 days after filing pursuant to Rule 485, paragraph (a)(2) on ________________ pursuant to Rule 485, paragraph (a)(2) this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: Preferred Shares of Cash Fund, Treasury Cash Fund and Government Cash Fund. Each Fund is structured as a master-feeder fund. This amendment is also executed by Core Trust (Delaware). MONARCH FUNDS PROSPECTUS THREE MONEY MARKET FUNDS PREFERRED SHARES THAT EACH SEEK TO PROVIDE HIGH CURRENT INCOME TO THE TREASURY CASH FUND EXTENT CONSISTENT WITH THE GOVERNMENT CASH FUND PRESERVATION OF CAPITAL AND CASH FUND THE MAINTENANCE OF LIQUIDITY. - -------------------------------------------------------------------------------- TABLE OF CONTENTS Summary............................2 Your Account.........................6 Performance........................4 Other Information...................10 Fee Tables.........................5 Financial Highlights................11 Management.........................5 For More Information................12 - -------------------------------------------------------------------------------- THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUNDS' SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 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 Preferred Shares of three money market funds -- Treasury Cash Fund, Government Cash Fund and Cash Fund (each a "Fund," and collectively, the "Funds"). Preferred Shares are designed for institutional investors and have a $10,000,000 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: 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 Agreements backed by Government Securities ________________________________________________________________________________ Cash Fund/ A broad spectrum of Money Market Securities Cash Portfolio including: o Securities issued by financial institutions, such as certificates of deposit, bankers' acceptances and time deposits o Securities issued by domestic companies, such as commercial paper o Government Securities o Repurchase Agreements The investment adviser for each Portfolio (the "Adviser") continuously monitors economic factors such as interest rate outlooks and technical factors such as prevailing interest rates and Federal Reserve policy to determine an appropriate maturity profile for the Portfolio's investments. The Adviser searches for securities that satisfy the maturity profile of a Portfolio and 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 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. 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. 3 MONARCH FUNDS - -------------------------------------------------------------------------------- PERFORMANCE The following charts and table provide some indication of the risks of investing in a Fund's Preferred Shares by showing changes in performance and investment returns from year to year. Because Preferred Shares have operated less than a year, the information provided below is for each Fund's Universal Shares, which are not offered in this prospectus. The returns for Preferred Shares are expected to be higher than those of the other class shown because of the lower expenses of Preferred 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 Universal Shares have operated. YEAR ENDED 12/31 1993 1994 1995 1996 1997 1998 1999 2000 TREASURY CASH FUND 6.23% Best Quarter: 1.62% (quarter ended 12/31/00) Worst Quarter: 1.37% (quarter ended 3/31/00) GOVERNMENT CASH FUND 3.24% 4.29% 6.01% 5.44% 5.56% 5.49% 5.06% 6.35% Best Quarter: 1.63% (quarter ended 9/30/00) Worst Quarter: 0.78% (quarter ended 3/31/94) CASH FUND 3.32% 4.32% 5.96% 5.36% 5.56% 5.55% 5.17% 6.41% Best Quarter: 1.65% (quarter ended 9/30/00) Worst Quarter: 0.79% (quarter ended 3/31/94)
The following table lists the average annual total return of Universal Shares as of December 31, 2000. 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 4 MONARCH FUNDS - -------------------------------------------------------------------------------- FEE TABLES The following table describes the various fees and expenses that you will pay if you invest in Preferred Shares of a Fund. Expenses are estimated for the fiscal year ending August 31, 2002. Expenses are stated as a percentage of average net assets. There is no charge to purchase or redeem Fund shares. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)(1) TREASURY GOVERNMENT CASH CASH FUND CASH FUND FUND Management Fees(2) 0.13% 0.13% 0.13% Distribution (Rule 12b-1) Fees None None None Other Expenses 0.07% 0.07% 0.07% Total Annual Fund Operating Expenses 0.20% 0.20% 0.20% (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 Preferred 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 Preferred 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: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS TREASURY CASH FUND $20 $64 $113 $255 GOVERNMENT CASH FUND $20 $64 $113 $255 CASH FUND $20 $64 $113 $255 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 MONARCH FUNDS - -------------------------------------------------------------------------------- OTHER SERVICE PROVIDERS The Forum Financial Group ("Forum") of companies provides various services to each Fund. As of March 31, 2001, Forum provided services to investment companies and collective investment funds with assets of approximately $98 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 Preferred 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) - Preferred 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: ORDER MUST BE RECEIVED BY: PAYMENT MUST BE RECEIVED BY: 11:00 a.m., Pacific time 1:00 p.m., Pacific time On days that the Bond Market Association recommends an early close of the government securities market or that those markets or the Federal Reserve Bank of San Francisco close early, the Trust may advance the time by which the Transfer Agent must receive completed purchase and redemption orders. If you purchase shares directly from a Fund, you will receive monthly statements and a confirmation of each transaction. You should verify the accuracy of all transactions in your account as soon as you receive your confirmations. Each Fund reserves the right to waive minimum investment amounts and may temporarily suspend (during unusual market conditions) or discontinue any service or privilege. 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 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 Preferred Shares is $10,000,000. ACCOUNT REQUIREMENTS TYPE OF ACCOUNT REQUIREMENT INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons required to Individual accounts are owned by one person, as are sole sign exactly as 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. INVESTMENT PROCEDURES HOW TO OPEN AN ACCOUNT HOW TO ADD TO YOUR ACCOUNT BY CHECK BY CHECK o Call or write us for an account application (and a o Fill out an investment slip from a confirmation Corporate/Organization Resolution form, if applicable). statement 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 the check. 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 original application (and resolution form) o Instruct your bank to wire your money to us. BY ACH PAYMENT o Call or write us for an account application (and a 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 We can electronically debit the purchase amount from your account at a designated institution
7 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 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] - Preferred 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"). 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 unauthorized telephone order as long as the Transfer Agent takes reasonable measures to verify that the order is genuine. 8 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. We will need written instructions signed by all registered shareholders, with a signature guarantee for each shareholder, for any of the following: o Written requests to redeem $100,000 or more 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 and distribution proceeds to any person, address, brokerage firm or bank account not on record o Sending redemption and distribution proceeds to an account with a different registration (name or ownership) from yours o Adding or changing: ACH or wire instructions; telephone redemption or exchange options; 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 Preferred Shares of a Fund for Preferred Shares of another Fund. You may exchange only between identically registered accounts (name(s), address and taxpayer ID number). New accounts opened through an exchange will be assigned the same shareholder privileges as the initial account. You may exchange your shares by mail or by telephone, unless you declined telephone redemption privileges on your account application. You may be responsible for any fraudulent telephone order as long as the Transfer Agent takes reasonable measures to verify the order. HOW TO EXCHANGE BY MAIL o Prepare a written request including: o Your name(s) and signature(s) o Your account 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. 9 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 Preferred Shares, each Fund offers Institutional Shares, Investor Shares, Service Shares and Universal Shares. You may obtain prospectuses describing these classes of shares from the Funds' distributor by contacting the Transfer Agent. Institutional Shares and Universal 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 MONARCH FUNDS - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS The following table is intended to help you understand the performance of Preferred Shares of each Fund. Data for Treasury Cash Fund's Institutional Shares and Government Cash Fund's and Cash Fund's Universal Shares are included in the table, as Preferred 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 Treasury Cash Fund's Institutional Shares or Government Cash Fund's or Cash Fund's Universal Shares (assuming the reinvestment of all distributions). The total return of Preferred Shares would have been higher than that of Universal Shares because of the lower expenses of Preferred 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. SELECTED DATA FOR A SINGLE SHARE RATIOS/SUPPLEMENTAL DATA --------------------------------------------- --------------------------------------------- Net Ratios to Assets at Average Net Assets Beginning DistributioEnding End of Net Asset Net From Net Net Asset Period Value Per Investment Investment Value per Total (000's Share Income Income Share Return Omitted) ---------------------------------- Net Net Investment Gross Year Ended August 31 Expenses Income Expenses(a) TREASURY CASH FUND 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%
(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. 11 MONARCH FUNDS - -------------------------------------------------------------------------------- FOR MORE INFORMATION MONARCH FUNDS ANNUAL/SEMI-ANNUAL REPORTS PREFERRED SHARES Additional information about the Funds' investments will be available in the Fund's annual TREASURY and semi-annual reports to shareholders. In the CASH FUND Funds' annual report, you will find a discussion of the conditions and investment strategies that GOVERNMENT significantly affected the Funds' performance CASH FUND during its last fiscal year. CASH FUND STATEMENT OF ADDITIONAL INFORMATION ("SAI") The SAI provides more detailed information about each Fund and is incorporated by reference into this Prospectus. CONTACTING THE FUNDS You can get copies of the Funds'annual/semi-annual reports and the SAI, request other information and discuss your questions about the Fund by contacting the Fund at: Forum Shareholder Services, LLC P.O. Box 446 Portland, Maine 04112 (207) 879-0001 (800) 754-8757 SECURITIES AND EXCHANGE COMMISSION INFORMATION You can also review a Fund's annual/semi annual 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: publicinfo@sec.gov 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 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION FUND INFORMATION: TREASURY CASH FUND GOVERNMENT CASH FUND Monarch Funds CASH FUND Two Portland Square Portland, Maine 04101 (800) 754-8757 ACCOUNT INFORMATION AND SHAREHOLDER SERVICES: Forum Shareholder Services, LLC P.O. Box 446 Portland, Maine 04112 (800) 754-8757 This Statement of Additional Information or "SAI" supplements the Prospectuses dated January 5, 2001, as may be amended from time to time, offering Institutional Shares, Investor Shares, Service Shares and Universal Shares, and dated _____________ offering Preferred 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 Prospectuses. 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. MONARCH FUNDS - -------------------------------------------------------------------------------- TABLE OF CONTENTS Glossary.......................................................................2 Core and Gateway(R)Structure...................................................3 Investment Policies and Risks..................................................3 Investment Limitations.........................................................8 Investments by Financial Institutions..........................................9 Performance Data and Advertising..............................................10 Management....................................................................13 Portfolio Transactions........................................................20 Purchase and Redemption Information...........................................21 Taxation......................................................................24 Other Matters.................................................................26 Appendix A - Description of Securities Ratings...............................A-1 Appendix B - Performance Data................................................B-1 Appendix C - Miscellaneous Tables............................................C-1 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 2 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 3 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 4 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 5 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 6 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 7 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 interests therein. COMMODITIES Purchase or sell physical commodities or contracts relating to physical commodities, provided that currencies and currency-related contracts will not be deemed to be physical commodities. BORROWING Borrow money, except for temporary or emergency purposes (including the meeting of redemption requests) and except for entering into reverse repurchase agreements, provided that borrowings do not exceed 33 1/3% of the value of the Portfolio's total assets. SENIOR SECURITIES Issue senior securities except as appropriate to evidence indebtedness that the Portfolio is permitted to incur, and provided that the Portfolio may issue shares of additional classes that the Core Trust Board may establish. 8 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. The 9 MONARCH FUNDS - -------------------------------------------------------------------------------- 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) a residual interest in a CMO or REMIC; or (3) a mortgage servicing right, a commercial mortgage related security or a small business related security. 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. Effective March 16, 2001, Government Cash Portfolio will no longer limit its investments to those legally permissible for Federally chartered credit unions. 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: 10 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 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. 11 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 12 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 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 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 .................................... ................. ..................................................................... 13 MONARCH FUNDS - -------------------------------------------------------------------------------- .................................... ................. ..................................................................... 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 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. 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 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. 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 14 MONARCH FUNDS - -------------------------------------------------------------------------------- .................................... .................... ................................................................. 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 .................................... .................... .................................................................
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. 15 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 16 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 at least annually by the Core Trust Board or by a majority vote of interstholders and, in either case, by a majority of the 17 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 18 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 19 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 20 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 21 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 22 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 23 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 24 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 to a foreign shareholder will be subject to U.S. withholding tax at the rate of 30% (or 25 MONARCH FUNDS - -------------------------------------------------------------------------------- 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, Investor,Preferred, Service and Universal 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 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 26 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 ________________, 2001, 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 , 2001, 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 NAME AND ADDRESS SHARES % OF CLASS % OF FUND TREASURY CASH FUND GOVERNMENT CASH FUND CASH FUND 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 misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of his office. 27 MONARCH FUNDS - -------------------------------------------------------------------------------- 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. 28 MONARCH FUNDS - -------------------------------------------------------------------------------- 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 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 MONARCH FUNDS - -------------------------------------------------------------------------------- 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: 7 DAY 7 DAY EFFECTIVE YIELD 30 DAY 30 DAY EFFECTIVE 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%
For the period ended August 31, 2000, the total return of each Class of the Funds that were then operating were as follows: 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% * Annualized return.
Inception dates are listed in the Funds' annual report. B-1 MONARCH FUNDS - -------------------------------------------------------------------------------- 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: TREASURY CASH GOVERNMENT CASH PORTFOLIO CASH 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 2 - DISTRIBUTION FEES* The fees payable by the Funds under the Distribution Agreement were: 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 * Fee information for Preferred Shares and Service Shares is not provided because these classes 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: 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 C-1 MONARCH FUNDS - -------------------------------------------------------------------------------- The fees payable by the Portfolios under the Core Administrative Agreement were: 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 4 - FUND ACCOUNTING FEES - CORE TRUST The fees payable by the Portfolios under the Core Accounting Agreement were: 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 C-2 MONARCH FUNDS - -------------------------------------------------------------------------------- TABLE 5 - TRANSFER AGENT FEES* The fees payable by the Funds under the Transfer Agency Agreement were: 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 * Fee information for Preferred Shares and Service Shares is not provided because these classes had not commenced operations prior to the Funds' August 31, 2000 fiscal year end. C-3 MONARCH FUNDS - -------------------------------------------------------------------------------- TABLE 6 - SHAREHOLDER SERVICE FEES The fees payable by the Funds under the Shareholder Services Agreement were: INSTITUTIONAL SHARES 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 INVESTOR SHARES 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 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 CASH PORTFOLIO VALUE Bank of America $95,000,000 Bear Stearns $75,000,000 C-4 MONARCH FUNDS - -------------------------------------------------------------------------------- TABLE 8 - 5% SHAREHOLDERS As of _________, 2001, 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. NAME AND ADDRESS SHARES % OF CLASS % OF FUND TREASURY CASH FUND GOVERNMENT CASH FUND CASH FUND
C-5 PART C OTHER INFORMATION ITEM 23. EXHIBITS (a) Trust Instrument of Registrant dated July 10, 1992 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (b) By-Laws of Registrant dated July 10, 1992, as amended May 12, 1995 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (c) None. (d) None. (e) Distribution Agreement between Registrant and Forum Fund Services, LLC dated as of January 1, 1999, relating to Treasury Cash Fund, Government Cash Fund and Cash Fund (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 17 via EDGAR on November 30, 1998, accession number 0001004402-98-000616). (f) None. (g) (1) Custodian Agreement between Registrant and Union Bank of California, N.A., dated May 7, 1999 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 20 via EDGAR on December 30, 1999, accession number 0001004402-99-000485). (2) Custodial Services Agreement between Registrant and Forum Trust, LLC dated as of July 1, 2000 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (3) Subcustodian Agreement between Union Bank of California, N.A. and Forum Trust, LLC dated as of the 1st day of July 2000 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (h) (1) Administration Agreement between Registrant and Forum Administrative Services, LLC dated as of December 1, 1997, relating to Treasury Cash Fund, Government Cash Fund and Cash Fund (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (2) Transfer Agency Agreement between Registrant and Forum Shareholder Services, LLC dated as of October 29, 1998, relating to Treasury Cash Fund, Government Cash Fund and Cash Fund (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 17 via EDGAR on November 30, 1998, accession number 0001004402-98-000616). (3) Shareholder Service Agreement between Registrant and Forum Administrative Services, LLC, as amended September 1, 2000, relating to Treasury Cash Fund, Government Cash Fund and Cash Fund (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (4) Fund Accounting Agreement between Registrant and Forum Accounting Services, LLC dated as of December 1, 1997, relating to Treasury Cash Fund, Government Cash Fund and Cash Fund (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (i) Opinion and Consent of Kirkpatrick & Lockhart LLP (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 20 via EDGAR on December 30, 1999, accession number 0001004402-99-000485). (j) None. (k) None. (l) Investment Representation letter (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). Part C-1 (m) (1) Investor Class Distribution Plan dated July 12, 1993 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (2) Service Class Distribution Plan dated as of July 1, 2000 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (n) (1) Multiclass (Rule 18f-3) Plan dated May 12, 1995, as amended July 1, 2000 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (2) Form of Multiclass (Rule 18f-3) Plan dated May 12, 1995, as amended July 1, 2000 and _____, 2001 (Exhibit filed herewith). (p) Not required because the securities being registered are money market funds. Other Exhibits: (1) Powers of Attorney, Maurice J. DeWald, Jack J. Singer, John Y. Keffer, Christine M. McCarthy, Robert M. Franko and Rudolph I. Estrada, Trustees of Registrant (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 22 via EDGAR on June 30, 2000, accession number 0001004402-00-000234). (2) Powers of Attorney, John Y. Keffer, James C. Cheng, J. Michael Parish and Costas Azariadis, Trustees of Core Trust (Delaware) (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Due to the ownership interest of Cash Fund, Government Cash Fund and Treasury Cash Fund of Cash Portfolio, Government Cash Portfolio and Treasury Cash Portfolio of Core Trust (Delaware), the Funds may be deemed to control those portfolios. ITEM 25. INDEMNIFICATION The general effect of Section 10.02 of the Registrant's Trust Instrument is to indemnify existing or former trustees and officers of the Trust to the fullest extent permitted by law against liability and expenses. There is no indemnification if, among other things, any such person is adjudicated liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. This description is modified in its entirety by the provisions of Section 10.02 of the Registrant's Trust Instrument contained in this Registration Statement as Exhibit 1 and incorporated herein by reference. The Registrant's Distribution Agreement provides that the Registrant's principal underwriter is protected against liability to the extent permitted by Section 17(i) of the Investment Company Act of 1940. Similar provisions are contained in the Administration Agreement, Transfer Agency Agreement and Fund Accounting Agreement. The Registrant's principal underwriter is also provided with indemnification against various liabilities and expenses under Section 8 of the Distribution Agreement between the Registrant and the principal underwriter; provided, however, that in no event shall the indemnification provision be construed as to protect the principal underwriter against any liability to the Registrant or its security holders to which the principal underwriter would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under Section 8 of the Distribution Agreement. The Registrant's transfer agent and certain related individuals are also provided with indemnification against various liabilities and expenses under Section 10 of the Transfer Agency Agreement between the Registrant and the transfer agent; provided, however, that in no event shall the transfer agent or such persons be indemnified against any liability or expense that is the direct result of willful misfeasance, bad faith or gross negligence by the transfer agent or such persons. The preceding paragraph is modified in its entirety by the provisions of Section 8 of the Distribution Agreement, Section 3 of the Administration Agreement, Section 10 of the Transfer Agency Agreement and Section 3 of the Fund Accounting Agreement of the Registrant filed as Exhibits 6, 9(a), 9(b) and 9(d), respectively, to Registrant's Registration Statement and incorporated herein by reference. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission Part C-2 such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER The description of Forum Investment Advisors, LLC (investment adviser to each of Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio of Core Trust (Delaware)) under the caption "Management" in the Prospectus and Statement of Additional Information, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following is the member of Forum Investment Advisors, LLC, Two Portland Square, Portland, Maine 04101, including its business connections, which are of a substantial nature. Forum Trust, LLC Forum Trust, LLC is controlled by John Y. Keffer, Chairman and President of the Registrant. Mr. Keffer is a Director and President of Forum Trust, LLC. Mr. Keffer is also a director and/or officer of various registered investment companies for which the various Forum Financial Group of Companies provide services. The following are the officers of Forum Investment Advisors, LLC, including their business connections, which are of a substantial nature. Each officer may serve as an officer of various registered investment companies for which the Forum Financial Group of Companies provides services. Name Title Business Connection .................................... ................................... ................................... David I. Goldstein Secretary Forum Investment Advisors, LLC ................................... ................................... Officer other Forum affiliated companies .................................... ................................... ................................... Charles F. Johnson Director Forum Investment Advisors, LLC ................................... ................................... .................................... ................................... ................................... Marc D. Keffer Assistant Secretary Forum Investment Advisors, LLC ................................... ................................... Assistant Secretary Forum Financial Group, LLC ................................... ................................... Officer Other Forum affiliated companies .................................... ................................... ................................... Ronald Hirsch Treasurer Forum Investment Advisors, LLC ................................... ................................... Treasurer Forum Financial Group, LLC ................................... ................................... Officer Other Forum affiliated companies .................................... ................................... ................................... Ben Niles Vice President Forum Investment Advisors, LLC .................................... ................................... ................................... Fred Skillin Assistant Treasurer Forum Investment Advisors, LLC
ITEM 27. PRINCIPAL UNDERWRITERS (a) Forum Fund Services, LLC, Registrant's underwriter serves as underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended: Century Capital Management Trust Millennium Funds, Inc. Century Shares Trust Monarch Funds The Cutler Trust NBP TrueCrossing Funds Forum Funds Sound Shore Fund, Inc. Memorial Funds Part C-3 (b) The following officers of Forum Fund Services, LLC, Registrant's underwriter, hold the following positions with registrant. Their business address is Two Portland Square, Portland, Maine 04101. Name Position with Underwriter Position with Registrant .............................. ..................................... .................................... John Y. Keffer President Chairman, President .............................. ..................................... .................................... David I Goldstein Secretary Vice President .............................. ..................................... .................................... Ronald H. Hirsch Treasurer Treasurer
(c) Not Applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS The majority of the accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are maintained at the offices of Forum Administrative Services, LLC, Forum Accounting Services, LLC and Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine 04101. The records required to be maintained under Rule 31a-1(b)(1) with respect to journals of receipts and deliveries of securities and receipts and disbursements of cash are maintained at the offices of the Registrant's custodian, as listed under "Custodian" in Part B to this Registration Statement. The records required to be maintained under Rule 31a-1(b)(5), (6) and (9) are maintained at the offices of the Registrant's adviser, as listed in Item 26 hereof. ITEM 29. MANAGEMENT SERVICES Not applicable. ITEM 30. UNDERTAKINGS None. Part C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, duly authorized in the City of Portland, State of Maine on May 8, 2001. MONARCH FUNDS By: /S/ JOHN Y. KEFFER ----------------------------------------- John Y. Keffer, President Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons on May 8, 2001 (a) Principal Executive Officer /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Chairman and President (b) Principal Financial Officer /S/ RONALD H. HIRSCH -------------------------------------------- Ronald H. Hirsch, Treasurer (c) A majority of the Trustees /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Trustee Rudolph I. Estrada, Trustee Maurice J. DeWald, Trustee Christine M. McCarthy, Trustee Robert M. Franko, Trustee Jack J. Singer, Trustee By:/S/ JOHN Y. KEFFER ----------------------------------------- John Y. Keffer, Attorney in fact* * Pursuant to powers of attorney filed as an Exhibit to this Registration Statement. SIGNATURES On behalf of Core Trust (Delaware), being duly authorized, I have duly caused this amendment to the Registration Statement of Monarch Funds to be signed in the City of Portland, State of Maine on May 8, 2001. CORE TRUST (DELAWARE) By: /S/ JOHN Y. KEFFER --------------------------------------- John Y. Keffer, President On behalf of Core Trust (Delaware), this amendment to the Registration Statement of Monarch Funds has been signed below by the following persons in the capacities indicated on May 8, 2001. (a) Principal Executive Officer /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Chairman and President (b) Principal Financial Officer /S/ RONALD H. HIRSCH -------------------------------------------- Ronald H. Hirsch, Treasurer (c) A majority of the Trustees /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Chairman Costas Azariadis, Trustee J. Michael Parish, Trustee James C. Cheng, Trustee By: /S/ JOHN Y. KEFFER ----------------------------------------- John Y. Keffer, Attorney in fact* * Pursuant to powers of attorney previously filed as an Exhibit to this Registration Statement. INDEX TO EXHIBITS (n)(2) Form of Multiclass (Rule 18f-3) Plan dated May 12, 1995, as amended July 1, 2000 and _____, 2001. EX-99.N 2 exhibit_n-2.txt RULE 18F-3 PLAN MONARCH FUNDS MULTICLASS (RULE 18F-3) PLAN May 12, 1995, as Amended July 1, 2000 and ____________, 2001 This Plan is adopted by Monarch Funds (the "Trust") pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "Act") in order to document the separate arrangements and expense allocations of each class of shares of beneficial interest (the "Classes") of each of the investment portfolios of the Trust (the "Funds") and the related exchange privileges. SECTION 1. CLASS DESIGNATIONS The types of Classes of the Funds are: "Preferred Shares," "Universal Shares," "Institutional Shares," "Investor Shares," and "Service Shares." Each Class has a different arrangement for shareholder services or distribution or both, as follows: (a) PREFERRED SHARES. Are offered with no sales charges or distribution expenses. The investment minimum is $10,000,000, subject to reduction by Forum Financial Services, Inc. ("Forum"), the Trust's manager. (b) UNIVERSAL SHARES. Are offered with no sales charges or distribution expenses. The investment minimum is $1,000,000, subject to reduction by Forum. (c) INSTITUTIONAL SHARES. Are offered solely through banks, trust companies and certain other financial institutions and their affiliates and correspondents with no sales charges or distribution expenses but subject to a shareholder services plan. The investment minimum for all purchases through a single financial institution is $100,000, subject to reduction by Forum, and the investment minimum for accounts held directly by the transfer agent is $50,000. (d) INVESTOR SHARES. Are offered with no sales charges but subject to a shareholder services plan and a distribution plan adopted in accordance with Rule 12b-1 under the Act. The investment minimum is $5,000. (e) SERVICE SHARES. Are offered with no sales charges but subject to a shareholder services plan and a distribution plan adopted in accordance with Rule 12b-1 under the Act. The investment minimum is $1,000. SECTION 2. VOTING Each Class shall have exclusive voting rights on any matter submitted to a shareholder vote that relates solely to the Class' arrangement for shareholder services or distribution and each Class shall have separate voting rights with respect to any matter submitted to a shareholder vote in which the interests of one Class differ from the interests of another Class. SECTION 3. EXPENSES (a) DISTRIBUTION EXPENSES. All expenses incurred under a Class's distribution plan adopted in accordance with Rule 12b-1 under the Act shall be allocated to that Class. (b) SHAREHOLDER SERVICE EXPENSES. All expenses incurred under a Class's shareholder service plan shall be allocated to that Class. (c) OTHER CLASS EXPENSES. The following expenses, which are incurred by Classes in different amounts or reflect differences in the amount or kind of services that different Classes receive (collectively with expenses under Sections 3(a) and 3(b) "Class Expenses"), shall be allocated to the Class that incurred the expenses to the extent practicable: (i) Administration and transfer agent fees and expenses; (ii) Litigation, legal and audit fees; (iii) State and foreign securities registration fees; (iv) Shareholder report expenses; (v) Trustee fees and expenses; (vi) Preparation, printing and related fees and expenses for proxy statements and, with respect to current shareholders, prospectuses and statements of additional information; (vii)Expenses incurred in connection with shareholder meetings; and (viii) Subject to approval by the Trustees, such other fees and expenses as Forum, pursuant to Rule 18f-3, deems to be allocable to specified Classes. (d) CLASS EXPENSE ALLOCATIONS. Class Expenses are to be borne solely by the Class to which they relate. Item (i) of Section 3(c) in its entirety is incurred by the Funds on a Class by Class basis and, accordingly, is wholly allocated to specific Classes. All fees of a Fund's investment adviser and custodian [and manager] and all portfolio based fees of a Fund's fund accountant are incurred by a Fund and not the individual Classes of the Fund. All other items in Section 3(c) are allocated to a specific Class to the extent they are attributable to the Classes in different amounts. SECTION 4. OTHER ALLOCATIONS AND WAIVERS/REIMBURSEMENTS (a) EXPENSES APPLICABLE TO MORE THAN ONE FUND. Expenses (other than Class Expenses) incurred by the Trust on behalf of a Fund shall be allocated to that Fund and expenses (other than Class Expenses) incurred by the Trust on behalf of more than one Fund shall be allocated among the Funds that incurred the expenses based on the net asset values of the Funds in relation to the net asset value of all Funds to which the expense relates. (b) OTHER ALLOCATIONS. Income, realized and unrealized capital gains and losses and expenses other than Class Expenses related to a Fund shall be allocated to each class of the Fund based on the net asset value of the Class (excluding the value of subscriptions receivable) in relation to the net asset value of the Fund. -2- (c) WAIVERS AND REIMBURSEMENTS. Nothing in this Plan shall be construed as limiting the ability of any person to waive any fee paid by a Fund or Class to that person or to reimburse any or all expenses of a Fund or Class; provided, however, that no waiver or reimbursement shall be made such that the waiver or reimbursement is, in effect, a DE FACTO modification of the fees provided for in the Fund's various service agreements. SECTION 5. EXCHANGES Shareholders of a Class may exchange their shares for shares of the same Class of any other Fund in accordance with Section 11(a) of the Act, the rules thereunder and the requirements of the applicable prospectuses. SECTION 6. AMENDMENTS AND BOARD REVIEW (a) NON-MATERIAL AMENDMENTS. Non-material amendments to this Plan may be made at any time by Forum. (b) MATERIAL AMENDMENTS. Material amendments to this Plan may only be made by a majority of the Trustees of the Trust, including a majority of the Trustees who are not interested persons of the Trust as defined by the Act, upon a finding that the amendment is in the best interests of the Classes affected by the amendment and of the Fund and the Trust. Prior to any material amendment to this Plan, the Board of Trustees (the "Board") shall request such information as may be reasonably necessary to evaluate the Plan as proposed to be amended. (c) BOARD REVIEW. The Board, including a majority of those trustees who are not interested persons of the Trust as defined in the Act, shall review periodically (i) this Plan for its continuing appropriateness and (ii) any fee waivers and expense reimbursements to determine that the Funds are in compliance with Section 4(c). -3- -----END PRIVACY-ENHANCED MESSAGE-----