-----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, FYLSAhHacrKYRC2/oliAMX4rIR49cntQC7HvzYTbCJG6GaLQrS9GkLN0AvCLktRG Wl4Ohe/PmaAn84fQ8Zy4hg== 0001004402-03-000242.txt : 20030324 0001004402-03-000242.hdr.sgml : 20030324 20030324163502 ACCESSION NUMBER: 0001004402-03-000242 CONFORMED SUBMISSION TYPE: N-14 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20030324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH FUNDS CENTRAL INDEX KEY: 0000889509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-14 SEC ACT: 1933 Act SEC FILE NUMBER: 333-103991 FILM NUMBER: 03614238 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101-4049 BUSINESS PHONE: 2078791900 MAIL ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101-4049 N-14 1 mo03-084.txt MONARCH FUNDS PROXY As filed with the Securities and Exchange Commission on March 24, 2003 Securities Act File No. ______________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. /_____/ Post-Effective Amendment No. /_____/ MONARCH FUNDS (Exact Name of Registrant as Specified in Charter) Two Portland Square, Portland, Maine 04101 (Address of Principal Executive Offices) (Zip Code) (207) 879-1900 (Registrant's Area Code and Telephone Number) Leslie K. Klenk Forum Administrative Services, LLC Two Portland Square Portland, ME 04101 Copies of Communications to: Robert J. Zutz, Esq. Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue NW 2nd Floor Washington, DC 20036-1800 Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective. - -------------------------------------------------------------------------------- Title of securities being registered: Universal Shares, Institutional Service Shares and Investor Shares of Daily Assets Government Fund and Daily Assets Cash Fund and Universal Shares and Institutional Service Shares of Daily Assets Treasury Fund. Pursuant to Rule 429, a filing fee is not required because the Registrant has previously registered an indefinite number of its Shares under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- IMPORTANT NOTICE: PLEASE COMPLETE THE ENCLOSED PROXY BALLOT AND RETURN IT AS SOON AS POSSIBLE. - -------------------------------------------------------------------------------- FORUM FUNDS Two Portland Square Portland, Maine 04101 _________, 2003 Dear Valued Shareholder: Enclosed is a Notice of Special Meeting of Shareholders of Daily Assets Treasury Obligations Fund ("Forum Treasury Fund"), Daily Assets Government Obligations Fund ("Forum Government Fund"), and Daily Assets Cash Fund ("Forum Cash Fund") (each a "Forum Series"), each a series of Forum Funds (the "Trust"), to be held on _________________, 2003 at the offices of Forum Financial Group, LLC, Two Portland Square, Second Floor Conference Room, Portland, Maine 04101. At the meeting, you will be asked to approve an Agreement and Plan of Reorganization between the Trust, on behalf of each Forum Series, and Monarch Funds ("Monarch"), another registered investment company, on behalf of its series Daily Assets Treasury Fund ("Monarch Treasury Fund"), Daily Assets Government Fund ("Monarch Government Fund"), and Daily Assets Cash Fund ("Monarch Cash Fund") (the "Plan"). Under the Plan, each of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund will transfer its assets and liabilities to Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund, respectively (each a "Monarch Series"), in exchange for shares of that corresponding Monarch Series and the corresponding Monarch Series' assumption of the applicable Forum Series' liabilities. Each Forum Series will then distribute the shares received from the Monarch Series proportionately to its shareholders and then terminate. Each Forum Series' shareholder holding Institutional, Institutional Service, and Investor Shares will receive Universal, Institutional Service, and Investor Shares, respectively, of the corresponding Monarch Series. Each Forum Series and the corresponding Monarch Series invest substantially all of their assets in the same portfolio of Core Trust (Delaware) ("Core Trust"), another registered investment company. After the Plan is consummated, each Monarch Series will redeem its investment in Core Trust and invest directly in portfolio securities. The Board of Trustees of the Trust (the "Board") unanimously approved the Plan and believes that it is in the best interests of the shareholders of each Forum Series. In evaluating the Plan with respect to the Forum Series in which you invest, please note that: o Each Forum Series and its corresponding Monarch Series invest substantially all of their assets in the same portfolio of Core Trust. o Each Forum Series and its corresponding Monarch Series pursue the same investment objective and have the same investment strategies and policies. o Although certain service provider fees of each Monarch Series are higher than those currently charged to its corresponding Forum Series, the economies of scale that will result from the combination of the assets of each Forum Series with the corresponding Monarch Series will result in lower gross expenses for the shareholders of each Forum Series after its reorganization. o As a result of the transactions contemplated under the Plan, the performance of each Forum Series will reflect the performance of the corresponding Monarch Series. Shareholders are being asked to approve the Plan only with respect to the Forum Series in which they own shares. The approval of the Plan by the shareholders of one Forum Series is not contingent on the approval of the Plan by the shareholders of any other Forum Series. The Board believes that the Plan is important and recommends that you read the enclosed materials carefully and then vote FOR the proposal. Please choose one of the following options to vote: o BY MAIL: Complete the enclosed proxy card and return it in the postage-paid envelope provided. o BY TELEPHONE: Call the Toll-Free number on your proxy card. o IN PERSON: Attend the Special Meeting (details enclosed). Forum Financial Group, LLC and/or its affiliates (collectively, "FFG") have agreed to pay the audit, legal, and proxy solicitation costs of the transactions contemplated under the Plan. FFG currently provides administrative, transfer agency, fund accounting and custody services to each Forum Series and each Monarch Series. - -------------------------------------------------------------------------------- WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES (UNLESS YOU ARE VOTING BY TELEPHONE). NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE. - -------------------------------------------------------------------------------- IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT/ PROSPECTUS OR THE PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT FORUM SHAREHOLDER SERVICES, LLC AT (800) 943-6786. Very truly yours, /s/ JOHN Y. KEFFER -------------------- John Y. Keffer President and Chairman of the Board of Trustees 2 FORUM FUNDS DAILY ASSETS TREASURY OBLIGATIONS FUND DAILY ASSETS GOVERNMENT OBLIGATIONS FUND DAILY ASSETS CASH FUND Two Portland Square Portland, Maine 04101 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS ________, 2003 To the Shareholders: A special meeting of shareholders of Daily Assets Treasury Obligations Fund ("Forum Treasury Fund), Daily Assets Government Obligations Fund ("Forum Government Fund"), and Daily Assets Cash Fund ("Forum Cash Fund"), each a series of Forum Funds (the "Trust"), will be held at the offices of Forum Financial Group, LLC, Two Portland Square, Second Floor Conference Room, Portland, Maine 04101 on _________, 2003 at 10:00 a.m. (Eastern time) to consider the following: 1. A proposal to approve an Agreement and Plan of Reorganization between the Trust, on behalf of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund (each a "Forum Series"), and Monarch Funds ("Monarch"), another registered investment company, on behalf of its series, Daily Assets Treasury Fund, Daily Assets Government Fund, and Daily Assets Cash Fund (the "Plan"). Under the Plan, each of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund will transfer its assets to Daily Assets Treasury Fund ("Monarch Treasury Fund"), Daily Assets Government Fund ("Forum Government Fund"), and Daily Assets Cash Fund ("Monarch Cash Fund"), respectively (each a "Monarch Series"), in exchange for shares of that corresponding Monarch Series and the corresponding Monarch Series' assumption of the applicable Forum Series' liabilities. Each Forum Series will then distribute the shares received from the Monarch Series proportionately to its shareholders and terminate. Each Forum Series' shareholder holding Institutional, Institutional Service, and Investor Shares will receive Universal, Institutional Service, and Investor Shares, respectively, of the corresponding Monarch Series; and 2. Any other business that properly comes before the meeting. Each Forum Series and the corresponding Monarch Series invest substantially all of their assets in the same portfolio of Core Trust (Delaware), another registered investment company. After the Plan is consummated, each Monarch Series will redeem its investment in Core Trust and invest directly in portfolio securities. The approval of the Plan by shareholders of one Forum Series is not contingent on the approval of the Plan by the shareholders of another Forum Series. If shareholders of a Forum Series approve the Plan, that Forum Series will reorganize into the corresponding Monarch Series regardless of whether shareholders of any other Forum Series shareholders vote to approve the Plan. Enclosed with this notice is a Proxy Statement/Prospectus, which includes information relevant to the proposed transaction. A form of the Plan is attached as Exhibit A to the Proxy Statement/Prospectus. Shareholders of record of each Forum Series as of the close of business on _____________, 2003 are entitled to vote at the meeting and at any postponement or adjournment thereof. This notice and related Proxy Statement/Prospectus are first being mailed to shareholders of each Forum Series on or about ______, 2003. This Proxy is being solicited by the Trust's Board of Trustees. - -------------------------------------------------------------------------------- WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES (UNLESS YOU ARE VOTING BY TELEPHONE). NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE. - -------------------------------------------------------------------------------- IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT/ PROSPECTUS OR THE PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT FORUM SHAREHOLDER SERVICES, LLC AT (800) 943-6786. By Order of the Board of Trustees, /s/ LESLIE K. KLENK ------------------------- Leslie K. Klenk Secretary Forum Funds YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWNED ON THE RECORD DATE. 2 PROXY STATEMENT/PROSPECTUS __________, 2003 Acquisition of the Assets of DAILY ASSETS TREASURY OBLIGATIONS FUND ("FORUM TREASURY FUND") DAILY ASSETS GOVERNMENT OBLIGATIONS FUND ("FORUM GOVERNMENT FUND") DAILY ASSETS CASH FUND ("FORUM CASH FUND"), each a series of FORUM FUNDS Two Portland Square Portland, Maine 04101 (800) 943-6786 By and In Exchange for Shares of Beneficial Interest of DAILY ASSETS TREASURY FUND ("MONARCH TREASURY FUND") DAILY ASSETS GOVERNMENT FUND ("MONARCH GOVERNMENT FUND") DAILY ASSETS CASH FUND ("MONARCH CASH FUND"), respectively each a series of MONARCH FUNDS Two Portland Square Portland, Maine 04101 (800) 754-8757 On February 11, 2003, the Board of Trustees of Forum Funds (the "Trust"), a registered investment company, unanimously approved the Agreement and Plan of Reorganization between Forum Funds, on behalf of its series, Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund, and Monarch Funds ("Monarch"), another registered investment company, on behalf of its series, Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund (the "Plan"). Under the Plan, each of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund (each a "Forum Series") will transfer its assets to Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund, respectively (each a "Monarch Series"), in exchange for shares of that corresponding Monarch Series and the corresponding Monarch Series' assumption of the applicable Forum Series' liabilities. Each Forum Series will then distribute the shares received from the Monarch Series proportionately to its shareholders and then terminate. Each Forum Series shareholder holding Institutional, Institutional Service, and Investor Shares will receive Universal, Institutional Service, and Investor Shares, respectively, of the corresponding Monarch Series. 1 Each Forum Series and the corresponding Monarch Series invest substantially all of their assets in the same portfolio of Core Trust (Delaware) ("Core Trust"), another registered investment company. After the Plan is consummated, each Monarch Series will redeem its investment in Core Trust and invest directly in portfolio securities. Please read the Proxy Statement/Prospectus carefully and retain it for future reference. The Proxy Statement/Prospectus sets forth concisely the information that you should know before investing in a Monarch Series. A Statement of Additional Information dated _________, 2003 containing additional information about the Plan and the transactions contemplated thereunder has been filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into, and is legally part of, this Proxy Statement/Prospectus. The Statement of Additional Information to this Proxy Statement/Prospectus is available upon request, without charge, by writing or calling: Forum Shareholder Services, LLC P.O. Box 446 Portland, Maine 04101 (800) 943-6786 [Additional information to be incorporated by reference shall be included by pre-effective amendment.] 2 Shareholders may also view or obtain copies of this Proxy Statement/Prospectus, the materials incorporated by reference herein or additional information regarding a Forum Series or a Monarch Series from the Securities and Exchange Commission's ("SEC") Website, HTTP://WWW.SEC.GOV. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN A FORUM SERIES OR A MONARCH SERIES IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, AND ANY OTHER U.S. GOVERNMENT AGENCY. AN INVESTMENT IN BOTH A FORUM SERIES AND A MONARCH SERIES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. 3 TABLE OF CONTENTS SUMMARY......................................................................5 The Proposed Agreement and Plan of Reorganization..........................5 Comparison of Fees.........................................................6 Comparison of Investment Objectives and Principal Investment Strategies....10 Comparison of Investment Advisory Services and Fees........................12 Comparison of Other Service Providers......................................12 Comparison of Class Structure..............................................13 Comparison of Purchase, Redemption, and Exchange Privileges................14 Comparison of Distribution Policies........................................16 Comparison of Distribution and Shareholder Service Fees....................16 Comparison of Net Asset Value Calculation Procedures.......................17 Tax Matters Relating to the Reorganization.................................17 INVESTMENT RISKS.............................................................17 INFORMATION ABOUT THE PLAN...................................................18 General Description of the Plan............................................18 Securities to be Issued....................................................19 Reasons for the Plan.......................................................20 TAXATION.....................................................................22 Tax Consequences of Distributions..........................................22 Tax Consequence of the Transactions Contemplated under the Plan............22 CAPITALIZATION...............................................................23 VOTING INFORMATION...........................................................20 Instructions for Signing Proxy Cards.......................................26 Information Regarding Shares of each Forum Series Outstanding..............27 Information Regarding Shares of each Monarch Series Outstanding............28 ADDITIONAL INFORMATION.......................................................29 Legal Matters..............................................................29 Experts....................................................................29 Information Filed with the Securities and Exchange Commission..............29 EXHIBIT A: Form of Agreement and Plan of Reorganization.....................A-1 4 SUMMARY This section summarizes the important terms of the proposed Plan between the Trust, on behalf of each Forum Series, and Monarch, on behalf of each Monarch Series (the "Plan"). This section also summarizes certain information regarding each Forum Series as well as each Monarch Series. As discussed below, the Trust's Board of Trustees (the "Board") believes that the Plan is in the best interest of the shareholders of each Forum Series. The information set forth in this section is only a summary of and is qualified in its entirety by the information contained elsewhere in this Proxy Statement/Prospectus or in the documents incorporated by reference herein. For a detailed discussion of the topics discussed in this Summary regarding the Monarch Series, see [Information to be incorporated by reference will be added by pre-effective amendment]. For a detailed discussion of the topics discussed in this Summary regarding each Forum Series, see [Information to be incorporated by reference will be added by pre-effective amendment]. THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION On February 11, 2003, the Board unanimously voted to approve the Plan with respect to each Forum Series. Under the Plan, each of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund will: (1) transfer its assets and liabilities to Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund, respectively, in exchange for shares of that corresponding Monarch Series and the corresponding Monarch Series' assumption of the applicable Forum Series' liabilities and (2) each Forum Series will then distribute the shares received from the Monarch Series proportionately to its shareholders and terminate (each a "Reorganization," collectively, the "Reorganizations"). Each Forum Series' shareholder holding Institutional, Institutional Service, and Investor Shares will receive Universal, Institutional Services, and Investor Shares, respectively, of the corresponding Monarch Series. A Reorganization of a Forum Series will occur as of the Effective Date designated in the Plan or at a later date as agreed upon by the Board and the Monarch Board of Trustees ("Monarch Board") and only after the Plan is approved by the shareholders of the Forum Series and all contigencies of the Plan are satisfied. The Plan is the second stage of a larger transaction to consolidate the money markets series of the Trust, Core Trust, and Monarch (collectively, the "Money Fund Assets") in order to take advantage of the economies of scale and operational efficiencies 5 that would result from the combination of the Money Fund Assets into one registrant. The first stage involved the reorganization of Monarch from a Delaware business trust into a Massachusetts business trust on April __, 2003. The final stage includes the redemption of each Monarch Series investment in Core Trust after the consummation of the Plan. For the reasons set forth in the section entitled "Information about the Plan - Reasons for the Plan," the Board, including the Trustees who are not "interested persons" as that term is defined in the Section 2(a)(19) of Investment Company Act of 1940, as amended (the "Independent Trustees"), unanimously approved the Plan, concluded that the transactions contemplated by the Plan with respect to each Forum Series was in the best interests of the shareholders of the Forum Series, and recommended that you approve the Plan with respect to the Forum Series in which you own shares. The Board, including the Independent Trustees, also unanimously concluded that the economic interests of each Forum Series' shareholders would not be diluted as a result of the transactions contemplated by the Plan. The Board considered a variety of different factors prior to forming these conclusions including, but not limited to: (1) the similarities of the investment objective and investment policies of each Forum Series and the corresponding Monarch Series; (2) the expenses of each Forum Series and the corresponding Monarch Series; (3) the tax-free nature of each Reorganization; and (4) the fact that Forum Financial Group, LLC and/or its affiliates (collectively, "FFG") have agreed to pay all audit, legal, and proxy solicitation costs associated with the Reorganizations. COMPARISON OF FEES Like all mutual funds, each Forum Series and Monarch Series incur certain expenses in their operations and, as a shareholder, you pay these expenses indirectly. The following tables compare the various fees and expenses that a shareholder bore from an investment in each Forum Series as of the fiscal year ended August 31, 2002 and the Pro Forma expenses of the corresponding Monarch Series, as of August 31, 2002, assuming the Reorganization is approved. FORUM TREASURY FUND/MONARCH TREASURY FUND - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- PRO FORMA PRO FORMA FORUM MONARCH FORUM MONARCH TREASURY TREASURY TREASURY TREASURY FUND(1) FUND(2) FUND(1) FUND(2) ----------------- ---------------- -- ----------------- ---------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE SHARES SHARES SHARES SHARES - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- Management Fees 0.13% 0.14% 0.13% 0.14% - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- Distribution (12b-1) Fees None None None None - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- Other Expenses 0.16% 0.11% 0.58% 0.36% - ----------------------------------------- ----------------- ---------------- -- ----------------- ---------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.29% (3) 0.25%(4) 0.71%(3) 0.50%(4) - ----------------------------------------- ----------------- ---------------- -- ----------------- ----------------
(1) Based on amounts incurred during Forum Treasury Fund's fiscal year ended August 31, 2002 stated as a percentage of the average daily net assets assets. 6 (2) Pro Forma amounts based on combined net assets of Forum Treasury Fund and Monarch Treasury Fund as if the Reorganization had occurred on August 31, 2002. (3) Certain service providers of Forum Treasury Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Institutional Shares and Institutional Service Shares to 0.20% and 0.45%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. (4) Certain service providers of Monarch Treasury Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Universal Shares and Institutional Service Shares to 0.20% and 0.45%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. FORUM GOVERNMENT FUND/MONARCH GOVERNMENT FUND - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- PROFORMA PROFORMA PROFORMA FORUM MONARCH FORUM MONARCH FORUM MONARCH GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT FUND(1) FUND(2) FUND(1) FUND(2) FUND(1) FUND(2) - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Management Fees 0.13% 0.14% 0.13% 0.14% 0.13% 0.14% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Distribution (12b-1) Fees None None None None 0.30% 0.25% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Other Expenses 0.19% 0.11% 0.49% 0.36% 4.05% 0.46% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.32%(3) 0.25%(4) 0.62%(3) 0.50%(4) 4.48%(3) 0.85%(4) - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- (1) Based on amounts incurred during Forum Government Fund's fiscal year ended August 31, 2002 stated as a percentage of the average daily net assets. (2) Pro Forma amounts based on combined net assets of Forum Government Fund and Monarch Government Fund as if the Reorganization had occurred on August 31, 2002. (3) Certain service providers of Forum Government Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Institutional, Institutional Service, and Investor Shares to 0.20%, 0.45%, and 0.90%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. (4) Certain service providers of Monarch Government Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Universal, Institutional Service and Investor Shares to 0.20%, 0.45%, and 0.85%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. 7 FORUM CASH FUND/MONARCH CASH FUND - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- PROFORMA PROFORMA PROFORMA FORUM MONARCH FORUM MONARCH FORUM MONARCH CASH FUND(1) CASH FUND(2) CASH FUND(1) CASH FUND(2) CASH FUND(1) CASH FUND2) --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Management Fees 0.13% 0.14% 0.13% 0.14% 0.13% 0.14% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Distribution (12b-1) Fees None None None None 0.30% 0.25% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- Other Expenses 0.18% 0.10% 0.50% 0.35% 3.38% 0.45% - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- --------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.31%(3) 0.24%(4) 0.63%(3) 0.49%(4) 3.81%(3) 0.84%(4) - ------------------------- --------------- ---------------- -- ---------------- --------------- -- ---------------- ---------------
(1) Based on amounts incurred during Forum Cash Fund's fiscal year ended August 31, 2002 stated as a percentage of the average daily net assets. (2) Pro Forma amounts based on combined net assets of the Forum Cash Fund and Monarch Cash Fund as if the Reorganization had occurred on August 31, 2002. (3) Certain service providers of Forum Cash Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Institutional, Institutional Service, and Investor Shares to 0.20%, 0.45%, and 0.90%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. (4) Certain service providers of Monarch Cash Fund have voluntarily agreed to waive a portion of their fees and reimburse fund expenses in order to limit Total Annual Fund Operating Expenses of Universal, Institutional Service, and Investor Shares to 0.20%, 0.45%, and 0.85%, respectively, of that class' average daily net assets. Fee waivers and expense reimbursements may be reduced or eliminated at any time. EXAMPLE OF EFFECT ON FUND EXPENSES The following is a hypothetical example intended to help you compare the cost of investing in each Forum Series with the costs of investing in the corresponding Monarch Series after their Reorganization. This example assumes that you invest $10,000 in a specified fund and class 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 rate of return, that the Total Annual Fund Operating Expenses of the specified fund and class remain the same as stated in the above tables and that all dividends and distributions are reinvested. Although your actual costs may be higher or lower, under these assumptions your costs would be: 8 FORUM TREASURY FUND/MONARCH TREASURY FUND - ------------------------------ -------------------- -------------------- -- -------------------- -------------------- FORUM PRO FORMA FORUM PRO FORMA TREASURY MONARCH TREASURY TREASURY MONARCH FUND FUND FUND TREASURY FUND -------------------- -------------------- -- -------------------- -------------------- INSTITUTIONAL UNIVERSAL INSTITUTIONAL INSTITUTIONAL SHARES SHARES SERVICE SHARES SERVICE SHARES - ------------------------------ -------------------- -------------------- -- -------------------- -------------------- 1 Year $30 $26 $73 $51 - ------------------------------ -------------------- -------------------- -- -------------------- -------------------- 3 Years $93 $80 $227 $160 - ------------------------------ -------------------- -------------------- -- -------------------- -------------------- 5 Years $163 $141 $395 $280 - ------------------------------ -------------------- -------------------- -- -------------------- -------------------- 10 Years $368 $318 $883 $628 - ------------------------------ -------------------- -------------------- -- -------------------- --------------------
FORUM GOVERNMENT FUND/MONARCH GOVERNMENT FUND - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- PROFORMA PROFORMA PROFORMA FORUM MONARCH FORUM MONARCH FORUM MONARCH GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT FUND FUND FUND FUND FUND FUND - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- 1 Year $33 $26 $63 $51 $449 $78 - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- 3 Years $103 $80 $199 $160 $1,355 $271 - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- 5 Years $180 $141 $346 $280 $2,269 $471 - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- 10 Years $406 $318 $774 $628 $4,598 $1,049 - -------------- --------------- --------------- --- --------------- ---------------- -- --------------- ---------------- FORUM CASH FUND/MONARCH CASH FUND - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- PROFORMA PROFORMA PROFORMA FORUM MONARCH FORUM MONARCH FORUM MONARCH CASH FUND CASH FUND CASH FUND CASH FUND CASH FUND CASH FUND - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- 1 Year $32 $25 $64 $50 $383 $86 - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- 3 Years $100 $77 $202 $157 $1,164 $268 - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- 5 Years $174 $135 $351 $274 $1,962 $466 - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ---------------- 10 Years $393 $306 $786 $616 $4,045 $1,037 - -------------- --------------- ---------------- -- --------------- ---------------- -- --------------- ----------------
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES The investment objective of each Forum Series and its corresponding Monarch Series is the same - to provide high current income to the extent consistent with preservation of capital and the maintenance of liquidity. Each Forum Series and its corresponding Monarch Series seeks to maintain a stable net asset value of $1.00 per share by investing substantially all of their assets in the same portfolio of Core Trust (each a "Portfolio," collectively, the "Portfolios") pursuant to a Core and Gateway(R) structure. Each Portfolio (1) invests in a diversified portfolio of money market securities which are high credit quality, short-term, U.S. 9 dollar denominated debt securities ("Money Market Securities"); (2) invests in securities with remaining maturities of 397 days or less; and (3) maintains a dollar weighted average maturity of its investments of 90 days or less. The investment policies of each Forum Series and its corresponding Monarch Series and the Portfolio in which they invest are the same and are summarized in the following table: - ------------------------------------------------------ ---------------------------------------------------- FUND/PORTFOLIO PRIMARY INVESTMENTS - ------------------------------------------------------ ---------------------------------------------------- Forum Treasury Fund At least 80% of net assets invested in securities Monarch Treasury Fund issued or guaranteed by the U.S. Treasury Treasury Cash Portfolio ("Treasury Securities") and Repurchase agreements backed by Treasury Securities. Repurchase agreements are transactions 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 ("Repurchase Agreements"). - ------------------------------------------------------ ---------------------------------------------------- Forum Government Fund At least 80% of net assets in securities issued Monarch Government Fund or guaranteed by the U.S. Government, its Cash Portfolio agencies, or instrumentalities ("Government Securities") and Repurchase Agreements backed by Government Securities. - ------------------------------------------------------ ---------------------------------------------------- Forum Cash Fund Invests in a broad spectrum of Money Market Monarch Cash Fund Securities including: Cash Portfolio 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 - ------------------------------------------------------ ----------------------------------------------------
Immediately after each Reorganization, each Monarch Series will redeem its investment in Core Trust and will receive its pro-rata share of the assets of the Portfolio in which it is invested. Thereafter, Forum Investment Advisors, LLC ("FIA"), each Portfolio's investment adviser, will manage each Monarch Series directly. Each Monarch Series will thereafter be managed in the same manner as the corresponding Portfolio as set forth in the above table. Each Monarch Series, like its corresponding Portfolio, will also continue to invest in Money Market Securities with maturities of 397 days or less and will maintains a dollar weighted average maturity of its investments of 90 days or less. THE ADVISER'S INVESTMENT PROCESS. FIA 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 a Portfolio's investments. FIA searches for securities that satisfy the maturity profile of a Portfolio and that provide the greatest potential return relative to the risk of the security. FIA will continue to utilize the same investment process with respect to each Monarch Series after each Monarch Series redeems its interest in Core Trust immediately after the Reorganizations. The Adviser may sell a Money Market Security held by a Portfolio if: 10 o Revised economic forecasts or interest rate outlook requires a repositioning of a Portfolio or a Monarch Series; o The security subsequently fails to meet FIA's investment criteria; or o Funds are needed for another purpose. The Adviser will follow the same process to sell securities on behalf of each Monarch Series after each Monarch Fund redeems its interest in Core Trust immediately after the Reorganizations. COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES Each Forum Series and its corresponding Monarch Series invests in the same Portfolio. FIA is the investment adviser for each Portfolio and is located at Two Portland Square, Portland, Maine 04101. FIA is a privately owned company controlled by John Y. Keffer, the chairman of the Trust and of Monarch. In addition to the Portfolios, FIA manages one other money market fund, one taxable bond fund, and three tax-free bond funds. Since their inception, Anthony R. Fischer, Jr., has been the portfolio manager responsible for the day-to-day management of the Portfolios. Mr. Fischer has over 25 years of experience in the money market industry. No Forum Series or Monarch Series incurs investment advisory fees directly. Rather, each Forum Series and its corresponding Monarch Series pay their pro-rata share of the investment advisory fee of the Portfolio in which they invest. Under an Investment Advisory Agreement with Core Trust (the "Core Advisory Agreement"), FIA is entitled to receive the following annual fee from the Portfolios: - ------------------------------------------------------- --------------------------------------------------- FEE AS A % OF THE ANNUAL AVERAGE DAILY NET ASSETS PORTFOLIOS OF THE PORTFOLIOS COMBINED - ------------------------------------------------------- --------------------------------------------------- Treasury Cash Portfolio, 0.06% for the first $200 million in assets, Cash Portfolio and 0.04% of the next $300 million in assets, Government Cash Portfolio and 0.03% of the remaining assets. - ------------------------------------------------------- ---------------------------------------------------
For the fiscal year ended August 31, 2002, the aggregate advisory fee paid to the Adviser from each Portfolio, as a percentage of its average net assets, were: - --------------------------------- -------------------- -------------------- -------------------- TREASURY CASH GOVERNMENT CASH CASH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - --------------------------------- -------------------- -------------------- -------------------- Advisory Fee 0.03% 0.03% 0.03% - --------------------------------- -------------------- -------------------- --------------------
Immediately after each Reorganization, each Monarch Series will withdraw its investment in its corresponding Portfolio and FIA, through Mr. Fischer, will manage the Monarch Series directly under an Investment Advisory Agreement with Monarch (the "Monarch Advisory Agreement"). The Monarch Advisory Agreement will be substantially similar to the Core Advisory Agreement and FIA will receive the same advisory fee from each of the Monarch Series, collectively, that it did from the Portfolios. 11 COMPARISON OF OTHER SERVICE PROVIDERS The following FFG affiliates serve as service providers to both the Trust and Monarch: (1) Forum Administrative Services, LLC ("FAdS") serves as administrator; (2) Forum Fund Services, LLC ("FFS") serves principal underwriter; (3) Forum Shareholder Services, LLC ("FSS") serves as transfer agent; (4) Forum Accounting Services, LLC serves as fund accountant; and (5) Forum Trust, LLC serves as custodian (collectively, the "Forum Companies"). Each of the Forum Companies is an indirect wholly owned subsidiary of FFG and is controlled by John Y. Keffer, the Chairman and President of the Trust and Monarch. FFG is indirectly controlled by John Y. Keffer. FFG and Mr. Keffer stand to benefit financially from each Reorganization in that the consolidation of the Money Market Assets under one registrant is expected to provide certain economies of scale that will effectively decrease the level of fee waivers required of FFG to maintain the net expenses of each Monarch Series at pre-Reorganization levels. Fee waivers are voluntary and may be reduced or eliminated at any time. COMPARISON OF CLASS STRUCTURES Each Monarch Series offers five (5) share classes - Preferred, Universal, Institutional, Institutional Service and Investor Shares. Each Forum Series offers three (3) share classes - Institutional, Institutional Service, and Investor Shares except Forum Treasury Fund which offers (2) share classes - Institutional and Institutional Service Shares. The following classes of each Forum Series will reorganize with and into the below referenced classes of the corresponding Monarch Series: - ---------------------------------------------------------- ------------------------------------------------------- FORUM SERIES/CLASS MONARCH SERIES/CLASS - ---------------------------------------------------------- ------------------------------------------------------- Forum Treasury Fund Monarch Treasury Fund - ---------------------------------------------------------- ------------------------------------------------------- Institutional Shares Universal Shares - ---------------------------------------------------------- ------------------------------------------------------- Institutional Service Shares Institutional Service Shares - ---------------------------------------------------------- ------------------------------------------------------- Forum Government Fund Monarch Government Fund - ---------------------------------------------------------- ------------------------------------------------------- Institutional Shares Universal Shares - ---------------------------------------------------------- ------------------------------------------------------- Institutional Service Shares Institutional Service Shares - ---------------------------------------------------------- ------------------------------------------------------- Investor Shares Investor Shares - ---------------------------------------------------------- ------------------------------------------------------- Forum Cash Fund Monarch Cash Fund - ---------------------------------------------------------- ------------------------------------------------------- Institutional Shares Universal Shares - ---------------------------------------------------------- ------------------------------------------------------- Institutional Service Shares Institutional Service Shares - ---------------------------------------------------------- ------------------------------------------------------- Investor Shares Investor Shares - ---------------------------------------------------------- -------------------------------------------------------
Institutional Shares of each Forum Series and Universal Shares of each Monarch Series are available for purchase by institutional investors. Institutional Service Shares of each Forum Series and Monarch Series are available for purchase by banks, trust companies, and certain other financial institutions for their own and customer accounts. Investor Shares of each Forum Series and Monarch Series are available for purchase by retail investors. The minimum initial investment for Institutional Shares of each Forum Series and Universal Series of each Monarch Series is $1 million while the minimum initial investment for Institutional Service Shares of each Forum Series and Monarch Series is $100,000. Institutional 12 and Institutional Service Shares of each Forum Series and Institutional Service Shares of each Monarch Series also have a minimum subsequent investment of $250. The minimum initial investment for Investor Shares of each Forum Series is as follows: - ------------------------------------------------ -------------------------------- ----------------------------- MINIMUM INITIAL INVESTMENT MINIMUM SUBSEQUENT INVESTMENT - ------------------------------------------------ -------------------------------- ----------------------------- Standard Accounts $10,000 $500 - ------------------------------------------------ -------------------------------- ----------------------------- Traditional and Roth IRA Accounts $2,000 $250 - ------------------------------------------------ -------------------------------- ----------------------------- Accounts with Systematic Investment Plans $250 $250 - ------------------------------------------------ -------------------------------- ----------------------------- Exchanges $2,000 $250 - ------------------------------------------------ -------------------------------- -----------------------------
The minimum initial investment for Investor Shares of each Monarch Series is $5,000. There is no minimum subsequent investment requirement for Investor Shares of a Monarch Series. KEY DIFFERENCES. In contrast to Institutional Shares and Investor Shares of each Forum Series, Universal Shares and Investor Shares of each Monarch Series do not have a minimum subsequent investment requirement. Moreover, the minimum initial investment for purchases of Investor Shares of a Forum Series ranges from $250 to $10,000 depending on the type of account or transaction involved whereas the minimum initial investment for all accounts and/or transaction types for investments in Investor Shares of a Monarch Series is $5,000. COMPARISON OF PURCHASE, REDEMPTION, AND EXCHANGE PRIVILEGES PURCHASE PROCEDURES. Each Forum Series and Monarch Series continuously offers its shares through FFS. You may purchase shares of each Forum Series and Monarch Series by check, wire, ACH payment, systematic investment, or through financial institutions. All checks must be made payable in U.S. dollars and drawn on U.S. financial institutions. No Forum Series or Monarch Series may accept purchases made by cash, cash equivalents (for instance, you may not pay by money order, cashier's check, bank draft or traveler's check), or credit card check. Purchases of Investor Shares of each Forum Series may also be made through systematic investments. Under a Forum Series' systematic investment plan, you may invest a specified amount of money in the Forum Series once or twice a month on specified dates. These payments are taken from your bank account by ACH payment. Systematic investments must be for at least $250. No Monarch Series offers a systematic investment plan with respect to Investor Shares. If you purchase shares directly from a Forum Series, you will receive monthly statements and a confirmation of each transaction. If you purchase shares directly from a Monarch Series, you will only receive monthly statements. If you purchase shares of either a Forum Series or a Monarch Series through a financial institution, the policies and fees charged by that institution may be different from those charged by the Forum Series or the Monarch Series. Purchases of shares of a Forum Series and a Monarch Series may be made on each weekday except on Federal holidays and other days that the Federal Reserve Bank of San Francisco is closed ("Business Day"). 13 You may purchase shares of a Forum Series or a Monarch Series at the net asset value ("NAV") of each class next calculated after FSS receives your request in proper form. Investments are not accepted or invested by a Forum Series or a Monarch Series during the period before receipt of funds on deposit at a Federal Reserve Bank ("Federal Funds"). Shares of a Forum Series or a Monarch Series become entitled to receive distributions on the day of purchase if the order and payment are received in proper form by FSS as follows: - ------------------------------------- ----------------------------------- ORDER MUST BE RECEIVED BY PAYMENT MUST BE RECEIVED BY - ------------------------------------- ----------------------------------- 2:00 p.m., Eastern time/ 4:00 p.m., Eastern time/ 11:00 a.m., Pacific time 1:00 p.m., Pacific time - ------------------------------------- ----------------------------------- KEY DIFFERENCES. Each Forum Series offers a systematic investment plan for investments in Investor Shares while its corresponding Monarch Series does not offer a similar plan with respect to its Investor Shares. Additionally, if you purchase shares directly from a Forum Series, you will receive monthly statements and confirmations of each transaction while if you purchase shares directly from a Monarch Series, you will only receive monthly statements. EXCHANGE PROCEDURES. Shareholders of a Forum Series may exchange their Institutional, Institutional Service, and Investor Shares for Institutional, Institutional Service and Investor Shares, respectively, of another Forum Series, or for Institutional, Institutional Service and Investor Shares of Daily Assets Government Fund, another money market series of the Trust, or for certain other Trust Series. Shareholders of a Monarch Series may exchange their Universal, Institutional Service, and Investor Shares for Universal, Institutional Service, and Investor Shares of another Monarch Series. Shareholders of a Monarch Series may also exchange their Institutional Service Shares for Institutional Service Shares of Daily Assets Government Obligations Fund, another Monarch Series. Not all classes of a Forum Series or a Monarch Series may be available for purchase in every state. Shares of the Trust's Daily Assets Government Fund, other series of the Trust, and Monarch's Daily Assets Government Obligations Fund also may not be available for purchase in every state. The Trust's Daily Assets Government Fund and Monarch's Daily Assets Government Obligations Fund have the same objective and investment policies and the Trust's Daily Assets Government Fund is expected to reorganize with and into Monarch's Daily Assets Government Obligations Fund, a newly organized series, prior to August 31, 2003. It is anticipated that Investor Shares and Institutional Shares of the Trust's Daily Assets Government Fund will cease operations prior to the reorganization of the fund with and into Monarch's Daily Assets Government Obligations Fund. REDEMPTION PROCEDURES. You may redeem shares of a Forum Series and a Monarch Series at the NAV next calculated for the shares after FSS receives your request in proper form. Shares of a Forum Series and a Monarch Series are not entitled to receive distributions declared on or after the day on which a redemption order is accepted by FSS. You may redeem shares of a Forum Series or a Monarch Series by mail, wire, or telephone. If FSS receives your wire redemption order with respect to shares of a Forum Series 14 or a Monarch Series after 2:00 p.m., Eastern time/11:00 a.m., Pacific time, FSS will wire proceeds to you on the next Business Day. Redemptions of Investor Shares of a Forum Series may also be made through systematic withdrawal. Under a Forum Series systematic withdraw plan, you may redeem a specified amount of money once a month on a specified date. These payments are sent from your shareholder account to a designated bank account by ACH payment. Systematic withdraws must be for at least $250. Redemptions of Investor Shares of a Monarch Series may be made by writing checks provided by the Monarch Series against your account balance. Monarch Series charge a $10 fee for all checks presented in amounts of less than $500 and deducts this fee directly from your shareholder account. KEY DIFFERENCES. In addition to redeeming shares by mail, wire, or by phone, you may redeem Investor Shares of a Forum Series pursuant to systematic withdrawals and you may redeem Investor Shares of a Monarch Series by writing checks provided by the Monarch Series against your account. COMPARISON OF DISTRIBUTION POLICIES Each Forum Series and Monarch Series declares distributions from its net investment income daily and pays those distributions monthly. In addition, each Forum Series and Monarch Series pays capital gain distributions at least annually. All distributions of each Forum Series and Monarch Series are reinvested in additional shares unless a shareholder elects to receive distributions in cash. COMPARISON OF DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Trust has adopted a Shareholder Service Plan with respect to Institutional Service Shares and Investor Shares of each Forum Series. Under the Shareholder Service Plan, the Trust may pay FAdS a shareholder service fee of up to 0.20% and 0.25%, respectively, of the average daily net assets of Institutional Service Shares and Investor Shares of each Forum Series. FAdS may pay any or all of these fees to various financial institutions that provide shareholder servicing to their customers who hold Institutional Service Shares and Investor Shares of a Forum Series. Similarly, Monarch has adopted a Shareholder Service Agreement with respect to Institutional Service Shares and Investor Shares of each Monarch Series. Under the Shareholder Service Agreement, Monarch may pay FAdS a shareholder service fee of up to 0.20% of the average daily net assets of each of Institutional Service Shares and Investor Shares of each Monarch Series. FAdS may pay any or all of these fees to various financial institutions that provide shareholder servicing to their customers who hold Institutional Service Shares and Investor Shares of a Monarch Series. 15 The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") under which the Trust pays FFS a distribution fee at an annual rate of up to 0.50% of the average daily net assets of the Investor Shares of each Forum Series. The Board's approval of the Distribution Plan was subject to the condition that FFS would not charge a distribution fee at an annual rate of more than 0.30% of the average daily net assets of Investor Shares of a Forum Series without additional Board approval. Similarly, Monarch has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act under which Monarch pays FFS a distribution fee at an annual rate of up to 0.25% of the average daily net assets of the Investor Shares of each Monarch Series. KEY DIFFERENCES. The shareholder servicing fee authorized under the Monarch Shareholder Service Agreement for Investor Shares of a Monarch Series is 0.05% lower than the shareholder servicing fee authorized under the Trust's Shareholder Service Plan for Investor Shares of a Forum Series. Additionally, the distribution fee authorized under the Monarch Distribution Plan for Investor Shares of a Monarch Series is 0.05% lower than the distribution fee authorized by the Board with respect to the Trust's Distribution Plan for Investor Shares of a Forum Series. COMPARISON OF NET ASSET VALUE CALCULATION PROCEDURES Each Forum Series and Monarch Series calculates its NAV as of 4:00 p.m., Eastern time/1:00 p.m., Pacific time on each Business Day. The time at which NAV is calculated may be changed in case of an emergency. In order to maintain a stable NAV of $1.00 per share, each Forum Series and Monarch Series values securities in its portfolio on an amortized cost basis. TAX MATTERS RELATING TO THE REORGANIZATION The Trust will receive an opinion from __________________________, counsel to Monarch and Monarch's Independent Trustees, to the effect that each Reorganization will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the "Code"). Consequently, no gain or loss will be recognized for federal income tax purposes by a Forum Series, the corresponding Monarch Series, or their respective shareholders as a result of a Reorganization. There is additional information about the federal income tax consequences of the Reorganizations under "Taxation." INVESTMENT RISKS An investment in a Forum Series or a Monarch Series 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 Forum Series and Monarch Series seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Forum Series or Monarch Series. There is also no assurance that any Forum Series or Monarch Series will achieve its investment objective. An investment in a Forum Series or a Monarch Series is not by itself a complete or balanced investment program. 16 The principal risks of investing in a Forum Series and a Monarch Series and the Portfolio in which they invest are: INTEREST RATE RISK. Interest rates may affect the value of a Portfolio's investments. Increases in interest rates may cause a decline in the value of a Portfolio's investments. In addition, those increases may cause the investment performance of the corresponding Forum Series and Monarch Series to underperform currently available investments. CREDIT RISK. The value of a security held by a Portfolio may decline if the security's credit rating is downgraded or credit quality otherwise falls. In the worst case, an issuer of a security or a Repurchase Agreement counterparty may 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. Generally, credit risk is greatest for Cash Portfolio/Forum Cash Fund/Monarch Cash Fund followed by Government Cash Portfolio/Forum Government Fund/Monarch Government Fund and then Treasury Cash Portfolio/Forum Treasury Fund/Monarch Treasury Fund. MANAGEMENT RISK. As with all mutual funds, the Portfolio's investment adviser may make poor investment decisions. The above risks can result in a decrease in the value of a security or all the securities owned by a Portfolio and, therefore, cause a change in the $1.00 per share value of the corresponding Forum Series and Monarch Series. These risks also can result in lower investment performance of the applicable Forum Series and Monarch Series. As discussed previously, immediately after the Reorganizations, each Monarch Series will withdraw its investment in Core Trust and invest directly in securities. The risks associated with an investment in each Monarch Series will remain unchanged as a result of the underlying Reorganization and the subsequent withdraw of its investment in Core Trust. INFORMATION ABOUT THE PLAN This section summarizes the material terms of the Plan. This section is qualified in its entirety by the terms and conditions contained in the Plan, a form of which is attached as Exhibit A to this Proxy Statement/Prospectus. GENERAL DESCRIPTION OF THE PLAN The Plan is the second stage of a larger transaction to consolidate the Money Market Assets of the Trust, Core Trust and Monarch in order to take advantage of the economies of scale and operational efficiencies that would result from the combination of the Money Fund Assets into one registrant. The first stage involved the reorganization of Monarch from a Delaware business trust into a Massachusetts business trust on April __, 2003. The final stage includes the redemption of each Monarch Series investment in Core Trust after the consummation of the Plan. 17 Under the Plan, each Forum Series will transfer its assets to a corresponding Monarch Series with the same investment objective, policies and risks in exchange for shares of the Monarch Series and the Monarch Series' assumption of applicable Forum Series' liabilities. Each Forum Series will distribute the shares received from the Monarch Series proportionately to its shareholders and then terminate. Each Forum Series' shareholder holding Institutional, Institutional Service, and Investor Shares will receive Universal, Institutional Service, and Investor Shares, respectively, of the corresponding Monarch Series. The Plan contains customary representations, warranties, and conditions designed to ensure that a Reorganization is fair to the applicable Forum Series and its shareholders. The Plan provides that the consummation of a Reorganization is contingent upon, among other things, approval of the Plan by the applicable Forum Series' shareholders. The Plan may be terminated with respect to a Reorganization if, on the Closing Date, any of the applicable conditions have not been met or if the representations and warranties are not true, or if the Board determines that consummation of a Reorganization is not in the best interest of the applicable Forum Series. The Plan also provides that all of the audit, legal and proxy solicitation costs of each Reorganization will be borne by FFG. FFG currently provides administrative, transfer agency, fund accounting and custody services to each Forum Series and Monarch Series. The Closing Date of each Reorganization is ____________, 2003. The Board and the Monarch Board, by agreement, may change the Closing Date of a Reorganization. The approval of the Plan by shareholders of one Forum Series is not contingent on the approval of the Plan by the shareholders of another Forum Series. If shareholders of a Forum Series vote to approve the Plan, that Forum Series will reorganize into the corresponding Monarch Series regardless of whether shareholders of another Forum Series approve the Plan. If the shareholders of a Forum Series do not approve the Plan, the Reorganization related to that Forum Series will not take place. If a Forum Series' shareholders approve the Plan, shares of the Forum Series will no longer be offered for sale, except for the reinvestment of dividend and capital gain distributions or through established automatic investment plans. From the date of Shareholder approval until the close of business on the Closing Date, shareholders may continue to add to their existing account only through an established automatic investment plan or through the reinvestment of dividend and capital gain distributions. If shareholders of a Forum Series approve the Plan, the stock transfer books of that Forum Series will be permanently closed as of 4:00 p.m., Eastern time, on the Closing Date. The Forum Series' will only accept requests for redemption received in proper form before 4:00 p.m., Eastern time, on the business day immediately preceding the Closing Date. Requests received after that time will be considered requests to redeem shares of the corresponding Monarch Series. 18 SECURITIES TO BE ISSUED The Trust, a Delaware business trust, is subject to Delaware law while Monarch, a Massachusetts business trust, is subject to Massachusetts' law. Delaware law provides that the Trust's shareholders are entitled to the same limitations of personal liability extended to stockholders of private corporations for profit. The Trust's Trust Instrument contains an express disclaimer of shareholder liability for the debts, liabilities, obligations and expenses of each Forum Series and provides for indemnification out of each Forum Series' property of any shareholder or former shareholder held personally liable for the obligations of the Forum Series. The Trust's Trust Instrument also provides that each Forum Series shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Forum Series and satisfy any judgment thereon. Thus, the risk of a shareholder of a Forum Series 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 the Forum Series is unable to meet its obligations. Under Massachusetts law, shareholders of a Monarch Series may, under certain circumstances, be held personally liable for the obligations of the Monarch Series. Monarch's Agreement and Declaration of Trust, however, provides substantially similar shareholder indemnification coverage as that which is included in the Trust's Trust Instrument. Both the Trust and Monarch are authorized to issue an unlimited number of authorized shares of beneficial interest, no par value. The Board and the Monarch Board may, without shareholder vote, divide the authorized shares into an unlimited number of separate portfolios or series. The Board and the Monarch Board may also, without shareholder approval, divide series into two or more classes of shares. Each share of each series of the Trust and Monarch, regardless of the share class, has equal distribution, liquidation and voting rights, and fractional shares have these rights proportionately. Each share class of the Trust and of Monarch bears its own expenses related to the distribution of the shares (and certain other expenses such as transfer agency, shareholder service and administration expenses). Generally, shares of the Trust and Monarch 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; (2) the 1940 Act requires a class vote; or (3) the Board or the Monarch Board, as applicable, determines that the matter affects more than one series and all affected series must vote. Neither Delaware nor Massachusetts law requires the Trust or Monarch, respectively, to hold annual meetings of shareholders, and generally the Trust and Monarch will hold shareholder meetings only when required by federal or state law. Shareholders of the Trust or Monarch representing 10% or more of the Trust's or Monarch's (or a series thereof) shares may, as set forth in their respective organizational documents, call meetings of the Trust or Monarch (or a series thereof), as applicable, for any purpose related to the Trust or Monarch (or a series thereof), as applicable, including, the removal of one or more Trustees. 19 There are no conversion or preemptive rights in connection with shares of the Trust or Monarch. All shares of the Trust and Monarch are fully paid and non-assessable. A shareholder of a Forum Series or a Monarch 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. KEY DIFFERENCE. In contrast to the Forum Series, a Monarch Series may reorganize into or merge with another registered, open-end investment company without a shareholder vote. REASONS FOR THE PLAN At a meeting held on February 11, 2003, the Board, including the Independent Trustees, unanimously approved the Plan and determined that each Reorganization contemplated by the Plan would be in the best interests of the applicable Forum Series' shareholders. In considering the Plan, the Board considered that FFG would no longer support fee waivers required to maintain the expenses of each Forum Series at prior levels. The Board, including the Independent Trustees, also concluded (with the advice and assistance of independent legal counsel) that each Reorganization would provide certain benefits to the shareholders of each Forum Series based on the following information provided during the meeting: 1. Cost Savings: Each Reorganization would eliminate the marketing and management overlap arising from operating different funds with the same investment objective in a Core and Gateway structure. 2. Dilution: The Plan includes provisions intended to avoid dilution of shareholders' interests of the shareholders of each Forum Series. Under the Plan, each Forum Series shareholder will receive shares of a corresponding class of the Monarch Series equal in value to its share of the net assets of the class of the Forum Series held. Consequently, the Board, including the Independent Trustees, determined that the Reorganizations would not dilute the interests of the shareholders of the applicable Forum Series. 3. Similarity of Investment Objectives and Policies: Each Forum Series and its corresponding Monarch Series have the same investment objective - to provide high current income consistent with preservation of capital and the maintenance of liquidity. Each Forum Series and its corresponding Monarch Series also share the same investment policies. 4. Expenses: Although certain service provider fees of each Monarch Series are higher than those currently charged to its corresponding Forum Series counterpart, the Reorganization will result in lower gross expenses for the Forum Series and the same net expenses. The consolidation of Money Market Assets under one registrant is expected to provide certain economies of scale that will effectively decrease the level of fee waivers required of FFG to maintain the net expenses of each Monarch Series at pre-Reorganization levels. The Board noted, 20 however, that fee waivers are voluntary and may be reduced or eliminated at any time. 5. Portfolio Management: Each Reorganization would result in a continuity of portfolio management. Prior to each Reorganization, each Forum Series and its corresponding Monarch Series will invest substantially all of their assets in the same series of Core Trust managed by FIA. Immediately after the Reorganizations, each Monarch Series will withdraw its investment from Core Trust and be managed directly by FIA. 6. Tax-Free Nature of the Reorganization: It is anticipated that each Reorganization will be accomplished without federal tax consequences for the Forum Series, Monarch Series and their respective shareholders. 7. Transaction Costs: The audit, legal and proxy solicitation costs of each Reorganization will be borne by FFG. THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN. TAXATION Each Forum Series and Monarch Series has similar tax treatment and each intends to qualify each fiscal year to be treated as a regulated investment company (a "RIC") under the Code. As a RIC, each Forum Series and Monarch Series generally will not be liable for federal income taxes on the net investment income and capital gain distributed to its shareholders. Each Forum Series and Monarch Series intends to distribute all of its net income and net capital gains each year. Accordingly, no Forum Series or Monarch Series should be subject to federal income or excise taxes. TAX CONSEQUENCES OF DISTRIBUTIONS The distribution of net income (including short-term capital gain) by a Forum Series or a Monarch Series is taxable as ordinary income. The distribution of long-term capital gain, if any, by a Forum Series or a Monarch Series is taxable as long-term capital gain regardless of how long shares are held. Each Forum Series and Monarch Series expects that its distributions will primarily consist of net income or short-term capital gain, if any, as opposed to long-term capital gain. Distributions by a Forum Series and a Monarch Series may also be subject to certain state and local taxes. Shareholders of a Forum Series or a Monarch Series that are not U.S. citizens or residents and that are not considered to be engaged in a U.S. trade or business under the Code generally will be subject to withholding tax at a 30% rate on distributions of either Series' net income, including net short-term capital gains. This rate may be reduced under an applicable income tax treaty. Net capital gain distributions by either Series generally will not be subject to withholding tax for such shareholders. 21 TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN As a condition to the consummation of each Reorganization, the Trust and Monarch will receive an opinion from __________________ to the effect that, based on the facts and assumptions stated in the Plan as well as certain representations by the Trust and Monarch including those in the Plan, for federal income tax purposes: (1) Each Monarch Series' acquisition of its corresponding Forum Series' assets in exchange solely for that Monarch Series' shares and its assumption of that Forum Series' liabilities, followed by that Forum Series' distribution of those shares PRO RATA to its shareholders constructively in exchange for their Forum Series shares, will constitute a "reorganization" (as defined in section 368(a)(1)(C) of the Code), and each Forum Series and Monarch Series will be "a party to a reorganization" (within the meaning of section 368(b) of the Code); (2) Each Forum Series will recognize no gain or loss on the transfer of its assets to its corresponding Monarch Series in exchange solely for that Monarch Series' shares and that Monarch Series' assumption of that Forum Series' liabilities or on the subsequent distribution of those shares to that Forum Series' shareholders in constructive exchange for their Forum Series shares: (3) Each Monarch Series will recognize no gain or loss on its receipt of the transferred assets in exchange solely for its shares and its assumption of its corresponding Forum Series' liabilities; (4) Each Monarch Series' basis in the transferred assets will be the same as its corresponding Forum Series' basis therein immediately before the Reorganization, and each Monarch Series' holding period for those assets will include its corresponding Forum Series' holding period therefor; (5) Each Forum Series shareholder will recognize no gain or loss on the constructive exchange of all its Forum Series shares solely for the corresponding Monarch Series' shares pursuant to the Reorganization; and (6) Each Forum Series shareholder's aggregate basis in the corresponding Monarch Series' shares it receives in the Reorganization will be the same as the aggregate basis in its Forum Series shares it constructively surrenders in exchange for those Monarch Series shares, and its holding period for those Monarch Series shares will include its holding period for those Forum Series shares, provided the shareholder holds them as capital assets on the Closing Date. The tax opinion will state that no opinion is expressed as to the effect of a Reorganization on each Forum Series and Monarch Series or any shareholder thereof with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. 22 Shareholders of each Forum Series should consult their tax advisers regarding the effect on them, if any, of the Reorganization in which that Forum Series is participating in light of their individual circumstances. Because the foregoing discussion only relates to the federal income tax consequences of the Reorganizations, those shareholders also should consult their tax advisers about state and local tax consequences, if any, of that Reorganization. CAPITALIZATION The following tables set forth the capitalization of each class of each Forum Series as of August 31, 2002 and, on a pro forma combined basis, the capitalization of each applicable class of the corresponding Monarch Series as of August 31, 2002, assuming that the Plan is approved and the applicable Reorganization is consummated. FORUM TREASURY FUND/MONARCH TREASURY FUND ------------------- ----------------- -- ------------------ ------------------ PRO FORMA PRO FORMA FORUM MONARCH FORUM MONARCH TREASURY FUND TREASURY FUND TREASURY FUND TREASURY FUND ------------------- ----------------- -- ------------------ ------------------ INSTITUTIONAL UNIVERSAL INSTITUTIONAL INSTITUTIONAL SHARES SHARES SERVICE SHARES SERVICE SHARES - --------------------------------------- ------------------- ----------------- -- ------------------ ------------------ Net Assets - --------------------------------------- ------------------- ----------------- -- ------------------ ------------------ Net Asset Value Per Share - --------------------------------------- ------------------- ----------------- -- ------------------ ------------------ Shares Outstanding - --------------------------------------- ------------------- ----------------- -- ------------------ ------------------
FORUM GOVERNMENT FUND/MONARCH GOVERNMENT FUND - ------------------- ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- PROFORMA PROFORMA PROFORMA FORUM MONARCH FORUM MONARCH FORUM MONARCH GOVERNMENT FUND GOVERNMENT FUND GOVERNMENT FUND GOVERNMENT FUND GOVERNMENT FUND GOVERNMENT FUND ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - ------------------- ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- Net Assets - ------------------- ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- Net Asset Value Per Share - ------------------- ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- Shares Outstanding - ------------------- ---------------- ----------------- -- ---------------- ----------------- -- ---------------- ----------------- FORUM CASH FUND/MONARCH CASH FUND - ------------------- ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ---------------- PROFORMA PROFORMA PROFORMA FORUM CASH FUND MONARCH CASH FORUM CASH FUND MONARCH CASH FORUM CASH FUND MONARCH CASH FUND FUND FUND ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ---------------- INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL UNIVERSAL SERVICE SERVICE INVESTOR INVESTOR SHARES SHARES SHARES SHARES SHARES SHARES - ------------------- ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ---------------- Net Assets - ------------------- ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ---------------- Net Asset Value Per Share - ------------------- ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ---------------- Shares Outstanding - ------------------- ----------------- ---------------- -- ----------------- ---------------- -- ----------------- ----------------
VOTING INFORMATION This Proxy Statement/Prospectus is being furnished by the Board in connection with the solicitation of proxies for the Special Meeting of Forum Series shareholders. Solicitation of proxies will be primarily by mail. Officers of the Trust may also solicit proxies by telephone, facsimile, or in person. The costs of solicitation will be borne by the FFG and are estimated to be under $___. 23 Each share of each Forum Series is entitled to one vote. Approval of the Plan by each Forum Series requires the affirmative vote of the lesser of (a) 67% or more of the shares of the Forum Series present at the Special Meeting or represented by proxy if the holders of more than 50% of the outstanding shares are present or represented by proxy at the Special Meeting or (b) more than 50% of the outstanding shares of the Forum Series. Shareholders holding one third of the outstanding shares of each Forum Series as of the Record Date present in person or by proxy will constitute a quorum for the transaction of business at the Special Meeting. For purposes of determining the presence of a quorum and counting votes on the matters presented, shares represented by abstentions and "broker non-votes" will be counted as present, but not votes cast at the Special Meeting and therefore will have the effect of voting "AGAINST" the proposal. Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners and other persons entitled to vote for which the broker lacks discretionary voting authority. You may vote on the Plan on behalf of a Forum Series in which you invest by utilizing one of the following options: BY MAIL: Complete the proxy card enclosed with the Proxy Statement/Prospectus ("Proxy Card") and return it in the postage paid envelope provided. BY TELEPHONE: Call the Toll-Free number on your proxy card. IN PERSON: Attend the Special Meeting in person at 10:00 a.m. (Eastern time) on _________, 2003 at the offices of Forum Financial Group, LLC, Two Portland Square, 2nd Floor Conference Room, Portland, Maine 04101. If you plan to vote by mail, you should complete the Proxy Card by: 1. Indicating whether you vote "FOR", "AGAINST", or "ABSTAIN" from voting on the Plan by checking the appropriate box on the Proxy Card; 2. Signing and dating the Proxy Card; and 3. Returning it to FSS in the enclosed postage-paid envelope. Any shareholder may revoke his or her proxy at any time before it is voted by giving written notice of revocation or by executing and delivering a later dated proxy to FSS at Two Portland Square, Portland, Maine, 04101, or by personally casting a vote at the Meeting. To change a vote by written notice of revocation, you must provide FSS with a "Revocation Letter" that: 1. Identifies yourself; 2. States that as shareholder of a Forum Series, you revoke your prior decisions as set forth in the previously returned Proxy Card; and 3. Indicates your approval, disapproval or abstention from voting on the Plan. If you do not specify a choice on a proxy card that is properly executed and returned in time to be voted at the Special Meeting, it will be voted "FOR" the approval of the Plan. 24 If you do not plan to attend the Special Meeting of Shareholders of the Forum Series in which you invest on _________, 2003, FSS must receive your vote by mail or telephone on or before _________, 2003. If you do not return your Proxy Card by that date or you abstain from voting, you will be treated as having voted "AGAINST" the Plan. It is not anticipated that any matters other than the approval of the Plan will be brought before the meeting. Should other business be brought before the meeting, it is intended that all proxies will be voted in accordance with the judgment of the persons named as proxies. If sufficient votes in favor of approving the Plan are not received by the time scheduled for the meeting, the persons named as proxies may propose one or more adjournments of the meeting for a reasonable period of time to permit further solicitation of proxies. Any adjournment will require the affirmative vote of a majority of the votes cast on the question in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies will vote "FOR" adjournment those proxies required to be voted "FOR" the approval of the proposal. The persons named as proxies will vote "AGAINST" adjournment those proxies required to be voted "AGAINST" the proposal. The costs of any additional solicitation and of any adjourned session will be paid by FFG. INSTRUCTIONS FOR SIGNING PROXY CARDS The following general rules for signing proxy cards may be of assistance to you and avoid the time and expense to the Forum Series involved in validating your vote if you fail to sign your proxy card properly. 1. Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card. 2. Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to the name shown in the registration on the proxy card. 3. All Other Accounts: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the form of registration. For example: REGISTRATION VALID SIGNATURE ------------ --------------- CORPORATE ACCOUNTS ------------------ (1) ABC Corp...................................... ABC Corp. John Doe, Treasurer (2) ABC Corp...................................... John Doe, Treasurer (3) ABC Corp. c/o John Doe, Treasurer............. John Doe (4) ABC Corp. Profit Sharing Plan................. John Doe, Director PARTNERSHIP ACCOUNTS -------------------- (1) The XYZ Partnership........................... Jane B. Smith, Partner (2) Smith and Jones, Limited Partnership.......... Jane B. Smith, General Partner TRUST ACCOUNTS -------------- (1) ABC Trust Account............................. Jane B. Doe, Director (2) Jane B. Doe, Director u/t/d 12/28/78.......... Jane B. Doe CUSTODIAL OR ESTATE ACCOUNTS ---------------------------- (1) John B. Smith, Cust. f/b/o John B. Smith, Jr. 25 UGM/UTMA...................................... John B. Smith (2) Estate of John B. Smith....................... John B. Smith, Executor INFORMATION REGARDING SHARES OF EACH FORUM SERIES OUTSTANDING Only shareholders of a Forum Series on ____________, 2003 (the "Record Date") are entitled to notice of and to vote at the Special Meeting. As of ___________, 2003, shares outstanding of each Forum Series were: TRUST SERIES CLASS OUTSTANDING SHARES Forum Treasury Fund Institutional Shares Forum Treasury Fund Institutional Service Shares Forum Government Fund Institutional Shares Forum Government Fund Institutional Service Shares Forum Government Fund Investor Shares Forum Cash Fund Institutional Shares Forum Cash Fund Institutional Service Shares Forum Cash Fund Investor Shares As of _____, 2003, the Trust's officers and Trustees, as a group, owned less than 1% of each class of each Forum Series. From time to time, certain shareholders may own a large percentage of the shares of a Forum Series. Accordingly, those shareholders may be able to greatly affect (if not determine) the outcome of a shareholder vote. As of ______________, 2003, and to the best of the Trust's knowledge and belief, the following persons beneficially owned 25% or more of the shares of a Forum Series and may be deemed to control the Forum Series. For each person that is a company, the jurisdiction under the laws of which the company is organized and the company's parents are listed. - ---------------------------------------- -------------------------------------- ------------------------------------- NAME NUMBER OF SHARES PERCENTAGE OF FUND SHARES OWNED ADDRESS OWNED - ---------------------------------------- -------------------------------------- ------------------------------------- - ---------------------------------------- -------------------------------------- -------------------------------------
As of ____________, 2003, and to the best of the Trust's knowledge, the following shareholders owned beneficially or of record 5% or more of a Forum Series or a class thereof: - --------------------------- ----------------------------- ----------------------------- ----------------------------- NAME NUMBER OF SHARES OWNED PERCENTAGE OF CLASS OWNED PERCENTAGE OF FUND SHARES ADDRESS OWNED - --------------------------- ----------------------------- ----------------------------- ----------------------------- - --------------------------- ----------------------------- ----------------------------- -----------------------------
INFORMATION REGARDING SHARES OF EACH MONARCH SERIES OUTSTANDING As of ______, 2003, shares outstanding of each Monarch Series were: TRUST SERIES CLASS OUTSTANDING SHARES Monarch Treasury Fund Universal Shares Monarch Treasury Fund Institutional Service Shares Monarch Government Fund Universal Shares Monarch Government Fund Institutional Service Shares Monarch Government Fund Investor Shares Monarch Cash Fund Universal Shares Monarch Cash Fund Institutional Service Shares Monarch Cash Fund Investor Shares As of _____, 2003, Monarch's officers and Trustees as a group owned less than 1% of each class of each Monarch Series. From time to time, certain shareholders may own a large percentage of the shares of a Monarch Series. Accordingly, those shareholders may be able to greatly affect (if not determine) the outcome of a shareholder vote. As of ______________, 2003, and to the best of Monarch's knowledge and belief, the following persons beneficially owned 25% or more of the shares of a Monarch Series and may be deemed to control the Monarch Series. For each person that is a company, the jurisdiction under the laws of which the company is organized and the company's parents are listed. 26 - ---------------------------------------- -------------------------------------- ------------------------------------- NAME NUMBER OF SHARES PERCENTAGE OF FUND SHARES OWNED ADDRESS OWNED - ---------------------------------------- -------------------------------------- ------------------------------------- - ---------------------------------------- -------------------------------------- -------------------------------------
As of ____________, 2003, and to the best of Monarch's knowledge, the following shareholders owned beneficially or of record 5% or more of a Monarch Series or a class thereof: - ---------------------------- ----------------------------- ----------------------------- ---------------------------- NAME NUMBER OF SHARES OWNED PERCENTAGE OF CLASS OWNED PERCENTAGE OF FUND SHARES ADDRESS OWNED - ---------------------------- ----------------------------- ----------------------------- ---------------------------- - ---------------------------- ----------------------------- ----------------------------- ----------------------------
ADDITIONAL INFORMATION LEGAL MATTERS Seward & Kissel LLP ("S&K") serves as counsel for each Forum Series and the Trust. S&K does not represent FIA or FFS regarding the Plan or any related transaction. Kirkpatrick & Lockhart LLP ("K&L") serves as counsel to the Trust's Independent Trustees and does not represent FIA or FFS regarding the Plan or any related transaction. K&L also serves as counsel to Monarch and its Independent Trustees. EXPERTS __________ are the independent accountants for each Forum Series and each Monarch Series. _________ is considered to be an expert due to its experience in auditing and accounting. Please refer to Exhibits B and C to this Proxy Statement/Prospectus for financial highlight information for Institutional, Institutional Service, and Investor Shares of each Forum Series and for Universal, Service (now known as Institutional Service), and Investor Shares of each Monarch Series, respectfully. INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION This Proxy Statement/Prospectus and the related Statement of Additional Information does not contain all of the information set forth in the registration statements and exhibits of each Forum Series or Monarch Series filed with the SEC under the Securities Act of 1933, as amended, and the 1940 Act. [Information to be incorporated by reference to be added by pre-effective amendment]. The Trust, on behalf of each Forum Series, and Monarch, on behalf of each Monarch Series, file proxy materials, reports and other information with the SEC in accordance with the informational requirements of the Securities Act of 1934, as amended, and the 1940 Act. These materials can be inspected and copied at the SEC's Public Reference Room at 450 Fifth Street NW, Washington, D.C. 20549, and at the SEC's regional and district offices located at 73 Tremont Street, Suite 600, Boston, MA 02108-3912, 601 Walnut Street, Suite 1120E, Philadelphia, PA 19106 3475 Lenox Road, N.E., Suite 1000, Atlanta, GA 30326 and 175 Jackson Boulevard, Suite 900, Chicago, IL 60604. Copies of such materials can also be obtained 27 by mail from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549 at prescribed rates. 28 EXHIBIT A AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (the "PLAN") is made as of this ___ day of _______, 2003, by and between Monarch Funds (the "Trust"), a Massachusetts business trust, for itself and on behalf of its series listed in the Acquiring Funds column below (each an "Acquiring Fund") and Forum Funds ("Forum"), a Delaware statutory trust, for itself and on behalf of its series listed in the Target Funds column below (each a "Target Fund"). - ------------------------------------------------------------ --------------------------------------------------------- Acquiring Funds TARGET FUNDS - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- Daily Assets Treasury Fund Daily Assets Treasury Obligations Fund - ------------------------------------------------------------ --------------------------------------------------------- Daily Assets Government Fund Daily Assets Government Obligations Fund - ------------------------------------------------------------ --------------------------------------------------------- Daily Assets Cash Fund Daily Assets Cash Fund - ------------------------------------------------------------ ---------------------------------------------------------
WHEREAS, the parties desire that each Acquiring Fund acquire the assets and assume the liabilities of the Target Fund listed opposite the Acquiring Fund ("Corresponding Target Fund") in exchange for shares of equal value of the Acquiring Fund and the distribution of the shares of the Acquiring Fund to the shareholders of the Corresponding Target Fund in connection with the dissolution and liquidation of the Corresponding Target Fund (each a "REORGANIZATION"); and WHEREAS, the parties, for convenience, have structured this Plan so that it generally refers to a single Reorganization between a single Acquiring Fund and its Corresponding Target Fund, but intend for this Plan and its terms and conditions to apply to each Reorganization; and WHEREAS, the parties intend that the Reorganization qualify as a "reorganization," within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and that the Acquiring Fund and the Target Fund each be a "party to a reorganization," within the meaning of Section 368(b) of the Code, with respect to the Reorganization; NOW, THEREFORE, in accordance with the mutual promises described herein, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings: 1940 ACT The Investment Company Act of 1940, as amended. ACQUIRING CLASS The class of the Acquiring Fund whose shares that the Trust will issue to the shareholders of the Corresponding Target Class set forth in Schedule A. ASSETS All property and assets of any kind and all interests, rights, privileges and powers of or attributable to the Target Fund whether or not determinable at the Effective Time and wherever located. Assets include all cash, cash equivalents, securities, claims (whether absolute or contingent, Known or unknown, accrued or unaccrued or conditional or unmatured), contract rights and receivables (including dividend and interest receivables) owned by or attributed to the Target Fund and any deferred or prepaid expense shown as an asset on the Target Fund's books. ASSETS LIST A list of securities and other Assets and Known Liabilities of or attributable to the Target Fund as of the date provided to the Trust. CLOSING DATE A date that the parties agree to in writing. A-1 CORRESPONDING TARGET CLASS The Target Fund share class set forth opposite the Acquiring Class in Schedule A. EFFECTIVE TIME 9:00 a.m. Eastern time on the business day following the Closing Date, or such other time as the parties may agree to in writing. FUND The Acquiring Fund or the Target Fund as the context may require. KNOW, KNOWN OR KNOWLEDGE Known after reasonable inquiry. LIABILITIES All liabilities of, allocated or attributable to the Target Fund, whether Known or unknown, accrued or unaccrued, absolute or contingent or conditional or unmatured. N-14 REGISTRATION STATEMENT The Trust's Registration Statement on Form N-14 under the 1940 Act that will register the shares of the Acquiring Fund to be issued in the Reorganization and will include the proxy materials necessary for shareholders of the Target Fund to approve the Reorganization. NET VALUE OF ASSETS Value of Assets net of Liabilities. REORGANIZATION DOCUMENTS Such bills of sale, assignments and other instruments as desirable for the Target Fund to transfer to the Acquiring Fund all right and title to and interest in the Target Fund's Assets and for the Acquiring Fund to assume the Target Fund's Liabilities. SCHEDULE A Schedule A to this Plan. TARGET FINANCIAL STATEMENTS The audited financial statements of the Target Fund for its most recently completed fiscal year and, if applicable, the unaudited financial statements of the Target Fund for its most recently completed semi-annual period. VALUATION TIME The time on the Closing Date, the business day immediately preceding the Closing Date if the Closing Date is not a business day, or such other date as the parties may agree to in writing, that the Trust determines the net asset value of the shares of the Acquiring Fund and determines the net value of the Assets of or attributable to the Target Fund. Unless otherwise agreed to in writing, the Valuation Time shall be at the time of day then set forth in the Target Fund's Registration Statement on Form N-1A as the time of day at which net asset value is calculated. 2. REGULATORY FILINGS AND SHAREHOLDER ACTION. (a) The Trust shall promptly prepare and file the N-14 Registration Statement with the SEC. The Trust and Forum shall promptly prepare and file any other appropriate regulatory filings, including, without limitation, filings with federal, state or foreign securities regulatory authorities. (b) The parties shall seek an order of the SEC, if appropriate, providing them with any necessary relief from Section 17 of the 1940 Act to permit them to consummate the transactions contemplated by this Plan. (c) As soon as practicable after the effective date of the N-14 Registration Statement, the Target Fund shall hold a shareholder meeting to consider and approve this plan, the Reorganization and such other matters as the Target Fund's Board of Trustees may determine. A-2 3. TRANSFER OF ASSETS. The Trust and Forum shall take the following steps with respect to the Reorganization: (a) On or prior to the Closing Date, Forum shall endeavor to pay or make reasonable provision to pay out of the Assets all of the Liabilities, expenses, costs and charges of or attributable to the Target Fund that are Known to the Target Fund and that are due and payable as of the Closing Date. (b) At the Effective Time, Forum shall assign, transfer, deliver and convey all of the Assets to the Acquiring Fund, subject to all of the Liabilities. The Trust shall then accept the Assets and assume the Liabilities such that at and after the Effective Time (i) all of the Assets at or after the Effective Time shall become and be the assets of the Acquiring Fund and (ii) all of the Liabilities at the Effective Time shall attach to the Acquiring Fund, enforceable against the Acquiring Fund to the same extent as if initially incurred by the Acquiring Fund. (c) Forum shall assign, transfer, deliver and convey the Assets to the Acquiring Fund at the Effective Time on the following bases: (1) In exchange for the transfer of the Assets, the Trust shall simultaneously issue and deliver to the Target Fund full and fractional shares of beneficial interest of each Acquiring Class. The Trust shall determine the number of shares of the Acquiring Class to be issued by dividing the Net Value of Assets of the Corresponding Target Class by the net asset value of one Acquiring Class share. Based on this calculation, the Trust shall issue shares of beneficial interest of each Acquiring Class with an aggregate net asset value equal to the Net Value of the Assets of the Corresponding Target Class. (2) The parties shall determine, as of the Valuation Time, the net asset value of the Acquiring Fund shares to be delivered and the net asset value of the Assets to be conveyed, substantially in accordance with the Trust's current valuation procedures. The parties shall make all computations to the fourth decimal place or such other decimal place as the parties may agree to in writing. (3) Forum shall transfer the Assets with good and marketable title to the Trust for the benefit the Acquiring Fund. Forum shall transfer all cash in the form of immediately available funds payable to the order of the Trust for the benefit of the Acquiring Fund. Forum shall transfer any of the Assets that were not transferred to the Trust at the Effective Time to the Trust at the earliest practicable date thereafter. (d) Promptly after the Closing Date, Forum will deliver to the Trust a Statement of Assets and Liabilities of the Target Fund as of the Closing Date (usually within one week). 4. DISSOLUTION AND LIQUIDATION OF THE TARGET FUND, REGISTRATION OF SHARES AND ACCESS TO RECORDS. The Trust and Forum also shall take the following steps in connection with the Reorganization: (a) At or as soon as reasonably practical after the Effective Time, the Target Fund shall dissolve and liquidate by transferring to shareholders of record of each Corresponding Target Class full and fractional shares of beneficial interest of the Acquiring Class equal in value to the shares of the Corresponding Target Class held by the shareholder. Each Corresponding Target Class shareholder also shall have the right to receive any unpaid dividends or other distributions that the Target Fund declared with respect to the shareholder's Corresponding Target Class shares before the Effective Time. The Trust A-3 shall record on its books the ownership by the shareholders of the respective Acquiring Fund shares; the Target Fund shall simultaneously redeem and cancel on its books all of its issued and outstanding shares of each Corresponding Target Class. The Target Fund shall then wind up its affairs and dissolve as soon as is reasonably possible after the Effective Time and in accordance with all applicable laws and regulations. (b) If a former Target Fund shareholder requests a change in the registration of the shareholder's Acquiring Fund shares to a person other than the shareholder, the Acquiring Fund shall require the shareholder to (i) furnish the Acquiring Fund with an instrument of transfer properly endorsed, accompanied by any required signature guarantees and otherwise in proper form for transfer; (ii) if any of the shares are outstanding in certificate form, deliver to the Acquiring Fund the certificate representing such shares; and (iii) pay to the Acquiring Fund any transfer or other taxes required by reason of such registration or establish to the reasonable satisfaction of the Acquiring Fund that such tax has been paid or does not apply. (c) At and after the Closing Date, Forum shall provide the Trust and its transfer agent with immediate access to: (i) all records containing the names, addresses and taxpayer identification numbers of all of the Target Fund shareholders and the number and percentage ownership of the outstanding shares of the Corresponding Target Classes owned by each shareholder as of the Effective Time and (ii) all original documentation (including all applicable Internal Revenue Service forms, certificates, certifications and correspondence) relating to the Target Fund shareholders' taxpayer identification numbers and their liability for or exemption from back-up withholding. The Target Fund shall preserve and maintain, or shall direct its service providers to preserve and maintain, its records as required by Section 31 of and Rules 31a-1 and 31a-2 under the 1940 Act. 5. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF FORUM. Forum, on behalf of itself and, as appropriate, the Target Fund, represents and warrants to, and agrees with, the Trust as follows: (a) Forum is a statutory trust, validly existing and in good standing under the laws of the State of Delaware. Forum's Board of Trustees duly established and designated each class of the Target Fund as a class of the Target Fund. Forum is registered with the SEC as an open-end management investment company under the 1940 Act, and such registration is in full force and effect. (b) Forum has the power and all necessary federal, state and local qualifications and authorizations to own all of its properties and Assets, to carry on its business as now being conducted and described in its currently effective Registration Statement on Form N-1A, and to enter into this Plan and to consummate the transactions contemplated herein. (c) Forum's Board of Trustees has duly authorized the execution and delivery of the Plan and the transactions contemplated herein. Duly authorized officers of Forum have executed and delivered the Plan. The Plan represents a valid and binding contract, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution and delivery of this Plan does not, and, subject to the approval of shareholders referenced in Section 2(c), the consummation of the transactions contemplated by this Plan will not, violate Forum's Trust Instrument or By-Laws. Except for obtaining the approval of Target Fund shareholders, Forum does not need to take any other action to authorize its officers to effectuate this Plan and the transactions contemplated herein. A-4 (d) The Target Fund has qualified as a regulated investment company under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect of each taxable year since the commencement of its operations and qualifies and shall continue to qualify as a regulated investment company for its taxable year which includes the Effective Time. (e) The materials included within the N-14 Registration Statement when filed with the SEC, when Part A of the N-14 Registration Statement is distributed to shareholders, at the time of the Target Fund shareholder meeting and at the Effective Time of the Reorganization, insofar as they relate to Forum and the Target Fund (i) shall comply in all material respects with the applicable provisions of the 1933 Act and the 1940 Act, the rules and regulations thereunder and state securities laws, and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. (f) Forum has duly authorized and validly issued all of its issued and outstanding shares and all of the shares are validly outstanding, fully paid and non-assessable, and are offered for sale and sold in conformity with the registration requirements of all applicable federal and state securities laws. There are no outstanding options, warrants or other rights to subscribe for or purchase the Target Fund shares, nor are there any securities convertible into Target Fund shares. (g) Forum shall operate the business of the Target Fund in the ordinary course between the date hereof and the Effective Time, it being agreed that such ordinary course of business will include the declaration and payment of customary dividends and distributions and any other dividends and distributions deemed advisable in anticipation of the Reorganization. (h) At the Effective Time, the Target Fund will have good and marketable title to the Assets and full right, power and authority to assign, transfer, deliver and convey the Assets. (i) The Target Financial Statements, copies of which have been previously delivered to the Trust, fairly present the financial position of the Target Fund as of the Target Fund's most recent fiscal year-end and the results of the Target Fund's operations and changes in its net Assets for the periods indicated. The Target Financial Statements are in accordance with generally accepted accounting principles consistently applied. (j) To the Knowledge of the Trust, the Target Fund has no liabilities, whether or not determined or determinable, other than the Liabilities disclosed or provided for in the Target Financial Statements or Liabilities incurred in the ordinary course of business subsequent to the date of the Target Financial Statements, and Liabilities set forth in the Assets List. (k) Forum does not Know of any claims, actions, suits, investigations or proceedings of any type pending or threatened against the Target Fund or the Assets or businesses. Forum does not Know of any facts that it currently has reason to believe are likely to form the basis for the institution of any such claim, action, suit, investigation or proceeding against the Target Fund. For purposes of this provision, investment underperformance or negative investment performance shall not be deemed to constitute such facts, provided all required performance disclosures have been made. The Target Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that adversely affects, or is reasonably likely to adversely affect, its financial condition, results of operations, business, properties or the Assets or its ability to consummate the transactions contemplated by the Plan. (l) Except for contracts, agreements, franchises, licenses, or permits entered into or granted in the ordinary course of its business in each case under which no material default exists, A-5 Forum is not a party to or subject to any material contract, debt instrument, employee benefit plan, lease, franchise, license or permit of any kind or nature whatsoever on behalf of the Target Fund. (m) Forum has filed its federal income tax returns of the Target Fund, copies of which have been previously delivered to the Trust, for all taxable years to and including the Target Fund's most recent taxable year, and has paid all taxes payable pursuant to such returns. No such return is currently under audit and no assessment has been asserted with respect to such returns. (n) Since the date of the Target Financial Statements, there has been no material adverse change in the financial condition, results of operations, business, properties or Assets of the Target Fund. For all purposes under this Plan, investment underperformance, negative investment performance and/or investor redemptions shall not be considered material adverse changes, provided all required performance disclosures have been made. 6. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust, on behalf of itself and, as appropriate, the Acquiring Fund, represents and warrants to, and agrees with Forum as follows: (a) The Trust is organized as a business trust duly created, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. The Trust's Board of Trustees has duly established and designated the Acquiring Fund as a series of the Trust and each Acquiring Class as a class of the Acquiring Fund. Upon the Closing Date, the Trust will be registered with the SEC as an open-end management company under the 1940 Act. (b) The Trust has the power and all necessary federal, state and local qualifications and authorizations to own all of its properties and assets, to enter into this Plan and to consummate the transactions contemplated herein. (c) The Trust's Board of Trustees has duly authorized the execution and delivery of the Plan and the transactions contemplated herein. Duly authorized officers of the Trust have executed and delivered the Plan. The Plan represents a valid and binding contract, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution and delivery of this Plan does not, and the consummation of the transactions contemplated by this Plan will not, violate the Trust's Trust Instrument or By-Laws. The Trust does not need to take any other action to authorize its officers to effectuate the Plan and the transactions contemplated herein. (d) The Acquiring Fund shall qualify as a regulated investment company under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect of its current taxable year. (e) The materials included within the N-14 Registration Statement when filed with the SEC, when Part A of the N-14 Registration Statement is distributed to shareholders, at the time of the Target Fund shareholder meeting and at the Effective Time of the Reorganization, insofar as they relate to the Trust and the Acquiring Fund (i) shall comply in all material respects with the applicable provisions of the 1933 Act and the 1940 Act, the rules and regulations thereunder and state securities laws, and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. (f) The Trust shall duly authorize the Acquiring Fund shares to be issued and delivered to the Corresponding Target Fund as of the Effective Time. When issued and delivered, the A-6 Acquiring Fund shares shall be duly and validly issued, fully paid and non-assessable, and no shareholder of the Acquiring Fund shall have any preemptive right of subscription or purchase in respect of them. There are no outstanding options, warrants or other rights to subscribe for or purchase the Acquiring Fund shares, nor are there any securities convertible into Acquiring Fund shares. (g) The Trust does not Know of any claims, actions, suits, investigations or proceedings of any type pending or threatened against the Acquiring Fund or its assets or businesses. There are no facts that the Trust currently has reason to believe are likely to form the basis for the institution of any such claim, action, suit, investigation or proceeding against it. The Acquiring Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that adversely affects, or is reasonably likely to adversely affect, its financial condition, results of operations, business, properties or assets or its ability to consummate the transactions contemplated herein. (h) Except for contracts, agreements, franchises, licenses or permits entered into or granted in the ordinary course of its business, in each case under which no material default exists, the Trust is not a party to or subject to any material contract, debt instrument, employee benefit plan, lease, franchise, license or permit of any kind or nature whatsoever on behalf of the Acquiring Fund. (i) The Trust has made all state filings to register each Acquiring Class in each jurisdiction that the Corresponding Target Class is currently registered and all necessary steps have been taken under all relevant jurisdictions' securities laws to consummate the Reorganization. (j) Since August 31, 2002, there has been no material adverse change in the financial condition, business, properties or assets of the Acquiring Fund. 7. CONDITIONS TO FORUM'S OBLIGATIONS. The obligations of Forum with respect to the Reorganization shall be subject to the following conditions precedent: (a) The Trust shall have duly executed and delivered the applicable Reorganization Documents to Forum. (b) The Target Fund's shareholders shall have approved the Reorganization in the manner required by Forum's Trust Instrument and applicable law. If the Target Fund shareholders fail to approve the Reorganization, that failure shall release the obligations of the Trust with respect to the Target Fund under this Plan. (c) The Trust shall have delivered to Forum a certificate dated as of the Closing Date and executed in its name by the Secretary or Assistant Secretary of the Trust, in a form reasonably satisfactory to Forum, stating that the representations and warranties of the Trust in this Plan that apply to the Reorganization are true and correct in all material respects at and as of the Valuation Time. (d) Forum shall have received an opinion of _____________ with respect to the tax matters specified in Section 8(d) addressed to Forum and the Trust in form and substance reasonably satisfactory to them, and dated as of the Closing Date. (e) The N-14 Registration Statement shall have become effective under the 1933 Act as to the Acquiring Fund's shares and the SEC shall not have instituted or, to the Knowledge of the Trust, contemplated instituting, any stop order suspending the effectiveness of the N-14 Registration Statement. A-7 (f) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with the Reorganization. (g) The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the Reorganization under Section 25(c) of the 1940 Act. (h) The Trust shall have performed and complied in all material respects with each of its agreements and covenants required by this Plan to be performed or complied with by it prior to or at the Reorganization's Valuation Time and Effective Time. (i) Forum shall have received from the Trust a duly executed instrument whereby the Acquiring Fund assumes all of the Liabilities of or attributable to the Target Fund. (j) Neither party shall have terminated this Plan with respect to the Reorganization pursuant to Section 10 of this Plan. (k) The parties shall have received any necessary order of the SEC exempting the parties from the prohibitions of Section 17 of the 1940 Act or any similar relief necessary to permit the Reorganization. (l) The parties shall have received a certificate from Forum Financial Group, LLC stating that it and/or its affiliates will pay all audit, legal, and proxy solicitation costs incurred by the Acquiring Fund and the Target Fund in connection with the Reorganization. (m) Forum's Board of Trustees shall have determined that the Target Fund's participation in the Reorganization is in the best interests of the Target Fund. (n) The Parties shall have received such assurances as they deem appropriate with respect to the audited and pro forma financial information of the Acquiring Fund and the Target Fund contained in the N-14 Registration Statement. 8. CONDITIONS TO THE TRUST'S OBLIGATIONS. The obligations of Trust with respect to the Reorganization shall be subject to the following conditions precedent: (a) Forum shall have duly executed and delivered its applicable Reorganization Documents to the Trust. (b) The Target Fund's shareholders shall have approved the Reorganization in the manner required by the Trust's Trust Instrument and applicable law. If the Target Fund shareholders fail to approve the Reorganization, that failure shall release the Acquiring Fund of its obligations under this Plan. (c) The Target Fund shall have delivered to the Trust a certificate dated as of the Closing Date executed in its name by its Secretary or Assistant Secretary, in a form reasonably satisfactory to the Trust, stating that the representations and warranties of Forum and the Target Fund in this Plan that apply to the Reorganization are true and correct in all material respects at and as of the Valuation Time. (d) The Trust shall have received an opinion of _______________ addressed to the Trust and Forum in form and substance reasonably satisfactory to them, based upon representations made in certificates provided by them, their affiliates and/or principal shareholders and dated as of the Closing Date, substantially to the effect that, for federal income tax purposes: A-8 (1) The Reorganization will constitute a "reorganization" within the meaning of Code Section 368(a). The Acquiring Fund and the Target Fund each will be a "party to a reorganization." Code Section 368(b). (2) The Target Fund shareholders will recognize no gain or loss on their receipt of voting shares of the Acquiring Fund in exchange for their voting shares of the Target Fund pursuant to the Reorganization. Code Section 354(a)(1). (3) The Target Fund will not recognize gain or loss on the transfer of all of the Assets to the Acquiring Fund solely in exchange for voting shares of the Acquiring Fund and the assumption by the Acquiring Fund of the Liabilities pursuant to the Reorganization. Code Sections 357(a) and 361(a). (4) The Target Fund will not recognize gain or loss on its distribution of voting shares of the Acquiring Fund to its shareholders pursuant to the liquidation of the Target Fund. Code Section 361(c). (5) The Acquiring Fund will not recognize gain or loss on its acquisition of all of the Assets solely in exchange for voting shares of the Acquiring Fund and the assumption by the Acquiring Fund of the Liabilities. Code Section 1032(a). (6) The aggregate tax basis of the voting shares of the Acquiring Fund received by each of the Target Fund's shareholders pursuant to the Reorganization will equal the aggregate tax basis of the voting shares of the Target Fund surrendered in exchange therefor. Code Section 358(a)(1). (7) The holding period of the voting shares of the Acquiring Fund received by each of the Target Fund's shareholders pursuant to the Reorganization will include the period that the shareholder held the voting shares of the Target Fund exchanged therefor, provided that the shareholder held such shares as a capital asset on the date of the Reorganization. Code Section 1223(1). (8) The Acquiring Fund's basis in the Assets received pursuant to the Reorganization will equal the Target Fund's basis in the Assets immediately before the Reorganization. Code Section 362(b). (9) The Acquiring Fund's holding period in the Assets received pursuant to the Reorganization will include the period during which the Target Fund held the Assets. Code Section 1223(2). (10) The Acquiring Fund will succeed to and take into account the items of the Target Fund described in Code Section 381(c), including the earnings and profits, or deficit in earnings and profits, of the Target Fund as of the date of the Reorganization. The Acquiring Fund will take these items into account subject to the conditions and limitations specified in Code Sections 381, 382, 383 and 384 and applicable regulations thereunder. (e) The N-14 Registration Statement shall have become effective under the 1933 Act as to the Acquiring Fund's shares and no stop order suspending the effectiveness of the N-14 Registration Statement shall have been instituted or, the Knowledge of the Trust, contemplated by the SEC. (f) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit or obtain damages or other relief in connection with the Reorganization. A-9 (g) The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the Reorganization under Section 25(c) of the 1940 Act. (h) Forum shall have performed and complied in all material respects with each of its agreements and covenants required by this Plan to be performed or complied with by it prior to or at the Valuation Time and Effective Time. (i) Neither party shall have terminated this Plan with respect to the Reorganization pursuant to Section 10 of this Plan. (j) The parties shall have received any necessary order of the SEC exempting the parties from the prohibitions of Section 17 of the 1940 Act or any similar relief necessary to permit the Reorganization. (k) The parties shall have received a certificate from Forum Financial Group, LLC stating that it and/or its affiliates will pay all audit, legal, and proxy solicitation costs incurred by the Acquiring Fund and the Target Fund in connection with the Reorganization. (l) The Board of Trustees of the Trust shall have determined that the Acquiring Fund's participation in the Reorganization is in the best interests of the Acquiring Fund. (m) The parties shall have received such assurances as they deem appropriate with respect to the audited and pro forma financial information of the Acquiring Fund and the Target Fund contained in the N-14 Registration Statement. 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of the parties hereto shall survive the completion of the transactions contemplated herein. 10. TERMINATION OF PLAN. A majority of a party's Board of Trustees may terminate this Plan with respect to the Acquiring Fund or Target Fund, as appropriate, at any time before the applicable Effective Time if: (i) the party's conditions precedent set forth in Sections 7 or 8, as appropriate, are not satisfied or (ii) the Board of Trustees determines that the consummation of the Reorganization is not in the best interests of shareholders and gives notice to the other party. 11. GOVERNING LAW. This Plan and the transactions contemplated hereby shall be governed, construed and enforced in accordance with the laws of the State of Delaware, except to the extent preempted by federal law, without regard to conflicts of law principles. 12. BROKERAGE FEES. Each party represents and warrants that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for in the Plan. 13. AMENDMENTS. The parties may, by agreement in writing authorized by its respective Boards of Trustees, amend this Plan at anytime before or after the Target Fund's shareholders approve the Reorganization. However, after the Target Fund's shareholders have approved the Reorganization, the parties may not amend this Plan in a manner that materially alters the obligations of either party with respect to the Reorganization. The parties shall not deem this Section to preclude them from changing the Closing Date or the Effective Time by mutual agreement. 14. WAIVERS. At any time prior to the Closing Date, either party may by written instrument signed by it (i) waive the effect of any inaccuracies in the representations and warranties made to it contained herein and (ii) waive compliance with any of the agreements, covenants or conditions made for its benefit contained herein. The parties agree that any waiver shall apply only to the particular inaccuracy or requirement for compliance waived, and not any other or future inaccuracy or lack of compliance. A-10 15. COOPERATION AND FURTHER ASSURANCES. Each party will cooperate with the other in fulfilling its obligations under this Plan and will provide such information and documentation as is reasonably requested by the other in carrying out this Plan's terms. Each party will provide such further assurances concerning the performance of obligations under this Plan and the consummation of the Reorganization as the other shall deem necessary, advisable or appropriate. 16. UPDATING OF N-14 REGISTRATION STATEMENT. If at any time prior to the Effective Date, a party becomes aware of any material information that is not reflected in the N-14 Registration Statement, the party discovering the information shall notify the other party and the parties shall cooperate in promptly preparing, filing and clearing with the SEC, and, if appropriate, distributing to shareholders appropriate disclosure with respect to the information. 17. LIMITATION ON LIABILITIES. The obligations of Forum and the Target Fund or the Trust and the Acquiring Fund shall not bind any of their respective Trustees, shareholders, nominees, officers, agents, or employees of Forum or the Trust personally, but shall bind only the assets and property of the Target Fund and Acquiring Fund, respectively. The execution and delivery of this Plan by the parties' officers shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the Assets and the property of the Target Fund or the Acquiring Fund, as appropriate. 18. NOTICES. Any notice, report, statement, certificate or demand required or permitted by any provision of this Plan shall be in writing and shall be given by prepaid telegraph, telecopy, certified mail or overnight express courier to: For Forum: Leslie K. Klenk Forum Financial Group, LLC Two Portland Square Portland, Maine 04101 With copies to: Anthony C.J. Nuland, Esq. Seward & Kissel LLP 1200 G Street, N.W., Suite 350 Washington, D.C. 20005 For Monarch: Patrick J. Keniston Forum Financial Group, LLC Two Portland Square Portland, ME 04101 A-11 With copies to: Robert J. Zutz, Esq. Kirkpatrick & Lockart LLP 1800 Massachusetts Avenue, NW Washington, D.C. 20036-1800 19. GENERAL. This Plan supersedes all prior agreements between the parties (written or oral), is intended as a complete and exclusive statement of the terms of the agreement between the parties and may not be changed or terminated orally. The parties may execute this Plan in counterparts, which shall be considered one and the same agreement, and shall become effective when the counterparts have been executed by and delivered to both parties. The headings contained in this Plan are for reference only and shall not affect in any way the meaning or interpretation of this Plan. Nothing in this Plan, expressed or implied, confers upon any other person any rights or remedies under or by reason of this Plan. Neither party may assign or transfer any right or obligation under this Plan without the written consent of the other party. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers designated below to execute this Plan as of the date first written above. FORUM FUNDS, FOR ITSELF AND ON BEHALF OF EACH OF DAILY ASSETS TREASURY OBLIGATIONS FUND, DAILY ASSETS GOVERNMENT OBLIGATIONS FUND, AND DAILY ASSETS CASH FUND ATTEST: ____________________________________________ By: ______________________________________________ Name: Name: Title: Title: MONARCH FUNDS, FOR ITSELF AND ON BEHALF OF EACH OF ITS SERIES ATTEST: ____________________________________________ By: ______________________________________________ Name: Name: Title: Title:
A-12 SCHEDULE A CORRESPONDING CLASS TABLE - ------------------------------- ----------------------------- ------------------------------ ------------------------------ ACQUIRING CLASS CORRESPONDING TARGET CLASS - ------------------------------- ----------------------------- ------------------------------ ------------------------------ - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Daily Assets Treasury Fund Universal Shares Daily Assets Treasury Institutional Shares Obligations Fund - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Institutional Service Shares Institutional Service Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Daily Assets Government Fund Universal Shares Daily Assets Government Institutional Shares Obligations Fund - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Institutional Service Shares Institutional Service Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Investor Shares Investor Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Daily Assets Cash Fund Universal Shares Daily Assets Cash Fund Institutional Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Institutional Service Shares Institutional Service Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ Investor Shares Investor Shares - ------------------------------- ----------------------------- ------------------------------ ------------------------------ - ------------------------------- ----------------------------- ------------------------------ ------------------------------
A-13 EXHIBIT B FINANCIAL HIGHLIGHTS FORUM TREASURY FUND FORUM GOVERNMENT FUND FORUM CASH FUND [TO BE INSERTED BY PRE-EFFECTIVE AMENDMENT] EXHIBIT C FINANCIAL HIGHLIGHTS MONARCH TREASURY FUND MONARCH GOVERNMENT FUND MONARCH CASH FUND [TO BE INSERTED BY PRE-EFFECTIVE AMENDMENT] STATEMENT OF ADDITIONAL INFORMATION MONARCH FUNDS DAILY ASSETS TREASURY FUND ("MONARCH TREASURY FUND") DAILY ASSETS GOVERNMENT FUND ("MONARCH GOVERNMENT FUND") DAILY ASSETS CASH FUND ("MONARCH CASH FUND") _________________, 2003 This Statement of Additional Information supplements the Combined Proxy Statement/Prospectus dated _______________, 2003 relating to: 1. A proposal to approve an Agreement and Plan of Reorganization between Forum Funds, another registered investment company, on behalf of Daily Assets Treasury Obligations Fund ("Forum Treasury Fund"), Daily Assets Government Obligations Fund ("Forum Government Fund"), and Daily Assets Cash Fund ("Forum Cash Fund") (each a "Forum Series"), and Monarch Funds ("Monarch"), on behalf of its series, Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund (the "Plan"). Under the Plan, each of Forum Treasury Fund, Forum Government Fund, and Forum Cash Fund will (a) transfer its assets to Monarch Treasury Fund, Monarch Government Fund, and Monarch Cash Fund, respectively (each a "Monarch Series"), in exchange for shares of that corresponding Monarch Series and the corresponding Monarch Series' assumption of the applicable Forum Series' liabilities and (b) then distribute the shares received from the Monarch Series proportionately to its shareholders and terminate (collectively, the "Reorganizations"). This Statement of Additional Information consists of this cover page and the Pro Forma financial statements for each Monarch Series after the Reorganization and as of August 31, 2002, which follows as Appendix A. The following documents, each of which has been filed with the Securities and Exchange Commission, are incorporated herein by reference. [Items to be incorporated by reference shall be included in a pre-effective amendment] This Statement of Additional Information is not a Prospectus; a Combined Proxy Statement/Prospectus dated August 15, 2002, relating to the Reorganizations may be obtained without charge by writing Forum Shareholder Services, LLC at P.O. Box 446, Portland, Maine 04112 or calling (800) 754-8757. This Statement of Additional Information relates to, and should be read in conjunction with, such Combined Prospectus/Proxy Statement. APPENDIX A PRO FORMA FINANCIAL STATEMENTS OF EACH MONARCH SERIES POST- REORGANIZATION AND AS OF AUGUST 31, 2002 PRO FORMA STATEMENTS OF ASSETS AND LIABILITIES - MONARCH TREASURY FUND AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA MONARCH MONARCH FORUM TREASURY TREASURY OBLIGATIONS FUND FUND FUND ADJUSTMENTS TOTAL ---------------- ---------------- ---------------- ---------------- Assets Investments Securities at amortized cost $ 156,553,029 $ 115,111,061 $ (75,567,894) $ 196,096,196 Repurchase agreements at amortized cost - - 75,550,000 75,550,000 Total investment, at amortized cost 156,553,029 115,111,061 (17,894) 271,646,196 Cash - - 39,274 39,274 Receivables: Interest and other receivables - - 7,817 7,817 Receivable from Administrator 1,147 - - 1,147 Organization costs, net of amortization - 457 - 457 Prepaid expenses 1,590 4,432 7,624 13,646 ---------------- ---------------- ---------------- ---------------- Total Assets 156,555,766 115,115,950 36,821 271,708,537 ---------------- ---------------- ---------------- ---------------- Liabilities Payables: Fund shares redeemed - - 2,509,198 1 2,509,198 Dividends 10,892 159,620 - 170,512 Accrued Liabilities: Investment advisory fees - - 9,534 9,534 Administration fees 9,904 - 13,686 23,590 Transfer agent fees 35,630 6,383 - 42,013 Custodian fees - - 5,999 5,999 Shareholder Service Agent fees 18,789 1,780 - 20,569 Distributor fees 35,198 - - 35,198 Other 5,618 9,717 7,602 22,937 ---------------- ---------------- ---------------- ---------------- Total Liabilities 116,031 177,500 2,546,019 2,839,550 ---------------- ---------------- ---------------- ---------------- Net Assets $ 156,439,735 $ 114,938,450 $ (2,509,198) $ 268,868,987 ================ ================ ================ ================ Components of Net Assets Paid in capital $ 156,414,732 $ 114,929,437 $ (2,509,198)1 $ 268,834,971 Undistributed (distributions in excess of) net investment income 24,951 9,002 - 33,953 Accumulated net realized gain 52 11 - 63 ---------------- ---------------- ---------------- ---------------- Net Assets $ 156,439,735 $ 114,938,450 $ (2,509,198) $ 268,868,987 ================ ================ ================ ================ Net Assets by Class of Shares Universal Shares $ 104,336 $ - $ 103,281,355 $ 103,385,691 Institutional Service Shares - 11,657,095 20,067,958 31,725,053 Institutional Shares 20,067,958 103,281,355 (123,349,313) - Investor Shares 133,758,243 - - 133,758,243 Service Shares 2,509,198 - (2,509,198)1 - Net Assets $ 156,439,735 $ 114,938,450 $ (2,509,198) $ 268,868,987 ================ ================ ================ ================ Shares of Beneficial Interest Universal Shares 104,334 - 103,273,820 103,378,154 Institutional Service Shares - 11,655,616 20,058,874 31,714,490 Institutional Shares 20,058,874 103,273,820 (123,332,694) - Investor Shares 133,742,691 - - 133,742,691 Service Shares 2,508,834 - (2,508,834)1 - ---------------- ---------------- ---------------- ---------------- 156,414,733 114,929,436 (2,508,834) 268,835,335 Net Asset Value Per Share (Offering and Redemption Price per Share) for each Class $ 1.00 $ 1.00 $ - $ 1.00
1 Reflects the redemption of Service Share Class A-1 PRO FORMA STATEMENTS OF OPERATIONS - MONARCH TREASURY FUND YEAR ENDED AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA FORUM MONARCH MONARCH TREASURY TREASURY TREASURY OBLIGATIONS FUND FUND FUND ADJUSTMENTS TOTAL --------------- ---------------- ------------------ --------------- Investment Income Interest income allocated from Core Portfolio $ 4,716,486 $ 3,265,698 $ (7,982,184) $ - Interest income - - 7,982,184 7,982,184 Net expenses allocated form Core Portfolio (296,248) (205,563) 501,811 - --------------- ---------------- ------------------ --------------- Net Investment Income 4,420,238 3,060,135 501,811 7,982,184 --------------- ---------------- ------------------ --------------- Expenses Investment Advisory - - 128,396 128,396 Custody - - 72,831 72,831 Administration Universal Shares 56 - 149,964 150,020 Institutional Service Shares - 6,823 49,989 56,812 Institutional Shares 21,691 72,416 (94,107) - Investor Shares 97,467 - 90,332 187,799 Service Shares 4,350 - (4,350) - Transfer Agency Universal Shares 7,753 - 79,491 87,244 Institutional Service Shares - 26,202 35,710 61,912 Institutional Shares 92,146 86,707 (178,853) - Investor Shares 386,084 - 7,566 393,650 Service Shares 16,204 - (16,204) - Shareholder services Institutional Service Shares - 34,113 75,662 109,775 Institutional Shares 82,485 - (82,485) - Investor Shares 362,872 - - 362,872 Service Shares 10,569 - (10,569) - Distribution Investor Shares 453,590 - - 453,590 Service Shares 31,708 - (31,708) - Professional services 8,753 20,211 (490) 28,474 Accounting 3,000 25,900 34,100 63,000 Trustees 7,797 7,178 (9,240) 5,735 Compliance 9,441 2,395 (5,673) 6,163 Reporting 772 1,760 (668) 1,864 Amortization of organization costs - 1,173 - 1,173 Insurance expense - 3,077 (3,077) - Miscellaneous 13,888 19,340 (959) 32,269 --------------- ---------------- ------------------ --------------- Total Expenses 1,610,626 307,295 285,658 2,203,579 Expenses reimbursed and fees waived (127,307) (155,281) 173,335 (109,253) --------------- ---------------- ------------------ --------------- Net Expenses 1,483,319 152,014 458,993 2,094,326 --------------- ---------------- ------------------ --------------- Net Investment Income 2,936,919 2,908,121 42,818 5,887,858 Net Realized Gain on Investments Allocated from Portfolios 54 11 - 65 --------------- ---------------- ------------------ --------------- Net Increase in Net Assets from Operations $ 2,936,973 $ 2,908,132 $ 42,818 $ 5,887,923 =============== ================ ================== ===============
A-2 PRO FORMA STATEMENTS OF ASSETS AND LIABILITIES - MONARCH GOVERNMENT FUND AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA MONARCH FORUM MONARCH GOVERNMENT GOVERNMENT GOVERNMENT FUND FUND ADJUSTMENTS FUND ------------- ------------- -------------- -------------- Assets Investments Securities at amortized cost $ 270,911,188 $ 109,815,103 $ (113,380,630)$ 267,345,661 Repurchase agreements at amortized cost - - 111,210,000 111,210,000 Total investment, at amortized cost 270,911,188 109,815,103 (2,170,630) 378,555,661 Cash - - 15,872 15,872 Receivables: Interest and other receivables - - 2,179,199 2,179,199 Receivable from Administrator 3,566 - - 3,566 Organization costs, net of amortization - 601 - 601 Prepaid expenses 2,710 13,042 16,165 31,917 ------------- ------------- -------------- -------------- Total Assets 270,917,464 109,828,746 40,606 380,786,816 ------------- ------------- -------------- -------------- Liabilities Payables: Fund shares redeemed - - 1,379,113 1 1,379,113 Dividends 98,740 107,739 - 206,479 Accrued Liabilities: Investment advisory fees - - 12,224 12,224 Administration fees 14,779 - 17,548 32,327 Transfer agent fees 33,458 4,317 - 37,775 Custodian fees - - 8,091 8,091 Shareholder Service Agent fees 23,978 10,360 - 34,338 Distributor fees 14,885 - - 14,885 Other 12,723 4,739 2,743 20,205 ------------- ------------- -------------- -------------- Total Liabilities 198,563 127,155 1,419,719 1,745,437 ------------- ------------- -------------- -------------- Net Assets $ 270,718,901 $ 109,701,591 $ (1,379,113) $ 379,041,379 ============= ============= ============== ============== Components of Net Assets Paid in capital $ 270,738,860 $ 109,690,578 $ (1,379,113)1$ 379,050,325 Undistributed (distributions in excess of) net investment income (31,162) 8,445 - (22,717) Accumulated net realized gain 11,203 2,568 - 13,771 ------------- ------------- -------------- -------------- Net Assets $ 270,718,901 $ 109,701,591 $ (1,379,113) $ 379,041,379 ============= ============= ============== ============== Net Assets by Class of Shares Preferred Shares $ 12,041,343 $ - $ - $ 12,041,343 Universal Shares 81,425,667 - 51,619,928 133,045,595 Institutional Service Shares - 57,519,745 - 57,519,745 Institutional Shares 117,475,462 51,619,928 (51,619,928) 117,475,462 Investor Shares 58,397,316 561,918 - 58,959,234 Service Shares 1,379,113 - (1,379,113)1 - Net Assets $ 270,718,901 $ 109,701,591 $ (1,379,113) $ 379,041,379 ============= ============= ============== ============== Shares of Beneficial Interest Preferred Shares 12,040,678 - - 12,040,678 Universal Shares 81,462,046 - 51,614,191 133,076,237 Institutional Service Shares - 57,514,503 - 57,514,503 Institutional Shares 117,467,521 51,614,191 (51,614,191) 117,467,521 Investor Shares 58,390,207 561,882 - 58,952,089 Service Shares 1,378,408 - (1,378,408)1 - ------------- ------------- -------------- -------------- 270,738,860 109,690,576 (1,378,408) 379,051,028 Net Asset Value Per Share (Offering and Redemption Price per Share) for each Class $ 1.00 $ 1.00 $ - $ 1.00
1 Reflects the redemption of Service Share Class A-3 PRO FORMA STATEMENTS OF OPERATIONS - MONARCH GOVERNMENT FUND YEAR ENDED AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA MONARCH FORUM MONARCH GOVERNMENT GOVERNMENT GOVERNMENT FUND FUND ADJUSTMENTS FUND ---------------- ---------------- ------------------ ---------------- Investment Income Interest income allocated from Core Portfolio $ 12,875,100 $ 2,568,209 $ (15,443,309) $ - Interest income - - 15,443,309 15,443,309 Net expenses allocated form Core Portfolio (610,556) (129,594) 740,150 - ---------------- ---------------- ------------------ ---------------- Net Investment Income 12,264,544 2,438,615 740,150 15,443,309 ---------------- ---------------- ------------------ ---------------- Expenses Investment Advisory - - 207,950 207,950 Custody - - 117,957 117,957 Administration Preferred Shares 15,745 - 14,823 30,568 Universal Shares 77,719 - 123,852 201,571 Institutional Service Shares - 28,814 30,835 59,649 Institutional Shares 136,034 25,055 111,013 272,102 Investor Shares 39,287 241 35,726 75,254 Service Shares 8,739 - (8,739) - Transfer Agency Preferred Shares 8,154 - (5,043) 3,111 Universal Shares 86,090 - 33,262 119,352 Institutional Service Shares - 71,260 (7,207) 64,053 Institutional Shares 543,819 37,928 (26,644) 555,103 Investor Shares 154,397 13,271 (13,350) 154,318 Service Shares 24,722 - (24,722) - Shareholder Services Preferred Shares - - - - Universal Shares - - - - Institutional Service Shares - 144,071 (28,815) 115,256 Institutional Shares 525,766 - - 525,766 Investor Shares 144,444 1,206 (241) 145,409 Service Shares 21,409 - (21,409) - Distribution Investor Shares 180,555 1,448 (242) 181,761 Service Shares 64,227 - (64,227) - Professional services 24,644 15,659 (2,200) 38,103 Accounting 3,000 37,900 46,100 87,000 Trustees 18,633 4,710 (14,055) 9,288 Compliance 9,625 9,527 (9,171) 9,981 Reporting 2,557 1,556 (1,094) 3,019 Amortization of organization costs - 1,461 - 1,461 Insurance expense - 1,904 (1,904) - Miscellaneous 27,536 14,015 11,150 52,701 ---------------- ---------------- ------------------ ---------------- Total Expenses 2,117,102 410,026 503,605 3,030,733 Expenses reimbursed and fees waived (144,661) (171,291) 108,537 (207,415) ---------------- ---------------- ------------------ ---------------- Net Expenses 1,972,441 238,735 612,142 2,823,318 ---------------- ---------------- ------------------ ---------------- Net Investment Income 10,292,103 2,199,880 128,008 12,619,991 Net Realized Gain on Investments Allocated from Portfolios 16,108 3,058 - 19,166 ---------------- ---------------- ------------------ ---------------- Net Increase in Net Assets from Operations $ 10,308,211 $ 2,202,938 $ 128,008 $ 12,639,157 ================ ================ ================== ================
A-4 PRO FORMA STATEMENTS OF ASSETS AND LIABILITIES - MONARCH CASH FUND AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA MONARCH FORUM MONARCH CASH CASH CASH FUND FUND ADJUSTMENTS FUND ----------------- ----------------- ----------------- ----------------- Assets Investments Securities at amortized cost $ 1,061,932,382 $ 85,901,295 $ (382,094,432) $ 765,739,245 Repurchase agreements at amortized cost 381,300,000 381,300,000 Total investment, at amortized cost 1,061,932,382 85,901,295 (794,432) 1,147,039,245 Cash - - 14,931 14,931 Receivables: Interest and other receivables - - 858,037 858,037 Receivable from Administrator 2,452 - - 2,452 Prepaid expenses 9,695 3,085 26,811 39,591 ----------------- ----------------- ----------------- ----------------- Total Assets 1,061,944,529 85,904,380 105,347 1,147,954,256 ----------------- ----------------- ----------------- ----------------- Liabilities Payables: Fund shares redeemed - - 7,695,178 1 7,695,178 Dividends 30,797 39,821 - 70,618 Accrued Liabilities: Investment advisory fees - - 33,361 33,361 Administration fees 51,217 - 47,890 99,107 Transfer agent fees 164,929 1,958 - 166,887 Custodian fees - - 22,596 22,596 Shareholder Service Agent fees 161,784 9,899 - 171,683 Distributor fees 129,740 - - 129,740 Other 28,862 7,618 1,500 37,980 ----------------- ----------------- ----------------- ----------------- Total Liabilities 567,329 59,296 7,800,525 8,427,150 ----------------- ----------------- ----------------- ----------------- Net Assets $ 1,061,377,200 $ 85,845,084 $ (7,695,178) $ 1,139,527,106 ================= ================= ================= ================= Components of Net Assets Paid in capital $ 1,061,339,332 $ 85,840,154 $ (7,695,178)1 $ 1,139,484,308 Undistributed (distributions in excess of) net investment income - 797 - 797 Accumulated net realized gain 37,868 4,133 - 42,001 ----------------- ----------------- ----------------- ----------------- Net Assets $ 1,061,377,200 $ 85,845,084 $ (7,695,178) $ 1,139,527,106 ================= ================= ================= ================= Net Assets by Class of Shares Preferred Shares $ 13,095,274 $ - $ - 13,095,274 Universal Shares 46,833,306 - 35,199,174 82,032,480 Institutional Service Shares - 49,965,409 - 49,965,409 Institutional Shares 347,468,889 35,199,174 (35,199,174) 347,468,889 Investor Shares 646,284,553 680,501 - 646,965,054 Service Shares 7,695,178 - (7,695,178)1 - Net Assets $ 1,061,377,200 $ 85,845,084 $ (7,695,178) $ 1,139,527,106 ================= ================= ================= ================= Shares of Beneficial Interest Preferred Shares 13,092,899 - - 13,092,899 Universal Shares 46,831,876 - 35,196,905 82,028,781 Institutional Service Shares - 49,962,783 - 49,962,783 Institutional Shares 347,458,274 35,196,905 (35,196,905) 347,458,274 Investor Shares 646,262,172 680,466 - 646,942,638 Service Shares 7,694,108 - (7,694,108)1 - ----------------------------------- ----------------- ----------------- 1,061,339,329 85,840,154 (7,694,108) 1,139,485,375 Net Asset Value Per Share (Offering and Redemption Price per Share) for each Class $ 1.00 $ 1.00 $ - $ 1.00
1 Reflects the redemption of Service Share Class A-5 PRO FORMA STATEMENTS OF OPERATIONS - MONARCH CASH FUND YEAR ENDED AUGUST 31, 2002 - -------------------------------------------------------------------------------- PRO FORMA MONARCH FORUM MONARCH CASH CASH CASH FUND FUND ADJUSTMENTS FUND --------------- ---------------- ------------------ --------------- Investment Income Interest income allocated from Core Portfolio $ 32,013,680 $ 2,504,922 $ (34,518,602) $ - Interest income - - 34,518,602 34,518,602 Net expenses allocated form Core Portfolio (1,542,845) (119,822) 1,662,667 - --------------- ---------------- ------------------ --------------- Net Investment Income Allocated 30,470,835 2,385,100 1,662,667 34,518,602 --------------- ---------------- ------------------ --------------- Expenses Investment Advisory - - 488,010 488,010 Custody - - 276,818 276,818 Administration Preferred Shares 37,898 - 31,094 68,992 Universal Shares 25,540 - 76,556 102,096 Institutional Service Shares - 26,753 28,630 55,383 Institutional Shares 284,274 25,933 245,374 555,581 Investor Shares 372,094 324 345,450 717,868 Service Shares 17,885 - (17,885) - Transfer Agency Preferred Shares 8,527 - (3,948) 4,579 Universal Shares 33,278 - 26,489 59,767 Institutional Service Shares - 68,366 (9,049) 59,317 Institutional Shares 1,098,548 38,993 (24,901) 1,112,640 Investor Shares 1,419,424 14,591 12,193 1,446,208 Service Shares 44,030 - (44,030) - Shareholder services Institutional Service Shares - 133,767 (26,754) 107,013 Institutional Shares 1,073,516 - - 1,073,516 Investor Shares 1,385,796 1,620 (324) 1,387,092 Service Shares 43,810 - (43,810) - Distribution Investor Shares 1,732,245 1,944 (323) 1,733,866 Service Shares 131,429 - (131,429) - Professional services 56,589 14,889 523 72,001 Accounting 3,000 37,900 46,100 87,000 Trustees 46,017 4,643 (28,863) 21,797 Compliance 12,401 11,865 (842) 23,424 Reporting 3,636 1,376 2,073 7,085 Insurance expense - 1,797 (1,797) - Miscellaneous 57,990 17,108 52,008 127,106 --------------- ---------------- ------------------ --------------- Total Expenses 7,887,927 401,869 1,297,363 9,587,159 Expenses reimbursed and fees waived (122,567) (166,991) 123,231 (166,327) --------------- ---------------- ------------------ --------------- Net Expenses 7,765,360 234,878 1,420,594 9,420,832 --------------- ---------------- ------------------ --------------- Net Investment Income 22,705,475 2,150,222 242,073 25,097,770 Net Realized Gain on Investments Allocated from Portfolios 54,031 4,150 - 58,181 --------------- ---------------- ------------------ --------------- Net Increase in Net Assets from Operations $ 22,759,506 $ 2,154,372 $ 242,073 $ 25,155,951 =============== ================ ================== ===============
A-6 PART C OTHER INFORMATION ITEM 15 - INDEMNIFICATION. CURRENT TRUST INSTRUMENT; FORM OF AGREEMENT AND DECLARATION OF TRUST The Registrant's current Trust Instrument and the Registrant's form of Agreement and Declaration of Trust effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 requires the Registrant to indemnify existing or former trustees and officers of the Registrant 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 qualified in its entirety by the contents of the current Trust Instrument and the form of Agreement and Declaration of Trust included in this Registration Statement as Exhibit 16(1)(b) and Exhibit 16(1)(a), respectively, and which are incorporated herein by reference. CURRENT DISTRIBUTION AGREEMENT; FORM OF DISTRIBUTION AGREEMENT The Registrant's current Distribution Agreement and the Registrant's form of Distribution Agreement effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 require the Registrant's distributor to indemnify, defend and hold the Registrant and its several officers and trustees free and harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, cots, charges, reasonable counsel fees and other expenses of ever nature and character (including the cost of investigating or defending such claims, demands, actions, suits or liabilities and any reasonable counsel fees incurred in connection therewith) (collectively, "Damages") but only if such Damages arise out of or are based upon: (i) any alleged untrue statement of a material fact contained in the Registration Statement or Prospectus or any alleged omission of a material fact required to be stated or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon, and in conformity with, information furnished to the Trust in writing in connection with the preparation of the Registration Statement or Prospectus by or on behalf of the distributor; or (ii) any error of judgment or mistake of law, for any loss arising out of any investment, or for any action or inaction of the distributor in the absence of bad faith, willful misfeasance or gross negligence in the performance of the distributor's duties or obligations under this Agreement or by reason or the distributor's reckless disregard of its duties and obligations under this Agreement. This description is qualified in its entirety by the contents of the current Distribution Agreement and the form of Distribution Agreement included in this Registration Statement as Exhibit 16(7)(b) and Exhibit 16(7)(a), respectively, and which are incorporated herein by reference. FORM OF INVESTMENT ADVISORY AGREEMENT The Registrant's form of Investment Advisory Agreement effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 provides the adviser will be liable to the Registrant for error of judgment or mistake of law, for any loss arising out of any investment, or in any event due resulting from willful misfeasance, bad faith or gross negligence in the performance of its duties under the agreement, or by reason of reckless disregard of its obligations and duties under the agreement. This description is qualified in its entirety by the contents of the form of Investment Advisory Agreement included in this Registration Statement as Exhibit 16(6) and which is incorporated herein by reference. OTHER AGREEMENTS OF THE REGISTRANT The Registrant's current Administration Agreement and the Registrant's form of Administration Agreement effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 require the 2 Registrant's administrator to indemnify and hold harmless the Registrant, its employees, agents, trustees, and officers against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of ever nature and character (collectively, "Damages") arising out of the administrator's actions taken or failures to act with respect to a series of the Registrant due to bad faith, willful misfeasance or gross negligence in the performance of the administrator's duties or obligations under the agreement or by reason of the administrator's reckless disregard of its duties and obligations under the agreement. The Registrant's current and form of Transfer Agency Agreement and the Registrant's current and form of Fund Accounting Agreement contain similar indemnification language. This description is qualified in its entirety by the contents of the current Administration Agreement, form of Administration Agreement, current Transfer Agency Agreement, form of Transfer Agency Agreement, current Fund Fund Accounting Agreement, and the form of Fund Accounting Agreement included in this Registration Statement as Exhibit 16(13)(b), Exhibit 16(13)(a), Exhibit 16(13)(d), Exhibit 16(13)(c), Exhibit 16(13)(h), and Exhibit 16(13)(g), respectively, and which are 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 such indemnification is againnst 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 16 - EXHIBITS. (1) (a) Form of Agreement and Declaration of Trust for Registrant effective after reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (b) Trust Instrument for Registration effective prior to reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (2) (a) Form of By-Laws for Registrant effective after reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (b) By-Laws for Registrant prior to reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (3) None. (4) Form of Agreement and Plan of Reorganization between Registrant, after reorganization into a Massachusetts business trust, and Forum Funds is filed herewith as Exhibit A to the Proxy Statement/Prospectus. (5) Sections 2.10 and 10.3 and Article VII of the Form of Agreement and Declaration of Trust filed as Exhibit 1(a) and of the Trust Instrument filed as Exhibit 1(b). (6) Form of Investment Advisory Agreement between Registrant and Forum Investment Advisors, LLC (filed herewith). (7) (a) Form of Distribution Agreement between the Registrant and Forum Fund Services, LLC effective after reorganization into a Massachusetts business trust on or about April 11, 2003 ( (filed herewith). (b) Current Distribution Agreement between the Registrant and Forum Funds Services, LLC effective prior to reorganization into a Massachusetts business trust on or about April 11, 2003 (b) Form of Selected Dealer Agreement between Forum Fund Services, LLC and securities brokers 3 (Exhibit incorporated herein by reference as filed as Exhibit (e)(1) in PEA 105 via EDGAR on November 2, 2001, accession number 0001004402-01-500277). (8) None. (9) None. (10) (a) Form of Distribution Plan for Investor Shares after Registrant's effective after reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (b) Investor Class Distribution Plan effective prior to reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (c) Service Class Distribution Plan effective before Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (d) Form of Multiclass (Rule 18f-3) Plan effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (e) Multiclass (Rule 18f-3) Plan effective before Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 28 via EDGAR on June 27, 2001, accession number 0001004402-01-500123). (11) Opinion and consent of Kirkpatrick & Lockhart l LLP regarding legality of securities (to be filed by pre-effective amendment). (12) Opinion and consent of ______________ regarding the tax consequences of each reorganization (to be filed pursuant to a post-effective amendment). (13) (a) Form of Administration Agreement between Registrant and Forum Administrative Services, LLC effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (b) Administration Agreement between Registrant and Forum Administrative Services, LLC effective prior to Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264). (c) Form of Transfer Agency Agreement between Registrant and Forum Administrative Services, LLC effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). (d) Transfer Agency Agreement between Registrant and Forum Shareholder Services, LLC effective prior to Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 17 via EDGAR on November 30, 1998, accession number 0001004402-98-000616). (e) Form of Shareholder Service Agreement between Registrant and Forum Administrative Services, LLC effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 relating to Institutional Shares, Institutional Service Shares, and Investor Shares (filed herewith). (f) Shareholder Service Agreement between Registrant and Forum Administrative Services, LLC effective prior to Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 relating, to Institutional Shares, Service Shares, and Investor Shares (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 24 via EDGAR on August 31, 2000, accession number 0001004402-00-000307). (g) Form of Fund Accounting Agreement between Registrant and Forum Accounting Services, LLC effective after Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (filed herewith). 4 (h) Fund Accounting Agreement between Registrant and Forum Accounting Services, LLC effective prior to Registrant's reorganization into a Massachusetts business trust on or about April 11, 2003 (Exhibit incorporated by reference as filed in Post-Effective Amendment No. 15 via EDGAR on December 19, 1997, accession number 0001004402-97-000264).Consent of independent auditor (to be filed by pre-effective amendment) (14) None. (15) None. (16) (a) Powers of Attorney, Maurice J. DeWald, John Y. Keffer, Christine M. McCarthy, Robert M. Franko and Rudolph I. Estrada, Trustees of Registrant (filed herewith). (b) Powers of Attorney, John Y. Keffer, James C. Cheng, J. Michael Parish and Costas Azariadis, Trustees of Core Trust (Delaware) (filed herewith). (17) (a) Form of Proxy Card for Daily Assets Treasury Obligations Fund (filed herewith). (b) Proxy Card for Daily Assets Government Obligations Fund (filed herewith). (c) Proxy Card for Daily Assets Cash Fund (filed herewith). ITEM 17 - UNDERTAKINGS (1) The undersigned registrant agrees that prior to any public re-offering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the re-offering prospectus will contain the information called for by the applicable registration form for re-offerings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act, each post- effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees to file copies of the tax opinions required to be filed as an exhibit to the registration statement by Item 16 (12) of Form N-14 under the Securities Act of 1933, as amended, by means of a post-effective amendment to the registration statement. 5 SIGNATURES As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant in the city of Portland and State of Maine, March 24, 2003. MONARCH FUNDS By: /S/ JOHN Y. KEFFER --------------------------- John Y. Keffer President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE DATE Principal Executive Officer /S/ JOHN Y. KEFFER Chairman March 24, 2003 - --------------------------- John Y. Keffer and President Principal Financial and Accounting Officer /S/ STACEY A. HONG Treasurer March 24, 2003 - --------------------------- Stacey A. Hong A majority of the Trustees /S/ JOHN Y. KEFFER March 24, 2003 - --------------------------- John Y. Keffer Rudolph I. Estrada, Trustee Maurice J. DeWald, Trustee Christine M. McCarthy, Trustee Robert M. Franko, Trustee Jack J. Singer, Trustee /S/ JOHN Y. KEFFER March 24, 2003 - --------------------------- By: John Y. Keffer (Attorney-in-fact) 6 SIGNATURES On behalf of Core Trust (Delaware), being duly authorized, I have duly caused this Registration Statement of Monarch Funds to be signed in the City of Portland, State of Maine on March 24, 2003. CORE TRUST (DELAWARE) By: /S/ JOHN Y. KEFFER ----------------------------- John Y. Keffer, President On behalf of Core Trust (Delaware), this Registration Statement of Monarch Funds has been signed below by the following persons in the capacities indicated on March 24, 2003. (a) Principal Executive Officer /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Chairman and President (b) Principal Financial Officer /S/ STACEY E. HONG -------------------------------------------- Stacey E. Hong, Treasurer (c) A majority of the Trustees /S/ JOHN Y. KEFFER -------------------------------------------- John Y. Keffer, Chairman Costas Azariadis, Trustee J. Michael Parish, Trustee James C. Cheng, Trustee By: /S/ JOHN Y. KEFFER ----------------------------------------- John Y. Keffer, Attorney in fact* * Pursuant to powers of attorney previously filed as an Exhibit to this Registration Statement. 7 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 16(1)(a) Form of Agreement and Declaration of Trust 16(2)(a) Form of By-Laws 16(4) Form of Agreement and Plan of Reorganization 16(6) Form of Investment Advisory Agreement 16(7)(a) Form of Distribution Agreement 16(10)(a) Form of Distribution Plan for Investor Shares 16(10)(d) Form of Multiclass (Rule 18f-3) Plan 16(13)(a) Form of Administration Agreement 16(13)(c) Form of Transfer Agency Agreement 16(13)(e) Form of Shareholder Service Agreement 16(13)(g) Form of Fund Accounting Agreement 16(16)(a) Powers of Attorney for Trustees of Monarch Funds 16(16)(b) Powers of Attorney for Trustees of Core Trust (Delaware) 16(17)(a) Form of Proxy Card for Daily Assets Treasury Obligations Fund. 16(17)(b) Proxy Card for Daily Assets Government Obligations Fund. 16(17)(c) Proxy Card for Daily Assets Cash Fund. 8 EX-99 3 dectrust.txt AGREEMENT AND DECLARATION OF TRUST MONARCH FUNDS AGREEMENT AND DECLARATION OF TRUST FEBRUARY 7, 2003 MONARCH FUNDS TABLE OF CONTENTS PAGE ARTICLE I NAME AND DEFINITIONS Section 1.01 Name 1 Section 1.02 Definitions 1 ARTICLE II BENEFICIAL INTEREST Section 2.01 Shares of Beneficial Interest 3 Section 2.02 Issuance of Shares 3 Section 2.03 Register of Shares and Share Certificates 3 Section 2.04 Transfer of Shares 3 Section 2.05 Treasury Shares 4 Section 2.06 Establishment of Series 4 Section 2.07 Investment in the Trust 4 Section 2.08 Assets and Liabilities of Series 5 Section 2.09 No Preemptive Rights 5 Section 2.10 No Personal Liability of Shareholder 5 Section 2.11 Assent to Trust Instrument 6 ARTICLE III THE TRUSTEES Section 3.01 Management of the Trust 6 Section 3.02 Initial Trustees 6 Section 3.03 Term of Office 6 Section 3.04 Vacancies and Appointments 7 Section 3.05 Temporary Absence 7 Section 3.06 Number of Trustees 7 Section 3.07 Effect of Ending of a Trustee's Service 7 Section 3.08 Ownership of Assets of the Trust 7 ARTICLE IV POWERS OF THE TRUSTEES Section 4.01 Powers 8 Section 4.02 Issuance and Repurchase of Shares 11 Section 4.03 Trustees and Officers as Shareholders 11 Section 4.04 Action by the Trustees 11 Section 4.05 Chairman of the Trustees 12 Section 4.06 Principal Transactions 12 ARTICLE V EXPENSES OF THE TRUST 12 ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT AND REGISTERED AGENT Section 6.01 Investment Adviser 13 Section 6.02 Principal Underwriter 13 Section 6.03 Administration 13 Section 6.04 Transfer Agent 14 Section 6.05 Registered Agent 14 Section 6.06 Parties to Contract 14 Section 6.07 Provisions and Amendments 14 ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS Section 7.01 Voting Powers 14 Section 7.02 Meetings 15 Section 7.03 Quorum and Required Vote 15 ARTICLE VIII CUSTODIAN Section 8.01 Appointment and Duties 16 Section 8.02 Central Certificate System 16 ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS Section 9.01 Distributions 17 Section 9.02 Redemptions 17 Section 9.03 Determination of Net Asset Value and Valuation of Portfolio Assets 17 Section 9.04 Suspension of the Right of Redemption 18 Section 9.05 Redemption of Shares in Order to Qualify as Regulated Investment Company 18 ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION Section 10.01 Limitation of Liability 19 Section 10.02 Indemnification 19 Section 10.03 Shareholders 20 ARTICLE XI MISCELLANEOUS Section 11.01 Trust Not A Partnership 21 Section 11.02 Trustee's Good Faith Action, Expert Advice, -ii- No Bond or Surety 21 Section 11.03 Establishment of Record Dates 21 Section 11.04 Termination of Series 22 Section 11.05 Reorganization of Series 22 Section 11.06 Filing of Copies, References, Headings 23 Section 11.07 Applicable Law 23 Section 11.08 Amendments 23 Section 11.09 Fiscal Year 23 Section 11.10 Provisions in Conflict With Law 24 ARTICLE XII PURPOSE OF THE TRUST 24 ARTICLE XIII PRINCIPAL PLACE OF BUSINESS 24 -iii- MONARCH FUNDS AGREEMENT AND DECLARATION OF TRUST THIS AGREEMENT AND DECLARATION OF TRUST made at Portland, Maine, this 7th day of February, 2003 by the Trustees hereunder and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided: WITNESSETH that WHEREAS, this Trust has been formed to carry on the business of an investment company; and WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts voluntary association with transferable shares in accordance with the provisions hereinafter set forth; NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets, which they may from time to time acquire in any manner as Trustees hereunder, IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of Shares in this Trust as hereinafter set forth. ARTICLE I NAME AND DEFINITIONS Section 1.01 Name. The name of the trust created hereby is "Monarch Funds," and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. Section 1.02 Definitions. Wherever used herein, unless otherwise required by the context or specifically provided: (a) The "1940 Act" means the Investment Company Act of 1940 and the Rules and Regulations thereunder, as amended from time to time. (b) "Bylaws" means the Bylaws of the trust as adopted by the Trustees, as amended from time to time. (c) "Commission" has the meaning given it in the 1940 Act. (d) "Affiliated Person," "Assignment," "Interested Person" and "Principal Underwriter" shall have the respective meanings given them in the 1940 Act, as modified or interpreted by the Commission under any applicable order, rule or regulations of the Commission thereunder. "Majority Shareholder Vote" shall have the same meaning as the term "vote of a majority of the outstanding voting securities" is given in the 1940 Act, as modified by or interpreted by any applicable order or orders of the Commission or any rules or regulations adopted by or interpretive releases of the Commission thereunder. (e) "Declaration of Trust" shall mean this Agreement and Declaration of Trust, as amended or restated from time to time. (f) "Net Asset Value" means the net asset value of each Series of the Trust determined in the manner provided in Article IX, Section 9.03 hereoff. (g) "Outstanding Shares" means those Shares shown from time to time in the books of the Trust or its transfer agent as then issued and outstanding, but shall not include Shares which have been redeemed by the Trust or which have been repurchased by the Trust and which are at the time held in the treasury of the Trust. (h) "Series" or "Series of Shares" refers to the one or more separate investment portfolios of the Trust into which the assets and liabilities of the Trust may be divided and the Shares of the Trust representing the beneficial interest of Shareholders in such respective portfolios. (i) "Shareholder" means a record owner of Outstanding Shares of the Trust. (j) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one Series or Class of Shares is authorized by the Trustees, the equal proportionate transferable units into which each Series or Class of Shares shall be divided from time to time. (k) "Trust" refers to the Massachusetts business trust established by this Agreement and Declaration of Trust, as amended from time to time. (l) "Trustees" means the person or persons who has or have signed this Trust Instrument, so long as he or they shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with the provisions of Article IV hereof, and reference herein to a Trustee or to the Trustees shall refer respectively to each individual Trustee, or the Trustees, collectively, in each case in their capacity as Trustees hereunder. (m) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of one or more of the Trust or any Series, or the Trustees on behalf of the Trust or any Series. -2- ARTICLE II BENEFICIAL INTEREST Section 2.01 Shares of Beneficial Interest. The beneficial interest in the Trust shall be divided into such transferable Shares of one or more separate and distinct Series or classes of a Series as the Trustees shall from time to time create and establish. The number of Shares of each Series, and class thereof, authorized hereunder is unlimited. Each Share shall have no par value. All Shares issued hereunder, including without limitation, Shares issued in connection with a dividend in Shares or a split or reverse split of Shares, shall be fully paid and nonassessable. Section 2.02 Issuance of Shares. The Trustees in their discretion may, from time to time, without vote of the Shareholders, issue Shares, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration, subject to applicable law, including cash or securities, at such time or times and on such terms as the Trustees may deem appropriate, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with, the assumption of liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares and may issues Shares held in the treasury. The Trustees may from time to time divide or combine the Shares into a greater or lesser number without thereby changing the proportionate beneficial interests in the Trust. Contributions to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or integral multiples thereof. Section 2.03 Register of Shares and Share Certificates. A register shall be kept at the principal office of the Trust or an office of the Trust's transfer agent that shall contain the names and addresses of the Shareholders of each Series, the number of Shares of that Series (or any class or classes thereof) held by them respectively and a record of all transfers thereof. No share certificates shall be issued by the Trust. Such register shall be entitled to receive dividends or other distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or other distribution, nor to have notice given to him as herein or in the Bylaws provided, until he has given his address to the transfer agent or such officer or other agent of the Trustees as shall keep the said register for entry thereon. Section 2.04 Transfer of Shares. Except as otherwise provided by the Trustees, Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized upon delivery to the Trustees or the Trust's transfer agent of a duly executed instrument or instruction of transfer and such evidence of the genuineness of such execution and authorization and of such other matters as may be required by the Trustees or the transfer agent. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor the Trust, nor any transfer agent or registrar nor any officer, employee or agent of the Trust, shall be affected by any notice of the proposed transfer. -3- Section 2.05 Treasury Shares. Shares held in the treasury shall, until reissued pursuant to Section 2.02 hereof, not confer any voting rights on the Trustees, nor shall such Shares be entitled to any dividends or other distributions declared with respect to the Shares. Section 2.06 Establishment of Series. The Trust created hereby shall consist of one or more Series. Separate and distinct records shall be maintained by the Trust for each Series, and the assets associated with any such Series shall be held and accounted for separately from the assets of the Trust or any other Series. The Trustees shall have full power and authority, in their sole discretion, and without obtaining any prior authorization or vote of the Shareholders of any Series of the Trust, (a) to establish and designate, and to change in any manner, any such Series of Shares or any classes of initial or additional Series and (b) to fix such preferences, voting powers, rights and privileges of such Series or classes thereof as the Trustees may from time to time determine, (c) to divide or combine the Shares or any Series or classes thereof into a greater or lesser number, (d) to classify or reclassify any issued Shares or any Series or classes thereof into one or more Series or classes of Shares, and (e) to take such other action with respect to the Shares as the Trustees may deem desirable. The establishment and designation of any Series shall be effective upon the adoption of a resolution by a majority of the Trustees setting forth such establishment and designation and the relative rights and preferences of the Shares of such Series. A Series may issue any number of Shares but need not issue shares. Without limiting any other power of the Trustees hereunder, at any time that there are no Shares outstanding of any particular Series previously established and designated, the Trustees may by a majority vote abolish that Series and the establishment and designation thereof. All references to Shares in this Trust Instrument shall be deemed to be Shares of any or all Series, or classes thereof, as the context may require. All provisions herein relating to the Trust shall apply equally to each Series of the Trust, and each class thereof, except as the context otherwise requires. Each Share of a Series of the Trust shall represent an equal beneficial interest in the net assets of such Series. Each holder of Shares of a Series shall be entitled to receive his pro rata share of all distributions made with respect to such Series. Upon redemption of his Shares, such Shareholder shall be paid solely out of the funds and property of such Series of the Trust. Section 2.07 Investment in the Trust. The Trustees shall accept investments in any Series or class of a Series of the Trust from such persons and on such terms as they may from time to time authorize. At the Trustees' discretion, such investments, subject to applicable law, may be in the form of cash or securities in which the affected Series is authorized to invest, valued as provided in Article IX, Section 9.03 hereof. Investments in a Series shall be credited to each Shareholder's account in the form of full Shares at the Net Asset Value per Share next determined after the investment is received or accepted, as may be determined by the Trustees; PROVIDED, HOWEVER, that the Trustees may, in their sole discretion, (a) fix the Net Asset Value per Share of the initial capital contribution, (b) impose a sales charge upon investments in the Trust in such manner and at such time determined by the Trustees, or (c) issue fractional Shares. -4- Section 2.08 Assets and Liabilities of Series. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held and accounted for separately from the other assets of the Trust and of every other Series and may be referred to herein as "assets belonging to" that Series. The assets belonging to a particular Series shall belong to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. In addition, any assets, income, earnings, profits or funds, or payments and proceeds with respect thereto, which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more of the Series in such manner as the Trustees, in their sole discretion, deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and such assets, income, earnings, profits or funds, or payments and proceeds with respect thereto shall be assets belonging to that Series. The assets belonging to a particular Series shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the holders of Shares of that Series. The assets belonging to each particular Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not determined by the Trustees or the authorized agents of the Trust as belonging to any particular Series shall be allocated and charged by the Trustees between or among any one or more of the Series in such manner as the Trustees in their sole discretion deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes. Any person extending credit to, contracting with or having any claim against any Series may look only to the assets of that Series to satisfy or enforce any debt, with respect to that Series. No Shareholder or former Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series. Section 2.09 No Preemptive Rights. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or the Trustees, whether of the same or other Series. Section 2.10 No Personal Liability of Shareholder. No Shareholder of the Trust and of any Series shall be personally liable for the debts, liabilities, obligation and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or by or on behalf of any Series. The Trustees shall have no power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay by way of subscription for any Shares or otherwise. Every note, bond, contract or other undertaking issued by or on behalf of the Trust or the Trustees relating to the Trust or to a Series shall include a recitation limiting the obligation represented thereby to the Trust or to one or more Series and its or their assets (but the omission of such a recitation shall not operate to bind any Shareholder or Trustee of the Trust). -5- Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue of having purchased a Share, shall become a Shareholder and shall be held to have expressly assented and agreed to be bound by the terms hereof. ARTICLE III THE TRUSTEES SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Trust Instrument. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, in any and all commonwealths, territories, dependencies, colonies, or possessions of the United States of America, and in any foreign jurisdiction, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Trust Instrument, the presumption shall be in favor of a grant of power to the Trustees. The enumeration of any specific power in this Trust Instrument shall not be construed as limiting the aforesaid power. The powers of the Trustees may be exercised without order of or resort to any court. Except for the Trustees named herein or appointed to fill vacancies pursuant to Section 3.04 of this Article III, the Trustees shall be elected by the Shareholders owning of record a plurality of the Shares voting at a meeting of Shareholders. Such a meeting shall be held on a date fixed by the Trustees. In the event that less than a majority of the Trustees holding office have been elected by Shareholders, the Trustees then in office will call a Shareholders' meeting for the election of Trustees. SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the persons named herein. On a date fixed by the Trustees, the Shareholders shall elect at least three (3) but not more than twelve (12) Trustees, as specified by the Trustees pursuant to Section 3.06 of this Article III. SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the lifetime of this Trust, and until its termination as herein provided; except (a) that any Trustee may resign his trust by written instrument signed by him and delivered to the other Trustees, which shall take effect upon such delivery or upon such later date as is specified therein; (b) that any Trustee may be removed at any time by written instrument, signed by at least two-thirds of the number of Trustees in office immediately prior to such removal, specifying the date when such removal shall become effective; (c) that any Trustee who requests in writing to be retired or who has died, -6- become physically or mentally incapacitated by reason of disease or otherwise, or is otherwise unable to serve, may be retired by written instrument signed by a majority of the other Trustees, specifying the date of his retirement; and (d) that a Trustee may be removed at any meeting of the Shareholders of the Trust by a vote of Shareholders owning at least two-thirds of the Outstanding Shares. SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the death, resignation, retirement, removal, physical or mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee is otherwise unable to serve, or an increase in the number of Trustees, a vacancy shall occur in the Board of Trustees. Whenever a vacancy shall occur, then until such vacancy is filled the other Trustees shall have all the powers hereunder and the confirmation by the other Trustees of such vacancy shall be conclusive. In the case of a vacancy, the remaining Trustees shall fill such vacancy by appointing such other person, as they in their discretion shall see fit consistent with the limitations under the 1940 Act. Such appointment shall be evidenced by a written instrument signed by a majority of the Trustees in office or by resolution of the Trustees, duly adopted, which shall be recorded in the minutes of a meeting of the Trustees, whereupon the appointment shall take effect. An appointment of a Trustee may be made by the Trustees then in office in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that said appointment shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. As soon as any Trustee appointed pursuant to this Section 3.04 shall have accepted this trust, the trust estate shall vest in the new Trustee or Trustees, together with the continuing Trustees, without any further act or conveyance, and such appointee shall be deemed a Trustee hereunder. SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney, delegate his power for a period not exceeding six months at any time to any other Trustee or Trustees, provided that in no case shall less than two Trustees personally exercise the other powers hereunder except as herein otherwise expressly provided. SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at least three (3), and thereafter shall be such number as shall be fixed from time to time by a majority of the Trustees, provided, however, that the number of Trustees shall in no event be more than twelve (12). SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The death, resignation, retirement, removal, incapacity, or inability of the Trustees, or any one of them, shall not operate to terminate the Trust or to revoke any existing agency created pursuant to the terms of this Trust Instrument. SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust and of each Series shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. Legal title in all of -7- the assets of the Trust and the right to conduct any business shall at all times be considered as vested in the Trustees on behalf of the Trust, except that the Trustees may cause legal title to any Trust Property to be held by, or in the name of the Trust, or in the name of any person as nominee. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or of any Series or any right of partition or possession thereof, but each Shareholder shall have, except as otherwise provided for herein, a proportionate undivided beneficial interest in the Trust or Series. The Shares shall be personal property giving only the rights specifically set forth in this Trust Instrument. ARTICLE IV POWERS OF THE TRUSTEES SECTION 4.01 POWERS. The Trustees in all instances shall act as principals, and are and shall be free from the control of the Shareholders. The Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that they may consider necessary or appropriate in connection with the management of the Trust. The Trustees shall not in any way be bound or limited by present or future laws or customs in regard to trust investments, but shall have full authority and power to make any and all investments which they, in their sole discretion, shall deem proper to accomplish the purpose of this Trust without recourse to any court or other authority. Subject to any applicable limitation in this Trust Instrument or the Bylaws of the Trust, the Trustees shall have the power and authority: (a) To invest and reinvest cash and other property, and to hold cash or other property uninvested, without in any event being bound or limited by any present or future law or custom in regard to investments by trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust; (b) To operate as and carry on the business of an investment company, and exercise all the powers necessary and appropriate to the conduct of such operations; (c) To borrow money and in this connection issue notes or other evidence of indebtedness; to secure borrowings by mortgaging, pledging or otherwise subjecting as security the Trust Property; to endorse, guarantee, or undertake the performance of an obligation or engagement of any other person and to lend Trust Property; (d) To provide for the distribution of interests of the Trust either through a Principal Underwriter in the manner hereinafter provided for or by the Trust itself, or both, or otherwise pursuant to a plan of distribution of any kind; (e) To adopt Bylaws not inconsistent with this Trust Instrument providing for the conduct of the business of the Trust, and to amend and repeal them to the extent that they do not reserve that right to the Shareholders; such Bylaws shall be deemed incorporated and included in this Trust Instrument; -8- (f) To elect and remove such officers and appoint and terminate such agents as they consider appropriate; (g) To employ one or more banks, trust companies or companies that are members of a national securities exchange or such other entities as the Commission may permit as custodians of any assets of the Trust subject to any conditions set forth in this Trust Instrument or in the Bylaws; (h) To retain one or more transfer agents and shareholder servicing agents, or both; (i) To set record dates in the manner provided herein or in the Bylaws; (j) To delegate such authority as they consider desirable to any officers of the Trust and to any investment adviser, manager, custodian, underwriter or other agent or independent contractor; (k) To sell or exchange any or all of the assets of the Trust, subject to the provisions of Article XI; (l) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (m) To exercise powers and rights of subscription or otherwise that in any manner arise out of ownership of securities; (n) To hold any security or property in a form not indicating any trust, whether in bearer, book entry, unregistered or other negotiable form; or either in the name of the Trust or in the name of a custodian or a nominee or nominees, subject in either case to proper safeguards according to the usual practice of Massachusetts trust companies or investment companies; (o) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes in accordance with the provisions of Article II hereof, and to establish classes of such Series having relative rights, powers and duties as they may provide consistent with applicable law; (p) To allocate assets, liabilities and expenses of the Trust to a particular Series or to apportion the same between or among two or more Series, provided that any liabilities or expenses incurred by a particular Series shall be payable solely out of the assets belonging to that Series as provided for in Article II hereof; -9- (q) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern, any security of which is held in the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or concern, and to pay calls or subscriptions with respect to any security held in the Trust; (r) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including, but not limited to, claims for taxes; (s) To make distributions of income and of capital gains to Shareholders in the manner provided herein; (t) To establish, from time to time, a minimum investment for Shareholders in the Trust or in one or more Series or class, and to require the redemption of the Shares of any Shareholders whose investment is less than such minimum upon giving notice to such Shareholder; (u) To establish one or more committees, to delegate any of the powers of the Trustees to said committees and to adopt a committee charter providing for such responsibilities, membership (including Trustees, officers or other agents of the Trust therein) and any other characteristics of said committees as the Trustees may deem proper. Notwithstanding the provisions of this Article IV, and in addition to such provisions or any other provision of this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a committee consisting of less than the whole number of Trustees then in office, which committee may be empowered to act for and bind the Trustees and the Trust, as if the acts of such committee were the acts of all the Trustees then in office, with respect to the institution, prosecution, dismissal, settlement, review or investigation of any action, suit or proceeding that shall be pending or threatened to be brought before any court, administrative agency or other adjudicatory body; (v) To interpret the investment policies, practices or limitations of any Series; (w) To establish a registered office and have a registered agent in the Commonwealth of Massachusetts; and (x) In general to carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary, suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power hereinbefore set forth, either alone or in association with others, and to do every other act or thing incidental or appurtenant to or growing out of or connected with the aforesaid business or purposes, objects or powers. The foregoing clauses shall be construed as objects and powers, and the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the general powers of the Trustees. Any action by one or more of the Trustees in their capacity as such hereunder shall be deemed an action on behalf of the Trust or the applicable Series, and not an action in an individual capacity. -10- The Trustees shall not be limited to investing in obligations maturing before the possible termination of the Trust. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see the application of any payments made or property transferred to the Trustees or upon their order. SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, and otherwise deal in Shares and, subject to the provisions set forth in Article II and Article IX, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust, or the particular Series of the Trust, with respect to which such Shares are issued. SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer or other agent of the Trust may acquire, own and dispose of Shares to the same extent as if he were not a Trustee, officer or agent; and the Trustees may issue and sell or cause to be issued and sold Shares to and buy such Shares from any such person or any firm or company in which he is interested, subject only to the general limitations herein contained as to the sale and purchase of such Shares; and all subject to any restrictions which may be contained in the Bylaws. SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority vote at a meeting duly called, or by unanimous written consent without a meeting, or by telephone meeting provided a quorum of Trustees participate in any such telephone meeting, unless the 1940 Act requires that a particular action be taken only at a meeting at which the Trustees are present in person. At any meeting of the Trustees, a majority of the Trustees shall constitute a quorum. Meetings of the Trustees may be called orally or in writing by the Chairman of the Board of Trustees or by any two other Trustees. Notice of the time, date and place of all meetings of the Trustees shall be given by the party calling the meeting, or the Secretary of the Trust to each Trustee by telephone, facsimile or other electronic mechanism sent to his home or business address at least twenty-four hours in advance of the meeting or by written notice mailed to his home or business address at least seventy-two hours in advance of the meeting. Notice need not be given to any Trustee who attends the meeting without objecting to the lack of notice or who executes a written waiver of notice with respect to the meeting. Any meeting conducted by telephone shall be deemed to take place at the principal office of the Trust, as determined by the Bylaws or by the Trustees. Subject to the requirements of the 1940 Act, the Trustees by majority vote may delegate to any one or more of their number their authority to approve particular matters or take particular actions on behalf of the Trust. Written consents or waivers of the Trustees may be executed in one or more counterparts. Execution of a written consent or waiver and delivery thereof to the Trust may be accomplished by facsimile or other similar electronic mechanism. -11- SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one of their number to be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees, shall be responsible for the execution of policies established by the Trustees and the administration of the Trust, and may be (but is not required to be) the chief executive, financial and/or accounting officer of the Trust. SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any investment adviser, administrator, distributor or transfer agent for the Trust or with any Interested Person of such person; and the Trust may employ any such person, or firm or company in which such person is an Interested Person, as broker, legal counsel, registrar, investment adviser, administrator, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms. ARTICLE V EXPENSES OF THE TRUST Subject to the provisions of Article II, Section 2.08 hereof, the Trustees shall be reimbursed from the Trust estate or the assets belonging to the appropriate Series for their expenses and disbursements, including, without limitation, interest charges, taxes, brokerage fees and commissions; expenses of issue, repurchase and redemption of shares; certain insurance premiums; applicable fees, interest charges and expenses of third parties, including the Trust's investment advisers, managers, administrators, distributors, custodian, transfer agent and fund accountant; fees of pricing, interest, dividend, credit and other reporting services; costs of membership in trade associations; telecommunications expenses; funds transmission expenses; auditing, legal and compliance expenses; costs of forming the Trust and maintaining corporate existence; costs of preparing and printing the Trust's prospectuses, statements of additional information and shareholder reports and delivering them to existing shareholders; expenses of meetings of shareholders and proxy solicitations therefore; costs of maintaining books and accounts; costs of reproduction, stationery and supplies; fees and expenses of the Trust's trustees; compensation of the Trust's officers and employees and costs of other personnel performing services for the Trust; costs of Trustee meetings; Securities and Exchange Commission registration fees and related expenses; state or foreign securities laws registration fees and related expenses and for such non-recurring items as may arise, including litigation to which the Trust (or a Trustee acting as such) is a party, and for all losses and liabilities by them incurred in administering the Trust, and for the payment of such expenses, disbursements, losses and liabilities the Trustees shall have a lien on the assets belonging to the appropriate Series, or in the case of an expense allocable to more than one Series, on the assets of each such Series, prior to any rights or interests of the Shareholders thereto. This section shall not preclude the Trust from directly paying any of the aforementioned fees and expenses. -12- ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT AND REGISTERED AGENT SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion, from time to time, enter into an investment advisory contract or contracts with respect to the Trust or any Series whereby the other party or parties to such contract or contracts shall undertake to furnish the Trustees with such investment advisory, statistical and research facilities and services and such other facilities and services, if any, all upon such terms and conditions as may be prescribed in the Bylaws or as the Trustees may in their discretion determine (such terms and conditions not to be inconsistent with the provisions of this Trust Instrument or of the Bylaws). Notwithstanding any other provision of this Trust Instrument, the Trustees may authorize any investment adviser (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales or exchanges of portfolio securities, other investment instruments of the Trust, or other Trust Property on behalf of the Trustees, or may authorize any officer, agent, or Trustee to effect such purchases, sales or exchanges pursuant to recommendations of the investment adviser (and all without further action by the Trustees). Any such purchases, sales and exchanges shall be deemed to have been authorized by all of the Trustees. The Trustees may authorize the investment adviser to employ, from time to time, one or more sub-advisers to perform such of the acts and services of the investment adviser, and upon such terms and conditions, as may be agreed upon between the investment adviser and sub-adviser (such terms and conditions not to be inconsistent with the provisions of this Trust Instrument or of the Bylaws). Any reference in this Trust Instrument to the investment adviser shall be deemed to include such sub-advisers, unless the context otherwise requires. SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their discretion from time to time enter into an exclusive or non-exclusive underwriting contract or contracts providing for the sale of Shares, whereby the Trust may either agree to sell Shares to the other party to the contract or appoint such other party its sales agent for such Shares. In either case, the contract shall be on such terms and conditions as may be prescribed in the Bylaws and as the Trustees may in their discretion determine (such terms and conditions not to be inconsistent with the provisions of this Trust Instrument or of the Bylaws); and such contract may also provide for the repurchase or sale of Shares by such other party as principal or as agent of the Trust. SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from time to time enter into one or more management or administrative contracts whereby the other party or parties shall undertake to furnish the Trustees with management or administrative services. The contract or contracts shall be on such terms and conditions as may be prescribed in the Bylaws and as the Trustees may in their discretion determine (such terms and conditions not to be inconsistent with the provisions of this Trust Instrument or of the Bylaws). -13- SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from time to time enter into one or more transfer agency and Shareholder service contracts whereby the other party or parties shall undertake to furnish the Trustees with transfer agency and Shareholder services. The contract or contracts shall be on such terms and conditions as may be prescribed in the Bylaws and as the Trustees may in their discretion determine (such terms and conditions not to be inconsistent with the provisions of this Trust Instrument or of the Bylaws). SECTION 6.05 REGISTERED AGENT. The registered agent of the Trust is: CT Corporation System, 101 Federal Street, Boston, Massachusetts 02110. SECTION 6.06 PARTIES TO CONTRACT. Any contract of the character described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any contract of the character described in Article VIII hereof may be entered into with any corporation, firm, partnership, trust or association, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered void or voidable by reason of the existence of any relationship, nor shall any person holding such relationship be disqualified from voting on or executing the same in his capacity as Shareholder and/or Trustee, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article VI or Article VIII hereof or of the Bylaws. The same person (including a firm, corporation, partnership, trust, or association) may be the other party to contracts entered into pursuant to Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article VIII hereof, and any individual may be financially interested or otherwise affiliated with persons who are parties to any or all of the contracts mentioned in this Section 6.05. SECTION 6.07 PROVISIONS AND AMENDMENTS. Any contract entered into pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with and subject to the requirements of Section 15 of the 1940 Act, if applicable, or other applicable Act of Congress hereafter enacted with respect to its continuance in effect, its termination, and the method of authorization and approval of such contract or renewal thereof, and no amendment to any contract entered into pursuant to Section 6.01 of this Article VI shall be effective unless assented to in a manner consistent with any applicable requirements of said Section 15, as modified by any applicable rule, regulation or order of the Commission. ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote only (a) for the election of Trustees as provided in Article III, Sections 3.01 and 3.02 hereof, (b) for the removal of Trustees as provided in Article III, Section 3.03(d) hereof, (c) with respect to any investment advisory contract, as required under the 1940 Act or other applicable law, and (d) with respect to such additional matters relating to the Trust as may be specifically required by law, by this Trust -14- Instrument, or the Bylaws, or any registration of the Trust with the Commission or any State, or as the Trustees may consider desirable. On any matter submitted to a vote of the Shareholders, all Shares shall be voted separately by individual Series, except (i) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series; and (ii) when the Trustees have determined that the matter affects the interests of more than one Series, then the Shareholders of all such Series shall be entitled to vote thereon. The Trustees may also determine that a matter affects only the interests of one or more classes of a Series, in which case any such matter shall be voted on by such class or classes. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner provided for in the Bylaws. A proxy may be given in writing. The Bylaws may provide that proxies may also, or may instead, be given by any electronic or telecommunications device or in any other manner. Notwithstanding anything else herein or in the Bylaws, in the event a proposal by anyone other than the officers or Trustees of the Trust is submitted to a vote of the Shareholders of one or more Series or of the Trust, or in the event of any proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees of the Trust, Shares may be voted only in person or by written proxy. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required or permitted to be taken by Shareholders by law, this Trust Instrument or any of the Bylaws of the Trust. SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in order to elect Trustees as specified in Section 3.02 of Article III hereof at the principal office of the Trust or such other place as the Trustees may designate. Meetings may be held within or without the Commonwealth of Massachusetts. Special meetings of the Shareholders of any Series may be called by the Trustees and shall be called by the Trustees upon the written request of Shareholders owning at least one-tenth of the Outstanding Shares entitled to vote. Whenever ten or more Shareholders meeting the qualifications set forth in Section 16(c) of the 1940 Act, as the same may be amended from time to time, seek the opportunity of furnishing materials to the other Shareholders with a view to obtaining signatures on such a request for a meeting, the Trustees shall comply with the provisions of said Section 16(c) with respect to providing such Shareholders access to the list of the Shareholders of record of the Trust or the mailing of such materials to such Shareholders of record, subject to any rights provided to the Trust or any Trustees provided by said Section 16(c). Notice shall be sent, by First Class Mail or such other means determined by the Trustees, at least 15 days prior to any such meeting. SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to vote in person or by proxy shall be a quorum for the transaction of business at a Shareholders' meeting, except that where any provision of law or of this Trust Instrument permits or requires that holders of any Series shall vote as a Series (or that holders of a class shall vote as a class), then one-third of the aggregate number of Shares of that Series (or that class) entitled to vote shall be necessary to constitute a quorum for the transaction of business by that Series (or that class). Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may -15- be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. Except when a larger vote is required by law or by any provision of this Trust Instrument or the Bylaws, a majority of the Shares voted in person or by proxy shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Trust Instrument permits or requires that the holders of any Series shall vote as a Series (or that the holders of any class shall vote as a class), then a majority of the Shares present in person or by proxy of that Series (or class), voted on the matter in person or by proxy shall decide that matter insofar as that Series (or class) is concerned. Shareholders may act by unanimous written consent. Actions taken by Series (or class) may be consented to unanimously in writing by Shareholders of that Series (or class). ARTICLE VIII CUSTODIAN SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times employ a bank, a company that is a member of a national securities exchange, or a trust company, qualified to act as custodian under applicable with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the Bylaws of the Trust: (a) to hold the securities owned by the Trust and deliver the same upon written order or oral order confirmed in writing; (b) to receive and receipt for any moneys due to the Trust and deposit the same in its own banking department or elsewhere as the Trustees may direct; and (c) to disburse such funds upon orders or vouchers. The Trustees may also authorize the custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian, and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub-custodian shall be a bank, a company that is a member of a national securities exchange, or a trust company organized under the laws of the United States or one of the states thereof and qualified to act as custodian under applicable law or such other person as may be permitted by the Commission or otherwise in accordance with the 1940 Act. SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, as amended, or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust or its custodians, sub-custodians or other agents. -16- ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS SECTION 9.01 DISTRIBUTIONS. (a) The Trustees may from time to time declare and pay dividends or other distributions with respect to any Series. The amount of such dividends or distributions and the payment of them, and whether they are in cash or any other Trust Property, shall be wholly in the discretion of the Trustees. (b) Dividends and other distributions may be paid or made to the Shareholders of record at the time of declaring a dividend or other distribution or among the Shareholders of record at such other date or time or dates or times as the Trustees shall determine, which dividends or distributions, at the election of the Trustees, may be paid pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine. The Trustees may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or related plans, as the Trustees shall deem appropriate. (c) Anything in this Trust Instrument to the contrary notwithstanding, the Trustees may at any time declare and distribute a stock dividend pro rata among the Shareholders of a particular Series, or class thereof, as of the record date of that Series fixed as provided in Subsection 9.01(b) hereof. SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a particular Series desires to dispose of his Shares or any portion thereof, he may deposit at the office of the transfer agent or other authorized agent of that Series a written request or such other form of request as the Trustees may from time to time authorize, requesting that the Series purchase the Shares in accordance with this Section 9.02; and the Shareholder so requesting shall be entitled to require the Series to purchase, and the Series or the principal underwriter of the Series shall purchase his said Shares, but only at the Net Asset Value thereof (as described in Section 9.03 of this Article IX). The Series shall make payment for any such Shares to be redeemed, as aforesaid, in cash or property from the assets of that Series and payment for such Shares shall be made by the Series or the Principal Underwriter of the Series to the Shareholder of record within seven (7) days after the date upon which the request is effective. Upon redemption, shares shall become Treasury shares and may be reissued from time to time. SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS. The term "Net Asset Value" of any Series shall mean that amount by which the assets of that Series exceed its liabilities, all as determined by or under the direction of the Trustees. Such value shall be determined separately for each Series and shall be determined on such days and at such times as the Trustees may determine. Such determination shall be made with respect to securities for which market quotations are readily available, at the market value of such -17- securities; and with respect to other securities and assets, at the fair value as determined in good faith by the Trustees; PROVIDED, HOWEVER, that the Trustees, without Shareholder approval, may alter the method of valuing portfolio securities insofar as permitted under the 1940 Act and the rules, regulations and interpretations thereof promulgated or issued by the Commission or insofar as permitted by any order of the Commission applicable to the Series. The Trustees may delegate any of their powers and duties under this Section 9.03 with respect to valuation of assets and liabilities. The resulting amount, which shall represent the total Net Asset Value of the particular Series, shall be divided by the total number of shares of that Series outstanding at the time and the quotient so obtained shall be the Net Asset Value per Share of that Series. At any time the Trustees may cause the Net Asset Value per Share last determined to be determined again in similar manner and may fix the time when such redetermined value shall become effective. If, for any reason, the net income of any Series, determined at any time, is a negative amount, the Trustees shall have the power with respect to that Series (a) to offset each Shareholder's pro rata share of such negative amount from the accrued dividend account of such Shareholder, (b) to reduce the number of Outstanding Shares of such Series by reducing the number of Shares in the account of each Shareholder by a pro rata portion of that number of full and fractional Shares which represents the amount of such excess negative net income, (c) to cause to be recorded on the books of such Series an asset account in the amount of such negative net income (provided that the same shall thereupon become the property of such Series with respect to such Series and shall not be paid to any Shareholder), which account may be reduced by the amount of dividends declared thereafter upon the Outstanding Shares of such Series on the day such negative net income is experienced until such asset account is reduced to zero; (d) to combine the methods described in clauses (a) and (b) and (c) of this sentence; or (e) to take any other action they deem appropriate, in order to cause (or in order to assist in causing) the Net Asset Value per Share of such Series to remain at a constant amount per Outstanding Share immediately after each such determination and declaration. The Trustees shall also have the power not to declare a dividend out of net income for the purpose of causing the Net Asset Value per Share to be increased. The Trustees shall not be required to adopt, but may at any time adopt, discontinue or amend the practice of maintaining the Net Asset Value per Share of the Series at a constant amount. SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may declare a suspension of the right of redemption or postpone the date of payment as permitted under the 1940 Act. Such suspension shall take effect at such time as the Trustees shall specify but not later than the close of business on the business day next following the declaration of suspension, and thereafter there shall be no right of redemption or payment until the Trustees shall declare the suspension at an end. In the case of a suspension of the right of redemption, a Shareholder may either withdraw his request for redemption or receive payment based on the Net Asset Value per Share next determined after the termination of the suspension. In the event that any Series is divided into classes, the provisions of this Section 9.03, to the extent applicable as determined in the discretion of the Trustees and consistent with applicable law, may be equally applied to each such class. SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of the opinion that direct or -18- indirect ownership of Shares of any Series has or may become concentrated in any Person to an extent which would disqualify any Series as a regulated investment company under the Internal Revenue Code, then the Trustees shall have the power (but not the obligation) by lot or other means deemed equitable by them (a) to call for redemption by any such person of a number, or principal amount, of Shares sufficient to maintain or bring the direct or indirect ownership of Shares into conformity with the requirements for such qualification and (b) to refuse to transfer or issue Shares to any person whose acquisition of Shares in question would result in such disqualification. The redemption shall be effected at the redemption price and in the manner provided in this Article IX. The holders of Shares shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares, as the Trustees deem necessary to comply with the requirements of any taxing or regulatory authority. ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such capacity, shall not be personally liable to any person other than the Trust or Shareholder for any act, omission or obligation of the Trust or any Trustee. A Trustee shall not be liable for any act or omission or any conduct whatsoever in his capacity as Trustee, provided that nothing contained herein or in the Massachusetts law shall protect any Trustee against any liability to the Trust or to Shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee hereunder. SECTION 10.02 INDEMNIFICATION. (a) Subject to the exceptions and limitations contained in Subsection 10.02(b): (i) every person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as a "Covered Person") shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof; (ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened while in office or thereafter, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Covered Person: -19- (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or (ii) in the event of a settlement, unless there has been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry); PROVIDED, HOWEVER, that any Shareholder may, by appropriate legal proceedings, challenge any such determination by the Trustees or by independent counsel. (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel, other than Covered Persons, and other persons may be entitled by contract or otherwise under law. (d) Expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him to the Trust or Series if it is ultimately determined that he is not entitled to indemnification under this Section 10.02; provided, however, that either (i) such Covered Person shall have provided appropriate security for such undertaking, (ii) the Trust is insured against losses arising out of any such advance payments or (iii) either a majority of the Trustees who are neither Interested Persons of the Trust nor parties to the matter, or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a trial-type inquiry or full investigation), that there is reason to believe that such Covered Person will be found entitled to indemnification under Section 10.02. SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall be held to be personally liable solely by reason of his being or having been a Shareholder of such Series and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives, or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by the Shareholder, assume the defense of any claim made against the Shareholder -20- for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series. ARTICLE XI MISCELLANEOUS SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared that a trust, and not a partnership, is created hereby. No Trustee hereunder shall have any power to bind personally either the Trust officers or any Shareholder. All persons extending credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the appropriate Series or (if the Trustees shall have yet to have established Series) of the Trust for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of their agents, whether past, present or future, shall be personally liable therefor. Nothing in this Trust Instrument shall protect a Trustee against any liability to which the Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee hereunder. SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The exercise by the Trustees of their powers and discretion hereunder in good faith and with reasonable care under the circumstances then prevailing shall be binding upon everyone interested. Subject to the provisions of Article X hereof and to Section 11.01 of this Article XI, the Trustees shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Trust Instrument, and subject to the provisions of Article X hereof and Section 11.01 of this Article XI, shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is obtained. SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the Share transfer books of the Trust for a period not exceeding sixty (60) days preceding the date of any meeting of Shareholders, or the date for the payment of any dividends or other distributions, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect; or in lieu of closing the stock transfer books as aforesaid, the Trustees may fix in advance a date, not exceeding sixty (60) days preceding the date of any meeting of Shareholders, or the date for payment of any dividend or other distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect, as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or other distribution, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of Shares, and in such case such Shareholders and only such Shareholders as shall be Shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend or other distribution, or to receive such allotment or rights, or to exercise such rights, as the case may be, -21- notwithstanding any transfer of any Shares on the books of the Trust after any such record date fixed as aforesaid. SECTION 11.04 TERMINATION OF SERIES. (a) Each Series or class thereof shall continue without limitation of time but subject to the provisions of this Section 11.04(b). The Trustees may provide that any Series or class thereof shall have a limited life and shall automatically terminate as determined by the Trustees. (b) The Trustees may determine to terminate the operations of any Series or class thereof. After such determination, the Trustees may require the redemption of all Shares of a Series or class or take such other action, as they deem necessary in order to eliminate all Outstanding Shares of that Series or class, as the case may be. (c) The Trustees may at any time, in contemplation of the termination a Series: (i) sell and convey all or any portion of the assets of the affected Series to another person organized under the laws of any jurisdiction, or to a separate series of shares thereof, for adequate consideration, which may include the assumption of all outstanding and contingent liabilities of any affected Series, and which may include shares of beneficial interest, stock or other ownership interest of such person or series thereof; or (ii) sell and convert into money all or any portion of the assets of any affected Series. Upon paying or making reasonable provision for the payment of all known liabilities any affected Series, the Trustees shall distribute the remaining proceeds or assets (as the case may be) ratably among the Shareholders of the affected Series subject to Section 2.08 and the preferences, rights and privileges of each class of the Series. (d) At any time that there are no Outstanding Shares of a Series or a class, the Trustees may, but shall not be required to, abolish the Series or class, as applicable, and, if applicable, the establishment and designation thereof. (e) Upon completion of the distribution of the remaining proceeds or the remaining assets of a Series as provided in Subsection 11.04(c), any affected Series shall terminate. Upon the abolishment of a Series or a class as provided in Subsection 11.04(d), a Series or a class, as applicable, shall terminate. Upon such termination, the Trustees and the Trust shall be discharged of any and all further liabilities and duties hereunder and the right, title and interest of all parties with respect to the Series or class shall be canceled and discharged. SECTION 11.05 REORGANIZATION OF SERIES. Notwithstanding anything else in this Trust Instrument, the Trustees may (i) cause any such Series to merge or consolidate with or into one or more entities, if the surviving or resulting entity is another company registered as an open-end, management investment company under the 1940 Act, or a series thereof and (ii) cause any or all Shares of a Series to be exchanged under or pursuant to any state of federal statute to the extent permitted by law. -22- Notwithstanding anything to the contrary contained in this Trust Instrument, an agreement of merger or consolidation approved by the Trustees in accordance with this Section 11.05(b) may effect any amendment to the Trust Instrument. SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of this Trust Instrument and of each amendment hereof or Trust Instrument supplemental hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such amendments or supplements have been make and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this Trust Instrument or of any such amendment or supplemental Trust Instrument. In this Trust Instrument or in any such amendment or supplemental Trust Instrument, references to this Trust Instrument, and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this Trust Instrument as amended or affected by any such supplemental Trust Instrument. All expressions like "his", "he" and "him", shall be deemed to include the feminine and neuter, as well as masculine, genders. Headings are placed herein for convenience of reference only and in case of any conflict, the text of this Trust Instrument, rather than the headings, shall control. This Trust Instrument may be executed in any number of counterparts, each of which shall be deemed an original. SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is made in the Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers, which are ordinarily exercised by such a trust. SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the Trustees may, without shareholder vote, amend or otherwise supplement this Trust Instrument by making an amendment, a trust instrument supplemental hereto or an amended and restated trust instrument. Shareholders shall only have the right to vote (a) on any amendment which would affect their right to vote granted in Section 7.01 of Article VII hereof, (b) on any amendment to this Section 11.08, (c) on any amendment as may be required by law or by the Trust's registration statement filed with the Commission and (d) on any amendment submitted to them by the Trustees. Any amendment submitted to Shareholders which, as the Trustees determine, shall affect the Shareholders of one or more Series shall be authorized by vote of the Shareholders of each Series affected and no vote of shareholders of a Series not affected shall be required. Notwithstanding anything else herein, any amendment to Article X hereof shall not limit the rights to indemnification or insurance provided therein with respect to action or omission of Covered Persons prior to such amendment. SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a specified date as set forth in the Bylaws, provided, however, that the Trustees may, without Shareholder approval, change the fiscal year of the Trust. -23- SECTION 11.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this Trust Instrument are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Trust Instrument; provided, however, that such determination shall not affect any of the remaining provisions of this Trust Instrument or render invalid or improper any action taken or omitted prior to such determination. If any provision of this Trust Instrument shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any matter affect such provisions in any other jurisdiction or any other provision of this Trust Instrument in any jurisdiction. ARTICLE XII PURPOSE OF THE TRUST The purpose of this Trust is to provide investors a continuous source of managed investment in securities and other financial instruments. ARTICLE XIII PRINCIPAL PLACE OF BUSINESS The Trust's principal place of business is: Two Portland Square, Portland, Maine 04101. -24- IN WITNESS WHEREOF, the undersigned, being all of Trustees of the Trust, have executed this instrument as of date first written above. /s/ LESLIE K. KLENK -------------------------------- Leslie K. Klenk, as Trustee and not individually Two Portland Square Portland, Maine 04101 /S/ BETH P. HANSON -------------------------------- Beth P. Hanson, as Trustee and not individually Two Portland Square Portland, Maine 04101 /S/ PATRICK J. KENISTON -------------------------------- Patrick J. Keniston, as Trustee and not individually Two Portland Square Portland, Maine 04101 -25- EX-99 4 bylaws.txt BYLAWS MONARCH FUNDS BYLAWS FEBRUARY 11, 2003 MONARCH FUNDS BYLAWS These Bylaws of Monarch Funds (the "Trust"), a Massachusetts business trust, are subject to the Trust Instrument of the Trust, dated February 11, 2003, as from time to time amended, supplemented or restated (the "Trust Instrument"). Capitalized terms used herein that are defined in the Trust Instrument are used as therein defined. ARTICLE I PRINCIPAL OFFICE The principal office of the Trust shall be located in Portland, Maine, or such other location as the Trustees may, from time to time, determine. The Trust may establish and maintain such other offices and places of business as the Trustees may, from time to time, determine. ARTICLE II OFFICERS AND THEIR ELECTION SECTION 2.01 OFFICERS. The officers of the Trust shall be a President, a Treasurer, a Secretary, and such other officers as the Trustees may from time to time elect. The Trustees may delegate to any officer or committee the power to appoint any subordinate officers or agents. It shall not be necessary for any Trustee or other officer to be a holder of Shares in the Trust. SECTION 2.02 ELECTION OF OFFICERS. The Treasurer and Secretary shall be chosen by the Trustees. The President shall be chosen by and from the Trustees. Two or more offices may be held by a single person except the offices of President and Secretary. Subject to the provisions of Section 3.13 hereof, the President, the Treasurer and the Secretary shall each hold office until their successors are chosen and qualified and all other officers shall hold office at the pleasure of the Trustees. SECTION 2.03 RESIGNATIONS. Any officer of the Trust may resign, notwithstanding Section 2.02 hereof, by filing a written resignation with the President, the Trustees or the Secretary, which resignation shall take effect on being so filed or at such time as may be therein specified. ARTICLE III POWERS AND DUTIES OF OFFICERS AND TRUSTEES SECTION 3.01 MANAGEMENT OF THE TRUST. The business and affairs of the Trust shall be managed by, or under the direction of, the Trustees, and they shall have all powers necessary and desirable to carry out their responsibilities, so far as such powers are not inconsistent with the laws of the Commonwealth of Massachusetts, the Trust Instrument or with these Bylaws. SECTION 3.02 EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect from their own number an executive committee, which shall have any or all the powers of the Trustees while the Trustees are not in session. The Trustees may also elect from their own number other committees from time to time. The number composing such committees and the powers conferred upon the same are to be determined by vote of a majority of the Trustees. All members of such committees shall hold such offices at the pleasure of the Trustees. The Trustees may abolish any such committee at any time. Any committee to which the Trustees delegate any of their powers or duties shall keep records of its meetings and shall report its actions to the Trustees. The Trustees shall have power to rescind any action of any committee, but no such rescission shall have retroactive effect. SECTION 3.03 COMPENSATION. Each Trustee and each committee member may receive such compensation for his services and reimbursement for his expenses as may be fixed from time to time by resolution of the Trustees. SECTION 3.04 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint from among their number a Chairman who shall serve as such at the pleasure of the Trustees. When present, he shall preside at all meetings of the Shareholders and the Trustees, and he may, subject to the approval of the Trustees, appoint a Trustee to preside at such meetings in his absence. He shall perform such other duties as the Trustees may from time to time designate. SECTION 3.05 PRESIDENT. The President shall be the chief executive officer of the Trust and, subject to the direction of the Trustees, shall have general administration of the business and policies of the Trust. Except as the Trustees may otherwise order, the President shall have the power to grant, issue, execute or sign such powers of attorney, proxies, agreements or other documents as may be deemed advisable or necessary in the furtherance of the interests of the Trust or any Series thereof. He shall also have the power to employ attorneys, accountants and other advisors and agents and counsel for the Trust. The President shall perform such duties additional to all of the foregoing as the Trustees may from time to time designate. SECTION 3.06 TREASURER. The Treasurer shall be the principal financial and accounting officer of the Trust. He shall deliver all funds and securities of the Trust which may come into his hands to such company as the Trustees shall employ as Custodian in accordance with the Trust Instrument and applicable provisions of law. He shall furnish such reports regarding the business and condition of the Trust as the Trustees may from time to time require. The Treasurer shall perform such additional duties as the Trustees may from time to time designate. SECTION 3.07 SECRETARY. The Secretary shall record in books kept for the purpose all votes and proceedings of the Trustees and the Shareholders at their respective meetings. He shall have the custody of the seal of the Trust. The Secretary shall perform such additional duties as the Trustees may from time to time designate. SECTION 3.08 VICE PRESIDENT. Any Vice President of the Trust shall perform such duties as the Trustees or the President may from time to time designate. At the request or in the absence or disability of the President, the Vice President (or, if there are two or more Vice Presidents, then the senior of the Vice Presidents present and able to act) may perform all the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. SECTION 3.09 ASSISTANT TREASURER. Any Assistant Treasurer of the Trust shall perform such duties as the Trustees or the Treasurer may from time to time designate, and, in the absence of the Treasurer, the senior Assistant Treasurer, present and able to act, may perform all the duties of the Treasurer. -2- SECTION 3.10 ASSISTANT SECRETARY. Any Assistant Secretary of the Trust shall perform such duties as the Trustees or the Secretary may from time to time designate, and, in the absence of the Secretary, the senior Assistant Secretary, present and able to act, may perform all the duties of the Secretary. SECTION 3.11 SUBORDINATE OFFICERS. The Trustees from time to time may appoint such officers or agents as they may deem advisable, each of whom shall have such title, hold office for such period, have such authority and perform such duties as the Trustees may determine. The Trustees from time to time may delegate to one or more officers or committees of Trustees the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authorities and duties. SECTION 3.12 SURETY BONDS. The Trustees may require any officer or agent of the Trust to execute a bond (including without limitation, any bond required by the 1940 Act and the rules and regulations of the Commission) to the Trust in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his duties to the Trust including responsibility for negligence and for the accounting of any of the Trust's property, funds or securities that may come into his hands. SECTION 3.13 REMOVAL. Any officer may be removed from office whenever in the judgment of the Trustees the best interest of the Trust will be served thereby, by the vote of a majority of the Trustees given at any regular meeting or any special meeting of the Trustees. In addition, any officer or agent appointed in accordance with the provisions of Section 3.10 hereof may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the Trustees. SECTION 3.14 REMUNERATION. The salaries or other compensation, if any, of the officers of the Trust shall be fixed from time to time by resolution of the Trustees. ARTICLE IV SHAREHOLDER'S MEETINGS SECTION 4.01 SPECIAL MEETINGS. A special meeting of the shareholders shall be called by the Secretary whenever (a) ordered by the Trustees or (b) requested in writing by the holder or holders of at least 10% of the Outstanding Shares entitled to vote. If the Secretary, when so ordered or requested, refuses or neglects for more than 30 days to call such special meeting, the Trustees or the Shareholders so requesting, may, in the name of the Secretary, call the meeting by giving notice thereof in the manner required when notice is given by the Secretary. If the meeting is a meeting of the Shareholders of one or more Series or classes of Shares, but not a meeting of all Shareholders of the Trust, then only special meetings of the Shareholders of such one or more Series or classes shall be called and only the shareholders of such one or more Series or classes shall be entitled to notice of and to vote at such meeting. SECTION 4.02 NOTICES. Except as provided in Section 4.01, notices of any meeting of the Shareholders shall be given by the Secretary by delivering or mailing, postage prepaid, to each Shareholder entitled to vote at said meeting, written or printed notification of such meeting at least fifteen (15) days before the meeting, to such address as may be registered with the Trust by the Shareholder. Notice of any Shareholder meeting need not be given to any Shareholder if a written waiver of notice, executed before or after such meeting, is filed with the record of such meeting, or to any Shareholder who shall attend such meeting in person or by proxy. Notice of adjournment of a Shareholder's meeting to another time or place need not be given, if such time -3- and place are announced at the meeting or reasonable notice is given to persons present at the meeting and the adjourned meeting is held within a reasonable time after the date set for the original meeting. SECTION 4.03 VOTING-PROXIES. Subject to the provisions of the Trust Instrument, shareholders entitled to vote may vote either in person or by proxy, provided that either (a) an instrument authorizing such proxy to act is executed by the Shareholder in writing and dated not more than eleven (11) months before the meeting, unless the instrument specifically provides for a longer period or (b) the Trustees adopt by resolution an electronic, telephonic, computerized or other alternative to execution of a written instrument authorizing the proxy to act, which authorization is received not more than eleven (11) months before the meeting. Proxies shall be delivered to the Secretary of the Trust or other person responsible for recording the proceedings before being voted. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Trust receives a specific written notice from any one of them. Unless otherwise specifically limited by their terms, proxies shall entitle the holder thereof to vote at any adjournment of a meeting. A proxy purporting to be exercised by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden or proving invalidity shall rest on the challenger. At all meetings of the Shareholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. Except as otherwise provided herein or in the Trust Instrument, as these Bylaws or such Trust Instrument may be amended or supplemented from time to time, all maters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the Commonwealth of Massachusetts relating to proxies, and judicial interpretations thereunder, as if the Trust were a Massachusetts corporation and the Shareholders were shareholder of a Massachusetts corporation. SECTION 4.04 PLACE OF MEETING. All special meetings of the Shareholders shall be held at the principal place of business of the Trust or at such other place in the United States as the Trustees may designate. SECTION 4.05 ACTION WITHOUT A MEETING. Any action to be taken by Shareholders may be taken without a meeting if all Shareholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of meetings of Shareholders of the Trust. Such consent shall be treated for all purposes as a vote at a meeting of the Shareholders held at the principal place of business of the Trust. ARTICLE V TRUSTEES' MEETINGS SECTION 5.01 SPECIAL MEETINGS. Special meetings of the Trustees may be called orally or in writing by the Chairman of the Board of Trustees or any two other Trustees. SECTION 5.02 REGULAR MEETINGS. Regular meetings of the Trustees may be held at such places and at such times as the Trustees may from time to time determine; each Trustee present at such determination shall be deemed a party calling the meeting and no call or notice will be required to such Trustee provided that any Trustee who is absent when such determination is made shall be given notice of the determination by the Chairman or any two other Trustees, as provided for in Section 4.04 of the Trust Instrument. -4- SECTION 5.03 QUORUM. A majority of the Trustees shall constitute a quorum for the transaction of business and an action of a majority of the quorum shall constitute action of the Trustees. SECTION 5.04 NOTICE. Except as otherwise provided, notice of any special meeting of the Trustees shall be given by the party calling the meeting to each Trustee, as provided for the Section 4.04 of the Trust Instrument. A written notice may be mailed, postage prepaid, addressed to him at his address as registered on the books of the Trust or, if not so registered, at his last known address. SECTION 5.05 PLACE OF MEETING. All special meetings of the Trustees shall be held at the principal place of business of the Trust or such other place as the Trustees may designate. Any meeting may adjourn to any place. SECTION 5.06 SPECIAL ACTION. When all the Trustees shall be present at any meeting, however called or wherever held, or shall assent to the holding of the meeting without notice, or shall sign a written assent thereto filed with the record of such meeting, the acts of such meeting shall be valid as if such meeting had been regularly held. SECTION 5.07 ACTION BY CONSENT. Any action by the Trustees may be taken without a meeting if a written consent thereto is signed by all the Trustees and filed with the records of the Trustees' meeting. Such consent shall be treated, for all purposes, as a vote at a meeting of the Trustees held at the principal place of business of the Trustees. SECTION 5.08 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Trustees may participate in a meeting of Trustees by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. Any meeting conducted by telephone shall be deemed to take place at and from the principal office of the Trust. ARTICLE VI SHARES OF BENEFICIAL INTEREST SECTION 6.01 BENEFICIAL INTEREST. The beneficial interest in the Trust shall at all times be divided into such transferable Shares of one or more separate and distinct Series, or classes thereof, as the Trustees shall from time to time create and establish. The number of Shares is unlimited, and each Share of each Series or class thereof shall be without par value and shall represent an equal proportionate interest with each other Share in the Series, none having priority or preference over another, except to the extent that such priorities or preference are established with respect to one or more classes of shares consistent with applicable law and any rule or order of the Commission. SECTION 6.02 TRANSFER OF SHARES. The Shares of the Trust shall be transferable, so as to affect the rights of the Trust, only by transfer recorded on the books of the Trust, in person or by attorney. SECTION 6.03 EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be entitled to treat the holder of record of any Share or Shares of beneficial interest as equitable or other claim or interest in such Share or Shares on the part of any other person except as may be otherwise expressly provided by law. -5- SECTION 6.04 SHARE CERTIFICATE. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise authorize. The Trustees may issue certificates to a Shareholder of any Series or class thereof for any purpose and the issuance of a certificate to one or more Shareholders shall not require the issuance of certificates generally. In the event that the Trustees authorize the issuance of Share certificates, such certificate shall be in the form proscribed from time to time by the Trustees and shall be signed by the President or a Vice President and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be facsimiles if the certificate is signed by a transfer or shareholder services agent or by a registrar, other than a Trustee, officer or employee of the Trust. In case any officer who has signed or whose facsimile signature has been placed on certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he or she were such officer at the time of its issue. In lieu of issuing certificates for Shares, the Trustees or the transfer or shareholder services agent may either issue receipts therefor or may keep accounts upon the books of the Trusts for the record holders of such Shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such Shares as if they had accepted such certificates and shall be held to have expressly assented and agreed to the terms hereof. SECTION 6.05 LOSS OF CERTIFICATES. In the case of the alleged loss or destruction or the mutilation of a Share certificate, a duplicate certificate may be issued in place thereof, upon such terms as the Trustees may prescribe. SECTION 6.06 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any time discontinue the issuance of Share certificates and may, by written notice to each Shareholder, require the surrender of Share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of Shares in the Trust. ARTICLE VII OWNERSHIP OF ASSETS OF THE TRUST The Trustees, acting for and on behalf of the Trust, shall be deemed to hold legal and beneficial ownership of any income earned on securities held by the Trust issued by any business entity formed, organized or existing under the laws of any jurisdiction other than a state, commonwealth, possession or colony of the United States or the laws of the United States. ARTICLE VIII INSPECTION OF BOOKS The Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions and regulations the accounts and books of the Trust or any of them shall be open to the inspection of the Shareholder; and no Shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by law or otherwise by the Trustees or by resolution of the Shareholders. -6- ARTICLE IX INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES The Trust may purchase and maintain insurance on behalf of any person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as a "Covered Person") or employee of the Trust, including any Covered Person or employee of the Trust who is or was serving at the request of the Trust as a Trustee, officer or employee of a corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Trustees would have the power to indemnify him against such liability. The Trust may not acquire or obtain a contract for insurance that protects or purports to protect any Trustee or officer of the Trust against any liability to the Trust of its Shareholders to which he would otherwise be subject by reason or willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. ARTICLE X SEAL The seal of the Trust shall be circular in form bearing the inscription: "MONARCH FUNDS -- 2003 COMMONWEALTH OF MASSACHUSETTS" -7- EX-99 5 iaplan.txt INVESTMENT ADVISORY AGREEMENT MONARCH FUNDS INVESTMENT ADVISORY AGREEMENT AGREEMENT made the ____ day of February, 2003 between Monarch Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts with its principal place of business at Two Portland Square, Portland, Maine 04101, and Forum Investment Advisors, LLC (the "Adviser"), a corporation organized under the laws of State of Delaware with its principal place of business at Two Portland Square, Portland, Maine 04101. WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended, (the "Act") as an open-end management investment company and is authorized to issue interests (as defined in the Trust's Trust Instrument) in separate series; and WHEREAS, the Trust desires that the Adviser perform investment advisory services for the series listed in Appendix A hereto (each a "Fund," and collectively the "Funds"), and the Adviser is willing to provide those services on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS The Trust is engaged in the business of investing and reinvesting its assets in securities of the type and in accordance with the limitations specified in its Trust Instrument and Registration Statement filed with the Securities and Exchange Commission (the "Commission") under the Act, as may be supplemented from time to time, all in such manner and to such extent as may from time to time be authorized by the Trust's Board of Trustees (the "Board"). The Trust is currently authorized to issue four series of interests and the Board is authorized to issue interests in any number of additional series. The Trust has delivered to the Adviser copies of the Trust's Trust Instrument and Registration Statement and will from time to time furnish the Adviser with any amendments thereof. SECTION 2. INVESTMENT ADVISER; APPOINTMENT The Trust hereby employs the Adviser, subject to the direction and supervision of the Board, to manage the investment and reinvestment of the assets in each Fund and, without limiting the generality of the foregoing, to provide other services specified in Section 3 hereof. SECTION 3. DUTIES OF THE ADVISER (a) The Adviser shall make decisions with respect to all purchases and sales of securities and other investment assets in each Fund. To carry out such decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for the Trust, for the account of, at the risk of and in the name of the Trust, to place orders and issue instructions with respect to those transactions of the Funds. In all purchases, sales and other transactions in securities for the Funds, the Adviser is authorized to exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or other transactions. (b) The Adviser will report to the Board at each meeting thereof all changes in each Fund since the prior report, and will also keep the Board informed of important developments affecting the Trust, the Funds and the Adviser, and on its own initiative, will furnish the Board from time to time with such information as the Adviser may believe appropriate for this purpose, whether concerning the individual companies whose securities are included in the Funds' holdings, the industries in which they engage, or the economic, social or political conditions prevailing in each country in which the Funds maintain investments. The Adviser will also furnish the Board with such statistical and analytical information with respect to securities in the Funds as the Adviser may believe appropriate or as the Board reasonably may request. (c) In making purchases and sales of securities for the Funds, the Adviser will follow and comply with the policies set from time to time by the Board as well as the limitations imposed by the Trust's Trust Instrument and Registration Statement under the Act, the limitations in the Act and in the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies and the investment objectives, policies and restrictions of the Funds. (d) The Adviser will from time to time employ or associate with such persons as the Adviser believes to be particularly qualified to assist in the execution of the Adviser's duties hereunder, the cost of performance of such duties to be borne and paid by the Adviser. No obligation may be incurred on the Trust's behalf in any such respect. (e) The Adviser shall either monitor the performance of brokers, dealers and other persons who introduce or execute purchases, sales and other transactions of securities and other investment assets of the Funds or select an introducing broker who shall, as part of its transaction charges, monitor such performance. Such persons may be affiliated with the Adviser, any investment subadviser or other affiliates of the Trust to the extent permitted by the Act. (f) The Adviser shall maintain records relating to portfolio transactions and the placing and allocation of brokerage orders as are required to be maintained by the Trust under the Act. The Adviser shall prepare and maintain, or cause to be prepared and maintained, in such form, for such periods and in such locations as may be required by applicable law, all documents and records relating to the services provided by the Adviser pursuant to this Agreement required to be prepared and maintained by the Trust pursuant to the rules and regulations of any national, state, or local government entity with jurisdiction over the Trust, including the Commission and the Internal Revenue Service. The books and records pertaining to the Trust which are in possession of the Adviser shall be the property of the Trust. The Trust, or the Trust's authorized representatives, shall have access to such books and records at all times during the Adviser's -2- normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided promptly by the Adviser to the Trust or the Trust's authorized representatives. SECTION 4. DELEGATION OF THE ADVISER'S DUTIES The Adviser may carry out any of its obligations under this Agreement by entering into a contract with a person(s) who (i) is registered as an investment adviser pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act"), or who is exempt from registration thereunder or (ii) is under the control of, and is supervised by, the Adviser ("Controlled Person") with respect to any investment advisory functions performed by such Controlled Person. The Adviser may not delegate any of its obligations under this Agreement unless it has instituted appropriate procedures for the supervision of the Controlled Person's activities. SECTION 5. EXPENSES The Trust hereby confirms that the Trust shall be responsible and shall assume the obligation for payment of all the Trust's expenses, including: interest charges, taxes, brokerage fees and commissions; certain insurance premiums; fees, interest charges and expenses of the Trust's custodian and transfer agent; telecommunications expenses; auditing, legal and compliance expenses; costs of the Trust's formation and maintaining its existence; costs of preparing the Trust's registration statement, account application forms and interestholder reports and delivering them to existing and prospective interestholders; costs of maintaining books of original entry for portfolio and fund accounting and other required books and accounts and of calculating the net asset value of interests in the Trust; costs of reproduction, stationery and supplies; compensation of the Trust's trustees, officers and employees and the costs of other personnel performing services for the Trust; costs of Trust meetings; registration fees and related expenses for registration with the Commission and the securities regulatory authorities of other countries in which the Trust's interests are sold; state securities law registration fees and related expenses; and fees and out-of-pocket expenses payable to Forum Financial Services, Inc. under any placement agent, management or similar agreement. SECTION 6. STANDARD OF CARE (a) The Adviser shall give the Trust the benefit of its best judgment and efforts in rendering its services to the Trust and shall not be liable for error of judgment or mistake of law, for any loss arising out of any investment, or in any event whatsoever, provided that nothing herein shall be deemed to protect, or purport to protect, the Adviser against any liability to the Trust or to the security holders of the Trust to which it would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or by reason of reckless disregard of its obligations and duties hereunder. No provision of this Agreement shall be construed to protect any Trustee or officer of the Trust, or the Adviser, from liability in violation of Sections 17(h), 17(i) or 36(b) of the Act. -3- (b) The Adviser shall not be held responsible for any loss incurred by reason of any act or omission of any dealer, broker or custodian; provided that such loss is not the result of the Adviser's willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or the result of the Adviser's reckless disregard of its obligations and duties hereunder. (c) This Section shall survive the termination of this Agreement and shall be binding upon the Trust's and the Adviser's successors and personal representatives. SECTION 7. COMPENSATION For the services provided by the Adviser pursuant to this Agreement, the Trust shall pay the Adviser an advisory fee as set forth in Appendix B. SECTION 8. EFFECTIVENESS, DURATION AND TERMINATION (a) This Agreement shall become effective with respect to each Fund on date referenced above. (b) This Agreement shall remain in effect with respect to a Fund for a period of two years from the date of its effectiveness and shall continue in effect for successive twelve-month periods (computed from each anniversary date of the approval) with respect to the Fund; provided that such continuance is specifically approved at least annually (i) by the Board or by the vote of a majority of the outstanding voting interests of the Fund, and, in either case, (ii) by a majority of the Trust's trustees who are not parties to this Agreement or interested persons of any such party (other than as trustees of the Trust); provided further, however, that if this Agreement or the continuation of this Agreement is not approved as to a Fund, the Adviser may continue to render to that Fund the services described herein in the manner and to the extent permitted by the Act and the rules and regulations thereunder. (c) This Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty, (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund on 60 days' written notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the Trust. This agreement shall terminate upon assignment. SECTION 9. ACTIVITIES OF THE ADVISER (a) Except to the extent necessary to perform its obligations hereunder, nothing herein shall be deemed to limit or restrict the Adviser's right, or the right of any of the Adviser's officers, directors or employees who may also be a trustee, officer or employee of the Trust, or persons otherwise affiliated persons of the Trust to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, trust, firm, individual or association. -4- (b) The Adviser represents that it is currently registered, and will during the entire period this Agreement is in effect be registered, as an investment adviser under the Advisers Act. SECTION 10. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY The Trustees of the Trust and the interestholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and the Adviser agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Trust or the Fund to which the Adviser's rights or claims relate in settlement of such rights or claims, and not to the Trustees of the Trust or the interestholders of the Funds. SECTION 11. NOTICE Any notice or other communication required to be given pursuant to this Agreement shall be in writing or by telex and shall be effective upon receipt. Notices and communications shall be given, if to the Trust, at: Two Portland Square Portland, Maine 04101 Attention: Secretary and if to the Adviser at: Two Portland Square Portland, Maine 04101 Attention: Secretary SECTION 12. MISCELLANEOUS (a) No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto and, if required by the Act, by a vote of a majority of the outstanding voting interests of the Funds thereby affected. No amendment to this Agreement or the termination of this Agreement with respect to a Fund shall effect this Agreement as it pertains to any other Fund. (b) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (c) This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -5- (d) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (e) This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Delaware. (f) The terms "vote of a majority of the outstanding voting interests," "interested person," "affiliated person" and "assignment" shall have the meanings ascribed thereto in the Act to the terms "vote of a majority of the outstanding voting securities," "interested person," "affiliated person" and "assignment," respectively. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. MONARCH FUNDS /s/ JOHN Y. KEFFER ------------------------------ John Y. Keffer Chairman of the Board FORUM INVESTMENT ADVISORS, LLC /s/ DAVID I. GOLDSTEIN ------------------------------ David I. Goldstein Secretary -6- MONARCH FUNDS INVESTMENT ADVISORY AGREEMENT APPENDIX A FUNDS OF THE TRUST Daily Assets Treasury Cash Fund Daily Assets Government Cash Fund Daily Assets Government Fund Daily Assets Cash Fund MONARCH FUNDS INVESTMENT ADVISORY AGREEMENT APPENDIX B FEE SCHEDULE FEE AS A % OF THE ANNUAL AVERAGE DAILY NET ASSETS FUNDS OF THE TRUST OF THE FUND ------------------ ----------- Daily Assets Government Fund 0.05% FEE AS A % OF THE ANNUAL AVERAGE DAILY NET ASSETS FUNDS OF THE TRUST OF THE FUNDS COMBINED ------------------ --------------------- Daily Assets Treasury Cash Fund, 0.06% for the first $200 million in assets, Daily Assets Cash Fund and 0.04% of the next $300 million in assets, Daily Assets Government Cash Fund and 0.03% of the remaining assets. EX-99 6 distrplan.txt DISTRIBUTION AGREEMENT MONARCH FUNDS DISTRIBUTION AGREEMENT AGREEMENT made as of the 11th day of February, 2003, by and between Monarch Funds, a Massachusetts business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Fund Services, LLC, a Delaware limited liability company with its principal office and place of business at Two Portland Square, Portland, Maine 04101 ("Distributor"). WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end management investment company and may issue its shares of beneficial interest, no par value ("Shares") in separate series and classes; and WHEREAS, the Distributor is registered under the Securities Exchange Act of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the business of selling shares of registered investment companies either directly to purchasers or through other financial intermediaries; WHEREAS, the Trust offers shares in various series as listed in Appendix A hereto (each such series, together with all other series subsequently established by the Trust and made subject to this Agreement being herein referred to as a "Fund," and collectively as the "Funds") and the Trust offers shares of various classes of each Fund as listed in Appendix A hereto (each such class together with all other classes subsequently established by the Trust in a Fund being herein referred to as a "Class," and collectively as the "Classes"); and WHEREAS, the Trust desires that the Distributor offer, as principal underwriter, the Shares of each Fund and Class thereof to the public and the Distributor is willing to provide those services on the terms and conditions set forth in this Agreement in order to promote the growth of the Funds and facilitate the distribution of the Shares; NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the Trust and the Distributor do hereby agree as follows: SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS (a) The Trust hereby appoints the Distributor, and the Distributor hereby agrees, to act as distributor of the Shares for the period and on the terms set forth in this Agreement. (b) In connection therewith, the Trust has delivered to the Distributor copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended from time to time, "Organic Documents"), (ii) the Trust's Registration Statement and all amendments thereto filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended ("Securities Act"), or the 1940 Act ("Registration Statement"), (iii) the current prospectuses and statements of additional information of each Fund and Class thereof (collectively, as currently in effect and as amended or supplemented, the "Prospectus"), (iv) each current plan of distribution or similar document adopted by the Trust under Rule 12b-1 under the 1940 Act ("Plan") and each current shareholder service plan or similar document adopted by the Trust ("Service Plan"); and (iv) all procedures adopted by the Trust with respect to the Funds (E.G., repurchase agreement procedures), and shall promptly furnish the Distributor with all amendments of or supplements to the foregoing. The Trust shall deliver to the Distributor a certified copy of the resolution of the Board of Trustees of the Trust (the "Board") appointing the Distributor and authorizing the execution and delivery of this Agreement. SECTION 2. EXCLUSIVE NATURE OF DUTIES The Distributor shall be the exclusive representative of the Trust to act as distributor of the Funds except that the rights given under this Agreement to the Distributor shall not apply to: (i) Shares issued in connection with the merger, consolidation or reorganization of any other investment company or series or class thereof with a Fund or Class thereof; (ii) a Fund's acquisition by purchase or otherwise of all or substantially all of the assets or stock of any other investment company or series or class thereof; (iii) the reinvestment in Shares by a Fund's shareholders of dividends or other distributions; or (iv) any other offering by the Trust of securities to its shareholders (collectively "exempt transactions"). SECTION 3. OFFERING OF SHARES (a) The Distributor shall have the right to buy from the Trust the Shares needed to fill unconditional orders for unsold Shares of the Funds as shall then be effectively registered under the Securities Act placed with the Distributor by investors or selected dealers or selected agents (each as defined in Section 11 hereof) acting as agent for their customers or on their own behalf. Alternatively, the Distributor may act as the Trust's agent, to offer, and to solicit offers to subscribe to, unsold Shares of the Funds as shall then be effectively registered under the Securities Act. The Distributor will promptly forward all orders and subscriptions to the Trust. The price that the Distributor shall pay for Shares purchased from the Trust shall be the net asset value per Share, determined as set forth in Section 3(c) hereof, used in determining the public offering price on which the orders are based. Shares purchased by the Distributor are to be resold by the Distributor to investors at the public offering price, as set forth in Section 3(b) hereof, or to selected dealers or selected agents acting as agent for their customers that have entered into agreements with the Distributor pursuant to Section 11 hereof or acting on their own behalf. The Trust reserves the right to sell Shares directly to investors through subscriptions received by the Trust, but no such direct sales shall affect the sales charges due to the Distributor hereunder. (b) The public offering price of the Shares of a Fund, I.E., the price per Share at which the Distributor or selected dealers or selected agents may sell Shares to the public or to those persons eligible to invest in Shares as described in the applicable Prospectus, shall be the public offering price determined in accordance with the then currently effective Prospectus of the Fund or Class thereof under the Securities Act relating to such Shares. The public offering price shall -2- not exceed the net asset value at which the Distributor, when acting as principal, is to purchase such Shares, plus, in the case of Shares for which an initial sales charge is assessed, an initial charge equal to a specified percentage or percentages of the public offering price of the Shares as set forth in the current Prospectus relating to the Shares. In the case of Shares for which an initial sales charge may be assessed, Shares may be sold to certain classes of persons at reduced sales charges or without any sales charge as from time to time set forth in the current Prospectus relating to the Shares. The Trust will advise the Distributor of the net asset value per Share at each time as the net asset value per Share shall have been determined by the Trust and at such other times as the Distributor may reasonably request. (c) The net asset value per Share of each Fund or Class thereof shall be determined by the Trust, or its designated agent, in accordance with and at the times indicated in the applicable Prospectus on each Fund business day in accordance with the method set forth in the Prospectus and guidelines established by the Trust's Board of Trustees (the "Board"). (d) The Trust reserves the right to suspend the offering of Shares of a Fund or of any Class thereof at any time in the absolute discretion of the Board, and upon notice of such suspension the Distributor shall cease to offer Shares of the Funds or Classes thereof specified in the notice. (e) The Trust, or any agent of the Trust designated in writing to the Distributor by the Trust, shall be promptly advised by the Distributor of all purchase orders for Shares received by the Distributor and all subscriptions for Shares obtained by the Distributor as agent shall be directed to the Trust for acceptance and shall not be binding until accepted by the Trust. Any order or subscription may be rejected by the Trust; provided, however, that the Trust will not arbitrarily or without reasonable cause refuse to accept or confirm orders or subscriptions for the purchase of Shares. The Trust or its designated agent will confirm orders and subscriptions upon their receipt, will make appropriate book entries and, upon receipt by the Trust or its designated agent of payment thereof, will issue such Shares in certificated or uncertificated form pursuant to the instructions of the Distributor. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Trust or its designated agent. SECTION 4. REPURCHASE OR REDEMPTION OF SHARES BY THE TRUST (a) Any of the outstanding Shares of a Fund or Class thereof may be tendered for redemption at any time, and the Trust agrees to redeem or repurchase the Shares so tendered in accordance with its obligations as set forth in the Organic Documents and the Prospectus relating to the Shares. The price to be paid to redeem or repurchase the Shares of a Fund of Class thereof shall be equal to the net asset value calculated in accordance with the provisions of Section 3(b) hereof less, in the case of Shares for which a deferred sales charge is assessed, a deferred sales charge equal to a specified percentage or percentages of the net asset value of those Shares as from time to time set forth in the Prospectus relating to those Shares or their cost, whichever is less. Shares of a Fund or Class thereof for which a deferred sales charge may be assessed and that have been outstanding for a specified period of time may be redeemed without payment of a deferred sales charge as from time to time set forth in the Prospectus relating to those Shares. -3- (b) The Trust or its designated agent shall pay (i) the total amount of the redemption price consisting of the redemption price less any applicable deferred sales charge to the redeeming shareholder or its agent and (ii) except as may be otherwise required by the Rules of Fair Practice (the "Rules") of the National Association of Securities Dealers Regulation, Inc. (the "NASD") and any interpretations thereof, any applicable deferred sales charges to the Distributor in accordance with the Distributor's instructions on or before the fifth business day (or such other earlier business day as is customary in the investment company industry) subsequent to the Trust or its agent having received the notice of redemption in proper form. (c) Redemption of Shares or payment therefor may be suspended at times when the New York Stock Exchange is closed for any reason other than its customary weekend or holiday closings, when trading thereon is restricted, when an emergency exists as a result of which disposal by the Trust of securities owned by a Fund is not reasonably practicable or it is not reasonably practicable for the Trust fairly to determine the value of a Fund's net assets, or during any other period when the SEC so requires or permits. SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR (a) The Distributor shall use reasonable efforts to sell Shares of the Funds upon the terms and conditions contained herein and in the then current Prospectus. The Distributor shall devote reasonable time and effort to effect sales of Shares but shall not be obligated to sell any specific number of Shares. The services of the Distributor to the Trust hereunder are not to be deemed exclusive, and nothing herein contained shall prevent the Distributor from entering into like arrangements with other investment companies so long as the performance of its obligations hereunder is not impaired thereby. (b) In selling Shares of the Funds, the Distributor shall use its best efforts in all material respects duly to conform with the requirements of all federal and state laws relating to the sale of the Shares. None of the Distributor, any selected dealer, any selected agent or any other person is authorized by the Trust to give any information or to make any representations other than as is contained in a Fund's Prospectus or any advertising materials or sales literature specifically approved in writing by the Trust or its agents. (c) The Distributor shall adopt and follow procedures for the confirmation of sales to investors and selected dealers or selected agents, the collection of amounts payable by investors and selected dealers or selected agents on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the NASD. (d) The Distributor represents and warrants to the Trust that: (i) It is a limited liability company duly organized and existing and in good standing under the laws of the State of Delaware and it is duly qualified to carry on its business in the State of Maine; -4- (ii) It is empowered under applicable laws and by its Operating Agreement to enter into and perform this Agreement; (iii) All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; (iv) It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement; (v) This Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the Distributor, enforceable against the Distributor in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties; (vi) It is registered under the 1934 Act with the SEC as a broker-dealer, it is a member in good standing of the NASD, it will abide by the rules and regulations of the NASD, and it will notify the Trust if its membership in the NASD is terminated or suspended; and (vii) The performance by the Distributor of its obligations hereunder does not and will not contravene any provision of its Operating Agreement. (e) Notwithstanding anything in this Agreement, including the Appendices, to the contrary, the Distributor makes no warranty or representation as to the number of selected dealers or selected agents with which it has entered into agreements in accordance with Section 11 hereof, as to the availability of any Shares to be sold through any selected dealer, selected agent or other intermediary or as to any other matter not specifically set forth herein. SECTION 6. DUTIES AND REPRESENTATIONS OF THE TRUST (a) The Trust shall furnish to the Distributor copies of all financial statements and other documents to be delivered to shareholders or investors at least two Fund business days prior to such delivery and shall furnish the Distributor copies of all other financial statements, documents and other papers or information which the Distributor may reasonably request for use in connection with the distribution of Shares. The Trust shall make available to the Distributor the number of copies of the Funds' Prospectuses as the Distributor shall reasonably request. (b) The Trust shall execute any and all documents, furnish to the Distributor any and all information, otherwise use its best efforts to take all actions that may be reasonably necessary and cooperate with the Distributor in taking any action as may be necessary to register or qualify Shares for sale under the securities laws of the various states of the United States and other jurisdictions ("States") as the Distributor shall designate (subject to approval by the Trust); provided that the Distributor shall not be required to register as a broker-dealer or file a consent to service of process in any State and neither the Trust nor any Fund or Class thereof shall be required to qualify as a foreign corporation, trust or association in any State. Any registration or -5- qualification may be withheld, terminated or withdrawn by the Trust at any time in its discretion. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Trust in connection with such registration or qualification. (c) The Trust represents and warrants to the Distributor that: (i) It is a business trust duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts; (ii) It is empowered under applicable laws and by its Organic Documents to enter into and perform this Agreement; (iii) All proceedings required by the Organic Documents have been taken to authorize it to enter into and perform its duties under this Agreement; (iv) It is an open-end management investment company registered with the SEC under the 1940 Act; (v) All Shares, when issued, shall be validly issued, fully paid and non-assessable; (vi) This Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties; (vii) The performance by the Trust of its obligations hereunder does not and will not contravene any provision of its Organic Documents. (viii) The Registration statement is currently effective and will remain effective with respect to all Shares of the Funds and Classes thereof being offered for sale; (ix) The Registration Statement and Prospectuses have been or will be, as the case may be, prepared in conformity with the requirements of the Securities Act and the rules and regulations thereunder; (x) The Registration Statement and Prospectuses contain or will contain all statements required to be stated therein in accordance with the Securities Act and the rules and regulations thereunder; all statements of fact contained or to be contained in the Registration Statement or Prospectuses are or will be true and correct at the time indicated or on the effective date as the case may be; and neither the Registration Statement nor any Prospectus, when they shall become effective or be authorized for use, will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of Shares; -6- (xi) It will from time to time file such amendment or amendments to the Registration Statement and Prospectuses as, in the light of then-current and then-prospective developments, shall, in the opinion of its counsel, be necessary in order to have the Registration Statement and Prospectuses at all times contain all material facts required to be stated therein or necessary to make any statements therein not misleading to a purchaser of Shares ("Required Amendments"); (xii) It shall not file any amendment to the Registration Statement or Prospectuses without giving the Distributor reasonable advance notice thereof; provided, however, that nothing contained in this Agreement shall in any way limit the Trust's right to file at any time such amendments to the Registration Statement or Prospectuses, of whatever character, as the Trust may deem advisable, such right being in all respects absolute and unconditional; and (xiii) Any amendment to the Registration Statement or Prospectuses hereafter filed will, when it becomes effective, contain all statements required to be stated therein in accordance with the 1940 Act and the rules and regulations thereunder; all statements of fact contained in the Registration Statement or Prospectuses will, when be true and correct at the time indicated or on the effective date as the case may be; and no such amendment, when it becomes effective, will include an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of the Shares. SECTION 7. STANDARD OF CARE (a) The Distributor shall use its best judgment and reasonable efforts in rendering services to the Trust under this Agreement but shall be under no duty to take any action except as specifically set forth herein or as may be specifically agreed to by the Distributor in writing. The Distributor shall not be liable to the Trust or any of the Trust's shareholders for any error of judgment or mistake of law, for any loss arising out of any investment, or for any action or inaction of the Distributor in the absence of bad faith, willful misfeasance or gross negligence in the performance of the Distributor's duties or obligations under this Agreement or by reason or the Distributor's reckless disregard of its duties and obligations under this Agreement. SECTION 8. INDEMNIFICATION (a) The Trust will indemnify, defend and hold the Distributor, its employees, agents, directors and officers and any person who controls the Distributor within the meaning of section 15 of the Securities Act or section 20 of the 1934 Act ("Distributor Indemnitees") free and harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character (including the cost of investigating or defending such claims, demands, actions, suits or liabilities and any reasonable counsel fees incurred in connection therewith) which any Distributor Indemnitee may incur, under the Securities Act, or under common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in the -7- Registration Statement or the Prospectuses or arising out of or based upon any alleged omission to state a material fact required to be stated in any one thereof or necessary to make the statements in any one thereof not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished in writing to the Trust in connection with the preparation of the Registration Statement or exhibits to the Registration Statement by or on behalf of the Distributor ("Distributor Claims"). After receipt of the Distributor's notice of termination under Section 13(e), the Trust shall indemnify and hold each Distributor Indemnitee free and harmless from and against any Distributor Claim; provided, that the term Distributor Claim for purposes of this sentence shall mean any Distributor Claim related to the matters for which the Distributor has requested amendment to the Registration Statement and for which the Trust has not filed a Required Amendment, regardless of with respect to such matters whether any statement in or omission from the Registration Statement was made in reliance upon, or in conformity with, information furnished to the Trust by or on behalf of the Distributor. (b) The Trust may assume the defense of any suit brought to enforce any Distributor Claim and may retain counsel of good standing chosen by the Trust and approved by the Distributor, which approval shall not be withheld unreasonably. The Trust shall advise the Distributor that it will assume the defense of the suit and retain counsel within ten (10) days of receipt of the notice of the claim. If the Trust assumes the defense of any such suit and retains counsel, the defendants shall bear the fees and expenses of any additional counsel that they retain. If the Trust does not assume the defense of any such suit, or if the Distributor does not approve of counsel chosen by the Trust or has been advised that it may have available defenses or claims that are not available to or conflict with those available to the Trust, the Trust will reimburse any Distributor Indemnitee named as defendant in such suit for the reasonable fees and expenses of any counsel that person retains. A Distributor Indemnitee shall not settle or confess any claim without the prior written consent of the Trust, which consent shall not be unreasonably withheld or delayed. (c) The Distributor will indemnify, defend and hold the Trust and its several officers and trustees (collectively, the "Trust Indemnitees"), free and harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character (including the cost of investigating or defending such claims, demands, actions, suits or liabilities and any reasonable counsel fees incurred in connection therewith), but only to the extent that such claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses result from, arise out of or are based upon: (i) any alleged untrue statement of a material fact contained in the Registration Statement or Prospectus or any alleged omission of a material fact required to be stated or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon, and in conformity with, information furnished to the Trust in writing in connection with the preparation of the Registration Statement or Prospectus by or on behalf of the Distributor; or -8- (ii) any act of, or omission by, Distributor or its sales representatives that does not conform to the standard of care set forth in Section 7 of this Agreement ("Trust Claims"). (d) The Distributor may assume the defense of any suit brought to enforce any Trust Claim and may retain counsel of good standing chosen by the Distributor and approved by the Trust, which approval shall not be withheld unreasonably. The Distributor shall advise the Trust that it will assume the defense of the suit and retain counsel within ten (10) days of receipt of the notice of the claim. If the Distributor assumes the defense of any such suit and retains counsel, the defendants shall bear the fees and expenses of any additional counsel that they retain. If the Distributor does not assume the defense of any such suit, or if the Trust does not approve of counsel chosen by the Distributor or has been advised that it may have available defenses or claims that are not available to or conflict with those available to the Distributor, the Distributor will reimburse any Trust Indemnitee named as defendant in such suit for the reasonable fees and expenses of any counsel that person retains. A Trust Indemnitee shall not settle or confess any claim without the prior written consent of the Distributor, which consent shall not be unreasonably withheld or delayed. (e) The Trust's and the Distributor's obligations to provide indemnification under this Section is conditioned upon the Trust or the Distributor receiving notice of any action brought against a Distributor Indemnitee or Trust Indemnitee, respectively, by the person against whom such action is brought within twenty (20) days after the summons or other first legal process is served. Such notice shall refer to the person or persons against whom the action is brought. The failure to provide such notice shall not relieve the party entitled to such notice of any liability that it may have to any Distributor Indemnitee or Trust Indemnitee except to the extent that the ability of the party entitled to such notice to defend such action has been materially adversely affected by the failure to provide notice. (f) The provisions of this Section and the parties' representations and warranties in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Distributor Indemnitee or Trust Indemnitee and shall survive the sale and redemption of any Shares made pursuant to subscriptions obtained by the Distributor. The indemnification provisions of this Section will inure exclusively to the benefit of each person that may be a Distributor Indemnitee or Trust Indemnitee at any time and their respective successors and assigns (it being intended that such persons be deemed to be third party beneficiaries under this Agreement). (g) Each party agrees promptly to notify the other party of the commencement of any litigation or proceeding of which it becomes aware arising out of or in any way connected with the issuance or sale of Shares. (h) Nothing contained herein shall require the Trust to take any action contrary to any provision of its Organic Documents or any applicable statute or regulation or shall require the Distributor to take any action contrary to any provision of its Operating Agreement or any applicable statute or regulation; provided, however, that neither the Trust nor the Distributor may -9- amend their Organic Documents or Operating Agreement, respectively, in any manner that would result in a violation of a representation or warranty made in this Agreement. (i) Nothing contained in this section shall be construed to protect the Distributor against any liability to the Trust or its security holders to which the Distributor would otherwise be subject by reason of its failure to satisfy the standard of care set forth in Section 7 of this Agreement. SECTION 9. NOTIFICATION BY THE TRUST The Trust shall advise the Distributor immediately: (i) of any request by the SEC for amendments to the Trust's Registration Statement or Prospectus or for additional information; (ii) in the event of the issuance by the SEC of any stop order suspending the effectiveness of the Trust's Registration Statement or any Prospectus or the initiation of any proceedings for that purpose; (iii) of the happening of any material event which makes untrue any statement made in the Trust's then current Registration Statement or Prospectus or which requires the making of a change in either thereof in order to make the statements therein not misleading; and (iv) of all action of the SEC with respect to any amendments to the Trust's Registration Statement or Prospectus which may from time to time be filed with the SEC under the 1940 Act or the Securities Act. SECTION 10. COMPENSATION; EXPENSES (a) In consideration of the Distributor's services in connection with the distribution of Shares of each Fund and Class thereof, the Distributor shall receive: (i) any applicable sales charge assessed upon investors in connection with the purchase of Shares; (ii) from the Trust, any applicable contingent deferred sales charge ("CDSC") assessed upon investors in connection with the redemption of Shares; and (iii) from the Trust, the distribution service fees with respect to the Shares of those Classes as designated in Appendix A for which a Plan is effective (the "Distribution Fee"). The Distribution Fee shall be accrued daily by each applicable Fund or Class thereof and shall be paid monthly as promptly as possible after the last day of each calendar month but in any event on or before the fifth (5th) Fund business day after month-end, at the rate or in the amounts set forth in Appendix A and, as applicable, the Plans. (b) The Trust shall cause its transfer agent (the "Transfer Agent") to withhold, from redemption proceeds payable to holders of Shares of the Funds and the Classes thereof, all CDSCs properly payable by the shareholders in accordance with the terms of the applicable Prospectus and shall cause the Transfer Agent to pay such amounts over to the Distributor as promptly as possible after the settlement date for each redemption of Shares. (c) Except as specified in Sections 8 and 10(a), the Distributor shall be entitled to no compensation or reimbursement of expenses for the services provided by the Distributor pursuant to this Agreement. -10- (d) The Trust shall be responsible and assumes the obligation for payment of all the expenses of the Funds, including fees and disbursements of its counsel and auditors, in connection with the preparation and filing of the Registration Statement and Prospectuses (including but not limited to the expense of setting in type the Registration Statement and Prospectuses and printing sufficient quantities for internal compliance, regulatory purposes and for distribution to current shareholders). (e) The Trust shall bear the cost and expenses (i) of the registration of the Shares for sale under the Securities Act; (ii) of the registration or qualification of the Shares for sale under the securities laws of the various States; (iii) if necessary or advisable in connection therewith, of qualifying the Trust, the Funds or the Classes thereof (but not the Distributor) as an issuer or as a broker or dealer, in such States as shall be selected by the Trust and the Distributor pursuant to Section 6(b) hereof; and (iv) payable to each State for continuing registration or qualification therein until the Trust decides to discontinue registration or qualification pursuant to Section 6(b) hereof. The Distributor shall pay all expenses relating to the Distributor's broker-dealer qualification. SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS The Distributor shall have the right to enter into selected dealer agreements with securities dealers of its choice ("selected dealers") and selected agent agreements with depository institutions and other financial intermediaries of its choice ("selected agents") for the sale of Shares and to fix therein the portion of the sales charge, if any, that may be allocated to the selected dealers or selected agents; provided, that the Trust shall approve the forms of agreements with selected dealers or selected agents and shall review the compensation set forth therein. Shares of each Fund or Class thereof shall be resold by selected dealers or selected agents only at the public offering price(s) set forth in the Prospectus relating to the Shares. Within the United States, the Distributor shall offer and sell Shares of the Funds only to such selected dealers as are members in good standing of the NASD. SECTION 12. CONFIDENTIALITY The Distributor agrees to treat all records and other information related to the Trust as proprietary information of the Trust and, on behalf of itself and its employees, to keep confidential all such information, except that the Distributor may: (i) prepare or assist in the preparation of periodic reports to shareholders and regulatory bodies such as the SEC; (ii) provide information typically supplied in the investment company industry to companies that track or report price, performance or other information regarding investment companies; and (iii) release such other information as approved in writing by the Trust, which approval shall not be unreasonably withheld; -11- provided, however, that the Distributor may release any information regarding the Trust without the consent of the Trust if the Distributor reasonably believes that it may be exposed to civil or criminal legal proceedings for failure to comply, when requested to release any information by duly constituted authorities or when so requested by the Trust. SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION (a) This Agreement shall become effective with respect to each Fund on the later of (i) the date first above written or (ii) the date on which the Trust's Registration Statement relating to Shares of the Fund becomes effective. Upon effectiveness of this Agreement, it shall supersede all previous agreements between the parties hereto covering the subject matter hereof insofar as such Agreement may have been deemed to relate to the Funds. (b) This Agreement shall continue in effect with respect to a Fund for a period of one year from its effectiveness and thereafter shall continue in effect with respect to a Fund until terminated; provided, that continuance is specifically approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund and (ii) by a vote of a majority of Trustees of the Trust (I) who are not parties to this Agreement or interested persons of any such party (other than as Trustees of the Trust) and (II) with respect to each class of a Fund for which there is an effective Plan, who do not have any direct or indirect financial interest in any such Plan applicable to the class or in any agreements related to the Plan, cast in person at a meeting called for the purpose of voting on such approval. (c) This Agreement may be terminated at any time with respect to a Fund, without the payment of any penalty, (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund or, with respect to each class of a Fund for which there is an effective Plan, a majority of Trustees of the Trust who do not have any direct or indirect financial interest in any such Plan or in any agreements related to the Plan, on 60 days' written notice to the Distributor or (ii) by the Distributor on 60 days' written notice to the Trust. (d) This Agreement shall automatically terminate upon its assignment and upon the termination of the Distributor's membership in the NASD. (e) If the Trust shall not file a Required Amendment within fifteen days following receipt of a written request from the Distributor to do so, the Distributor may, at its option, terminate this Agreement immediately. (f) The obligations of Sections 5(d), 6(d), 8, 9 and 10 shall survive any termination of this Agreement. SECTION 14. NOTICES Any notice required or permitted to be given hereunder by either party to the other shall be deemed sufficiently given if personally delivered or sent by telegram, facsimile or registered, -12- certified or overnight mail, postage prepaid, addressed by the party giving such notice to the other party at the last address furnished by the other party to the party giving such notice, and unless and until changed pursuant to the foregoing provisions hereof each such notice shall be addressed to the Trust or the Distributor, as the case may be, at their respective principal places of business. SECTION 15. ACTIVITIES OF THE DISTRIBUTOR Except to the extent necessary to perform the Distributor's obligations hereunder, nothing herein shall be deemed to limit or restrict the Distributor's right, or the right of any of the Distributor's employees, agents, officers or directors who may also be a trustee, officer or employee of the Trust, or affiliated persons of the Trust to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, trust, firm, individual or association. SECTION 16. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY The Trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and the Distributor agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Trust or the Fund to which the Distributor's rights or claims relate in settlement of such rights or claims, and not to the Trustees of the Trust or the shareholders of the Funds. SECTION 17. MISCELLANEOUS (a) Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. (b) No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto. (c) This Agreement shall be governed by, and the provisions of this Agreement shall be construed and interpreted under and in accordance with, the laws of the State of New York. (d) This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written. (e) This Agreement may be executed by the parties hereto on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument. (f) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and -13- enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (g) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (h) Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise. (i) No affiliated person, employee, agent, officer or director of the Distributor shall be liable at law or in equity for the Distributor's obligations under this Agreement. (j) Each of the undersigned warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof. (k) The terms "vote of a majority of the outstanding voting securities," "interested person," "affiliated person" and "assignment" shall have the meanings ascribed thereto in the 1940 Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers or persons, as of the day and year first above written. MONARCH FUNDS By: /s/ THOMAS G. SHEEHAN ----------------------------- Thomas G. Sheehan Vice President FORUM FUND SERVICES, LLC By: /s/ JOHN Y. KEFFER ----------------------------- John Y. Keffer Director -14- MONARCH FUNDS DISTRIBUTION AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST AS OF FEBRUARY 11, 2003 DAILY ASSETS TREASURY CASH FUND Preferred Shares Universal Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT FUND Universal Shares DAILY ASSETS CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares * * * * * SHAREHOLDER SERVICE PAYMENTS PURSUANT TO THE SERVICE PLAN Up to 0.20% of the average annual daily net assets of the Institutional Service Class or Institutional Class, as applicable, represented by shares owned by investors for which the shareholder service agent maintains a servicing relationship. -A1- Up to 0.25% of the average annual daily net assets of the Investor Class, represented by shares owned by investors for which the shareholder service agent maintains a servicing relationship. -A2- DISTRIBUTION PAYMENTS PURSUANT TO THE PLAN 0.25% of the average annual daily net assets of the Investor Class represented by shares owned by investors for which the shareholder service agent maintains a servicing relationship. -A3- EX-99 7 ic12b1.txt DISTRIBUTION 12B-1 PLAN MONARCH FUNDS INVESTOR CLASS DISTRIBUTION PLAN as of February __, 2003 This Distribution Plan (the "Plan") is adopted by Monarch Funds (the "Trust") with respect to the Investor Class of shares of beneficial interest of each of the Funds identified in Appendix A (individually a "Fund" and collectively the "Funds") in accordance with the provisions of Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act"). SECTION 1. DISTRIBUTOR The Trust has entered into a Distribution Agreement (the "Agreement") with Forum Fund Services, LLC ("Forum") whereby Forum acts as principal underwriter of the Funds. SECTION 2. PAYMENTS (a) As compensation for Forum's distribution and service activities with respect to the Investor Class of each Fund, the Trust shall pay Forum a fee at an annual rate of 0.25% of the average daily net assets of the Investor Class of each Fund (the "Payments"). The Payments shall be accrued daily and paid monthly or at such other interval as the Trust's Board of Trustees ("Board") shall determine. (b) On behalf of the Trust, as principal underwriter of each Fund, Forum may spend such amounts and incur such expenses as it deems appropriate or necessary on any activities primarily intended to result in the sale of the shares of the Investor Class of each Fund (distribution activities) or for the servicing and maintenance of shareholder accounts of the Investor Class of each Fund (service activities); provided, however that: (i) any agreement entered into pursuant to Section 4 hereof shall apportion the payments made under the agreement between distribution and service activities and (ii) the Investor Class of each Fund shall not directly or indirectly pay any amounts, whether Payments or otherwise, that exceed any applicable limits imposed by law or the National Association of Securities Dealers, Inc. ("NASD"). (c) For purposes of the Plan, service activities shall mean any activities covered by the definition of "service fee" contained in the NASD's Rules of Fair Practice, as amended from time to time, and distribution activities shall mean any activities in connection with Forum's performance of its obligations under the Plan or the Agreement that are not deemed service activities. SECTION 3. DISTRIBUTION AND SERVICE ACTIVITIES Distribution and service activities include: (i) any sales, marketing and other activities primarily intended to result in the sale of Investor Class shares and (ii) responding to Investor Class shareholder inquiries regarding the Funds' investment objectives, policies and other operational features. Expenses for such activities include compensation to employees, and expenses, including overhead and telephone and other communication expenses, of Forum and various financial institutions or other persons who engage in or support the distribution of Investor Class shares, or who respond to Investor Class shareholder inquiries regarding the Funds' operations; the incremental costs of printing (excluding typesetting) and distributing prospectuses, statements of additional information, annual reports and other periodic reports for use in connection with the offering or sale of Investor Class shares to any prospective investors; and the costs of preparing, printing and distributing sales literature and advertising materials used by Forum or others in connection with the offering of Investor Class shares for sale to the public. SECTION 4. MARKETING AND SERVICE AGREEMENTS Pursuant to agreements the form of which shall be approved by the Board ("Agreements"), Forum may pay any or all amounts of the Payments to other persons ("Service Providers") for any distribution or service activity. Each Agreement shall contain a representation by the Service Provider that any compensation payable to the Service Provider in connection with the investment in the Investor class of a Fund of the assets of its customers: (i) will be disclosed by the Service Provider to its customers; (ii) will be authorized by its customers; and (iii) will not result in an excessive fee to the Service Provider. Each Agreement shall provide that, in the event an issue pertaining to the Plan is submitted for shareholder approval, the Service Provider will vote any shares held for its own account in the same proportion as the vote of those shares held for the accounts of the Service Provider's customers. SECTION 5. REVIEW AND RECORDS (a) Forum shall prepare and furnish to the Board, and the Board shall review at least quarterly, written reports setting forth all amounts expended under the Plan by the Trust and Forum and identifying the activities for which the expenditures were made. (b) The Trust shall preserve copies of the Plan, each agreement related to the Plan and each report prepared and furnished pursuant to this Section in accordance with Rule 12b-1 under the Act. SECTION 6. EFFECTIVENESS; DURATION; AND TERMINATION With respect to the Investor Class of a Fund: (a) The Plan shall become effective upon approval by: (i) a vote of at least a majority of the outstanding voting securities of the Investor Class of the Fund and (ii) the Board, including a majority of the trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan (the "Qualified Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on approval of the Plan. -2- (b) The Plan shall remain in effect for a period of one year from the date of its effectiveness, unless earlier terminated in accordance with this Section, and thereafter shall continue in effect for successive twelve-month periods, provided that such continuance is specifically approved at least annually by the Board and a majority of the Qualified Trustees pursuant to a vote cast in person at a meeting called for the purpose of voting on continuance of the Plan. (c) The Plan may be terminated without penalty at any time by a vote of: (i) a majority of the Qualified Trustees or (ii) a vote of a majority of the outstanding voting securities of the Investor Class of the Fund. SECTION 7. AMENDMENT The Plan may be amended at any time by the Board, provided that: (i) any material amendments to the Plan shall be effective only upon approval of the Board and a majority of the Qualified Trustees pursuant to a vote cast in person at a meeting called for the purpose of voting on the amendment to the Plan and (ii) any amendment which increases materially the amount which may be spent by the Trust pursuant to the Plan with respect to the Investor Class of a Fund shall be effective only upon the additional approval a majority of the outstanding voting securities of the Investor Class of that Fund. SECTION 8. NOMINATION OF DISINTERESTED TRUSTEES While the Plan is in effect, the trustees of the Trust who are not interested persons of the Trust shall select and nominate any such disinterested trustee. SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY The Trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under the Plan, and the Distributor agrees that, in asserting any rights or claims under this Plan, it shall look only to the assets and property of the Trust or the Fund to which the Distributor's rights or claims relate in settlement of such rights or claims, and not to the Trustees of the Trust or the shareholders of the Funds. SECTION 10. MISCELLANEOUS (a) The terms "majority of the outstanding voting securities" and "interested person" shall have the meanings ascribed thereto in the Act. (b) If any provision of the Plan shall be held invalid by a court decision, statute, rule or otherwise, the remainder of the Plan shall not be affected thereby. -3- MONARCH FUNDS INVESTOR CLASS DISTRIBUTION PLAN APPENDIX A Daily Assets Treasury Cash Fund Daily Assets Government Cash Fund Daily Assets Government Fund Daily Assets Cash Fund EX-99 8 mc18f3.txt MULTICLASS 18F-3 PLAN MONARCH FUNDS MULTICLASS (RULE 18F-3) PLAN February 11, 2003 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 series of the Trust identified in Appendix A (individually a "Fund" and collectively 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. (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, subject to reduction by Forum. (e) INSTITUTIONAL SERVICE SHARES. Are offered with no sales charges or distribution expenses. The investment minimum is $100,000, subject to reduction by Forum. 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 and for the shares of the other funds (whether series of the Trust or otherwise) listed in Appendix A in accordance with Section 11(a) of the Act, the rules thereunder and the requirements of the applicable prospectuses without charge. 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- MONARCH FUNDS MULTICLASS (RULE 18F-3) PLAN APPENDIX A: MONEY FUNDS(A) AND EXCHANGE PRIVILEGES as of February 11, 2003 - ------------------------------------- --------------------------------------- ---------------------------------------- Class Fund Exchange Privileges(b) - ------------------------------------- --------------------------------------- ---------------------------------------- Preferred Shares o Money Funds o Preferred Shares of Other Money Funds - ------------------------------------- --------------------------------------- ---------------------------------------- Universal Shares o Money Funds o Universal Shares of Other Money Funds - ------------------------------------- --------------------------------------- ---------------------------------------- Institutional Shares o Money Funds o Institutional Shares of Other Money Funds - ------------------------------------- --------------------------------------- ---------------------------------------- Institutional Service Shares o Money Funds o Institutional Service Shares of Other Money Funds - ------------------------------------- --------------------------------------- ---------------------------------------- Investor Shares o Daily Assets Government Cash o Each series/class of the Fund Forum Funds (c) o Each series of Sound Shore Fund, Inc. (c) o Each series of The Cutler Trust (c) o Investor Shares of Other Money Funds --------------------------------------- ---------------------------------------- o Other Money Funds o Investor Shares of Other Money Funds - ------------------------------------- --------------------------------------- ----------------------------------------
(a) Money Funds are (i) Daily Assets Treasury Cash Fund, (ii) Daily Assets Government Cash Fund, (iii) Daily Assets Government Fund and (iv) Daily Assets Cash Fund. (b) Shareholders of a Class of a Money Fund also may exchange their shares for shares of the same Class of any another Money Fund. (c) While shareholders of the funds that are not series of the Trust may exchange into the Money Fund indicated, shareholders of the Money Fund indicated may only exchange into other funds that are not series of the Trust if the shareholder originally exchanged from that other fund to the Money Fund. -4- EX-99 9 adminplan.txt ADMINISTRATION AGREEMENT MONARCH FUNDS ADMINISTRATION AGREEMENT AGREEMENT made as of the 11th day of February, 2003, by and between Monarch Funds, a Massachusetts business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Administrative Services, LLC, a Delaware limited liability company with its principal office and place of business at Two Portland Square, Portland, Maine 04101 ("Forum"). WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company and may issue its shares of beneficial interest, no par value (the "Shares"), in separate series and classes; and WHEREAS, the Trust offers shares in various series as listed in Appendix A hereto (each such series, together with all other series subsequently established by the Trust and made subject to this Agreement in accordance with Section 6, being herein referred to as a "Fund," and collectively as the "Funds") and the Trust offers shares of various classes of each Fund as listed in Appendix A hereto (each such class together with all other classes subsequently established by the Trust in a Fund being herein referred to as a "Class," and collectively as the "Classes"); and WHEREAS, the Trust desires that Forum perform certain administrative services for each Fund and Class thereof and Forum is willing to provide those services on the terms and conditions set forth in this Agreement; NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the Trust and Forum hereby agree as follows: SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS (a) The Trust hereby appoints Forum, and Forum hereby agrees, to act as administrator of the Trust for the period and on the terms set forth in this Agreement. (b) In connection therewith, the Trust has delivered to Forum copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended from time to time, "Organic Documents"), (ii) the Trust's Registration Statement and all amendments thereto filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the 1940 Act (the "Registration Statement"), (iii) the Trust's current Prospectus and Statement of Additional Information of each Fund (collectively, as currently in effect and as amended or supplemented, the "Prospectus"), (iv) each current plan of distribution or similar document adopted by the Trust under Rule 12b-1 under the 1940 Act ("Plan") and each current shareholder service plan or similar document adopted by the Trust ("Service Plan"), and (iv) all procedures adopted by the Trust with respect to the Funds (i.e., repurchase agreement procedures), and shall promptly furnish Forum with all amendments of or supplements to the foregoing. The Trust shall deliver to Forum a certified copy of the resolution of the Board of Trustees of the Trust (the "Board") appointing Forum and authorizing the execution and delivery of this Agreement. SECTION 2. DUTIES OF FORUM AND THE TRUST (a) Subject to the direction and control of the Board, Forum shall manage all aspects of the Trust's operations with respect to the Funds except those that are the responsibility of any other service provider hired by the Trust, all in such manner and to such extent as may be authorized by the Board. (b) With respect to the Trust or each Fund, as applicable, Forum shall: (i) at the Trust's expense, provide the Trust with, or arrange for the provision of, the services of persons competent to perform such legal, administrative and clerical functions not otherwise described in this Section 2(b) as are necessary to provide effective operation of the Trust; (ii) oversee (A) the preparation and maintenance by the Trust's custodian, transfer agent, dividend disbursing agent and fund accountant in such form, for such periods and in such locations as may be required by applicable United States law, of all documents and records relating to the operation of the Trust required to be prepared or maintained by the Trust or its agents pursuant to applicable law; (B) the reconciliation of account information and balances among the Trust's custodian, transfer agent, dividend disbursing agent and fund accountant; (C) the transmission of purchase and redemption orders for Shares; and (D) the performance of fund accounting, including the calculation of the net asset value of the Shares; (iii) oversee the performance of administrative and professional services rendered to the Trust by others, including its custodian, transfer agent and dividend disbursing agent as well as legal, auditing, shareholder servicing and other services performed for the Funds; (iv) file or oversee the filing of each document required to be filed by the Trust in either written or, if required, electronic format (e.g., electronic data gathering analysis and retrieval system or "EDGAR") with the SEC; (v) assist in and oversee the preparation, filing and printing and the periodic updating of the Registration Statement and Prospectuses; (vi) oversee the preparation and filing of the Trust's tax returns; (vii) oversee the preparation of financial statements and related reports to the Trust's shareholders, the SEC and state and other securities administrators; -2- (viii) assist in and oversee the preparation and printing of proxy and information statements and any other communications to shareholders; (ix) provide the Trust with adequate general office space and facilities and provide persons suitable to the Board to serve as officers of the Trust; (x) assist the investment advisers in monitoring Fund holdings for compliance with Prospectus investment restrictions and assist in preparation of periodic compliance reports, as applicable; (xi) prepare, file and maintain the Trust's Organic Documents and minutes of meetings of Trustees, Board committees and shareholders; (xii) with the cooperation of the Trust's counsel, investment advisers, the officers of the Trust and other relevant parties, prepare and disseminate materials for meetings of the Board, as applicable; (xiii) maintain the Trust's existence and good standing under applicable state law; (xiv) monitor sales of Shares, ensure that the Shares are properly and duly registered with the SEC and register, or prepare applicable filings with respect to, the Shares with the various state and other securities commissions; (xv) oversee the calculation of performance data for dissemination to information services covering the investment company industry, for sales literature of the Trust and other appropriate purposes; (xvi) oversee the determination of the amount of and supervise the declaration of dividends and other distributions to shareholders as necessary to, among other things, maintain the qualification of each Fund as a regulated investment company under the Internal Revenue Code of 1986, as amended (the "Code"), and prepare and distribute to appropriate parties notices announcing the declaration of dividends and other distributions to shareholders; (xvii) advise the Trust and the Board on matters concerning the Trust and its affairs; (xviii) calculate, review and account for Fund expenses and report on Fund expenses on a periodic basis; (xix) authorize the payment of Trust expenses and pay, from Trust assets, all bills of the Trust; (xx) prepare Fund budgets, pro-forma financial statements, expense and profit/loss projections and fee waiver/expense reimbursement projections on a periodic basis; -3- (xxi) prepare financial statement expense information; (xxii) assist the Trust in the selection of other service providers, such as independent accountants, law firms and proxy solicitors; and (xxiii) perform such other recordkeeping, reporting and other tasks as may be specified from time to time in the procedures adopted by the Board; provided, that Forum need not begin performing any such task except upon 65 days' notice and pursuant to mutually acceptable compensation agreements. (c) Forum shall provide such other services and assistance relating to the affairs of the Trust as the Trust may, from time to time, reasonably request pursuant to mutually acceptable compensation agreements. (d) Forum shall maintain records relating to its services, such as journals, ledger accounts and other records, as are required to be maintained under the 1940 Act and Rule 31a-1 thereunder. The books and records pertaining to the Trust that are in possession of Forum shall be the property of the Trust. The Trust, or the Trust's authorized representatives, shall have access to such books and records at all times during Forum's normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided promptly by Forum to the Trust or the Trust's authorized representatives. In the event the Trust designates a successor that assumes any of Forum's obligations hereunder, Forum shall, at the expense and direction of the Trust, transfer to such successor all relevant books, records and other data established or maintained by Forum under this Agreement. (e) Nothing contained herein shall be construed to require Forum to perform any service that could cause Forum to be deemed an investment adviser for purposes of the 1940 Act or the Investment Advisers Act of 1940, as amended, or that could cause a Fund to act in contravention of a Fund's Prospectus or any provision of the 1940 Act. Except with respect to Forum's duties as set forth in the Section 2 and except as otherwise specifically provided herein, the Trust assumes all responsibility for ensuring that the Trust complies with all applicable requirements of the Securities Act, the 1940 Act and any laws, rules and regulations of governmental authorities with jurisdiction over the Trust. All references to any law in this Agreement shall be deemed to include reference to the applicable rules and regulations promulgated under authority of the law and all official interpretations of such law or rules or regulations. (f) In order for Forum to perform the services required by this Section 2, the Trust (i) shall cause all service providers to the Trust to furnish any and all information to Forum, and assist Forum as may be required and (ii) shall ensure that Forum has access to all records and documents maintained by the Trust or any service provider to the Trust. -4- SECTION 3. STANDARD OF CARE AND RELIANCE (a) Forum shall be under no duty to take any action except as specifically set forth herein or as may be specifically agreed to by Forum in writing. Forum shall use its best judgment and efforts in rendering the services described in this Agreement. Forum shall not be liable to the Trust or any of the Trust's shareholders for any action or inaction of Forum relating to any event whatsoever in the absence of bad faith, willful misfeasance or gross negligence in the performance of Forum's duties or obligations under this Agreement or by reason of Forum's reckless disregard of its duties and obligations under this Agreement. (b) The Trust agrees to indemnify and hold harmless Forum, its employees, agents, directors, officers and managers and any person who controls Forum within the meaning of section 15 of the Securities Act or section 20 of the Securities Exchange Act of 1934, as amended, ("Forum Indemnitees") against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character arising out of or in any way related to Forum's actions taken or failures to act with respect to a Fund that are consistent with the standard of care set forth in Section 3(a) or based, if applicable, on good faith reliance upon an item described in Section 3(d) (a "Claim"). The Trust shall not be required to indemnify any Forum Indemnitee if, prior to confessing any Claim against the Forum Indemnitee, Forum or the Forum Indemnitee does not give the Trust written notice of and reasonable opportunity to defend against the claim in its own name or in the name of the Forum Indemnitee. (c) Forum agrees to indemnify and hold harmless the Trust, its employees, agents, trustees and officers against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character arising out of Forum's actions taken or failures to act with respect to a Fund that are not consistent with the standard of care set forth in Section 3(a). Forum shall not be required to indemnify the Trust if, prior to confessing any Claim against the Trust, the Trust does not give Forum written notice of and reasonable opportunity to defend against the claim in its own name or in the name of the Trust. (d) A Forum Indemnitee shall not be liable for any action taken or failure to act in good faith reliance upon: (i) the advice of the Trust or of counsel, who may be counsel to the Trust or counsel to Forum; (ii) any oral instruction which it receives and which it reasonably believes in good faith was transmitted by the person or persons authorized by the Board to give such oral instruction. Forum shall have no duty or obligation to make any inquiry or effort of certification of such oral instruction; -5- (iii) any written instruction or certified copy of any resolution of the Board, and Forum may rely upon the genuineness of any such document or copy thereof reasonably believed in good faith by Forum to have been validly executed; or (iv) any signature, instruction, request, letter of transmittal, certificate, opinion of counsel, statement, instrument, report, notice, consent, order, or other document reasonably believed in good faith by Forum to be genuine and to have been signed or presented by the Trust or other proper party or parties; and no Forum Indemnitee shall be under any duty or obligation to inquire into the validity or invalidity or authority or lack thereof of any statement, oral or written instruction, resolution, signature, request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice, consent, order, or any other document or instrument which Forum reasonably believes in good faith to be genuine. SECTION 4. COMPENSATION AND EXPENSES (a) In consideration of the administrative services provided by Forum pursuant to this Agreement, the Trust shall pay Forum, with respect to each Class of each of the Funds, the fees set forth in Appendix B hereto. These fees shall be accrued by the Trust daily and shall be payable monthly in arrears on the first day of each calendar month for services performed under this Agreement during the prior calendar month. In the event that any of the legal services identified in Appendix C hereto are provided to the Trust by personnel of the legal department of Forum, they will be provided at no additional charge to the Trust except those matters designated as Special Legal Services, as to which Forum may charge, and the Trust shall pay an additional amount as reimbursement of the cost of Forum providing such services. Reimbursement shall be payable monthly in arrears on the first day of each calendar month for services performed under this Agreement during the prior calendar month. Nothing in this Agreement shall require Forum to provide any of the services listed in Appendix C hereto, as such services may be performed by an outside vendor if appropriate in the judgment of Forum. If fees begin to accrue in the middle of a month or if this Agreement terminates before the end of any month, all fees for the period from that date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. Upon the termination of this Agreement with respect to a Fund, the Trust shall pay to Forum such compensation as shall be payable prior to the effective date of termination. (b) The Trust shall be responsible for and assumes the obligation for payment of all of its expenses, including: (a) the fee payable under this Agreement; (b) the fees payable to each investment adviser under an agreement between the investment adviser and the Trust; (c) expenses of issue, repurchase and redemption of Shares; (d) interest charges, taxes and brokerage fees and commissions; (e) premiums of insurance for the Trust, its trustees and officers and fidelity bond premiums; (f) fees, interest charges and expenses of third parties, including the -6- Trust's independent accountant, custodian, transfer agent, dividend disbursing agent and fund accountant; (g) fees of pricing, interest, dividend, credit and other reporting services; (h) costs of membership in trade associations; (i) telecommunications expenses; (j) funds transmission expenses; (k) auditing, legal and compliance expenses; (l) costs of forming the Trust and maintaining its existence; (m) costs of preparing, filing and printing the Trust's Prospectuses, subscription application forms and shareholder reports and other communications and delivering them to existing shareholders, whether of record or beneficial; (n) expenses of meetings of shareholders and proxy solicitations therefor; (o) costs of maintaining books of original entry for portfolio and fund accounting and other required books and accounts, of calculating the net asset value of Shares and of preparing tax returns; (p) costs of reproduction, stationery, supplies and postage; (q) fees and expenses of the Trust's trustees; (r) compensation of the Trust's officers and employees and costs of other personnel (who may be employees of the investment adviser, Forum or their respective affiliated persons) performing services for the Trust; (s) costs of Board, Board committee, shareholder and other corporate meetings; (t) SEC registration fees and related expenses; (u) state, territory or foreign securities laws registration fees and related expenses; and (v) all fees and expenses paid by the Trust in accordance with any Plan or Service Plan or agreement related to similar manners. (c) Should the Trust exercise its right to terminate this Agreement, the Trust, on behalf of the applicable Fund, shall reimburse Forum for all out-of-pocket expenses and employee time (at 150% of salary) associated with the copying and movement of records and material to any successor person and providing assistance to any successor person in the establishment of the accounts and records necessary to carry out the successor's responsibilities. SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT (a) This Agreement shall become effective with respect to each Fund on February 11, 2003. Upon effectiveness of this Agreement, it shall supersede all previous agreements between the parties hereto covering the subject matter hereof insofar as such Agreement may have been deemed to relate to the Funds. (b) This Agreement shall continue in effect with respect to a Fund until terminated; provided, that continuance is specifically approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund and (ii) by a vote of a majority of Trustees of the Trust who are not parties to this Agreement or interested persons of any such party (other than as Trustees of the Trust). (c) This Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty (i) by the Board on 60 days' written notice to Forum or (ii) by Forum on 60 days' written notice to the Trust. The obligations of Sections 3 and 4 shall survive any termination of this Agreement. -7- (d) This Agreement and the rights and duties under this Agreement otherwise shall not be assignable by either Forum or the Trust except by the specific written consent of the other party. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. SECTION 6. ADDITIONAL FUNDS AND CLASSES In the event that the Trust establishes one or more series of Shares or one or more classes of Shares after the effectiveness of this Agreement, such series of Shares or classes of Shares, as the case may be, shall become Funds and Classes under this Agreement. Forum or the Trust may elect not to make any such series or classes subject to this Agreement. SECTION 7. CONFIDENTIALITY Forum agrees to treat all records and other information related to the Trust as proprietary information of the Trust and, on behalf of itself and its employees, to keep confidential all such information, except that Forum may (a) prepare or assist in the preparation of periodic reports to shareholders and regulatory bodies such as the SEC; (b) provide information typically supplied in the investment company industry to companies that track or report price, performance or other information regarding investment companies; and (c) release such other information as approved in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where Forum may be exposed to civil or criminal contempt proceedings for failure to release the information, when requested to divulge such information by duly constituted authorities or when so requested by the Trust. SECTION 8. FORCE MAJEURE Forum shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. SECTION 9. ACTIVITIES OF FORUM (a) Except to the extent necessary to perform Forum's obligations under this Agreement, nothing herein shall be deemed to limit or restrict Forum's right, or the right of any of Forum's managers, officers or employees who also may be a trustee, officer or employee of -8- the Trust, or persons who are otherwise affiliated persons of the Trust to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, trust, firm, individual or association. (b) Forum may subcontract any or all of its responsibilities pursuant to this Agreement to one or more corporations, trusts, firms, individuals or associations, which may be affiliated persons of Forum, who agree to comply with the terms of this Agreement; provided, that any such subcontracting shall not relieve Forum of its responsibilities hereunder. Forum may pay those persons for their services, but no such payment will increase Forum's compensation from the Trust. (c) Without limiting the generality of the Sections 9(a) and (b), the Trust acknowledges that certain legal services may be rendered to it by lawyers who are employed by Forum or its affiliates and who render services to Forum and its affiliates. A lawyer who renders such services to the Trust, and any lawyer who supervises such lawyer, although employed generally by Forum or its affiliates, will have a direct professional attorney/client relationship with the Trust. Those services for which such a direct relationship will exist are listed in Appendix C hereto. Each of Forum and the Trust hereby consents to the simultaneous representation by such lawyers of both Forum and the Trust, and waives any conflict of interest existing in such simultaneous representation. Furthermore, the Trust agrees that, in the event such lawyer ceases to represent the Trust, whether at the request of the Trust or otherwise, the lawyer may continue thereafter to represent Forum, and the Trust expressly consents to such continued representation. SECTION 10. COOPERATION WITH INDEPENDENT ACCOUNTANTS Forum shall cooperate, if applicable, with each Fund's independent public accountants and shall take reasonable action to make all necessary information available to the accountants for the performance of the accountants' duties. SECTION 11. SERVICE DAYS Nothing contained in this Agreement is intended to or shall require Forum, in any capacity under this Agreement, to perform any functions or duties on any day other than a business day of the Trust or of a Fund. Functions or duties normally scheduled to be performed on any day which is not a business day of the Trust or of a Fund shall be performed on, and as of, the next business day, unless otherwise required by law. SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY The trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and Forum agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property -9- of the Trust or the Fund to which Forum's rights or claims relate in settlement of such rights or claims, and not to the trustees of the Trust or the shareholders of the Funds. SECTION 13. MISCELLANEOUS (a) Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. (b) Except for Appendix A to add new Funds and Classes in accordance with Section 6, no provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto. (c) This Agreement shall be governed by, and the provisions of this Agreement shall be construed and interpreted under and in accordance with, the laws of the State of Delaware. (d) This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written. (e) This Agreement may be executed by the parties hereto on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument. (f) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (g) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (h) Notices, requests, instructions and communications received by the parties at their respective principal places of business, or at such other address as a party may have designated in writing, shall be deemed to have been properly given. (i) Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund of the Trust are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise. (j) No affiliated person, employee, agent, director, officer or manager of Forum shall be liable at law or in equity for Forum's obligations under this Agreement. -10- (k) Each of the undersigned warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof and each party hereto warrants and represents that this Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the party, enforceable against the party in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. (l) The terms "vote of a majority of the outstanding voting securities," "interested person," and "affiliated person" shall have the meanings ascribed thereto in the 1940 Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons, as of the day and year first above written. MONARCH FUNDS By: /s/ JOHN Y. KEFFER ------------------------------- John Y. Keffer Trustee FORUM ADMINISTRATIVE SERVICES, LLC By: /s/ CHARLES F. JOHNSON ------------------------------ Charles F. Johnson Director -11- MONARCH FUNDS ADMINISTRATION AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST AS OF FEBRUARY 11, 2003 DAILY ASSETS TREASURY CASH FUND Preferred Shares Universal Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT FUND Universal Shares DAILY ASSETS CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares -A1- MONARCH FUNDS ADMINISTRATION AGREEMENT APPENDIX B FEES AND EXPENSES AS OF FEBRUARY 11, 2003 (I) ADMINISTRATIVE SERVICE FEES Fee as a % of the Annual Average Daily Net Assets of FUND EACH CLASS OF THE FUND - ---- ---------------------- Daily Assets Treasury Cash Fund Preferred Shares 0.06% Universal Shares 0.06% Institutional Service Shares 0.06% Investor Shares 0.06% Daily Assets Government Cash Fund Preferred Shares 0.06% Universal Shares 0.06% Institutional Shares 0.06% Institutional Service Shares 0.06% Investor Shares 0.06% Daily Assets Government Fund Universal Shares 0.06% Daily Assets Cash Fund Preferred Shares 0.06% Universal Shares 0.06% Institutional Shares 0.06% Institutional Service Shares 0.06% Investor Shares 0.06% -C1- MONARCH FUNDS ADMINISTRATION AGREEMENT APPENDIX C LEGAL SERVICES 1. Advise the Trust on compliance with applicable U.S. laws and regulations with respect to matters that are WITHIN the ordinary course of the Trust's business. 2. Advise the Trust on compliance with applicable U.S. laws and regulations with respect to matters that are OUTSIDE the ordinary course of the Trust's business(*). 3. Liaison with the SEC. 4. Draft correspondences to SEC and respond to SEC comments. 5. Liaison with the Trust's outside counsel. 6. Provide attorney letters to the Trust's auditors. 7. Assist Trust outside counsel in the preparation of exemptive applications, no-action letters, prospectuses, registration statements and proxy statements and related material. 8. Prepare exemptive applications, no-action letters, prospectuses, registration statements and proxy statements and related material, and draft correspondences to SEC and respond to SEC comments with respect thereto(*). 9. Prepare prospectus supplements. 10. Review and authorize Section 24 filings. 11. Prepare and/or review agendas and minutes for and respond to inquiries at board and shareholder meetings regarding applicable U.S. laws and regulations. 12. Prepare and/or review agreements between the Trust and any third parties. Note: Items designated with an (*) are Special Legal Services. -C2- EX-99 10 tagencyplan.txt TRANSFER AGENCY AGREEMENT MONARCH FUNDS TRANSFER AGENCY AGREEMENT AGREEMENT made as of the 11th day of February, 2003, by and between Monarch Funds, a Massachusetts business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Shareholder Services, LLC, a Delaware limited liability company with its principal office and place of business at Two Portland Square, Portland, Maine 04101 ("Forum"). WHEREAS, the Trust is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and is authorized to divide those series into separate classes; and WHEREAS, the Trust offers shares in various series as listed in Appendix A hereto (each such series, together with all other series subsequently established by the Trust and made subject to this Agreement in accordance with Section 13, being herein referred to as a "Fund," and collectively as the "Funds") and the Trust offers shares of various classes of each Fund as listed in Appendix A hereto (each such class together with all other classes subsequently established by the Trust in a Fund being herein referred to as a "Class," and collectively as the "Classes"); and WHEREAS, the Trust on behalf of the Funds desires to appoint Forum as its transfer agent and dividend disbursing agent and Forum desires to accept such appointment; NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the Trust and Forum hereby agree as follows: SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS (a) APPOINTMENT. The Trust, on behalf of the Funds, hereby appoints Forum to act as, and Forum agrees to act as, (i) transfer agent for the authorized and issued shares of beneficial interest of the Trust representing interests in each of the respective Funds and Classes thereof ("Shares"), (ii) dividend disbursing agent and (iii) agent in connection with any accumulation, open-account or similar plans provided to the registered owners of shares of any of the Funds ("Shareholders") and set out in the currently effective prospectuses and statements of additional information (collectively "prospectus") of the applicable Fund, including, without limitation, any periodic investment plan or periodic withdrawal program. (b) DOCUMENT DELIVERY. The Trust has delivered to Forum copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended from time to time, "Organic Documents"), (ii) the Trust's Registration Statement and all amendments thereto filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Investment Company Act of 1940, as amended ("1940 Act")(the "Registration Statement"), (iii) the Trust's current Prospectus and Statement of Additional Information of each Fund (collectively, as currently in effect and as amended or supplemented, the "Prospectus"), (iv) each current plan of distribution or similar document adopted by the Trust under Rule 12b-1 under the 1940 Act ("Plan") and each current shareholder service plan or similar document adopted by the Trust ("Service Plan"), and (v) all procedures adopted by the Trust with respect to the Funds (i.e., repurchase agreement procedures), and shall promptly furnish Forum with all amendments of or supplements to the foregoing. The Trust shall deliver to Forum a certified copy of the resolution of the Board of Trustees of the Trust (the "Board") appointing Forum and authorizing the execution and delivery of this Agreement. SECTION 2. DUTIES OF FORUM (a) SERVICES. Forum agrees that in accordance with procedures established from time to time by agreement between the Trust on behalf of each of the Funds, as applicable, and Forum, Forum will perform the following services: (i) provide the services of a transfer agent, dividend disbursing agent and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program) that are customary for open-end management investment companies including: (A) maintaining all Shareholder accounts, (B) preparing Shareholder meeting lists, (C) mailing proxies to Shareholders, (D) mailing Shareholder reports and prospectuses to current Shareholders, (E) withholding taxes on U.S. resident and non-resident alien accounts, (F) preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required by federal authorities with respect to distributions for Shareholders, (G) preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, (H) preparing and mailing activity statements for Shareholders, and (I) providing Shareholder account information; (ii) receive for acceptance orders for the purchase of Shares and promptly deliver payment and appropriate documentation therefor to the custodian of the applicable Fund (the "Custodian") or, in the case of Fund's operating in a master-feeder or fund of funds structure, to the transfer agent or interestholder recordkeeper for the master portfolios in which the Fund invests; (iii) pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account; (iv) receive for acceptance redemption requests and deliver the appropriate documentation therefor to the Custodian or, in the case of Fund's operating in a master-feeder or fund of funds structure, to the transfer agent or interestholder recordkeeper for the master portfolios in which the Fund invests; -2- (v) as and when it receives monies paid to it by the Custodian with respect to any redemption, pay the redemption proceeds as required by the prospectus pursuant to which the redeemed Shares were offered and as instructed by the redeeming Shareholders; (vi) effect transfers of Shares upon receipt of appropriate instructions from Shareholders; (vii) prepare and transmit to Shareholders (or credit the appropriate Shareholder accounts) payments for all distributions declared by the Trust with respect to Shares; (viii) issue share certificates and replacement share certificates for those share certificates alleged to have been lost, stolen, or destroyed upon receipt by Forum of indemnification satisfactory to Forum and protecting Forum and the Trust and, at the option of Forum, issue replacement certificates in place of mutilated share certificates upon presentation thereof without requiring indemnification; (ix) receive from Shareholders or debit Shareholder accounts for sales commissions, including contingent deferred, deferred and other sales charges, and service fees (i.e., wire redemption charges) and prepare and transmit payments to underwriters, selected dealers and others for commissions and service fees received; (x) track shareholder accounts by financial intermediary source and otherwise as requested by the Trust and provide periodic reporting to the Trust or its administrator or other agent; (xi) maintain records of account for and provide reports and statements to the Trust and Shareholders as to the foregoing; (xii) record the issuance of Shares of the Trust and maintain pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934, as amended ("1934 Act") a record of the total number of Shares of the Trust, each Fund and each Class thereof, that are authorized, based upon data provided to it by the Trust, and are issued and outstanding and provide the Trust on a regular basis a report of the total number of Shares that are authorized and the total number of Shares that are issued and outstanding; and (xiii) provide a system which will enable the Trust to calculate the total number of Shares of each Fund and Class thereof sold in each State. (b) OTHER SERVICES. Forum shall provide the following additional services on behalf of the Trust and such other services agreed to in writing by the Trust and Forum: (i) monitor and make appropriate filings with respect to the escheatment laws of the various states and territories of the United States; and -3- (ii) receive and tabulate proxy votes/oversee the activities of proxy solicitation firms and coordinate the tabulation of proxy and shareholder meeting votes; and (iii) enter into control agreements on behalf of the Trust in order to permit a third party to perfect a security interest in Trust shares pledged to the third party by registered shareholders. (c) BLUE SKY MATTERS. The Trust or its administrator or other agent (i) shall identify to Forum in writing those transactions and assets to be treated as exempt from reporting for each state and territory of the United States and for each foreign jurisdiction (collectively "States") and (ii) shall monitor the sales activity with respect to Shareholders domiciled or resident in each State. The responsibility of Forum for the Trust's State registration status is solely limited to the reporting of transactions to the Trust, and Forum shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Trust or its administrator or other agent. (d) SAFEKEEPING. Forum shall establish and maintain facilities and procedures reasonably acceptable to the Trust for the safekeeping, control, preparation and use of share certificates, check forms, and facsimile signature imprinting devices. Forum shall establish and maintain facilities and procedures reasonably acceptable to the Trust for safekeeping of all records maintained by Forum pursuant to this Agreement. (e) COOPERATION WITH ACCOUNTANTS. Forum shall cooperate with each Fund's independent public accountants and shall take reasonable action to make all necessary information available to the accountants for the performance of the accountants' duties. (f) RESPONSIBILITY FOR COMPLIANCE WITH LAW. Except with respect to Forum's duties as set forth in this Section 2 and except as otherwise specifically provided herein, the Trust assumes all responsibility for ensuring that the Trust complies with all applicable requirements of the Securities Act, the 1940 Act and any laws, rules and regulations of governmental authorities with jurisdiction over the Trust. All references to any law in this Agreement shall be deemed to include reference to the applicable rules and regulations promulgated under authority of the law and all official interpretations of such law or rules or regulations. SECTION 3. RECORDKEEPING (a) PREDECESSOR RECORDS. Prior to the commencement of Forum's responsibilities under this Agreement, if applicable, the Trust shall deliver or cause to be delivered over to Forum (i) an accurate list of Shareholders of the Trust, showing each Shareholder's address of record, number of Shares owned and whether such Shares are represented by outstanding share certificates and (ii) all Shareholder records, files, and other materials necessary or appropriate for proper performance of the functions assumed by Forum under this Agreement (collectively referred to as the "Materials"). The Trust shall on behalf of each applicable Fund or Class indemnify and hold Forum harmless from and against any and all losses, damages, costs, -4- charges, counsel fees, payments, expenses and liability arising out of or attributable to any error, omission, inaccuracy or other deficiency of the Materials, or out of the failure of the Trust to provide any portion of the Materials or to provide any information in the Trust's possession or control reasonably needed by Forum to perform the services described in this Agreement. (b) RECORDKEEPING. Forum shall keep records relating to the services to be performed under this Agreement, in the form and manner as it may deem advisable and as required by applicable law. To the extent required by Section 31 of the 1940 Act, and the rules thereunder, Forum agrees that all such records prepared or maintained by Forum relating to the services to be performed by Forum under this Agreement are the property of the Trust and will be preserved, maintained and made available in accordance with Section 31 of the 1940 Act and the rules thereunder, and will be surrendered promptly to the Trust on and in accordance with the Trust's request. The Trust and the Trust's authorized representatives shall have access to Forum's records relating to the services to be performed under this Agreement at all times during Forum's normal business hours. Upon the reasonable request of the Trust, copies of any such records shall be provided promptly by Forum to the Trust or the Trust's authorized representatives. (c) CONFIDENTIALITY OF RECORDS. Forum and the Trust agree that all books, records, information, and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. (d) INSPECTION OF RECORDS BY OTHERS. In case of any requests or demands for the inspection of the Shareholder records of the Trust, Forum will endeavor to notify the Trust and to secure instructions from an authorized officer of the Trust as to such inspection. Forum shall abide by the Trust's instructions for granting or denying the inspection; provided, however, that Forum may grant the inspection without instructions if Forum is advised by counsel to Forum that failure to do so will result in liability to Forum. SECTION 4. ISSUANCE AND TRANSFER OF SHARES (a) ISSUANCE OF SHARES. Forum shall make original issues of Shares of each Fund and Class thereof in accordance with the Trust's then current prospectus only upon receipt of (i) instructions requesting the issuance, (ii) a certified copy of a resolution of the Board authorizing the issuance, (iii) necessary funds for the payment of any original issue tax applicable to such Shares, and (iv) an opinion of the Trust's counsel as to the legality and validity of the issuance, which opinion may provide that it is contingent upon the filing by the Trust of an appropriate notice with the SEC, as required by Section 24 of the 1940 Act or the rules thereunder. If the opinion described in (iv) above is contingent upon a filing under Section 24 of the 1940 Act, the Trust shall indemnify Forum for any liability arising from the failure of the Trust to comply with that section or the rules thereunder. -5- (b) TRANSFER OF SHARES. Transfers of Shares of each Fund and Class thereof shall be registered on the Shareholder records maintained by Forum. In registering transfers of Shares, Forum may rely upon the Uniform Commercial Code as in effect in the State of Delaware or any other statutes that, in the opinion of Forum's counsel, protect Forum and the Trust from liability arising from (i) not requiring complete documentation, (ii) registering a transfer without an adverse claim inquiry, (iii) delaying registration for purposes of such inquiry or (iv) refusing registration whenever an adverse claim requires such refusal. As Transfer Agent, Forum will be responsible for delivery to the transferor and transferee of such documentation as is required by the Uniform Commercial Code. SECTION 5. SHARE CERTIFICATES (a) CERTIFICATES. The Trust shall furnish to Forum a supply of blank share certificates of each Fund and Class thereof and, from time to time, will renew such supply upon Forum's request. Blank share certificates shall be signed manually or by facsimile signatures of officers of the Trust authorized to sign by the Organic Documents of the Trust and, if required by the Organic Documents, shall bear the Trust's seal or a facsimile thereof. Unless otherwise directed by the Trust, Forum may issue or register Share certificates reflecting the manual or facsimile signature of an officer who has died, resigned or been removed by the Trust. (b) ENDORSEMENT; TRANSPORTATION. New Share certificates shall be issued by Forum upon surrender of outstanding Share certificates in the form deemed by Forum to be properly endorsed for transfer and satisfactory evidence of compliance with all applicable laws relating to the payment or collection of taxes. Forum shall forward Share certificates in "non-negotiable" form by first-class or registered mail, or by whatever means Forum deems equally reliable and expeditious. Forum shall not mail Share certificates in "negotiable" form unless requested in writing by the Trust and fully indemnified by the Trust to Forum's satisfaction. (c) NON-ISSUANCE OF CERTIFICATES. In the event that the Trust informs Forum that any Fund or Class thereof does not issue share certificates, Forum shall not issue any such share certificates and the provisions of this Agreement relating to share certificates shall not be applicable with respect to those Funds or Classes thereof. SECTION 6. SHARE PURCHASES; ELIGIBILITY TO RECEIVE DISTRIBUTIONS (a) PURCHASE ORDERS. Shares shall be issued in accordance with the terms of a Fund's or Class' prospectus after Forum or its agent receives either: (i) (A) an instruction directing investment in a Fund or Class, (B) a check (other than a third party check) or a wire or other electronic payment in the amount designated in the instruction and (C), in the case of an initial purchase, a completed account application; or (ii) the information required for purchases pursuant to a selected dealer agreement, processing organization agreement, or a similar contract with a financial intermediary. -6- (b) DISTRIBUTION ELIGIBILITY. Shares issued in a Fund after receipt of a completed purchase order shall be eligible to receive distributions of the Fund at the time specified in the prospectus pursuant to which the Shares are offered. (c) DETERMINATION OF FEDERAL FUNDS. Shareholder payments shall be considered Federal Funds no later than on the day indicated below unless other times are noted in the prospectus of the applicable Class or Fund: (i) for a wire received, at the time of the receipt of the wire; (ii) for a check drawn on a member bank of the Federal Reserve System, on the second Fund Business Day following receipt of the check; and (iii) for a check drawn on an institution that is not a member of the Federal Reserve System, at such time as Forum is credited with Federal Funds with respect to that check. SECTION 7. FEES AND EXPENSES (a) FEES. For the services provided by Forum pursuant to this Agreement, the Trust, on behalf of each Fund, agrees to pay Forum the fees set forth in Clauses (i) and (ii) of Appendix B hereto. Fees will begin to accrue for each Fund on the latter of the date of this Agreement or the date of commencement of operations of the Fund. If fees begin to accrue in the middle of a month or if this Agreement terminates before the end of any month, all fees for the period from that date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. Upon the termination of this Agreement with respect to a Fund, the Trust shall pay to Forum such compensation as shall be payable prior to the effective date of termination. (b) EXPENSES. In connection with the services provided by Forum pursuant to this Agreement, the Trust, on behalf of each Fund, agrees to reimburse Forum for the expenses set forth in Appendix B hereto. In addition, the Trust, on behalf of the applicable Fund, shall reimburse Forum for all expenses and employee time (at 150% of salary) attributable to any review of the Trust's accounts and records by the Trust's independent accountants or any regulatory body outside of routine and normal periodic reviews. Should the Trust exercise its right to terminate this Agreement, the Trust, on behalf of the applicable Fund, shall reimburse Forum for all out-of-pocket expenses and employee time (at 150% of salary) associated with the copying and movement of records and material to any successor person and providing assistance to any successor person in the establishment of the accounts and records necessary to carry out the successor's responsibilities. (c) PAYMENT. All fees and reimbursements are payable in arrears on a monthly basis and the Trust, on behalf of the applicable Fund, agrees to pay all fees and reimbursable expenses within five (5) business days following receipt` of the respective billing notice. -7- SECTION 8. REPRESENTATIONS AND WARRANTIES (a) REPRESENTATIONS AND WARRANTIES OF FORUM. Forum represents and warrants to the Trust that: (i) It is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. (ii) It is duly qualified to carry on its business in the State of Maine. (iii) It is empowered under applicable laws and by its Article of Incorporation and Bylaws to enter into this Agreement and perform its duties under this Agreement. (iv) All requisite corporate proceedings have been taken to authorize it to enter into this Agreement and perform its duties under this Agreement. (v) It has access to the necessary facilities, equipment, and personnel to perform its duties and obligations under this Agreement. (vi) This Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of Forum, enforceable against Forum in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. (vii) It is registered as a transfer agent under Section 17A of the 1934 Act. (b) REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust represents and warrants to Forum that: (i) It is a business trust duly organized and existing and in good standing under the laws of Massachusetts. (ii) It is empowered under applicable laws and by its Organic Documents to enter into this Agreement and perform its duties under this Agreement. (iii) All requisite corporate proceedings have been taken to authorize it to enter into this Agreement and perform its duties under this Agreement. (iv) It is an open-end management investment company registered under the 1940 Act. (v) This Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. -8- (vi) A registration statement under the Securities Act is currently effective and will remain effective, and appropriate State securities law filings have been made and will continue to be made, with respect to all Shares of the Funds and Classes of the Trust being offered for sale. SECTION 9. PROPRIETARY INFORMATION (a) PROPRIETARY INFORMATION OF FORUM. The Trust acknowledges that the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals maintained by Forum on databases under the control and ownership of Forum or a third party constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to Forum or the third party. The Trust agrees to treat all Proprietary Information as proprietary to Forum and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided under this Agreement. (b) PROPRIETARY INFORMATION OF THE TRUST. Forum acknowledges that the Shareholder list and all information related to Shareholders furnished to Forum by the Trust or by a Shareholder in connection with this Agreement (collectively, "Customer Data") constitute proprietary information of substantial value to the Trust. In no event shall Proprietary Information be deemed Customer Data. Forum agrees to treat all Customer Data as proprietary to the Trust and further agrees that it shall not divulge any Customer Data to any person or organization except as may be provided under this Agreement or as may be directed by the Trust. SECTION 10. INDEMNIFICATION (a) INDEMNIFICATION OF FORUM. Forum shall not be responsible for, and the Trust shall on behalf of each applicable Fund or Class thereof indemnify and hold Forum harmless from and against, any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributable to: (i) all actions of Forum or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without gross negligence or willful misconduct; (ii) the Trust's lack of good faith or the Trust's gross negligence or willful misconduct; (iii) the reliance on or use by Forum or its agents or subcontractors of information, records, documents or services which have been prepared, maintained or performed by the Trust or any other person or firm on behalf of the Trust, including but not limited to any previous transfer agent or registrar; -9- (iv) the reasonable reliance on, or the carrying out by Forum or its agents or subcontractors of, any instructions or requests of the Trust on behalf of the applicable Fund; and (v) the offer or sale of Shares in violation of any requirement under the Federal securities laws or regulations or the securities laws or regulations of any State that such Shares be registered in such State or in violation of any stop order or other determination or ruling by any federal agency or any State with respect to the offer or sale of such Shares in such State. (b) INDEMNIFICATION OF TRUST. Forum shall indemnify and hold the Trust and each Fund or Class thereof harmless from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributed to any action or failure or omission to act by Forum as a result of Forum's lack of good faith, gross negligence or willful misconduct with respect to the services performed under or in connection with this Agreement. (c) RELIANCE. At any time Forum may apply to any officer of the Trust for instructions, and may consult with legal counsel to the Trust or to Forum with respect to any matter arising in connection with the services to be performed by Forum under this Agreement, and Forum and its agents or subcontractors shall not be liable and shall be indemnified by the Trust on behalf of the applicable Fund for any action taken or omitted by it in reasonable reliance upon such instructions or upon the advice of such counsel. Forum, its agents and subcontractors shall be protected and indemnified in acting upon (i) any paper or document furnished by or on behalf of the Trust, reasonably believed by Forum to be genuine and to have been signed by the proper person or persons, (ii) any instruction, information, data, records or documents provided Forum or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Trust, and (iii) any authorization, instruction, approval, item or set of data, or information of any kind transmitted to Forum in person or by telephone, vocal telegram or other electronic means, reasonably believed by Forum to be genuine and to have been given by the proper person or persons. Forum shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Trust. Forum, its agents and subcontractors shall also be protected and indemnified in recognizing share certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Trust, and the proper countersignature of any former transfer agent or former registrar or of a co-transfer agent or co-registrar of the Trust. (d) RELIANCE ON ELECTRONIC INSTRUCTIONS. If the Trust has the ability to originate electronic instructions to Forum in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event Forum shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by Forum from time to time. -10- (e) USE OF FUND/SERV AND NETWORKING. The Trust has authorized or in the future may authorize Forum to act as a "Mutual Fund Services Member" for the Trust or various Funds. Fund/SERV and Networking are services sponsored by the National Securities Clearing Corporation ("NSCC") and as used herein have the meanings as set forth in the then current edition of NSCC RULES AND PROCEDURES published by NSCC or such other similar publication as may exist from time to time. The Trust shall indemnify and hold Forum harmless from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising directly or indirectly out of or attributed to any action or failure or omission to act by NSCC. (f) NOTIFICATION OF CLAIMS. In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. SECTION 11. EFFECTIVENESS, DURATION AND TERMINATION (a) EFFECTIVENESS. This Agreement shall become effective with respect to each Fund or Class on February 11, 2003. Upon effectiveness of this Agreement, it shall supersede all previous agreements between the parties hereto covering the subject matter hereof insofar as such Agreement may have been deemed to relate to the Funds. (b) DURATION. This Agreement shall continue in effect with respect to a Fund until terminated; provided, that continuance is specifically approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund and (ii) by a vote of a majority of Trustees of the Trust who are not parties to this Agreement or interested persons of any such party (other than as Trustees of the Trust). (c) TERMINATION. This Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty (i) by the Board on 60 days' written notice to Forum or (ii) by Forum on 60 days' written notice to the Trust. Any termination shall be effective as of the date specified in the notice. Upon notice of termination of this Agreement by either party, Forum shall promptly transfer to the successor transfer agent the original or copies of all books and records maintained by Forum under this Agreement including, in the case of records maintained on computer systems, copies of such records in machine-readable form, and shall cooperate with, and provide reasonable assistance to, the successor transfer agent in the establishment of the books and records necessary to carry out the successor transfer agent's responsibilities. -11- (d) SURVIVAL. The obligations of Sections 7, 9 and 10 shall survive any termination of this Agreement. SECTION 12. ADDITIONAL FUNDS AND CLASSES. In the event that the Trust establishes one or more series of Shares or one or more classes of Shares after the effectiveness of this Agreement, such series of Shares or classes of Shares, as the case may be, shall become Funds and Classes under this Agreement. Forum or the Trust may elect not to make and such series or classes subject to this Agreement. SECTION 13. ASSIGNMENT. Except as otherwise provided in this Agreement, neither this Agreement nor any rights or obligations under this Agreement may be assigned by either party without the written consent of the other party. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. Forum may, without further consent on the part of the Trust, subcontract for the performance hereof with any entity, including affiliated persons of Forum; provided however, that Forum shall be as fully responsible to the Trust for the acts and omissions of any subcontractor as Forum is for its own acts and omissions. SECTION 14. FORCE MAJEURE. Forum shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails or any transportation medium, communication system or power supply. SECTION 15. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS, OFFICERS, EMPLOYEES AND AGENTS. The trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and Forum agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Trust or the Fund to which Forum's rights or claims relate in settlement of such rights or claims, and not to the trustees of the Trust or the shareholders of the Funds. SECTION 16. TAXES. Forum shall not be liable for any taxes, assessments or governmental charges that may be levied or assessed on any basis whatsoever in connection with the Trust or any Shareholder or any purchase of Shares, excluding taxes assessed against Forum for compensation received by it under this Agreement. SECTION 17. MISCELLANEOUS (a) NO CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. -12- (b) AMENDMENTS. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto. (c) CHOICE OF LAW. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Delaware. (d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. (e) COUNTERPARTS. This Agreement may be executed by the parties hereto on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument. (f) SEVERABILITY. If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (g) HEADINGS. Section and paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (h) NOTICES. Notices, requests, instructions and communications received by the parties at their respective principal addresses, or at such other address as a party may have designated in writing, shall be deemed to have been properly given. (i) BUSINESS DAYS. Nothing contained in this Agreement is intended to or shall require Forum, in any capacity hereunder, to perform any functions or duties on any day other than a Fund Business Day. Functions or duties normally scheduled to be performed on any day which is not a Fund Business Day shall be performed on, and as of, the next Fund Business Day, unless otherwise required by law. (j) DISTINCTION OF FUNDS. Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund of the Trust are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise. (k) NONLIABILITY OF AFFILIATES. No affiliated person (as that term is defined in the 1940 Act), employee, agent, director, officer or manager of Forum shall be liable at law or in equity for Forum's obligations under this Agreement. -13- (l) REPRESENTATION OF SIGNATORIES. Each of the undersigned expressly warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons, as of the day and year first above written. MONARCH FUNDS By: /s/ JOHN Y. KEFFER ---------------------------- John Y. Keffer Chairman FORUM SHAREHOLDER SERVICES, LLC By: /s/ LISA J. WEYMOUTH ---------------------------- Lisa J. Weymouth Director -14- MONARCH FUNDS TRANSFER AGENCY AND SERVICE AGREEMENT APPENDIX A FUNDS AND CLASSES AS OF FEBRUARY 11, 2003 DAILY ASSETS TREASURY CASH FUND Preferred Shares Universal Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT FUND Universal Shares DAILY ASSETS CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares -A1- MONARCH FUNDS TRANSFER AGENCY AND SERVICE AGREEMENT APPENDIX B FEES AND EXPENSES AS OF FEBRUARY 11, 2003 (I) BASE FEE: Fees per Fund with $12,000 plus $6,000 per each class above one plus, more than one Class 0.05% of the Average Annual Daily Net Assets attributable to the Universal Class, 0.20% of the Average Annual Daily Net Assets attributable to the Institutional Class, and 0.20% of the Average Annual Daily Net Assets attributable to the Investor Class. 0.10% of the Average Annual Daily Net Assets attributable to the Institutional Service Class. 0.00% of the Average Annual Daily Net Assets attributable to the Preferred Class. The rates set forth above shall remain fixed through December 31, 2003. On January 1, 2004, and on each successive January 1, the rates may be adjusted automatically by Forum without action of the Trust to reflect changes in the Consumer Price Index for the preceding calendar year, as published by the U.S. Department of Labor, Bureau of Labor Statistics. Forum shall notify the Trust each year of the new rates, if applicable. (II) SHAREHOLDER ACCOUNT FEES: $120 per Shareholder account per year for the Universal Class. $120 per Shareholder account per year for the Preferred Class. $24 per Shareholder account per year for the Institutional Class. $24 per Shareholder account per year for the Investor Class. $24 per Shareholder account per year for the Institutional Service Class. Shareholder account fees are based upon the number of Shareholder accounts as of the last Fund Business Day of the prior month. -B1- (III) OUT-OF-POCKET AND RELATED EXPENSES The Trust, on behalf of the applicable Fund, shall reimburse Forum for all out-of-pocket and ancillary expenses in providing the services described in this Agreement, including but not limited to the cost of (or appropriate share of the cost of): (i) statement, confirmation, envelope and stationary stock, (ii) share certificates, (iii) printing of checks and drafts, (iv) check and draft clearing, (v) postage, (vi) telecommunications, (vii) NSCC Mutual Fund Service Member fees and expenses, (viii) outside proxy solicitors and tabulators, (ix) proxy solicitation fees and (x) microfilm and microfiche. In addition, any other expenses incurred by Forum at the request or with the consent of the Trust, will be reimbursed by the Trust on behalf of the applicable Fund. Notwithstanding the foregoing, the Trust shall not be required to reimburse Forum for Forum's out-of-pocket costs relating to banking services (DDA account, wire and ACH and lock box fees and charges). -B2- EX-99 11 shareservplan.txt SHAREHOLDER SERVICE AGREEMENT MONARCH FUNDS SHAREHOLDER SERVICE AGREEMENT SECTION 1. APPOINTMENT In consideration of the services provided by Forum Administrative Services, LLC ("Forum") to the Trust as described herein, Monarch Funds (the "Trust") hereby appoints Forum as agent to perform the services for the period and on the terms set forth in this Agreement. Forum accepts such appointment and agrees to furnish the services described herein, in return for the compensation specified in Section 3 of this Agreement. Forum agrees to comply with all relevant provisions of the Investment Company Act of 1940, as amended (the "Act"), and the Securities Exchange Act of 1934, as amended, and applicable rules and regulations thereunder in performing the services described herein. SECTION 2. SERVICE ACTIVITIES Forum shall perform, or arrange for the performance of certain activities relating to the servicing and maintenance of shareholder accounts not otherwise provided by the Trust's transfer agent ("Shareholder Servicing Activities") of each class of shares listed in Appendix A hereto (each, a Share Class") of the various series of the trust (each, a "Fund"). Shareholder Servicing Activities include (i) answering shareholder inquiries regarding the manner in which purchases, exchanges and redemptions of shares of the Trust may be effected and other matters pertaining to the Trust's services; (ii) providing necessary personnel and facilities to establish and maintain shareholder accounts and records; (iii) assisting shareholders in arranging for processing purchase, exchange and redemption transactions; (iv) arranging for the wiring of funds; (v) guaranteeing shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; (vi) integrating periodic statements with other shareholder transactions; and (vii) providing such other related services as the shareholder may request. SECTION 3. COMPENSATION As compensation for Forum's Shareholder Servicing Activities with respect to Institutional Shares, Institutional Service Shares, and Investor Shares, the Trust shall pay Forum a fee at an annual rate of 0.20%, 0.20% and 0.25%, respectively, of the average daily net assets attributable to that Share Class (the "Payments"). The Payments shall be accrued daily and paid monthly or at such other interval as the Trust's Board of Trustees ("Board") shall determine. A Share Class shall not directly or indirectly pay any amounts, whether Payments or otherwise, that exceed any applicable limits imposed by law or the National Association of Securities Dealers, Inc. The Trust hereby grants and transfers to Forum a general lien and security interest in any and all securities and other assets of a Fund now or hereafter maintained in an account at the Fund's custodian on behalf of the Fund, limited to the amount of any liability, to secure any amounts owed Forum by the Fund under this Agreement. SECTION 4. SERVICE AGREEMENTS Forum is authorized to enter into shareholder service agreements ("Servicing Agreements") pursuant to which financial institutions or other persons who service shareholder accounts ("Service Providers") would perform Shareholder Servicing Activities, Forum may pay any or all amounts of the Payments to the service providers for any service activity described in Section 2. To the extent practicable, each Agreement shall contain a representation by the Service Provider that any compensation payable to the Service Provider in connection with the investment in a Share Class of the assets of its customers (i) will be disclosed by the Service Provider to its customers if required by law, (ii) will be authorized by its customers if customer authorization is required, and (iii) will not result in an excessive fee to the Service Provider. SECTION 5. DURATION; TERMINATION AND AMENDMENT With respect to each Share Class: (a) This Agreement shall remain in effect for a period of one year from the date of its effectiveness, unless earlier terminated in accordance with this Section, and thereafter shall continue in effect for successive annual periods, provided that such continuance is specifically approved at least annually by the Board and a majority of the Trustees who are not interested persons of the Trust (the "Disinterested Trustees"). (b) This Agreement may be terminated without penalty at any time (i) by a vote of a majority of the Board and a majority of the Disinterested Trustees or (ii) by Forum. (c) Any amendment to this Agreement shall be effective only upon the approval of the Board and a majority of the Disinterested Trustees. SECTION 6. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY The Trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and Forum agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Trust or the Fund to which the Forum's rights or claims relate in settlement of such rights or claims, and not to the Trustees of the Trust or the shareholders of the Funds. SECTION 7. MISCELLANEOUS (a) No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto and, if required by the Act, by a vote of a majority of the outstanding voting securities of any Fund or Share Class thereby affected. -2- (b) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (c) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (d) Notices, requests, instructions and communications received by the parties at their respective principal places of business, or at such other address as a party may have designated in writing, shall be deemed to have been properly given. (e) This Agreement shall be governed by and shall be construed in accordance with the laws of the State of Delaware. (f) The term "interested person" shall have the meaning ascribed thereto in the Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the ____ day of February 2003. MONARCH FUNDS /s/ JOHN Y. KEFFER ------------------------ John Y. Keffer Chairman FORUM ADMINISTRATIVE SERVICES, LLC /s/ CHARLES F. JOHNSON ------------------------ Charles F. Johnson Director -3- MONARCH FUNDS SHAREHOLDER SERVICE AGREEMENT APPENDIX A FUND SHARE CLASS - ---- ----------- Daily Assets Treasury Cash Fund Preferred Shares Universal Shares Institutional Shares Investor Shares Daily Assets Government Cash Fund Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares Daily Assets Government Fund Universal Shares Daily Assets Cash Fund Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares -A1- EX-99 12 faccountingplan.txt FUND ACCOUNTING AGREEMENT MONARCH FUNDS FUND ACCOUNTING AGREEMENT AGREEMENT made as of the 11th day of February, 2003, by and between Monarch Funds, a Massachusetts business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Accounting Services, LLC, a Delaware limited liability company with its principal office and place of business at Two Portland Square, Portland, Maine 04101 ("Forum"). WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company and may issue its shares of beneficial interest, no par value (the "Shares"), in separate series and classes; and WHEREAS, the Trust offers shares in various series as listed in Appendix A hereto (each such series, together with all other series subsequently established by the Trust and made subject to this Agreement in accordance with Section 6, being herein referred to as a "Fund," and collectively as the "Funds") and the Trust offers shares of various classes of each Fund as listed in Appendix A hereto (each such class together with all other classes subsequently established by the Trust in a Fund being herein referred to as a "Class," and collectively as the "Classes"); and WHEREAS, the Trust desires that Forum perform certain fund accounting services for each Fund and Class thereof and Forum is willing to provide those services on the terms and conditions set forth in this Agreement; NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the Trust and Forum hereby agree as follows: SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS (a) The Trust hereby appoints Forum, and Forum hereby agrees, to act as fund accountant of the Trust for the period and on the terms set forth in this Agreement. (b) In connection therewith, the Trust has delivered to Forum copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended from time to time, "Organic Documents"), (ii) the Trust's Registration Statement and all amendments thereto filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the 1940 Act (the "Registration Statement"), (iii) the Trust's current Prospectus and Statement of Additional Information of each Fund (collectively, as currently in effect and as amended or supplemented, the "Prospectus") and (iv) all procedures adopted by the Trust with respect to the Funds (i.e., repurchase agreement procedures), and shall promptly furnish Forum with all amendments of or supplements to the foregoing. The Trust shall deliver to Forum a certified copy of the resolution of the Board of Trustees of the Trust (the "Board") appointing Forum and authorizing the execution and delivery of this Agreement. SECTION 2. DUTIES OF FORUM (a) Forum and the Trust's administrator, Forum Administrative Services, Limited Liability Company (the "Administrator"), may from time to time adopt such procedures as they agree upon to implement the terms of this Section. With respect to each Fund, Forum will perform the following services under this Agreement: (i) calculate the net asset value per share with the frequency prescribed in each Fund's then current Prospectus; (ii) calculate each item of income, expense, deduction, credit, gain and loss, if any, as required by the Trust and in conformance with generally accepted accounting principles ("GAAP"), the SEC's Regulation S-X (or any successor regulation) and the Internal Revenue Code of 1986, as amended (or any successor laws)(the "Code"); (iii) maintain each Fund's general ledger and record all income, expenses, capital share activity and security transactions of each Fund; (iv) calculate the yield, effective yield, tax equivalent yield and total return for each Fund, and each Class thereof, as applicable, and such other measure of performance as may be agreed upon between the parties hereto; (v) provide the Trust and such other persons as the Administrator may direct with the following reports (A) a current security position report, (B) a summary report of transactions and pending maturities (including the principal, cost, and accrued interest on each portfolio security in maturity date order), and (C) a current cash position and projection report; (vi) prepare and record, as of each time when the net asset value of a Fund is calculated or as otherwise directed by the Trust, either (A) a valuation of the assets of the Fund (in accordance with the Trust's valuation procedures) or (B) a calculation confirming that the market value of the Fund's assets does not deviate from the amortized cost value of those assets by more than a specified percentage; (vii) make such adjustments over such periods as Forum deems necessary to reflect over-accruals or under-accruals of estimated expenses or income; (viii) request any necessary information from the Administrator and the Trust's transfer agent and distributor in order to prepare, and prepare, the Trust's Form N-SAR; (ix) provide appropriate records to assist the Trust's independent accountants and, upon approval of the Trust or the Administrator, any regulatory body in any requested review of the Trust's books and records maintained by Forum; -2- (x) prepare semi-annual financial statements and oversee the production of the semi-annual financial statements and any related report to the Trust's shareholders prepared by the Trust or its investment advisers, as applicable; (xi) file the Funds' semi-annual financial statements with the SEC or ensure that the Funds' semi-annual financial statements are filed with the SEC; (xii) provide information typically supplied in the investment company industry to companies that track or report price, performance or other information with respect to investment companies; (xiii) provide the Trust or the Administrator with the data requested by the Administrator that is required to update the Registration Statement; (xiv) provide the Trust or independent accountants with all information requested with respect to the preparation of the Trust's income, excise and other tax returns; (xv) prepare or prepare, execute and file all Federal income and excise tax returns and state income and other tax returns, including any extensions or amendments, each as agreed between the Trust and Forum; (xvi) produce quarterly compliance reports for investment advisers, as applicable, to the Trust and the Board and provide information to the Administrator, investment advisers to the Trust and other appropriate persons with respect to questions of Fund compliance; (xvii) determine the amount of distributions to shareholders as necessary to, among other things, maintain the qualification of each Fund as a regulated investment company under the Code, and prepare and distribute to appropriate parties notices announcing the declaration of dividends and other distributions to shareholders; (xviii) transmit to and receive from each Fund's transfer agent appropriate data to on a daily basis and daily reconcile Shares outstanding and other data with the transfer agent; (xix) periodically reconcile all appropriate data with each Fund's custodian; (xx) verify investment trade tickets when received from an investment adviser and maintain individual ledgers and historical tax lots for each security; and (xxi) perform such other recordkeeping, reporting and other tasks as may be specified from time to time in the procedures adopted by the Board; provided, that Forum need not begin performing any such task except upon 65 days' notice and pursuant to mutually acceptable compensation agreements. -3- (b) Forum shall prepare and maintain on behalf of the Trust the following books and records of each Fund, and each Class thereof, as applicable, pursuant to Rule 31a-1 under the 1940 Act (the "Rule"): (i) Journals containing an itemized daily record in detail of all purchases and sales of securities, all receipts and disbursements of cash and all other debits and credits, as required by subsection (b)(1) of the Rule; (ii) Journals and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, as required by subsection (b)(2) of the Rule (but not including the ledgers required by subsection (b)(2)(iv); (iii) A record of each brokerage order given by or on behalf of the Trust for, or in connection with, the purchase or sale of securities, and all other portfolio purchases or sales, as required by subsections (b)(5) and (b)(6) of the Rule; (iv) A record of all options, if any, in which the Trust has any direct or indirect interest or which the Trust has granted or guaranteed and a record of any contractual commitments to purchase, sell, receive or deliver any property as required by subsection (b)(7) of the Rule; (v) A monthly trial balance of all ledger accounts (except shareholder accounts) as required by subsection (b)(8) of the Rule; and (vi) Other records required by the Rule or any successor rule or pursuant to interpretations thereof to be kept by open-end management investment companies, but limited to those provisions of the Rule applicable to portfolio transactions and as agreed upon between the parties hereto. (c) The books and records maintained pursuant to Section 2(b) shall be prepared and maintained in such form, for such periods and in such locations as may be required by the 1940 Act. The books and records pertaining to the Trust that are in possession of Forum shall be the property of the Trust. The Trust, or the Trust's authorized representatives, shall have access to such books and records at all times during Forum's normal business hours. Upon the reasonable request of the Trust or the Administrator, copies of any such books and records shall be provided promptly by Forum to the Trust or the Trust's authorized representatives at the Trust's expense. In the event the Trust designates a successor that shall assume any of Forum's obligations hereunder, Forum shall, at the expense and direction of the Trust, transfer to such successor all relevant books, records and other data established or maintained by Forum under this Agreement. (d) In case of any requests or demands for the inspection of the records of the Trust maintained by Forum, Forum will endeavor to notify the Trust and to secure instructions from an authorized officer of the Trust as to such inspection. Forum shall abide by the Trust's instructions for granting or denying the inspection; provided, however, that Forum may grant the -4- inspection without instructions if Forum is advised by counsel to Forum that failure to do so will result in liability to Forum. SECTION 3. STANDARD OF CARE; RELIANCE (a) Forum shall be under no duty to take any action except as specifically set forth herein or as may be specifically agreed to by Forum in writing. Forum shall use its best judgment and efforts in rendering the services described in this Agreement. Forum shall not be liable to the Trust or any of the Trust's shareholders for any action or inaction of Forum relating to any event whatsoever in the absence of bad faith, willful misfeasance or gross negligence in the performance of Forum's duties or obligations under this Agreement or by reason of Forum's reckless disregard of its duties and obligations under this Agreement. (b) The Trust agrees to indemnify and hold harmless Forum, its employees, agents, directors, officers and managers and any person who controls Forum within the meaning of section 15 of the Securities Act or section 20 of the Securities Exchange Act of 1934, as amended, ("Forum Indemnitees") against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character arising out of or in any way related to Forum's actions taken or failures to act with respect to a Fund that are consistent with the standard of care set forth in Section 3(a) or based, if applicable, on good faith reliance upon an item described in Section 3(d) (a "Claim"). The Trust shall not be required to indemnify any Forum Indemnitee if, prior to confessing any Claim against the Forum Indemnitee, Forum or the Forum Indemnitee does not give the Trust written notice of and reasonable opportunity to defend against the claim in its own name or in the name of the Forum Indemnitee. (c) Forum agrees to indemnify and hold harmless the Trust, its employees, agents, trustees and officers against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character arising out of Forum's actions taken or failures to act with respect to a Fund that are not consistent with the standard of care set forth in Section 3(a). Forum shall not be required to indemnify the Trust if, prior to confessing any Claim against the Trust, the Trust does not give Forum written notice of and reasonable opportunity to defend against the claim in its own name or in the name of the Trust. (d) A Forum Indemnitee shall not be liable for any action taken or failure to act in good faith reliance upon: (i) the advice of the Trust or of counsel, who may be counsel to the Trust or counsel to Forum; (ii) any oral instruction which it receives and which it reasonably believes in good faith was transmitted by the person or persons authorized by the Board to give such oral instruction (Forum shall have no duty or obligation to make any inquiry or effort of certification of such oral instruction.); -5- (iii) any written instruction or certified copy of any resolution of the Board, and Forum may rely upon the genuineness of any such document or copy thereof reasonably believed in good faith by Forum to have been validly executed; or (iv) any signature, instruction, request, letter of transmittal, certificate, opinion of counsel, statement, instrument, report, notice, consent, order, or other document reasonably believed in good faith by Forum to be genuine and to have been signed or presented by the Trust or other proper party or parties; and no Forum Indemnitee shall be under any duty or obligation to inquire into the validity or invalidity or authority or lack thereof of any statement, oral or written instruction, resolution, signature, request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice, consent, order, or any other document or instrument which Forum reasonably believes in good faith to be genuine. (e) Except to the extent it has breached the provisions of this Agreement, Forum shall not be liable for the errors of other service providers to the Trust, including the errors of pricing services (other than to pursue all reasonable claims against the pricing service based on the pricing services' standard contracts entered into by Forum) and errors in information provided by an investment adviser (including prices and pricing formulas and the untimely transmission of trade information), custodian or transfer agent to the Trust. (f) With respect to Funds which do not value their assets in accordance with Rule 2a-7 under the 1940 Act, notwithstanding anything to the contrary in this Agreement, Forum shall not be liable to the Trust or any shareholder of the Trust for (i) any loss to the Trust if an NAV Difference for which Forum would otherwise be liable under this Agreement is less than or equal to 0.001 (1/10 of 1%) or (ii) any loss to a shareholder of the Trust if the NAV Difference for which Forum would otherwise be liable under this Agreement is less than or equal to 0.005 (1/2 of 1%) or if the loss in the shareholder's account with the Trust is less than or equal to $10. Any loss for which Forum is determined to be liable hereunder shall be reduced by the amount of gain which inures to shareholders, whether to be collected by the Trust or not. (g) For purposes of this Agreement, (i) the NAV Difference shall mean the difference between the NAV at which a shareholder purchase or redemption should have been effected ("Recalculated NAV") and the NAV at which the purchase or redemption is effected, divided by the Recalculated NAV, (ii) NAV Differences and any Forum liability therefrom are to be calculated each time a Fund's (or class's) NAV is calculated, (iii) in calculating any NAV Difference for which Forum would otherwise be liable under this Agreement for a particular NAV error, Fund losses and gains shall be netted and (iv) in calculating any NAV Difference for which Forum would otherwise be liable under this Agreement for a particular NAV error that continues for a period covering more than one NAV determination, Fund losses and gains for the period shall be netted. -6- (h) Nothing contained herein shall be construed to require Forum to perform any service that could cause Forum to be deemed an investment adviser for purposes of the 1940 Act or the Investment Advisers Act of 1940, as amended, or that could cause a Fund to act in contravention of a Portfolio's Prospectus or any provision of the 1940 Act. Except with respect to Forum's duties as set forth in Section 2 of this Agreement and except as otherwise specifically provided herein, the Trust assumes all responsibility for ensuring that the Trust complies with all applicable requirements of the Securities Act, the 1940 Act and any laws, rules and regulations of governmental authorities with jurisdiction over the Trust. All references to any law in this Agreement shall be deemed to include reference to the applicable rules and regulations promulgated under authority of the law and all official interpretations of such law or rules or regulations. SECTION 4. COMPENSATION AND EXPENSES (a) In consideration of the services provided by Forum pursuant to this Agreement, the Trust shall pay Forum, with respect to each Fund, the fees set forth in Clause (i) of Appendix B hereto. In consideration of the services provided by Forum pursuant to Clause (iii) of Appendix B hereof, the Trust shall pay Forum, with respect to each Fund, the fees set forth in Clause (ii) of Appendix B hereto. In consideration of services provided by Forum to perform certain functions, the Trust shall pay Forum, with respect to each Fund the fees set forth in Clause (iii) of Appendix B hereto. Nothing in this Agreement shall require Forum to perform any of the services listed in Section 2(a)(xiv) and Clause (iii) of Appendix B hereto, as such services may be performed by the Fund's independent accountant if appropriate. All fees payable hereunder shall be accrued daily by the Trust. The fees payable for the services listed in Clauses (i) and (iii) of Appendix B hereto shall be payable monthly in advance on the first day of each calendar month for services to be performed during the following calendar month. The fees payable for the services listed in Clause (ii) and for all reimbursements as described in Section 4(b) shall be payable monthly in arrears on the first day of each calendar month (the first day of the calendar month after the Fund commences operations in the case of the fees listed in Clause (ii) of Appendix B hereto) for services performed during the prior calendar month. If fees payable for the services listed in Clause (i) begin to accrue in the middle of a month or if this Agreement terminates before the end of any month, all fees for the period from that date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. Upon the termination of this Agreement with respect to a Fund, the Trust shall pay to Forum such compensation as shall be payable prior to the effective date of termination. (b) In connection with the services provided by Forum pursuant to this Agreement, the Trust, on behalf of each Fund, agrees to reimburse Forum for the expenses set forth in Clause (iv) of Appendix B hereto. In addition, the Trust, on behalf of the applicable Fund, shall reimburse Forum for all expenses and employee time (at 150% of salary) attributable to any review of the Trust's accounts and records by the Trust's independent accountants or any regulatory body outside of routine and normal periodic reviews. Should the Trust exercise its -7- right to terminate this Agreement, the Trust, on behalf of the applicable Fund, shall reimburse Forum for all out-of-pocket expenses and employee time (at 150% of salary) associated with the copying and movement of records and material to any successor person and providing assistance to any successor person in the establishment of the accounts and records necessary to carry out the successor's responsibilities. (d) Forum may, with respect to questions of law relating to its services hereunder, apply to and obtain the advice and opinion of counsel to the Trust or counsel to Forum. The costs of any such advice or opinion shall be borne by the Trust. SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT (a) This Agreement shall become effective with respect to each Fund or Class on December 1, 1997. Upon effectiveness of this Agreement, it shall supersede all previous agreements between the parties hereto covering the subject matter hereof insofar as such Agreement may have been deemed to relate to the Funds. (b) This Agreement shall continue in effect with respect to a Fund until terminated; provided, that continuance is specifically approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund and (ii) by a vote of a majority of Trustees of the Trust who are not parties to this Agreement or interested persons of any such party (other than as Trustees of the Trust). (c) This Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty (i) by the Board on 60 days' written notice to Forum or (ii) by Forum on 60 days' written notice to the Trust. The obligations of Sections 3 and 4 shall survive any termination of this Agreement. (d) This Agreement and the rights and duties under this Agreement otherwise shall not be assignable by either Forum or the Trust except by the specific written consent of the other party. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. SECTION 6. ADDITIONAL FUNDS AND CLASSES In the event that the Trust establishes one or more series of Shares or one or more classes of Shares after the effectiveness of this Agreement, such series of Shares or classes of Shares, as the case may be, shall become Funds and Classes under this Agreement. Forum or the Trust may elect not to make any such series or classes subject to this Agreement. -8- SECTION 7. CONFIDENTIALITY Forum agrees to treat all records and other information related to the Trust as proprietary information of the Trust and, on behalf of itself and its employees, to keep confidential all such information, except that Forum may; (a) prepare or assist in the preparation of periodic reports to shareholders and regulatory bodies such as the SEC; (b) provide information typically supplied in the investment company industry to companies that track or report price, performance or other information regarding investment companies; and (c) release such other information as approved in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where Forum may be exposed to civil or criminal contempt proceedings for failure to release the information, when requested to divulge such information by duly constituted authorities or when so requested by the Trust. SECTION 8. FORCE MAJEURE Forum shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. SECTION 9. ACTIVITIES OF FORUM (a) Except to the extent necessary to perform Forum's obligations under this Agreement, nothing herein shall be deemed to limit or restrict Forum's right, or the right of any of Forum's managers, officers or employees who also may be a trustee, officer or employee of the Trust, or persons who are otherwise affiliated persons of the Trust to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, trust, firm, individual or association. (b) Forum may subcontract any or all of its responsibilities pursuant to this Agreement to one or more corporations, trusts, firms, individuals or associations, which may be affiliated persons of Forum, who agree to comply with the terms of this Agreement; provided, that any such subcontracting shall not relieve Forum of its responsibilities hereunder. Forum may pay those persons for their services, but no such payment will increase Forum's compensation from the Trust. -9- SECTION 10. COOPERATION WITH INDEPENDENT ACCOUNTANTS Forum shall cooperate, if applicable, with each Fund's independent public accountants and shall take reasonable action to make all necessary information available to the accountants for the performance of the accountants' duties. SECTION 11. SERVICE DAYS Nothing contained in this Agreement is intended to or shall require Forum, in any capacity under this Agreement, to perform any functions or duties on any day other than a business day of the Trust or of a Fund. Functions or duties normally scheduled to be performed on any day which is not a business day of the Trust or of a Fund shall be performed on, and as of, the next business day, unless otherwise required by law. SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY The trustees of the Trust and the shareholders of each Fund shall not be liable for any obligations of the Trust or of the Funds under this Agreement, and Forum agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Trust or the Fund to which Forum's rights or claims relate in settlement of such rights or claims, and not to the trustees of the Trust or the shareholders of the Funds. SECTION 13. MISCELLANEOUS (a) Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. (b) Except for Appendix A to add new Funds and Classes in accordance with Section 6, no provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto. (c) This Agreement shall be governed by, and the provisions of this Agreement shall be construed and interpreted under and in accordance with, the laws of the State of Delaware. (d) This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written. (e) This Agreement may be executed by the parties hereto on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument. (f) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and -10- enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. (g) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (h) Notices, requests, instructions and communications received by the parties at their respective principal places of business, or at such other address as a party may have designated in writing, shall be deemed to have been properly given. (i) Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund of the Trust are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise. (j) No affiliated person, employee, agent, director, officer or manager of Forum shall be liable at law or in equity for Forum's obligations under this Agreement. (k) Each of the undersigned warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof and each party hereto warrants and represents that this Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the party, enforceable against the party in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. (l) The terms "vote of a majority of the outstanding voting securities," "interested person" and "affiliated person" shall have the meanings ascribed thereto in the 1940 Act. -11- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons, as of the day and year first above written. MONARCH FUNDS By: /s/ JOHN Y. KEFFER --------------------------- John Y. Keffer Chairman FORUM ACCOUNTING SERVICES, LLC By: /s/ STACEY E. HONG --------------------------- Stacey E. Hong Director -12- MONARCH FUNDS FUND ACCOUNTING AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST AS OF FEBRUARY 11, 2003 DAILY ASSETS TREASURY CASH FUND Preferred Shares Universal Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares DAILY ASSETS GOVERNMENT FUND Universal Shares DAILY ASSETS CASH FUND Preferred Shares Universal Shares Institutional Shares Institutional Service Shares Investor Shares -A1- MONARCH FUNDS FUND ACCOUNTING AGREEMENT APPENDIX B FEES AND EXPENSES AS OF FEBRUARY 11, 2003 (I) BASE FEE A. Standard Fee Fee per Fund................................................................... $3,000/month Fee for each additional Class of the Fund above one............................ $1,000/month B. Plus additional surcharges for each of: (i) Portfolios with asset levels exceeding $100 million................... $500/month Portfolios with asset levels exceeding $250 million................... $1000/month Portfolios with asset levels exceeding $500 million................... $1,500/month Portfolios with asset levels exceeding $1,000 million................. $2,000/month (ii) Portfolios requiring international custody............................ $1,000/month (iii) Portfolios with more than 30 international positions ................. $1,000/month (iv) Tax free money market Funds........................................... $1,000/month (v) Portfolios with more than 25% of net assets invested in asset backed securities............................................... $1,000/month Portfolios with more than 50% of net assets invested in asset backed securities............................................... $2,000/month (vii) Portfolios with more than 100 security positions...................... $1,000/month (viii) Portfolios with a monthly portfolio turnover rate of 10% or greater............................................................ $1,000/month C. Standard Fee per Gateway Fund (a Fund operating pursuant to Section 12(d)(1)(E) of the 1940 Act) Standard Fee per Fund.......................................................... $1,000/month Standard Fee per Fund that invests in one or more instruments in addition to the fund in which it invests.................................... $2,000/month Fee for each additional Class of a Fund above one.............................. $1,000/month Additional surcharges listed above do not apply D. Standard Fee per Gateway Fund (a Fund operating pursuant to Section 12(d)(1)(G) of the 1940 Act or in a similar structure) Standard Fee per Fund.......................................................... $1,000/month Fee for each additional Class of a Fund above one.............................. $1,000/month Plus additional surcharges listed above if the Fund invests in securities other than investment companies (calculated as if the securities were the Fund's only assets) -B1- Note 1: Surcharges are determined based upon the total assets, security positions or other factors as of the end of the prior month and on the portfolio turnover rate for the prior month. Portfolio turnover rate shall have the meaning ascribed thereto in SEC Form N-1A. Note 2: The rates set forth above shall remain fixed through December 31, 2003. On January 1, 2004, and on each successive January 1, the rates may be adjusted automatically by Forum without action of the Trust to reflect changes in the Consumer Price Index for the preceding calendar year, as published by the U.S. Department of Labor, Bureau of Labor Statistics. Forum shall notify the Trust each year of the new rates, if applicable. (II) START-UP FEE Fund Start-Up Fee ......................................................................$2,000 (III) OTHER SERVICES (payable in equal installments monthly) TAX SERVICES. Preparation of Federal income and excise tax returns and preparation, execution and filing of state income tax returns, including any extensions or amendments Standard Fee.................................................. $3,000/fiscal period Fee per Gateway Fund (a Fund described in (i)(C) or (D) above)....................................... $1,500/fiscal period Fee per Gateway Fund (a Fund described in (i)(C) or (D) above) that invests in more than one instrument in addition to the fund(s) in which it invests.................................................... $3,000/fiscal period
(IV) OUT-OF-POCKET AND RELATED EXPENSES The Trust, on behalf of the applicable Fund, shall reimburse Forum for all out-of-pocket and ancillary expenses in providing the services described in this Agreement, including but not limited to the cost of (or appropriate share of the cost of): (i) pricing, paydown, corporate action, credit and other reporting services, (ii) taxes, (iii) postage and delivery services, (iv) telephone services, (v) electronic or facsimile transmission services, (vi) reproduction, (vii) printing and distributing financial statements, (xiii) microfilm and microfiche and (ix) Trust record storage and retention fees. In addition, any other expenses incurred by Forum at the request or with the consent of the Trust, will be reimbursed by the Trust on behalf of the applicable Fund. -B2- EX-99 13 poamo.txt POWERS OF ATTORNEY FOR MONARCH POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Maurice J. DeWald constitutes and appoints John Y. Keffer, Beth P. Hanson, Leslie K. Klenk, Robert J. Zutz, and R. Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Monarch Funds, and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ MAURICE J. DEWALD -------------------------------- Maurice J. DeWald Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Rudolph I. Estrada constitutes and appoints John Y. Keffer, Beth P. Hanson, Leslie K. Klenk, Robert J. Zutz, and R. Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Monarch Funds, and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ RUDOLPH I. ESTRADA -------------------------------- Rudolph I. Estrada Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that John Y. Keffer constitutes and appoints Beth P. Hanson, Leslie K. Klenk, Robert J. Zutz, and R. Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Monarch Funds on Form N-1a or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ JOHN Y. KEFFER -------------------------------- John Y. Keffer Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Christine M. McCarthy constitutes and appoints John Y. Keffer, Beth P. Hanson, Leslie K. Klenk, Robert J. Zutz, and R. Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Monarch Funds, and any amendments thereto, on Form N-1a or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ CHRISTINE M. MCCARTHY -------------------------------- Christine M. McCarthy Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Robert M. Franko constitutes and appoints John Y. Keffer, Beth P. Hanson, Leslie K. Klenk, Robert J. Zutz, and R. Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Monarch Funds, and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ ROBERT M. FRANKO -------------------------------- Robert M. Franko Dated: March 21, 2003 EX-99 14 poact.txt POWERS OF ATTORNEY FOR CORE TRUST POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Costas Azariadis constitutes and appoints John Y. Keffer, Dana A. Lukens, Leslie K. Klenk, Robert J. Zutz, and R Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Core Trust (Delaware) and Monarch Funds, and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ COSTAS AZARIADIS -------------------------------- Costas Azariadis Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that James C. Cheng constitutes and appoints John Y. Keffer, Dana A. Lukens, Leslie K. Klenk, Robert J. Zutz, and R Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Core Trust (Delaware) or Monarch Funds, and any amendments thereto, on Form N-1a or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ JAMES C. CHENG -------------------------------- James C. Cheng Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that J. Michael Parish constitutes and appoints John Y. Keffer, Dana A. Lukens, Leslie K. Klenk, Robert J. Zutz, and R Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Core Trust (Delaware), and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ J. MICHAEL PARISH -------------------------------- J. Michael Parish Dated: March 21, 2003 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that John Y. Keffer constitutes and appoints Dana A. Lukens, Leslie K. Klenk, Robert J. Zutz, and R Darrell Mounts and each of them to act severally as attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned in any and all capacities to sign the Registration Statement of Core Trust (Delaware) or Monarch Funds, and any amendments thereto, on Form N-1A or Form N-14, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, and their substitute or substitutes, may do or cause to be done by virtue hereof. /S/ JOHN Y. KEFFER -------------------------------- John Y. Keffer Dated: March 21, 2003 EX-99 15 proxies.txt PROXY CARDS FOR DAILY ASSETS FUNDS FORUM FUNDS TWO PORTLAND SQUARE PORTLAND, MAINE 04101 PROXY (FOR SHAREHOLDERS OF DAILY ASSETS CASH FUND ONLY) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES Revoking any such prior appointments, the undersigned appoints Lisa J. Weymouth, Leslie K. Klenk and Patrick J. Keniston (or, if only one shall act, that one) proxies with the power of substitution to vote all of the shares of Daily Assets Cash Fund (the "Forum Series"), a series of Forum Funds (the "Trust"), registered in the name of the undersigned at the Special Meeting of Shareholders of the Forum Series to be held at the offices of Forum Financial Group, LLC, Two Portland Square, Portland, Maine 04101, on ________, 2003, at 10:00 a.m. (Eastern time), and at any postponements or adjournments thereof. The shares of beneficial interest represented by this Proxy will be voted in accordance with the instructions given by the undersigned below. IF NO CHOICE IS SPECIFIED ON THE PROXY, PROPERLY EXECUTED PROXIES THAT ARE RETURNED IN TIME TO BE VOTED AT THE MEETING WILL BE VOTED "FOR" THE APPROVAL OF THE PROPOSAL SET FORTH BELOW. The Trust has proposed this Proposal. The Board of Trustees recommends voting "FOR" the Proposal. PROPOSAL To approve the Agreement and Plan of Reorganization between Forum Funds, on behalf of Daily Assets Cash Fund, a series thereof, and Monarch Funds, on behalf of Daily Assets Cash Fund, a series thereof. FOR _____ AGAINST _____ ABSTAIN _____ (NOTE: Checking the box labeled "Abstain" will result in the shares covered by the Proxy being treated as if they were voted "Against" a Proposal.) Receipt is acknowledged of the Notice and Proxy Statement for the Special Meeting of Shareholders to be held on __________, 2003. PLEASE SIGN AND DATE THIS PROXY IN THE SPACE PROVIDED. Execution by shareholders who are not individuals must be made by an authorized signatory. Executors, administrators, trustees, guardians and others signing in a representative capacity should give their full title as such. _________________________________________________________ ________________ Authorized Signature Date _________________________________________________________ Printed Name (and Title if Applicable) _________________________________________________________ ________________ Authorized Signature (Joint Investor or Second Signatory) Date _________________________________________________________ Printed Name (and Title if Applicable) FORUM FUNDS TWO PORTLAND SQUARE PORTLAND, MAINE 04101 PROXY (FOR SHAREHOLDERS OF DAILY ASSETS TREASURY OBLIGATIONS FUND) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES Revoking any such prior appointments, the undersigned appoints Lisa J. Weymouth, Leslie K. Klenk and Patrick J. Keniston (or, if only one shall act, that one) proxies with the power of substitution to vote all of the shares of Daily Assets Treasury Obligations Fund (the "Forum Series"), a series of Forum Funds (the "Trust"), registered in the name of the undersigned at the Special Meeting of Shareholders of the Forum Series to be held at the offices of Forum Financial Group, LLC, Two Portland Square, Portland, Maine 04101, on ________, 2003, at 10:00 a.m. (Eastern time), and at any postponements or adjournments thereof. The shares of beneficial interest represented by this Proxy will be voted in accordance with the instructions given by the undersigned below. IF NO CHOICE IS SPECIFIED ON THE PROXY, PROPERLY EXECUTED PROXIES THAT ARE RETURNED IN TIME TO BE VOTED AT THE MEETING WILL BE VOTED "FOR" THE APPROVAL OF THE PROPOSAL SET FORTH BELOW. The Trust has proposed this Proposal. The Board of Trustees recommends voting "FOR" the Proposal. PROPOSAL To approve the Agreement and Plan of Reorganization between Forum Funds, on behalf of Daily Assets Treasury Obligations Fund, a series thereof, and Monarch Funds, on behalf of Daily Assets Treasury Fund, a series thereof. FOR _____ AGAINST _____ ABSTAIN _____ (NOTE: Checking the box labeled "Abstain" will result in the shares covered by the Proxy being treated as if they were voted "Against" a Proposal.) Receipt is acknowledged of the Notice and Proxy Statement for the Special Meeting of Shareholders to be held on __________, 2003. PLEASE SIGN AND DATE THIS PROXY IN THE SPACE PROVIDED. Execution by shareholders who are not individuals must be made by an authorized signatory. Executors, administrators, trustees, guardians and others signing in a representative capacity should give their full title as such. _________________________________________________________ ________________ Authorized Signature Date _________________________________________________________ Printed Name (and Title if Applicable) _________________________________________________________ ________________ Authorized Signature (Joint Investor or Second Signatory) Date _________________________________________________________ Printed Name (and Title if Applicable) FORUM FUNDS TWO PORTLAND SQUARE PORTLAND, MAINE 04101 PROXY (FOR SHAREHOLDERS OF DAILY ASSETS GOVERNMENT OBLIGATIONS FUND ONLY) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES Revoking any such prior appointments, the undersigned appoints Lisa J. Weymouth, Leslie K. Klenk and Patrick J. Keniston (or, if only one shall act, that one) proxies with the power of substitution to vote all of the shares of Daily Assets Government Obligations Fund (the "Forum Series"), a series of Forum Funds (the "Trust"), registered in the name of the undersigned at the Special Meeting of Shareholders of the Forum Series to be held at the offices of Forum Financial Group, LLC, Two Portland Square, Portland, Maine 04101, on ________, 2003, at 10:00 a.m. (Eastern time), and at any postponements or adjournments thereof. The shares of beneficial interest represented by this Proxy will be voted in accordance with the instructions given by the undersigned below. IF NO CHOICE IS SPECIFIED ON THE PROXY, PROPERLY EXECUTED PROXIES THAT ARE RETURNED IN TIME TO BE VOTED AT THE MEETING WILL BE VOTED "FOR" THE APPROVAL OF THE PROPOSAL SET FORTH BELOW. The Trust has proposed this Proposal. The Board of Trustees recommends voting "FOR" the Proposal. PROPOSAL To approve the Agreement and Plan of Reorganization between Forum Funds, on behalf of Daily Assets Government Obligations Fund, a series thereof, and Monarch Funds, on behalf of Daily Assets Government Fund, a series thereof. FOR _____ AGAINST _____ ABSTAIN _____ (NOTE: Checking the box labeled "Abstain" will result in the shares covered by the Proxy being treated as if they were voted "Against" a Proposal.) Receipt is acknowledged of the Notice and Proxy Statement for the Special Meeting of Shareholders to be held on __________, 2003. PLEASE SIGN AND DATE THIS PROXY IN THE SPACE PROVIDED. Execution by shareholders who are not individuals must be made by an authorized signatory. Executors, administrators, trustees, guardians and others signing in a representative capacity should give their full title as such. _________________________________________________________ ________________ Authorized Signature Date _________________________________________________________ Printed Name (and Title if Applicable) _________________________________________________________ ________________ Authorized Signature (Joint Investor or Second Signatory) Date _________________________________________________________ Printed Name (and Title if Applicable) -----END PRIVACY-ENHANCED MESSAGE-----