-----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, GgaLvLQaU3szULXrlCO+jfIod68SyE87y+pixMx8PM12N9rrNvmpjgxQy2+oFcB7 UV50fTndro0R4EI5d0i3iw== 0001004402-98-000307.txt : 20040407 0001004402-98-000307.hdr.sgml : 20040407 19980526172700 ACCESSION NUMBER: 0001004402-98-000307 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19980526 DATE AS OF CHANGE: 19981113 EFFECTIVENESS DATE: 19980526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORUM FUNDS INC CENTRAL INDEX KEY: 0000315774 IRS NUMBER: 133114790 STATE OF INCORPORATION: ME FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-67052 FILM NUMBER: 98631730 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 2078796500 MAIL ADDRESS: STREET 1: FORUM FUNDS STREET 2: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 FORMER COMPANY: FORMER CONFORMED NAME: FORUM FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FAHNESTOCK DAILY INCOME FUND INC DATE OF NAME CHANGE: 19870617 FORMER COMPANY: FORMER CONFORMED NAME: DAILY INCOME EXTENSION FUND INC DATE OF NAME CHANGE: 19810607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORUM FUNDS INC CENTRAL INDEX KEY: 0000315774 IRS NUMBER: 133114790 STATE OF INCORPORATION: ME FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03023 FILM NUMBER: 98631731 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 2078796500 MAIL ADDRESS: STREET 1: FORUM FUNDS STREET 2: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 FORMER COMPANY: FORMER CONFORMED NAME: FORUM FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FAHNESTOCK DAILY INCOME FUND INC DATE OF NAME CHANGE: 19870617 FORMER COMPANY: FORMER CONFORMED NAME: DAILY INCOME EXTENSION FUND INC DATE OF NAME CHANGE: 19810607 485BPOS 1 PEA# 62 As filed with the Securities and Exchange Commission on May 26, 1998 File Nos. 2-67052 and 811-3023 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 62 AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 64 FORUM FUNDS (Formerly "Forum Funds, Inc.") Two Portland Square Portland, Maine 04101 (207) 879-1900 Leslie Klenk, Esq. Forum Financial Services, Inc. Two Portland Square, Portland, Maine 04101 Copies to: Anthony C.J. Nuland, Esq. Seward & Kissel 1200 G Street, N.W. Washington, D.C. 20005 It is proposed that this filing will become effective: [X] immediately upon filing pursuant to Rule 485, paragraph (b) [ ] on [ ] pursuant to Rule 485, paragraph (b) [ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1) [ ] on [ ] pursuant to Rule 485, paragraph (a)(1) [ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2) [ ] on [ ] pursuant to Rule 485, paragraph (a)(2) [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities being registered: Institutional Shares, Institutional Service Shares and Investor Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund of Registrant, which are structured as master-feeder funds. This amendment is also executed by Core Trust (Delaware). CROSS REFERENCE SHEET (AS REQUIRED BY RULE 481(A)) (Prospectus offering Institutional Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund) PART A FORM N-1A ITEM NO. LOCATION IN PROSPECTUS Item 1. Cover Page Cover Page Item 2. Synopsis Prospectus Summary Item 3. Condensed Financial Information Financial Highlights Item 4. General Description of Registrant Prospectus Summary; Investment Objectives and Policies; Other Information Item 5. Management of the Fund Prospectus Summary; Management Item 5A. Management's Discussion of Fund Performance Not Applicable Item 6. Capital Stock and Other Securities Investment Objectives and Policies; Distributions and Tax Matters; Other Information - The Trust and its Shares Item 7. Purchase of Securities Being Offered Purchases and Redemptions of Shares; Other Information - Determination of Net Asset Value; Management Item 8. Redemption or Repurchase Purchases and Redemptions of Shares Item 9. Pending Legal Proceedings Not Applicable
CROSS REFERENCE SHEET (AS REQUIRED BY RULE 481(A)) (Prospectus offering Institutional Service Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund) PART A FORM N-1A ITEM NO. LOCATION IN PROSPECTUS Item 1. Cover Page Cover Page Item 2. Synopsis Prospectus Summary Item 3. Condensed Financial Information Financial Highlights Item 4. General Description of Registrant Prospectus Summary; Investment Objectives and Policies; Other Information Item 5. Management of the Fund Prospectus Summary; Management Item 5A. Management's Discussion of Fund Performance Not Applicable Item 6. Capital Stock and Other Securities Investment Objectives and Policies; Distributions and Tax Matters; Other Information - The Trust and its Shares Item 7. Purchase of Securities Being Offered Purchases and Redemptions of Shares; Other Information - Determination of Net Asset Value; Management Item 8. Redemption or Repurchase Purchases and Redemptions of Shares Item 9. Pending Legal Proceedings Not Applicable
CROSS REFERENCE SHEET (AS REQUIRED BY RULE 481(A)) (Prospectus offering Investor Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund) PART A FORM N-1A ITEM NO. LOCATION IN PROSPECTUS Item 1. Cover Page Cover Page Item 2. Synopsis Prospectus Summary Item 3. Condensed Financial Information Financial Highlights Item 4. General Description of Registrant Prospectus Summary; Investment Objectives and Policies; Other Information Item 5. Management of the Fund Prospectus Summary; Management Item 5A. Management's Discussion of Fund Performance Not Applicable Item 6. Capital Stock and Other Securities Investment Objectives and Policies; Distributions and Tax Matters; Other Information - The Trust and its Shares Item 7. Purchase of Securities Being Offered Purchases and Redemptions of Shares; Other Information - Determination of Net Asset Value; Management Item 8. Redemption or Repurchase Purchases and Redemptions of Shares Item 9. Pending Legal Proceedings Not Applicable
CROSS REFERENCE SHEET (AS REQUIRED BY RULE 481(A)) (SAI offering Institutional Shares, Institutional Service Shares and Investor Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund,Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund) PART B FORM N-1A ITEM NO. LOCATION IN STATEMENT OF ADDITIONAL INFORMATION Item 10. Cover Page Cover Page Item 11. Table of Contents Cover Page Item 12. General Information and History Management; Other Information Item 13. Investment Objectives and Other Policies Investment Policies; Investment Limitations Item 14. Management of the Fund Management Item 15. Control Persons and Principal Holders of Other Information Securities Item 16. Investment Advisory and Other Services Management; Other Information - Custodian, Counsel, Auditors Item 17. Brokerage Allocation and Other Practices Portfolio Transactions Item 18. Capital Stock and Other Securities Determination of Net Asset Value Item 19. Purchase, Redemption and pricing of Determination of Net Asset Value; Additional Securities Being Offered Purchase and Redemption Information Item 20. Tax Status Taxation Item 21. Underwriters Management Item 22. Calculation of Performance Data Performance Data Item 23. Financial Statements Not Applicable
PROSPECTUS May 27, 1998 FORUM FUNDS Daily Assets Treasury Obligations Fund Daily Assets Government Fund (formerly Daily Assets Treasury Fund) Daily Assets Government Obligations Fund (formerly Daily Assets Government Fund) Daily Assets Cash Fund Daily Assets Municipal Fund (formerly Daily Assets Tax-Exempt Fund) - -------------------------------------------------------------------------------- This Prospectus offers Institutional Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund (each a "Fund"). Each Fund is a diversified no-load, money market portfolio of Forum Funds (the "Trust"), a registered open-end, management investment company. Each Fund seeks to provide its shareholders with high current income (which, in the case of Daily Assets Municipal Fund, is exempt from federal income taxes) to the extent consistent with the preservation of capital and the maintenance of liquidity. EACH FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE PORTFOLIO OF AN OPEN-END, MANAGEMENT INVESTMENT COMPANY WITH AN IDENTICAL INVESTMENT OBJECTIVE. SEE "OTHER INFORMATION - FUND STRUCTURE." THROUGH THE PORTFOLIO IN WHICH IT INVESTS: DAILY ASSETS TREASURY OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Treasury and in repurchase agreements backed by these obligations. DAILY ASSETS GOVERNMENT FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities with a view toward providing income that is generally considered exempt from state and local income taxes. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities and in repurchase agreements backed by these obligations. DAILY ASSETS CASH FUND invests in a broad spectrum of high-quality money market instruments. DAILY ASSETS MUNICIPAL FUND invests primarily in high-quality obligations of the states, territories and possessions of the U.S. and of their subdivisions, authorities and corporations ("municipal securities") with a view toward providing income that is exempt from federal income taxes. This Prospectus sets forth concisely the information concerning the Trust and the Funds that a prospective investor should know before investing. The Trust has filed with the Securities and Exchange Commission ("SEC") a Statement of Additional Information dated May 27, 1998 (the "SAI"), which contains more detailed information about the Trust and the Funds and is available together with other related materials for reference on the SEC's Internet Web Site (http://www.sec.gov). The SAI, which is incorporated into this Prospectus by reference, also is available without charge by contacting the Funds' transfer agent, Forum Shareholder Services, LLC, at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800) 94FORUM. Investors should read this Prospectus and retain it for future reference. FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS 1. Prospectus Summary..............................3 5. Purchases and Redemptions of Shares.............13 2. Financial Highlights............................5 6. Distributions and Tax Matters...................17 3. Investment Objectives and Policies..............7 7. Other Information...............................18 4. Management......................................11
2 1. PROSPECTUS SUMMARY HIGHLIGHTS OF THE FUNDS This prospectus offers shares of the Institutional class ("Institutional Shares") of each of the Funds. The Funds operate in accordance with the provisions of Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). Each Fund invests all of its investable assets in a separate portfolio (each a "Portfolio") of Core Trust (Delaware), an open-end, management investment company ("Core Trust") as follows: Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Daily Assets Government Fund Government Portfolio Daily Assets Government Obligations Fund Government Cash Portfolio Daily Assets Cash Fund Cash Portfolio Daily Assets Municipal Fund Municipal Cash Portfolio Accordingly, the investment experience of each Fund will correspond directly with the investment experience of its corresponding Portfolio. See "Other Information - Fund Structure." Each Fund currently offers three separate classes of shares: Institutional Shares, Institutional Service Shares and Investor Shares. Institutional Shares are sold through this Prospectus. Institutional Service Shares and Investor Shares are each offered by a separate prospectus. See "Other Information -- Fund Structure -- Other Classes of Shares." MANAGEMENT. Forum Administrative Services, LLC ("FAdS") supervises the overall management of the Funds and the Portfolios and Forum Financial Services, Inc. ("FFSI") is the distributor of the Funds' shares. Forum Investment Advisors, LLC ("FIA") is the investment adviser of each Portfolio and provides professional management of the Portfolios' investments. The Funds' transfer agent, dividend disbursing agent and shareholder servicing agent is Forum Shareholder Services, LLC (the "FSS"). See "Management" for a description of the services provided and fees charged to the Funds. PURCHASES AND REDEMPTIONS. The minimum initial investment in Institutional Shares is $1,000,000. Institutional Shares may be purchased and redeemed Monday through Friday, between 9:00 a.m. and 6:00 p.m., Eastern time, except on Federal holidays and days that the Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) is closed ("Fund Business Days"). To be eligible to receive that day's income, purchase orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). Shareholders may have redemption proceeds over $5,000 transferred by bank wire to a designated bank account. To be able to receive redemption proceeds by wire on the day of the redemption, redemption orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). All times may be changed without notice by Fund management due to market activities. See "Purchase and Redemption of Shares." EXCHANGES. Shareholders of a Fund may exchange Institutional Shares without charge for Institutional Shares of the other Funds. See "Purchases and Redemptions of Shares - Exchanges." DISTRIBUTIONS. Distributions of net investment income are declared daily and paid monthly by each Fund and are automatically reinvested in additional Fund shares unless the shareholder has requested payment in cash. See "Distributions and Tax Matters." INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able to maintain a stable net asset value of $1.00 per share. Although the Portfolios invest only in money market instruments, an investment in any Fund involves certain risks, depending on the types of investments made and the types of investment techniques employed. Investment in any security, including U.S. Government Securities, involves some level of investment risk. An investment in a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss of principal. EXPENSES OF INVESTING IN THE FUNDS The purpose of the following table is to assist investors in understanding the various expenses that an investor in Institutional 3 Shares will bear directly or indirectly. There are no transaction expenses associated with purchases, redemptions or exchanges of Fund shares. ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(1) Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets Treasury Government Government Cash Municipal Obligations Fund Fund Obligations Fund Fund Fund Management Fees(2) 0.14% 0.15% 0.14% 0.14% 0.15% Other Expenses(3) (after expense reimbursements) 0.06% 0.05% 0.06% 0.06% 0.05% ----- ----- ----- ----- ----- Total Operating Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
(1) For a further description of the various expenses incurred in the operation of the Funds and the Portfolios, see "Management." The amount of fees and expenses for each Fund is based on estimated annualized expenses for the Funds' fiscal year ending August 31, 1998. Each Fund's expenses include the Fund's pro rata portion of all expenses of its corresponding Portfolio, which are borne indirectly by Fund shareholders. (2) Management Fees include all administration fees and investment advisory fees incurred by the Funds and the Portfolios; as long as its assets are invested in a Portfolio, a Fund pays no investment advisory fees directly. (3) Absent estimated reimbursements by FIA and its affiliates, Other Expenses and Total Fund Operating Expenses would be: 0.15% and 0.29%, respectively, for Daily Assets Treasury Obligations Fund; 0.17 % and 0.32%, respectively, for Daily Assets Government Fund; 0.17% and 0.31%, respectively, for Daily Assets Government Obligations Fund; 0.19% and 0.33%, respectively, for Daily Assets Cash Fund; 0.19% and 0.34%, respectively, for Daily Assets Municipal Fund. Expense reimbursements are voluntary and may be reduced or eliminated at any time. EXAMPLE Following is a hypothetical example that indicates the dollar amount of expenses that an investor in Institutional Shares would pay assuming (1) the investment of all of the Fund's assets in the Portfolio, (2) a $1,000 investment in the Fund, (3) a 5% annual return, (4) the reinvestment of all distributions and (5) redemption at the end of each period: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS Each Fund $2 $6 $11 $26 The example is based on the expenses listed in the Annual Fund Operating Expenses table, which assumes the continued waiver and reimbursement of certain fees and expenses. The five percent annual return is not predictive of and does not represent the Funds' projected returns; rather, it is required by government regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED. 4 2. FINANCIAL HIGHLIGHTS The following information represents selected data for a single outstanding Institutional Share of the Funds that offered Institutional Shares prior to February 28, 1998. The following information also represents selected data for a single outstanding Institutional Service Share of Daily Assets Government Fund and Daily Assets Cash Fund. That class was the first offered by the these two Funds and, accordingly, represent data since each of those Fund's inception. Information for the period ended August 31, 1997, was audited by KPMG Peat Marwick LLP, independent auditors. Information for prior periods was audited by other independent auditors and information for the period ended February 28, 1998 is unaudited. The financial statements and independent auditors' report thereon for the fiscal year ended August 31, 1997 and the financial statements for the semi-annual period ended February 28, 1998 are incorporated by reference into the SAI and may be obtained from the Trust without charge. As of May 20, 1998, Daily Assets Municipal Fund had not commenced operations. As of February 28, 1998, Treasury Cash Portfolio, Government Portfolio, Government Cash Portfolio and Cash Portfolio had net assets of $168,183,226; $46,711,943; $603,202,130 and $391,807,519, respectively. 5 RATIO TO AVERAGE NET ASSETS Beginning Distributions Net Asset Net From Net Ending Net Net Value Per Investment Investment Asset Net Investment Share Income Income Value Per Expenses Income Share DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, $1.00 0.01 (0.01) $1.00 0.20%(2) 2.13%(2) 1998 (unaudited) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.02 (0.02) $1.00 0.47%(2) 4.86%(2) April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00 0.50%(2) 4.76%(2) Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70% Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01% Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45% Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82% July 1, 1992 to March 31, 1993 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.01 (0.01) $1.00 0.20%(2) 1.76%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.03 (0.03) $1.00 0.47%(2) 5.23%(2) October 1, 1996 to August 31, 1997 1.00 0.05 (0.05) 1.00 0.52%(2) 5.06%(2)%
Ratio of Net Assets Gross End of Expenses Period to Average Total (000s Net Assets Return Omitted) (1) DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited)0.55% 60,926 0.35%(2) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited)2.43% 46,519 0.78%(2) April 1, 1997 to August 31, 1997 2.01% 44,116 0.95%(2) Year Ended March 31, 1997 4.80% 43,975 0.99% Year Ended March 31, 1996 5.18% 43,103 1.06% Year Ended March 31, 1995 4.45% 36,329 1.10% Year Ended March 31, 1994 2.83% 26,505 1.17% July 1, 1992 to March 31, 1993 3.13%(2) 4,687 2.43%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited)0.46% 4,952 1.33%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited)2.62% 13,034 0.89%(2) October 1, 1996 to August 31, 1997 4.70% 12,076 1.22%(2)
(1) During each period, various fees and expenses were waived and reimbursed, respectively. The ratio of Gross Expenses to Average Net Assets reflects the expense ratio in the absence of any waivers and reimbursements for the Fund and its respective Portfolio. (2) Annualized. 6 3. INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVE The investment objective of each Fund except Daily Assets Municipal Fund is to provide high current income to the extent consistent with the preservation of capital and the maintenance of liquidity. The investment objective of Daily Assets Municipal Fund is to provide high current income which is exempt from federal income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE. Each Fund currently seeks to achieve its investment objective by investing all of its investable assets in its corresponding Portfolio, which has the same investment objective and substantially similar investment policies. Therefore, although the following discusses the investment policies of the Portfolios (and the responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it applies equally to the Funds (and the Trust's board of trustees (the "Board")). INVESTMENT POLICIES Each Portfolio invests only in high quality, short-term money market instruments that are determined by FIA, pursuant to procedures adopted by the Core Trust Board, to be eligible for purchase and to present minimal credit risks. High quality instruments include those that (1) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in the highest rating category by two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (2) are otherwise unrated and determined by FIA to be of comparable quality. A description of the rating categories of certain NRSROs, such as Standard & Poor's and Moody's Investors Service, Inc., is contained in the SAI. Each Portfolio invests only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated under Rule 2a-7) and maintains a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities, each Portfolio will not invest more than 5% of its total assets in the securities of any one issuer. As used herein, "U.S. Government Securities" means obligations issued or guaranteed as to principal and interest by the United States government, its agencies or instrumentalities and "Treasury Securities" means U.S. Treasury bills and notes and other U.S. Government Securities which are guaranteed as to principal and interest by the U.S. Treasury. In the case of municipal securities, when the assets and revenues of an issuer are separate from those of the government creating the issuer and a security is backed only by the assets and revenues of the issuer, the issuer and not the creating government is deemed to be the sole issuer of the security. Similarly, in the case of a security issued by or on behalf of public authorities to finance various privately operated facilities that is backed only by the assets and revenues of the non-governmental user, the non-governmental user will be deemed to be the sole issuer of the security. Yields on money market securities are dependent on a variety of factors, including the general conditions of the money markets and the fixed income markets in general, the size of a particular offering, the maturity of the obligation and the rating of the issue. A Fund's yield will tend to fluctuate inversely with prevailing market interest rates. For instance, in periods of falling market interest rates, yields will tend to be somewhat higher. Although each Portfolio only invests in high quality money market instruments, an investment in a Fund is subject to risk even if all securities in the Portfolio's portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities and municipal securities, can change in value when there is a change in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. The achievement of a Fund's investment objective is dependent in part on the continuing ability of the issuers of the securities in which the Portfolio invests to meet their obligations for the payment of principal and interest when due. DAILY ASSETS TREASURY OBLIGATIONS FUND Treasury Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in Treasury Securities and in repurchase agreements backed by Treasury Securities. 7 DAILY ASSETS GOVERNMENT FUND Government Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities. The Portfolio invests with a view toward providing income that is generally considered exempt from state and local income taxes. Among the U.S. Government Securities in which the Portfolio may invest are U.S. Treasury Securities and obligations of the Farm Credit System, Farm Credit System Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan Banks, General Services Administration, Student Loan Marketing Association, and Tennessee Valley Authority. Income on these obligations and the obligations of certain other agencies and instrumentalities is generally not subject to state and local income taxes by Federal law. In addition, the income received by Fund shareholders that is attributable to these investments will also be exempt in most states from state and local income taxes. Shareholders should determine through consultation with their own tax advisers whether and to what extent dividends payable by the Fund from interest received with respect to its investments will be considered to be exempt from state and local income taxes in the shareholder's state. Shareholders similarly should determine whether the capital gain and other income, if any, payable by the Fund will be subject to state and local income taxes in the shareholder's state. See "Distributions and Tax Matters." The U.S. Government Securities in which the Portfolio may invest include securities supported primarily or solely by the creditworthiness of the issuer. There is no guarantee that the U.S. government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. government's full faith and credit. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Government Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities and in repurchase agreements backed by U.S. Government Securities. The U.S. Government Securities in which the Portfolio may invest include Treasury Securities and securities supported primarily or solely by the creditworthiness of the issuer, such as securities of the Federal National Mortgage Association, Federal Home Loan Banks and Student Loan Marketing Association. There is no guarantee that the U.S. Government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. Government's full faith and credit. DAILY ASSETS CASH FUND Cash Portfolio seeks to attain its investment objective by investing in a broad spectrum of money market instruments. The Portfolio may invest in (1) obligations of domestic financial institutions, (2) U.S. Government Securities (see "Investment Objectives and Policies - Daily Assets Government Fund") and (3) corporate debt obligations of domestic issuers. Financial institution obligations include negotiable certificates of deposit, bank notes, bankers' acceptances and time deposits of banks (including savings banks and savings associations) and their foreign branches. The Portfolio limits its investments in bank obligations to banks which at the time of investment have total assets in excess of one billion dollars. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bank notes are debt obligations of a bank. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Certificates of deposit and fixed time deposits, which are payable at the stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Portfolio but may be subject to early withdrawal penalties which could reduce the Portfolio's yield. Corporate debt obligations include commercial paper (short-term promissory notes) issued by companies to finance their, or their affiliates', current obligations. The Portfolio may also invest in commercial paper or other corporate securities issued in "private placements" that are restricted as to disposition under the Federal securities laws ("restricted securities"). Any sale of these securities may not be made absent registration under the Securities Act of 1933 or the availability of an appropriate exemption therefrom. Some of these restricted securities, however, are eligible for resale to institutional investors, and accordingly, a liquid 8 market may exist for them. Pursuant to guidelines adopted by the Core Trust Board, the investment adviser will determine whether each such investment is liquid. DAILY ASSETS MUNICIPAL FUND Municipal Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in municipal securities. The Portfolio attempts to maintain 100% of its assets invested in federally tax-exempt municipal securities; during periods of normal market conditions the Portfolio will have at least 80% of its net assets invested in federally tax-exempt instruments the income from which may be subject to the federal alternative minimum tax ("AMT"). The Portfolio may from time to time invest more than 25% of its assets in obligations of issuers located in one state but, under normal circumstances, will not invest more than 35% of its assets in obligations of issuers located in one state or territory. If the Portfolio concentrates its investments in this manner, it will be more susceptible to factors adversely affecting issuers of those municipal securities than would be a more geographically diverse municipal securities portfolio. These risks arise from the financial condition of the particular state or territory and its political subdivisions. THE SHORT-TERM MUNICIPAL SECURITIES MARKET. It is anticipated that a substantial amount of the municipal securities held by the Portfolio will be supported by credit and liquidity enhancements, such as letters of credit (which are not covered by federal deposit insurance) or put or demand features of third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Portfolio will be dependent in part upon the credit quality of the banks supporting the Portfolio's investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. These risks include a sustained increase in interest rates, which can adversely affect the availability and cost of a bank's lending activities; exposure to credit losses during times of economic decline; concentration of loan portfolios in certain industries; regulatory developments; and competition among financial institutions. Brokerage firms and insurance companies also provide certain liquidity and credit support. The Portfolio's policy is to purchase municipal securities with third party credit or liquidity support only after FIA has considered the creditworthiness of the financial institution providing the support and believes that the security presents minimal credit risk. The Portfolio may purchase long term municipal securities with various maturity shortening provisions. For instance, variable rate demand notes ("VRDN") are municipal bonds with maturities of up to 40 years that are sold with a demand feature (an option for the holder of the security to sell the security back to the issuer) which may be exercised by the security holder at predetermined intervals, usually daily or weekly. The interest rate on the security is typically reset by a remarketing or similar agent at prevailing interest rates. VRDNs may be issued directly by the municipal issuer or created by a bank, broker-dealer or other financial institution by selling a previously issued long-term bond with a demand feature attached. Similarly, tender option bonds (also referred to as certificates of participation) are municipal securities with relatively long original maturities and fixed rates of interest that are coupled with an agreement of a third party financial institution under which the third party grants the security holders the option to tender the securities to the institution and receive the face value thereof. The option may be exercised at periodic intervals, usually six months to a year. As consideration for providing the option, the financial institution receives a fee equal to the difference between the underlying municipal security's fixed rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of the interest rate determination. These bonds effectively provide the holder with a demand obligation that bears interest at the prevailing short-term municipal securities interest rate. The Portfolio also may acquire "puts" on municipal securities it purchases. A put gives the Portfolio the right to sell the municipal security at a specified price at any time before a specified date. The Portfolio will acquire puts only to enhance liquidity, shorten the maturity of the related municipal security or permit the Portfolio to invest its funds at more favorable rates. Generally, the Portfolio will buy a municipal security that is accompanied by a put only if the put is available at no extra cost. In some cases, however, the Portfolio may pay an extra amount to acquire a put, either in connection with the purchase of the related municipal security or separately from the purchase of the security. The Portfolio may purchase municipal securities together with the right to resell them to the seller or a third party at an agreed-upon price or yield within specified periods prior to their maturity dates. Such a right to resell is commonly known as a "stand-by commitment," and the aggregate price which the Portfolio pays for securities with a stand-by commitment may be higher than the price which otherwise would be paid. The primary purpose of this practice is to permit the Portfolio to be as fully invested as 9 practicable in municipal securities while preserving the necessary flexibility and liquidity to meet unanticipated redemptions. In this regard, the Portfolio acquires stand-by commitments solely to facilitate portfolio liquidity and does not exercise its rights thereunder for trading purposes. Stand-by commitments involve certain expenses and risks, including the inability of the issuer of the commitment to pay for the securities at the time the commitment is exercised, non-marketability of the commitment, and differences between the maturity of the underlying security and the maturity of the commitment. MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities. "General obligation" bonds are secured by a municipality's pledge of its full faith, credit and taxing power for the payment of principal and interest. "Revenue" bonds are usually payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax, but not from general tax revenues. Under a "moral obligation" bond (which is normally issued by special purpose public authorities), if the issuer is unable to meet its obligations under the bonds from current revenues, it may draw on a reserve fund that is backed by the moral commitment (but not the legal obligation) of the state or municipality that created the issuer. The Portfolio may invest in industrial development bonds, which in most cases are revenue bonds. The payment of the principal and interest on these bonds is dependent solely on the ability of an initial or subsequent user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either "general obligation" or "revenue" securities, are short-term fixed income securities intended to fulfill short-term capital needs of a municipality. Municipal leases, which may take various forms, are issued by municipalities to acquire a wide variety of equipment and facilities. Municipal leases frequently have special risks not normally associated with other municipal securities. Municipal leases (which normally provide for title to the leased assets to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in municipal securities that are owned by banks or other financial institutions. Participation interests usually carry a demand feature backed by a letter of credit or guarantee of the bank or institution permitting the holder to tender them back to the bank or other institution. TAXABLE INVESTMENTS. The Portfolio may invest up to 20% of the value of its net assets in cash and money market instruments, the interest income on which is subject to federal income taxation. In addition, when business or financial conditions warrant or when an adequate supply of appropriate municipal securities is not available, the Portfolio may assume a temporary defensive position and invest without limit in such taxable money market instruments. ADDITIONAL INVESTMENT POLICIES Each Fund's and each Portfolio's investment objective and certain investment limitations, as described in the SAI, are fundamental and therefore may not be changed without approval of the holders of a majority of the Fund's or Portfolio's, as applicable, outstanding voting securities (as defined in the 1940 Act). Except as otherwise indicated herein or in the SAI, investment policies of a Fund or a Portfolio may be changed by the applicable board of trustees without shareholder approval. Each Portfolio is permitted to hold cash in any amount pending investment in securities and may invest in other investment companies that intend to comply with Rule 2a-7 and have substantially similar investment objectives and policies. A further description of the Funds' and the Portfolios' investment policies is contained in the SAI. BORROWING. Each Portfolio may borrow money for temporary or emergency purposes (including the meeting of redemption requests), but not in excess of 33 1/3% of the value of the Portfolio's total assets. Borrowing for purposes other than meeting redemption requests will not exceed 5% of the value of the Portfolio's total assets. REPURCHASE AGREEMENTS. Each Portfolio may seek additional income or liquidity by entering into repurchase agreements. Repurchase agreements are transactions in which a Portfolio purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed-upon future date, normally one to seven days later. The resale price 10 reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased security. The Portfolios' custodian holds the underlying collateral, which is maintained at not less than 100% of the repurchase price. Repurchase agreements involve certain credit risks not associated with direct investment in securities. Each Portfolio, however, intends to enter into repurchase agreements only with sellers which FIA believes present minimal credit risks in accordance with guidelines established by the Core Trust Board. In the event that a seller defaulted on its repurchase obligation, however, a Portfolio might suffer a loss. LIQUIDITY. To ensure adequate liquidity, each Portfolio may not invest more than 10% of its net assets in illiquid securities, including repurchase agreements not entitling the Portfolio to payment of principal within seven days. There may not be an active secondary market for securities held by a Portfolio. The value of securities that have a limited market tend to fluctuate more than those that have an active market. FIA monitors the liquidity of each Portfolio's investments, but there can be no guarantee that an active secondary market will exist. WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of being able to obtain securities at prices which FIA believes might not be available at a future time, FIA may purchase securities on a when-issued or delayed delivery basis. When these transactions are negotiated, the price or yield is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. Securities so purchased are subject to market price fluctuation and no interest on the securities accrues to a Portfolio until delivery and payment take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Commitments for when-issued or delayed delivery transactions will be entered into only when a Portfolio has the intention of actually acquiring the securities, but the Portfolio may sell the securities before the settlement date if deemed advisable. Failure by the other party to deliver a security purchased by a Portfolio may result in a loss or missed opportunity to make an alternative investment. As a result of entering into forward commitments, the Funds are exposed to greater potential fluctuations in the value of their assets and net asset values per share. VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio invest may have variable or floating rates of interest. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. The interest paid on these securities is a function primarily of the index or market rate upon which the interest rate adjustments are based. Those securities with ultimate maturities of greater than 397 days may be purchased only in accordance with the provisions of Rule 2a-7. Under that Rule, only those long-term instruments that have demand features which comply with certain requirements and certain U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. No Portfolio may purchase a variable or floating rate security whose interest rate is adjusted based on a long-term interest rate or index, on more than one interest rate or index, or on an interest rate or index that materially lags behind short-term market rates (these prohibited securities are often referred to as "derivative" securities). All variable and floating rate securities purchased by a Portfolio will have an interest rate that is adjusted based on a single short-term rate or index, such as the Prime Rate. FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and Government Cash Portfolio invests only in instruments which, if held directly by a bank or bank holding company organized under the laws of the United States or any state thereof, would be assigned to a risk-weight category of no more than 20% under the current risk based capital guidelines adopted by the Federal bank regulators. These Portfolios do not intend to hold in their portfolio any securities or instruments that would be subject to restriction as to amount held by a national bank under Title 12, Section 24 (Seventh) of the United States Code. In addition, these Portfolios limit their investments to those permissible for Federally chartered credit unions under applicable provisions of the Federal Credit Union Act and the applicable rules and regulations of the National Credit Union Administration. Government Cash Portfolio limits its investments to investments that are legally permissible for Federally chartered savings associations without limit as to percentage and to investments that permit Fund shares to qualify as liquid assets and as short-term liquid assets. 4. MANAGEMENT The business of the Trust is managed under the direction of the Board and the business of Core Trust is managed under the direction the Core Trust Board. The Board formulates the general policies of the Funds and meets periodically to review the results of the Funds, monitor investment activities and practices and discuss other matters affecting the Funds and the Trust. The 11 Core Trust Board performs similar functions for the Portfolios and Core Trust. The SAI contains general background information about the trustees and officers of the Trust and Core Trust. ADMINISTRATION AND DISTRIBUTION Subject to the supervision of the Board, FAdS supervises the overall management of the Trust, including overseeing the Trust's receipt of services, advising the Trust and the Trustees on matters concerning the Trust and its affairs, and providing the Trust with general office facilities and certain persons to serve as officers. For these services and facilities, FAdS receives a fee at an annual rate of 0.05% of the daily net assets of each Fund. FAdS also serves as administrator of the Portfolios and provides administrative services for each Portfolio that are similar to those provided to the Funds. For its administrative services to the Portfolios, FAdS receives a fee at an annual rate of 0.05% of the average daily net assets of each Portfolio. Forum Accounting Services, LLC ("FAcS") performs portfolio accounting services for the Funds and Portfolios pursuant to agreements with the Trust and Core Trust and is paid a separate fee for these services. FFSI acts as the agent of the Trust in connection with the offering of shares of the Funds but receives no compensation for these services. FFSI is a registered broker-dealer and is a member of the National Association of Securities Dealers, Inc. FAdS, FFSI, FIA, FAcS and FSS are members of the Forum Financial Group of Companies and together provide a full range of services to the investment company and financial services industry. As of the date of this Prospectus, each of these companies was controlled by John Y. Keffer, President and Chairman of the Trust, and FAdS and FFSI provided administration services to registered investment companies with assets of approximately $30 billion. INVESTMENT ADVISER Subject to the general supervision of the Core Trust Board, FIA makes investment decisions for each Portfolio and monitors the Portfolios' investments. FIA, which is located at Two Portland Square, Portland, Maine 04101, provides investment advisory services to six other mutual funds. Prior to January 2, 1998, Linden Asset Management, Inc. ("Linden") served as investment adviser to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provided professional management of those Portfolios' investments, and Forum Advisors, Inc. served as investment adviser to Government Portfolio and provided professional management of that Portfolio's investments. Linden and Forum Advisors, Inc. also acted as investment subadvisors to each Portfolio that they did not manage on a daily basis. On January 2, 1998, Forum Advisors, Inc. acquired Linden and reorganized into a new company named Forum Investment Advisors, LLC. Anthony R. Fischer, Jr. is primarily responsible for the day-to-day management of the Portfolios. Mr. Fischer was the sole stockholder and President of Linden Asset Management, Inc. from 1992 until January 2, 1998. He has been primarily responsible for the day-to-day management of Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio since their inception. Mr. Fischer has over twenty-five years experience in the money market industry and during that time has managed money market investment portfolios for various banks and investment firms. For its services, FIA receives an advisory fee at an annual rate of 0.05% of Government Portfolio's and Municipal Cash Portfolio's average daily net assets For services provided to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, FIA receives an advisory fee based upon the total average daily net assets of those Portfolios ("Total Portfolio Assets"). FIA's fee is calculated at an annual rate on a cumulative basis as follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of Total Portfolio Assets, and 0.03% of the remaining Total Portfolio Assets. A Fund's expenses include the Fund's pro rata portion of the advisory fee paid by the corresponding Portfolio. SHAREHOLDER SERVICING Shareholder inquiries and communications concerning the Funds may be directed to FSS at the address and telephone numbers on the first page of this Prospectus. FSS maintains an account for each shareholder of the Funds (unless such accounts are maintained by sub-transfer agents or processing agents) and performs other transfer agency and related functions. FSS is authorized to subcontract any or all of its functions to one or more qualified sub-transfer agents or processing agents, which may be its affiliates, who agree to comply with the terms of FSS's agreement with the Trust. FSS may pay those agents for their services, but no such payment will increase FSS's compensation from the Trust. For its services, FSS is paid a transfer 12 agent fee at an annual rate of 0.05% of the average daily net assets of each Fund attributable to Institutional Shares plus $12,000 per year for each Fund and certain account and additional class charges and is reimbursed for certain expenses incurred on behalf of the Funds. EXPENSES OF THE FUNDS Each Fund's expenses comprise Trust expenses attributable to the Fund, which are charged to the Fund, and expenses not attributable to a particular fund of the Trust, which are allocated among the Fund and all other funds of the Trust in proportion to their average net assets. Each service provider in its sole discretion may elect to waive (or continue to waive) all or any portion of its fees, which are accrued daily and paid monthly, and may reimburse a Fund for certain expenses. Any such waivers or reimbursements would have the effect of increasing a Fund's performance for the period during which the waiver was in effect and would not be recouped at a later date. Each Fund's expenses include the service fees described in this Prospectus, the fees and expenses of the Board, applicable insurance and bonding expenses and state and SEC registration fees. Each Fund bears its pro rata portion of the expenses of the Portfolio in which it invests along with all other investors in the Portfolio. 5. PURCHASES AND REDEMPTIONS OF SHARES GENERAL INFORMATION All transactions in Fund shares are effected through FSS, which accepts orders for purchases and redemptions from shareholders of record and new investors. Shareholders of record will receive from the Trust periodic statements listing all account activity during the statement period. The Trust reserves the right in the future to modify, limit or terminate any shareholder privilege, upon appropriate notice to shareholders, and may charge a fee for certain shareholder services, although no such fees are currently contemplated. PURCHASES. Fund shares are sold at a price equal to their net asset value next-determined after receipt of an order in proper form, on each Fund Business Day. Fund shares are issued immediately after an order for the shares in proper form, accompanied by funds on deposit at a Federal Reserve Bank ("Federal Funds"), is accepted by FSS. Each Fund's net asset value is calculated at 4:00 p.m., Eastern time. Fund shares become entitled to receive distributions on the day the purchase order is accepted if the order and payment are received by FSS as follows: ORDER MUST BE RECEIVED BY PAYMENT MUST BE RECEIVED BY Daily Assets Government Fund and Daily Assets Municipal Fund 12:00 p.m., Eastern time 4:00 p.m., Eastern time All other Funds 2:00 p.m., Eastern time 4:00 p.m., Eastern time
If a purchase order is transmitted to FSS (or the wire is received) after the times listed above, the investor will not receive a distribution on that day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire purchase orders and the cut-off times set forth above. Each Fund reserves the right to reject any subscription for the purchase of Fund shares. Stock certificates are issued only to shareholders of record upon their written request and no certificates are issued for fractional shares. REDEMPTIONS. Fund shares may be redeemed without charge at their net asset value on any Fund Business Day. There is no minimum period of investment and no restriction on the frequency of redemptions. Fund shares are redeemed as of the next determination of the Fund's net asset value following receipt by FSS of the redemption order in proper form (and any supporting documentation which FSS may require). Shares redeemed are not entitled to receive distributions declared on or after the day on 13 which the redemption becomes effective. For wire redemption orders received after 12:00 p.m., Eastern time, in the case of Daily Assets Government Fund and Daily Assets Municipal Fund, and after 2:00 p.m., Eastern time, in the case of each other Fund, FSS will wire proceeds the next Fund Business Day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire redemption orders. Normally, redemption proceeds are paid immediately, but in no event later than seven days, following acceptance of a redemption order. Proceeds of redemption requests (and exchanges), however, will not be paid unless any check used to purchase the shares has been cleared by the shareholder's bank, which may take up to 15 calendar days. This delay may be avoided by investing through wire transfers. Unless otherwise indicated, redemption proceeds normally are paid by check mailed to the shareholder's record address. The right of redemption may not be suspended nor the payment dates postponed for more than seven days after the tender of the shares to the Fund except when the New York Stock Exchange is closed (or when trading thereon is restricted) for any reason other than its customary weekend or holiday closings or under any emergency or other circumstance as determined by the SEC. Proceeds of redemptions normally are paid in cash. However, payments may be made wholly or partially in portfolio securities if the Board determines that payment in cash would be detrimental to the best interests of the Fund. The Trust employs reasonable procedures to ensure that telephone orders are genuine (which include recording certain transactions and the use of shareholder security codes). If the Trust did not employ such procedures, it could be liable for any losses due to unauthorized or fraudulent telephone instructions. Shareholders should verify the accuracy of telephone instructions immediately upon receipt of confirmation statements. During times of drastic economic or market changes, telephone redemption and exchange privileges may be difficult to implement. In the event that a shareholder is unable to reach FSS by telephone, requests may be mailed or hand-delivered to FSS. Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves the right to redeem, upon not less than 60 days' written notice, all shares in any Fund account with an aggregate net asset value of less than $5,000. PURCHASE AND REDEMPTION PROCEDURES Investors may open an account by completing the application at the back of this Prospectus or by contacting FSS at the address on the first page of this Prospectus. To request shareholder services not referenced on the account application and to change information regarding a shareholder's account (such as addresses), investors should request an Optional Services Form from FSS. INITIAL PURCHASE OF SHARES There is a $1,000,000 minimum for initial investments in each Fund. BY MAIL. Investors may send a check made payable to the Trust along with a completed account application to FSS. Checks are accepted at full value subject to collection. Payment by a check drawn on any member of the Federal Reserve System can normally be converted into Federal Funds within two business days after receipt of the check. Checks drawn on some non-member banks may take longer. For individual or Uniform Gift to Minors Act accounts, the check or money order used to purchase shares of a Fund must be made payable to "Forum Funds" or to one or more owners of that account and endorsed to Forum Funds. For corporation, partnership, trust, 401(k) plan or other non-individual type accounts, the check used to purchase shares of a Fund must be made payable on its face to "Forum Funds." No other method of payment by check will be accepted. All purchases must be paid in U.S. dollars; checks must be drawn on U.S. banks. Payment by Traveler's Checks is prohibited. BY BANK WIRE. To make an initial investment in a Fund using the wire system for transmittal of money among banks, an investor should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to obtain an account number. The 14 investor should then instruct a bank to wire the investor's money immediately to: BankBoston Boston, Massachusetts ABA# 011000390 For Credit To: Forum Shareholder Services, LLC Account #: 541-54171 Re: [Name of Fund] - Institutional Shares Account #: ......... Account Name: ......... The investor should then promptly complete and mail the account application. Any investor planning to wire funds should instruct a bank early in the day so the wire transfer can be accomplished the same day. There may be a charge imposed by the bank for transmitting payment by wire, and there also may be a charge for the use of Federal Funds. THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through certain broker-dealers, banks or other financial institutions ("Processing Organizations"), including affiliates of FSS. Processing Organizations may charge their customers a fee for their services and are responsible for promptly transmitting purchase, redemption and other requests to a Fund. The Trust is not responsible for the failure of any Processing Organization to promptly forward these requests. Investors who purchase or redeem shares in this manner will be subject to the procedures of their Processing Organization, which may include charges, limitations, investment minimums, cutoff times and restrictions in addition to, or different from, those applicable to shareholders who invest in a Fund directly. These investors should acquaint themselves with their institution's procedures and should read this Prospectus in conjunction with any materials and information provided by their institution. Investors who purchase Fund shares through a Processing Organization may or may not be the shareholder of record and, subject to their institution's and the Fund's procedures, may have Fund shares transferred into their name. Certain Processing Organizations may enter purchase orders with payment to follow. The Trust may confirm purchases and redemptions of a Processing Organization's customers directly to the Processing Organization, which in turn will provide its customers with such confirmations and periodic statements as may be required by law or agreed to between the Processing Organization and its customers. SUBSEQUENT PURCHASES OF SHARES Subsequent purchases may be made by mailing a check, by sending a bank wire or through a financial institution as indicated above. Shareholders using the wire system for purchase should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to notify it of the wire transfer. All payments should clearly indicate the shareholder's name and account number. Shareholders may purchase Fund shares at regular, preselected intervals by authorizing the automatic transfer of funds from a designated bank account maintained with a United States banking institution which is an Automated Clearing House member. Under the program, existing shareholders may authorize amounts of $250 or more to be debited from their bank account and invested in the Fund monthly or quarterly. Shareholders may terminate their automatic investments or change the amount to be invested at any time by written notification to FSS. REDEMPTION OF SHARES Shareholders who wish to redeem shares by telephone or receive redemption proceeds by bank wire must elect these options by properly completing the appropriate sections of their account application. These privileges may not be available until several days after a shareholder's application is received. Shares for which certificates have been issued may not be redeemed by telephone. BY MAIL. Shareholders may make a redemption in any amount by sending a written request to FSS accompanied by any stock certificate that may have been issued to the shareholder. All written requests for redemption must be signed by the shareholder 15 with signature guaranteed and all certificates submitted for redemption must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. A shareholder who has elected telephone redemption privileges may make a telephone redemption request by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. In response to the telephone redemption instruction, the Fund will mail a check to the shareholder's record address or, if the shareholder has elected wire redemption privileges, wire the proceeds. BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected wire redemption privileges may request the Fund to transmit the redemption proceeds by Federal Funds wire to a bank account designated on the shareholder's account application. To request bank wire redemptions by telephone, the shareholder also must have elected the telephone redemption privilege. Redemption proceeds are transmitted by wire on the day the redemption request in proper form is received by FSS . OTHER REDEMPTION MATTERS. To protect shareholders and the Funds against fraud, signatures on certain requests must have a signature guarantee. Requests must be made in writing and include a signature guarantee for any of the following transactions: (1) any endorsement on a stock certificate; (2) written instruction to redeem Shares whose value exceeds $50,000; (3) instructions to change a shareholder's record name; (4) redemption in an account in which the account address or account registration has changed within the last 30 days; (5) the proceeds are not being sent to the address of record, preauthorized bank account, or preauthorized brokerage firm account; (6) proceeds are to be paid to someone other than the registered owners or to an account with a different registration; (7) change of automatic investment or redemption, dividend election, telephone redemption or exchange option election or any other option election in connection with the shareholder's account. Signature guarantees may be provided by any eligible institution acceptable to FSS, including a bank, a broker, a dealer, a national securities exchange, a credit union, or a savings association that is authorized to guarantee signatures. Whenever a signature guarantee is required, the signature of each person required to sign for the account must be guaranteed. A notarized signature is not sufficient. FSS will deem a shareholder's account "lost" if correspondence to the shareholder's address of record is returned as undeliverable, unless FSS determines the shareholder's new address. When an account is deemed lost all distributions on the account will be reinvested in additional shares of the Fund. In addition, the amount of any outstanding (unpaid for six months or more) checks for distributions that have been returned to FSS will be reinvested and the checks will be canceled. EXCHANGES Shareholders may exchange their shares for Institutional Shares of any other Fund. Exchanges are subject to the fees charged by, and the restrictions listed in the prospectus for, the fund into which a shareholder is exchanging, including minimum investment requirements. The Funds do not charge for exchanges, and there is currently no limit on the number of exchanges a shareholder may make, but each Fund reserves the right to limit excessive exchanges by any shareholder. See "Additional Purchase and Redemption Information" in the SAI. Exchanges may only be made between accounts registered in the same name. A completed account application must be submitted to open a new account in a Fund through an exchange if the shareholder requests any shareholder privilege not associated with the new account. Shareholders may only exchange into a fund if that fund's shares may legally be sold in the shareholder's state of residence. The Trust (and Federal tax law) treats an exchange as a redemption of the shares owned and the purchase of the shares of the fund being acquired. Accordingly, a shareholder may realize a capital gain or loss with respect to the shares redeemed. Redemptions and purchases are effected at the respective net asset values of the two funds as next determined following receipt of proper instructions and all necessary supporting documents by the fund whose shares are being exchanged. The exchange privilege may be modified materially or terminated by the Trust at any time upon 60 days' notice to shareholders. BY MAIL. Exchanges may be accomplished by written instruction to FSS accompanied by any stock certificate that may have 16 been issued to the shareholder. All written requests for exchanges must be signed by the shareholder (a signature guarantee is not required) and all certificates submitted for exchange must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder who has elected telephone exchange privileges by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. 6. DISTRIBUTIONS AND TAX MATTERS DISTRIBUTIONS Distributions of each Fund's net investment income are declared daily and paid monthly following the close of the last Fund Business Day of the month. Each type of net capital gain realized by a Fund, if any, will be distributed annually. Shareholders may choose to have all distributions reinvested in additional shares of the Fund or received in cash. In addition, shareholders may have all distributions of net capital gain reinvested in additional shares of the Fund and distributions of net investment income paid in cash. All distributions are treated in the same manner for Federal income tax purposes whether received in cash or reinvested in shares of the Fund. All distributions will be reinvested at the Fund's net asset value as of the payment date of the dividend. All distributions are reinvested unless another option is selected. All distributions not reinvested will be paid to the shareholder in cash and may be paid more than seven days following the date on which distribution would otherwise be reinvested. TAXES TAX STATUS OF THE FUNDS. Each Fund intends to qualify or continue to qualify to be taxed as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. Accordingly, no Fund will be liable for Federal income taxes on the net investment income and capital gain distributed to its shareholders. Because each Fund intends to distribute all of its net investment income and net capital gain each year, the Funds should also avoid Federal excise taxes. Distributions paid by each Fund out of its net investment income (including realized net short-term capital gain) are taxable to the shareholders of the Fund as ordinary income. Two different tax rates apply to net capital gain -- that is, the excess of net gain from capital assets held for more than one year over net losses from capital assets held for not more than one year. One rate (generally 28%) applies to net gain on capital assets held for more than one year but not more than 18 months and a second rate (generally 20%) applies to the balance of such net capital gains. Distributions of net capital gain will be taxable to shareholders as such, regardless of how long a shareholder has held shares in the Fund. THE PORTFOLIOS. The Portfolios are not required to pay Federal income taxes on their net investment income and capital gain, as they are treated as partnerships for Federal income tax purposes. All interest, dividends and gains and losses of a Portfolio are deemed to have been "passed through" to the respective Fund in proportion to the Fund's holdings of the Portfolio, regardless of whether such interest, dividends or gains have been distributed by the Portfolio. DAILY ASSETS MUNICIPAL FUND. Distributions paid by Daily Assets Municipal Fund out of federally tax-exempt interest income earned by the Fund ("exempt-interest dividends") generally will not be subject to federal income tax in the hands of the Fund's shareholders. Substantially all of the distributions paid by the Fund are anticipated to be exempt-interest dividends. Persons who are "substantial users" or "related persons" thereof of facilities financed by private activity securities held by the Fund, however, may be subject to federal income tax on their pro rata share of the interest income from those securities and should consult their tax advisers before purchasing Shares. Exempt-interest dividends are included in the "adjusted current earnings" of corporations for purposes of the federal alternative minimum tax ("AMT"). Interest on indebtedness incurred by shareholders to purchase or carry shares of the Fund generally is not deductible for federal income tax purposes. Under rules for determining when borrowed funds are used for purchasing or carrying particular assets, shares of the Fund may be considered to have been purchased or carried with borrowed funds even though those funds are not directly linked to the shares. 17 The income from the Portfolio's investments may be subject to the AMT. Interest on certain municipal securities issued to finance "private activities" ("private activity securities") is a "tax preference item" for purposes of the AMT applicable to certain individuals and corporations even though such interest will continue to be fully tax-exempt for regular federal income tax purposes. The Portfolio may purchase private activity securities, the interest on which may constitute a "tax preference item" for purposes of the AMT. STATE AND LOCAL TAXES. Daily Assets Government Fund's investment policies are structured to provide shareholders, to the extent permissible by Federal and state law, with income that is exempt or excluded from income taxation at the state and local level. Many states (by statute, judicial decision or administrative action) do not tax dividends from a regulated investment company that are attributable to interest on obligations of the U.S. Treasury and certain U.S. Government agencies and instrumentalities if the interest on those obligations would not be taxable to a shareholder that held the obligation directly. As a result, substantially all distributions paid by the Fund to shareholders residing in certain states will be exempt or excluded from state income taxes. A portion of the distributions paid by the other Funds to shareholders may be exempt or excluded from state income taxes, but these Funds are not managed to provide any specific amount of state tax-free income to shareholders. The exemption for federal income tax purposes of distributions derived from interest on municipal securities does not necessarily result in an exemption under the income or other tax laws of any state or local taxing authority. Shareholders of Daily Assets Municipal Fund may be exempt from state and local taxes on distributions of tax-exempt interest income derived from obligations of the state and/or municipalities of the state in which they reside but may be subject to tax on income derived from the municipal securities of other jurisdictions. Shareholders are advised to consult with their tax advisers concerning the application of state and local taxes to investments in a Fund which may differ from the federal income tax consequences described above. GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable payments (which may include taxable distributions and redemption proceeds) paid to individuals and certain other non-corporate shareholders. Withholding is not required if a shareholder certifies that the shareholder's social security or tax identification number provided to a Fund is correct and that the shareholder is not subject to backup withholding. Each Fund must include a portion of the original issue discount of zero-coupon securities, if any, as income even though these securities do not pay any interest until maturity. Because each Fund distributes all of its net investment income, a Fund may have to sell portfolio securities to distribute imputed income, which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in a taxable gain or loss. Shortly after the close of each year, a statement is sent to each shareholder of the Funds advising the shareholder of the portion of total distributions paid to the shareholder that is (1) derived from each type of obligation in which a Fund has invested, (2) derived from the obligations of issuers in the various states and (3) exempt from federal income taxes. These portions are determined for the entire year and on a monthly basis and, thus, are an annual or monthly average, rather than a day-by-day determination for each shareholder. The foregoing is only a summary of some of the important Federal and state tax considerations generally affecting the Funds and their shareholders. There may be other Federal, state or local tax considerations applicable to a particular investor. Prospective investors are urged to consult their tax advisers. 7. OTHER INFORMATION PERFORMANCE INFORMATION Institutional Shares' performance may be advertised. All performance information is based on historical results, is not intended to indicate future performance and, unless otherwise indicated, is net of all expenses. The Funds may advertise yield, which shows the rate of income a Fund has earned on its investments as a percentage of the Fund's share price. To calculate yield, a Fund takes the interest income it earned from its portfolio of investments for a specified period (net of expenses), divides it by the average number of shares entitled to receive distributions, and expresses the result as an 18 annualized percentage rate based on the Fund's share price at the end of the period. A Fund's compounded annualized yield assumes the reinvestment of distributions paid by the Fund, and, therefore will be somewhat higher than the annualized yield for the same period. A Fund may also quote tax-equivalent yields, which show the taxable yields a shareholder would have to earn to equal the Fund's tax-free yield, after taxes. A tax-equivalent yield is calculated by dividing the Fund's tax-free yield by one minus a stated federal, state or combined federal and state tax rate. Each class' performance will vary. The Funds' advertisements may also reference ratings and rankings among similar funds by independent evaluators such as Morningstar, Lipper Analytical Services, Inc. or IBC Financial Data, Inc. In addition, the performance of the Funds may be compared to recognized indices of market performance. The comparative material found in a Fund's advertisements, sales literature, or reports to shareholders may contain performance rankings. This material is not to be considered representative or indicative of future performance. BANKING LAW MATTERS Banking laws and regulations generally permit a bank or bank affiliate to purchase shares of an investment company as agent for and upon the order of a customer and permit a bank or bank affiliate to serve as a Processing Organization or perform sub-transfer agent or similar services for the Trust and its shareholders. If a bank or bank affiliate were prohibited from performing all or a part of the foregoing services, its shareholder customers would be permitted to remain shareholders of the Trust and alternative means for continuing to service them would be sought. DETERMINATION OF NET ASSET VALUE The Trust determines the net asset value per share of each Fund as of 4:00 p.m., Eastern time, on each Fund Business Day by dividing the value of the Fund's net assets (the value of its interest in the Portfolio and other assets less its liabilities) by the number of shares outstanding at the time the determination is made. In order to more easily maintain a stable net asset value per share, each Portfolio's portfolio securities are valued at their amortized cost (acquisition cost adjusted for amortization of premium or accretion of discount) in accordance with Rule 2a-7. The Portfolios will only value their portfolio securities using this method if the Core Trust Board believes that it fairly reflects the market-based net asset value per share. The Portfolios' other assets, if any, are valued at fair value by or under the direction of the Core Trust Board. THE TRUST AND ITS SHARES The Trust is registered with the SEC as an open-end, management investment company and was organized as a business trust under the laws of the State of Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the assets and liabilities of Forum Funds, Inc., which was incorporated in 1980. The Board has the authority to issue an unlimited number of shares of beneficial interest of separate series with no par value per share and to create classes of shares within each series. There are currently sixteen series of the Trust. Each share of each fund of the Trust and each class of shares has equal distribution, liquidation and voting rights, and fractional shares have those rights proportionately, except that expenses related to the distribution of the shares of each class (and certain other expenses such as transfer agency and administration expenses) are borne solely by those shares and each class votes separately with respect to the provisions of any Rule 12b-1 plan which pertain to the class and other matters for which separate class voting is appropriate under applicable law. Generally, shares will be voted in the aggregate without reference to a particular fund or class, except if the matter affects only one fund or class or voting by fund or class is required by law, in which case shares will be voted separately by fund or class, as appropriate. Delaware law does not require the Trust to hold annual meetings of shareholders, and it is anticipated that shareholder meetings will be held only when specifically required by Federal or state law. Shareholders (and Trustees) have available certain procedures for the removal of Trustees. There are no conversion or preemptive rights in connection with shares of the Trust. All shares when issued in accordance with the terms of the offering will be fully paid and nonassessable. Shares are redeemable at net asset value, at the option of the shareholders. A shareholder in a fund is entitled to the shareholder's pro rata share of all distributions arising from that fund's assets and, upon redeeming shares, will receive the portion of the fund's net assets represented by the redeemed shares. As of May 1, 1998, Babb & Co. may be deemed to have controlled Daily Assets Treasury Obligations Fund and Daily Assets Government Obligations Fund, H.M. Payson & Co. may be deemed to have controlled Daily Assets Government Fund and 19 f Daily Assets Cash Fund and Allagash & Co. may be deemed to have controlled Daily Assets Government Obligations Fund and Daily Assets Cash Fund, through investment in the Funds by their customers. From time to time, these shareholders or other shareholders may own a large percentage of the Shares of a Fund and accordingly, may be able to greatly affect (if not determine) the outcome of a shareholder vote. FUND STRUCTURE OTHER CLASSES OF SHARES. In addition to Institutional Shares, each Fund may create and issue shares of other classes of securities. Each Fund currently has two other classes of shares authorized, Institutional Service Shares and Investor Shares. Institutional Services Shares are offered solely through banks, trust companies and certain other financial institutions, and their affiliates and correspondents, for investment of their funds or funds for which they act in a fiduciary, agency or custodial capacity. Investor Shares are offered to the general public, have a $10,000 minimum investment and bear shareholder service and distribution fees. Institutional Service Shares and Investor Shares incur more expenses than Institutional Shares. See, "Additional Information" below. Except for certain differences, each share of each class represents an undivided, proportionate interest in a Fund. Each share of each Fund is entitled to participate equally in distributions and the proceeds of any liquidation of that Fund except that, due to the differing expenses borne by the various classes, the amount of distributions will differ among the classes. CORE TRUST STRUCTURE. Each Fund invests all of its assets in its corresponding Portfolio of Core Trust, a business trust organized under the laws of the State of Delaware in September 1994 and registered under the 1940 Act as an open-end, management investment company. Accordingly, a Portfolio directly acquires its own securities and its corresponding Fund acquires an indirect interest in those securities. The assets of each Portfolio belong only to, and the liabilities of the Portfolio are borne solely by, the Portfolio and no other portfolio of Core Trust. Upon liquidation of a Portfolio, investors in the Portfolio would be entitled to share pro rata in the net assets of the Portfolio available for distribution to investors. THE PORTFOLIOS. A Fund's investment in a Portfolio is in the form of a non-transferable beneficial interest. As of the date of this Prospectus, Daily Assets Government Fund and Daily Assets Municipal Fund are the only investors (other than FAdS or its affiliates) that have invested in Government Portfolio and Municipal Cash Portfolio, respectively. Each of the other Portfolios has another investor besides the Funds (and FAdS and its affiliates). All investors in a Portfolio invest on the same terms and conditions as the Funds and will pay a proportionate share of the Portfolio's expenses. The Portfolios normally will not hold meetings of investors except as required by the 1940 Act. Each investor in a Portfolio is entitled to vote in proportion to the relative value of its interest in the Portfolio. On most issues subject to a vote of investors, as required by the 1940 Act and other applicable law, a Fund will solicit proxies from shareholders of the Fund and will vote its interest in a Portfolio in proportion to the votes cast by its shareholders. There can be no assurance that any issue that receives a majority of the votes cast by a Fund's shareholders will receive a majority of votes cast by all investors in the Portfolio. CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Portfolio may be affected by the actions of other large investors in the Portfolio, if any. If a large investor other than a Fund redeemed its interest in a Portfolio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. A Fund may withdraw its entire investment from a Portfolio at any time, if the Board determines that it is in the best interests of the Fund and its shareholders to do so. The Fund might withdraw, for example, if other investors in the Portfolio, by a vote of shareholders, changed the investment objective or policies of the Portfolio in a manner not acceptable to the Board or not permissible by the Fund. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Portfolio. If the Fund decided to convert those securities to cash, it usually would incur transaction costs. If the Fund withdrew its investment from the Portfolio, the Board would consider what action might be taken, including the management of the Fund's assets in accordance with its investment objective and policies by the investment adviser to the Portfolio or the investment of all of the Fund's investable assets in another pooled investment entity having substantially the same investment objective as the Fund. The inability of the Fund to find a suitable replacement investment, in the event the Board decided not to permit the Portfolio's investment adviser to manage the Fund's assets, could have a significant impact on shareholders of the Fund. ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company that invests in a Portfolio) may have a different expense ratio and different sales charges, including distribution fees, and each class' (and investment company's) performance will be affected by its expenses and sales charges. For more information on any other class of shares of the 20 Funds or concerning any other investment companies that invest in a Portfolio, investors may contact FFSI at 207-879-1900. If an investor invests through a financial institution, the investor may also contact their financial institution to obtain information about the other classes or any other investment company investing in a Portfolio. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE. 21 PROSPECTUS May 27, 1998 FORUM FUNDS Daily Assets Treasury Obligations Fund Daily Assets Government Fund (formerly Daily Assets Treasury Fund) Daily Assets Government Obligations Fund (formerly Daily Assets Government Fund) Daily Assets Cash Fund Daily Assets Municipal Fund (formerly Daily Assets Tax-Exempt Fund) - -------------------------------------------------------------------------------- This Prospectus offers Institutional Service Shares of Daily Assets Treasury Fund, Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund (each a "Fund"). Each Fund is a diversified no-load, money market portfolio of Forum Funds (the "Trust"), a registered, open-end, management investment company. Each Fund seeks to provide its shareholders with high current income (which, in the case of Daily Assets Municipal Fund, is exempt from federal income taxes) to the extent consistent with the preservation of capital and the maintenance of liquidity. EACH FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE PORTFOLIO OF AN OPEN-END, MANAGEMENT INVESTMENT COMPANY WITH AN IDENTICAL INVESTMENT OBJECTIVE. SEE "OTHER INFORMATION - FUND STRUCTURE." THROUGH THE PORTFOLIO IN WHICH IT INVESTS: DAILY ASSETS TREASURY OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Treasury and in repurchase agreements backed by these obligations. DAILY ASSETS GOVERNMENT FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities with a view toward providing income that is generally considered exempt from state and local income taxes. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities and in repurchase agreements backed by these obligations. DAILY ASSETS CASH FUND invests in a broad spectrum of high-quality money market instruments. DAILY ASSETS MUNICIPAL FUND invests primarily in high-quality obligations of the states, territories and possessions of the U.S. and of their subdivisions, authorities and corporations ("municipal securities") with a view toward providing income that is exempt from federal income taxes. This Prospectus sets forth concisely the information concerning the Trust and the Funds that a prospective investor should know before investing. The Trust has filed with the Securities and Exchange Commission ("SEC") a Statement of Additional Information dated May 27, 1998 (the "SAI"), which contains more detailed information about the Trust and the Funds and is available together with other related materials for reference on the SEC's Internet Web Site (http://www.sec.gov). The SAI, which is incorporated into this Prospectus by reference, also is available without charge by contacting the Funds' transfer agent, Forum Shareholder Services, LLC, at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800) 94FORUM. Investors should read this Prospectus and retain it for future reference. FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS 1. Prospectus Summary..............................3 5. Purchases and Redemptions of Shares.............13 2. Financial Highlights............................4 6. Distributions and Tax Matters...................17 3. Investment Objectives and Policies..............7 7. Other Information...............................18 4. Management.....................................11
2 1. PROSPECTUS SUMMARY HIGHLIGHTS OF THE FUNDS This prospectus offers shares of the Institutional Service class ("Institutional Service Shares") of each of the Funds. Institutional Services Shares are offered solely through banks, trust companies and certain other financial institutions, and their affiliates and correspondents, for investment of their funds or funds for which they act in a fiduciary, agency or custodial capacity. The Funds operate in accordance with the provisions of Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). Each Fund invests all of its investable assets in a separate portfolio (each a "Portfolio") of Core Trust (Delaware), an open-end, management investment company ("Core Trust") as follows: Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Daily Assets Government Fund Government Portfolio Daily Assets Government Obligations Fund Government Cash Portfolio Daily Assets Cash Fund Cash Portfolio Daily Assets Municipal Fund Municipal Cash Portfolio Accordingly, the investment experience of each Fund will correspond directly with the investment experience of its corresponding Portfolio. See "Other Information Fund Structure." Each Fund currently offers three separate classes of shares: Institutional Shares, Institutional Service Shares and Investor Shares. Institutional Service Shares are sold through this Prospectus. Institutional Shares and Investor Shares are each offered by a separate prospectus. See "Other Information -- Fund Structure -- Other Classes of Shares." MANAGEMENT. Forum Administrative Services, LLC ("FAdS") supervises the overall management of the Funds and the Portfolios and Forum Financial Services, Inc. ("FFSI") is the distributor of the Funds' shares. Forum Investment Advisors, LLC ("FIA") is the investment adviser of each Portfolio and provides professional management of the Portfolios' investments. The Funds' transfer agent, dividend disbursing agent and shareholder servicing agent is Forum Shareholder Services, LLC (the "FSS"). See "Management" for a description of the services provided and fees charged to the Funds. SHAREHOLDER SERVICING. The Trust has adopted a Shareholder Service Plan relating to Institutional Service Shares under which FAdS is compensated for various shareholder servicing activities. See "Management - Shareholder Servicing" and "- Administration and Distribution." PURCHASES AND REDEMPTIONS. The minimum initial investment in Institutional Service Shares is $100,000. Institutional Service Shares may be purchased and redeemed Monday through Friday, between 9:00 a.m. and 6:00 p.m., Eastern time, except on Federal holidays and days that the Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) is closed ("Fund Business Days"). To be eligible to receive that day's income, purchase orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). Shareholders may have redemption proceeds over $5,000 transferred by bank wire to a designated bank account. To be able to receive redemption proceeds by wire on the day of the redemption, redemption orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). All times may be changed without notice by Fund management due to market activities. See "Purchase and Redemption of Shares." EXCHANGES. Shareholders of a Fund may exchange Institutional Service Shares without charge for Institutional Service Shares of the other Funds. See "Purchases and Redemptions of Shares - Exchanges." DISTRIBUTIONS. Distributions of net investment income are declared daily and paid monthly by each Fund and are automatically reinvested in additional Fund shares unless the shareholder has requested payment in cash. See "Distributions and Tax Matters." INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able to maintain a stable net asset value of $1.00 per share. Although the Portfolios invest only in money market instruments, an investment in any Fund involves certain risks, depending on the types of investments made and the types of investment techniques employed. Investment in any security, 3 including U.S. Government Securities, involves some level of investment risk. An investment in a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss of principal. EXPENSES OF INVESTING IN THE FUNDS The purpose of the following table is to assist investors in understanding the various expenses that an investor in Institutional Service Shares will bear directly or indirectly. There are no transaction expenses associated with purchases, redemptions or exchanges of Fund shares. ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(1) Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets Treasury Government Government Cash Municipal Obligations Fund Fund Obligations Fund Fund Fund Management Fees(2) 0.14% 0.15% 0.14% 0.14% 0.15% Other Expenses(3) (after expense reimbursements) 0.31% 0.30% 0.31% 0.31% 0.30% ----- ----- ----- ----- ----- Total Operating Expenses 0.45% 0.45% 0.45% 0.45% 0.45%
(1) For a further description of the various expenses incurred in the operation of the Funds and the Portfolios, see "Management." The amount of fees and expenses for Daily Assets Government Fund and Daily Assets Cash Fund is based on the Fund's expenses for its last fiscal year ended August 31, 1997 restated to reflect current fees; the amount of expenses for each other Fund is based on estimated annualized expenses for those Funds' fiscal year ending August 31, 1998. Each Fund's expenses include the Fund's pro rata portion of all expenses of its corresponding Portfolio, which are borne indirectly by Fund shareholders. (2) Management Fees include all administration fees and investment advisory fees incurred by the Funds and the Portfolios; as long as its assets are invested in a Portfolio, a Fund pays no investment advisory fees directly. (3) Absent estimated reimbursements by FIA and its affiliates, Other Expenses and Total Fund Operating Expenses would be: 0.36% and 0.50%, respectively, for Daily Assets Treasury Obligations Fund; 0.40% and 0.55%, respectively, for Daily Assets Government Fund; 0.40% and 0.54%, respectively, for Daily Assets Government Obligations Fund; 0.43% and 0.57%, respectively, for Daily Assets Cash Fund; 0.43% and 0.58%, respectively, for Daily Assets Municipal Fund. Expense reimbursements are voluntary and may be reduced or eliminated at any time. EXAMPLE Following is a hypothetical example that indicates the dollar amount of expenses that an investor in Institutional Service Shares would pay assuming (1) the investment of all of the Fund's assets in the Portfolio, (2) a $1,000 investment in the Fund, (3) a 5% annual return, (4) the reinvestment of all distributions and (5) redemption at the end of each period: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS Each Fund $5 $14 $25 $57 The example is based on the expenses listed in the Annual Fund Operating Expenses table, which assumes the continued waiver and reimbursement of certain fees and expenses. The five percent annual return is not predictive of and does not represent the Funds' projected returns; rather, it is required by government regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED. 2. FINANCIAL HIGHLIGHTS The following information represents selected data for a single outstanding Institutional Service Share of the Funds that offered Institutional Service Shares prior to February 28, 1998. The following information also represents selected data for a single outstanding Institutional Share of Daily Assets Government Obligations Fund and Daily Assets Government Cash Fund. That class was the first offered by the these two Funds and, accordingly, represent data since each of those Fund's inception. Information for the period ended August 31, 1997, was audited by KPMG Peat Marwick LLP, independent auditors. Information for prior periods was audited by other independent 4 auditors and information for the period ended February 28, 1998 is unaudited. The financial statements and independent auditors' report thereon for the fiscal year ended August 31, 1997 and the financial statements for the semi-annual period ended February 28, 1998 are incorporated by reference into the SAI and may be obtained from the Trust without charge. As of May 20, 1998, Daily Assets Municipal Fund had not commenced operations. As of February 28, 1998, Treasury Cash Portfolio, Government Portfolio, Government Cash Portfolio and Cash Portfolio had net assets of $168,183,226; $46,711,943; $603,202,130 and $391,807,519, respectively. 5 RATIO TO AVERAGE NET ASSETS Beginning Distributions Net Asset Net From Net Ending Net Net Value Per Investment Investment Asset Net Investment Share Income Income Value Per Expenses Income Share DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.01 (0.01) $1.00 0.20%(2) 2.13%(2) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.02 (0.02) $1.00 0.47%(2) 4.86%(2) April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00 0.50%(2) 4.76%(2) Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70% Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01% Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45% Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82% July 1, 1992 to March 31, 1993 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998 (unaudited)$1.00 0.01 (0.01) $1.00 0.20%(2) 1.76%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998 $1.00 0.03 (0.03) $1.00 0.47%(2) 5.23%(2) October 1, 1996 to August 31, 1997 (unaudited) 1.00 0.05 (0.05) 1.00 0.52%(2) 5.06%(2)%
Ratio of Net Assets Gross End of Expenses Period to Average Total (000s Net Assets Return Omitted) (1) DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) 0.55% 60,926 0.35%(2) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) 2.43% 46,519 0.78%(2) April 1, 1997 to August 31, 1997 2.01% 44,116 0.95%(2) Year Ended March 31, 1997 4.80% 43,975 0.99% Year Ended March 31, 1996 5.18% 43,103 1.06% Year Ended March 31, 1995 4.45% 36,329 1.10% Year Ended March 31, 1994 2.83% 26,505 1.17% July 1, 1992 to March 31, 1993 3.13%(2) 4,687 2.43%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) 0.46% 4,952 1.33%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) 2.62% 13,034 0.89%(2) October 1, 1996 to August 31, 1997 4.70% 12,076 1.22%(2)
(1) During each period, various fees and expenses were waived and reimbursed, respectively. The ratio of Gross Expenses to Average Net Assets reflects the expense ratio in the absence of any waivers and reimbursements for the Fund and its respective Portfolio. (2) Annualized. 6 3. INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVE The investment objective of each Fund except Daily Assets Municipal Fund is to provide high current income to the extent consistent with the preservation of capital and the maintenance of liquidity. The investment objective of Daily Assets Municipal Fund is to provide high current income which is exempt from federal income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE. Each Fund currently seeks to achieve its investment objective by investing all of its investable assets in its corresponding Portfolio, which has the same investment objective and substantially similar investment policies. Therefore, although the following discusses the investment policies of the Portfolios (and the responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it applies equally to the Funds (and the Trust's board of trustees (the "Board")). INVESTMENT POLICIES Each Portfolio invests only in high quality, short-term money market instruments that are determined by FIA, pursuant to procedures adopted by the Core Trust Board, to be eligible for purchase and to present minimal credit risks. High quality instruments include those that (1) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in the highest rating category by two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (2) are otherwise unrated and determined by FIA to be of comparable quality. A description of the rating categories of certain NRSROs, such as Standard & Poor's and Moody's Investors Service, Inc., is contained in the SAI. Each Portfolio invests only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated under Rule 2a-7) and maintains a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities, each Portfolio will not invest more than 5% of its total assets in the securities of any one issuer. As used herein, "U.S. Government Securities" means obligations issued or guaranteed as to principal and interest by the United States government, its agencies or instrumentalities and "Treasury Securities" means U.S. Treasury bills and notes and other U.S. Government Securities which are guaranteed as to principal and interest by the U.S. Treasury. In the case of municipal securities, when the assets and revenues of an issuer are separate from those of the government creating the issuer and a security is backed only by the assets and revenues of the issuer, the issuer and not the creating government is deemed to be the sole issuer of the security. Similarly, in the case of a security issued by or on behalf of public authorities to finance various privately operated facilities that is backed only by the assets and revenues of the non-governmental user, the non-governmental user will be deemed to be the sole issuer of the security. Yields on money market securities are dependent on a variety of factors, including the general conditions of the money markets and the fixed income markets in general, the size of a particular offering, the maturity of the obligation and the rating of the issue. A Fund's yield will tend to fluctuate inversely with prevailing market interest rates. For instance, in periods of falling market interest rates, yields will tend to be somewhat higher. Although each Portfolio only invests in high quality money market instruments, an investment in a Fund is subject to risk even if all securities in the Portfolio's portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities and municipal securities, can change in value when there is a change in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. The achievement of a Fund's investment objective is dependent in part on the continuing ability of the issuers of the securities in which the Portfolio invests to meet their obligations for the payment of principal and interest when due. DAILY ASSETS TREASURY OBLIGATIONS FUND Treasury Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in Treasury Securities and in repurchase agreements backed by Treasury Securities. 7 DAILY ASSETS GOVERNMENT FUND Government Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities. The Portfolio invests with a view toward providing income that is generally considered exempt from state and local income taxes. Among the U.S. Government Securities in which the Portfolio may invest are U.S. Treasury Securities and obligations of the Farm Credit System, Farm Credit System Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan Banks, General Services Administration, Student Loan Marketing Association, and Tennessee Valley Authority. Income on these obligations and the obligations of certain other agencies and instrumentalities is generally not subject to state and local income taxes by Federal law. In addition, the income received by Fund shareholders that is attributable to these investments will also be exempt in most states from state and local income taxes. Shareholders should determine through consultation with their own tax advisers whether and to what extent dividends payable by the Fund from interest received with respect to its investments will be considered to be exempt from state and local income taxes in the shareholder's state. Shareholders similarly should determine whether the capital gain and other income, if any, payable by the Fund will be subject to state and local income taxes in the shareholder's state. See "Distributions and Tax Matters." The U.S. Government Securities in which the Portfolio may invest include securities supported primarily or solely by the creditworthiness of the issuer. There is no guarantee that the U.S. government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. government's full faith and credit. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Government Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities and in repurchase agreements backed by U.S. Government Securities. The U.S. Government Securities in which the Portfolio may invest include Treasury Securities and securities supported primarily or solely by the creditworthiness of the issuer, such as securities of the Federal National Mortgage Association, Federal Home Loan Banks and Student Loan Marketing Association. There is no guarantee that the U.S. Government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. Government's full faith and credit. DAILY ASSETS CASH FUND Cash Portfolio seeks to attain its investment objective by investing in a broad spectrum of money market instruments. The Portfolio may invest in (1) obligations of domestic financial institutions, (2) U.S. Government Securities (see "Investment Objectives and Policies - Daily Assets Government Fund") and (3) corporate debt obligations of domestic issuers. Financial institution obligations include negotiable certificates of deposit, bank notes, bankers' acceptances and time deposits of banks (including savings banks and savings associations) and their foreign branches. The Portfolio limits its investments in bank obligations to banks which at the time of investment have total assets in excess of one billion dollars. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bank notes are debt obligations of a bank. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Certificates of deposit and fixed time deposits, which are payable at the stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Portfolio but may be subject to early withdrawal penalties which could reduce the Portfolio's yield. Corporate debt obligations include commercial paper (short-term promissory notes) issued by companies to finance their, or their affiliates', current obligations. The Portfolio may also invest in commercial paper or other corporate securities issued in "private placements" that are restricted as to disposition under the Federal securities laws ("restricted securities"). Any sale of these securities may not be made absent registration under the Securities Act of 1933 or the availability of an appropriate exemption therefrom. Some of these restricted securities, however, are eligible for resale to institutional investors, and accordingly, a liquid 8 market may exist for them. Pursuant to guidelines adopted by the Core Trust Board, the investment adviser will determine whether each such investment is liquid. DAILY ASSETS MUNICIPAL FUND Municipal Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in municipal securities. The Portfolio attempts to maintain 100% of its assets invested in federally tax-exempt municipal securities; during periods of normal market conditions the Portfolio will have at least 80% of its net assets invested in federally tax-exempt instruments the income from which may be subject to the federal alternative minimum tax ("AMT"). The Portfolio may from time to time invest more than 25% of its assets in obligations of issuers located in one state but, under normal circumstances, will not invest more than 35% of its assets in obligations of issuers located in one state or territory. If the Portfolio concentrates its investments in this manner, it will be more susceptible to factors adversely affecting issuers of those municipal securities than would be a more geographically diverse municipal securities portfolio. These risks arise from the financial condition of the particular state or territory and its political subdivisions. THE SHORT-TERM MUNICIPAL SECURITIES MARKET. It is anticipated that a substantial amount of the municipal securities held by the Portfolio will be supported by credit and liquidity enhancements, such as letters of credit (which are not covered by federal deposit insurance) or put or demand features of third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Portfolio will be dependent in part upon the credit quality of the banks supporting the Portfolio's investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. These risks include a sustained increase in interest rates, which can adversely affect the availability and cost of a bank's lending activities; exposure to credit losses during times of economic decline; concentration of loan portfolios in certain industries; regulatory developments; and competition among financial institutions. Brokerage firms and insurance companies also provide certain liquidity and credit support. The Portfolio's policy is to purchase municipal securities with third party credit or liquidity support only after FIA has considered the creditworthiness of the financial institution providing the support and believes that the security presents minimal credit risk. The Portfolio may purchase long term municipal securities with various maturity shortening provisions. For instance, variable rate demand notes ("VRDN") are municipal bonds with maturities of up to 40 years that are sold with a demand feature (an option for the holder of the security to sell the security back to the issuer) which may be exercised by the security holder at predetermined intervals, usually daily or weekly. The interest rate on the security is typically reset by a remarketing or similar agent at prevailing interest rates. VRDNs may be issued directly by the municipal issuer or created by a bank, broker-dealer or other financial institution by selling a previously issued long-term bond with a demand feature attached. Similarly, tender option bonds (also referred to as certificates of participation) are municipal securities with relatively long original maturities and fixed rates of interest that are coupled with an agreement of a third party financial institution under which the third party grants the security holders the option to tender the securities to the institution and receive the face value thereof. The option may be exercised at periodic intervals, usually six months to a year. As consideration for providing the option, the financial institution receives a fee equal to the difference between the underlying municipal security's fixed rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of the interest rate determination. These bonds effectively provide the holder with a demand obligation that bears interest at the prevailing short-term municipal securities interest rate. The Portfolio also may acquire "puts" on municipal securities it purchases. A put gives the Portfolio the right to sell the municipal security at a specified price at any time before a specified date. The Portfolio will acquire puts only to enhance liquidity, shorten the maturity of the related municipal security or permit the Portfolio to invest its funds at more favorable rates. Generally, the Portfolio will buy a municipal security that is accompanied by a put only if the put is available at no extra cost. In some cases, however, the Portfolio may pay an extra amount to acquire a put, either in connection with the purchase of the related municipal security or separately from the purchase of the security. The Portfolio may purchase municipal securities together with the right to resell them to the seller or a third party at an agreed-upon price or yield within specified periods prior to their maturity dates. Such a right to resell is commonly known as a "stand-by commitment," and the aggregate price which the Portfolio pays for securities with a stand-by commitment may be higher than the price which otherwise would be paid. The primary purpose of this practice is to 9 permit the Portfolio to be as fully invested as practicable in municipal securities while preserving the necessary flexibility and liquidity to meet unanticipated redemptions. In this regard, the Portfolio acquires stand-by commitments solely to facilitate portfolio liquidity and does not exercise its rights thereunder for trading purposes. Stand-by commitments involve certain expenses and risks, including the inability of the issuer of the commitment to pay for the securities at the time the commitment is exercised, non-marketability of the commitment, and differences between the maturity of the underlying security and the maturity of the commitment. MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities. "General obligation" bonds are secured by a municipality's pledge of its full faith, credit and taxing power for the payment of principal and interest. "Revenue" bonds are usually payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax, but not from general tax revenues. Under a "moral obligation" bond (which is normally issued by special purpose public authorities), if the issuer is unable to meet its obligations under the bonds from current revenues, it may draw on a reserve fund that is backed by the moral commitment (but not the legal obligation) of the state or municipality that created the issuer. The Portfolio may invest in industrial development bonds, which in most cases are revenue bonds. The payment of the principal and interest on these bonds is dependent solely on the ability of an initial or subsequent user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either "general obligation" or "revenue" securities, are short-term fixed income securities intended to fulfill short-term capital needs of a municipality. Municipal leases, which may take various forms, are issued by municipalities to acquire a wide variety of equipment and facilities. Municipal leases frequently have special risks not normally associated with other municipal securities. Municipal leases (which normally provide for title to the leased assets to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in municipal securities that are owned by banks or other financial institutions. Participation interests usually carry a demand feature backed by a letter of credit or guarantee of the bank or institution permitting the holder to tender them back to the bank or other institution. TAXABLE INVESTMENTS. The Portfolio may invest up to 20% of the value of its net assets in cash and money market instruments, the interest income on which is subject to federal income taxation. In addition, when business or financial conditions warrant or when an adequate supply of appropriate municipal securities is not available, the Portfolio may assume a temporary defensive position and invest without limit in such taxable money market instruments. ADDITIONAL INVESTMENT POLICIES Each Fund's and each Portfolio's investment objective and certain investment limitations, as described in the SAI, are fundamental and therefore may not be changed without approval of the holders of a majority of the Fund's or Portfolio's, as applicable, outstanding voting securities (as defined in the 1940 Act). Except as otherwise indicated herein or in the SAI, investment policies of a Fund or a Portfolio may be changed by the applicable board of trustees without shareholder approval. Each Portfolio is permitted to hold cash in any amount pending investment in securities and may invest in other investment companies that intend to comply with Rule 2a-7 and have substantially similar investment objectives and policies. A further description of the Funds' and the Portfolios' investment policies is contained in the SAI. BORROWING. Each Portfolio may borrow money for temporary or emergency purposes (including the meeting of redemption requests), but not in excess of 33 1/3% of the value of the Portfolio's total assets. Borrowing for purposes other than meeting redemption requests will not exceed 5% of the value of the Portfolio's total assets. REPURCHASE AGREEMENTS. Each Portfolio may seek additional income or liquidity by entering into repurchase agreements. Repurchase agreements are transactions in which a Portfolio purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed-upon future date, normally one to seven days later. The resale price 10 reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased security. The Portfolios' custodian holds the underlying collateral, which is maintained at not less than 100% of the repurchase price. Repurchase agreements involve certain credit risks not associated with direct investment in securities. Each Portfolio, however, intends to enter into repurchase agreements only with sellers whichFIA believes present minimal credit risks in accordance with guidelines established by the Core Trust Board. In the event that a seller defaulted on its repurchase obligation, however, a Portfolio might suffer a loss. LIQUIDITY. To ensure adequate liquidity, each Portfolio may not invest more than 10% of its net assets in illiquid securities, including repurchase agreements not entitling the Portfolio to payment of principal within seven days. There may not be an active secondary market for securities held by a Portfolio. The value of securities that have a limited market tend to fluctuate more than those that have an active market. FIA monitors the liquidity of each Portfolio's investments, but there can be no guarantee that an active secondary market will exist. WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of being able to obtain securities at prices which FIA believes might not be available at a future time, FIA may purchase securities on a when-issued or delayed delivery basis. When these transactions are negotiated, the price or yield is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. Securities so purchased are subject to market price fluctuation and no interest on the securities accrues to a Portfolio until delivery and payment take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Commitments for when-issued or delayed delivery transactions will be entered into only when a Portfolio has the intention of actually acquiring the securities, but the Portfolio may sell the securities before the settlement date if deemed advisable. Failure by the other party to deliver a security purchased by a Portfolio may result in a loss or missed opportunity to make an alternative investment. As a result of entering into forward commitments, the Funds are exposed to greater potential fluctuations in the value of their assets and net asset values per share. VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio invest may have variable or floating rates of interest. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. The interest paid on these securities is a function primarily of the index or market rate upon which the interest rate adjustments are based. Those securities with ultimate maturities of greater than 397 days may be purchased only in accordance with the provisions of Rule 2a-7. Under that Rule, only those long-term instruments that have demand features which comply with certain requirements and certain U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. No Portfolio may purchase a variable or floating rate security whose interest rate is adjusted based on a long-term interest rate or index, on more than one interest rate or index, or on an interest rate or index that materially lags behind short-term market rates (these prohibited securities are often referred to as "derivative" securities). All variable and floating rate securities purchased by a Portfolio will have an interest rate that is adjusted based on a single short-term rate or index, such as the Prime Rate. FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and Government Cash Portfolio invests only in instruments which, if held directly by a bank or bank holding company organized under the laws of the United States or any state thereof, would be assigned to a risk-weight category of no more than 20% under the current risk based capital guidelines adopted by the Federal bank regulators. These Portfolios do not intend to hold in their portfolio any securities or instruments that would be subject to restriction as to amount held by a national bank under Title 12, Section 24 (Seventh) of the United States Code. In addition, these Portfolios limit their investments to those permissible for Federally chartered credit unions under applicable provisions of the Federal Credit Union Act and the applicable rules and regulations of the National Credit Union Administration. Government Cash Portfolio limits its investments to investments that are legally permissible for Federally chartered savings associations without limit as to percentage and to investments that permit Fund shares to qualify as liquid assets and as short-term liquid assets. 4. MANAGEMENT The business of the Trust is managed under the direction of the Board and the business of Core Trust is managed under the direction the Core Trust Board. The Board formulates the general policies of the Funds and meets periodically to review the results of the Funds, monitor investment activities and practices and discuss other matters affecting the Funds and the Trust. The 11 F Core Trust Board performs similar functions for the Portfolios and Core Trust. The SAI contains general background information about the trustees and officers of the Trust and Core Trust. ADMINISTRATION AND DISTRIBUTION Subject to the supervision of the Board, FAdS supervises the overall management of the Trust, including overseeing the Trust's receipt of services, advising the Trust and the Trustees on matters concerning the Trust and its affairs, and providing the Trust with general office facilities and certain persons to serve as officers. For these services and facilities, FAdS receives a fee at an annual rate of 0.05% of the daily net assets of each Fund. FAdS also serves as administrator of the Portfolios and provides administrative services for each Portfolio that are similar to those provided to the Funds. For its administrative services to the Portfolios, FAdS receives a fee at an annual rate of 0.05% of the average daily net assets of each Portfolio. Forum Accounting Services, LLC ("FAcS") performs portfolio accounting services for the Funds and Portfolios pursuant to agreements with the Trust and Core Trust and is paid a separate fee for these services. FFSI acts as the agent of the Trust in connection with the offering of shares of the Funds but receives no compensation for these services. FFSI is a registered broker-dealer and is a member of the National Association of Securities Dealers, Inc. FAdS, FFSI, FIA, FAcS and FSS are members of the Forum Financial Group of companies and together provide a full range of services to the investment company and financial services industry. As of the date of this Prospectus, each of these companies was controlled by John Y. Keffer, President and Chairman of the Trust, and FAdS and FFSI provided administration services to registered investment companies with assets of approximately $30 billion. INVESTMENT ADVISER Subject to the general supervision of the Core Trust Board, FIA makes investment decisions for each Portfolio and monitors the Portfolios' investments. FIA, which is located at Two Portland Square, Portland, Maine 04101, provides investment advisory services to six other mutual funds. Prior to January 2, 1998, Linden Asset Management, Inc. ("Linden") served as investment adviser to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provided professional management of those Portfolios' investments, and Forum Advisors, Inc. served as investment adviser to Government Portfolio and provided professional management of that Portfolio's investments. Linden and Forum Advisors, Inc. also acted as investment subadvisors to each Portfolio that they did not manage on a daily basis. On January 2, 1998, Forum Advisors, Inc. acquired Linden and reorganized into a new company named Forum Investment Advisors, LLC. Anthony R. Fischer, Jr. is primarily responsible for the day-to-day management of the Portfolios. Mr. Fischer was the sole stockholder and President of Linden Asset Management, Inc. from 1992 until January 2, 1998. He has been primarily responsible for the day-to-day management of Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio since their inception. Mr. Fischer has over twenty-five years experience in the money market industry and during that time has managed money market investment portfolios for various banks and investment firms. For its services, FIA receives an advisory fee at an annual rate of 0.05% of Government Portfolio's and Municipal Cash Portfolio's average daily net assets For services provided to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, FIA receives an advisory fee based upon the total average daily net assets of those Portfolios ("Total Portfolio Assets"). FIA's fee is calculated at an annual rate on a cumulative basis as follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of Total Portfolio Assets, and 0.03% of the remaining Total Portfolio Assets. A Fund's expenses include the Fund's pro rata portion of the advisory fee paid by the corresponding Portfolio. SHAREHOLDER SERVICING TRANSFER AND DIVIDEND DISBURSING AGENT. Shareholder inquiries and communications concerning the Funds may be directed to FSS at the address and telephone numbers on the first page of this Prospectus. FSS maintains an account for each shareholder of the Funds (unless such accounts are maintained by sub-transfer agents or processing agents) and performs other transfer agency and related functions. FSS is authorized to subcontract any or all of its functions to one or more qualified sub-transfer agents or processing agents, which may be its affiliates, who agree to comply with the terms of FSS's agreement with the Trust. FSS may pay those agents for their services, but no such payment will increase FSS's 12 compensation from the Trust. For its services, FSS is paid a transfer agent fee at an annual rate of 0.10% of the average daily net assets of each Fund attributable to Institutional Service Shares plus $12,000 per year for each Fund and certain account and additional class charges and is reimbursed for certain expenses incurred on behalf of the Funds. SHAREHOLDER SERVICE AGENTS. The Trust has adopted a shareholder service plan ("Shareholder Service Plan") which provides that, as compensation for FAdS's service activities with respect to the Institutional Service Shares, the Trust shall pay FAdS a fee at an annual rate of 0.25% of the average daily net assets attributable to Institutional Service Shares. FAdS is authorized to enter into shareholder servicing agreements pursuant to which a shareholder servicing agent, on behalf of its customers, performs certain shareholder services not otherwise provided by FSS. As compensation for its services, the shareholder servicing agent is paid a fee by FAdS of up to 0.25% of the average daily net assets of Institutional Service Shares owned by investors for which the shareholder service agent maintains a servicing relationship. Certain shareholder servicing agents may be subtransfer or processing agents. Among the services provided by shareholder servicing agents are answering customer 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; providing necessary personnel and facilities to establish and maintain shareholder accounts and records; assisting shareholders in arranging for processing purchase, exchange and redemption transactions; arranging for the wiring of funds; guaranteeing shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; integrating periodic statements with other customer transactions; and providing such other related services as the shareholder may request. EXPENSES OF THE FUNDS Each Fund's expenses comprise Trust expenses attributable to the Fund, which are charged to the Fund, and expenses not attributable to a particular fund of the Trust, which are allocated among the Fund and all other funds of the Trust in proportion to their average net assets. Each service provider in its sole discretion may elect to waive (or continue to waive) all or any portion of its fees, which are accrued daily and paid monthly, and may reimburse a Fund for certain expenses. Any such waivers or reimbursements would have the effect of increasing a Fund's performance for the period during which the waiver was in effect and would not be recouped at a later date. Each Fund's expenses include the service fees described in this Prospectus, the fees and expenses of the Board, applicable insurance and bonding expenses and state and SEC registration fees. Each Fund bears its pro rata portion of the expenses of the Portfolio in which it invests along with all other investors in the Portfolio. 5. PURCHASES AND REDEMPTIONS OF SHARES GENERAL INFORMATION All transactions in Fund shares are effected through FSS, which accepts orders for purchases and redemptions from shareholders of record and new investors. Shareholders of record will receive from the Trust periodic statements listing all account activity during the statement period. The Trust reserves the right in the future to modify, limit or terminate any shareholder privilege, upon appropriate notice to shareholders, and may charge a fee for certain shareholder services, although no such fees are currently contemplated. PURCHASES. Fund shares are sold at a price equal to their net asset value next-determined after receipt of an order in proper form, on each Fund Business Day. Fund shares are issued immediately after an order for the shares in proper form, accompanied by funds on deposit at a Federal Reserve Bank ("Federal Funds"), is accepted by FSS. Each Fund's net asset value is calculated at 4:00 p.m., Eastern time. Fund shares become entitled to receive distributions on the day the purchase order is accepted if the order and payment are received by FSS as follows: 13 ORDER MUST BE RECEIVED BY PAYMENT MUST BE RECEIVED BY Daily Assets Government Fund and Daily Assets Municipal Fund 12:00 p.m., Eastern time 4:00 p.m., Eastern time All other Funds 2:00 p.m., Eastern time 4:00 p.m., Eastern time
If a purchase order is transmitted to FSS (or the wire is received) after the times listed above, the investor will not receive a distribution on that day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire purchase orders and the cut-off times set forth above. Each Fund reserves the right to reject any subscription for the purchase of Fund shares. Stock certificates are issued only to shareholders of record upon their written request and no certificates are issued for fractional shares. REDEMPTIONS. Fund shares may be redeemed without charge at their net asset value on any Fund Business Day. There is no minimum period of investment and no restriction on the frequency of redemptions. Fund shares are redeemed as of the next determination of the Fund's net asset value following receipt by FSS of the redemption order in proper form (and any supporting documentation which FSS may require). Shares redeemed are not entitled to receive distributions declared on or after the day on which the redemption becomes effective. For wire redemption orders received after 12:00 p.m., Eastern time, in the case of Daily Assets Government Fund and Daily Assets Municipal Fund, and after 2:00 p.m., Eastern time, in the case of each other Fund, FSS will wire proceeds the next Fund Business Day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire redemption orders. Normally, redemption proceeds are paid immediately, but in no event later than seven days, following acceptance of a redemption order. Proceeds of redemption requests (and exchanges), however, will not be paid unless any check used to purchase the shares has been cleared by the shareholder's bank, which may take up to 15 calendar days. This delay may be avoided by investing through wire transfers. Unless otherwise indicated, redemption proceeds normally are paid by check mailed to the shareholder's record address. The right of redemption may not be suspended nor the payment dates postponed for more than seven days after the tender of the shares to the Fund except when the New York Stock Exchange is closed (or when trading thereon is restricted) for any reason other than its customary weekend or holiday closings or under any emergency or other circumstance as determined by the SEC. Proceeds of redemptions normally are paid in cash. However, payments may be made wholly or partially in portfolio securities if the Board determines that payment in cash would be detrimental to the best interests of the Fund. The Trust employs reasonable procedures to ensure that telephone orders are genuine (which include recording certain transactions and the use of shareholder security codes). If the Trust did not employ such procedures, it could be liable for any losses due to unauthorized or fraudulent telephone instructions. Shareholders should verify the accuracy of telephone instructions immediately upon receipt of confirmation statements. During times of drastic economic or market changes, telephone redemption and exchange privileges may be difficult to implement. In the event that a shareholder is unable to reach FSS by telephone, requests may be mailed or hand-delivered to FSS. Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves the right to redeem, upon not less than 60 days' written notice, all shares in any Fund account with an aggregate net asset value of less than $5,000. PURCHASE AND REDEMPTION PROCEDURES Investors may open an account by completing the application at the back of this Prospectus or by contacting FSS at the address on the first page of this Prospectus. To request shareholder services not referenced on the account application and to change information regarding a shareholder's account (such as addresses), investors should request an Optional Services Form from 14 FSS. INITIAL PURCHASE OF SHARES There is a $100,000 minimum for total initial investments through of by any financial institution in each Fund. BY MAIL. Investors may send a check made payable to the Trust along with a completed account application to FSS. Checks are accepted at full value subject to collection. Payment by a check drawn on any member of the Federal Reserve System can normally be converted into Federal Funds within two business days after receipt of the check. Checks drawn on some non-member banks may take longer. For individual or Uniform Gift to Minors Act accounts, the check or money order used to purchase shares of a Fund must be made payable to "Forum Funds" or to one or more owners of that account and endorsed to Forum Funds. For corporation, partnership, trust, 401(k) plan or other non-individual type accounts, the check used to purchase shares of a Fund must be made payable on its face to "Forum Funds." No other method of payment by check will be accepted. All purchases must be paid in U.S. dollars; checks must be drawn on U.S. banks. Payment by Traveler's Checks is prohibited. BY BANK WIRE. To make an initial investment in a Fund using the wire system for transmittal of money among banks, an investor should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to obtain an account number. The investor should then instruct a bank to wire the investor's money immediately to: BankBoston Boston, Massachusetts ABA# 011000390 For Credit To: Forum Shareholder Services, LLC Account #: 541-54171 Re: [Name of Fund] - Institutional Service Shares Account #: ......... Account Name: ......... The investor should then promptly complete and mail the account application. Any investor planning to wire funds should instruct a bank early in the day so the wire transfer can be accomplished the same day. There may be a charge imposed by the bank for transmitting payment by wire, and there also may be a charge for the use of Federal Funds. THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through certain broker-dealers, banks or other financial institutions ("Processing Organizations"), including affiliates of FSS. Processing Organizations may charge their customers a fee for their services and are responsible for promptly transmitting purchase, redemption and other requests to a Fund. The Trust is not responsible for the failure of any Processing Organization to promptly forward these requests. Investors who purchase or redeem shares in this manner will be subject to the procedures of their Processing Organization, which may include charges, limitations, investment minimums, cutoff times and restrictions in addition to, or different from, those applicable to shareholders who invest in a Fund directly. These investors should acquaint themselves with their institution's procedures and should read this Prospectus in conjunction with any materials and information provided by their institution. Investors who purchase Fund shares through a Processing Organization may or may not be the shareholder of record and, subject to their institution's and the Fund's procedures, may have Fund shares transferred into their name. Certain Processing Organizations may enter purchase orders with payment to follow. The Trust may confirm purchases and redemptions of a Processing Organization's customers directly to the Processing Organization, which in turn will provide its customers with such confirmations and periodic statements as may be required by law or agreed to between the Processing Organization and its customers. SUBSEQUENT PURCHASES OF SHARES Subsequent purchases may be made by mailing a check, by sending a bank wire or through a financial institution as indicated 15 above. Shareholders using the wire system for purchase should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to notify it of the wire transfer. All payments should clearly indicate the shareholder's name and account number. Shareholders may purchase Fund shares at regular, preselected intervals by authorizing the automatic transfer of funds from a designated bank account maintained with a United States banking institution which is an Automated Clearing House member. Under the program, existing shareholders may authorize amounts of $250 or more to be debited from their bank account and invested in the Fund monthly or quarterly. Shareholders may terminate their automatic investments or change the amount to be invested at any time by written notification to FSS. REDEMPTION OF SHARES Shareholders who wish to redeem shares by telephone or receive redemption proceeds by bank wire must elect these options by properly completing the appropriate sections of their account application. These privileges may not be available until several days after a shareholder's application is received. Shares for which certificates have been issued may not be redeemed by telephone. BY MAIL. Shareholders may make a redemption in any amount by sending a written request to FSS accompanied by any stock certificate that may have been issued to the shareholder. All written requests for redemption must be signed by the shareholder with signature guaranteed and all certificates submitted for redemption must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. A shareholder who has elected telephone redemption privileges may make a telephone redemption request by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. In response to the telephone redemption instruction, the Fund will mail a check to the shareholder's record address or, if the shareholder has elected wire redemption privileges, wire the proceeds. BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected wire redemption privileges may request the Fund to transmit the redemption proceeds by Federal Funds wire to a bank account designated on the shareholder's account application. To request bank wire redemptions by telephone, the shareholder also must have elected the telephone redemption privilege. Redemption proceeds are transmitted by wire on the day the redemption request in proper form is received by FSS . OTHER REDEMPTION MATTERS. To protect shareholders and the Funds against fraud, signatures on certain requests must have a signature guarantee. Requests must be made in writing and include a signature guarantee for any of the following transactions: (1) any endorsement on a stock certificate; (2) written instruction to redeem Shares whose value exceeds $50,000; (3) instructions to change a shareholder's record name; (4) redemption in an account in which the account address or account registration has changed within the last 30 days; (5) the proceeds are not being sent to the address of record, preauthorized bank account, or preauthorized brokerage firm account; (6) proceeds are to be paid to someone other than the registered owners or to an account with a different registration; (7) change of automatic investment or redemption, dividend election, telephone redemption or exchange option election or any other option election in connection with the shareholder's account. Signature guarantees may be provided by any eligible institution acceptable to FSS, including a bank, a broker, a dealer, a national securities exchange, a credit union, or a savings association that is authorized to guarantee signatures. Whenever a signature guarantee is required, the signature of each person required to sign for the account must be guaranteed. A notarized signature is not sufficient. FSS will deem a shareholder's account "lost" if correspondence to the shareholder's address of record is returned as undeliverable, unless FSS determines the shareholder's new address. When an account is deemed lost all distributions on the account will be reinvested in additional shares of the Fund. In addition, the amount of any outstanding (unpaid for six months or more) checks for distributions that have been returned to FSS will be reinvested and the checks will be canceled. 16 EXCHANGES Shareholders may exchange their shares for Institutional Service Shares of any other Fund or for shares of any other mutual fund administered by FAdS that participates with the Funds in the exchange program. Exchanges are subject to the fees charged by, and the restrictions listed in the prospectus for, the fund into which a shareholder is exchanging, including minimum investment requirements. The Funds do not charge for exchanges, and there is currently no limit on the number of exchanges a shareholder may make, but each Fund reserves the right to limit excessive exchanges by any shareholder. See "Additional Purchase and Redemption Information" in the SAI. Exchanges may only be made between accounts registered in the same name. A completed account application must be submitted to open a new account in a Fund through an exchange if the shareholder requests any shareholder privilege not associated with the new account. Shareholders may only exchange into a Fund if that Fund's shares may legally be sold in the shareholder's state of residence. The Trust (and Federal tax law) treats an exchange as a redemption of the shares owned and the purchase of the shares of the fund being acquired. Accordingly, a shareholder may realize a capital gain or loss with respect to the shares redeemed. Redemptions and purchases are effected at the respective net asset values of the two Funds as next determined following receipt of proper instructions and all necessary supporting documents by the Fund whose shares are being exchanged. The exchange privilege may be modified materially or terminated by the Trust at any time upon 60 days' notice to shareholders. BY MAIL. Exchanges may be accomplished by written instruction to FSS accompanied by any stock certificate that may have been issued to the shareholder. All written requests for exchanges must be signed by the shareholder (a signature guarantee is not required) and all certificates submitted for exchange must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder who has elected telephone exchange privileges by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. 6. DISTRIBUTIONS AND TAX MATTERS DISTRIBUTIONS Distributions of each Fund's net investment income are declared daily and paid monthly following the close of the last Fund Business Day of the month. Each type of net capital gain realized by a Fund, if any, will be distributed annually. Shareholders may choose to have all distributions reinvested in additional shares of the Fund or received in cash. In addition, shareholders may have all distributions of net capital gain reinvested in additional shares of the Fund and distributions of net investment income paid in cash. All distributions are treated in the same manner for Federal income tax purposes whether received in cash or reinvested in shares of the Fund. All distributions will be reinvested at the Fund's net asset value as of the payment date of the dividend. All distributions are reinvested unless another option is selected. All distributions not reinvested will be paid to the shareholder in cash and may be paid more than seven days following the date on which distribution would otherwise be reinvested. 17 TAXES TAX STATUS OF THE FUNDS. Each Fund intends to qualify or continue to qualify to be taxed as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. Accordingly, no Fund will be liable for Federal income taxes on the net investment income and capital gain distributed to its shareholders. Because each Fund intends to distribute all of its net investment income and net capital gain each year, the Funds should also avoid Federal excise taxes. Distributions paid by each Fund out of its net investment income (including realized net short-term capital gain) are taxable to the shareholders of the Fund as ordinary income. Two different tax rates apply to net capital gain -- that is, the excess of net gain from capital assets held for more than one year over net losses from capital assets held for not more than one year. One rate (generally 28%) applies to net gain on capital assets held for more than one year but not more than 18 months and a second rate (generally 20%) applies to the balance of such net capital gains. Distributions of net capital gain will be taxable to shareholders as such, regardless of how long a shareholder has held shares in the Fund. THE PORTFOLIOS. The Portfolios are not required to pay Federal income taxes on their net investment income and capital gain, as they are treated as partnerships for Federal income tax purposes. All interest, dividends and gains and losses of a Portfolio are deemed to have been "passed through" to the respective Fund in proportion to the Fund's holdings of the Portfolio, regardless of whether such interest, dividends or gains have been distributed by the Portfolio. DAILY ASSETS MUNICIPAL FUND. Distributions paid by Daily Assets Municipal Fund out of federally tax-exempt interest income earned by the Fund ("exempt-interest dividends") generally will not be subject to federal income tax in the hands of the Fund's shareholders. Substantially all of the distributions paid by the Fund are anticipated to be exempt-interest dividends. Persons who are "substantial users" or "related persons" thereof of facilities financed by private activity securities held by the Fund, however, may be subject to federal income tax on their pro rata share of the interest income from those securities and should consult their tax advisers before purchasing shares. Exempt-interest dividends are included in the "adjusted current earnings" of corporations for purposes of the federal alternative minimum tax ("AMT"). Interest on indebtedness incurred by shareholders to purchase or carry shares of the Fund generally is not deductible for federal income tax purposes. Under rules for determining when borrowed funds are used for purchasing or carrying particular assets, shares of the Fund may be considered to have been purchased or carried with borrowed funds even though those funds are not directly linked to the shares. The income from the Portfolio's investments may be subject to the AMT. Interest on certain municipal securities issued to finance "private activities" ("private activity securities") is a "tax preference item" for purposes of the AMT applicable to certain individuals and corporations even though such interest will continue to be fully tax-exempt for regular federal income tax purposes. The Portfolio may purchase private activity securities, the interest on which may constitute a "tax preference item" for purposes of the AMT. STATE AND LOCAL TAXES. Daily Assets Government Fund's investment policies are structured to provide shareholders, to the extent permissible by Federal and state law, with income that is exempt or excluded from income taxation at the state and local level. Many states (by statute, judicial decision or administrative action) do not tax dividends from a regulated investment company that are attributable to interest on obligations of the U.S. Treasury and certain U.S. Government agencies and instrumentalities if the interest on those obligations would not be taxable to a shareholder that held the obligation directly. As a result, substantially all distributions paid by the Fund to shareholders residing in certain states will be exempt or excluded from state income taxes. A portion of the distributions paid by the other Funds to shareholders may be exempt or excluded from state income taxes, but these Funds are not managed to provide any specific amount of state tax-free income to shareholders. The exemption for federal income tax purposes of distributions derived from interest on municipal securities does not necessarily result in an exemption under the income or other tax laws of any state or local taxing authority. Shareholders of Daily Assets Municipal Fund may be exempt from state and local taxes on distributions of tax-exempt interest income derived from obligations of the state and/or municipalities of the state in which they reside but may be subject to tax on income derived from the municipal securities of other jurisdictions. Shareholders are advised to consult with their tax advisers concerning the application of state and local taxes to investments in a 18 Fund which may differ from the federal income tax consequences described above. GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable payments (which may include taxable distributions and redemption proceeds) paid to individuals and certain other non-corporate shareholders. Withholding is not required if a shareholder certifies that the shareholder's social security or tax identification number provided to a Fund is correct and that the shareholder is not subject to backup withholding. Each Fund must include a portion of the original issue discount of zero-coupon securities, if any, as income even though these securities do not pay any interest until maturity. Because each Fund distributes all of its net investment income, a Fund may have to sell portfolio securities to distribute imputed income, which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in a taxable gain or loss. Shortly after the close of each year, a statement is sent to each shareholder of the Funds advising the shareholder of the portions of total distributions paid to the shareholder that is (1) derived from each type of obligation in which a Fund has invested, (2) derived from the obligations of issuers in the various states and (3) exempt from federal income taxes. These portions are determined for the entire year and on a monthly basis and, thus, are an annual or monthly average, rather than a day-by-day determination for each shareholder. The foregoing is only a summary of some of the important Federal and state tax considerations generally affecting the Funds and their shareholders. There may be other Federal, state or local tax considerations applicable to a particular investor. Prospective investors are urged to consult their tax advisers. 7. OTHER INFORMATION PERFORMANCE INFORMATION Institutional Service Shares' performance may be advertised. All performance information is based on historical results, is not intended to indicate future performance and, unless otherwise indicated, is net of all expenses. The Funds may advertise yield, which shows the rate of income a Fund has earned on its investments as a percentage of the Fund's share price. To calculate yield, a Fund takes the interest income it earned from its portfolio of investments for a specified period (net of expenses), divides it by the average number of shares entitled to receive distributions, and expresses the result as an annualized percentage rate based on the Fund's share price at the end of the period. A Fund's compounded annualized yield assumes the reinvestment of distributions paid by the Fund, and, therefore will be somewhat higher than the annualized yield for the same period. A Fund may also quote tax-equivalent yields, which show the taxable yields a shareholder would have to earn to equal the Fund's tax-free yield, after taxes. A tax-equivalent yield is calculated by dividing the Fund's tax-free yield by one minus a stated federal, state or combined federal and state tax rate. Each class' performance will vary. The Funds' advertisements may also reference ratings and rankings among similar funds by independent evaluators such as Morningstar, Lipper Analytical Services, Inc. or IBC Financial Data, Inc. In addition, the performance of the Funds may be compared to recognized indices of market performance. The comparative material found in a Fund's advertisements, sales literature, or reports to shareholders may contain performance rankings. This material is not to be considered representative or indicative of future performance. BANKING LAW MATTERS Banking laws and regulations generally permit a bank or bank affiliate to purchase shares of an investment company as agent for and upon the order of a customer and permit a bank or bank affiliate to serve as a Processing Organization or perform sub-transfer agent or similar services for the Trust and its shareholders. If a bank or bank affiliate were prohibited from performing all or a part of the foregoing services, its shareholder customers would be permitted to remain shareholders of the Trust and alternative means for continuing to service them would be sought. DETERMINATION OF NET ASSET VALUE The Trust determines the net asset value per share of each Fund as of 4:00 p.m., Eastern time, on each Fund Business Day by 19 dividing the value of the Fund's net assets (the value of its interest in the Portfolio and other assets less its liabilities) by the number of shares outstanding at the time the determination is made. In order to more easily maintain a stable net asset value per share, each Portfolio's portfolio securities are valued at their amortized cost (acquisition cost adjusted for amortization of premium or accretion of discount) in accordance with Rule 2a-7. The Portfolios will only value their portfolio securities using this method if the Core Trust Board believes that it fairly reflects the market-based net asset value per share. The Portfolios' other assets, if any, are valued at fair value by or under the direction of the Core Trust Board. THE TRUST AND ITS SHARES The Trust is registered with the SEC as an open-end, management investment company and was organized as a business trust under the laws of the State of Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the assets and liabilities of Forum Funds, Inc., which was incorporated in 1980. The Board has the authority to issue an unlimited number of shares of beneficial interest of separate series with no par value per share and to create classes of shares within each series. There are currently sixteen series of the Trust. Each share of each fund of the Trust and each class of shares has equal distribution, liquidation and voting rights, and fractional shares have those rights proportionately, except that expenses related to the distribution of the shares of each class (and certain other expenses such as transfer agency and administration expenses) are borne solely by those shares and each class votes separately with respect to the provisions of any Rule 12b-1 plan which pertain to the class and other matters for which separate class voting is appropriate under applicable law. Generally, shares will be voted in the aggregate without reference to a particular fund or class, except if the matter affects only one fund or class or voting by fund or class is required by law, in which case shares will be voted separately by fund or class, as appropriate. Delaware law does not require the Trust to hold annual meetings of shareholders, and it is anticipated that shareholder meetings will be held only when specifically required by Federal or state law. Shareholders (and Trustees) have available certain procedures for the removal of Trustees. There are no conversion or preemptive rights in connection with shares of the Trust. All shares when issued in accordance with the terms of the offering will be fully paid and nonassessable. Shares are redeemable at net asset value, at the option of the shareholders. A shareholder in a fund is entitled to the shareholder's pro rata share of all distributions arising from that fund's assets and, upon redeeming shares, will receive the portion of the fund's net assets represented by the redeemed shares. As of May 1, 1998, Babb & Co. may be deemed to have controlled Daily Assets Treasury Obligations Fund and Daily Assets Government Obligations Fund, H.M. Payson & Co. may be deemed to have controlled Daily Assets Government Fund and Daily Assets Cash Fund and Allagash & Co. may be deemed to have controlled Daily Assets Government Obligations Fund and Daily Assets Cash Fund, through investment in the Funds by their customers. From time to time, these shareholders or other shareholders may own a large percentage of Shares of a Fund and accordingly, may be able to greatly affect (if not determine) the outcome of a shareholder vote. FUND STRUCTURE OTHER CLASSES OF SHARES. In addition to Institutional Service Shares, each Fund may create and issue shares of other classes of securities. Each Fund currently has two other classes of shares authorized, Institutional Shares and Investor Shares. Institutional Shares have an investment minimum of $1,000,000. Investor Shares are offered to the general public, have a $10,000 minimum investment and bear shareholder service and distribution fees. Institutional Shares incur less expenses and Investor Shares incur more expenses than Institutional Service Shares. See, "Additional Information" below. Except for certain differences, each share of each class represents an undivided, proportionate interest in a Fund. Each share of each Fund is entitled to participate equally in distributions and the proceeds of any liquidation of that Fund except that, due to the differing expenses borne by the various classes, the amount of distributions will differ among the classes. CORE TRUST STRUCTURE. Each Fund invests all of its assets in its corresponding Portfolio of Core Trust, a business trust organized under the laws of the State of Delaware in September 1994 and registered under the 1940 Act as an open-end, management investment company. Accordingly, a Portfolio directly acquires its own securities and its corresponding Fund acquires an indirect interest in those securities. The assets of each Portfolio belong only to, and the liabilities of the Portfolio are borne solely by, the Portfolio and no other portfolio of Core Trust. Upon liquidation of a Portfolio, investors in the Portfolio would be entitled to share pro rata in the net assets of the Portfolio available for distribution to investors. 20 THE PORTFOLIOS. A Fund's investment in a Portfolio is in the form of a non-transferable beneficial interest. As of the date of this Prospectus, Daily Assets Government Fund and Daily Assets Municipal Fund are the only investors (other than FAdS or its affiliates) that have invested in Government Portfolio and Municipal Cash Portfolio, respectively. Each of the other Portfolios has another investor besides the Funds (and FAdS and its affiliates). All investors in a Portfolio invest on the same terms and conditions as the Funds and will pay a proportionate share of the Portfolio's expenses. The Portfolios normally will not hold meetings of investors except as required by the 1940 Act. Each investor in a Portfolio is entitled to vote in proportion to the relative value of its interest in the Portfolio. On most issues subject to a vote of investors, as required by the 1940 Act and other applicable law, a Fund will solicit proxies from shareholders of the Fund and will vote its interest in a Portfolio in proportion to the votes cast by its shareholders. There can be no assurance that any issue that receives a majority of the votes cast by a Fund's shareholders will receive a majority of votes cast by all investors in the Portfolio. CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Portfolio may be affected by the actions of other large investors in the Portfolio, if any. If a large investor other than a Fund redeemed its interest in a Portfolio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. A Fund may withdraw its entire investment from a Portfolio at any time, if the Board determines that it is in the best interests of the Fund and its shareholders to do so. The Fund might withdraw, for example, if other investors in the Portfolio, by a vote of shareholders, changed the investment objective or policies of the Portfolio in a manner not acceptable to the Board or not permissible by the Fund. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Portfolio. If the Fund decided to convert those securities to cash, it usually would incur transaction costs. If the Fund withdrew its investment from the Portfolio, the Board would consider what action might be taken, including the management of the Fund's assets in accordance with its investment objective and policies by the investment adviser to the Portfolio or the investment of all of the Fund's investable assets in another pooled investment entity having substantially the same investment objective as the Fund. The inability of the Fund to find a suitable replacement investment, in the event the Board decided not to permit the Portfolio's investment adviser to manage the Fund's assets, could have a significant impact on shareholders of the Fund. ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company that invests in a Portfolio) may have a different expense ratio and different sales charges, including distribution fees, and each class' (and investment company's) performance will be affected by its expenses and sales charges. For more information on any other class of shares of the Funds or concerning any other investment companies that invest in a Portfolio, investors may contact FFSI at 207-879-1900. If an investor invests through a financial institution, the investor may also contact their financial institution to obtain information about the other classes or any other investment company investing in a Portfolio. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE. 21 PROSPECTUS May 27, 1998 FORUM FUNDS Daily Assets Treasury Obligations Fund Daily Assets Government Fund (formerly Daily Assets Treasury Fund) Daily Assets Government Obligations Fund (formerly Daily Assets Government Fund) Daily Assets Cash Fund Daily Assets Municipal Fund (formerly Daily Assets Tax-Exempt Fund) - -------------------------------------------------------------------------------- This Prospectus offers Investor Shares of Daily Assets Treasury Fund, Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund (each a "Fund"). Each Fund is a diversified no-load, money market portfolio of Forum Funds (the "Trust"), a registered, open-end, management investment company. Each Fund seeks to provide its shareholders with high current income (which, in the case of Daily Assets Municipal Fund, is exempt from federal income taxes) to the extent consistent with the preservation of capital and the maintenance of liquidity. EACH FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE PORTFOLIO OF AN OPEN-END, MANAGEMENT INVESTMENT COMPANY WITH AN IDENTICAL INVESTMENT OBJECTIVE. SEE "OTHER INFORMATION - FUND STRUCTURE." THROUGH THE PORTFOLIO IN WHICH IT INVESTS: DAILY ASSETS TREASURY OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Treasury and in repurchase agreements backed by these obligations. DAILY ASSETS GOVERNMENT FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities with a view toward providing income that is generally considered exempt from state and local income taxes. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND invests substantially all of its assets in obligations of the U.S. Government, its agencies and instrumentalities and in repurchase agreements backed by these obligations. DAILY ASSETS CASH FUND invests in a broad spectrum of high-quality money market instruments. DAILY ASSETS MUNICIPAL FUND invests primarily in high-quality obligations of the states, territories and possessions of the U.S. and of their subdivisions, authorities and corporations ("municipal securities") with a view toward providing income that is exempt from federal income taxes. This Prospectus sets forth concisely the information concerning the Trust and the Funds that a prospective investor should know before investing. The Trust has filed with the Securities and Exchange Commission ("SEC") a Statement of Additional Information dated May 27, 1998 (the "SAI"), which contains more detailed information about the Trust and the Funds and is available together with other related materials for reference on the SEC's Internet Web Site (http://www.sec.gov). The SAI, which is incorporated into this Prospectus by reference, also is available without charge by contacting the Funds' transfer agent, Forum Shareholder Services, LLC., at P.O. Box 446, Portland, Maine 04112, (207) 879-0001 or (800) 94FORUM. Investors should read this Prospectus and retain it for future reference. FUND SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS 1. Prospectus Summary..............................3 5. Purchases and Redemptions of Shares.............12 2. Financial Highlights............................5 6. Distributions and Tax Matters...................16 3. Investment Objectives and Policies..............5 7. Other Information...............................18 4. Management......................................10
2 1. PROSPECTUS SUMMARY HIGHLIGHTS OF THE FUNDS This prospectus offers shares of the Investor class ("Investor Shares") of each of the Funds. The Funds operate in accordance with the provisions of Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). Each Fund invests all of its investable assets in a separate portfolio (each a "Portfolio") of Core Trust (Delaware), an open-end, management investment company ("Core Trust") as follows: Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Daily Assets Government Fund Government Portfolio Daily Assets Government Obligations Fund Government Cash Portfolio Daily Assets Cash Fund Cash Portfolio Daily Assets Municipal Fund Municipal Cash Portfolio Accordingly, the investment experience of each Fund will correspond directly with the investment experience of its corresponding Portfolio. See "Other Information Fund Structure." Each Fund currently offers three separate classes of shares: Institutional Shares, Institutional Service Shares and Investor Shares. Investor Shares are sold through this Prospectus. Institutional Shares and Institutional Service Shares are each offered by a separate prospectus. See "Other Information --Fund Structure -- Other Classes of Shares." MANAGEMENT. Forum Administrative Services, LLC ("FAdS") supervises the overall management of the Funds and the Portfolios and Forum Financial Services, Inc. ("FFSI") is the distributor of the Funds' shares. Forum Investment Advisors, LLC ("FIA") is the investment adviser of each Portfolio and provides professional management of the Portfolios' investments. The Funds' transfer agent, dividend disbursing agent and shareholder servicing agent is Forum Shareholder Services, LLC (the "FSS"). See "Management" for a description of the services provided and fees charged to the Funds. SHAREHOLDER SERVICING AND DISTRIBUTION. The Trust has adopted a Shareholder Service Plan and a Plan of Distribution relating to Investor Shares under which FAdS and FFSI, respectively, are compensated for various shareholder servicing and distribution related activities. See "Management - Shareholder Servicing" and "Administration and Distribution." PURCHASES AND REDEMPTIONS. The minimum initial investment in Investor Shares is $10,000 ($2,000 for IRAs, $2,500 for exchanges). The minimum subsequent investment is $500. Investor Shares may be purchased and redeemed Monday through Friday, between 9:00 a.m. and 6:00 p.m., Eastern time, except on Federal holidays and days that the Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) is closed ("Fund Business Days"). To be eligible to receive that day's income, purchase orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). Shareholders may have redemption proceeds over $5,000 transferred by bank wire to a designated bank account. To be able to receive redemption proceeds by wire on the day of the redemption, redemption orders must be received by FSS in good order no later than 2:00 p.m., Eastern time (noon in the case of Daily Assets Government Fund and Daily Assets Municipal Fund). All times may be changed without notice by Fund management due to market activities. See "Purchase and Redemption of Shares." EXCHANGES. Shareholders of a Fund may exchange Investor Shares without charge for Investor Shares of the other Funds and for the shares of certain other mutual funds not offered by this Prospectus. See "Purchases and Redemptions of Shares - Exchanges." DISTRIBUTIONS. Distributions of net investment income are declared daily and paid monthly by each Fund and are automatically reinvested in additional Fund shares unless the shareholder has requested payment in cash. See "Distributions and Tax Matters." 3 INVESTMENT CONSIDERATIONS. There can be no assurance that any Fund will be able to maintain a stable net asset value of $1.00 per share. Although the Portfolios invest only in money market instruments, an investment in any Fund involves certain risks, depending on the types of investments made and the types of investment techniques employed. Investment in any security, including U.S. Government Securities, involves some level of investment risk. An investment in a Fund is not insured by the FDIC, nor is it insured or guaranteed against loss of principal. EXPENSES OF INVESTING IN THE FUNDS The purpose of the following table is to assist investors in understanding the various expenses that an investor in Investor Shares will bear directly or indirectly. There are no transaction expenses associated with purchases, redemptions or exchanges of Fund shares. EXPENSES OF INVESTING IN THE FUNDS ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(1) Daily Assets Daily Assets Daily Assets Daily Assets Daily Assets Treasury Government Government Cash Municipal Obligations Fund Fund Obligations Fund Fund Fund Management Fees(2) 0.14% 0.15% 0.14% 0.14% 0.15% Rule 12b-1 Fees 0.15% 0.15% 0.15% 0.15% 0.15% Other Expenses(3) (after expense reimbursements) 0.46% 0.45% 0.46% 0.46% 0.45% ----- ----- ----- ----- ----- Total Operating Expenses 0.75% 0.75% 0.75% 0.75% 0.75%
(1) For a further description of the various expenses incurred in the operation of the Funds and the Portfolios, see "Management." The amount of fees and expenses for each Fund is based on estimated annualized expenses for the Funds' fiscal year ending August 31, 1998. Each Fund's expenses include the Fund's pro rata portion of all expenses of its corresponding Portfolio, which are borne indirectly by Fund shareholders. (2) Management Fees include all administration fees and investment advisory fees incurred by the Funds and the Portfolios; as long as its assets are invested in a Portfolio, a Fund pays no investment advisory fees directly. (3) Absent estimated reimbursements by FIA and its affiliates, Other Expenses and Total Fund Operating Expenses would be: 0.70% and 0.99%, respectively, for Daily Assets Treasury Obligations Fund; 0.75% and 1.05%, respectively, for Daily Assets Government Fund; 0.75% and 1.04%, respectively, for Daily Assets Government Obligations Fund; 0.80% and 1.09%, respectively, for Daily Assets Cash Fund; 0.80% and 1.10%, respectively, for Daily Assets Municipal Fund. Expense reimbursements are voluntary and may be reduced or eliminated at any time. EXAMPLE Following is a hypothetical example that indicates the dollar amount of expenses that an investor in Investor Shares would pay assuming (1) the investment of all of the Fund's assets in the Portfolio, (2) a $1,000 investment in the Fund, (3) a 5% annual return, (4) the reinvestment of all distributions and (5) redemption at the end of each period: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS Each Fund $8 $24 $42 $93 The example is based on the expenses listed in the Annual Fund Operating Expenses table, which assumes the continued waiver and reimbursement of certain fees and expenses. The five percent annual return is not predictive of and does not represent the Funds' projected returns; rather, it is required by government regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED. 4 2. FINANCIAL HIGHLIGHTS As of February 28, 1998, Investor Shares were not offered. The following information represents selected data for a single outstanding Institutional Service Share of Daily Assets Government Fund and Daily Assets Cash Fund and for a single outstanding Institutional Share of Daily Assets Treasury Obligations Fund and Daily Assets Government Obligations Fund. Those classes were the first offered by the respective Funds and, accordingly, represent data since each Fund's inception. Information for the period ended August 31, 1997, was audited by KPMG Peat Marwick LLP, independent auditors. Information for prior periods was audited by other independent auditors and information for the period ended February 28, 1998 is unaudited. The financial statements and independent auditors' report thereon for the fiscal year ended August 31, 1997 and the financial statements for the semi-annual period ended February 28, 1998 are incorporated by reference into the SAI and may be obtained from the Trust without charge. As of May 20, 1998, Daily Assets Municipal Fund had not commenced operations. As of February 28, 1998, Treasury Cash Portfolio, Government Portfolio, Government Cash Portfolio and Cash Portfolio had net assets of $168,183,226; $46,711,943; $603,202,130 and $391,807,519, respectively. RATIO TO AVERAGE NET ASSETS Beginning Distributions Net Asset Net From Net Ending Net Net Value Per Investment Investment Asset Net Investment Share Income Income Value Per Expenses Income Share DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.01 (0.01) $1.00 0.20%(2) 2.13%(2) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.02 (0.02) $1.00 0.47%(2) 4.86%(2) April 1, 1997 to August 31, 1997 1.00 0.02 (0.02) 1.00 0.50%(2) 4.76%(2) Year Ended March 31, 1997 1.00 0.05 (0.05) 1.00 0.50% 4.70% Year Ended March 31, 1996 1.00 0.05 (0.05) 1.00 0.50% 5.01% Year Ended March 31, 1995 1.00 0.04 (0.04) 1.00 0.37% 4.45% Year Ended March 31, 1994 1.00 0.03 (0.03) 1.00 0.33% 2.82% July 1, 1992 to March 31, 1993 1.00 0.02 (0.02) 1.00 0.32%(2) 2.92%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.01 (0.01) $1.00 0.20%(2) 1.76%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited) $1.00 0.03 (0.03) $1.00 0.47%(2) 5.23%(2) October 1, 1996 to August 31, 1997 1.00 0.05 (0.05) 1.00 0.52%(2) 5.06%(2)%
Ratio of Net Assets Gross End of Expenses Period to Average Total (000s Net Assets Return Omitted) (1) DAILY ASSETS TREASURY OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited)0.55% 60,926 0.35%(2) DAILY ASSETS GOVERNMENT FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited)2.43% 46,519 0.78%(2) April 1, 1997 to August 31, 1997 2.01% 44,116 0.95%(2) Year Ended March 31, 1997 4.80% 43,975 0.99% Year Ended March 31, 1996 5.18% 43,103 1.06% Year Ended March 31, 1995 4.45% 36,329 1.10% Year Ended March 31, 1994 2.83% 26,505 1.17% July 1, 1992 to March 31, 1993 3.13%(2) 4,687 2.43%(2) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES Sept. 1, 1997 to February 28, 1998(unaudited) 0.46% 4,952 1.33%(2) DAILY ASSETS CASH FUND INSTITUTIONAL SERVICE SHARES Sept. 1, 1997 to February 28, 1998(unaudited)2.62% 13,034 0.89%(2) October 1, 1996 to August 31, 1997 4.70% 12,076 1.22%(2)
(1) During each period, various fees and expenses were waived and reimbursed, respectively. The ratio of Gross Expenses to Average Net Assets reflects the expense ratio in the absence of any waivers and reimbursements for the Fund and its respective Portfolio. (2) Annualized. 3. INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVE The investment objective of each Fund except Daily Assets Municipal Fund is to provide high current income to the extent consistent with the preservation of capital and the maintenance of liquidity. The investment objective of Daily Assets Municipal Fund is to provide high current income which is exempt from federal income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. 5 THERE CAN BE NO ASSURANCE THAT ANY FUND OR PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE OR MAINTAIN A STABLE NET ASSET VALUE. Each Fund currently seeks to achieve its investment objective by investing all of its investable assets in its corresponding Portfolio, which has the same investment objective and substantially similar investment policies. Therefore, although the following discusses the investment policies of the Portfolios (and the responsibilities of Core Trust's board of trustees (the "Core Trust Board")), it applies equally to the Funds (and the Trust's board of trustees (the "Board")). INVESTMENT POLICIES Each Portfolio invests only in high quality, short-term money market instruments that are determined by FIA, pursuant to procedures adopted by the Core Trust Board, to be eligible for purchase and to present minimal credit risks. High quality instruments include those that (1) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in the highest rating category by two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (2) are otherwise unrated and determined by FIA to be of comparable quality. A description of the rating categories of certain NRSROs, such as Standard & Poor's and Moody's Investors Service, Inc., is contained in the SAI. Each Portfolio invests only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated under Rule 2a-7) and maintains a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities, each Portfolio will not invest more than 5% of its total assets in the securities of any one issuer. As used herein, "U.S. Government Securities" means obligations issued or guaranteed as to principal and interest by the United States government, its agencies or instrumentalities and "Treasury Securities" means U.S. Treasury bills and notes and other U.S. Government Securities which are guaranteed as to principal and interest by the U.S. Treasury. In the case of municipal securities, when the assets and revenues of an issuer are separate from those of the government creating the issuer and a security is backed only by the assets and revenues of the issuer, the issuer and not the creating government is deemed to be the sole issuer of the security. Similarly, in the case of a security issued by or on behalf of public authorities to finance various privately operated facilities that is backed only by the assets and revenues of the non-governmental user, the non-governmental user will be deemed to be the sole issuer of the security. Yields on money market securities are dependent on a variety of factors, including the general conditions of the money markets and the fixed income markets in general, the size of a particular offering, the maturity of the obligation and the rating of the issue. A Fund's yield will tend to fluctuate inversely with prevailing market interest rates. For instance, in periods of falling market interest rates, yields will tend to be somewhat higher. Although each Portfolio only invests in high quality money market instruments, an investment in a Fund is subject to risk even if all securities in the Portfolio's portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities and municipal securities, can change in value when there is a change in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. The achievement of a Fund's investment objective is dependent in part on the continuing ability of the issuers of the securities in which the Portfolio invests to meet their obligations for the payment of principal and interest when due. DAILY ASSETS TREASURY OBLIGATIONS FUND Treasury Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in Treasury Securities and in repurchase agreements backed by Treasury Securities. DAILY ASSETS GOVERNMENT FUND Government Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities. The Portfolio invests with a view toward providing income that is generally considered exempt from state and local income taxes. Among the U.S. Government Securities in which the Portfolio may invest are U.S. Treasury Securities and obligations of the Farm Credit System, Farm Credit System Financial Assistance Corporation, Federal Financing Bank, Federal Home Loan Banks, 6 General Services Administration, Student Loan Marketing Association, and Tennessee Valley Authority. Income on these obligations and the obligations of certain other agencies and instrumentalities is generally not subject to state and local income taxes by Federal law. In addition, the income received by Fund shareholders that is attributable to these investments will also be exempt in most states from state and local income taxes. Shareholders should determine through consultation with their own tax advisers whether and to what extent dividends payable by the Fund from interest received with respect to its investments will be considered to be exempt from state and local income taxes in the shareholder's state. Shareholders similarly should determine whether the capital gain and other income, if any, payable by the Fund will be subject to state and local income taxes in the shareholder's state. See "Distributions and Tax Matters." The U.S. Government Securities in which the Portfolio may invest include securities supported primarily or solely by the creditworthiness of the issuer. There is no guarantee that the U.S. government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. government's full faith and credit. DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Government Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in U.S. Government Securities and in repurchase agreements backed by U.S. Government Securities. The U.S. Government Securities in which the Portfolio may invest include Treasury Securities and securities supported primarily or solely by the creditworthiness of the issuer, such as securities of the Federal National Mortgage Association, Federal Home Loan Banks and Student Loan Marketing Association. There is no guarantee that the U.S. Government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the U.S. Government's full faith and credit. DAILY ASSETS CASH FUND Cash Portfolio seeks to attain its investment objective by investing in a broad spectrum of money market instruments. The Portfolio may invest in (1) obligations of domestic financial institutions, (2) U.S. Government Securities (see "Investment Objectives and Policies - Daily Assets Government Fund") and (3) corporate debt obligations of domestic issuers. Financial institution obligations include negotiable certificates of deposit, bank notes, bankers' acceptances and time deposits of banks (including savings banks and savings associations) and their foreign branches. The Portfolio limits its investments in bank obligations to banks which at the time of investment have total assets in excess of one billion dollars. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bank notes are debt obligations of a bank. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Certificates of deposit and fixed time deposits, which are payable at the stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Portfolio but may be subject to early withdrawal penalties which could reduce the Portfolio's yield. Corporate debt obligations include commercial paper (short-term promissory notes) issued by companies to finance their, or their affiliates', current obligations. The Portfolio may also invest in commercial paper or other corporate securities issued in "private placements" that are restricted as to disposition under the Federal securities laws ("restricted securities"). Any sale of these securities may not be made absent registration under the Securities Act of 1933 or the availability of an appropriate exemption therefrom. Some of these restricted securities, however, are eligible for resale to institutional investors, and accordingly, a liquid market may exist for them. Pursuant to guidelines adopted by the Core Trust Board, the investment adviser will determine whether each such investment is liquid. DAILY ASSETS MUNICIPAL FUND Municipal Cash Portfolio seeks to attain its investment objective by investing substantially all of its assets in municipal securities. The Portfolio attempts to maintain 100% of its assets invested in federally tax-exempt municipal securities; during periods of normal market conditions the Portfolio will have at least 80% of its net assets invested in federally tax-exempt instruments the income from which may be subject to the federal alternative minimum tax ("AMT"). 7 The Portfolio may from time to time invest more than 25% of its assets in obligations of issuers located in one state but, under normal circumstances, will not invest more than 35% of its assets in obligations of issuers located in one state or territory. If the Portfolio concentrates its investments in this manner, it will be more susceptible to factors adversely affecting issuers of those municipal securities than would be a more geographically diverse municipal securities portfolio. These risks arise from the financial condition of the particular state or territory and its political subdivisions. THE SHORT-TERM MUNICIPAL SECURITIES MARKET. It is anticipated that a substantial amount of the municipal securities held by the Portfolio will be supported by credit and liquidity enhancements, such as letters of credit (which are not covered by federal deposit insurance) or put or demand features of third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Portfolio will be dependent in part upon the credit quality of the banks supporting the Portfolio's investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. These risks include a sustained increase in interest rates, which can adversely affect the availability and cost of a bank's lending activities; exposure to credit losses during times of economic decline; concentration of loan portfolios in certain industries; regulatory developments; and competition among financial institutions. Brokerage firms and insurance companies also provide certain liquidity and credit support. The Portfolio's policy is to purchase municipal securities with third party credit or liquidity support only after FIA has considered the creditworthiness of the financial institution providing the support and believes that the security presents minimal credit risk. The Portfolio may purchase long term municipal securities with various maturity shortening provisions. For instance, variable rate demand notes ("VRDN") are municipal bonds with maturities of up to 40 years that are sold with a demand feature (an option for the holder of the security to sell the security back to the issuer) which may be exercised by the security holder at predetermined intervals, usually daily or weekly. The interest rate on the security is typically reset by a remarketing or similar agent at prevailing interest rates. VRDNs may be issued directly by the municipal issuer or created by a bank, broker-dealer or other financial institution by selling a previously issued long-term bond with a demand feature attached. Similarly, tender option bonds (also referred to as certificates of participation) are municipal securities with relatively long original maturities and fixed rates of interest that are coupled with an agreement of a third party financial institution under which the third party grants the security holders the option to tender the securities to the institution and receive the face value thereof. The option may be exercised at periodic intervals, usually six months to a year. As consideration for providing the option, the financial institution receives a fee equal to the difference between the underlying municipal security's fixed rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of the interest rate determination. These bonds effectively provide the holder with a demand obligation that bears interest at the prevailing short-term municipal securities interest rate. The Portfolio also may acquire "puts" on municipal securities it purchases. A put gives the Portfolio the right to sell the municipal security at a specified price at any time before a specified date. The Portfolio will acquire puts only to enhance liquidity, shorten the maturity of the related municipal security or permit the Portfolio to invest its funds at more favorable rates. Generally, the Portfolio will buy a municipal security that is accompanied by a put only if the put is available at no extra cost. In some cases, however, the Portfolio may pay an extra amount to acquire a put, either in connection with the purchase of the related municipal security or separately from the purchase of the security. The Portfolio may purchase municipal securities together with the right to resell them to the seller or a third party at an agreed-upon price or yield within specified periods prior to their maturity dates. Such a right to resell is commonly known as a "stand-by commitment," and the aggregate price which the Portfolio pays for securities with a stand-by commitment may be higher than the price which otherwise would be paid. The primary purpose of this practice is to permit the Portfolio to be as fully invested as practicable in municipal securities while preserving the necessary flexibility and liquidity to meet unanticipated redemptions. In this regard, the Portfolio acquires stand-by commitments solely to facilitate portfolio liquidity and does not exercise its rights thereunder for trading purposes. Stand-by commitments involve certain expenses and risks, including the inability of the issuer of the commitment to pay for the securities at the time the commitment is exercised, non-marketability of the commitment, and differences between the maturity of the underlying security and the maturity of the commitment. MUNICIPAL BONDS. Municipal bonds are long term fixed-income securities. "General obligation" bonds are secured by a municipality's pledge of its full faith, credit and taxing power for the payment of principal and interest. "Revenue" bonds are usually payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the 8 proceeds of a special excise or other tax, but not from general tax revenues. Under a "moral obligation" bond (which is normally issued by special purpose public authorities), if the issuer is unable to meet its obligations under the bonds from current revenues, it may draw on a reserve fund that is backed by the moral commitment (but not the legal obligation) of the state or municipality that created the issuer. The Portfolio may invest in industrial development bonds, which in most cases are revenue bonds. The payment of the principal and interest on these bonds is dependent solely on the ability of an initial or subsequent user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either "general obligation" or "revenue" securities, are short-term fixed income securities intended to fulfill short-term capital needs of a municipality. Municipal leases, which may take various forms, are issued by municipalities to acquire a wide variety of equipment and facilities. Municipal leases frequently have special risks not normally associated with other municipal securities. Municipal leases (which normally provide for title to the leased assets to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. PARTICIPATION INTERESTS. The Portfolio may purchase participation interests in municipal securities that are owned by banks or other financial institutions. Participation interests usually carry a demand feature backed by a letter of credit or guarantee of the bank or institution permitting the holder to tender them back to the bank or other institution. TAXABLE INVESTMENTS. The Portfolio may invest up to 20% of the value of its net assets in cash and money market instruments, the interest income on which is subject to federal income taxation. In addition, when business or financial conditions warrant or when an adequate supply of appropriate municipal securities is not available, the Portfolio may assume a temporary defensive position and invest without limit in such taxable money market instruments. ADDITIONAL INVESTMENT POLICIES Each Fund's and each Portfolio's investment objective and certain investment limitations, as described in the SAI, are fundamental and therefore may not be changed without approval of the holders of a majority of the Fund's or Portfolio's, as applicable, outstanding voting securities (as defined in the 1940 Act). Except as otherwise indicated herein or in the SAI, investment policies of a Fund or a Portfolio may be changed by the applicable board of trustees without shareholder approval. Each Portfolio is permitted to hold cash in any amount pending investment in securities and may invest in other investment companies that intend to comply with Rule 2a-7 and have substantially similar investment objectives and policies. A further description of the Funds' and the Portfolios' investment policies is contained in the SAI. BORROWING. Each Portfolio may borrow money for temporary or emergency purposes (including the meeting of redemption requests), but not in excess of 33 1/3% of the value of the Portfolio's total assets. Borrowing for purposes other than meeting redemption requests will not exceed 5% of the value of the Portfolio's total assets. REPURCHASE AGREEMENTS. Each Portfolio may seek additional income or liquidity by entering into repurchase agreements. Repurchase agreements are transactions in which a Portfolio purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed-upon future date, normally one to seven days later. The resale price reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased security. The Portfolios' custodian holds the underlying collateral, which is maintained at not less than 100% of the repurchase price. Repurchase agreements involve certain credit risks not associated with direct investment in securities. Each Portfolio, however, intends to enter into repurchase agreements only with sellers which FIA believes present minimal credit risks in accordance with guidelines established by the Core Trust Board. In the event that a seller defaulted on its repurchase obligation, however, a Portfolio might suffer a loss. LIQUIDITY. To ensure adequate liquidity, each Portfolio may not invest more than 10% of its net assets in illiquid securities, including repurchase agreements not entitling the Portfolio to payment of principal within seven days. There may not be an 9 active secondary market for securities held by a Portfolio. The value of securities that have a limited market tend to fluctuate more than those that have an active market. FIA monitors the liquidity of each Portfolio's investments, but there can be no guarantee that an active secondary market will exist. WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. In order to assure itself of being able to obtain securities at prices which FIA believes might not be available at a future time, FIA may purchase securities on a when-issued or delayed delivery basis. When these transactions are negotiated, the price or yield is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. Securities so purchased are subject to market price fluctuation and no interest on the securities accrues to a Portfolio until delivery and payment take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Commitments for when-issued or delayed delivery transactions will be entered into only when a Portfolio has the intention of actually acquiring the securities, but the Portfolio may sell the securities before the settlement date if deemed advisable. Failure by the other party to deliver a security purchased by a Portfolio may result in a loss or missed opportunity to make an alternative investment. As a result of entering into forward commitments, the Funds are exposed to greater potential fluctuations in the value of their assets and net asset values per share. VARIABLE AND FLOATING RATE SECURITIES. The securities in which each Portfolio invest may have variable or floating rates of interest. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. The interest paid on these securities is a function primarily of the index or market rate upon which the interest rate adjustments are based. Those securities with ultimate maturities of greater than 397 days may be purchased only in accordance with the provisions of Rule 2a-7. Under that Rule, only those long-term instruments that have demand features which comply with certain requirements and certain U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. No Portfolio may purchase a variable or floating rate security whose interest rate is adjusted based on a long-term interest rate or index, on more than one interest rate or index, or on an interest rate or index that materially lags behind short-term market rates (these prohibited securities are often referred to as "derivative" securities). All variable and floating rate securities purchased by a Portfolio will have an interest rate that is adjusted based on a single short-term rate or index, such as the Prime Rate. FINANCIAL INSTITUTION GUIDELINES. Treasury Cash Portfolio and Government Cash Portfolio invests only in instruments which, if held directly by a bank or bank holding company organized under the laws of the United States or any state thereof, would be assigned to a risk-weight category of no more than 20% under the current risk based capital guidelines adopted by the Federal bank regulators. These Portfolios do not intend to hold in their portfolio any securities or instruments that would be subject to restriction as to amount held by a national bank under Title 12, Section 24 (Seventh) of the United States Code. In addition, these Portfolios limit their investments to those permissible for Federally chartered credit unions under applicable provisions of the Federal Credit Union Act and the applicable rules and regulations of the National Credit Union Administration. Government Cash Portfolio limits its investments to investments that are legally permissible for Federally chartered savings associations without limit as to percentage and to investments that permit Fund shares to qualify as liquid assets and as short-term liquid assets. 4. MANAGEMENT The business of the Trust is managed under the direction of the Board and the business of Core Trust is managed under the direction the Core Trust Board. The Board formulates the general policies of the Funds and meets periodically to review the results of the Funds, monitor investment activities and practices and discuss other matters affecting the Funds and the Trust. The Core Trust Board performs similar functions for the Portfolios and Core Trust. The SAI contains general background information about the trustees and officers of the Trust and Core Trust. ADMINISTRATION AND DISTRIBUTION Subject to the supervision of the Board, FAdS supervises the overall management of the Trust, including overseeing the Trust's receipt of services, advising the Trust and the Trustees on matters concerning the Trust and its affairs, and providing the Trust with general office facilities and certain persons to serve as officers. For these services and facilities, FAdS receives a fee at an annual rate of 0.05% of the daily net assets of each Fund. FAdS also serves as administrator of the Portfolios and 10 provides administrative services for each Portfolio that are similar to those provided to the Funds. For its administrative services to the Portfolios, FAdS receives a fee at an annual rate of 0.05% of the average daily net assets of each Portfolio. Forum Accounting Services, LLC ("FAcS") performs portfolio accounting services for the Funds and Portfolios pursuant to agreements with the Trust and Core Trust and is paid a separate fee for these services. FFSI acts as the agent of the Trust in connection with the offering of shares of the Funds. FFSI is a registered broker-dealer and is a member of the National Association of Securities Dealers, Inc. In order to facilitate the distribution of Investor Shares, the Trust has adopted a plan of distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Investor Shares. Under the Plan, FFSIreceives a fee at an annual rate of 0.15% of the average daily net assets of each Fund attributable to Investor Shares as compensation for FFSIs services as distributor. From this amount, FFSI may make payments to various financial institutions, including broker-dealers, banks and trust companies as compensation for services or reimbursement of expenses in connection with the distribution of shares or the provision of various shareholder services. If the distribution related expenses of FFSI exceed its Rule 12b-1 fees for any Fund, the Fund will not be obligated to pay Forum an additional amount and if Forum's distribution related expenses are less than its Rule 12b-1 fees, Forum will realize a profit. FAdS, FFSI, FIA, FAcS and FSS are members of the Forum Financial Group of Companies and together provide a full range of services to the investment company and financial services industry. As of the date of this Prospectus, each of these companies was controlled by John Y. Keffer, President and Chairman of the Trust and FAdS and FFSI provide administration services to registered investment companies with assets of approximately $30 billion. INVESTMENT ADVISER Subject to the general supervision of the Core Trust Board, FIA makes investment decisions for each Portfolio and monitors the Portfolios' investments. FIA, which is located at Two Portland Square, Portland, Maine 04101, provides investment advisory services to six other mutual funds. Prior to January 2, 1998, Linden Asset Management, Inc. ("Linden") served as investment adviser to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio and provided professional management of those Portfolios' investments, and Forum Advisors, Inc. served as investment adviser to Government Portfolio and provided professional management of that Portfolio's investments. Linden and Forum Advisors, Inc. also acted as investment subadvisors to each Portfolio that they did not manage on a daily basis. On January 2, 1998, Forum Advisors, Inc. acquired Linden and reorganized into a new company named Forum Investment Advisors, LLC. Anthony R. Fischer, Jr. is primarily responsible for the day-to-day management of the Portfolios. Mr. Fischer was the sole stockholder and President of Linden Asset Management, Inc. from 1992 until January 2, 1998. He has been primarily responsible for the day-to-day management of Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio since their inception. Mr. Fischer has over twenty-five years experience in the money market industry and during that time has managed money market investment portfolios for various banks and investment firms. For its services, FIA receives an advisory fee at an annual rate of 0.05% of Government Portfolio's and Municipal Cash Portfolio's average daily net assets For services provided to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, FIA receives an advisory fee based upon the total average daily net assets of those Portfolios ("Total Portfolio Assets"). FIA's fee is calculated at an annual rate on a cumulative basis as follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of Total Portfolio Assets, and 0.03% of the remaining Total Portfolio Assets. A Fund's expenses include the Fund's pro rata portion of the advisory fee paid by the corresponding Portfolio. SHAREHOLDER SERVICING TRANSFER AND DIVIDEND DISBURSING AGENT. Shareholder inquiries and communications concerning the Funds may be directed to FSS at the address and telephone numbers on the first page of this Prospectus. FSS maintains an account for each shareholder of the Funds (unless such accounts are maintained by sub-transfer agents or processing agents) and performs other transfer agency and related functions. FSS is authorized to subcontract any or all of its functions to one or more qualified sub-transfer agents or processing agents, which may be its affiliates, who agree to comply with the terms of FSS's agreement with the Trust. FSS may pay those agents for their services, but no such payment will increase FSS's compensation from the Trust. For its services, FSS is paid a fee at an annual rate of 0.25% of the average daily net assets of 11 each Fund attributable to Investor Shares plus $12,000 per year for each Fund and certain account and additional class charges and is reimbursed for certain expenses incurred on behalf of the Funds. SHAREHOLDER SERVICE AGENTS. The Trust has adopted a shareholder service plan ("Shareholder Service Plan") which provides that, as compensation for FAdS's service activities with respect to the Investor Shares, the Trust shall pay FAdS a fee at an annual rate of 0.25% of the average daily net assets attributable to Investor Shares. FAdS is authorized to enter into shareholder servicing agreements pursuant to which a shareholder servicing agent, on behalf of its customers, performs certain shareholder services not otherwise provided by FSS. As compensation for its services, the shareholder servicing agent is paid a fee by FAdS of up to 0.25% of the average daily net assets of Investor Shares owned by investors for which the shareholder service agent maintains a servicing relationship. Certain shareholder servicing agents may be subtransfer or processing agents. Among the services provided by shareholder servicing agents are answering customer 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; providing necessary personnel and facilities to establish and maintain shareholder accounts and records; assisting shareholders in arranging for processing purchase, exchange and redemption transactions; arranging for the wiring of funds; guaranteeing shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; integrating periodic statements with other customer transactions; and providing such other related services as the shareholder may request. EXPENSES OF THE FUNDS Each Fund's expenses comprise Trust expenses attributable to the Fund, which are charged to the Fund, and expenses not attributable to a particular fund of the Trust, which are allocated among the Fund and all other funds of the Trust in proportion to their average net assets. Each service provider in its sole discretion may elect to waive (or continue to waive) all or any portion of its fees, which are accrued daily and paid monthly, and may reimburse a Fund for certain expenses. Any such waivers or reimbursements would have the effect of increasing a Fund's performance for the period during which the waiver was in effect and would not be recouped at a later date. Each Fund's expenses include the service fees described in this Prospectus, the fees and expenses of the Board, applicable insurance and bonding expenses and state and SEC registration fees. Each Fund bears its pro rata portion of the expenses of the Portfolio in which it invests along with all other investors in the Portfolio. 5. PURCHASES AND REDEMPTIONS OF SHARES GENERAL INFORMATION All transactions in Fund shares are effected through FSS, which accepts orders for purchases and redemptions from shareholders of record and new investors. Shareholders of record will receive from the Trust periodic statements listing all account activity during the statement period. The Trust reserves the right in the future to modify, limit or terminate any shareholder privilege, upon appropriate notice to shareholders, and may charge a fee for certain shareholder services, although no such fees are currently contemplated. PURCHASES. Fund shares are sold at a price equal to their net asset value next-determined after receipt of an order in proper form, on each Fund Business Day. Fund shares are issued immediately after an order for the shares in proper form, accompanied by funds on deposit at a Federal Reserve Bank ("Federal Funds"), is accepted by FSS. Each Fund's net asset value is calculated at 4:00 p.m., Eastern time. Fund shares become entitled to receive distributions on the day the purchase order is accepted if the order and payment are received by FSS as follows: 12 ORDER MUST BE RECEIVED BY PAYMENT MUST BE RECEIVED BY Daily Assets Government Fund and Daily Assets Municipal Fund 12:00 p.m., Eastern time 4:00 p.m., Eastern time All other Funds 2:00 p.m., Eastern time 4:00 p.m., Eastern time
If a purchase order is transmitted to FSS (or the wire is received) after the times listed above, the investor will not receive a distribution on that day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire purchase orders and the cut-off times set forth above. Each Fund reserves the right to reject any subscription for the purchase of Fund shares. Stock certificates are issued only to shareholders of record upon their written request and no certificates are issued for fractional shares. REDEMPTIONS. Fund shares may be redeemed without charge at their net asset value on any Fund Business Day. There is no minimum period of investment and no restriction on the frequency of redemptions. Fund shares are redeemed as of the next determination of the Fund's net asset value following receipt by FSS of the redemption order in proper form (and any supporting documentation which FSS may require). Shares redeemed are not entitled to receive distributions declared on or after the day on which the redemption becomes effective. For wire redemption orders received after 12:00 p.m., Eastern time, in the case of Daily Assets Government Fund and Daily Assets Municipal Fund, and after 2:00 p.m., Eastern Time, in the case of each other Fund, FSS will wire proceeds the next Fund Business Day. On days that the New York Stock Exchange or Federal Reserve Bank of San Francisco (Boston in the case of Daily Assets Government Fund) closes early or the Public Securities Association recommends that the government securities markets close early, the Trust may advance the time by which FSS must receive completed wire redemption orders. Normally, redemption proceeds are paid immediately, but in no event later than seven days, following acceptance of a redemption order. Proceeds of redemption requests (and exchanges), however, will not be paid unless any check used to purchase the shares has been cleared by the shareholder's bank, which may take up to 15 calendar days. This delay may be avoided by investing through wire transfers. Unless otherwise indicated, redemption proceeds normally are paid by check mailed to the shareholder's record address. The right of redemption may not be suspended nor the payment dates postponed for more than seven days after the tender of the shares to the Fund except when the New York Stock Exchange is closed (or when trading thereon is restricted) for any reason other than its customary weekend or holiday closings or under any emergency or other circumstance as determined by the SEC. Proceeds of redemptions normally are paid in cash. However, payments may be made wholly or partially in portfolio securities if the Board determines that payment in cash would be detrimental to the best interests of the Fund. The Trust employs reasonable procedures to ensure that telephone orders are genuine (which include recording certain transactions and the use of shareholder security codes). If the Trust did not employ such procedures, it could be liable for any losses due to unauthorized or fraudulent telephone instructions. Shareholders should verify the accuracy of telephone instructions immediately upon receipt of confirmation statements. During times of drastic economic or market changes, telephone redemption and exchange privileges may be difficult to implement. In the event that a shareholder is unable to reach FSS by telephone, requests may be mailed or hand-delivered to FSS. Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves the right to redeem, upon not less than 60 days' written notice, all shares in any Fund account with an aggregate net asset value of less than $5,000. PURCHASE AND REDEMPTION PROCEDURES Investors may open an account by completing the application at the back of this Prospectus or by contacting FSS at the address on the first page of this Prospectus. To request shareholder services not referenced on the account application and to change information regarding a shareholder's account (such as addresses), investors should request an Optional Services Form from FSS. 13 INITIAL PURCHASE OF SHARES There is a $10,000 minimum for initial investments in each Fund ($2,000 for individual retirement accounts, $2,500 for exchanges). BY MAIL. Investors may send a check made payable to the Trust along with a completed account application to FSS. Checks are accepted at full value subject to collection. Payment by a check drawn on any member of the Federal Reserve System can normally be converted into Federal Funds within two business days after receipt of the check. Checks drawn on some non-member banks may take longer. For individual or Uniform Gift to Minors Act accounts, the check or money order used to purchase shares of a Fund must be made payable to "Forum Funds" or to one or more owners of that account and endorsed to Forum Funds. For corporation, partnership, trust, 401(k) plan or other non-individual type accounts, the check used to purchase shares of a Fund must be made payable on its face to "Forum Funds." No other method of payment by check will be accepted. All purchases must be paid in U.S. dollars; checks must be drawn on U.S. banks. Payment by Traveler's Checks is prohibited. BY BANK WIRE. To make an initial investment in a Fund using the wire system for transmittal of money among banks, an investor should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to obtain an account number. The investor should then instruct a bank to wire the investor's money immediately to: BankBoston Boston, Massachusetts ABA# 011000390 For Credit To: Forum Shareholder Services, LLC Account #: 541-54171 Re: [Name of Fund] - Investor Shares Account #: ......... Account Name: ......... The investor should then promptly complete and mail the account application. Any investor planning to wire funds should instruct a bank early in the day so the wire transfer can be accomplished the same day. There may be a charge imposed by the bank for transmitting payment by wire, and there also may be a charge for the use of Federal Funds. THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through certain broker-dealers, banks or other financial institutions ("Processing Organizations"), including affiliates of FSS. Processing Organizations may charge their customers a fee for their services and are responsible for promptly transmitting purchase, redemption and other requests to a Fund. The Trust is not responsible for the failure of any Processing Organization to promptly forward these requests. Investors who purchase or redeem shares in this manner will be subject to the procedures of their Processing Organization, which may include charges, limitations, investment minimums, cutoff times and restrictions in addition to, or different from, those applicable to shareholders who invest in a Fund directly. These investors should acquaint themselves with their institution's procedures and should read this Prospectus in conjunction with any materials and information provided by their institution. Investors who purchase Fund shares through a Processing Organization may or may not be the shareholder of record and, subject to their institution's and the Fund's procedures, may have Fund shares transferred into their name. Certain Processing Organizations may enter purchase orders with payment to follow. The Trust may confirm purchases and redemptions of a Processing Organization's customers directly to the Processing Organization, which in turn will provide its customers with such confirmations and periodic statements as may be required by law or agreed to between the Processing Organization and its customers. SUBSEQUENT PURCHASES OF SHARES There is a $500 minimum for subsequent purchases. Subsequent purchases may be made by mailing a check, by sending a bank wire or through a financial institution as indicated above. Shareholders using the wire system for purchase should first telephone the Trust at 800-94FORUM (800-943-6786) or (207) 879-0001 to notify it of the wire transfer. All payments should clearly 14 indicate the shareholder's name and account number. Shareholders may purchase Fund shares at regular, preselected intervals by authorizing the automatic transfer of funds from a designated bank account maintained with a United States banking institution which is an Automated Clearing House member. Under the program, existing shareholders may authorize amounts of $250 or more to be debited from their bank account and invested in the Fund monthly or quarterly. Shareholders may terminate their automatic investments or change the amount to be invested at any time by written notification to FSS. REDEMPTION OF SHARES Shareholders who wish to redeem shares by telephone or receive redemption proceeds by bank wire must elect these options by properly completing the appropriate sections of their account application. These privileges may not be available until several days after a shareholder's application is received. Shares for which certificates have been issued may not be redeemed by telephone. BY MAIL. Shareholders may make a redemption in any amount by sending a written request to FSS accompanied by any stock certificate that may have been issued to the shareholder. All written requests for redemption must be signed by the shareholder with signature guaranteed and all certificates submitted for redemption must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. A shareholder who has elected telephone redemption privileges may make a telephone redemption request by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. In response to the telephone redemption instruction, the Fund will mail a check to the shareholder's record address or, if the shareholder has elected wire redemption privileges, wire the proceeds. BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected wire redemption privileges may request the Fund to transmit the redemption proceeds by Federal Funds wire to a bank account designated on the shareholder's account application. To request bank wire redemptions by telephone, the shareholder also must have elected the telephone redemption privilege. Redemption proceeds are transmitted by wire on the day the redemption request in proper form is received by FSS. AUTOMATIC REDEMPTIONS. Shareholders may redeem Fund shares at regular, preselected intervals by authorizing the automatic redemption of shares from their Fund account. Redemption proceeds will be sent either by check or by automatic transfer to a designated bank account maintained with a United States banking institution which is an Automated Clearing House member. Under this program, shareholders may authorize the redemption of shares in amounts of $250 or more from their account monthly or quarterly. Shareholders may terminate their automatic redemptions or change the amount to be redeemed at any time by written notification to FSS. OTHER REDEMPTION MATTERS. To protect shareholders and the Funds against fraud, signatures on certain requests must have a signature guarantee. Requests must be made in writing and include a signature guarantee for any of the following transactions: (1) any endorsement on a stock certificate; (2) written instruction to redeem Shares whose value exceeds $50,000; (3) instructions to change a shareholder's record name; (4) redemption in an account in which the account address or account registration has changed within the last 30 days; (5) the proceeds are not being sent to the address of record, preauthorized bank account, or preauthorized brokerage firm account; (6) proceeds are to be paid to someone other than the registered owners or to an account with a different registration; (7) change of automatic investment or redemption, dividend election, telephone redemption or exchange option election or any other option election in connection with the shareholder's account. Signature guarantees may be provided by any eligible institution acceptable to FSS, including a bank, a broker, a dealer, a national securities exchange, a credit union, or a savings association that is authorized to guarantee signatures. Whenever a signature guarantee is required, the signature of each person required to sign for the account must be guaranteed. A notarized signature is not sufficient. FSS will deem a shareholder's account "lost" if correspondence to the shareholder's address of record is returned as 15 undeliverable, unless FSS determines the shareholder's new address. When an account is deemed lost all distributions on the account will be reinvested in additional shares of the Fund. In addition, the amount of any outstanding (unpaid for six months or more) checks for distributions that have been returned to FSS will be reinvested and the checks will be canceled. EXCHANGES Shareholders may exchange their shares for Investor Shares of any other Fund, for shares of the other funds of the Trust or for shares of any other mutual fund administered by FAdS that participates with the Funds in the exchange program.. Exchanges are subject to the fees charged by, and the restrictions listed in the prospectus for, the fund into which a shareholder is exchanging, including minimum investment requirements. The minimum amount required to open an account in a Fund through an exchange from another fund (other than the Funds) is $2,500. The Funds do not charge for exchanges, and there is currently no limit on the number of exchanges a shareholder may make, but each Fund reserves the right to limit excessive exchanges by any shareholder. See "Additional Purchase and Redemption Information" in the SAI. Exchanges may only be made between accounts registered in the same name. A completed account application must be submitted to open a new account in a Fund through an exchange if the shareholder requests any shareholder privilege not associated with the new account. Shareholders may only exchange into a fund if that fund's shares may legally be sold in the shareholder's state of residence. The Trust (and Federal tax law) treats an exchange as a redemption of the shares owned and the purchase of the shares of the fund being acquired. Accordingly, a shareholder may realize a capital gain or loss with respect to the shares redeemed. Redemptions and purchases are effected at the respective net asset values of the two funds as next determined following receipt of proper instructions and all necessary supporting documents by the fund whose shares are being exchanged. If a shareholder exchanges into a fund that imposes a sales charge, that shareholder is required to pay the difference between that fund's sales charge and any sales charge the shareholder has previously paid in connection with the shares being exchanged. For example, if a shareholder paid a 2% sales charge in connection with the purchase of the shares of a fund and then exchanged those shares into another fund with a 3% sales charge, that shareholder would pay an additional 1% sales charge on the exchange. Shares acquired through the reinvestment of dividends and distributions are deemed to have been acquired with a sales charge rate equal to that paid on the shares on which the dividend or distribution was paid. The exchange privilege may be modified materially or terminated by the Trust at any time upon 60 days' notice to shareholders. BY MAIL. Exchanges may be accomplished by written instruction to FSS accompanied by any stock certificate that may have been issued to the shareholder. All written requests for exchanges must be signed by the shareholder (a signature guarantee is not required) and all certificates submitted for exchange must be endorsed by the shareholder with signature guaranteed. BY TELEPHONE. Exchanges may be accomplished by telephone by any shareholder who has elected telephone exchange privileges by calling FSS at 800-94FORUM (800-943-6786) or (207) 879-0001 and providing the shareholder's account number, the exact name in which the shareholder's shares are registered and the shareholder's social security or taxpayer identification number. INDIVIDUAL RETIREMENT ACCOUNTS Each Fund (other than Daily Assets Municipal Fund) may be a suitable investment vehicle for part or all of the assets held in individual retirement accounts ("IRAs"). The minimum initial investment for IRAs is $2,000, and the minimum subsequent investment is $500. There are limits on the amount of tax-deductible contributions individuals may make into the various types of IRAs. Individuals should consult their tax advisers with respect to their specific tax situations as well as with respect to state and local taxes and read any materials supplied by the Funds concerning Fund sponsored IRAs. 6. DISTRIBUTIONS AND TAX MATTERS DISTRIBUTIONS Distributions of each Fund's net investment income are declared daily and paid monthly following the close of the last Fund 16 Business Day of the month. Each type of net capital gain realized by a Fund, if any, will be distributed annually. Shareholders may choose to have all distributions reinvested in additional shares of the Fund or received in cash. In addition, shareholders may have all distributions of net capital gain reinvested in additional shares of the Fund and distributions of net investment income paid in cash. All distributions are treated in the same manner for Federal income tax purposes whether received in cash or reinvested in shares of the Fund. All distributions will be reinvested at the Fund's net asset value as of the payment date of the dividend. All distributions are reinvested unless another option is selected. All distributions not reinvested will be paid to the shareholder in cash and may be paid more than seven days following the date on which distribution would otherwise be reinvested. TAXES TAX STATUS OF THE FUNDS. Each Fund intends to qualify or continue to qualify to be taxed as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. Accordingly, no Fund will be liable for Federal income taxes on the net investment income and capital gain distributed to its shareholders. Because each Fund intends to distribute all of its net investment income and net capital gain each year, the Funds should also avoid Federal excise taxes. Distributions paid by each Fund out of its net investment income (including realized net short-term capital gain) are taxable to the shareholders of the Fund as ordinary income. Two different tax rates apply to net capital gain -- that is, the excess of net gain from capital assets held for more than one year over net losses from capital assets held for not more than one year. One rate (generally 28%) applies to net gain on capital assets held for more than one year but not more than 18 months and a second rate (generally 20%) applies to the balance of such net capital gains. Distributions of net capital gain will be taxable to shareholders as such, regardless of how long a shareholder has held shares in the Fund. THE PORTFOLIOS. The Portfolios are not required to pay Federal income taxes on their net investment income and capital gain, as they are treated as partnerships for Federal income tax purposes. All interest, dividends and gains and losses of a Portfolio are deemed to have been "passed through" to the respective Fund in proportion to the Fund's holdings of the Portfolio, regardless of whether such interest, dividends or gains have been distributed by the Portfolio. DAILY ASSETS MUNICIPAL FUND. Distributions paid by Daily Assets Municipal Fund out of federally tax-exempt interest income earned by the Fund ("exempt-interest dividends") generally will not be subject to federal income tax in the hands of the Fund's shareholders. Substantially all of the distributions paid by the Fund are anticipated to be exempt-interest dividends. Persons who are "substantial users" or "related persons" thereof of facilities financed by private activity securities held by the Fund, however, may be subject to federal income tax on their pro rata share of the interest income from those securities and should consult their tax advisers before purchasing Shares. Exempt-interest dividends are included in the "adjusted current earnings" of corporations for purposes of the AMT. Interest on indebtedness incurred by shareholders to purchase or carry shares of the Fund generally is not deductible for federal income tax purposes. Under rules for determining when borrowed funds are used for purchasing or carrying particular assets, shares of the Fund may be considered to have been purchased or carried with borrowed funds even though those funds are not directly linked to the shares. The income from the Municipal Cash Portfolio's investments may be subject to the AMT. Interest on certain municipal securities issued to finance "private activities" ("private activity securities") is a "tax preference item" for purposes of the AMT applicable to certain individuals and corporations even though such interest will continue to be fully tax-exempt for regular federal income tax purposes. The Portfolio may purchase private activity securities, the interest on which may constitute a "tax preference item" for purposes of the AMT. STATE AND LOCAL TAXES. Daily Assets Government Fund's investment policies are structured to provide shareholders, to the extent permissible by Federal and state law, with income that is exempt or excluded from income taxation at the state and local level. Many states (by statute, judicial decision or administrative action) do not tax dividends from a regulated investment company that are attributable to interest on obligations of the U.S. Treasury and certain U.S. Government agencies and instrumentalities if the interest on those obligations would not be taxable to a shareholder that held the obligation directly. As a result, substantially all distributions paid by the Fund to shareholders residing in certain states will be exempt or excluded from state income taxes. A portion of the distributions paid by the other Funds to shareholders may be exempt or excluded from 17 state income taxes, but these Funds are not managed to provide any specific amount of state tax-free income to shareholders. The exemption for federal income tax purposes of distributions derived from interest on municipal securities does not necessarily result in an exemption under the income or other tax laws of any state or local taxing authority. Shareholders of Daily Assets Municipal Fund may be exempt from state and local taxes on distributions of tax-exempt interest income derived from obligations of the state and/or municipalities of the state in which they reside but may be subject to tax on income derived from the municipal securities of other jurisdictions. Shareholders are advised to consult with their tax advisers concerning the application of state and local taxes to investments in a Fund which may differ from the federal income tax consequences described above. GENERAL. Each Fund may be required by Federal law to withhold 31% of reportable payments (which may include taxable distributions and redemption proceeds) paid to individuals and certain other non-corporate shareholders. Withholding is not required if a shareholder certifies that the shareholder's social security or tax identification number provided to a Fund is correct and that the shareholder is not subject to backup withholding. Each Fund must include a portion of the original issue discount of zero-coupon securities, if any, as income even though these securities do not pay any interest until maturity. Because each Fund distributes all of its net investment income, a Fund may have to sell portfolio securities to distribute imputed income, which may occur at a time when the investment adviser would not have chosen to sell such securities and which may result in a taxable gain or loss. Shortly after the close of each year, a statement is sent to each shareholder of the Funds advising the shareholder of the portions of total distributions paid to the shareholder that is (1) derived from each type of obligation in which a Fund has invested, (2) derived from the obligations of issuers in the various states and (3) exempt from federal income taxes. These portions are determined for the entire year and on a monthly basis and, thus, are an annual or monthly average, rather than a day-by-day determination for each shareholder. The foregoing is only a summary of some of the important Federal and state tax considerations generally affecting the Funds and their shareholders. There may be other Federal, state or local tax considerations applicable to a particular investor. Prospective investors are urged to consult their tax advisers. 7. OTHER INFORMATION PERFORMANCE INFORMATION Investor Shares' performance may be advertised. All performance information is based on historical results, is not intended to indicate future performance and, unless otherwise indicated, is net of all expenses. The Funds may advertise yield, which shows the rate of income a Fund has earned on its investments as a percentage of the Fund's share price. To calculate yield, a Fund takes the interest income it earned from its portfolio of investments for a specified period (net of expenses), divides it by the average number of shares entitled to receive distributions, and expresses the result as an annualized percentage rate based on the Fund's share price at the end of the period. A Fund's compounded annualized yield assumes the reinvestment of distributions paid by the Fund, and, therefore will be somewhat higher than the annualized yield for the same period. A Fund may also quote tax-equivalent yields, which show the taxable yields a shareholder would have to earn to equal the Fund's tax-free yield, after taxes. A tax-equivalent yield is calculated by dividing the Fund's tax-free yield by one minus a stated federal, state or combined federal and state tax rate. Each class' performance will vary. The Funds' advertisements may also reference ratings and rankings among similar funds by independent evaluators such as Morningstar, Lipper Analytical Services, Inc. or IBC Financial Data, Inc. In addition, the performance of the Funds may be compared to recognized indices of market performance. The comparative material found in a Fund's advertisements, sales literature, or reports to shareholders may contain performance rankings. This material is not to be considered representative or indicative of future performance. 18 BANKING LAW MATTERS Banking laws and regulations generally permit a bank or bank affiliate to purchase shares of an investment company as agent for and upon the order of a customer and permit a bank or bank affiliate to serve as a Processing Organization or perform sub-transfer agent or similar services for the Trust and its shareholders. If a bank or bank affiliate were prohibited from performing all or a part of the foregoing services, its shareholder customers would be permitted to remain shareholders of the Trust and alternative means for continuing to service them would be sought. DETERMINATION OF NET ASSET VALUE The Trust determines the net asset value per share of each Fund as of 4:00 p.m., Eastern time, on each Fund Business Day by dividing the value of the Fund's net assets (the value of its interest in the Portfolio and other assets less its liabilities) by the number of shares outstanding at the time the determination is made. In order to more easily maintain a stable net asset value per share, each Portfolio's portfolio securities are valued at their amortized cost (acquisition cost adjusted for amortization of premium or accretion of discount) in accordance with Rule 2a-7. The Portfolios will only value their portfolio securities using this method if the Core Trust Board believes that it fairly reflects the market-based net asset value per share. The Portfolios' other assets, if any, are valued at fair value by or under the direction of the Core Trust Board. THE TRUST AND ITS SHARES The Trust is registered with the SEC as an open-end, management investment company and was organized as a business trust under the laws of the State of Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the assets and liabilities of Forum Funds, Inc., which was incorporated in 1980. The Board has the authority to issue an unlimited number of shares of beneficial interest of separate series with no par value per share and to create classes of shares within each series. There are currently sixteen series of the Trust. Each share of each fund of the Trust and each class of shares has equal distribution, liquidation and voting rights, and fractional shares have those rights proportionately, except that expenses related to the distribution of the shares of each class (and certain other expenses such as transfer agency and administration expenses) are borne solely by those shares and each class votes separately with respect to the provisions of any Rule 12b-1 plan which pertain to the class and other matters for which separate class voting is appropriate under applicable law. Generally, shares will be voted in the aggregate without reference to a particular fund or class, except if the matter affects only one fund or class or voting by fund or class is required by law, in which case shares will be voted separately by fund or class, as appropriate. Delaware law does not require the Trust to hold annual meetings of shareholders, and it is anticipated that shareholder meetings will be held only when specifically required by Federal or state law. Shareholders (and Trustees) have available certain procedures for the removal of Trustees. There are no conversion or preemptive rights in connection with shares of the Trust. All shares when issued in accordance with the terms of the offering will be fully paid and nonassessable. Shares are redeemable at net asset value, at the option of the shareholders. A shareholder in a fund is entitled to the shareholder's pro rata share of all distributions arising from that fund's assets and, upon redeeming shares, will receive the portion of the fund's net assets represented by the redeemed shares. As of May 1, 1998, Babb & Co. may be deemed to have controlled Daily Assets Treasury Obligations Fund and Daily Assets Government Obligations Fund, H.M. Payson & Co. may be deemed to have controlled Daily Assets Government Fund and Daily Assets Cash Fund and Allagash & Co. may be deemed to have controlled Daily Assets Government Obligations Fund and Daily Assets Cash Fund, through investment in the Funds by their customers. From time to time, these shareholders or other shareholders may own a large percentage of Shares of a Fund and accordingly, may be able to greatly affect (if not determine) the outcome of a shareholder vote. FUND STRUCTURE OTHER CLASSES OF SHARES. In addition to Investor Shares, each Fund may create and issue shares of other classes of securities. Each Fund currently has two other classes of shares authorized, Institutional Shares and Institutional Service Shares. Institutional Shares have an investment minimum of $1,000,000. Institutional Service Shares are offered solely through banks, trust companies and certain other financial institutions, and their affiliates and correspondents, for investment of their funds or funds for which they act in a fiduciary, agency or custodial capacity. Institutional Shares and Institutional Service Shares incur less expenses than Investor Shares. See, "Additional Information" below. Except for certain 19 differences, each share of each class represents an undivided, proportionate interest in a Fund. Each share of each Fund is entitled to participate equally in distributions and the proceeds of any liquidation of that Fund except that, due to the differing expenses borne by the various classes, the amount of distributions will differ among the classes. CORE TRUST STRUCTURE. Each Fund invests all of its assets in its corresponding Portfolio of Core Trust, a business trust organized under the laws of the State of Delaware in September 1994 and registered under the 1940 Act as an open-end, management investment company. Accordingly, a Portfolio directly acquires its own securities and its corresponding Fund acquires an indirect interest in those securities. The assets of each Portfolio belong only to, and the liabilities of the Portfolio are borne solely by, the Portfolio and no other portfolio of Core Trust. Upon liquidation of a Portfolio, investors in the Portfolio would be entitled to share pro rata in the net assets of the Portfolio available for distribution to investors. THE PORTFOLIOS. A Fund's investment in a Portfolio is in the form of a non-transferable beneficial interest. As of the date of this Prospectus, Daily Assets Government Fund and Daily Assets Municipal Fund are the only investors (other than FAdS or its affiliates) that have invested in Government Portfolio and Municipal Cash Portfolio, respectively. Each of the other Portfolios has another investor besides the Funds (and FAdS and its affiliates). All investors in a Portfolio invest on the same terms and conditions as the Funds and will pay a proportionate share of the Portfolio's expenses. The Portfolios normally will not hold meetings of investors except as required by the 1940 Act. Each investor in a Portfolio is entitled to vote in proportion to the relative value of its interest in the Portfolio. On most issues subject to a vote of investors, as required by the 1940 Act and other applicable law, a Fund will solicit proxies from shareholders of the Fund and will vote its interest in a Portfolio in proportion to the votes cast by its shareholders. There can be no assurance that any issue that receives a majority of the votes cast by a Fund's shareholders will receive a majority of votes cast by all investors in the Portfolio. CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Portfolio may be affected by the actions of other large investors in the Portfolio, if any. If a large investor other than a Fund redeemed its interest in a Portfolio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. A Fund may withdraw its entire investment from a Portfolio at any time, if the Board determines that it is in the best interests of the Fund and its shareholders to do so. The Fund might withdraw, for example, if other investors in the Portfolio, by a vote of shareholders, changed the investment objective or policies of the Portfolio in a manner not acceptable to the Board or not permissible by the Fund. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Portfolio. If the Fund decided to convert those securities to cash, it usually would incur transaction costs. If the Fund withdrew its investment from the Portfolio, the Board would consider what action might be taken, including the management of the Fund's assets in accordance with its investment objective and policies by the investment adviser to the Portfolio or the investment of all of the Fund's investable assets in another pooled investment entity having substantially the same investment objective as the Fund. The inability of the Fund to find a suitable replacement investment, in the event the Board decided not to permit the Portfolio's investment adviser to manage the Fund's assets, could have a significant impact on shareholders of the Fund. ADDITIONAL INFORMATION. Each class of a Fund (and any other investment company that invests in a Portfolio) may have a different expense ratio and different sales charges, including distribution fees, and each class' (and investment company's) performance will be affected by its expenses and sales charges. For more information on any other class of shares of the Funds or concerning any other investment companies that invest in a Portfolio, investors may contact FFSI at 207-879-1900. If an investor invests through a financial institution, the investor may also contact their financial institution to obtain information about the other classes or any other investment company investing in a Portfolio. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE. 20 FORUM FUNDS DAILY ASSETS TREASURY OBLIGATIONS FUND DAILY ASSETS GOVERNMENT FUND (FORMERLY DAILY ASSETS TREASURY FUND) DAILY ASSETS GOVERNMENT OBLIGATIONS FUND (FORMERLY DAILY ASSETS GOVERNMENT FUND) DAILY ASSETS CASH FUND DAILY ASSETS MUNICIPAL FUND (FORMERLY DAILY ASSETS TAX-EXEMPT FUND) Account Information and Shareholder Servicing: Distributor: Forum Shareholder Services, LLC Forum Financial Services, Inc. P.O. Box 446 Two Portland Square Portland, Maine 04112 Portland, Maine 04101 (207) 879-0001 (207) 879-1900 - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION May 27, 1998 This Statement of Additional Information supplements the Prospectuses dated May 27, 1998, offering Investor Shares, Institutional Service Shares and Institutional Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund, five portfolios of the Trust, and should be read only in conjunction with the applicable Prospectus, a copy of which may be obtained by an investor without charge by contacting the Trust's Distributor at the address listed above. TABLE OF CONTENTS PAGE 1. General 2 2. Investment Policies 3 3. Investment Limitations 7 4. Investment by Financial Institutions 10 5. Performance Data 12 6. Management 14 7. Determination of Net Asset Value 22 8. Portfolio Transactions 22 9. Additional Purchase and Redemption Information 23 10. Taxation 25 11. Other Information 25 12. Financial Statements 27 Appendix A - Description of Securities Ratings 29 Appendix B - Performance Information 31 Appendix C - Miscellaneous Tables 32 Appendix D -Additional Advertising Materials 39
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. 1. GENERAL THE TRUST The Trust is registered with the SEC as an open-end, management, investment company and was organized as a business trust under the laws of the State of Delaware on August 29, 1995. On January 5, 1996 the Trust succeeded to the assets and liabilities of Forum Funds, Inc. Forum Funds, Inc. was incorporated on March 24, 1980 and assumed the name of Forum Funds, Inc. on March 16, 1987. The Board has the authority to issue an unlimited number of shares of beneficial interest of separate series with no par value per share and to create separate classes of shares within each series. The Trust currently offers shares of 23 series. The series of the Trust are as follows: Daily Assets Treasury Obligations Fund Payson Value Fund Daily Assets Government Fund Payson Balanced Fund. Daily Assets Government Obligations Fund Polaris Global Value Fund Daily Assets Cash Fund Austin Global Equity Fund Daily Assets Municipal Fund Oak Hall Equity Fund Investors Bond Fund Quadra Growth Fund TaxSaver Bond Fund Quadra Value Equity Fund Investors High Grade Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Investors Index Fund Investors Equity Fund Investors Growth Fund Small Company Opportunities Fund International Fund Emerging Markets Fund DEFINITIONS As used in this Statement of Additional Information, the following terms shall have the meanings listed: "FIA" means Forum Investment Advisors, LLC. "Board" means the Board of Trustees of the Trust. "Core Trust" means Core Trust (Delaware). "Core Trust Board" means the Board of Trustees of Core Trust. "FAdS" means Forum Administrative Services, LLC. "FSS" means Forum Forum Shareholder Services, LLC "FFSI" means Forum Financial Services, Inc. "FAcS" means Forum Accounting Services, LLC. "Fund" means Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund or Daily Assets Municipal Fund. "Fund Business Day" has the meaning ascribed thereto in the current Prospectus of the Funds. 2 "NRSRO" means a nationally recognized statistical rating organization. "Portfolio" means Treasury Cash Portfolio, Government Portfolio, Government Cash Portfolio, Cash Portfolio or Municipal Cash Portfolio, each a portfolio of Core Trust. "SAI" means this Statement of Additional Information. "SEC" means the U.S. Securities and Exchange Commission. "Treasury Securities" has the meaning ascribed thereto by the current Prospectus of the Funds. "Trust" means Forum Funds. "U.S. Government Securities" has the meaning ascribed thereto by the current Prospectus of the Funds. "1940 Act" means the Investment Company Act of 1940, as amended. 2. INVESTMENT POLICIES Each Fund currently seeks to achieve its investment objective by investing all of its investable assets in its corresponding Portfolio. The corresponding Portfolios of each Fund are: FUND PORTFOLIO Daily Assets Treasury Obligations Fund Treasury Cash Portfolio Daily Assets Government Fund Government Portfolio Daily Assets Government Obligations Fund Government Cash Portfolio Daily Assets Cash Fund Cash Portfolio Daily Assets Municipal Fund Municipal Cash Portfolio Each Fund has an investment policy that allows it to invest all of its investable assets in its corresponding Portfolio. All other investment policies of each Fund and its corresponding Portfolio are identical. Therefore, although this and the following sections provide supplemental information regarding the investment policies of the Portfolios (and the responsibilities of the Core Trust Board), they apply equally to the investment policies of the Funds (and the responsibilities of the Board). Information with respect to Daily Assets Government Fund for periods prior to December 5, 1995 (for instance, investment advisory fees paid), the date that Fund began investing in Treasury Portfolio, reflects information with respect to the Fund and the Fund's direct investment in securities. Debt securities with longer maturities tend to produce higher yields and are generally subject to greater price movements than obligations with shorter maturities. An increase in interest rates will generally reduce the market value of portfolio investments, and a decline in interest rates will generally increase the value of portfolio investments. Each Portfolio invests at least 95% of its total assets in securities in the highest rating category (as determined pursuant to Rule 2a-7 under the 1940 Act). Government Cash Portfolio and Cash Portfolio currently are prohibited from purchasing any security issued by the Federal Home Loan Mortgage Corporation. This does not prohibit the Portfolios from entering into repurchase agreements collateralized with securities issued by the Federal Home Loan Mortgage Corporation. Except for U.S. Government Securities and to the limited extent otherwise permitted by Rule 2a-7 under the 1940 Act, the Portfolios may not invest more than five percent of their total assets in (i) the securities of any one issuer or (ii) securities that are rated (or are issued by an issuer with comparable outstanding short-term debt that is rated) in the second highest rating category or are unrated and determined by an Adviser to be of comparable quality. 3 RATINGS AS INVESTMENT CRITERIA Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") and other NRSROs are private services that provide ratings of the credit quality of debt obligations. A description of the higher quality ratings assigned to debt securities by several NRSROs is included in Appendix A to this SAI. The Portfolios use these ratings in determining whether to purchase, sell or hold a security. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, securities with the same maturity, interest rate and rating may have different market prices. Subsequent to its purchase by a Portfolio, an issue of securities may cease to be rated or its rating may be reduced. FIA , and in certain cases the Core Trust Board, will consider such an event in determining whether the Portfolio should continue to hold the obligation. Credit ratings attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value. Also, rating agencies may fail to make timely changes in credit ratings in response to developments and events, so that an issuer's current financial condition may be better or worse than the rating indicates. ADJUSTABLE RATE MORTGAGE/ASSET BACKED SECURITIES The Portfolios may purchase adjustable rate mortgage backed or other asset backed securities that are U.S. Government Securities. Treasury Cash Portfolio may purchase mortgage backed or asset backed securities that are U.S. Treasury Securities. These types of securities directly or indirectly represent a participation in, or are secured by and payable from, adjustable rate mortgages or other loans which may be secured by real estate or other assets. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayments of the principal of underlying loans may shorten the effective maturities of these securities. Some adjustable rate securities (or the underlying loans) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. Adjustable rate mortgage backed securities ("MBSs") are securities that have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. MBSs represent interests in pools of mortgages made by lenders such as commercial banks, savings associations, mortgage bankers and mortgage brokers and may be issued by governmental or government-related entities or by non-governmental entities such as commercial banks, savings associations, mortgage bankers and other secondary market issuers. MBSs differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates in that MBSs provide periodic payments which consist of interest and, in most cases, principal. In effect, these payments are a "pass-through" of the periodic payments and optional prepayments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments to holders of MBSs are caused by prepayments resulting from the sale of the underlying property or the refinancing or foreclosure of the underlying mortgage loans. Such prepayments may significantly shorten the effective maturities of MBSs, and occur more often during periods of declining interest rates. Although the rate adjustment feature of MBSs may act as a buffer to reduce sharp changes in the value of MBSs, these securities are still subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. Because the interest rate is reset only periodically, changes in the interest rate on MBSs may lag behind changes in prevailing market interest rates. Also, some MBSs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. During periods of declining interest rates, income to the Portfolios derived from mortgages which are not prepaid will decrease as the coupon rate resets along with the decline in interest rates in contrast to the income on fixed-rate mortgages, which will remain constant. At times, some of the MBSs in which the Portfolios will invest will have higher-than-market interest rates, and will therefore be purchased at a premium above their par value. Unscheduled prepayments, which are made at par, will cause the Portfolios to suffer a loss equal to the unamortized premium, if any. 4 During periods of rising interest rates, changes in the coupon rates of the mortgages underlying the Portfolios' investments may lag behind changes in market interest rates. This may result in a slightly lower value until the coupons reset to market rates. Many MBSs in the Portfolios' portfolios will have "caps" that limit the maximum amount by which the interest rate paid by the borrower may change at each reset date or over the life of the loan and fluctuation in interest rates above these levels could cause these securities to "cap out" and to behave more like fixed-rate debt securities. The Portfolios may purchase collateralized mortgage obligations ("CMOs"), which are collateralized by MBSs or by pools of conventional mortgages. CMOs are typically structured with a number of classes or series that have different maturities and are generally retired in sequence. Each class of bonds receives periodic interest payments according to the coupon rate on the bonds. However, all monthly principal payments and any prepayments from the collateral pool are paid first to the "Class 1" bondholders. The principal payments are such that the Class 1 bonds will be completely repaid no later than, for example, five years after the offering date. Thereafter, all payments of principal are allocated to the next most senior class of bonds until that class of bonds has been fully repaid. Although full payoff of each class of bonds is contractually required by a certain date, any or all classes of bonds may be paid off sooner than expected because of an acceleration in pre-payments of the obligations comprising the collateral pool. Since the inception of the mortgage-related pass-through security in 1970, the market for these securities has expanded considerably. The size of the primary issuance market and active participation in the secondary market by securities dealers and many types of investors make government and government-related pass-through pools highly liquid. Governmental or private entities may create new types of MBSs in response to changes in the market or changes in government regulation of such securities. As new types of these securities are developed and offered to investors, the FAI may, consistent with the investment objective and policies of a Portfolio, consider making investments in such new types of securities. SMALL BUSINESS ADMINISTRATION SECURITIES. Government Cash Portfolio and Cash Portfolio may purchase securities issued by the Small Business Administration ("SBA"). SBA securities are variable rate securities that carry the full faith and credit of the United States Government, and generally have an interest rate that resets monthly or quarterly based on a spread to the Prime rate. SBA securities generally have maturities at issue of up to 30 years. No Portfolio may purchase an SBA security if, immediately after the purchase, (i) the Portfolio would have more than 15% of its net assets invested in SBA securities or (ii) either the unamortized premium or unaccreted discount on SBA securities held by the Portfolio divided by the sum of the premium or discount securities' par amount, respectively, would exceed 2.5% (0.025). WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES Each Portfolio may purchase securities on a when-issued or delayed delivery basis. In those cases, the purchase price and the interest rate payable on the securities are fixed on the transaction date and delivery and payment may take place a month or more after the date of the transaction. At the time a Portfolio makes the commitment to purchase securities on a when-issued or delayed delivery basis, the Portfolio will record the transactions as a purchase and thereafter reflect the value each day of such securities in determining its net asset value. If a Portfolio chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. Failure of an issuer to deliver the security may result in the Portfolio incurring a loss or missing an opportunity to make an alternative investment. When a Portfolio agrees to purchase a security on a when-issued or delayed delivery basis, its custodian will set aside and maintain in a segregated account cash, U.S. Government Securities or other liquid assets with a market value at all times at least equal to the amount of its commitment. Core Trust's custodian will set aside and maintain in a segregated account cash and securities with a market value at all times equal to the amount of each Portfolio's forward commitment obligations. 5 ILLIQUID SECURITIES Each Portfolio may invest up to 10% of its net assets in illiquid securities. The term "illiquid securities" for this purpose means repurchase agreements not entitling the holder to payment of principal within seven days and securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. The Core Trust Board has ultimate responsibility for determining whether specific securities are liquid or illiquid. The Core Trust Board has delegated the function of making day-to-day determinations of liquidity to the FAI and, with respect to certain types of restricted securities which may be deemed to be liquid, has adopted guidelines to be followed by the FAI. FAI takes into account a number of factors in reaching liquidity decisions, including but not limited to (1) the frequency of trades and quotations for the security; (2) the number of dealers willing to purchase or sell the security and the number of other potential buyers; (3) the willingness of dealers to undertake to make a market in the security; (4) the nature of the marketplace trades, including the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer; (5) whether the security is registered; and (6) if the security is not traded in the United States, whether it can be freely traded in a liquid foreign securities market. FAI monitors the liquidity of the securities in each Portfolio's portfolio and report periodically to the Core Trust Board. Certificates of deposit and other fixed time deposits that carry an early withdrawal penalty or mature in greater than seven days are treated by the Portfolio as illiquid securities if there is no readily available market for the instrument. REPURCHASE AGREEMENTS AND SECURITIES LENDING In order to obtain additional income, the Portfolios may from time to time lend securities from their portfolio to brokers, dealers and financial institutions. Securities loans must be callable at any time and must be continuously secured by collateral from the borrower in the form of cash or U.S. Government Securities. The Portfolios receive fees in respect of securities loans from the borrower or interest from investing the cash collateral. The Portfolios may pay fees to arrange the loans. The Portfolios may not lend portfolio securities in an amount greater than 33 1/3% of the value of their total assets. In connection with entering into repurchase agreements and securities loans, the Portfolios require continual maintenance by Core Trust's custodian of the market value of the underlying collateral in amounts equal to, or in excess of, the repurchase price plus the transaction costs (including loss of interest) that the Portfolios could expect to incur upon liquidation of the collateral if the counterparty defaults. The Portfolios' use of securities lending entails certain risks not associated with direct investments in securities. For instance, in the event that bankruptcy or similar proceedings were commenced against a counterparty in these transactions or a counterparty defaulted on its obligations, a Portfolio might suffer a loss. Failure by the other party to deliver a security purchased by a Portfolio may result in a missed opportunity to make an alternative investment. FAI monitors the creditworthiness of counterparties to these transactions under the Core Trust Board's general supervision and pursuant to specific Core Trust Board adopted procedures and intend to enter into these transactions only when they believe the counterparties present minimal credit risks and the income to be earned from the transaction justifies the attendant risks. VARIABLE AND FLOATING RATE SECURITIES The yield of variable and floating rate securities varies in relation to changes in specific money market rates, such as the Prime Rate. A "variable" interest rate adjusts at predetermined intervals (for example, daily, weekly or monthly), while a "floating" interest rate adjusts whenever a specified benchmark rate (such as the bank prime lending rate) changes. These changes are reflected in adjustments to the yields of the variable and floating rate securities, and different securities may have different adjustment rates. Accordingly, as interest rates increase or decrease, the capital appreciation or depreciation may be less on these obligations than for fixed rate obligations. To the extent that the Portfolios invest in long-term variable or floating rate securities, FAI believes that the Portfolios may be able to take advantage of the higher yield that is usually paid on long-term securities. 6 Cash Portfolio also may purchase variable and floating rate master notes of corporations, which are unsecured obligations redeemable upon notice that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangement with the issuer of the instrument. These obligations include master demand notes that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangement with the issuer of the instrument. The issuer of these obligations often has the right, after a given period, to prepay their outstanding principal amount of the obligations upon a specified number of days' notice. These obligations generally are not traded, nor generally is there an established secondary market for these obligations. To the extent a demand note does not have a seven day or shorter demand feature and there is no readily available market for the obligation, it is treated as an illiquid security. INVESTMENT COMPANY SECURITIES In connection with managing their cash position, the Portfolios may invest in the securities of other investment companies that are money market funds within the limits proscribed by the 1940 Act. Under normal circumstances, each Portfolio may invest up to 15% of its assets in money market funds. The Portfolio only invests in money market funds when it has excess cash and FAI believes that the investment is in the best interest of the Portfolio. In addition to the Portfolio's expenses (including the various fees), as a shareholder in another investment company, the Portfolio bears its pro rata portion of the other investment company's expenses (including fees). Those expenses are not part of the Portfolio's (or Fund's) expense ratio, but rather are reflected in the yield of the investment in the money market fund. ZERO-COUPON SECURITIES Government Portfolio may invest in zero-coupon securities such as Treasury bills and separately traded principal and interest components of Treasury Securities issued or guaranteed under the U.S. Treasury's Separate Trading of Registered Interest and Principal of Securities ("STRIPS") program. These securities are sold at original issue discount and pay no interest to holders prior to maturity. Because of this, zero-coupon securities may be subject to greater fluctuation of market value than the other securities in which the Portfolios may invest. All zero-coupon securities in which the Portfolio invests will have a maturity of less than 13 months. The Portfolio (and thus the Fund) must include a portion of the original issue discount of zero-coupon securities, if any, as income even though these securities do not pay any interest until maturity. Because the Fund distributes all of its net investment income, the Fund may have to sell portfolio securities to distribute imputed income, which may occur at a time when FAI would not have chosen to sell such securities and which may result in a taxable gain or loss. 3. INVESTMENT LIMITATIONS Fundamental investment limitations of a Fund or of a Portfolio cannot be changed without the affirmative vote of the lesser of (i) more than 50% of the outstanding interests of the respective Fund or Portfolio or (ii) 67% of the shares of the Fund or Portfolio present or represented at a shareholders or interestholders meeting at which the holders of more than 50% of the outstanding interests of the Fund or Portfolio are present or represented. Except as required by the 1940 Act, if a percentage restriction on investment or utilization of assets is adhered to at the time an investment is made, a later change in percentage resulting from a change in the market values of a Portfolio's assets, the change in status of a security or purchases and redemptions of shares will not be considered a violation of the limitation. Each Fund has adopted the same fundamental and nonfundamental investment limitations as its corresponding Portfolio. In addition, the Portfolios and the Funds have adopted a fundamental policy which provides that, notwithstanding any other investment policy or restriction (whether fundamental), the Portfolio or Fund, as applicable, may invest all of its assets in the securities of a single pooled investment fund having substantially the same investment objectives, policies and restrictions as the Fund or Portfolio, as applicable. 7 GOVERNMENT PORTFOLIO - FUNDAMENTAL POLICIES Government Portfolio has adopted the following fundamental investment limitations which are in addition to those contained in the Prospectus of Daily Assets Government Fund and which may not be changed without shareholder approval. The Portfolio may not: (1) DIVERSIFICATION. With respect to 75% of its assets, purchase securities, other than U.S. Government Securities, of any one issuer if more than 5% of the value of the Portfolio's total assets would at the time of purchase be invested in any one issuer. (2) CONCENTRATION. Purchase securities, other than U.S. Government Securities, if more than 25% of the value of the Portfolio's total assets would be invested in securities of issuers conducting their principal business activity in the same industry, provided that consumer finance companies and industrial finance companies are considered to be separate industries and that there is no limit on the purchase of the securities of domestic commercial banks. (3) UNDERWRITING. Act as an underwriter of securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed to be an underwriter for purposes of the Securities Act of 1933. (4) REAL ESTATE. Purchase or sell (i) real estate or any interest therein, except that the Portfolio may invest in debt obligations secured by real estate or interests therein or issued by companies that invest in real estate or interests therein and (ii) real property (including limited partnership interests, but excluding readily marketable interests in real estate investment trusts or readily marketable securities of companies which invest in real estate.) (5) COMMODITIES. Purchase or sell physical commodities or contracts relating to physical commodities, provided that currencies and currency-related contracts will not be deemed to be physical commodities. (6) BORROWING. Borrow money, except for temporary or emergency purposes (including the meeting of redemption requests). Total borrowings may not exceed 33 1/3% of the Portfolio's total assets and borrowing for purposes other than meeting redemptions may not exceed 5% of the value of each the Portfolio's total assets. Outstanding borrowings in excess of 5% of the value of the Portfolio's total assets must be repaid before any subsequent investments are made by the Portfolio. (7) SENIOR SECURITIES. Issue senior securities except pursuant to Section 18 of the 1940 Act and except that the Portfolio may borrow money subject to investment limitations specified in the Portfolio's Prospectus. (8) LENDING. Make loans, except that the Portfolio may (i) purchase debt securities which are otherwise permissible investments, (ii) enter into repurchase agreements and (iii) lend portfolio securities. The Portfolio may not lend portfolio securities in an amount greater than 33 1/3% of the value of its total assets. (9) PLEDGING. Pledge, mortgage or hypothecate its assets, except to secure permitted indebtedness. Collateralized loans of securities are not deemed to be pledges or hypothecations for this purpose. (10) OPTIONS. Write put and call options. (11) INVEST FOR CONTROL. Invest for the purpose of exercising control over any person. (12) RESTRICTED SECURITIES. Purchase restricted securities. 8 GOVERNMENT PORTFOLIO - NONFUNDAMENTAL POLICIES Government Portfolio has adopted the following nonfundamental investment limitations that may be changed by the Core Trust Board without shareholder approval. The Portfolio may not: (a) SECURITIES WITH VOTING RIGHTS. Purchase securities having voting rights, except the Portfolio may invest in securities of other investment companies to the extent permitted by the 1940 Act. (b) MARGIN; SHORT SALES. Purchase securities on margin, or make short sales of securities, except for the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities. (c) LIQUIDITY. Acquire securities or invest in repurchase agreements with respect to any securities if, as a result, more than 10% of the Portfolio's net assets (taken at current value) would be invested in repurchase agreements not entitling the holder to payment of principal within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. TREASURY CASH PORTFOLIO, GOVERNMENT CASH PORTFOLIO, CASH PORTFOLIO AND MUNICIPAL CASH PORTFOLIO -- FUNDAMENTAL POLICIES Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio have adopted the following fundamental investment limitations which are in addition to those contained in the Prospectuses offering Daily Assets Treasury Obligations Fund, Daily Assets Government Obligations Fund, Daily Assets Cash Fund and Daily Assets Municipal Fund and which may not be changed without shareholder approval. No Portfolio may: (1) DIVERSIFICATION. With respect to 75% of its assets, purchase a security other than a U.S. Government Security (or, in the case of Municipal cash Portfolio, other than a security of an investment company) if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of a single issuer. (2) CONCENTRATION. Purchase securities if, immediately after the purchase, more than 25% of the value of the Portfolio's total assets would be invested in the securities of issuers having their principal business activities in the same industry; provided, however, that there is no limit on investments in U.S. Government Securities. (3) UNDERWRITING. Underwrite securities of other issuers, except to the extent that the Portfolio may be considered to be acting as an underwriter in connection with the disposition of portfolio securities. (4) REAL ESTATE. Purchase or sell real estate or any interest therein, except that the Portfolio may invest in debt obligations secured by real estate or interests therein or issued by companies that invest in real estate or interests therein. (5) COMMODITIES. Purchase or sell physical commodities or contracts relating to physical commodities, provided that currencies and currency-related contracts will not be deemed to be physical commodities. (6) BORROWING. Borrow money, except for temporary or emergency purposes (including the meeting of redemption requests) and except for entering into reverse repurchase agreements, provided that borrowings do not exceed 33 1/3% of the value of the Portfolio's total assets. (7) SENIOR SECURITIES. Issue senior securities except as appropriate to evidence indebtedness that the Portfolio is permitted to incur, and provided that the Portfolio may issue shares of additional series or classes that the Trustees may establish. (8) LENDING. Make loans except for loans of portfolio securities, through the use of repurchase agreements, and through the purchase of debt securities that are otherwise permitted investments. 9 (9) THRIFT INVESTOR LIMITATIONS. With respect to Government Cash Portfolio, purchase or hold any security that (i) a Federally chartered savings association may not invest in, sell, redeem, hold or otherwise deal pursuant to law or regulation, without limit as to percentage of the association's assets and (ii) pursuant to 12 C.F.R. Section 566.1 would cause shares of the Portfolio not to be deemed to be short term liquid assets when owned by Federally chartered savings associations. For purposes of limitation (2): (i) loan participations are considered to be issued by both the issuing bank and the underlying corporate borrower; (ii) utility companies are divided according to their services (for example, gas, gas transmission, electric and telephone will each be considered a separate industry); and (iii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry. TREASURY CASH PORTFOLIO, GOVERNMENT CASH PORTFOLIO, CASH PORTFOLIO AND MUNICIPAL CASH PORTFOLIO - NONFUNDAMENTAL POLICIES Treasury Cash Portfolio, Government Cash Portfolio, Cash Portfolio and Municipal Cash Portfolio - have adopted the following nonfundamental investment limitations that may be changed by the Core Trust Board without shareholder approval. Each Portfolio may not: (a) DIVERSIFICATION. With respect to 100% of its assets, purchase a security other than a U.S. Government Security if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of a single issuer, unless the investment is permitted by Rule 2a-7 under the 1940 Act. (b) BORROWING. Purchase securities for investment while any borrowing equaling 5% or more of the Portfolio's total assets is outstanding; and if at any time the Portfolio's borrowings exceed the Portfolio's investment limitations due to a decline in net assets, such borrowings will be promptly (within three days) reduced to the extent necessary to comply with the limitations. Borrowing for purposes other than meeting redemption requests will not exceed 5% of the value of the Portfolio's total assets. (c) Purchase securities that have voting rights, except the Portfolio may invest in securities of other investment companies to the extent permitted by the 1940 Act. (d) MARGIN; SHORT SALES. Purchase securities on margin, or make short sales of securities, except for the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities. (e) LIQUIDITY. Acquire securities or invest in repurchase agreements with respect to any securities if, as a result, more than 10% of the Portfolio's net assets (taken at current value) would be invested in repurchase agreements not entitling the holder to payment of principal within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. 4. INVESTMENTS BY FINANCIAL INSTITUTIONS INVESTMENT BY SHAREHOLDERS THAT ARE BANKS - DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Government Cash Portfolio invests only in instruments which, if held directly by a bank or bank holding company organized under the laws of the United States or any state thereof, would be assigned to a risk-weight category of no more than 20% under the current risk based capital guidelines adopted by the Federal bank regulators (the "Guidelines"). In the event that the Guidelines are revised, the Portfolio's portfolio will be modified accordingly, including by disposing of portfolio securities or other instruments that no longer qualify under the Guidelines. In addition, the Portfolio does not intend to hold in its portfolio any securities or instruments that would be subject to restriction as to amount held by a National bank under Title 12, Section 24 (Seventh) of the United States Code. If the Portfolio's portfolio includes any instruments that would be subject to a restriction as to amount held by a National bank, investment in the Portfolio may be limited. 10 The Guidelines provide that shares of an investment fund are generally assigned to the risk-weight category applicable to the highest risk-weighted security or instrument that the fund is permitted to hold. Accordingly, Portfolio shares should qualify for a 20% risk weighting under the Guidelines. The Guidelines also provide that, in the case of an investment fund whose shares should qualify for a risk weighting below 100% due to limitations on the assets which it is permitted to hold, bank examiners may review the treatment of the shares to ensure that they have been assigned an appropriate risk-weight. In this connection, the Guidelines provide that, regardless of the composition of an investment fund's assets, shares of a fund may be assigned to the 100% risk-weight category if it is determined that the fund engages in activities that appear to be speculative in nature or has any other characteristics that are inconsistent with a lower risk weighting. FIA has no reason to believe that such a determination would be made with respect to the Portfolio. Their are various subjective criteria for making this determination and, therefore, it is not possible to provide any assurance as to how Portfolio shares will be evaluated by bank examiners. Before acquiring Fund shares, prospective investors that are banks or bank holding companies, particularly those that are organized under the laws of any country other than the United States or of any state, territory or other political subdivision of the United States, and prospective investors that are U.S. branches and agencies of foreign banks or Edge Corporations, should consult all applicable laws, regulations and policies, as well as appropriate regulatory bodies, to confirm that an investment in Fund Shares is permissible and in compliance with any applicable investment or other limits. Fund shares held by National banks are generally required to be revalued periodically and reported at the lower of cost or market value. Such shares may also be subject to special regulatory reporting, accounting and tax treatment. In addition, a bank may be required to obtain specific approval from its board of directors before acquiring Fund shares, and thereafter may be required to review its investment in a Fund for the purpose of verifying compliance with applicable Federal banking laws, regulations and policies. National banks generally must review their holdings of shares of a Fund at least quarterly to ensure compliance with established bank policies and legal requirements. Upon request, the Portfolios will make available to the Funds investors information relating to the size and composition of their portfolio for the purpose of providing Fund shareholders with this information. INVESTMENT BY SHAREHOLDERS THAT ARE CREDIT UNIONS - DAILY ASSETS TREASURY OBLIGATIONS FUND AND DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Treasury Cash Portfolio and Government Cash Portfolio limit their investments to investments that are legally permissible for Federally chartered credit unions under applicable provisions of the Federal Credit Union Act (including 12 U.S.C. Section 1757(7), (8) and (15)) and the applicable rules and regulations of the National Credit Union Administration (including 12 C.F.R. Part 703, Investment and Deposit Activities), as such statutes and rules and regulations may be amended. The Portfolios limit their investments to U.S. Government Securities (including Treasury STRIPS) and repurchase agreements fully collateralized by U.S. Government Securities. Certain U.S. Government Securities owned by a Portfolio may be mortgage or asset backed, but, except to reduce interest rate risk, no such security will be (i) a stripped mortgage backed security ("SMBS"), (ii) a collateralized mortgage obligation ("CMO") or real estate mortgage investment conduit ("REMIC") that meets any of the tests outlined in 12 C.F.R. Section 703.5(g) or (iii) a residual interest in a CMO or REMIC. In order to reduce interest rate risk, the Portfolios may purchase a SMBS, CMO, REMIC or residual interest in a CMO or REMIC but only in accordance with 12 C.F.R. Section 703.5(i). Treasury Cash Portfolio and Government Cash Portfolio have no current intention to make any such investment. The Portfolios also may invest in reverse repurchase agreements in accordance with 12 C.F.R. 703.4(e) to the extent otherwise permitted herein and in the Prospectus. INVESTMENTS BY SHAREHOLDERS THAT ARE SAVINGS ASSOCIATIONS - DAILY ASSETS TREASURY OBLIGATIONS FUND AND DAILY ASSETS GOVERNMENT OBLIGATIONS PORTFOLIO Treasury Cash Portfolio and Government Cash Portfolio limit their investments to investments that are legally permissible for Federally chartered savings associations without limit as to percentage under applicable provisions 11 of the Home Owners' Loan Act (including 12 U.S.C. Section 1464) and the applicable rules and regulations of the Office of Thrift Supervision, as such statutes and rules and regulations may be amended. In addition, the Portfolios limit their investments to investments that are permissible for an open-end investment company to hold and would permit shares of the investment company to qualify as liquid assets under 12 C.F.R. Section 566.1(g) and as short-term liquid assets under 12 C.F.R. Section 566.1(h). These policies may be amended only by approval of a Portfolio's interestholders or Fund's shareholders, as applicable. 5. PERFORMANCE DATA For a listing of certain performance data as of August 31, 1997, see Appendix B. YIELD INFORMATION Each Fund may provide current annualized and effective annualized yield quotations for each class based on its daily dividends. These quotations may from time to time be used in advertisements, shareholder reports or other communications to shareholders. All performance information supplied by a Fund is historical and is not intended to indicate future returns. In performance advertising the Funds may compare any of their performance information with data published by independent evaluators such as Morningstar, Lipper Analytical Services, Inc., IBC Financial Data, Inc. or CDA/Wiesenberger or other companies which track the investment performance of investment companies ("Fund Tracking Companies"). The Funds may also compare any of their performance information with the performance of recognized stock, bond and other indices. The Funds may also refer in such materials to mutual fund performance rankings and other data published by Fund Tracking Companies. Performance advertising may also refer to discussions of a Fund and comparative mutual fund data and ratings reported in independent periodicals, such as newspapers and financial magazines. Any current yield quotation of a class of a Fund which is used in such a manner as to be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as amended, shall consist of an annualized historical yield, carried at least to the nearest hundredth of one percent, based on a specific seven-calendar-day period and shall be calculated by dividing the net change during the seven-day period in the value of an account having a balance of one share at the beginning of the period by the value of the account at the beginning of the period, and multiplying the quotient by 365/7. For this purpose, the net change in account value would reflect the value of additional shares purchased with dividends declared on the original share and dividends declared on both the original share and any such additional shares, but would not reflect any realized gains or losses from the sale of securities or any unrealized appreciation or depreciation on portfolio securities. In addition, any effective annualized yield quotation used by a Fund shall be calculated by compounding the current yield quotation for such period by adding 1 to the product, raising the sum to a power equal to 365/7, and subtracting 1 from the result. Although published yield information is useful to investors in reviewing a class' performance, investors should be aware that each Fund's yield fluctuates from day to day and that the class' yield for any given period is not an indication or representation by the Fund of future yields or rates of return on the Fund's shares. Also, Participating Organizations (as that term is used in the Prospectus) may charge their customers direct fees in connection with an investment in a Fund, which will have the effect of reducing the class' net yield to those shareholders. The yields of a class are not fixed or guaranteed, and an investment in the Fund is not insured or guaranteed. Accordingly, yield information may not necessarily be used to compare shares of the Fund with investment alternatives which, like money market instruments or bank accounts, may provide a fixed rate of interest. Also, it may not be appropriate directly to compare a Fund's yield information to similar information of investment alternatives which are insured or guaranteed. Income calculated for the purpose of determining a class' yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding assumed in yield calculations, the yield quoted for a class may differ from the rate of distribution the class paid over the same period or the rate of income reported in the Fund's financial statements. 12 OTHER PERFORMANCE AND SALES LITERATURE MATTERS Total returns quoted in sales literature reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions. Average annual returns generally are calculated by determining the growth or decline in value of a hypothetical historical investment in a Fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that the performance is not constant over time but changes from year to year, and that average annual returns represent averaged figures as opposed to the actual year-to-year performance of the Funds. Average annual total return is calculated by finding the average annual compounded rates of return of a hypothetical investment over such periods according to the following formula: P(1+T)n = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value: ERV is the value, at the end of the applicable period, of a hypothetical $1,000 payment made at the beginning of the applicable period. OTHER ADVERTISING MATTERS The Funds may advertise other forms of performance. For example, average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, and/or a series of redemptions over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. Any performance information may be presented numerically or in a table, graph or similar illustration. A Fund may also include various information in its advertisements. Information included in the Fund's advertisements may include, but is not limited to: (i) the Fund's (or the Fund's corresponding Portfolios) portfolio holdings and portfolio allocation as of certain dates, such as portfolio diversification by instrument type, by instrument or by maturity, (ii) descriptions of the portfolio managers of the Fund or the Fund's corresponding Portfolio and the portfolio management staff of FIA or summaries of the views of the portfolio managers with respect to the financial markets, (iii) the results of a hypothetical investment in a Fund over a given number of years, including the amount that the investment would be at the end of the period, (iv) the effects of earning Federally and, if applicable, state tax-exempt income from the Fund or investing in a tax-deferred account, such as an individual retirement account and (v) the net asset value, net assets or number of shareholders of a Fund as of one or more dates. In connection with its advertisements a Fund may provide "shareholders' letters" which serve to provide shareholders or investors an introduction into the Fund's, the Portfolio's, the Trust's, the Core Trust's or any of the Trust's or the Core Trust's service providers' policies or business practices. Appendix D contains further information on matters that may be advertised. 13 6. MANAGEMENT TRUSTEES AND OFFICERS OF THE TRUST The trustees and officers of the Trust and their principal occupations during the past five years are set forth below. Each Trustee who is an "interested person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk. John Y. Keffer,* Chairman and President (age 55) President, Forum Financial Group, LLC (mutual fund services company holding company). Mr. Keffer is also a director and/or officer of various registered investment companies for which the various Forum Financial Group of Companies provides services. His address is Two Portland Square, Portland, Maine 04101. Costas Azariadis, Trustee (age 55) Professor of Economics, University of California, Los Angeles, since July 1992. Prior thereto, Dr. Azariadis was Professor of Economics at the University of Pennsylvania. His address is Department of Economics, University of California, Los Angeles, 405 Hilgard Avenue, Los Angeles, California 90024. James C. Cheng, Trustee (age 55) President of Technology Marketing Associates (a marketing consulting company) since September 1991. Prior thereto, Mr. Cheng was President and Chief Executive Officer of Network Dynamics, Incorporated (a software development company). His address is 27 Temple Street, Belmont, Massachusetts 02178. J. Michael Parish, Trustee (age 54) Partner at the law firm of Winthrop Stimson Putnam & Roberts since 1989. Prior thereto, he was a partner at LeBoeuf, Lamb, Leiby & MacRae, a law firm of which he was a member from 1974 to 1989. His address is 40 Wall Street, New York, New York 10005. Mark D. Kaplan, Vice President (age 42) Director, Investments, Forum Financial Group, LLC with which he has been associated since September 1995. Prior thereto, Mr. Kaplan was Managing Director and Director of Research at H.M. Payson & Co. His address is Two Portland Square, Portland, Maine 04101. Stacey Hong, Treasurer (age 32) Director, Fund Accounting, Forum Financial Group, LLC, with which he has been associated since April 1992. Prior thereto, Mr. Hong was as Senior Accountant with Ernst and Young. His address is Two Portland Square, Portland, Maine 04101. Max Berueffy, Secretary (age 46) Senior Counsel, Forum Financial Group, LLC, with which he has been associated since 1994. Prior thereto, Mr. Berueffy was on the staff of the U.S. Securities and Exchange Commission for seven years, first in the appellate branch of the Office of the General Counsel, then as a counsel to Commissioner Grundfest and finally as a senior special counsel in the Division of Investment Management. Mr. Berueffy also serves as an officer of other registered investment companies for which the Forum Financial Group of Companies provides services. His address is Two Portland Square, Portland, Maine 04101. 14 Leslie K. Klenk, Assistant Secretary (age 33) Assistant Counsel, Forum Financial Group, LLC, with which she has been associated since April 1998. Prior thereto, Ms. Klenk was Vice President and Associate General Counsel at Smith Barney Inc. . Her address is Two Portland Square, Portland, Maine 04101. Pamela Stutch, Assistant Secretary (age 30) Fund Administrator, Forum Financial Group, LLC, with which she has been associated since May 1998. Prior thereto, Ms. Stutch attended Temple University School of Law and graduated in 1997. Ms. Stutch was as a legal intern for the Maine Department of the Attorney General. TRUSTEES AND OFFICERS OF CORE TRUST The Trustees and officers of Core Trust and their principal occupations during the past five years are set forth below. Each of the Trustees of the Trust is also a Trustee of Core Trust and several officers of the Trust serve as officers of Core Trust . Each Trustee who is an "interested person" (as defined by the 1940 Act) of Core Trust is indicated by an asterisk. Accordingly, for background information pertaining to the Trustees and these officers, see "Trustees and Officers of the Trust" above. John Y. Keffer,* Chairman and President. Costas Azariadis, Trustee. James C. Cheng, Trustee. J. Michael Parish, Trustee. Thomas G. Sheehan, Vice President (age 44) Director, Relationship Management, Forum Financial Group, LLC, with which he has been associated since October, 1993. Prior thereto, Mr. Sheehan was a Special Counsel in the Division of Investment Management of the U.S. Securities and Exchange Commission in Washington, D.C. His address is Two Portland Square, Portland, Maine 04101. Stacey Hong, Treasurer Pamela J. Wheaton, Assistant Treasurer (age 38) Manager, Tax and Compliance, Forum Financial Group, LLC, with which she has been associated since 1989. Ms. Wheaton is also an officer of other registered investment companies for which the Forum Financial Group of Companies provides services. Her address is Two Portland Square, Portland, Maine 04101. David I. Goldstein, Vice President and Secretary (age 37) General Counsel, Forum Financial Group, LLC, with which he has been associated since 1991. Mr. Goldstein also serves as an officer of other registered investment companies for which the Forum Financial Group of Companies provides services. His address is Two Portland Square, Portland, Maine 04101. Max Berueffy, Vice President and Assistant Secretary Leslie K. Klenk, Assistant Secretary. 15 Pam Stutch, Assistant Secretary TRUSTEE COMPENSATION THE TRUST. Each Trustee of the Trust (other than John Y. Keffer, who is an interested person of the Trust) is paid $1,000 for each Board meeting attended (whether in person or by electronic communication) and $1,000 for each committee meeting attended on a date when a Board meeting is not held. As of March 31, 1997, in addition to the $1,000 for each Board meeting attended, each Trustee is paid $100 per active portfolio of the Trust. To the extent a meeting relates to only certain portfolios of the Trust, Trustees are paid the $100 fee only with respect to those portfolios. Trustees are also reimbursed for travel and related expenses incurred in attending meetings of the Board. No officer of the Trust is compensated by the Trust. The following table provides the aggregate compensation paid to each Trustee. The Trust has not adopted any form of retirement plan covering Trustees or officers. Information is presented for the six months ended February 28, 1998. Accrued Annual Aggregate Pension Benefits Upon Total Trustee Compensation Benefits Retirement Compensation ------- ------------ -------- ---------- ------------ Mr. Keffer None None None None Mr. Azariadis $5,219 None None $5,219 Mr. Cheng $5,219 None None $5,219 Mr. Parish $5,219 None None $5,219
CORE TRUST. Each of the Trustees of the Trust is also a Trustee of Core Trust. Each Trustee of Core Trust is paid $1,000 for each meeting of the Core Trust Board attended (whether in person or by electronic communication) plus $100 for each active portfolio of Core Trust and is paid $1000 for each committee meeting attended on a date when the Core Trust Board meeting is not held. As of August 31, 1997, there were fifteen active portfolios of Core Trust (including certain of the Portfolios). Trustees are also reimbursed for travel and related expenses incurred in attending meetings of the Core Trust Board. No officer of Core Trust is compensated or reimbursed for expenses by Core Trust. Since commencement of the Trust's operations, Mr. Keffer has not accepted any fees for his services as Trustee. The following table provides the aggregate compensation paid to each trustee of Core Trust for the six months ended February 28, 1998. Core Trust has not adopted any form of retirement plan covering trustees or officers of Core Trust. Accrued Annual Aggregate Pension Benefits Upon Total Trustee Compensation Benefits Retirement Compensation ------- ------------ -------- ---------- ------------ Mr. Keffer None None None None Mr. Azariadis $1,044 None None $1,044 Mr. Parish $1,044 None None $1,044 Mr. Cheng $1,044 None None $1,044
Each Trustee of Core Trust (other than John Y. Keffer, who is an interested person of Core Trust) is paid $1,000 for each Core Trust Board meeting attended (whether in person or by electronic communication) plus $100 per active portfolio of Core Trust and is paid $1,000 for each committee meeting attended on a date when a Core Trust Board meeting is not held. To the extent a meeting relates to only certain portfolios of Core Trust, trustees are paid the $100 fee only with respect to those portfolios. Core Trust trustees are also reimbursed for travel and related expenses incurred in attending meetings of the Core Trust Board 16 INVESTMENT ADVISERS FIA furnishes to the Portfolios at its own expense all services, facilities and personnel necessary in connection with managing the Portfolios' investments and effecting portfolio transactions for the Portfolios, pursuant to an investment advisory agreement between FIA and Core Trust (an "Advisory Agreement"). The Advisory Agreement provides, with respect to each Portfolio, for an initial term of one year from its effective date and for its continuance in effect for successive twelve-month periods thereafter, provided the Advisory Agreement is specifically approved at least annually by the Core Trust Board or by vote of the interestholders of the Portfolios, and in either case by a majority of the Trustees who are not parties to the Advisory Agreement or interested persons of any such party. Prior to January 2, 1998, Linden Asset Management, Inc. ("Linden") served as investment adviser to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, and Forum Advisors, Inc. served as investment adviser to Government Portfolio. Linden and Forum Advisors, Inc. also acted as investment subadvisors to each Portfolio that they did not manage on a daily basis. On January 2, 1998, Forum Advisors, Inc. acquired Linden and reorganized into a new company named Forum Investment Advisors, LLC. These transactions have not effected any change in advisory staff, portfolio managers, or advisory fees, or any other material change. Table 1 in Appendix C shows the dollar amount of fees paid under the investment advisory agreements between Core Trust and Linden and between Core Trust and Forum Advisors, Inc., as applicable, with respect to each Portfolio or, prior to Daily Assets Government Fund investing in Government Portfolio, the dollar amount of fees paid under the Investment Advisory Agreement between the Trust and Forum Advisors, Inc. with respect to the Fund. This information is provided for the past three years (or shorter time a Fund or Portfolio has been operational). The Advisory Agreement is terminable without penalty by Core Trust with respect to the Portfolio on 60 days' written notice when authorized either by vote of the Portfolio's interestholders or by a vote of a majority of the Core Trust Board, or by FIA on not more than 60 days' nor less than 30 days' written notice, and will automatically terminate in the event of its assignment. The Advisory Agreement also provides that, with respect to a Portfolio, FIA shall not be liable for any error of judgment or mistake of law or for any act or omission in the performance of its duties to the Portfolio, except for willful misfeasance, bad faith or gross negligence in the performance of FIA's duties or by reason of reckless disregard of its obligations and duties under the Advisory Agreement. The Advisory Agreement provides that FIA may render services to others. For its services, FIA receives an advisory fee at an annual rate of 0.05% of Government Portfolio's and Municipal Cash Portfolio's average daily net assets For services provided to Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, FIA receives an advisory fee based upon the total average daily net assets of those Portfolios ("Total Portfolio Assets"). FIA's fee is calculated at an annual rate on a cumulative basis as follows: 0.06% of the first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of Total Portfolio Assets, and 0.03% of the remaining Total Portfolio Assets. Prior to January 15, 1996, Forum Advisors, Inc. acted as Daily Assets Government Fund's investment adviser under an investment advisory agreement with Forum Funds, Inc. Under that investment advisory agreement, Forum Advisors, Inc. received a fee at an annual rate of 0.20% of the average daily net assets of the Fund. In addition to receiving an advisory fee from a Portfolio it advises, FIA may also act and be compensated as investment manager for its clients with respect to assets which are invested in the Portfolio. In some instances, FIA may elect to credit against any investment management fee received from a client who is also a shareholder in the Portfolio an amount equal to all or a portion of the fees received by FIA or any affiliate of FIA from the Portfolio with respect to the client's assets invested in the Portfolio. The Trust has confirmed its obligation to pay all of its expenses, including: interest charges, taxes, brokerage fees and commissions; certain insurance premiums; fees, interest charges and expenses of the custodian, transfer agent and dividend disbursing agent; telecommunications expenses; auditing, legal and compliance expenses; costs of forming the trust and maintaining corporate existence; costs of preparing and printing the Trust's prospectuses, 17 statements of additional information, account application forms and shareholder reports and delivering them to existing and prospective shareholders; 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 shares of the Funds; costs of reproduction, stationery and supplies; compensation of Trustees, officers and employees of the Trust and costs of other personnel performing services for the Trust; costs of corporate meetings; SEC registration fees and related expenses; state securities laws registration fees and related expenses; and fees payable to an investment adviser under an investment advisory agreement. Anthony R. Fischer, Jr., is primarily responsible for the day-to-day management of the Portfolios. Mr. Fischer was the sole stockholder, director and officer of Linden from 1992 until its acquisition by FIA. He has been primarily responsible for the day-to-day management of Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio since their inception. Mr. Fischer has over twenty-five years experience in the money market industry. From 1984 through 1989, Mr. Fischer served as Senior Vice President and Treasurer of United California Savings Bank, Santa Ana, California, and prior thereto, as a Manager for five years at PaineWebber Jackson & Curtis, New York, New York. ADMINISTRATION Table 2 in Appendix C shows the dollar amount of fees paid for administrative services by the Funds and the Portfolios. This information is provided for the past three years (or shorter time a Fund or Portfolio has been operational). THE TRUST. Pursuant to an administration agreement (the "Trust Administration Agreement"), FAdS supervises the overall management of the Trust (which includes, among other responsibilities, negotiation of contracts and fees with, and monitoring of performance and billing of, the transfer agent and custodian and arranging for maintenance of books and records of the Trust) and provides the Trust with general office facilities. The Trust Administration Agreement may be terminated by either party without penalty on 60 days' written notice and may not be assigned except upon written consent by both parties. The Trust Administration Agreement also provides that FAdS shall not be liable for any error of judgment or mistake of law or for any act or omission in the administration or management of the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of FAdS's duties or by reason of reckless disregard of its obligations and duties under the Trust Administration Agreement. Prior to June 19, 1997, FFSI provided administration services to the Trust. FAdS provides persons satisfactory to the Board to serve as officers of the Trust. Those officers, as well as certain other employees and Trustees of the Trust, may be Trustees, officers or employees of (and persons providing services to the Trust may include) FAdS, FFSI, their affiliates or affiliates of FIA. CORE TRUST. Pursuant to a management agreement with Core Trust (the "Core Trust Management Agreement"), FAdS supervises the overall management of Core Trust (which includes, among other responsibilities, negotiation of contracts and fees with, and monitoring of performance and billing of, the custodian and arranging for maintenance of books and records of Core Trust) and provides Core Trust with general office facilities. The Core Trust Management Agreement provides, with respect to the Portfolios, for an initial term of one year from its effective date and for its continuance in effect for successive twelve-month periods thereafter, provided the agreement is specifically approved at least annually by the Core Trust Board or by the interestholders of the Portfolios, and in either case by a majority of the Trustees who are not parties to the Core Trust Management Agreement or interested persons of any such party. Prior to November 15, 1997, FFSI provided administration services to Core Trust. The Core Trust Management Agreement terminates automatically if it is assigned and may be terminated without penalty with respect to the Portfolio by vote of a Portfolio's shareholders or by either party on 60 days' written notice. The Core Trust Management Agreement also provides that FAdS shall not be liable for any error of judgment or mistake of law or for any act or omission in the administration or management of Core Trust, except for willful misfeasance, bad faith or gross negligence in the performance of Forum's duties or by reason of reckless disregard of its obligations and duties under the Core Trust Management Agreement. 18 At the request of the Core Trust Board, FAdS provides persons satisfactory to the Core Trust Board to serve as officers of Core Trust. DISTRIBUTION FFSI was incorporated under the laws of the State of Delaware on February 7, 1986 and serves as distributor of shares of the Funds pursuant to a Distribution Agreement between FFSI and the Trust (the "Distribution Agreement"). The Distribution Agreement provides, with respect to each Fund, for an initial term of one year from its effective date and for its continuance in effect for successive twelve-month periods thereafter, provided the Distribution Agreement is specifically approved at least annually by the Board or by the shareholders of the Fund, and in either case by a majority of the Trustees who are not parties to the Distribution Agreement or interested persons of any such party. The Distribution Agreement terminates automatically if it is assigned and may be terminated without penalty with respect to each Fund by vote of the Fund's shareholders or by either party on 60 days' written notice. The Distribution Agreement also provides that FFSI shall not be liable for any error of judgment or mistake of law or for any act or omission in the performance of services to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of FFSI's duties or by reason of reckless disregard of its obligations and duties under the Distribution Agreement. With respect to any class that has adopted a distribution plan, the Distribution Agreement is also terminable upon similar notice by a majority of the Trustees who (i) are not interested persons of the Trust and (ii) have no direct or indirect financial interest in the operation of that distribution plan or in the Distribution Agreement ("Qualified Trustees"). FFSI acts as sole placement agent for interests in the Portfolios and receives no compensation for those services from the portfolios. INVESTOR CLASS DISTRIBUTION PLAN. In accordance with Rule 12b-1 under the 1940 Act, with respect to the Investor Class of each Fund, the Trust adopted a distribution plan (the "Investor Class Plan") which provides for the payment to Forum of a Rule 12b-1 fee at the annual rate of 0.15% of the average daily net assets of the Investor class of each Fund as compensation for Forum's services as distributor. The Investor Class Plan provides that all written agreements relating to that plan must be approved by the Board, including a majority of the Qualified Trustees. In addition, the Investor Class Plan (as well as the Distribution Agreement) requires the Trust and Forum to prepare and submit to the Board, at least quarterly, and the Board will review, written reports setting forth all amounts expended under the Investor Class Plan and identifying the activities for which those expenditures were made. The Investor Class Plan provides that it will remain in effect for one year from the date of its adoption and thereafter shall continue in effect provided it is approved at least annually by the shareholders or by the Board, including a majority of the Qualified Trustees. The Investor Class Plan further provides that it may not be amended to increase materially the costs which may be borne by the Trust for distribution pursuant to the Investor Class Plan without shareholder approval and that other material amendments of the Investor Class Plan must be approved by the Qualified Trustees. The Investor Class Plan may be terminated at any time by the Board, by a majority of the Qualified Trustees, or by a Fund's Investor class shareholders. Table 3 in Appendix C shows the dollar amount of fees payable under the Investor Class Plan with respect to each Fund. This information is provided for the past three years (or shorter time a Fund has been operational). 19 TRANSFER AGENT FSS acts as transfer agent of the Trust pursuant to a transfer agency agreement with the Trust (the "Transfer Agency Agreement"). The Transfer Agency Agreement provides, with respect to the Funds, for an initial term of one year from its effective date and for its continuance in effect for successive twelve-month periods thereafter, provided that the Transfer Agency Agreement is specifically approved at least annually by the Board or by a vote of the shareholders of each Fund, and in either case by a majority of the Trustees who are not parties to the Transfer Agency Agreement or interested persons of any such party at a meeting called for the purpose of voting on the Transfer Agency Agreement. Among the responsibilities of FSS as transfer agent for the Trust are: (1) answering customer inquiries regarding account status and history, the manner in which purchases and redemptions of shares of each Fund may be effected and certain other matters pertaining to each Fund; (2) assisting shareholders in initiating and changing account designations and addresses; (3) providing necessary personnel and facilities to establish and maintain shareholder accounts and records, assisting in processing purchase and redemption transactions and receiving wired funds; (4) transmitting and receiving funds in connection with customer orders to purchase or redeem shares; (5) verifying shareholder signatures in connection with changes in the registration of shareholder accounts; (6) furnishing periodic statements and confirmations of purchases and redemptions; (7) arranging for the transmission of proxy statements, annual reports, prospectuses and other communications from the Trust to its shareholders; (8) arranging for the receipt, tabulation and transmission to the Trust of proxies executed by shareholders with respect to meetings of shareholders of the Trust; and (9) providing such other related services as the Trust or a shareholder may reasonably request. FSS or any sub-transfer agent or processing agent may also act and receive compensation as custodian, investment manager, nominee, agent or fiduciary for its customers or clients who are shareholders of a Fund with respect to assets invested in that Fund. FSS or any sub-transfer agent or other processing agent may elect to credit against the fees payable to it by its clients or customers all or a portion of any fee received from the Trust or from the Transfer Agent with respect to assets of those customers or clients invested in the Portfolio. FSS, FAdS or sub-transfer agents or processing agents retained by the FSS may be Processing Organizations (as defined in the Prospectus) and, in the case of sub-transfer agents or processing agents, may also be affiliated persons of FSS or FAdS. For its services under the Transfer Agency Agreement, FSS receives an annual fee from each Fund of (i) 0.02% of each Fund's average daily net assets attributable to institutional Shares and 0.25% of each Fund's average daily net assets attributable to Institutional Service Shares and Investor Shares (computed and paid monthly in arrears by the Fund), (ii) $12,000 per year (computed and paid monthly in arrears by the Fund) and (iii) Annual Shareholder Account Fees of $125 per shareholder account in Institutional Shares and $18.00 per shareholder account in Institutional Service Shares and Investor Shares (computed as of the last business day of the prior month). Table 4 in Appendix C shows the dollar amount of fees paid for transfer agency services by the Funds. This information is provided for the past three years (or shorter time a Fund has been operational). SHAREHOLDER SERVICE PLAN AND AGREEMENTS The Trust has adopted a shareholder service plan ("Shareholder Service Plan") with respect to the Institutional Service class and the Investor class of each Fund which provides that FAdS may obtain the services of financial institutions to act as shareholder servicing agents for their customers invested in those classes. The Shareholder Service Plan was effective on November 15, 1997 for the Institutional Service class of those Funds then operating. The Shareholder Service Plan provides that all written agreements relating to that plan must be approved by the Board, including a majority of the Qualified Trustees. In addition, the Shareholder Service Plan (as well as the various shareholder service agreements) requires the Trust and FAdS to prepare and submit to the Board, at least quarterly, and the Board will review written reports setting forth all amounts expended under the plan and identifying the activities for which those expenditures were made. 20 The Shareholder Service Plan provides that it will remain in effect for one year from the date of its adoption and thereafter shall continue in effect provided it is approved at least annually by the shareholders or by the Board. The Shareholder Service Plan further provides material amendments of the plan must be approved by the Qualified Trustees. The Shareholder Service Plan may be terminated at any time by the Board or by a majority of the Qualified Trustees. The Trust may enter into shareholder servicing agreements with various Shareholder Servicing Agents pursuant to which those agents, as agent for their customers, may agree among other things to: (i) answer shareholder inquiries regarding the manner in which purchases, exchanges and redemptions of shares of the Trust may be effected and other matters pertaining to the Trust's services; (ii) provide necessary personnel and facilities to establish and maintain shareholder accounts and records; (iii) assist shareholders in arranging for processing purchase, exchange and redemption transactions; (iv) arrange for the wiring of funds; (v) guarantee shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; (vi) integrate periodic statements with other shareholder transactions; and (vii) provide such other related services as the shareholder may request. As Participating Organizations, some Shareholder Servicing Agents also may impose certain conditions on their customers, subject to the terms of the Trust's Prospectus, in addition to or different from those imposed by the Trust, such as requiring a minimum initial investment or by charging their customers a direct fee for their services. Some Shareholder Servicing Agents may also act and receive compensation for acting as custodian, investment manager, nominee, agent or fiduciary for its customers or clients who are shareholders of the Funds with respect to assets invested in the Funds. These Shareholder Servicing Agents may elect to credit against the fees payable to it by its clients or customers all or a portion of any fee received from the Trust with respect to assets of those customers or clients invested in the Funds. Table 5 in Appendix C shows the dollar amount of fees paid under the Shareholder Service Plan with respect to Institutional Service Shares and Investor Shares of each Fund services by the Funds. This information is provided for the past three years (or shorter time a Fund has been operational). FUND ACCOUNTING Pursuant to a Fund Accounting Agreement, FAcS provides the Funds with accounting services, including the calculation of the Fund's net asset value. For these services, FAcS receives an annual fee ranging from $12,000 to $36,000 depending upon the number of securities in which the Fund invests and the number of classes in the Fund. Pursuant to a Fund Accounting Agreement with Core Trust, FAcS also provides portfolio accounting services to each Portfolio, including the calculation of each Portfolio's net asset value. For these services, FAcS receives an annual fee of $48,000 per year plus surcharges depending upon the amount and type of the Portfolio's portfolio transactions and positions. The Fee for Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio is the lesser of 0.05% of the average daily net assets of the Portfolios or $48,000 plus, for each investor in a Portfolio above one (excluding FFSI and its affiliates), $6,000 per year. FAcS is required to use its best judgment and efforts in rendering fund accounting services and is not liable to Core Trust for any action or inaction in the absence of bad faith, willful misconduct or gross negligence. FAcS is not responsible or liable for any failure or delay in performance of its fund accounting obligations arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control and Core Trust has agreed to indemnify and hold harmless FAcS, its employees, agents, officers and directors against and from any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising out of or in any way related to FAcS's actions taken or failures to act with respect to a Portfolio or based, if applicable, upon information, instructions or requests with respect to a Portfolio given or made to FAcS by an officer of the Trust duly authorized. This indemnification does not apply to FAcS actions taken or failures to act in cases of FAcS's own bad faith, willful misconduct or gross negligence. 21 Table 6 in Appendix C shows the dollar amount of fees paid for accounting services by the Funds and the Portfolios. This information is provided for the past three years (or shorter time a Fund or Portfolio has been operational). FORUM FINANCIAL GROUP FIA, FFSI, FSS and FAcS are members of the Forum Financial Group of Companies. Each of these companies are affiliated through the common control by John Y. Keffer. 7. DETERMINATION OF NET ASSET VALUE The Funds do not determine net asset value on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas. Purchases and redemptions are effected at the time of the next determination of net asset value following the receipt of any purchase or redemption order. Pursuant to the rules of the SEC, both the Board and the Core Trust Board have established procedures to stabilize each Fund's and each Portfolio's, as applicable, net asset value at $1.00 per share. These procedures include a review of the extent of any deviation of net asset value per share as a result of fluctuating interest rates, based on available market rates, from each Fund's and Portfolio's, as applicable, $1.00 amortized cost price per share. Should that deviation exceed 1/2 of 1%, the Board and the Core Trust Board, respectively, will consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redemption of shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per share as determined by using available market quotations. In determining the approximate market value of portfolio investments, the Portfolios may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried at their face value. Each investor in a Portfolio, including the Funds, may add to or reduce its investment in that Portfolio on each business day of the Portfolios (which corresponds to Fund Business Days). The Portfolios maintain the same Business Days as do the Funds. As of the close of regular trading on any Fund Business Day, the value of a Fund's beneficial interest in a Portfolio is determined by multiplying the net asset value of the Portfolio by the percentage, effective for that day, which represents the Fund's share of the aggregate beneficial interests in the Portfolio. Any additions or reductions, which are to be effected as of the close of the Fund Business Day, are then effected. The Fund's percentage of the aggregate beneficial interests in the Portfolio are then recomputed as the percentage equal to the fraction (i) the numerator of which is the value of the Fund's investment in the Portfolio as of the close of the Fund Business Day plus or minus, as the case may be, the amount of net additions to or reductions from the Fund's investment in the Portfolio effected as of that time, and (ii) the denominator of which is the aggregate net asset value of the Portfolio as of the close of the Fund Business Day plus or minus, as the case may be, the amount of net additions to or reductions from the aggregate investments in the Portfolio by all investors in the Portfolio. The percentage determined is then applied to determine the value of the Fund's interest in the Portfolio as of the close of the next Fund Business Day. 8. PORTFOLIO TRANSACTIONS Purchases and sales of portfolio securities for the Portfolio usually are principal transactions. Portfolio securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. There usually are no brokerage commissions paid for such purchases. Although Core Trust does not anticipate that the Portfolio will pay any amounts of commission, in the event the Portfolio pays brokerage commissions or other transaction-related 22 compensation, the payments may be made to broker-dealers who pay expenses of the Portfolio that it would otherwise be obligated to pay itself. Any transaction for which the Portfolio pays transaction-related compensation will be effected at the best price and execution available, taking into account the amount of any payments made on behalf of the Portfolio by the broker-dealer effecting the transaction. Purchases from underwriters of portfolio securities include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers include the spread between the bid and asked prices. Since each Fund's and Portfolio's inception, no brokerage fees were paid by any Fund (during those periods of the Funds invested directly in securities), nor any Portfolio. Allocations of transactions to dealers and the frequency of transactions are determined for each Portfolio by FIA in its best judgment and in a manner deemed to be in the best interest of shareholders of that Portfolio rather than by any formula. The primary consideration is prompt execution of orders in an effective manner and at the most favorable price available to the Portfolio. Investment decisions for the Portfolios will be made independently from those for any other account or investment company that is or may in the future become managed by FIA or its respective affiliates. If, however, a Portfolio and other investment companies or accounts managed by FIA is contemporaneously engaged in the purchase or sale of the same security, the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by a Portfolio or the size of the position obtainable for the Portfolio. In addition, when purchases or sales of the same security for a Portfolio and for other investment companies managed by FIA occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantages available to large denomination purchases or sales. No portfolio transactions are executed with FIA or any of its affiliates. 9. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION Shares of the Funds are sold on a continuous basis by the distributor without any sales charge. In addition to the situations described in the Prospectus, the Trust may redeem shares involuntarily to reimburse a Fund for any loss sustained by reason of the failure of a shareholder to make full payment for shares purchased by the shareholder or to collect any charge relating to transactions effected for the benefit of a shareholder which is applicable to a Fund's shares as provided in the Prospectus from time to time. The Trust has filed a formal election with the SEC pursuant to which the Funds will only effect a redemption in portfolio securities in kind if a shareholder is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever is less, during any 90-day period. The Funds may wire proceeds of redemptions to shareholders that have elected wire redemption privileges only if the wired amount is greater than $5,000. In addition, the Funds will only wire redemption proceeds to financial institutions located in the United States. By use of the telephone redemption or exchange privilege, the shareholder authorizes FSS to act upon the instruction of any person representing himself to either be, or to have the authority to act on behalf of, the investor and believed by FSS to be genuine. The records of FSS of such instructions are binding. FSS will deem a shareholder's account "lost" if correspondence to the shareholder's address of record is returned for six months, unless the Transfer Agent determines the shareholder's new address. When an account is deemed lost all distributions on the account will be reinvested in additional shares of the Fund. In addition, the amount of any outstanding (unpaid for six months or more) checks for distributions that have been returned to FSS will be reinvested and the checks will be canceled. 23 EXCHANGE PRIVILEGE The exchange privilege permits shareholders of the Funds to exchange their shares for shares of any Participating Fund, which includes (i) the same class of the other Funds and (ii) any other mutual fund for which Forum or its affiliates act as investment adviser, manager or distributor and which participates in the Trust's exchange privilege program. The following table summarizes the current exchange opportunities associated with class of each shares of the Funds. Class of Shares Exchange Opportunities --------------- ---------------------- Investor Shares Other Funds (Investor Shares) Other series of the Trust Sound Shore Fund, Inc. The CRM Funds (Investor Shares) The Cutler Trust Memorial Funds (Trust Shares) Institutional Shares Other Funds (Institutional Shares) Institutional Service Shares Other Funds (Institutional Service Shares) The CRM Funds (Institutional Shares) Memorial Funds (Institutional Shares)
Exchange transactions are made on the basis of relative net asset values per share at the time of the exchange transaction plus any applicable sales charge of the Participating Fund whose shares are acquired. Exchanges are accomplished by (i) a redemption of the shares of the Fund exchanged at the next determination of that Fund's net asset value after the exchange order in proper form (including any necessary supporting documents required by the Fund whose shares are being exchanged) is accepted by the Transfer Agent and (ii) a purchase of the shares of the fund acquired at the next determination of that fund's net asset value after (or occurring simultaneously with) the time of redemption. Shares of any Participating Fund may be exchanged without a sales charge for shares of any Participating Fund that are offered without a sales charge. If the Participating Fund whose shares are purchased in the exchange transaction imposes a higher sales charge the shareholder will be required to pay the sales charge on the purchased shares. Shareholders are entitled to any reduced sales charges of the Participating Fund into which they are exchanging to the extent those reduced sales charges would be applicable to that shareholder's purchase of shares. The Funds do not charge for the exchange privilege and there is currently no limit on the number of exchanges a shareholder may make, but each Fund reserves the right to limit excessive exchanges by any shareholder. A pattern of frequent exchanges may be deemed by the Transfer Agent to be contrary to the best interests of the Fund's other shareholders and, at the discretion of the Transfer Agent, may be limited by that Fund's refusal to accept additional exchanges from the investor. The terms of the exchange privilege are subject to change, and the privilege may be terminated by any Participating Fund or the Trust. However the privilege will not be terminated, and no material change that restricts the availability of the privilege to shareholders will be implemented, without 60 days' advance notice to shareholders. No notice need be given of an amendment whose only material effect is to reduce amount of sales charge required to be paid on the exchange and no notice need be given if redemptions of shares of a Fund are suspended or a Fund temporarily delays or ceases the sale of its shares. 24 INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT The Funds (other than Daily Assets Municipal Fund) offer an individual retirement plan (the "IRA") for individuals who wish to use shares of a Fund as a medium for funding individual retirement savings. Under the IRA, distributions of net investment income and capital gain will be automatically reinvested in the IRA established for the investor. The Funds' custodian furnishes custodial services to the IRAs for a service fee. Shareholders wishing to invest in a Fund through an IRA should contact the Transfer Agent for further information. 10. TAXATION Qualification as a regulated investment company under the Internal Revenue Code of 1986, as amended, does not involve governmental supervision of management or investment practices or policies. The information set forth in the Prospectuses and the following discussion relate solely to Federal income taxes on distributions and other distributions by the Funds and assumes that the Funds each qualify for treatment as a regulated investment company. Investors should consult their own counsel for further details and for the application of Federal, state and local tax laws to the investor's particular situation. In order to continue to qualify for treatment as a regulated investment company under the Internal Revenue Code, a Fund must distribute to its shareholders for each taxable year at least 90% of its net investment income and must meet several additional requirements. Among these requirements are the following: (1) the Fund must derive at least 90% of its gross income each taxable year from distributions, interest, payments with respect to securities loans, gains from the sale or other disposition of securities and certain other income; (2) subject to certain exceptions, at the close of each quarter of the Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, securities of investment companies, U.S. Government Securities and other securities, with these other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets; and (3) subject to certain exceptions, at the close of each quarter of the Fund's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than securities of investment companies and U.S. Government Securities) of any one issuer. The Funds expect to derive substantially all of their gross income (exclusive of capital gain) from sources other than dividends. Accordingly, it is expected that none of the Funds' dividends or distributions will qualify for the dividends-received deduction for corporations. Distributions declared by the Fund in October, November, or December of any year and payable to shareholders of record on a date in such a month will be deemed to have been paid by the Fund and received by the shareholders on December 31 of the year declared if paid by the Fund during the following January. 11. OTHER INFORMATION CUSTODIAN Pursuant to a Custodian Agreement with Core Trust, BankBoston N.A., 100 Federal Street, Boston, Massachusetts 02106, acts as the custodian of Government Portfolio's assets. Pursuant to a Custodian Agreement with Core Trust, Imperial Trust Company, 201 North Figueroa Street, Suite 610, Los Angeles, California 90012, acts as the custodian of each other Portfolio's assets. The custodians' responsibilities include safeguarding and controlling the Portfolios cash and securities and determining income payable on and collecting interest on Portfolio investments. COUNSEL Legal matters in connection with the issuance of beneficial interest of the Trust are passed upon by Seward & Kissel, 1200 G Street, N.W., Washington, D.C. 20005. 25 AUDITORS KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, independent auditors, acts as auditors for the Funds and as auditors for the Portfolios. THE TRUST AND ITS SHARES The Trust is a business trust organized under Delaware law. Delaware law provides that shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit. The securities regulators of some states, however, have indicated that they and the courts in their state may decline to apply Delaware law on this point. The Trust Instrument contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses of the Trust and requires that a disclaimer be given in each contract entered into or executed by the Trust or the Trustees. The Trust Instrument provides for indemnification out of each series' property of any shareholder or former shareholder held personally liable for the obligations of the series. The Trust Instrument also provides that each series shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the series and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which Delaware law does not apply, no contractual limitation of liability was in effect and the portfolio is unable to meet its obligations. FAdS believes that, in view of the above, there is no risk of personal liability to shareholders. The Trust Instrument further provides that the Trustees shall not be liable to any person other than the Trust or its shareholders; moreover, the Trustees shall not be liable for any conduct whatsoever, provided that a Trustee is not protected against any liability to which he would otherwise by subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. The Board is required to call a meeting of shareholders for the purpose of voting upon the removal of any trustee when so requested in writing by the shareholders of record holding at least 10% of the Trust's outstanding shares. Each series' capital consists of shares of beneficial interest. Shares are fully paid and nonassessable, except as set forth above with respect to Trustee and shareholder liability. Shareholders representing 10% or more of the Trust or a series may, as set forth in the Trust Instrument, call meetings of the Trust or series for any purpose related to the Trust or series, as the case may be, including, in the case of a meeting of the entire Trust, the purpose of voting on removal of one or more Trustees. The Trust or any series may be terminated upon the sale of its assets to, or merger with, another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by the vote of the holders of a majority of the outstanding shares of the Trust or the series; however, the Trustees may, without prior shareholder approval, change the form of organization of the Trust by merger, consolidation or incorporation. If not so terminated or reorganized, the Trust and its series will continue indefinitely. Under the Trust Instrument, the Trustees may, without shareholder vote, cause the Trust to merge or consolidate into one or more trusts, partnerships or corporations or cause the Trust to merge or consolidate into one or more trusts, partnerships or corporations or cause the Trust to be incorporated under Delaware law, so long as the surviving entity is an open-end management investment company that will succeed to or assume the Trust's registration statement. FUND STRUCTURE CORE AND GATEWAY. The Funds seek to achieve their objective by investing all of their investable assets in a separate portfolio of a registered, open-end management investment company with substantially the same investment objective and policies as the Fund. This "Core and Gateway" fund structure is an arrangement whereby one or more investment companies or other collective investment vehicles that share investment objectives -- but offer their shares through distinct distribution channels -- pool their assets by investing in a single investment company having substantially the same investment objective and policies (a "Core Portfolio"). This means that the only investment securities that will be held by a Fund will be the Fund's interest in the Core Portfolio. This structure permits other collective investment vehicles to invest collectively in a Core Portfolio, allowing for greater 26 economies of scale in managing operations of the single Core Portfolio. The Board retains the right to withdraw a Fund's investments from a Core Portfolio at any time; the Fund would then resume investing directly in individual securities of other issuers or could re-invest all of its assets in another Core Portfolio. FUND SHAREHOLDERS' VOTING RIGHTS. A Core Portfolio normally will not hold meetings of its investors except as required under the 1940 Act. As a shareholder in a Core Portfolio, a Fund is entitled to vote in proportion to its relative interest in the Core Portfolio. On any issue, a Fund will vote its shares in a Core Portfolio in proportion to the votes cast by its shareholders. If there are other investors in a Core Portfolio, there can be no assurance that any issue that receives a majority of the votes cast by the Fund's shareholders will receive a majority of votes cast by all Core Portfolio shareholders. Generally, a Fund will hold a meeting of its shareholders to obtain instructions on how to vote its interest in a Core Portfolio when the Core Portfolio is conducting a meeting of its shareholders. However, subject to applicable statutory and regulatory requirements, a Fund will not seek instructions from its shareholders with respect to (i) any proposal relating to a Core Portfolio that, if made with respect to the Fund, would not require the vote of Fund shareholders, or (ii) any proposal relating to the Core Portfolio that is identical to a proposal previously approved by the Fund's shareholders. In addition to a vote to remove a trustee or change a fundamental policy, examples of matters that will require approval of shareholders of a Core Portfolio include, subject to applicable statutory and regulatory requirements: the election of trustees; approval of an investment advisory contract; the dissolution of a Core Portfolio; certain amendments of the organizational documents for the Core Portfolio; a merger, consolidation or sale of substantially all of a Core Portfolio's assets; or any additional matters required or authorized by the charter or trust instrument and by-laws of a Core Portfolio or any registration statement of a Core Portfolio, or as the directors or trustees of the Core Portfolio may consider desirable. The board of trustees of a Core Portfolio will typically reserve the power to change nonfundamental policies without prior shareholder approval. CONSIDERATIONS OF INVESTING IN A PORTFOLIO. A Fund's investment in a Core Portfolio may be affected by the actions of other large investors in the Core Portfolio, if any. For example, if the Core Portfolio had a large investor other than the Fund that redeemed its interest in the Core Portfolio, the Core Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. A Fund may withdraw its entire investment from the Core Portfolio at any time, if the Board determines that it is in the best interests of the Fund and its shareholders to do so. A Fund might withdraw, for example, if other investors in the Core Portfolio, by a vote of shareholders, changed the investment objective or policies of the Core Portfolio in a manner not acceptable to the Board. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Core Portfolio. That distribution could result in a less diversified portfolio of investments for the Fund and could affect adversely the liquidity of the Fund's portfolio. If the Fund decided to convert those securities to cash, it normally would incur transaction costs. If a Fund withdrew its investment from the Core Portfolio, the Board would consider what action might be taken, including the management of the Fund's assets in accordance with its investment objective and policies by FIA or the investment of all of the Fund's investable assets in another pooled investment entity having substantially the same investment objective as the Fund. 12. FINANCIAL STATEMENTS AUGUST 31, 1997 ANNUAL REPORT The Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, Financial Highlights and Notes Thereto of Daily Assets Government Fund (formerly known as Daily Assets Treasury Fund) and Daily Assets Cash Fund for the fiscal year ended August 31, 1997 and the Independent Auditors' Report thereon (included in the Annual Report to Shareholders), which are delivered along with this SAI, are incorporated herein by reference. Also incorporated by reference into this SAI are the Schedules of Investments, Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, and notes thereto, of Government Portfolio (formerly known as Treasury Portfolio) and Cash Portfolio for the fiscal year ended August 31, 1997 and the Independent Auditors' Report thereon. 27 FEBRUARY 28, 1998 SEMI-ANNUAL REPORT The Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, Financial Highlights and Notes Thereto of Daily Assets Government Fund (formerly known as Daily Assets Treasury Fund), Daily Assets Treasury Obligations Fund, Daily Assets Government Obligations Fund (formerly known as Daily Assets Government Fund) and Daily Assets Cash Fund for the semi-annual period ended February 28, 1998 (included in the Semi-Annual Report to Shareholders), which are delivered along with this SAI, are incorporated herein by reference. Also incorporated by reference into this SAI are the Schedules of Investments, Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, and notes thereto, of Government Portfolio (formerly known as Treasury Portfolio) and Cash Portfolio for the semi-annual period ended February 28, 1998. DAILY ASSETS MUNICIPAL FUND As Daily Assets Municipal Fund and Municipal Cash Portfolio had not as of February 28, 1998 commenced operations, no financial statements will be available until after August 31, 1998. 28 APPENDIX A - DESCRIPTION OF SECURITIES RATINGS CORPORATE BONDS MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"). Bonds which are rated Aaa are judged by Moody's to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Note: Those bonds in the Aa and A groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1 and A1. STANDARD AND POOR'S CORPORATION ("S&P"). Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in small degree. Bonds rated A have a strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt rated in higher rated categories. Note: The ratings for AA and A may be modified by the addition of a plus (+) or minus (-) sign to show the relative standing within the rating category. FITCH INVESTORS SERVICE, INC. ("FITCH"). AAA Bonds are considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA Bonds are considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, shorter-term debt of these issuers is generally rate F-1+. A Bonds are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. Plus (+) and minus (-) signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the AAA categories. 29 COMMERCIAL PAPER MOODY'S INVESTORS SERVICE, INC. Moody's two highest ratings for short-term debt, including commercial paper, are Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative repayment ability of rated issuers. Issuers rated Prime-1 have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: o Leading market positions in well-established industries. o High rates of return on funds employed. o Conservative capitalization structure with moderate reliance on debt and ample asset protection. o Broad margins in earnings coverage of fixed financial charges and high internal cash generation. o Well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. STANDARD AND POOR'S CORPORATION. S&P's two highest commercial paper ratings are A and B. Issues assigned an A rating are regarded as having the greatest capacity for timely payment. Issues in this category are delineated with the numbers 1, 2 and 3 to indicate the relative degree of safety. An A-1 designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign designation. The capacity for timely payment on issues with an A-2 designation is strong. However, the relative degree of safety is not as high as for issues designated A-1. A-3 issues have a satisfactory capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. Issues rated B are regarded as having only an adequate capacity for timely payment. However, such capacity may be damaged by changing conditions or short-term adversities. FITCH INVESTORS SERVICE, INC. Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. F-1+. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ or F-1 ratings. 30 APPENDIX B - PERFORMANCE INFORMATION For the seven day period ended August 31, 1997, the annualized yields of each of the classes of the Funds that were then operating were as follows: TAX EQUIVALENT TAX EQUIVALENT CURRENT YIELD EFFECTIVE YIELD CURRENT YIELD EFFECTIVE YIELD DAILY ASSETS TREASURY OBLIGATIONS FUND Investor Shares -- -- -- -- Institutional Service Shares -- -- -- -- Institutional Shares -- -- -- -- DAILY ASSETS GOVERNMENT FUND Investor Shares -- -- -- -- Institutional Service Shares 4.76% 4.87% -- -- Institutional Shares -- -- -- -- DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Investor Shares -- -- -- -- Institutional Service Shares -- -- -- -- Institutional Shares -- -- -- -- DAILY ASSETS CASH FUND Investor Shares -- -- -- -- Institutional Service Shares 5.19% 5.33% -- -- Institutional Shares -- -- -- -- DAILY ASSETS MUNICIPAL FUND Investor Shares -- -- -- -- Institutional Service Shares -- -- -- -- Institutional Shares -- -- -- --
As of August 31, 1997, there were no outstanding Institutional Shares, Investor Shares or Institutional Service Shares of each Fund other than Daily Assets Government Fund and Daily Assets Cash Fund. 31 APPENDIX C- MISCELLANEOUS TABLES TABLE 1 - INVESTMENT ADVISORY FEES ($) GROSS FEE FEE WAIVED NET FEE PAID TREASURY CASH PORTFOLIO Year ended August 31, 1997 0 Year ended August 31, 1996 12,930 0 12,930 GOVERNMENT PORTFOLIO Period ended August 31, 1997 9,064 0 9,064 Year ended March 31, 1997 20,637 0 20,637 Year ended March 31, 1996 69,466 0 69,466 Year ended March 31, 1995 59,382 53,382 6,000 GOVERNMENT CASH PORTFOLIO Year ended August 31, 1997 196,857 0 196,857 Year ended August 31, 1996 156,552 0 156,552 CASH PORTFOLIO Year ended August 31, 1997 72,872 0 72,872 Year ended August 31, 1996 38,083 0 38,083 MUNICIPAL CASH PORTFOLIO Year ended August 31, 1997 -- -- --
32 TABLE 2 - ADMINISTRATION FEES ($) GROSS FEE FEE WAIVED NET FEE PAID TREASURY CASH PORTFOLIO Year ended August 31, 1997 24,287 14,346 9,941 Year ended August 31, 1996 19,198 9,307 9,891 GOVERNMENT PORTFOLIO Period ended August 31, 1997 18,128 18,128 0 Year ended March 31, 1997 41,274 41,274 0 Year ended March 31, 1996(1) GOVERNMENT CASH PORTFOLIO Year ended August 31, 1997 252,821 0 252,821 Year ended August 31, 1996 230,547 104,558 125,989 CASH PORTFOLIO Year ended August 31, 1997 92,652 7,621 85,031 Year ended August 31, 1996 56,125 3,719 52,406 MUNICIPAL CASH PORTFOLIO Year ended August 31, 1997 -- -- -- DAILY ASSETS TREASURY OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT FUND Period ended August 31, 1997 18,123 0 18,123 Year ended March 31, 1997 41,232 7,453 33,779 Year ended March 31, 1996 DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS CASH FUND Year ended August 31, 1997 7,453 7,453 0 DAILY ASSETS MUNICIPAL FUND Year ended August 31, 1997 -- -- --
33 TABLE 3 - INVESTOR SHARES RULE 12B-1 FEES ($) GROSS FEE FEE WAIVED NET FEE PAID DAILY ASSETS TREASURY OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT FUND Period ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS CASH FUND Period ended August 31, 1997 -- -- -- DAILY ASSETS MUNICIPAL FUND Year ended August 31, 1997 -- -- --
For the fiscal year ended August 31, 1997, no Investor Shares were outstanding and, accordingly, no fees were payable under the Investor Class Plan. 34 TABLE 4 - TRANSFER AGENCY FEES ($) GROSS FEE FEE WAIVED NET FEE PAID DAILY ASSETS TREASURY OBLIGATIONS FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT FUND Institutional Service Shares Period ended August 31, 1997 50,810 44,054 6,756 Year ended March 31, 1997 116,051 101,485 14,566 Year ended March 31, 1996 110,792 96,881 13,911 DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- DAILY ASSETS CASH FUND Institutional Service Shares Period ended August 31, 1997 29,772 17,766 12,006 DAILY ASSETS MUNICIPAL FUND Institutional Service Shares Year ended August 31, 1997 -- -- --
As of August 31, 1997, there were no outstanding Institutional Shares, Investor Shares or Institutional Service Shares of each Fund other than Daily Assets Government Fund and Daily Assets Cash Fund. 35 TABLE 5 - SHAREHOLDER SERVICE FEES ($) GROSS FEE FEE WAIVED NET FEE PAID DAILY ASSETS TREASURY OBLIGATIONS FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- Investor Shares Period ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT FUND Institutional Service Shares Period ended August 31, 1997 -- -- -- Investor Shares Period ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- Investor Shares Period ended August 31, 1997 -- -- -- DAILY ASSETS CASH FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- Investor Shares Period ended August 31, 1997 -- -- -- DAILY ASSETS MUNICIPAL FUND Institutional Service Shares Year ended August 31, 1997 -- -- -- Investor Shares Period ended August 31, 1997 -- -- --
As of August 31, 1997, there were no outstanding Investor Shares and no effective Shareholder Plan with respect to Institutional Service Shares of any Fund. 36 TABLE 6 - FUND ACCOUNTING FEES ($) GROSS FEE FEE WAIVED NET FEE PAID TREASURY CASH PORTFOLIO Year ended August 31, 1997 24,279 0 24,279 Year ended August 31, 1996 28,518 19,955 8,563 GOVERNMENT PORTFOLIO Period ended August 31, 1997 20,000 0 20,000 Year ended March 31, 1997 48,000 0 48,000 Year ended March 31, 1996(1) GOVERNMENT CASH PORTFOLIO Year ended August 31, 1997 48,000 0 48,000 Year ended August 31, 1996 42,000 0 42,000 CASH PORTFOLIO Year ended August 31, 1997 48,000 0 48,000 Year ended August 31, 1996 42,000 14,957 27,043 MUNICIPAL CASH PORTFOLIO Year ended August 31, 1997 -- -- -- DAILY ASSETS TREASURY OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS GOVERNMENT FUND Period ended August 31, 1997 5,000 0 5,000 Year ended March 31, 1997 12,000 0 12,000 Year ended March 31, 1996 DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Year ended August 31, 1997 -- -- -- DAILY ASSETS CASH FUND Year ended August 31, 1997 DAILY ASSETS MUNICIPAL FUND Year ended August 31, 1997 -- -- --
37 TABLE 7 - 5% SHAREHOLDERS As of May 1, 1998, the officers and Trustees of the Trust as a group owned less than 1% of the outstanding shares of each Fund. Also as of that date, the following table lists the persons who owned of record 5% or more of the outstanding shares of a class of shares, as well as their percentage holding of all shares of the Fund PERCENTAGE OF SHARES PERCENTAGE OF SHARES OF CLASS OWNED OF FUND OWNED DAILY ASSETS TREASURY OBLIGATIONS FUND Investor Shares Forum Administrative Services, LLC 100.00 0.00 Two Portland Square, Portland, ME 04101 Institutional Shares Babb & Co., C/O Bank of New Hampshire 99.90 96.97 P.O. Box 477, Concord, NH 03302 Institutional Service Shares Allagash & Co., C/O Bank of New Hampshire 100.00 2.93 P.O. Box 477, Concord, NH 03302 DAILY ASSETS GOVERNMENT FUND Institutional Shares Forum Financing 100.00 0.00 Two Portland Square, Portland, ME 04101 Institutional Service Shares H.M. Payson & Co. Custody Account 54.07 54.07 P.O. Box 31, Portland, ME 04112 H.M. Payson & Co. Custody Account 25.71 25.71 P.O. Box 31, Portland, ME 04112 DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Investor Shares Forum Administrative Services, LLC 100.00 0.00 Two Portland Square, Portland, ME 04101 Institutional Shares Allagash & Co., C/O Bank of New Hampshire 61.79 61.77 P.O. Box 477, Concord, NH 03302 Babb & Co., C/O Bank of New Hampshire 38.21 38.20 P.O. Box 477, Concord, NH 03302 Institutional Service Shares Mike Stone, C/O Peoples Heritage Bank 99.85 0.03 P.O. Box 9540, Portland, ME04112 DAILY ASSETS CASH FUND Investor Shares Forum Administrative Services, LLC 100.00 0.00 Two Portland Square, Portland, ME 04101 Institutional Shares 100.00 34.66 Allagash & Co., C/O Bank of New Hampshire P.O. Box 477, Concord, NH 03302 Institutional Service Shares H.M. Payson & Co. Custody Account 58.43 38.17 P.O. Box 31, Portland, ME 04112 H.M. Payson & Co. Trust Account 37.29 24.36 P.O. Box 31, Portland, ME 04112
38 APPENDIX D- ADDITIONAL ADVERTISING MATERIALS TEXT OF PEOPLES HERITAGE NEWS RELEASE Peoples Heritage Financial Group, Inc. (NASDAQ:PHBK) announced today that it has formed an alliance with a major mutual fund provider and an investment advisory firm to expand its mutual fund offerings. The alliance with Forum Financial Group and H.M. Payson & Company will result in 18 funds, including the unique Maine Municipal Bond Fund and New Hampshire Bond Fund, being offered through the branches of Peoples' affiliate banks in Maine, New Hampshire and northern Massachusetts and the Company's trust and investment subsidiaries 'There is no secret to where financial services are moving, under one roof," said William J. Ryan, Chairman, President and Chief Executive Officer of Peoples Heritage. "One only has to watch the virtually daily announcements of consolidations in the financial sector to understand that customers are demanding and receiving 'one-stop' financial services. "We think we are adding the additional competitive advantage of funds that are managed and administered close to home." Eighteen Forum funds will be offered including two Payson funds. The tax-free Maine and New Hampshire state bond funds are the only two such funds available and usually invest 80% of total assets in municipal securities. Other funds being provided by the alliance include money market, fixed income and equity funds. Forum Financial, based in Portland, Maine since 1987, administers 146 funds with more than $36 billion in assets. Forum manages mutual funds for independent investment advisors such as Payson and for banks. Forum Investment Advisors, LLC an affiliate, is the largest Maine-based investment advisor with approximately $1.7 billion in fund assets under management. "We are providing a great product set to the customers served by Peoples' nearly 200 branches in northern New England," said John Y. Keffer, Forum Financial president, "The key today is to link a wide variety of investment options with convergent, easy access for customers. I believe this alliance does just that." H.M. Payson & Co., founded in 1854, is one of the nation's oldest investment firms with nearly $1 billion in assets under management and $300 million in non-managed custodial accounts. The Payson value Fund and Payson Balanced Fund are among the 18 offerings. "I believe we have all the ingredients of a tremendous alliance," said John Walker, Payson president and managing director. "We have the region's premier community banking company, a community-based investment advisor, and a local mutual fund company that operates nationally and specializes in working with banks. We are poised to provide solid investment performance and service." 39 Peoples Heritage Financial Group is a $10 billion multi-state bank and financial services holding company headquartered in Portland, Maine. Its Maine banking affiliate, Peoples Heritage Bank, has the state's leading deposit market share. Its New Hampshire banking affiliate, Bank of New Hampshire, has the state's leading deposit market share. Family Bank, the Company's Massachusetts banking subsidiary, has the state's tenth largest deposit market share and the leading market share in many of the northern Massachusetts communities it serves. Peoples affiliate banks also operate subsidiaries in leasing, trust and investment services and insurance. 40 FORUM FINANCIAL GROUP: Headquarters: Two Portland Square, Portland, Maine 04101 President: John Y. Keffer Offices: Portland, Seattle, Warsaw, Bermuda *Established in 1986 to administer mutual funds for independent investment advisors and banks *Among the nation's largest third-party fund administrators *Uses proprietary in-house systems and custom programming capabilities *ADMINISTRATION AND DISTRIBUTION SERVICES: Regulatory, compliance, expense accounting, budgeting for all funds *FUND ACCOUNTING SERVICES: Portfolio valuation, accounting, dividend declaration, and tax advice *SHAREHOLDER SERVICES: Preparation of statements, distribution support, inquiries and processing of trades *CLIENT ASSETS UNDER ADMINISTRATION AND DISTRIBUTION: $36.9 billion *CLIENT ASSETS PROCESSED BY FUND ACCOUNTING: $47.6 billion *CLIENT FUNDS UNDER ADMINISTRATION AND DISTRIBUTION: 146 mutual funds with 219 share classes *INTERNATIONAL VENTURES: Joint venture with Bank Handlowy in Warsaw, Poland, using Forum's proprietary transfer agency and distribution systems Off-shore investment fund administration, using Bermuda as Forum's center of operations *FORUM EMPLOYEES: United States -198, Poland - 61, Bermuda - 3 FORUM CONTACTS: Mark Kaplan, Managing Director and Portfolio Manager, Forum Investment Advisors, LLC, (207) 879-1900 X 6123 Tony Santaniello, Director of Marketing, (207) 879-1900 X 6175 41 H.M. PAYSON & CO.: Headquarters: One Portland Square, Portland, Maine President and Managing Director: John Walker Quality investment services and conservative wealth management since 1854 *Assets under Management: $1 Billion *Custody Income Assets: $300 Million *Client Base: 85% individuals; 15% institutional *Owned by 11 shareholders; 11 managing directors *Payson Balanced Fund and Payson Value Fund (administrative and shareholder services provided by Forum Financial Group) *Employees: 45 H.M. PAYSON & CO. CONTACT: Joel Harris, Portfolio/Marketing Coordinator, (207) 772-3761 42 TEXT OF FORUM BROCHURE In connection with its advertisements, a Fund may provide a description of the Fund's investment adviser and its affiliates, which are service providers to the Fund. Text which is currently in use is set forth below. "FORUM FINANCIAL GROUP OF COMPANIES Forum Financial Group of Companies represent more than a decade of diversified experience with every aspect of mutual funds. The Forum Family of Funds has benefited from the informed, sharply focused perspective on mutual funds that experience makes possible. The Forum Family of Funds has been created and managed by affiliated companies of Portland-based Forum Financial Group, among the nation's largest mutual fund administrators providing clients with a full line of services for every type of mutual fund. The Forum Family of Funds is designed to give investment representatives and investors a broad choice of carefully structured and diversified portfolios, portfolios that can satisfy a wide variety of immediate as well as long-term investment goals. Forum Financial Group has developed its "brand name" family of mutual funds and has made them available to the investment public and to institutions on both the national and regional levels. For more than a decade Forum has had direct experience with mutual funds from a different perspective, a perspective made possible by Forum's position as a leading designer and full-service administrator and manager of mutual funds of all types. Today Forum Financial Group administers and provides services for over 120 mutual funds for 17 different fund managers, with more than $30 billion in client assets. Forum has its headquarters in Portland, Maine, and has offices in Seattle, Bermuda, and Warsaw, Poland. In a joint venture with Bank Handlowy, the largest and oldest commercial bank in Poland, Forum operates the only independent transfer agent and mutual fund accounting business in Poland. Forum directs an off-shore and hedge fund administration business through its Bermuda office. It employs more than 230 professionals worldwide. From the beginning, Forum developed a plan of action that was effective with both start- up funds, and funds that needed restructuring and improved services in order to live up to their potential. The success of its innovative approach is evident in Forum's growth rate over the years, a growth rate that has consistently outstripped that of the mutual fund industry as a whole, as well as that of the fund service outsource industry. Forum has worked with both domestic and international mutual fund sponsors, designing unique mutual fund structures, positioning new funds within the sponsors' own corporate planning and targeted markets. 43 Forum's staff of experienced lawyers, many of whom have been associated with the Securities and Exchange Commission, have been available to work with fund sponsors to customize fund components and to evaluate the potential of various fund structures. Forum has introduced fund sponsors to its unique proprietary Core and Gateway(R) partnership, helping them to take advantage of this full-service master/feeder structure. Fund sponsors understand that even the most efficiently and creatively designed fund can disappoint shareholders if it is inadequately serviced. That is the reason why fund sponsors have relied on Forum to meet all of a fund's complex compliance, regulatory, and filing needs. Forum's full service commitment includes providing state-of- the-art accounting support (Forum has 8 CPAs on staff, as well as senior accountants who have been associated with Big 6 accounting firms). Forum's proprietary accounting system is continually upgraded and can provide custom-built modules to satisfy a fund's specific requirements. This service is joined with transfer agency and shareholder service groups that draw their strength both from the high caliber of the people staffing each unit and from Forum's advanced technology support system. More than a decade of experience with mutual funds has given Forum practical hands-on experience and knowledge of how mutual funds function "from the inside out." Forum has put that experience to work by creating the Forum Family of Funds, a family where each member is designed and positioned for your best investment advantage, and where each fund is serviced with the utmost attention to the delivery of timely, accurate, and comprehensive shareholder information. INVESTMENT ADVISERS Forum Investment Advisors, LLC offers the services of portfolio managers with the highest qualifications--because without such direction, a comprehensive and goal-oriented investment program and ongoing investment strategy are not possible. Serving as portfolio managers for the Forum Family of Funds are individuals with decades of experience with some of the country's major financial institutions. Individual funds in the Forum Family of Funds invest in portfolios that have as their investment adviser nationally recognized institutions, including Schroder Capital Management International, Inc., a major figure in worldwide mutual funds that, with its affiliates, managed over $175 billion as of September 30, 1997. Forum Funds are also managed by the portfolio managers of H.M. Payson & Co., founded in Portland, Maine in 1854 and one of the oldest investment firms in the country. Payson has approximately $1 billion in assets under management, with clients that include pension plans, endowment funds, and institutional and individual accounts. 44 FORUM INVESTMENT ADVISORS, LLC Forum Investment Advisors, LLC is the largest Maine based investment adviser with approximately $1.4 billion in assets under management. The portfolio managers have decades of combined experience in a cross section of the country's financial markets. The managers have specific, day-to-day experience in the asset class portfolios they manage, bringing critical focus to meeting each fund's explicit investment objectives. The portfolio managers have been involved in investing the assets of large insurance companies, banks, pension plans, individuals, and of course mutual funds. Forum Investment Advisors, LLC has a staff of analysts and investment administrators to meet the demands of serving shareholders in our funds. FORUM FAMILY OF FUNDS It has been said that mutual fund investment offerings--of which there are nearly 10,000, with assets spread across stock, bond, and money market funds worth more than $4 trillion--come in a rainbow of varieties. A better description would be a "spectrum" of varieties, the spectrum graded from green through amber and on to red. In simpler terms, from low risk investments, through moderate to high risk. The lower the risk, the lower the possible reward - -- the higher the risk, the higher the potential reward. The Forum Family of Funds provides conservative investment opportunities that reduce the risk of loss of capital, using underlying money market investments U.S. Government securities (although the shares of the Forum Funds are neither insured nor guaranteed by the U.S. Government or its agencies), thus cushioning the investment against market volatility. These funds offer regular income, ready access to your money, and flexibility to buy or sell at any time. In the less conservative but still not aggressive category are funds in the Forum Family that seek to provide steady income and, in certain cases, tax-free earnings. Such investments provide important diversification to an investment portfolio. Growth funds in the Forum Family more aggressively pursue a high return at the risk of market volatility. These funds include domestic and international stock mutual funds." 45 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements Prospectus: For Institutional Shares, Institutional Service Shares and Investor Shares of Daily Assets Treasury Obligations Fund, Daily Assets Government Fund (formerly known as Daily Assets Treasury Fund), Daily Assets Government Obligations Fund (formerly known as Daily Assets Government Fund) and Daily Assets Cash Fund (the "Funds"): Financial Highlights. Statement of Additional Information: Annual Report: The Funds' Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, Financial Highlights and Notes to Financial Statements for the year ended August 31, 1997, and the Schedules of Investments, Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets and Notes Thereto for Government Portfolio (formerly known as Treasury Portfolio) and Cash Portfolio, series of Core Trust (Delaware), for the year ended August 31, 1997, both of which were filed as part of the Funds' annual report to shareholders with the Securities and Exchange Commission on November 12, 1997, accession number 0001004402-97-000179 pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as amended. Semi-Annual Report: The Funds' Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, Financial Highlights and Notes to Financial Statements for the semi-annual period ended February 28, 1998, and the Schedules of Investments, Statements of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets and Notes Thereto for Government Portfolio (formerly known as Treasury Portfolio), Treasury Cash Portfolio, Government Cash Portfolio and Cash Portfolio, series of Core Trust (Delaware), for the semi-annual period ended February 28, 1998, both of which were filed as part of the Funds' semi-annual report to shareholders with the Securities and Exchange Commission on May 8, 1998, accession number 0001004402-98-000290 pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as amended. (b) Exhibits (1) Trust Instrument of Registrant dated August 29, 1995 (see note 1). (2) By-Laws of Registrant dated August 29, 1995 (see note 2). (3) None. (4) See the following Sections in the Trust Instrument filed as Exhibit 24(b)(1)(a): Sections 2.04 and 2.06. (5)(a) Investment Advisory Agreement between Registrant and H.M. Payson & Co. relating to Payson Value Fund and Payson Balanced Fund dated December 18, 1995 (filed herewith). (b) Investment Advisory Agreement between Registrant and Quadra Capital Partners, L.P. relating to Quadra Value Equity Fund, Quadra International Equity Fund, Quadra Opportunistic Bond Fund and Quadra Restricted Maturity Treasury Fund dated as of December 20, 1996 (see note 3). (c) Investment Subadvisory Agreement between Quadra Capital Partners, L.P. and Carl Domino Associates, L.P. relating to Value Equity Fund dated as of October 18, 1996 (see note 3). (d) Investment Advisory Agreement between Registrant and Austin Investment Management, Inc. relating to Austin Global Equity Fund dated as of June 14, 1996 (filed herewith). (e) Investment Advisory Agreement between Registrant and Oak Hall Capital Advisors, Inc. relating to Oak Hall Equity Fund dated as of June 14, 1996 (filed herewith). (f) Investment Advisory Agreement between Registrant and Forum Investment Advisors, LLC relating to Investors Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, Investors High Grade Bond Fund and Investors Growth Fund dated as of January 2, 1998 (see note 4). (g) Investment Subadvisory Agreement between Quadra Capital Partners, L.P. and Smith Asset Management Group, L.P. relating to Quadra Growth Fund dated as of November 1, 1997 (see note 5). (6)(a) Selected Dealer Agreement between Forum Financial Services, Inc. and securities brokers (filed herewith). (b) Bank Affiliated Selected Dealer Agreement between Forum Financial Services, Inc. and bank affiliates (filed herewith). (c) Distribution Agreement between Registrant and Forum Financial Services, Inc. relating to Quadra Opportunistic Bond Fund, Quadra Limited Maturity Treasury Fund, Quadra International Equity Fund, Quadra Value Equity Fund, Investor Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Oak Hall Equity Fund and Austin Global Equity Fund dated as of June 19, 1997 (filed herewith). (7) None. (8)(a) Transfer Agency and Services Agreement between Registrant and Forum Shareholder Services, LLC relating to Investors Bond Fund TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Equity Index Fund, Small Cap Fund, International Equity Fund, Emerging Markets Fund, Investors Equity Fund, Investors Growth Fund, Investors High Grade Bond Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Daily Assets Government Fund, Daily Assets Tax-Exempt Fund, Daily Assets Treasury Obligations Fund, Austin Global Equity Fund, Oak Hall Equity Fund, Quadra Value Equity Fund andQuadra Growth Fund dated May 19, 1998 (filed herewith). (b) Custodian Agreement between Registrant and BankBoston N.A.,relating to Daily Assets Treasury Fund, Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Cash Fund, Daily Assets Municipal Fund, Investors High Grade Bond Fund, Investors Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Equity Index Fund, Investors Equity Fund, Payson Value Fund, Investors Growth Fund, International Equity Fund, Emerging Markets Fund, Small Company Opportunities Fund, Quadra Limited Maturity Treasury Fun, Quadra Growth Fund, Oak Hall Small Cap Contrarian Fund, Austin Global Equity Fund and Polaris Global Value Fund dated as of May 19, 1998 (filed herewith). (c) Sub-Transfer Agent Agreement between Forum Financial Corp., Administrative Data Management Corp. and Forum Funds dated December 18, 1995 (filed herewith). (9)(a) Administration Agreement between Registrant and Forum Administrative Services, LLC relating to Investor Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Equity Index Fund, Small Cap Fund, International Equity Fund, Emerging Markets Fund, Investors Equity Fund, Investors Growth Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Daily Assets Government Fund, Daily Assets Tax-Exempt Fund, Daily Assets Treasury Obligations Fund, Austin Global Equity Fund, Oak Hall Equity Fund, Quadra International Equity Fund, Quadra Value Equity Fund, Quadra Opportunistic Bond Fund, Quadra Limited Maturity Treasury Fund and Quadra Growth Fund dated as of June 19, 1997 and amended as of December 5, 1997(filed herewith ). (b) Shareholder Service Plan of Registrant relating to Quadra Funds dated June 19, 1997, amended September 22, 1997 and Form of Shareholder Service Agreement relating to Quadra Funds (see note 6). (c) Form of Shareholder Service Plan of Registrant dated September 22, 1997 and Form of Shareholder Service Agreement dated ___/____/1997 relating to the Daily Assets Treasury Fund, Daily Assets Cash Fund, Daily Assets Government Fund, Daily Assets Municipal Fund and Daily Assets Treasury Obligations Fund (see note 7). (10) Opinion of Seward & Kissel dated January 5, 1996 (see note 8). (11) Consent of Independent Auditors (filed herewith). (12) None. (13) Investment Representation letter of Reich & Tang, Inc. as original purchaser of shares of Registrant (filed herewith). (14) Form of Disclosure Statement and Custodial Account Agreement applicable to individual retirement accounts (filed herewith). (15) Rule 12b-1 Plan adopted by Registrant(filed herewith). (16) Schedule of Sample Performance Calculations (see note 9) relating to: Investors High Grade Bond Fund Oak Hall Small Cap Contrarian Fund Investors Bond Fund Quadra Limited Maturity Treasury Fund TaxSaver Bond Fund Quadra Value Equity Fund Maine Municipal Bond Fund Quadra Growth Fund New Hampshire Bond Fund Quadra International Equity Fund Daily Assets Treasury Obligations Fund Quadra Opportunistic Bond Fun Daily Assets Government Fund Equity Index Fund Daily Assets Government Obligations Fund Investors Equity Fund Daily Assets Cash Fund Investors Growth Fund Daily Assets Municipal Fund Small Company Opportunities Fund Payson Value Fund International Equity Fund Payson Balanced Fund Emerging Markets Fund Austin Global Equity Fund
(17) Financial Data Schedules (filed herewith). (18) 18f-3 Plan adopted by Registrant (filed herewith). Other Exhibits: Powers of Attorney (see note 1). --------------- Note: (1) Exhibit incorporated by reference as filed on PEA No. 34 via EDGAR on May 9, 1996, accession number 0000912057-96-008780. (2) Exhibit incorporated by reference as filed on PEA No. 43 via EDGAR on July 31, 1997, accession number 0000912057-97-025707. (3) Exhibit incorporated by reference as filed on PEA No. 41 via EDGAR on December 31, 1996, accession number 0000912057-96-030646. (4) Exhibit incorporated by reference as filed on PEA 56 via EDGAR on December 31, 1997, accession number 0001004402-97-000281. (5) Exhibit incorporated by reference as filed on PEA 48 via EDGAR on October 31, 1997, accession number 0001004402-97-000152. (6) Exhibit incorporated by reference as filed on PEA No. 49 via EDGAR on November 5, 1997, accession number 0001004402-97-000163. (7) Exhibit incorporated by reference as filed on PEA No. 50 via EDGAR on November 12, 1997, accession no. 0001004402-97-000189. (8) Exhibit incorporated by reference as filed on PEA No. 33 via EDGAR on January 5, 1996, accession number 0000912057-96-000216. (9) Exhibit incorporated by reference as filed on PEA No. 61 via EDGAR on May 8, 1998, accession number 0001004402-98-000295. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES ------------------------------------------------------------------------- -------------------------------- Title of Class Number of Recordholders as of May 1, 1998 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investors High Grade Bond Fund 2 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investors Bond Fund 59 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- TaxSaver Bond Fund 42 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Maine Municipal Bond Fund 388 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- New Hampshire Bond Fund 76 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Daily Assets Treasury Fund ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investor Shares 0 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Service Shares 103 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Daily Assets Treasury Obligations Fund ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investor Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Shares 3 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Service Shares 3 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Daily Assets Government Fund ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investor Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Shares 3 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Service Shares 3 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Daily Assets Cash Fund 0 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investor Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Shares 2 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Service Shares 29 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Daily Assets Municipal Fund ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investor Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Institutional Service Shares 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Payson Value Fund 360 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Payson Balanced Fund 388 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Austin Global Equity Fund 13 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Oak Hall Small Cap Contrarian Fund 165 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Quadra Limited Maturity Treasury Fund 0 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Quadra Value Equity Fund 17 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Quadra Growth Fund 14 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Quadra International Equity Fund 0 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Quadra Opportunistic Bond Fund 0 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Equity Index Fund 2 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investors Equity Fund 6 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Investors Growth Fund 4 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Small Company Opportunities Fund 1 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- International Equity Fund 2 ------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------- -------------------------------- Emerging Markets Fund 2 ------------------------------------------------------------------------- --------------------------------
ITEM 27. INDEMNIFICATION Pursuant to Section 3803 of the Delaware Business Trust Act, Section 5.2 of Registrant's Trust Instrument provides as follows: "5.2. INDEMNIFICATION. "(a) Subject to the exceptions and limitations contained in Section (b) below: "(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 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: "(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 Holders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the Covered Person's office or (B) not to have acted in good faith in the reasonable belief that Covered Person's 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 the Trustee's or officer's 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 Holder 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 paragraph (a) of this Section 5.2 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 5.2; provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust is insured against losses arising out of any such advance payments or (c) 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 this Section 5.2. "(e) Conditional advancing of indemnification monies under this Section 5.2 for actions based upon the 1940 Act may be made only on the following conditions: (i) the advances must be limited to amounts used, or to be used, for the preparation or presentation of a defense to the action, including costs connected with the preparation of a settlement; (ii) advances may be made only upon receipt of a written promise by, or on behalf of, the recipient to repay that amount of the advance which exceeds that amount which it is ultimately determined that he is entitled to receive from the Trust by reason of indemnification; and (iii) (a) such promise must be secured by a surety bond, other suitable insurance or an equivalent form of security which assures that any repayments may be obtained by the Trust without delay or litigation, which bond, insurance or other form of security must be provided by the recipient of the advance, or (b) a majority of a quorum of the Trust's disinterested, non-party Trustees, or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts, that the recipient of the advance ultimately will be found entitled to indemnification. "(f) In case any Holder or former Holder of any Series shall be held to be personally liable solely by reason of the Holder or former Holder being or having been a Holder of that Series and not because of the Holder or former Holder acts or omissions or for some other reason, the Holder or former Holder (or the Holder or former Holder's 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 Holder, assume the defense of any claim made against the Holder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series." Paragraph 4 of each Investment Advisory Agreement provides in substance as follows: "4. We shall expect of you, and you will give us the benefit of, your best judgment and efforts in rendering these services to us, and we agree as an inducement to your undertaking these services that you shall not be liable hereunder for any mistake of judgment or in any event whatsoever, except for lack of good faith, provided that nothing herein shall be deemed to protect, or purport to protect, you against any liability to us or and to our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder." Section 8 of the Distribution Agreement provides: (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 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 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 (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 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 Articles of Incorporation or Bylaws or any applicable statute or regulation; provided, however, that neither the Trust nor the Distributor may amend their Organic Documents or Articles of Incorporation and Bylaws, 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. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER (a) Forum Investment Advisors, LLC The description of Forum Investment Advisors, LLC in the Prospectuses and Statements of Additional Information, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the members of Forum Investment Advisors, LLC, Two Portland Square, Portland, Maine 04101, including their business connections which are of a substantial nature. Forum Holdings Corp. I., Member. Forum Trust, LLC., Member. Both Forum Holdings Corp. and Forum Financial Group, LLC ("Forum") are controlled by John Y. Keffer, Chairman and President of the Registrant. Mr. Keffer is President of Forum Financial Group, LLC. Mr. Keffer is also a director and/or officer of various registered investment companies for which the various Forum Financial Group of Companies provides services. The following are the officers of Forum Investment Advisors, LLC, including their business connections which are of a substantial nature. Each officer may serve as an officer of various registered investment companies for which the Forum Financial Group of Companies provides services. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- William J. Lewis Director Forum Investment Advisors, LLC. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Sara M. Morris Treasurer Forum Investment Advisors, LLC. ------------------------------------ ---------------------------------- Chief Financial Officer Forum Financial Group, LLC. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Officer Other Forum affiliated companies ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- David I. Goldstein Secretary Forum Investment Advisors, LLC. ------------------------------------ ---------------------------------- General Counsel Forum Financial Group, LLC. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Officer Other Forum affiliated companies ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Dana A. Lukens Assistant Secretary Forum Investment Advisors, LLC. ------------------------------------ ---------------------------------- Corporate Counsel Forum Financial Group, LLC. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Officer Other Forum affiliated companies ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Margaret J. Fenderson Assistant Treasurer Forum Investment Advisors, LLC. ------------------------------------ ---------------------------------- Corporate Accounting Manager Forum Financial Group, LLC. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Officer Other Forum affiliated companies ---------------------------------- ------------------------------------ ----------------------------------
(b) H.M. Payson & Co. The description of H.M. Payson & Co. in the Prospectuses and Statements of Additional Information, with respect to the Payson Value Fund, Payson Balanced Fund and investors Equity Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the directors and principal executive officers of H.M. Payson & Co., including their business connections which are of a substantial nature. The address of H.M. Payson & Co. is One Portland Square, Portland, Maine 04101. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Adrian l. Asherman Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John C. Downing Managing Director, Treasurer H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- William A. Macleod Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Thomas M. Pierce Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Peter E. Robbins Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John H. Walker Managing Director, President H.M. Payson & Co. ------------------------------------ ---------------------------------- Director York Holding Company ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Director York Insurance Company ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Teresa M. Esposito Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John C. Knox Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Harold J Dixon Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Laura McDill Managing Director H.M. Payson & Co. ---------------------------------- ------------------------------------ ----------------------------------
(c) Austin Investment Management, Inc. The description of Austin Investment Management, Inc. in the Prospectus and Statement of Additional Information with respect to the Austin Global Equity Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following is the director and principal executive officer of Austin Investment Management, Inc. 375 Park Avenue, New York, New York 10152, including his business connections which are of a substantial nature. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Peter Vlachos Director, President, Treasurer, Austin Investment Management Inc. Secretary ---------------------------------- ------------------------------------ ----------------------------------
(d) Oak Hall Capital Advisors, LLP The description of Oak Hall Capital Advisors, LLP in the Prospectus and Statement of Additional Information with respect to Oak Hall Small Cap Contrarian Fund, constituting part of Parts A and B, respectively, of this Registration Statement are incorporated by reference herein. The following are the directors and principal executive officers of, Oak Hall Capital Advisors, LLP,. 122 East 42nd Street, New York, New York 10168, including their business connections which are of a substantial nature. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Alexander G. Anagnos Director, Portfolio Manager Oak Hall Capital Advisors, LLP ------------------------------------ ---------------------------------- Consultant American Services Corporation ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Financial Advisor WR Family Associates ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Lewis G. Cole Director Oak Hall Capital Advisors, LLP ------------------------------------ ---------------------------------- Partner The Law Firm of Strook, Strook & Lavan ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John J. Hock Executive Vice President Oak Hall Capital Advisors, LLP ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Charles D. Klein Portfolio Manager Oak Hall Capital Advisors, LLP ------------------------------------ ---------------------------------- Director American Services Corporation ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Financial Advisor WR Family Associates ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- David P. Steinmann Executive Vice President Oak Hall Capital Advisors, LLP ------------------------------------ ---------------------------------- Secretary, Treasurer American Securities Corporation ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Administrator WR Family Associates ---------------------------------- ------------------------------------ ----------------------------------
(e) Carl Domino Associates, L.P. The description of Carl Domino Associates, L.P. in the Prospectus and Statement of Additional Information with respect to the Quadra Value Equity Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the directors and principal executive officers of, Carl Domino Associates, L.P., 580 Village Blvd., West Palm Beach, FL 33409 including their business connections which are of a substantial nature. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Carl J. Domino Managing Partner, Portfolio Manager Carl Domino Associates, L.P. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Paul Scoville, Jr. Senior Portfolio Manager Carl Domino Associates, L.P. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Ann Fritts Syring Senior Portfolio Manager Carl Domino Associates, L.P. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John Wagstaff-Callahan Senior Portfolio Manager Carl Domino Associates, L.P. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Trustee Formerly of Batterymarch Financial Management ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Stephen Krider Kent, Jr. Senior Portfolio Manager Carl Domino Associates, L.P. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Senior Portfolio Manager Formerly of Gamble, Jones Holbrook & Brent ---------------------------------- ------------------------------------ ----------------------------------
(f) Smith Asset Management Group, L.P. The description of Smith Asset Management Group, L.P. in the Prospectus and Statement of Additional Information with respect to the Quadra Growth Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the directors and principal executive officers of Smith Asset Management Group, L.P., including their business connections which are of a substantial nature. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Stephen Smith Chief Investment Officer Smith Asset Management Group, L.P. ---------------------------------- ------------------------------------ ----------------------------------
(g) Norwest Investment Management, Inc. The description of Norwest Investment Management, Inc. ("NIM") in the Prospectus and Statement of Additional Information for Equity Index Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the directors and principal executive officers of NIM, including their business connections which are of a substantial nature. The address of Norwest Corporation, the parent of Norwest Bank Minnesota, N.A., which is the parent of NIM, is Norwest Center, Sixth Street and Marquette Avenue, Minneapolis, MN 55479. Unless otherwise indicated below, the principal business address of any company with which the directors and principal executive officers are connected is also Sixth Street and Marquette Avenue, Minneapolis, MN 55479. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- P. Jay Kiedrowski Chairman, Chief Executive Officer, Norwest Investment Management, President Inc. ------------------------------------ ---------------------------------- Executive Vice President, Employee Norwest Bank Minnesota, N.A. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Director Crestone Capital Management, Inc. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Chairman Galliard Capital Management, Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- James W. Paulsen Chief Investment Officer Norwest Investment Management, Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Stephen P. Gianoli Senior Vice President, Chief Norwest Investment Management, Executive Officer Inc. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Director Crestone Capital Management, Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- David S. Lunt Vice President, Senior Portfolio Norwest Investment Management, Manager Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Richard C. Villars Vice President, Senior Portfolio Norwest Investment Management, Manager Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Lee K. Chase Senior Vice President Norwest Investment Management, Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Andrew Owen Vice President Norwest Investment Management, Inc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Eileen A. Kuhry Investment Compliance Specialist Norwest Investment Management, Inc. ---------------------------------- ------------------------------------ ----------------------------------
(h) Schroder Capital Management International Inc. The description of Schroder Capital Management International Inc. ("Schroder") in the Prospectus Statement of Additional Information relating to International Equity Fund and Emerging Markets Fund, constituting certain of Parts A and B, respectively, of this Registration Statement, are incorporated by reference herein. The following are the directors and principal officers of Schroder, including their business connections of a substantial nature. The address of each company listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is a United Kingdom affiliate of Schroder which provides investment management services international clients located principally in the United States. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- David M. Salisbury Chief Executive Officer, Director, SCMI Chairman ------------------------------------ ---------------------------------- Chief Executive, Director Schroder Ltd. ------------------------------------ ---------------------------------- Director Schroders plc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Richard R. Foulkes Deputy Chairman/Executive Vice SCMI President ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John A. Troiano Chief Executive, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- David Gibson Senior Vice President, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Capital Management ------------------------------------ ---------------------------------- Senior Vice President Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- John S. Ager Senior Vice President, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Sharon L. Haugh Executive Vice President, Director SCMI ---------------------------------- ------------------------------------ ---------------------------------- Director, Chairman Schroder Advisors ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Gavin D. L. Ralston Senior Vice President, Managing SCMI Director ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Mark J. Smith Senior Vice President, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ---------------------------------- ------------------------------------ Robert G. Davy Senior Vice President, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Ltd. ------------------------------------ ---------------------------------- ------------------------------------ ---------------------------------- Officer of open end investment companies for which SCMI and/or its affiliates provide investment services ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Jane P. Lucas Senior Vice President, Director SCMI ------------------------------------ ---------------------------------- Director Schroder Advisors ------------------------------------ ---------------------------------- Director Schroder Capital Management ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- C. John Govett Director SCMI ------------------------------------ ---------------------------------- Group Managing Director Schroder Ltd. ---------------------------------- ------------------------------------ Director Schroders plc. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Phillipa J. Gould Senior Vice President, Director SCMI ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Louise Croset First Vice President, Director SCMI ------------------------------------ ---------------------------------- First Vice President Schroder Ltd. ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Abdallah Nauphal Group Vice President, Director SCMI ---------------------------------- ------------------------------------ ----------------------------------
(i) Polaris Capital Management, Inc. The description of Polaris Capital Management, Inc. ("Polaris") under the caption "Management -Investment Adviser and Portfolio Manager." in the Prospectus for Polaris Global Value Fund and "Management - Investment Adviser and Portfolio Manager" in the Statement of Additional Information relating to that fund, constituting certain of Parts A and B, respectively, of the Registration Statement, are incorporated by reference herein. The following are the directors and principal officers of Polaris, including their business connections of a substantial nature. The address of the company is 125 Summer Street, Boston, Massachusetts 02110. ---------------------------------- ------------------------------------ ---------------------------------- Name Title Business Connection ---------------------------------- ------------------------------------ ---------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- Bernard R. Horn, Jr. President, Portfolio Manager Polaris Capital Management, Inc. ---------------------------------- ------------------------------------ ----------------------------------
ITEM 29. PRINCIPAL UNDERWRITERS (a) Forum Financial Services, Inc., Registrant's underwriter, serves as underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended: The CRM Funds BT Alex. Brown Cash Reserve Fund, Inc The Cutler Trust Flag Investors Telephone Fund, Inc. Forum Funds Flag Investors International Fund, Inc. Flag Investor Family of Funds Flag Investors Emerging Growth Fund, Inc. The Glenmede Fund, Inc. Total Return U.S. Treasury Fund, Inc. The Glenmede Portfolios Managed Municipal Fund, Inc. Memorial Funds Flag Investors Value Builder Fund, Inc. Monarch Funds Flag Investors Real Estate Securities Fund, Inc. Norwest Advantage Funds Flag Investors Equity Partners Fund, Inc. Norwest Select Funds Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc. Sound Shore Fund, Inc. Flag Investors Short-Intermediate Income Fund, Inc.
(b) The following directors and officers of Forum Financial Services, Inc. hold the following positions with Registrant. Their business address is Two Portland Square, Portland, Maine 04101. --------------------------- ------------------------------- ----------------------------- Name Position with Underwriter Position with Registrant --------------------------- ------------------------------- ----------------------------- --------------------------- ------------------------------- ----------------------------- John Y. Keffer President Chairman, President --------------------------- ------------------------------- -----------------------------
(c) Not Applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS The majority of the accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are maintained at the offices of Forum Administrative Services, LLC and Forum Shareholder Services, LLC., Two Portland Square, Portland, Maine 04101. The records required to be maintained under Rule 31a-1(b)(1) with respect to journals of receipts and deliveries of securities and receipts and disbursements of cash are maintained at the offices of the Registrant's custodian, BankBoston N.A., 100 Federal Street, Boston, Massachusetts 02106. The records required to be maintained under Rule 31a-1(b)(5), (6) and (9) are maintained at the offices of the Registrant's advisers or subadvisers, as listed in Item 28 hereof. ITEM 31. MANAGEMENT SERVICES Not Applicable. ITEM 32. UNDERTAKINGS Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders relating to the portfolio or class thereof to which the prospectus relates upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Portland, and State of Maine on the 22nd day of May, 1998. FORUM FUNDS By: /s/ John Y. Keffer -------------------- John Y. Keffer President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement amendment has been signed below by the following persons on the 22nd day of May, 1998. SIGNATURES TITLE (a) Principal Executive Officer /s/ John Y. Keffer Chairman and President ----------------------------- John Y. Keffer (b) Principal Financial and Accounting Officer /s/ Sara M. Morris Treasurer ----------------------------- Sara M. Morris (c) A Majority of the Trustees /s/ John Y. Keffer Chairman ---------------------------- John Y. Keffer James C. Cheng* Trustee J. Michael Parish* Trustee Costas Azariadis* Trustee *By: /s/ John Y. Keffer ------------------------- John Y. Keffer Attorney in Fact SIGNATURES On behalf of Core Trust (Delaware), being duly authorized, I have duly caused this amendment to the Registration Statement of Forum Funds to be signed in the City of Portland, State of Maine on the 22nd day of May, 1998. CORE TRUST (DELAWARE) By: /s/ John Y. Keffer ------------------- John Y. Keffer President This amendment to the Registration Statement of Forum Funds has been signed below by the following persons in the capacities indicated on the 22nd day of May, 1998. SIGNATURES TITLE (a) Principal Executive Officer /s/ John Y. Keffer Chairman and President ------------------------------ John Y. Keffer (b) Principal Financial and Accounting Officer /s/ Sara M. Morris Treasurer ----------------------------- Sara M. Morris (c) A Majority of the Trustees /s/ John Y. Keffer Chairman ------------------------------ John Y. Keffer J. Michael Parish* Trustee James C. Cheng* Trustee Costas Azariadis* Trustee *By: /s/ John Y. Keffer ------------------------- John Y. Keffer Attorney in Fact INDEX TO EXHIBITS EXHIBIT 5(a) Investment Advisory Agreement between Registrant and H.M. Payson & Co. relating to the Payson Value Fund and the Payson Balanced Fund dated December 18, 1995. 5(d) Investment Advisory Agreement between Registrant and Austin Investment Management, Inc. relating to Austin Global Equity Fund dated as of June 14, 1996. 5(e) Investment Advisory Agreement between Registrant and Oak Hall Capital Advisors, Inc. relating to Oak Hall Equity Fund dated as of June 14, 1996. 6(a) Selected Dealer Agreement between Forum Financial Services, Inc. and securities brokers. 6(b) Bank Affiliated Selected Dealer Agreement between Forum Financial Services, Inc. and bank affiliates. 6(c) Distribution Agreement between Registrant and Forum Financial Services, Inc. relating to Quadra Opportunistic Bond Fund, Quadra Limited Maturity Treasury Fund, Quadra International Equity Fund, Quadra Value Equity Fund, Investor Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Oak Hall Equity Fund and Austin Global Equity Fund dated as of June 19, 1997 8(a) Transfer Agency and Services Agreement between Registrant and Forum Shareholder Services, LLC relating to Investors Bond Fund TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Equity Index Fund, Small Cap Fund, International Equity Fund, Emerging Markets Fund, Investors Equity Fund, Investors Growth Fund, Investors High Grade Bond Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Daily Assets Government Fund, Daily Assets Tax-Exempt Fund, Daily Assets Treasury Obligations Fund, Austin Global Equity Fund, Oak Hall Equity Fund, Quadra Value Equity Fund andQuadra Growth Fund dated December 18, 1995. 8(b) Custodian Agreement between Registrant and BankBoston N.A.,relating to Daily Assets Treasury Fund, Daily Assets Treasury Obligations Fund, Daily Assets Government Fund, Daily Assets Cash Fund, Daily Assets Municipal Fund, Investors High Grade Bond Fund, Investors Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Equity Index Fund, Investors Equity Fund, Payson Value Fund, Investors Growth Fund, International Equity Fund, Emerging Markets Fund, Small Company Opportunities Fund, Quadra Limited Maturity Treasury Fun, Quadra Growth Fund, Oak Hall Small Cap Contrarian Fund, Austin Global Equity Fund and Polaris Global Value Fund dated as of May 19, 1998. 8(c) Sub-Transfer Agent Agreement between Forum Financial Corp., Administrative Data Management Corp. and Forum Funds dated December 18, 1995. 9(a) Administration Agreement between Registrant and Forum Administrative Services, LLC relating to Investor Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund, Payson Value Fund, Equity Index Fund, Small Cap Fund, International Equity Fund, Emerging Markets Fund, Investors Equity Fund, Investors Growth Fund, Daily Assets Cash Fund, Daily Assets Treasury Fund, Daily Assets Government Fund, Daily Assets Tax-Exempt Fund, Daily Assets Treasury Obligations Fund, Austin Global Equity Fund, Oak Hall Equity Fund, Quadra International Equity Fund, Quadra Value Equity Fund, Quadra Opportunistic Bond Fund, Quadra Limited Maturity Treasury Fund and Quadra Growth Fund dated as of June 19, 1997 and amended as of December 5, 1997. 11 Consent of Independent Auditors. 13 Investment Representation letter of Reich & Tang, Inc. as original purchaser of shares of Registrant. 14 Form of Disclosure Statement and Custodial Account Agreement applicable to individual retirement accounts. 15 Rule 12b-1 Plan adopted by Registrant. 17 Financial Data Schedules. 18 Rule 18f-3 Plan adopted by Registrant. EX-99.B5 2 5(A) INV ADVISORY AGMT PYSON Exhibit 5(a) FORUM FUNDS INVESTMENT ADVISORY AGREEMENT December 18, 1995 H. M. Payson & Co. One Portland Square Portland, Maine 04112 Dear Sirs: We, the undersigned Forum Funds, herewith confirm our agreement with you as follows: 1. We propose to engage in the business of investing and reinvesting our assets in securities of the type and in accordance with the limitations specified in our Trust Instrument, By-Laws and registration statement filed with the Securities and Exchange Commission under the Investment Company Act of 1940 (the "Investment Company Act") and the Securities Act of 1933 (the "Securities Act"), including any representations made in our prospectuses and statements of additional information, all in such manner and to such extent as may from time to time be authorized by our Board of Trustees. We are currently authorized to issue twelve classes of shares and our Board of Trustees is authorized to reclassify and issue any unissued shares to any number of additional classes or series each having its own investment objective, policies and restrictions. We enclose copies of the documents listed above and will from time to time furnish you with any amendments thereof. 2. We hereby employ you, subject to the direction and control of our Board of Trustees, to manage the investment and reinvestment of the assets in our Payson Value Fund and Payson Balanced Fund (the "Funds") as specified below, and, without limiting the generality of the foregoing, to provide management and other services specified below. (a) You will make decisions with respect to all purchases and sales of securities in the Funds. To carry out such decisions, you are hereby authorized, as our agent and attorney-in-fact, for our account and at our risk and in our name, to place orders for the investment and reinvestment of the assets of the Funds. In all purchases, sales and other transactions in securities in the Funds you are authorized to exercise full discretion and act for us in the same manner and with the same force and effect as we 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) You will report to our Board of Trustees at each meeting thereof all changes in the Funds since the prior report, and will also keep us in touch with important developments affecting the Funds and on your own initiative will furnish us from time to time with such information as you may believe appropriate for this purpose, whether concerning the individual companies whose securities are included in the Funds, the industries in which they engage, or the conditions prevailing in the economy generally. You will also furnish us with such statistical and analytical information with respect to securities in the Funds as you may believe appropriate or as we reasonably may request. In making such purchases and sales of securities in the Funds, you will bear in mind the policies set from time to time by our Board of Trustees as well as the limitations imposed by our Articles of Incorporation and in our Registration Statements under the Act and the Securities Act of 1933, the limitations in the Act and of the Internal Revenue Code in respect of regulated investment companies and the investment objective, policies and restrictions for the Funds. (c) It is understood that you will from time to time employ or associate with yourselves such persons as you believe to be particularly fitted to assist you in the execution of your duties hereunder, the cost of performance of such duties to be borne and paid by you. No obligation may be incurred on our behalf in any such respect. 3. It is further agreed that, subject to paragraph 4 of the Management and Distribution Agreement between us and Forum Financial Services, Inc. that relates to the Funds (the "Management and Distribution Agreement"), we shall be responsible and hereby assume the obligation for payment of all our other expenses, including: (a) payment of the fee payable to you under paragraph 5 hereof, the fee payable to Forum Financial Services, Inc. pursuant to the Management and Distribution Agreement between Forum Financial Services, Inc. and us and fees payable to investment advisers who manage our other investment portfolios; (b) interest charges, taxes, brokerage fees and commissions; (c) certain insurance premiums; (d) fees, interest charges and expenses of our custodian, transfer agent and dividend disbursing agent; (e) telecommunications expenses; (f) auditing, legal and compliance expenses; (g) costs of our formation and maintaining our corporate existence; (h) costs of preparing and printing our Prospectuses, Statements of Additional Information, account application forms and shareholder reports and their delivery to existing and prospective shareholders; (i) 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 our shares; (j) costs of reproduction, stationery and supplies; (k) compensation of our trustees, officers and employees and costs of other personnel performing services for us who are not your officers or officers of Forum Financial Services, Inc., or your and its respective affiliates; (l) costs of corporate meetings; (m) Securities and Exchange Commission registration fees and related expenses; (n) state securities laws registration fees and related expenses and (o) all fees and expenses paid by us in accordance with any distribution plan adopted by us pursuant to Rule 12b-1 under the Act. 4. We shall expect of you, and you will give us the benefit of, your best judgment and efforts in rendering these services to us, and we agree as an inducement to your undertaking these services that you shall not be liable hereunder for any mistake of judgment or in any event whatsoever, except for lack of good faith, provided that nothing herein shall be deemed to protect, or purport to protect, you against any liability to us or and to our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder. 5. In consideration of the foregoing we will pay you, with respect to the Payson Value Fund, a fee at an annual rate of .80% of the Fund's average daily net assets and, with respect to the Payson Balanced Fund, a fee at an annual rate of .60% of the Fund's average daily net assets. Such fees shall be accrued by us daily and shall be payable monthly in arrears on the first day of each calendar month for services performed hereunder during the prior calendar month. Payment of the advisory fees will be reduced or postponed, if necessary, with any adjustments made within three months after the end of the year. 6. This agreement shall become effective immediately upon approval by a majority of the outstanding voting securities (as defined in the Investment Company Act) of each Fund and shall remain in effect for a period of two years from the date of such approval and shall continue in effect thereafter for successive twelve-month periods (computed from each anniversary date of the effective date) with respect to each Fund, provided that such continuance is specifically approved at least annually by our Board of Trustees or by majority vote of the holders of the outstanding voting securities (as defined) of each Fund, and, in either case, by a majority of our trustees who are not parties to this agreement or interested persons, as defined in the Act, of any such party (other than as our trustees), provided further, however, that if this agreement or its continuation is not so approved as to a Fund, you may continue to render to such Fund the services described herein in the manner and to the extent permitted by the Act and the rules and regulations thereunder. Upon the effectiveness of this agreement, it shall supersede all previous agreements between us covering the subject matter hereof. This agreement may be terminated with respect to any Fund at any time, without the payment of any penalty, by vote of a majority of the outstanding voting securities (as so defined) of such Fund, or by a vote of a majority of our entire Board of Trustees on 60 days' written notice to you, or by you with respect to any Fund on not more than 60 days' nor less than 30 days' written notice to us. 7. This agreement may not be transferred, assigned, sold or in any manner hypothecated or pledged by you and this agreement shall terminate automatically in the event of any such transfer, assignment, sale, hypothecation or pledge by you. The terms "transfer," "assignment" and "sale" as used in this paragraph shall have the meanings ascribed thereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the Securities and Exchange Commission thereunder. 8. Except to the extent necessary to perform your obligations hereunder, nothing herein shall be deemed to limit or restrict your right, or the right of any of your officers, trustees or employees who may also be a trustee, officer or employee of ours, or persons otherwise affiliated with us (within the meaning of the Act) 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. If the foregoing is in accordance with your understanding, will you kindly so indicate by signing and returning to us the enclosed copy hereof. Very truly yours, FORUM FUNDS By /S/JOHN Y. KEFFER John Y. Keffer Accepted: December 18, 1995 H. M. PAYSON & CO. By /S/JOHN C. DOWNING John C. Downing EX-99.B5 3 5(D) IA AUSTIN Exhibit 5(d) FORUM FUNDS INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 14th day of June, 1996, between Forum Funds (the "Trust"), a business trust organized under the laws of the State of Delaware with its principal place of business at Two Portland Square, Portland, Maine 04101, and Austin Investment Management, Inc. (the "Adviser"), a corporation organized under the laws of State of New York with its principal place of business at 375 Park Avenue, Suite 2207, New York, New York 10152-2207. 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 its shares in separate series and classes; and WHEREAS, the Trust desires that the Adviser perform investment advisory services for certain investment portfolios of the Trust as listed on Schedule 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, the Trust and the Adviser agree as follows: SECTION 1. APPOINTMENT The Trust hereby appoints the Adviser, and the Adviser hereby agrees, to act as investment adviser to the Funds for the period and on the terms set forth in this Agreement. In connection therewith, the Trust has delivered to the Adviser copies of its Trust Instrument and By-laws, the Trust's Registration Statement and all amendments thereto filed pursuant to the Act or the Securities Act of 1933, as amended (the "Registration Statement") and the current Prospectus and Statement of Additional Information of the Funds (collectively, as currently in effect and as amended or supplemented, the "Prospectus") and, will from time to time furnish the Adviser with all amendments of or supplements to the foregoing. SECTION 2. DUTIES OF THE ADVISER Subject to the direction and control of the Trust's Board of Trustees (the "Board"), the Adviser shall manage the investment and reinvestment of the assets of the Funds, and, without limiting the generality of the foregoing, shall provide the management and other services specified below, all in such manner and to such extent as may be authorized by the Board. (a) The Adviser shall make decisions with respect to all purchases and sales and other transactions of securities and other investment assets of the Funds, including the selection of brokers, dealers and other persons to introduce or execute those transactions. To carry out such decisions, the Adviser is 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 or other assets 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) In making decisions with respect to all purchases and sales and other transactions of securities and other investment assets of the Funds, the Adviser shall follow and comply with the policies set forth from time to time by the Board (to the extent communicated to the Adviser in writing or at a Board meeting attended by a representative of the Adviser) as well as the limitations imposed by the Trust's Trust Instrument and By-laws, the Trust's Registration Statement and the Funds' Prospectuses (in each case, to the extent copies thereof are furnished to the Adviser) and, the limitations in the Act and in the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies. (c) 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 persons of the Adviser to the extent permitted by the Act. (d) The Adviser shall maintain such 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 and will provide copies of such records to the Trust's fund accountant as the accountant reasonably may request. 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 Securities and Exchange Commission and the Internal Revenue Service. The books and records of the Trust which are in the 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 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. (e) The Adviser shall determine in its sole discretion the propriety of (i) honoring requests for orders to purchase Fund shares "in kind" for a consideration consisting of securities determined to be suitable to purchase, (ii) honoring requests by shareholders for proceeds upon redemption of Fund shares to be paid "in kind" by delivery of portfolio securities, and (iii) decisions to pay redemption proceeds "in kind" even though not requested by a Fund shareholder, consistent with any elections or undertakings the Trust may have made to certain redemption proceeds in cash (f) The Adviser shall provide to the Board at each regularly scheduled meeting thereof (or such other meetings as may be requested by the Trust) a report containing an appropriate summary of all changes in the Funds since the prior report, will inform the Board of important developments affecting the Funds, and on its own initiative will furnish the Board from time to time with such information as it believes appropriate for this purpose, whether concerning the individual companies whose securities are included in the Funds, 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 also shall provide the Board with such statistical and analytical information with respect to securities in the Funds as the Adviser believes appropriate or as the Trust reasonably may request. The Adviser shall provide the Trust's fund accountant, in such forms and at such times as the fund accountant shall request, complete information about all portfolio transactions and borrowings and the requested information about prices or yield quotations of portfolio securities. (g) The Adviser shall from time to time employ or associate with such persons as it believes to be particularly fitted to assist it in the execution of its duties under this Agreement, the cost of performance of such duties to be borne and paid by the Adviser. No obligation may be incurred on behalf of the Trust in any such respect. SECTION 3. EXPENSES The Adviser shall be responsible for the portion of the net expenses that relate to each of the Funds (except interest, taxes, brokerage, fees and expenses paid by the Trust in accordance with an effective plan pursuant to Rule 12b-1 under the Act and organization expenses, all to the extent such exclusions are permitted by applicable state law) incurred by the Trust during each of its fiscal years or portion thereof that this Agreement is in effect which, as to a Fund, in any such year exceeds the limits applicable to the Fund under the laws of any state in which its shares are qualified for sale (reduced pro rata for any portion of less than a year). Subject to the foregoing and any other agreement by the Adviser to reimburse the Trust, the Trust shall be responsible and assumes the obligation for payment of all its other expenses. SECTION 4. STANDARD OF CARE 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 under hereunder. SECTION 5. COMPENSATION (a) For the services provided by the Adviser pursuant to this Agreement, the Trust shall pay the Adviser, with respect to each of the Funds, a fee at an annual rate equal to the amount set forth in Schedule B hereto. Such 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. Any reimbursement provided for in Section 3 of this Agreement shall be estimated and paid to the Trust monthly in arrears, at the same time as payment to the Adviser for such month. Payment of the fees hereunder will be reduced or postponed, if necessary, with any adjustments made after the end of the year. (b) Notwithstanding anything in this Agreement to the contrary, the Adviser and its affiliated persons may receive compensation or reimbursement from the Trust with respect to (i) the provision of distribution services on behalf of the Funds in accordance with any distribution plan adopted by the Trust pursuant to Rule 12b-1 under the Act or (ii) the provision of shareholder support or other services. SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION (a) This Agreement shall become effective with respect to a Fund on the latter of the date on which the Trust's Registration Statement relating to the shares of the Fund becomes effective and date of its approval by a vote of a majority of the outstanding voting securities of the Fund. Upon the effectiveness of this Agreement, it shall supersede all previous agreements between the Trust and the Adviser covering the subject matter hereof. (b) This Agreement shall continue in effect with respect to a Fund for twelve months and, thereafter, shall continue in effect for successive twelve-month periods (computed from each anniversary date of the approval), provided that such 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 at a meeting called for the purpose of voting on such approval. If the continuation of this Agreement is not approved as to a Fund, the Adviser may continue to render to the Fund the services described herein in the manner and to the extent permitted by the Act. (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 with respect to a Fund if it has not been approved in the manner specified in clauses (i) and (ii) of Section 6(b) within two years from its effective date. This Agreement also shall automatically terminate in the event of its assignment. SECTION 7. ACTIVITIES OF THE ADVISER (a) Except to the extent necessary to perform its obligations under this Agreement, nothing herein shall be deemed to limit or restrict the Adviser's right, or the right of any of its officers, directors or employees (whether or not they are a trustee, officer, employee or other affiliated person 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) The Adviser represents that it is currently registered as an investment adviser under the Investment Advisers Act of 1940 and will continue to be registered as such so long as this agreement remains in effect. SECTION 8. "AUSTIN" NAME If the Adviser ceases to act as investment adviser to the Austin Global Equity Fund or any other Fund whose name includes the word "Austin," or if the Adviser requests in writing, the Trust shall take prompt action to change the name of any such Fund to a name that does not include the word "Austin." The Adviser may from time to time make available without charge to the Trust for the Trust's use any marks or symbols owned by the Adviser, including marks or symbols containing the word "Austin" or any variation thereof, as the Adviser deems appropriate. Upon the Adviser's request in writing at any time, the Trust shall cease to use any such mark or symbol. The Trust acknowledges that any rights in or to the word "Austin" and any such marks or symbols which may exist on the date of this Agreement or arise hereafter are, and under any and all circumstances shall continue to be, the sole property of the Adviser. The Adviser may permit other parties, including other investment companies, to use the word "Austin" in their names without the consent of the Trust. The Trust shall not use the word "Austin" in conducting any business other than that of an investment company registered under the Act without the permission of the Adviser. SECTION 9. MISCELLANEOUS (a) Except for the Schedules, 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 thereby affected. (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 New York. (f) 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 Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. FORUM FUNDS /S/JOHN Y. KEFFER John Y. Keffer Chairman and President AUSTIN INVESTMENT MANAGEMENT, INC. /S/PETER A. VLACHOS Peter A. Vlachos President FORUM FUNDS INVESTMENT ADVISORY AGREEMENT SCHEDULE A FUNDS OF THE TRUST Austin Global Equity Fund SCHEDULE B ADVISORY FEES Advisory Fee as a % of the Annual Average Daily Net Fund Assets of the Fund - ----------------------------------------------------------- ------------------- Austin Global Equity Fund 1.50% EX-99.B5 4 5(E) IA OAK HALL Exhibit 5(e) FORUM FUNDS INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 14th day of June, 1996, between Forum Funds (the "Trust"), a business trust organized under the laws of the State of Delaware with its principal place of business at Two Portland Square, Portland, Maine 04101, and Oak Hall Capital Advisors, Inc. (the "Adviser"), a corporation organized under the laws of State of New York with its principal place of business at 122 East 42nd Street, New York, New York 10168. 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 its shares in separate series and classes; and WHEREAS, the Trust desires that the Adviser perform investment advisory services for certain investment portfolios of the Trust as listed on Schedule 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, the Trust and the Adviser agree as follows: SECTION 1. APPOINTMENT The Trust hereby appoints the Adviser, and the Adviser hereby agrees, to act as investment adviser to the Funds for the period and on the terms set forth in this Agreement. In connection therewith, the Trust has delivered to the Adviser copies of its Trust Instrument and By-laws, the Trust's Registration Statement and all amendments thereto filed pursuant to the Act or the Securities Act of 1933, as amended (the "Registration Statement") and the current Prospectus and Statement of Additional Information of the Funds (collectively, as currently in effect and as amended or supplemented, the "Prospectus") and, will from time to time furnish the Adviser with all amendments of or supplements to the foregoing. SECTION 2. DUTIES OF THE ADVISER Subject to the direction and control of the Trust's Board of Trustees (the "Board"), the Adviser shall manage the investment and reinvestment of the assets of the Funds, and, without limiting the generality of the foregoing, shall provide the management and other services specified below, all in such manner and to such extent as may be authorized by the Board. (a) The Adviser shall make decisions with respect to all purchases and sales and other transactions of securities and other investment assets of the Funds, including the selection of brokers, dealers and other persons to introduce or execute those transactions. To carry out such decisions, the Adviser is 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 or other assets 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) In making decisions with respect to all purchases and sales and other transactions of securities and other investment assets of the Funds, the Adviser shall follow and comply with the policies set forth from time to time by the Board (to the extent communicated to the Adviser in writing or at a Board meeting attended by a representative of the Adviser) as well as the limitations imposed by the Trust's Trust Instrument and By-laws, the Trust's Registration Statement and the Funds' Prospectuses (in each case, to the extent copies thereof are furnished to the Adviser) and, the limitations in the Act and in the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies. (c) 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 persons of the Adviser to the extent permitted by the Act. (d) The Adviser shall maintain such 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 and will provide copies of such records to the Trust's fund accountant as the accountant reasonably may request. 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 Securities and Exchange Commission and the Internal Revenue Service. The books and records of the Trust which are in the 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 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. (e) The Adviser shall determine in its sole discretion the propriety of (i) honoring requests for orders to purchase Fund shares "in kind" for a consideration consisting of securities determined to be suitable to purchase, (ii) honoring requests by shareholders for proceeds upon redemption of Fund shares to be paid "in kind" by delivery of portfolio securities, and (iii) decisions to pay redemption proceeds "in kind" even though not requested by a Fund shareholder, consistent with any elections or undertakings the Trust may have made to certain redemption proceeds in cash (f) The Adviser shall provide to the Board at each regularly scheduled meeting thereof (or such other meetings as may be requested by the Trust) a report containing an appropriate summary of all changes in the Funds since the prior report, will inform the Board of important developments affecting the Funds, and on its own initiative will furnish the Board from time to time with such information as it believes appropriate for this purpose, whether concerning the individual companies whose securities are included in the Funds, 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 also shall provide the Board with such statistical and analytical information with respect to securities in the Funds as the Adviser believes appropriate or as the Trust reasonably may request. The Adviser shall provide the Trust's fund accountant, in such forms and at such times as the fund accountant shall request, complete information about all portfolio transactions and borrowings and the requested information about prices or yield quotations of portfolio securities. (g) The Adviser shall from time to time employ or associate with such persons as it believes to be particularly fitted to assist it in the execution of its duties under this Agreement, the cost of performance of such duties to be borne and paid by the Adviser. No obligation may be incurred on behalf of the Trust in any such respect. SECTION 3. EXPENSES The Adviser shall be responsible for the portion of the net expenses that relate to each of the Funds (except interest, taxes, brokerage, fees and expenses paid by the Trust in accordance with an effective plan pursuant to Rule 12b-1 under the Act and organization expenses, all to the extent such exclusions are permitted by applicable state law) incurred by the Trust during each of its fiscal years or portion thereof that this Agreement is in effect which, as to a Fund, in any such year exceeds the limits applicable to the Fund under the laws of any state in which its shares are qualified for sale (reduced pro rata for any portion of less than a year). Subject to the foregoing and any other agreement by the Adviser to reimburse the Trust, the Trust shall be responsible and assumes the obligation for payment of all its other expenses. SECTION 4. STANDARD OF CARE 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 under hereunder. SECTION 5. COMPENSATION (a) For the services provided by the Adviser pursuant to this Agreement, the Trust shall pay the Adviser, with respect to each of the Funds, a fee at an annual rate equal to the amount set forth in Schedule B hereto. Such 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. Any reimbursement provided for in Section 3 of this Agreement shall be estimated and paid to the Trust monthly in arrears, at the same time as payment to the Adviser for such month. Payment of the fees hereunder will be reduced or postponed, if necessary, with any adjustments made after the end of the year. (b) Notwithstanding anything in this Agreement to the contrary, the Adviser and its affiliated persons may receive compensation or reimbursement from the Trust with respect to (i) the provision of distribution services on behalf of the Funds in accordance with any distribution plan adopted by the Trust pursuant to Rule 12b-1 under the Act or (ii) the provision of shareholder support or other services. SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION (a) This Agreement shall become effective with respect to a Fund on the latter of the date on which the Trust's Registration Statement relating to the shares of the Fund becomes effective and date of its approval by a vote of a majority of the outstanding voting securities of the Fund. Upon the effectiveness of this Agreement, it shall supersede all previous agreements between the Trust and the Adviser covering the subject matter hereof. (b) This Agreement shall continue in effect with respect to a Fund for twelve months and, thereafter, shall continue in effect for successive twelve-month periods (computed from each anniversary date of the approval), provided that such 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 at a meeting called for the purpose of voting on such approval. If the continuation of this Agreement is not approved as to a Fund, the Adviser may continue to render to the Fund the services described herein in the manner and to the extent permitted by the Act. (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 with respect to a Fund if it has not been approved in the manner specified in clauses (i) and (ii) of Section 6(b) within two years from its effective date. This Agreement also shall automatically terminate in the event of its assignment. SECTION 7. ACTIVITIES OF THE ADVISER (a) Except to the extent necessary to perform its obligations under this Agreement, nothing herein shall be deemed to limit or restrict the Adviser's right, or the right of any of its officers, directors or employees (whether or not they are a trustee, officer, employee or other affiliated person 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) The Adviser represents that it is currently registered as an investment adviser under the Investment Advisers Act of 1940 and will continue to be registered as such so long as this agreement remains in effect. SECTION 8. "OAK HALL" NAME If the Adviser ceases to act as investment adviser to the Oak Hall Equity Fund or any other Fund whose name includes the words "Oak Hall," or if the Adviser requests in writing, the Trust shall take prompt action to change the name of any such Fund to a name that does not include the words "Oak Hall." The Adviser may from time to time make available without charge to the Trust for the Trust's use any marks or symbols owned by the Adviser, including marks or symbols containing the words "Oak Hall" or any variation thereof, as the Adviser deems appropriate. Upon the Adviser's request in writing at any time, the Trust shall cease to use any such mark or symbol. The Trust acknowledges that any rights in or to the words "Oak Hall" and any such marks or symbols which may exist on the date of this Agreement or arise hereafter are, and under any and all circumstances shall continue to be, the sole property of the Adviser. The Adviser may permit other parties, including other investment companies, to use the words "Oak Hall" in their names without the consent of the Trust. The Trust shall not use the words "Oak Hall" in conducting any business other than that of an investment company registered under the Act without the permission of the Adviser. SECTION 9. MISCELLANEOUS (a) Except for the Schedules, 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 thereby affected. (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 New York. (f) 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 Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. FORUM FUNDS /S/JOHN Y. KEFFER John Y. Keffer Chairman and President OAK HALL CAPITAL ADVISORS, INC. /S/DAVID P. STEINMANN David P. Steinmann Executive Vice President FORUM FUNDS INVESTMENT ADVISORY AGREEMENT SCHEDULE A FUNDS OF THE TRUST Oak Hall Equity Fund SCHEDULE B ADVISORY FEES Advisory Fee as a % of the Annual Average Daily Net Fund Assets of the Fund - ----------------------------------------------------------- ------------------- Oak Hall Equity Fund 0.75 EX-99.B14 5 6(A) DIST SELECTED DEALER Exhibit 6(a) SELECTED DEALER AGREEMENT Ladies and Gentlemen: We are the principal underwriter of Forum Funds ("Forum Funds") and distribute shares of certain of the separate investment portfolios of Forum Funds (each a "Fund" and collectively the "Funds") at their net asset value plus applicable sales charges pursuant to our Distribution Services Agreement with Forum Funds. We hereby invite you to participate as a principal in the distribution of shares of the Funds upon the following terms and conditions: 1. You are to offer and sell shares of a Fund only at the public offering price which shall be currently in effect in accordance with the terms of the then current prospectus of the Fund. You agree to act only as principal in such transactions and shall not have authority to act as agent for the Fund, for us, or for any other dealer in any respect. All orders are subject to acceptance by us and become effective only upon confirmation by us. 2. On each purchase of shares by you from us, the total sales charge and discount to selected dealers shall be as stated in the Fund's then current prospectus. Such sales charge and discount are subject to reductions under a variety of circumstances as described in the Fund's then current prospectus. To obtain these reductions, we must be notified when a sale takes place that would qualify for the reduced charge. There is no sales charge or discount to selected dealers on the reinvestment of dividends or distributions. 3. As a selected dealer, you are hereby authorized (i) to place orders with the Fund for its shares to be resold by us to you subject to the applicable terms and conditions set forth in the Fund's then current prospectus governing the placement of orders by us and compensation and (ii) to tender shares directly to the Fund or its agent for redemption subject to the applicable terms and conditions set forth in the Fund's then current prospectus. 4. Repurchases of shares will be made at the net asset value of such shares in accordance with the Fund's then current prospectus. 5. Both parties represent that they are members in good standing of the National Association of Securities Dealers, Inc. and both parties agree to abide by the Rules of Fair Practice of this association. Both parties represent that they are qualified to act as a broker-dealer in the states or other jurisdictions where they transact business, and agree to maintain such registrations, qualifications and membership in good standing in full force and effect throughout the term of this Agreement. Our obligations under this Agreement are subject to all of the provisions of the Distribution Services Agreement between us and Forum Funds. 6. This Agreement is in all respects subject to Rule 26 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. which shall control any provisions to the contrary in this Agreement. 7. You agree: (a) To purchase shares only from us or only from your customers. (b) To purchase shares from us only for the purpose of covering purchase orders already received or for your own bona fide investment. (c) That you will not purchase any shares from your customers at prices lower than the redemption or repurchase prices then quoted by the Fund. You shall, however, be permitted to sell shares for the account of their record owners to the Fund at the repurchase prices currently established for such shares and may charge the owner a fair commission for handling the transaction. (d) That if any shares confirmed to you hereunder are redeemed or repurchased by the Fund within seven business days after such confirmation of your original order, you shall forthwith refund to us the full discount reallowed to you on such sales. We shall forthwith pay to the Fund both our share of the sales charge on the original sale and the refund from you as herein provided. We shall notify you of such redemption or repurchase within ten (10) days from the date of the redemption or repurchase. Termination or cancellation of this Agreement shall not relieve you or us from the requirements of this subparagraph. 8. We shall not accept from you any conditional orders for shares. Delivery of certificates for shares purchased and book-entry recording on the books of the Fund for shares purchased (if certificates have not been requested) shall be made by the Fund only against receipt of the purchase price, subject to deduction for the discount reallowed to you and our portion of the sales charge on such sale. Payment for the Fund shares by you shall be made on or before the settlement date specified in our confirmation at the office of our clearing agent or, at such time and place as you and we may agree from time to time. Payment for Fund shares shall be by check or wire payable to the order of Forum Funds, which reserves the right to delay issuance or transfer of shares until such payment is available in investable Federal Funds. If such payment is not received by us, we reserve the right, without notice, forthwith either to cancel the sale, or, at our option, to sell the shares ordered back to the Fund, and in either case, we may hold you responsible for any loss, including loss of profit, suffered by us or by the Fund resulting from your failure to make payment as aforesaid. 9. You will not offer or sell any of the shares except under circumstances that will result in compliance with the applicable Federal and State securities laws, as well as with all undertakings made by any Fund with any state in connection with the sale of shares in such state to the extent such undertakings are communicated to you, including any applicable requirements to deliver confirmations to your customers, and in connection with sales and offers to sell shares you will furnish to each person to whom any such sale or offer is made, a copy of the Fund's then current prospectus and statement of additional information, if requested. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing herein contained however, shall be deemed to be a condition, stipulation or provision binding any persons acquiring any securities to waive compliance with any provision of the Securities Act of 1933, the Securities Exchange Act of 1934 or the Rules and Regulations of the Securities and Exchange Commission or to relieve the parties hereto from any liability arising under the Securities Act of 1933. We shall advise you as to the states or other jurisdictions in which shares of the Fund have been qualified for sale under, or are exempt from the requirements of the respective securities laws of such states and jurisdictions and any undertakings made by any Fund with any state in connection with the sale of shares in such states. 10. No person is authorized to make any representations concerning shares of a Fund except those contained in the Fund's then current prospectus and printed information issued by the Fund or by us as information supplemental to the prospectus. We shall supply you with prospectuses, reasonable quantities of supplemental sales literature and additional information as issued or as requested by you. You agree not to use other advertising or sales material relating to a Fund unless approved in writing by us in advance of such use. Any printed information furnished by us other than the then current prospectus, periodic reports and proxy solicitation materials are our sole responsibility and are not the responsibility of the Fund and you agree that the Fund shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith. You shall have no responsibility with regard to the accuracy or completeness of any of the printed information furnished by us and you shall be held harmless from and against any cost or loss arising therefrom. You agree to hold us harmless and indemnify the Funds and us in the event that you, or any of your sales representatives, violates any federal or state law, rule or regulation or any provision of this agreement which may result in any damage, liability or expense to the Funds or their trustees, or to us. 11. Either party to this Agreement may cancel this agreement by giving written notice to the other. Such notice shall be deemed to have been given on the date on which it was either delivered personally to the other party or any officer or member thereof or was mailed postpaid or delivered in a telegraph office for transmission to the other party at his or its address as shown below. This Agreement may be amended by us at any time, any such amendment to be effective upon delivery to you, and your placing of an order after the effective date of any such amendment shall constitute your acceptance thereof. 12. This Agreement shall be construed in accordance with the laws of the State of New York and shall be binding upon both parties hereto when signed by us and accepted by you in the space provided below. 13. Any notice or communication to Forum shall be duly given if mailed, telegraphed, telecopied or hand delivered to Forum Financial Services, Inc. at the following address: Forum Financial Services, Inc. Attention: Legal Department Two Portland Square Portland, Maine 04101 Very truly yours, FORUM FINANCIAL SERVICES, INC. By: /S/JOHN Y. KEFFER John Y. Keffer President Firm Name__________________________________________________________________ Address____________________________________________________________________ City________________________________________ State __________ Zip Code _______ ACCEPTED BY (signature) Name __________________________________________ Title ______________________ Date ______________________________________________________________________ EX-99.B6 6 6(B) DIST BANK AFFILIATES Exhibit 6(b) BANK AFFILIATED SELECTED DEALER AGREEMENT Dear Sirs: We are the principal underwriter of Forum Funds ("Forum Funds") and distribute shares of certain of the separate investment portfolios of Forum Funds (each a "Fund" and collectively the "Funds") at their net asset value plus applicable sales charges pursuant to our Distribution Services Agreement with Forum Funds. We hereby invite you to participate as a principal in the distribution of shares of the Funds upon the following terms and conditions: 1. You are to offer and sell shares of a Fund only at the public offering price which shall be currently in effect in accordance with the terms of the then current prospectus of the Fund. You agree to make available, under an agency relationship with your customers, shares of the Funds. All orders are subject to acceptance by us and become effective only upon confirmation by us. 2. On each purchase of shares by you from us, the total sales charge and discount to selected dealers shall be as stated in the Fund's then current prospectus. Such sales charge and discount are subject to reductions under a variety of circumstances as described in the Fund's then current prospectus. To obtain these reductions, we must be notified when a sale takes place that would qualify for the reduced charge. There is no sales charge or discount to selected dealers on the reinvestment of dividends or distributions. 3. With respect to any and all transactions in the shares of a Fund pursuant to this Agreement, it is understood and agreed that: (a) You shall be acting solely as agent for the account of your customer. (b) Each transaction shall be initiated solely upon the order of your customer. (c) We shall execute transactions only upon receiving instructions from you acting as agent for your customer. (d) As between you and your customer, the customer will have full beneficial ownership of all Fund shares. (e) Each transaction shall be for the account of your customer and not for your own account. Each transaction shall be without recourse to you provided that you act in accordance with this Agreement. You represent and warrant to us that you will have full right, power and authority to effect transactions (including, without limitation, any purchases and redemptions) in Fund shares on behalf of all customer accounts provided by you to us or to a Fund's transfer agent. 4. All orders for the purchase of a Fund's shares shall be executed at the then current public offering price per share (i.e., the net asset value plus the applicable sales load, if any) and all orders for the redemption of a Fund's shares shall be executed at the net asset value per share, in each case as described in the Fund's then current prospectus. A Fund's minimum initial purchase order and minimum subsequent purchase order (if any) shall be as set forth in the Fund's then current prospectus. All orders are subject to acceptance or rejection at our sole discretion. Unless otherwise mutually agreed in writing, each transaction shall be promptly confirmed in writing directly to the customer on a fully disclosed basis and a copy of each confirmation shall be sent simultaneously to you. We reserve the right, at our discretion and without notice, to suspend the sale of shares or withdraw entirely the sale of shares of any or all of the Funds. 5. You agree that you shall not make shares available to your customers except in compliance with all applicable federal and state laws and the rules and regulations of applicable regulatory agencies or authorities. You agree that you shall not purchase any Fund shares, as agent for any customer, unless you deliver or cause to be delivered to the customer, at or prior to the time of purchase, a copy of the then current prospectus of the Fund, or unless the customer has acknowledged receipt of such prospectus. You further agree to obtain from each customer for whom you act as agent for the purchase of Fund shares any taxpayer identification certification required under the Internal Revenue Code of 1986 (the "Code"), and the regulations promulgated thereunder, and to provide us or our designee with timely written notice of any failure to obtain such taxpayer identification number certification in order to enable the implementation of any required backup withholding in accordance with the Code and the regulations promulgated thereunder. Unless otherwise mutually agreed in writing, you shall deliver or cause to be delivered to each of the customers who purchases shares of any Fund through you pursuant to this Agreement copies of all annual and interim reports, proxy solicitation materials and any other information and materials relating to the Fund and prepared by or on behalf of us, the Fund or its investment adviser, custodian or transfer agent for distribution to each such customer. We agree to supply you with copies of the Prospectus, annual reports, interim reports, proxy solicitation materials and any such other information and materials in reasonable quantities upon request. 6. Both parties represent that they are a member of the National Association of Securities Dealers, Inc. and both parties agree to abide by the Rules of Fair Practice of such Association. 7. This Agreement is in all respects subject to Rule 26 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. which shall control any provisions to the contrary in this Agreement. 8. You agree to pay for purchase orders for any Fund shares from you as agent for your customers in accordance with the terms of the prospectus of the applicable Fund. On or before settlement date of each purchase order for shares of any Fund, you shall either (i) remit to an account designated by us an amount equal to the then current public offering price of such Fund being purchased less your reallowance, if any, with respect to such purchase order in accordance with the applicable Fund's then current prospectus, or (ii) remit to any account designated by us an amount equal to the then current public offering price of the shares of such Fund being purchased without deduction for your reallowance, if any, with respect to such purchase order in accordance with the applicable Fund's then current prospectus, in which case your reallowance, if any, shall be payable by us to you on a monthly basis. If payment for any purchase order is not received in accordance with the applicable Fund's then current prospectus, we reserve the right, without notice, to cancel the sale and to hold you responsible for any loss sustained as a result thereof. If any shares sold by you as agent for your customers under the terms of this Agreement are sold with a sales load and are redeemed for the account of the Fund or are tendered for redemption within seven days after the confirmation of your purchase order for such shares, you shall forthwith pay to the Fund the portion of the sales load which had been retained by you. 9. You will not offer or sell any of the shares except under circumstances that will result in compliance with the applicable federal and state securities laws, including any applicable requirements to deliver confirmations to your customers, and in connection with sales and offers to sell shares you will furnish to each person to whom any such sale or offer is made, a copy of the Fund's then current prospectus. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing herein contained however, shall be deemed to be a condition, stipulation or provision binding any persons acquiring any securities to waive compliance with any provision of the Securities Act of 1933, the Securities Exchange Act of 1934 or the Rules and Regulations of the Securities and Exchange Commission or to relieve the parties hereto from any liability arising under the Securities Act of 1933. We shall advise you as to the states or other jurisdictions in which shares of the Fund have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states and jurisdictions. 10. No person is authorized to make any representations concerning shares of a Fund except those contained in the Fund's then current prospectus and printed information issued by the Fund or by us as information supplemental to the prospectus. We shall supply you with prospectuses, reasonable quantities of supplemental sales literature and additional information as issued or as requested by you. You agree not to use other advertising or sales material relating to a Fund unless approved in writing by us in advance of such use. Any printed information furnished by us other than the then current prospectus, periodic reports and proxy solicitation materials are our sole responsibility and are not the responsibility of the Fund and you agree that the Fund shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith. You shall have no responsibility with regard to the accuracy or completeness of any of the printed information furnished by us and you shall be held harmless from and against any cost or loss arising therefrom. 11. Either party to this Agreement may cancel this Agreement by giving written notice to the other. Such notice shall be deemed to have been given on the date on which it was either delivered personally to the other party or any officer or member thereof or was mailed postpaid or delivered in a telegraph office for transmission to the other party at his or its address as shown below. This Agreement may be amended by us at any time, any such amendment to be effective upon delivery to you, and your placing of an order after the effective date of any such amendment shall constitute your acceptance thereof. 12. This Agreement shall be construed in accordance with the laws of the State of New York and shall be binding upon both parties hereto when signed by us and accepted by you in the space provided below. Very truly yours, FORUM FINANCIAL SERVICES, INC. Two Portland Square Portland, Maine 04101 By: /S/John Y. Keffer -------------------------- John Y. Keffer President Firm Name_________________________________________________________________ Address___________________________________________________________________ City_________________________________ State _________ Zip Code____________ ACCEPTED BY (signature) Name (print)___________________________________ Title _____________________ Date _____________________________ EX-99 7 DISTRIBUTION AGREEMENT Exhibit 6(c) FORUM FUNDS DISTRIBUTION AGREEMENT AGREEMENT made as of the 19th day of June, 1997, by and between Forum Funds, a Delaware business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Financial Services, Inc., a Delaware corporation 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 may in the future offer 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 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. EXCLUSIVE NATURE OF DUTIES The Distributor shall be the exclusive representative of the Trust to act 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 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. (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 corporation 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; (ii) It is empowered under applicable laws and by its Articles of Incorporation 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 Articles of Incorporation. (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 take, from time to time, subject to the approval of the Board and any required approval of the shareholders of the Trust, all action necessary to fix the number of authorized Shares (if such number is not limited) and to register the Shares under the Securities Act, to the end that there will be available for sale the number of Shares as reasonably may be expected to be sold pursuant to this Agreement. (c) 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 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. (d) 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 State of Delaware; (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 Distributor of its obligations hereunder does not and will not contravene any provision of its Articles of Incorporation. (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, carefully 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; (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 (b) The Distributor 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 the Distributor; (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 (the Distributor shall have no duty or obligation to make any inquiry or effort of certification of such oral instruction); (iii) any written instruction or certified copy of any resolution of the Board, and the Distributor may rely upon the genuineness of any such document or copy thereof reasonably believed in good faith by the Distributor 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 the Distributor to be genuine and to have been signed or presented by the Trust or other proper party or parties; and the Distributor shall not 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 the Distributor reasonably believes in good faith to be genuine. (c) The Distributor 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. In addition, to the extent the Distributor's obligations hereunder are to oversee or monitor the activities of third parties, the Distributor shall not be liable for any failure or delay in the performance of the Distributor's duties caused, directly or indirectly, by the failure or delay of such third parties in performing their respective duties or cooperating reasonably and in a timely manner with the Distributor. 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 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 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 (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 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 Articles of Incorporation or Bylaws or any applicable statute or regulation; provided, however, that neither the Trust nor the Distributor may amend their Organic Documents or Articles of Incorporation and Bylaws, 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 Commission 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; (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"); and (iv) from the Trust, the shareholder service fees with respect to the Shares of those Classes as designated in Appendix A for which a Service Plan is effective (the "Shareholder Service Fee"). The Distribution Fee and Shareholder Service 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 Plan(s). The Trust grants and transfers to the Distributor 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 to secure any Distribution Fees and Shareholder Service Fees owed the Distributor by the Trust under this Agreement. (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. (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(c) 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(c) 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; 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, 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 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, as of the day and year first above written. FORUM FUNDS By: /s/Mark D. Kaplan -------------------------- Mark D. Kaplan Vice President, Assistant Treasurer and Assistant Secretary FORUM FINANCIAL SERVICES, INC. By: /s/John Y. Keffer ------------------------- John Y. Keffer President NOTE: THIS AGREEMENT NOT TO BE USED FOR CDSC FUNDING (B SHARE) FINANCING FORUM FUNDS DISTRIBUTION AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST AS OF JUNE 19, 1997 Quadra Opportunistic Bond Fund Quadra Limited Maturity Treasury Fund Quadra Invernational Equity Fund Quadra Value Equity Fund Investors Bond Fund TaxSaver Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Payson Balanced Fund Payson Value Fund Daily Assets Cash Fund Daily Assets Treasury Fund Oak Hall Equity Fund Austin Global Equity Fund FORUM FUNDS DISTRIBUTION AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST AS OF SEPTEMBER 22, 1997 Quadra Opportunistic Bond Fund Quadra Limited Maturity Treasury Fund Quadra Invernational Equity Fund Quadra Value Equity Fund Quadra Growth Fund Investors Bond Fund TaxSaver Bond Fund Investors High Grade Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Equity Index Fund Small Cap Fund International Equity Fund Emerging Markets Fund Investors Growth Fund Investors Equity Fund Payson Balanced Fund Payson Value Fund Oak Hall Equity Fund Austin Global Equity Fund INVESTOR SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets TaxSaver Fund Daily Assets Treasury Fund II INSTITUTIONAL SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets TaxSaver Fund Daily Assets Treasury Fund II INSTITUTIONAL SERVICE SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets TaxSaver Fund Daily Assets Treasury Fund II EX-99 8 TRANFER AGENT AGREEMENT Exhibit 8(a) FORUM FUNDS TRANSFER AGENCY AND SERVICES AGREEMENT AGREEMENT made as of the 19 day of May, 1998, by and between Forum Funds, a Delaware 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 corporation organized under the laws of the State of Delaware 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; (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 (ii) receive and tabulate proxy votes/oversee the activities of proxy solicitation firms and coordinate the tabulation of proxy and shareholder meeting votes. (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, 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. (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. (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 (iv) 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. 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 Delaware. (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. (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; (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. (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 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) 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. (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. (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. (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. FORUM FUNDS By: /s/John Y. Keffer ------------------------------ John Y. Keffer, President FORUM SHAREHOLDER SERVICES, LLC By: /s/David I. Goldstein ------------------------------ David I. Goldstein, Secretary FORUM FUNDS TRANSFER AGENCY AND SERVICE AGREEMENT APPENDIX A FUNDS AND CLASSES AS OF MAY 19, 1998 Investors Bond Fund TaxSaver Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Payson Balanced Fund Payson Value Fund Equity Index Fund Small Cap Fund International Equity Fund Emerging Markets Fund Investors Equity Fund Investors Growth Fund Investors High Grade Bond Fund INVESTOR SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund INSTITUTIONAL SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund INSTITUTIONAL SERVICE SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund FORUM FUNDS TRANSFER AGENCY AGREEMENT APPENDIX A (CONTINUED) FUNDS AND CLASSES OF THE TRUST MAY 19, 1998 Austin Global Equity Fund Oak Hall Equity Fund Quadra Value Equity Fund Quadra Growth Fund FORUM FUNDS TRANSFER AGENCY AGREEMENT APPENDIX B Fees Transfer Agency Fee as % of the Average Fund Daily Net Assets of the Fund - ------------------------------------------------------------------------------------------------------------------- Maine Municipal Bond Fund 0.25% per year plus $12,000 per year and New Hampshire Bond Fund annual shareholder account fees of $18.00 Investors Bond Fund per shareholder account TaxSaver Bond Fund Payson Value Fund Payson Balanced Fund Investors Equity Fund Investors Growth Fund Investors High Grade Bond Fund Equity Index Fund Small Cap Fund Emerging Markets Fund International Equity Fund - ------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES Daily Assets Treasury Fund 0.05% per year plus $12,000 per year and Daily Assets Cash Fund annual shareholder account fees of $18.00 Daily Assets Government Fund per shareholder account Daily Assets Tax-Exempt Fund - ------------------------------------------------------------------------------------------------------------------- Daily Assets Treasury Obligations Fund INSTITUTIONAL SERVICE SHARES Daily Assets Treasury Fund 0.10% per year plus $12,000 per year and Daily Assets Cash Fund annual shareholder account fees of $18.00 Daily Assets Government Fund per shareholder account Daily Assets Tax-Exempt Fund - ------------------------------------------------------------------------------------------------------------------- Daily Assets Treasury Obligations Fund
FORUM FUNDS TRANSFER AGENCY AGREEMENT APPENDIX B Fees (continued) Fund - ------------------------------------------------------------------------------------------------------------------- INVESTOR SHARES Daily Assets Treasury Fund 0.25% per year plus $12,000 per year and Daily Assets Cash Fund annual shareholder account fees of $18.00 Daily Assets Government Fund per shareholder account Daily Assets Tax-Exempt Fund - ------------------------------------------------------------------------------------------------------------------- Daily Assets Treasury Obligations Fund Oak Hall Equity Fund $12,000 per year plus $25 per shareholder Austin Global Equity Fund account - ------------------------------------------------------------------------------------------------------------------- Quadra Value Equity Fund $24,000 per year plus shareholder account Quadra Growth Fund charges in the amount of $25 for retail accounts and $125 for institutional accounts - -------------------------------------------------------------------------------------------------------------------
EX-99 9 CUSTODIAN AGREEMENT Exhibit 8(b) CUSTODIAN AGREEMENT FORUM FUNDS THIS AGREEMENT made as of this 19th day of May, 1998, between, Forum Funds, a Delaware business trust, with its principal place of business at Two Portland Square, Portland, Maine 04101 (hereinafter called the "Trust"), and BankBoston, N.A., a national banking association with its principal place of business in Boston, Massachusetts (hereinafter called the "Custodian"). WHEREAS, the Trust desires that the securities and cash of certain of its separate series shall be hereafter held and administered by Custodian as the Trust's agent pursuant to the terms of this Agreement; and WHEREAS, the Custodian provides services in the ordinary course of its business which will meet the Trust's needs as provided for hereinafter; NOW, THEREFORE, in consideration of the mutual promises herein made, the Trust and the Custodian agree as follows: SECTION 1. DEFINITIONS (a) "Account" shall mean the applicable custodial account maintained by the Custodian on behalf of the Trust for each Fund. The Account of each Fund shall be separate from the Account of each other Fund and the assets of a Fund's Account shall not in any way be charged with the liabilities of any other Fund's Account. (b) "Bank" shall mean a bank as defined in Section 2(a)(5) of the 1940 Act. (c) "Fund" shall mean each of the separate series of the Trust as listed in Appendix A hereto and each other series of the Trust as may be made subject to this Agreement by a writing between the Trust and the Custodian. (d) "Securities" shall mean and include stocks, shares, bonds, debentures, notes, money market instruments, "foreign securities," as that term is defined in Rule 17f-5 under the 1940 Act, and other obligations and any certificates, receipts, warrants or other instruments representing rights to receive, purchase, or subscribe for the same, or evidencing or representing any other rights or interests therein, or in any property or assets. (e) "Officers' Certificate" shall mean a request or direction in writing or a written confirmation of an oral request or direction signed in the name of the Trust by any two of the Officers of the Trust, the Chariman or any other persons duly authorized to sign by the Board of Trustees of the Trust. (f) "1940 Act" shall mean the United States Investment Company Act of 1940, as amended. (g) "Officer of the Trust" shall mean any President, Vice-President, Treasurer, Assistant Treasurer, Secretary of Assistant Secretary of the Trust. (h) "Securities Depository" means a clearing corporation registered under Section 17A of the Securities Exchange Act of 1934 which maintains a system for the central handling of securities in which 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 the securities. (i) "Book-Entry securities" means securities issued by the Treasury of the United States of America and Federal agencies and instrumentalities of the United States of America that are maintained in the book-entry system provided by the Federal Reserve Banks. (j) "Book-Entry Account" means an account maintained by a Federal Reserve Bank. SECTION 2. CUSTODIAN AS AGENT The Custodian is authorized to act under the terms of this Agreement as the Trust's agent and to represent the Trust and a particular Fund of the Trust whenever acting within the scope of the Agreement. SECTION 3. NAMES, TITLES AND SIGNATURE OF FUND'S OFFICERS (a) An Officer of the Trust will certify to the Custodian the names, titles, and signatures of those persons authorized to sign the Officers' Certificates, as well as names of the Board of Trustees and the Executive Committee. Said Officer, or his or her successor, will provide the Custodian with any changes which may occur from time to time. (b) The Custodian is authorized to rely and act upon written and manually signed instructions of any person or persons (if Custodain has been directed to act on the instructions of more than one person) identified on a separate list ("Authorized Persons") of those persons who may authorize the withdrawal of any portion of the cash or Securities contained in an Account furnished to the Custodian from time to time and signed by an Officer of the Trust and certified by its Secretary or an Assistant Secretary. The Trust will provide the Custodian with authenticated specimen signatures of all Authorized Persons. (c) The Custodian is further authorized to rely upon any instructions received by any other means and identified as having been given or authorized by any Authorized Person; regardless of whether such instructions shall in fact have been authorized or given by any such persons; provided, that, (i) the Custodian and the Trust shall have previously agreed in writing upon the means of transmission and the method of identification for such instructions; (ii) the Custodian has not been notified by the Trust to cease to recognize such means and methods; and (iii) such means and methods have in fact been used. (d) If the Trust should choose to have dial-up or other means of direct access to the Custodian's accounting system for Securities in custodial accounts, the Custodian is also authorized to rely and act upon any instructions received by the Custodian through the terminal device, regardless of whether such instructions shall in fact have been given or authorized by the Trust, provided that such instructions are accompanied by passwords which have been mutually agreed to in writing by the Custodian and the Trust and the Custodian has not been notified by the Trust to cease recognizing such passwords. When dial-up or other direct means of access to the Custodian's accounting system for cash or Securities is utilized, the Trust agrees to indemnify the Custodian and hold it harmless from and against any and all liabilities, losses, damages, costs, reasonable counsel fees, and other reasonable expenses of every nature suffered or incurred by the Custodian by reason of or in connection with the improper use, unauthorized use and misuse by the Trust or its employees of any terminal device with access to the Custodian's accounting system for cash or Securities in custodial accounts, unless such losses, damages, etc., result from negligent or wrongful acts of the Custodian, its employees or agents. SECTION 4. RECEIPT AND DISBURSEMENT OF MONEY (a) The Custodian shall open and maintain a separate Account with respect to each Fund, subject to debit only by a draft or order by the Custodian acting pursuant to the terms of this Agreement. The Custodian shall hold in each Account, subject to the provisions hereof, all cash received by it from or for the Account of the applicable Fund. (b) With respect to the Account of each Fund, the Custodian shall make payment of cash to the Account or shall debit the Account only: (i) for the purchase of Securities for the portfolio of the Fund upon the delivery of such Securities to the Custodian; (ii) for payments in connection with the conversion, exchange or surrender of Securities owned or subscribed to by the Fund held by or to be delivered to the Custodian; (iii) for payments in connection with the return of the cash collateral received in connection with Securities loaned by the Fund; (iv) for payments in connection with futures contracts positions held by the Fund; (v) for payments of interest, dividends, taxes and in connection with rights offerings; or (vi) for other proper Fund purposes. All Securities accepted in connection with the purchase of such Securities, if (a) usual in the course of local market practice or (b) specifically required in instructions from the Fund, shall be accompanied by payment of, or a "due bill" for, any dividends, interest or other distributions of the issue due the purchaser. (c) Except as hereinafter provided, the Custodian shall make any payment for which it receives direction from an Authorized Person so long as such direction is (A) in writing (or is a facsimile transmission of a written direction), (B) electronically transmitted to the Custodian as provided in Section 3 or (C) orally when written or electronic directions cannot reasonably be given within the relevant time period, when the person giving the direction is known to the Custodian's employee and when the person giving such direction (i) assures the Custodian that the directions will be confirmed in writing by an Authorized Person within twenty-four (24) hours and (ii) states that such payment is for a purpose permitted under the terms of this subsection. (d) All funds received by the Custodian in connection with the sale, transfer, exchange or loan of Securities will be credited to the applicable Account in immediately available funds as soon as reasonably possible on the date such received funds are immediately available. Payments for purchase of Securities for an Account made in immediately available funds will be charged against the Account on the day of delivery of such Securities and all other payments will be charged on the business day after the day of delivery. (i) The Custodian is hereby authorized and required to (A) collect on a timely basis all income and other payments with respect to Securities held hereunder to which a Fund shall be entitled either by law or pursuant to custom in the securities business, and to credit such income to the Account, (B) detach and present for payment all coupons and other income items requiring presentation as and when they become due, (C) collect interest when due on Securities held hereunder, and (D) endorse and collect all checks, drafts or other orders for the payment of money received by the Custodian for the account of the Fund. (ii) If the Custodian agrees to advance cash or Securities of the Custodian for delivery on behalf of a Fund to a third party, any property received by the Custodian on behalf of the Fund in respect of such delivery shall serve as security for the Fund's obligation to repay such advance until such time as such advance is repaid, and, in the case where such advance is extended for the purchase of Securities which constitute "margin stock" under Regulation U of the Board of Governors of the Federal Reserve System, such additional Securities of the Fund, as shall be necessary for the Custodian, in the Custodian's reasonable determination, to be in compliance with such Regulation U also shall constitute security for the Fund's obligation to repay such advance. Each Fund hereby grants the Custodian a security interest in such property of the Fund to secure such advance and agrees to repay such advance promptly without demand from the Custodian (and in any event, as soon as reasonably practicable following any demand by the Custodian), unless otherwise agreed by both parties. Should a Fund fail to repay such advance as required, the Custodian shall be entitled immediately to apply such security to the extent necessary to obtain repayment of the advance, subject, in the case of a Fund's failure to make prompt repayment without demand, to prior notice to the Fund. SECTION 5. RECEIPT OF SECURITIES (a) The Custodian shall hold in each Fund's Account, segregated at all times from those of any other persons, firms or corporations (including the Accounts of other Funds), pursuant to the provisions hereof, all Securities received by it from or for the account of the applicable Fund. All such Securities are to be held or disposed of by the Custodian for, and subject at all times to the instructions of, the applicable Fund pursuant to the terms of this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any of the Securities and cash, except pursuant to the directive of the applicable Fund and only for the account of the Fund as set forth in Section 7 of this Agreement. (b) The Trust hereby authorizes the Custodian to deposit assets of the Funds of the Trust as follows: (i) deposit with the Custodian or any opther bank licensed and examined by the United States or any state thereof; (ii) deposit in the Custodian's account(s) with any Securities Depository all or any part of the Securities as may from time to time be held for the Trust; and (iii) deposit Book-Entry Securities belonging to the Funds in a Book-Entry Account maintained for the Custodian by a Federal Reserve Bank. So long as any deposit referred to in (ii) or (iii) above is maintained for the Trust, the Custodian shall: (A) deposit the Securities in an account that includes only assets held by it for customers; (B) with respect to Securities of the Trust transferred to the account, identify as belonging to the Trust a quantity of securities in a fungible bulk of securities that are registered in the name of the Custodian or its nominee, or shown on the Custodian's account on the books of the Securities Depository, the Book-Entry System, or the Custodian's agent; (C) promptly send to the Trust all reports the Custodian receives from the appropriate Federal Reserve Bank or Securities Depository on its respective system of internal accounting control; and (D) send to the Trust such reports of the systems of internal accounting control of the Custodian and its agents through which such Securities are deposited as are available and as the Trust may reasonably request from time to time. The Custodian shall not waive any rights it may have against a Securities Depository or Federal Reserve Bank. The Trust may elect to be subrogated to the rights of the Custodian against the Securities Depository or Federal Reserve Bank or any other person with respect to any claim that the Custodian may have as a consequence of any loss or damage suffered by the Trust as a result of the Custodian's use of the Securities Depository or Book-Entry account if and to the extent that the Trust has not been made whole for any such loss or damage. SECTION 6. FOREIGN SUBCUSTODIANS AND OTHER AGENTS (a) In the event the Custodian places Securities, pursuant to this Agreement, with any foreign subcustodian, the Custodian agrees that it shall place such Securities only with those foreign subcustodians which either are "eligible foreign custodians" as defined in Rule 17f-5 under the 1940 Act, or with respect to which exemptive relief has been granted by the U. S. Securities and Exchange Commission from the requirements of Section 17(f). The Custodian agrees further that in placing Securities with any such foreign subcustodian, it will enter into a written subcustodian agreement which shall provide that: (i) the Custodian will be adequately indemnified and the Securities so placed adequately insured in the event of loss, as provided in subsection 6(b); (ii) the Securities will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign subcustodian or its creditors (except any claim for payment for the services provided by such subcustodian and any related expenses; provided, however that the Custodian shall use its best efforts promptly to release any such right, charge, security interest, lien or claim on the assets, except to the extent such right, charge, security interest, lien or claim arises with respect to a special request or requirement by the Fund for services the cost of which and the expenses incurred in connection with which the Fund has not paid or has declined to pay, it being agreed and understood that, in the ordinary course, all payments for usual and routine services rendered and expenses incurred by a subcustodian shall be the obligation of the Custodian); (iii) beneficial ownership of the Securities will be freely transferable without payment of money or value other than for safe custody or administration; (iv) adequate records will be maintained identifying the Securities as belonging to the Funds of the Trust; (v) the Custodian's independent public accountants will be given access to those records or the confirmation of the contents of those records; and (vi) the Custodian will receive periodic reports with respect to the safekeeping of the Securities, including, but not necessarily limited to, notification of any transfer to or from the Accounts. (b) In addition to the indemnities included in Section 13 hereof, the Custodian agrees that the Custodian shall be liable to the Trust for any loss which shall occur as a result of the failure of a subcustodian as listed in exhibit B hereto to exercise reasonable care with respect to the safekeeping of the Securities and cash of the Trust to the same extent that the Custodian would be liable to the Trust if the Custodian were holding such Securities or cash in NewYork. (c) With respect to any Securities to be placed with foreign subcustodians pursuant to this section, the Custodian represents and warrants that during the term of this Agreement it will carry a Bankers Blanket Bond or similar insurance for losses incurred as a result of such sub-custodial arrangements. (d) The Trust authorizes the Custodian to release any and all information regarding Securities placed with foreign subcustodians hereunder as may be required by court order of a court of competent jurisdiction. (e) So long as Rule 17f-5 under the 1940 Act so requires the Trust's Board of Trustees or Funds's investment adviser to review or monitor the Custodian's global custody network, the Custodian shall (a) furnish annually to the Trust information concerning the foreign sub-custodians employed by the Custodian similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Agreement; (b) promptly inform the Trust in the event that the custodian learns of (i) a material adverse change in the financial condition of a foreign sub-custodian, (ii) any material loss of the assets of a Fund or (iii) a foreign sub-custodian not the subject of an exemptive order from the U.S. Securities and Exchange Commission ceasing, or becoming likely to cease, to meet applicable minimum shareholders' equity requirements. SECTION 7. TRANSFER, EXCHANGE AND REDELIVERY OF SECURITIES The Custodian (or a subcustodian or any other agent of the Custodian) shall have sole power to release or deliver any Securities of a Fund held by the Custodian (or such subcustodian or agent) pursuant to this Agreement. The Custodian agrees (and will obtain an undertaking from each subcustodian or other agent) that Securities held by the Custodian (or by a subcustodian or other agent of the Custodian) will be transferred, exchanged or delivered only: (i) for sales of Securities for the account of the Fund in accordance with (A) "New York Street Practice", (B) predominant established practice in the relevant local market, or (C) specific instructions from the Fund; (ii) when Securities are called, redeemed or retired or otherwise become payable; (iii) for examination by any broker selling any such Securities in accordance with "street delivery" custom or other relevant local market practice; (iv) in exchange for or upon conversion into other Securities whether pursuant to any plan of merger, consolidation, reorganization, recapitalization or readjustment, or otherwise; (v) upon conversion of such Securities pursuant to their terms into other Securities; (vi) upon exercise of subscription, purchase or other similar rights represented by such Securities pursuant to their terms; (vii) for the purpose of exchanging interim receipts or temporary Securities for definitive Securities; (viii) for the purpose of tendering Securities; (ix) for the purpose of delivering Securities lent by the Fund; (x) for purposes of delivering collateral upon redelivery of Securities lent or for purposes of delivering excess collateral; or (xi) for other proper Fund purposes. As to any deliveries made by the Custodian pursuant to items (ii), (iv), (v), (vi), (vii), (ix), (x) and (xi), Securities in exchange therefor shall be deliverable to the Custodian (or a subcustodian or other agent of the Custodian). The Custodian may rely upon any written, electronic or oral instructions or an Officers' Certificate relating thereto as provided for in Sections 3 and 4 hereof. SECTION 8. THE CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS Unless and until the Custodian receives instructions to the contrary, the Custodian (or a subcustodian or other agent of the Custodian) shall: (i) present for payment all coupons and other income items held by it for the account of each Fund which call for payment upon presentation and hold the cash received by it upon such payment in the applicable Account; (ii) collect interest and cash dividends and other distributions, provide notice to the Fund of receipts, and deposit to the Account; (iii) hold for the account of the Fund all stock dividends, rights and similar Securities issued with respect to any Securities held by the Custodian under the terms of this Agreement; (iv) execute as agent on behalf of the Fund all necessary ownership certificates required by the United States Internal Revenue Code of 1986, as amended, the Income Tax Regulations of the United States Treasury Department, the laws of any State or territory of the United States, or, in the case of Securities held through foreign subcustodians, the laws of the jurisdiction in which such Securities are held, now or hereafter in effect, inserting the Fund's name on such certificates as the owner of the Securities covered thereby, to the extent it may lawfully do so; (v) use its best efforts, in cooperation with the Fund, to file such forms, certificates and other documents as may be required to comply with all applicable laws and regulations relating to withholding taxation applicable to the Securities; and (vi) use its best efforts to assist the Fund in obtaining any refund of local taxes to which the Fund may have a reasonable claim. The Trust agrees to furnish to the Custodian such information and to execute such forms and other documents as the Custodian may reasonably request or as otherwise may be reasonably necessary in connection with the Custodian's performance of its obligations under clauses (v) and (vi). SECTION 9. REGISTRATION OF SECURITIES (a) Except as otherwise directed by an Officers' Certificate, the Custodian shall register all Securities, except such as are in bearer form, in the name of the Trust or the applicable Fund or a registered nominee of the Trust or the Fund or a registered nominee of the Custodian or a subcustodian. Securities deposited with a Securities Depository or with a foreign subcustodian permitted under Section 6 may be registered in the nominee name of the Securities Depository or such foreign subcustodian. The Custodian shall execute and deliver all such certificates in connection therewith as may be required by the applicable provisions of the United States Internal Revenue Code fo 1986, as amended, the Income Tax Regulations of the United States Treasury Department, the laws of any State or territory of the United States, or, in the case of Securities placed with foreign subcustodians, the laws of the jurisdiction in which such Securities are held. The Custodian shall maintain such books and records as may be necessary to identify the specific Securities held by it hereunder at all times. (b) The Trust shall from time to time furnish the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee, any Securities which it may hold for the account of a Fund and which may from time to time be registered in the name of a Fund. SECTION 10. VOTING AND OTHER ACTION Neither the Custodian nor any nominee of the Custodian or of DTC shall vote any of the Securities held hereunder by or for the account of a Fund except in accordance with the instructions contained in an Officers' Certificate. The Custodian shall deliver or have delivered to the Trust all notices, proxies and proxy soliciting materials with relation to such Securities, such proxies to be executed by the registered holder of such Securities (if registered otherwise than in the name of a Fund), but without indicating the manner in which such proxies are to be voted. With respect to Securities deposited with a Securities Depository or a foreign subcustodian, as provided for in Section 6 hereof, that may be registered in the nominee name of the Securities Depository or the foreign subcustodian, the Custodian shall request that the nominee shall not vote any of such deposited Securities or execute any proxy to vote thereon or give any consent or take any other action with respect thereto unless instructed to do so by the Custodian following receipt by the Custodian of an Officers' Certificate. SECTION 11. TRANSFER TAX AND OTHER DISBURSEMENTS The Trust, on behalf of each Fund, shall pay or reimburse the Custodian from time to time for any transfer taxes payable upon transfers of Securities made hereunder and for all other necessary and proper disbursements and expenses made or incurred by the Custodian in the performance of this Agreement, as required by U.S. law or the laws of the jurisdiction in which the Securities are held, as the case may be. The Custodian shall execute and deliver such certificates in connection with Securities delivered to it or by it under this Agreement as may be required under the laws of any jurisdiction to exempt from taxation any exemptible transfers and/or deliveries of any such Securities. SECTION 12. COMPENSATION AND THE CUSTODIAN'S EXPENSES The Custodian shall be paid as compensation for its services pursuant to this Agreement such compensation as may from time to time be agreed upon in writing between the two parties. SECTION 13. INDEMNIFICATION The Trust, on behalf of each Fund, agrees to indemnify and hold harmless the Custodian and its employees, agents and nominee from all taxes, charges, expenses, assessments, claims and liabilities (including attorneys' fees) incurred or assessed against them in connection with the performance of the Agreement, except such as may arise from their own negligent action, negligent failure to act or willful misconduct. The Custodian agrees to indemnify and hold harmless the Trust and its trustees, officers, employees, and agents from all taxes, charges, expenses, assessments, claims and liabilities (including attorneys fees) incurred or assessed against the Trust in connection with the performance of the Agreement, which may arise from negligent action, negligent failure to act or willful misconduct on the part of the Custodian. In the event of any advance of cash for any purpose made by the Custodian resulting from orders or instructions of a Fund, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor. Within a reasonable time after receipt by an indemnified party of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, notify in writing the indemnifying party of the commencement thereof; and the omission so to notify the indemnifying party will not relieve it from any liability hereunder as to the particular item for which indemnification is then being sought, unless such omission is a result of the failure to exercise reasonable care on the part of the indemnified party. In case any such action is brought against an indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to assume the defense thereof, with counsel who shall be to the reasonable satisfaction of such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party. SECTION 14. MAINTENANCE OF RECORDS The Custodian will maintain records with respect to each Fund, including general ledgers, portfolio ledgers, subsidiary ledgers, if any, appropriate journals or other records reflecting (i) Securities maintained in the portfolio of a Fund, (ii) Securities borrowed, loaned or collateralizing obligations of a Fund, (iii) monies borrowed and monies loaned (together with a record of the collateral thereto and substitutions of such collateral), (iv) dividends and interest received, and (v) dividends receivable and interest accrued, in compliance with the rules and regulations of the 1940 Act, where applicable. SECTION 15. REPORTS BY THE CUSTODIAN The Custodian will furnish to the Trust at the end of every month, and at the close of each quarter of a Fund's fiscal year, a list of the portfolio Securities and the aggregate amount of cash in each Account and will assist in the preparation of the financial data for the N-SAR annual report to be filed on behalf of a Fund. The Custodian shall furnish the Trust with such other reports concerning transactions in the Accounts and/or the Securities as may be agreed upon from time to time. The books and records of the Custodian pertaining to its actions under this Agreement shall be kept and preserved by the Custodian in the manner and, in accordance with applicable rules and regulations under the 1940 Act, and shall be open to inspection and audit at reasonable times and upon reasonable notice to the Custodian, by officers of any auditors employed by the Trust (and such other persons as the Trust may designate from time to time). All such books and records shall be the property of the Trust and the Custodian shall forthwith upon the Trust's request, turn over to the Trust and cease to retain in its files, records and documents created and maintained by the Custodian pursuant to this Agreement, except that the Custodian may maintain copies of any such files, records and documents to the extent needed for its protection. SECTION 16. FUND VALUATION -- INTENTIONALLY LEFT BLANK SECTION 17. TERMINATION AND ASSIGNMENT (a) This agreement may be terminated with respect to one or more Funds by the Trust or by the Custodian, immediately upon written notice from the Trust or the Custodian, as applicable, to the other party, if the other party fails materially to perform its obligations hereunder, and may otherwise be terminated by the Trust or by the Custodian on sixty (60) days' notice, given in writing and sent by registered mail to the Custodian or the Trust as the case may be. Upon termination of this Agreement, the Custodian shall deliver the Securities and cash in the Account of the Funds for which this Agreement has been terminated to the Trust as is designated in writing by the Trust and, in the absence of such a designation may, but shall not be obligated to, deliver them to a bank or trust company of the Custodian's own selection having an aggregate capital, surplus and undivided profits as shown by its last published report of not less than 50 million dollars ($50,000,000), the Securities and cash to be held by such bank or trust company for the benefit of the Trust under terms similar to those of this Agreement, and the Trust shall be obligated to pay to such transferee the then current rates of such transferee for services rendered by it. The Custodian may decline, however, to transfer such amount of such Securities equivalent to all fees and other sums owing by the applicable Fund to the Custodian, and the Custodian shall have a charge against and security interest in such amount until all monies owing to it have been paid or escrowed to its satisfaction. (b) This Agreement may not be assigned by the Custodian without the consent of the Trust, authorized or approved by a resolution of the Trust's Board of Trustees. SECTION 18. FORCE MAJEURE The Custodian shall not be liable or accountable for any loss or damage resulting from any condition or event beyond its reasonable control; provided, however, that the Custodian shall promptly use its best efforts to mitigate any such loss or damage to the Trust or a Fund as a result of any such condition or event. For the purposes of the foregoing, the actions or inactions of the Custodian's subcustodians and other agents shall not be deemed to be beyond the reasonable control of the Custodian. In connection with the foregoing, the Custodian agrees (and agrees that it will use its best efforts to obtain the undertaking of its subcustodians and other agents to the effect) that the Custodian (and/or such subcustodian or agent) shall maintain such alternate power sources for computer and related systems and alternate channels for electronic communication with such computers and related systems that the failure of the primary power source and/or communications channel of the Custodian (and/or its subcustodians or other agents) will not foreseeably result in any loss or damage to the Trust or any Fund. SECTION 19. THIRD PARTIES This Agreement shall be binding upon and the benefits hereof shall inure to the parties hereto and their respective successors and assigns. However, nothing in this Agreement shall give or be construed to give or confer upon any third party any rights hereunder. SECTION 20. AMENDMENTS The terms of this Agreement shall not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever, except by written instrument signed by both of the parties hereto. SECTION 21. GOVERNING LAW This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts. SECTION 22. COUNTERPARTS This agreement may be executed in several counterparts, each of which is an original. SECTION 23. 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. SECTION 24. NOTICES All notices provided for herein shall be in writing and shall become effective when deposited in the United States mail, postage prepaid and certified, addressed (i) if to the Custodian, at: 150 Royall Street Canton, MA 02021 Attention: Worldwide Custody - MS: 45-02-90 (ii) if to the Trust, at: Two Portland Square Portland, Maine 04101 Attention: Secretary or to such other address as either party may notify the other in writing. A copy of the Trust Instrument of the Trust has been delivered to the Custodian is on file with the Secretary of the Trust and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees, and the obligations of this instrument are not binding upon any of the Trustees, officers, or shareholders of the Trust individually but binding only upon assets and property of the applicable Fund of the Trust. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. FORUM FUNDS By: /s/Max Berueffy --------------------------- Max Berueffy, Secretary BANKBOSTON, N.A. By: ________________________________ Name:_______________________________ Title:______________________________ CUSTODIAN AGREEMENT FORUM FUNDS APPENDIX A FUNDS OF THE TRUST MAY 1, 1998 Polaris Global Value Fund CUSTODIAN AGREEMENT FORUM FUNDS APPENDIX A FUNDS OF THE TRUST MAY 19, 1998 (A) MONEY MARKET FUNDS (INSTITUTIONAL, INSTITUTIONAL SERVICE, AND INVESTOR SHARE CLASS) Daily Assets Treasury Fund Daily Assets Treasury Obligations Fund Daily Assets Government Fund Daily Assets Cash Fund Daily Assets Municipal Fund (B) FORUM FIXED INCOME FUNDS Investors High Grade Bond Fund Investors Bond Fund TaxSaver Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund (C) FORUM EQUITY FUNDS Payson Balanced Fund Equity Index Fund Investors Equity Fund Payson Value Fund Investors Growth Fund International Equity Fund Emerging Markets Fund Small Company Opportunities Fund (D) QUADRA FUNDS Quadra Limited Maturity Treasury Fund Quadra Growth Fund (E) OTHER FUNDS Oak Hall Small Cap Contrarian Fund Austin Global Equity Fund Polaris Global Value Fund CUSTODIAN AGREEMENT FORUM FUNDS APPENDIX B SUBCUSTODIANS FOR WHICH THE CUSTODIAN IS LIABLE COUNTRY SUBCUSTODIAN Australia Australia & New Zealand Banking Group, Ltd. Austria Creditanstalt-Bankverein Belgium Banque Bruxelles Lambert, S.A. Canada Canadian Imperial Bank of Commerce Denmark Den Danske Bank Finland Merita Bank France Credit Agricole Indosuez Germany Dresdner Bank AG Greece Citibank, N.A. Hong Kong Standard Chartered Bank Hungary Creditanstalt-Bankverein Indonesia Standard Chartered Bank Ireland The Bank of Ireland Italy Banque Paribas Japan Bank of Tokyo-Mitsubishi, Ltd. Korea Standard Chartered Bank Malaysia Standard Chartered Bank Mexico Citibank, N.A. Netherlands Kas-Associatie N.V. New Zealand Australia & New Zealand Banking Group, Ltd. Norway Den norske Bank Portugal Banco Espirito Santo Commercial de Lisboa Singapore Standard Chartered Bank South Africa Standard Bank of South Africa Ltd. Spain Banco Bilboa Vizcaya Sweden Skandinaviska Enskilda Banken Switzerland Bank Leu Ltd. Transitional Cedel, S.A. United Kingdom Midland Bank plc First Chicago Clearing Centre Venezuela Citibank, N.A. Argentina, Brazil, Chile , Columbia, Panama, Peru, Bank Boston, N.A. United States and Uruguay
EX-99.B8 10 8(C) SUBTA ADM Exhibit 8(c) FORUM FUNDS SUB-TRANSFER AGENT AGREEMENT THIS AGREEMENT is made this 18th day of December, 1995 by and between Forum Financial Corp., a corporation organized under the laws of Delaware ("FFC"), Administrative Data Management Corp., a corporation organized and existing under the laws of the State of New York ("ADM") and Forum Funds, a business trust organized under the laws of Delaware (the "Trust"). R E C I T A L S WHEREAS, FFC is a registered transfer agent under the Securities and Exchange Commission Act of 1934 and serves as the transfer agent, register and dividend disbursing agent of the Trust, which is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, FFC desires to retain ADM to serve as a sub-transfer agent and dividend disbursing agent for certain accounts of each of the Trust's separate investment portfolios as listed on Appendix E hereto (each a "Fund" and collectively, the "Funds"), and ADM is willing to furnish such services; NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. APPOINTMENT. FFC hereby appoints ADM to serve as sub-transfer agent and dividend disbursing agent for the accounts of the Funds for the period and on the terms set forth in this Agreement. ADM accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided for in Paragraph 15 of this Agreement. 2. DELIVERY OF DOCUMENTS. a. FFC has furnished ADM with copies properly certified or authenticated of each of the following: 1) Resolutions of the Trust's Board of Trustees(the "Board") authorizing the execution of this Agreement; 2) Appendix B identifying and containing the signatures of the Trust's officers and other persons authorized to sign Written Instructions and give Oral Instructions (referred to herein as "Authorized Persons"), each as hereinafter defined, on behalf of the Trust; 3) The Trust's Articles of Incorporation filed with the Secretary of State and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein referred to as the "Articles"); 4) The Trust's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws"); 5) The Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") and under the 1940 Act as filed with the Securities and Exchange Commission ("SEC") and all amendments thereto; and 6) Each of the Fund's most recent prospectus and statement of additional information (such prospectus and statement of additional information, as from time to time in effect and all amendments and supplements thereto are herein called the "Prospectus"). b. ADM has furnished FFC with copies properly certified or authenticated of its Registration Statement on Form TA-1 under the Securities Exchange Act of 1934, as amended and all annual or other public reports filed with the SEC as may be requested by FFC. c. Each party from time to time will furnish the other with copies, properly certified or authenticated, of all amendments or supplements to the foregoing, if any. Neither party is obligated hereby to provide the other with otherwise confidential information. 3. DEFINITIONS. a. "AUTHORIZED PERSON". As used in this Agreement, the term "Authorized Person" means FFC's and the Trust's officers and other persons duly authorized by the Board to give Oral and Written Instructions on behalf of a Fund and listed on the Certificate annexed hereto as Appendix B or any amendment thereto as may be received by ADM from time to time. b. "ORAL INSTRUCTIONS". As used in this Agreement, the term "Oral Instructions" means verbal instructions actually received by ADM from an Authorized Person or from a person reasonably believed by ADM to be an Authorized Person. c. "WRITTEN INSTRUCTIONS". As used in this Agreement, the term "Written Instructions" means written instructions delivered by mail, telegram, cable, telex or facsimile sending device (a "fax"), and received by ADM and signed by an Authorized Person or reasonably believed by ADM to have been signed by or authorized by an Authorized Person unless otherwise required by a resolution of the Board furnished to ADM pursuant to Section 2(a) hereof. 4. INSTRUCTIONS CONSISTENT WITH ARTICLES, ETC. a. Unless otherwise provided in this Agreement, ADM shall act only upon Oral or Written Instructions. Although ADM may take cognizance of the provisions of the Articles and By-Laws of the Trust, each Fund's Prospectus and laws, rules and regulations applicable to the Funds, ADM may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Articles or By-Laws, a Fund's Prospectus or with any laws, rules or regulations applicable to the Funds or any vote, resolution or proceeding of the Shareholders, or of the Board, or of any committee thereof. b. ADM shall be entitled to rely upon any Oral instructions and any Written Instructions actually received by ADM pursuant to this Agreement and shall have no liability for any action which it takes or omits in accordance with such Oral Instructions or Written Instructions. FFC shall forward to ADM Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by ADM, whether by hand delivery, telex, facsimile sending device or otherwise, as promptly as practicable after Oral Instructions are given to ADM. FFC agrees that the fact that such confirming Written Instructions are not received by ADM shall in no way affect the validity of the actions or transactions or enforceability of the actions or transactions authorized by giving Oral Instructions. 5. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. a. In the absence of contrary Written Instructions, ADM is authorized to take and to the extent set forth in the Activities List shall take the following actions: 1) Issuing, transferring and redeeming shares of the Funds in accounts established on the books and records of ADM (the "Shares"); 2) Opening, maintaining and closing accounts of the registered owners of Shares (the "Shareholders"); 3) Answering procedural and administrative inquiries from Shareholders and their brokers; 4) Causing the reinvestment in Shareholders' accounts of dividends and distributions declared upon Shares; 5) Transferring the investment of an investor into, or from, the Shares of other open-end investment companies, if and to the extent permitted by the Prospectus; 6) Processing redemptions of Shares; 7) Examining and approving legal transfers of the Shares; 8) Furnishing to Shareholders confirmation of transactions relating to their Shares; 9) Preparing and mailing to the Internal Revenue Service and all payees all information returns and payee statements required under the Internal Revenue Code in respect to the Funds' dividends and distributions on the Shares and taking all other necessary actions with respect to the Shares in connection with the dividend and other withholding requirements of the Internal Revenue Code; 10) Mailing to Shareholders annual and semi-annual reports prepared by or on behalf of the Funds, and mailing new Prospectuses upon their issue to Shareholders; 11) Preparation and sending such other information from the Funds records with respect to Shares maintained by ADM as may be reasonably requested by an Authorized Person; 12) Preparing and sending to the Funds such affidavits of mailing and certifications as are reasonably requested by an Authorized Person; and 13) Maintaining such books and records relating to transactions effected by ADM as are required by the 1940 Act, or by any other applicable provisions of law, to be maintained by the Funds or ADM with respect to such transactions, and preserving, or causing to be preserved, any such books and records for such period as may be required by any such law, rule or regulation, and which is consistent with ADM's current procedures. b. In connection with the holding of annual or special meetings of shareholders of any Fund, ADM agrees to prepare and furnish to FFC certified lists of Shareholders as of such meeting date, in such form and containing such information as FFC may request, provided the cost or effort required by ADM to comply with such request is not unduly burdensome. ADM shall be reimbursed for out-of-pocket expenses in performing such services, such as the costs of forms, envelopes and postage. ADM, at its cost with the consent of FFC may employ another firm to perform all or some of the functions required by this subsection. FFC shall pay such additional charges as the parties may agree upon for the services of ADM in connection with special meetings of Shareholders of a Fund in excess of one such meeting per Fund held in any fiscal year of the Fund. c. ADM shall furnish to FFC such information and at such intervals as FFC may reasonably request for the Funds to comply with the normal registration and/or the normal reporting requirements of the SEC, Blue Sky authorities or other regulatory agencies. All such information shall be materially correct and complete based upon information supplied to ADM. d. ADM shall, in addition to the services herein itemized, if so requested by FFC and for such additional fees as FFC and ADM may from time to time agree upon, perform and do all other acts and services that are customarily performed and done by transfer agents, dividend disbursing agents and shareholder servicing agents of mutual funds such as the Funds, PROVIDED that normally occurring improvements in the services of such agents will be provided without initial capital cost to FFC and at service fees which are competitive with those prevailing in the industry. e. The parties hereto agree that without prejudice to any other provisions of this Agreement, the functions of ADM and FFC under this Agreement will be substantially performed in accordance with the requirements for the relevant function specified in the Activities List set forth in Appendix A to this Agreement. Such Activities List as amended from time to time is an integral part of this Agreement. In the event that the provisions of this Agreement are in conflict with or are inconsistent with those set forth in such Activities List the provisions of the Activities List shall govern. f. ADM agrees to provide to FFC upon request such information as may reasonably be required to enable FFC to reconcile the number of outstanding Shares of each Fund between ADM's records and the master shareholder record of each Fund. 6. AUTHORIZED SHARES. FFC shall advise ADM from time to time or upon ADM's request of the number of authorized and unissued shares available with respect to each Fund. FFC hereby represents that the Articles authorizes the Board to issue a total of 10,000,000,000 shares. 7. DIVIDENDS AND DISTRIBUTIONS. FFC shall furnish ADM with the amount of each dividend and with appropriate evidence of action by the Board authorizing the declaration of dividends and distributions in respect of Shares as described in the then current Prospectus. Upon declaration of each dividend, each capital gain distribution or other distribution by the Board, FFC shall promptly notify ADM of the date of such declaration, the amount payable per share, the record date for determining the Shareholders entitled to payment, the payment date, and the reinvestment date and price which is to be used to purchase Shares for reinvestment, all sufficiently in advance (at least one business day prior to the record date) to permit ADM to process properly such dividend or capital gain distribution or other distribution with respect to the Shares in a timely and orderly manner. Sufficiently in advance of each payment date to permit ADM to have federal funds available to it for the payment thereof, FFC will transfer, or cause the Custodian to transfer, to ADM in its capacity as sub-dividend disbursing agent, at First Financial Savings Bank, S.L.A. or at such bank or other financial institution as ADM with the consent of FFC shall select, which may but need not be an affiliate of ADM, the total amount of the remit portion of the dividend or distribution currently payable with respect to the Shares. After deducting any amount reasonably believed by ADM to be required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, rules and regulations, based upon information available to it, ADM shall, as agent for each Shareholder and in accordance with the provisions of the Articles, then current Prospectus, and shareholder elections, invest dividends in Shares in the manner described in the Prospectus or pay them in cash. ADM shall prepare, file with the Internal Revenue Service, and address and mail to shareholders such returns and information relating to dividends and distributions paid by the Funds as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. FFC shall promptly provide ADM with the information necessary to prepare such returns and information with respect to the Shares, all sufficiently in advance to permit ADM to prepare properly and mail such returns and information in a timely and orderly manner. On behalf of the Funds, ADM shall remit on a timely basis to the appropriate Federal authorities any taxes withheld on dividends and distributions paid by the Funds with respect to the Shares. 8. NOTIFICATION TO ADM: FFC shall promptly notify ADM of the closing net asset value per share and the offering price per share each day there are any transactions in shares of a Fund, but in any event not later than 90 minutes after the closing of the New York Stock Exchange. ADM will process all transactions based on the current day's net asset value price per share and the offering price per share, provided that ADM receives such prices no later than 7:00 p.m. In the event FFC provides such prices after 5:30 p.m., FFC shall pay ADM the Late Pricing Charges set forth on Appendix D. In the event that FFC is unable to provide ADM with such prices, FFC may elect to instruct ADM either to process the day's transactions at an alternative price ("Alternative Price"), calculated either at (i) the previous day's prices, or (ii) such other price determined by the Fund. In the event FFC fails to notify ADM of an Alternate Price before 7:30 p.m., then ADM, at its sole discretion, may process transactions at the price last determined by FFC. In the event ADM is not so notified, it may assume that the price is unchanged from the prior price, and process the days work using the prior price. 9. COMMUNICATIONS WITH SHAREHOLDERS. a. COMMUNICATIONS TO SHAREHOLDERS. FFC shall prepare, print and provide ADM with sufficient quantities of all communications by the Funds to their Shareholders all sufficiently in advance to permit ADM to properly address and mail to Shareholders in a timely and orderly manner all such communications, including reports to Shareholders, dividend and distribution notices and proxy material for its meetings of Shareholders. ADM agrees to mail all such material to Shareholders in a timely manner. ADM shall not be responsible for receiving and tabulating the proxy cards for the meetings of the Funds' shareholders unless agreed to by FFC and ADM with mutually agreed upon compensation. ADM shall, however, upon request, provide FFC with a list of Shareholders as of a specific date. b. CORRESPONDENCE. ADM will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between ADM and FFC. 10. RECORDS. ADM shall keep the records described on the Activities List, including but not limited to the following: a. Accounts for each Shareholder showing the following information: 1) Name, address and United States Taxpayer Identification Number; 2) Number of Shares held and number of Shares for which certificates, if any, have been issued, including certificate numbers and denominations; 3) Historical information starting on the date ADM posts an account regarding the account of each Shareholder, including dividends and distributions paid and the date and the price, if applicable, for all transactions in a Shareholder's account; 4) Any stop or restraining order placed against a Shareholder's account; 5) Any correspondence relating to the current maintenance of a Shareholder's account; 6) Information with respect to withholding in the case of a foreign account; and 7) Information with respect to withholding in the case of an account subject to backup withholding; and 8) Any information required in order for ADM to perform any calculations contemplated or required by this Agreement. The books and records pertaining to the Funds which are in the possession of ADM shall be the property of the Funds. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws and rules and regulations in effect from time to time, and consistent with ADM's current practices. ADM will, if so requested by the counsel to the Trust, modify the manner in which such books and records are prepared and maintained so as to comply with the reasonable opinion of such counsel as to such laws and rules. The Trust's or FFC's authorized representatives, shall have access to such books and records at all times during ADM's normal business hours. Upon the reasonable request of FFC, copies of any such books and records shall be provided by ADM to FFC or the Trust's authorized representative at the Fund's expense. 11. REPORTS AND OTHER INFORMATION. Upon reasonable request of FFC, PROVIDED that the cost or effort required therefore are, singly or in the aggregate, not unduly burdensome or expensive to it, ADM will promptly transmit to FFC, at no additional cost to FFC, (a) documents and information in the possession of ADM and not otherwise available necessary to enable the Trust, FFC and their affiliates to comply with the requirements of the Internal Revenue Service, the SEC, the National Association of Securities Dealers, Inc., State blue sky authorities, and any other regulatory bodies having jurisdiction; (b) documents and information in the possession of ADM necessary to enable the Funds to conduct annual and special meetings of Shareholders; and (c) such other information, including shareholder lists and statistical information concerning accounts as may be agreed upon from time to time between FFC and ADM. 12. COOPERATION WITH ACCOUNTANTS. ADM shall cooperate with the Trust's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available on a timely basis to such accountants for the expression of their unqualified opinion, including but not limited to the opinion included in the Funds' annual report to Fund shareholders and on Form N-SAR, or similar form. 13. CONFIDENTIALITY. ADM agrees on behalf of itself and its employees to treat confidentially all confidential records and other confidential information relative to the Funds and their prior, present or potential Shareholders and relative to the Funds' distributor and its prior, present or potential customers. ADM will not divulge any such confidential records or information to anyone other than the Shareholder, broker, or other person, firm, corporation or other entity (governmental or otherwise) which ADM reasonably believes is entitled to such records or information, PROVIDED that it shall, with respect to any non-routine governmental investigation or inquiry, first provide notice thereof to FFC. 14. EQUIPMENT FAILURES. ADM shall maintain adequate and reliable computer and other equipment necessary or appropriate to carry out its obligations under this Agreement. In the event of computer or other equipment failures at its own facilities beyond ADM's reasonable control, ADM shall, at its expense, use its best efforts to minimize service interruptions. The foregoing obligation of ADM shall not extend to computer terminals owned or maintained by others, and located outside of premises maintained by ADM. ADM represents that it has presently in effect backup and emergency systems described on Appendix C hereto. ADM will maintain such arrangements or equivalent while this Agreement is in force unless ADM notifies FFC to the contrary and establishes to the satisfaction of FFC that industry standards no longer require such arrangements. 15. COMPENSATION. As compensation for the services rendered by ADM during the term of this Agreement, ADM shall be entitled to receive such reimbursement for out-of-pocket expenses and such compensation as is specified on Appendix D attached hereto or as may from time to time be otherwise mutually agreed on in writing between FFC and ADM. The Trust will pay all compensation to ADM as contemplated by this Section 15 upon (i) notice from ADM of the expense or fee and (ii) certification from ADM that the expense or fee has been properly billed to FFC, that FFC has not paid the expense or fee and that the expense or fee is 15 days or more overdue. 16. RESPONSIBILITY OF ADM. In the performance of its duties hereunder, ADM shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to insure the accuracy and completeness of all services performed under this Agreement. ADM and the affiliates and agents of ADM shall not be responsible for or liable for any taxes, assessments, penalties, fines or other governmental charges of whatever description which may be levied or assessed on any basis whatsoever in connection with withholding of amounts, verifying or providing taxpayer identification numbers or otherwise under applicable tax laws and preparing and filing of tax forms, excepting only for taxes assessed on the basis of its compensation hereunder, provided that ADM exercises the care and diligence required by this Agreement. ADM and the affiliate and agents of ADM shall not be responsible or liable for the actions, inactions, or any losses or damages caused by any such actions or inactions of any agents, brokers or others who are specifically selected by FFC in writing. 17. RELEASE. ADM understands that the obligations of this Agreement are not binding upon any Shareholder of the Funds personally, but bind only the Funds' property; ADM represents that it has notice of the provisions of the Trust's Articles disclaiming Shareholder liability for acts or obligations of the Funds. FFC understands that the obligations of this Agreement are not binding upon the parent corporation of ADM or any affiliated or subsidiaries of ADM and that FFC, its Trustees, Officers, Shareholders and others shall look only to the separate assets of ADM. 18. RIGHT TO RECEIVE ADVICE. a. ADVICE OF FFC. If ADM shall be in reasonable doubt as to any action to be taken or omitted by it, it may request, and shall receive, from FFC, directions or advice, including Oral or Written Instructions where appropriate. b. ADVICE OF COUNSEL. If ADM shall be in doubt as to any question of law involved in any action to be taken or omitted by ADM, it may ----------------- request advice from counsel of its own choosing. c. CONFLICTING ADVICE. In case of conflict between directions, advice or Oral or Written Instructions received by ADM pursuant to subparagraph (a) of this paragraph and advice received by ADM pursuant to subparagraph (b) of this paragraph, ADM shall be entitled to rely on and follow the advice received pursuant to the latter provision alone. d. PROTECTION OF ADM. FFC and the Trust shall each indemnify and hold harmless ADM, each of ADM's affiliated companies, and all of the divisions, subsidiaries, trustees, officers, agents, employees and assigns of each of the foregoing (collectively, "Indemnified Transfer Agent Parties"), against and from any and all demands, damages, liabilities, and losses, or any threatened, pending or completed actions, claims, suits, complaints, proceedings, or investigations (including reasonable attorneys fees and other costs, including all expenses of litigation or arbitration, judgments, fines or amounts paid in settlement) to which any of them may be or become subject as a result or arising out of: (i) any action or inaction which it takes in reliance on the provisions of the Funds' Prospectuses; procedures established between ADM and FFC, or in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraph (a) or (b) of this paragraph which ADM, after receipt of any such directions, advice or Oral or Written Instructions, in good faith reasonably believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be; (ii) any negligent act or omission by FFC or its officers, employees or agents; (iii) FFC's failure to comply with any of the terms of this Agreement. However, nothing in this paragraph shall be construed as imposing upon ADM any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to ADM's properly taking or omitting to take such action. However, this indemnification shall not apply to actions or omissions of ADM in cases of its own bad faith, willful misfeasance, negligence or from reckless disregard by it of its obligations and duties hereunder; and provided further that prior to confessing any claim against it which may be the subject of this indemnification, ADM shall give FFC and each Fund from which ADM is seeking indemnification written notice of and a reasonable opportunity to defend against said claim in its own name or in the name of ADM. 19. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. ADM shall have no responsibility for insuring that the contents of each Prospectus of the Funds comply with all applicable requirements of the 1933 Act, the 1940 Act, and any laws, rules and regulations of governmental authorities having jurisdiction, except that ADM shall cause a senior officer of ADM, or his or her designee to provide such information and represents and warrants that all information so furnished by it for specific use in any such Prospectus will be correct and complete in all material respects. 20. RECORDS FROM OTHERS. ADM, its affiliates and agents shall have no responsibility or liability for the accuracy or completeness of any documents, records, or information maintained or provided by or reasonably believed by ADM to have been maintained or provided by FFC or any Fund or anyone on behalf of FFC or any Fund and FFC and each Fund hereby specifically agrees that ADM, its affiliates and agents may rely on and will be fully protected in so relying on the completeness and accuracy of all such documents, records and information; PROVIDED that ADM will inform FFC of material errors coming to its attention in the course of the performance of its duties hereunder; and further PROVIDED that the failure by ADM, its affiliates and agents to notice any material errors will not result in any liability on the part of ADM, its affiliates and agents. ADM, its affiliates and agents may conclusively rely on, and will be fully protected in relying on, the authenticity and accuracy of any documents or communications, whether oral, written or facsimile, it receives from FFC or any Fund or which ADM, its affiliates or agents reasonably believes are from FFC or any Fund, provided these are received from Authorized Persons in accordance with this Agreement. This provision will apply to, among other things, the daily public offering and net asset value prices for Fund shares; instructions from FFC concerning dividends and other distributions; and other matters relating to the Funds and their shareholders. 21. RESPONSIBILITIES OF FFC. FFC hereby acknowledges and agrees that ADM, its affiliates and its agents are responsible only for those functions and duties set forth in this Agreement and unless so set forth are not responsible for any of the following which are to be handled by FFC. a. Creating or maintaining any records on behalf of the Funds or others with respect to the Shares required by any federal or state law, or regulation or rule of any agency thereof or any self-regulatory authority except (i) those relating to shareholder account information set forth in Rule 31a-1(b)(2)(iv) promulgated under the 1940 Act or equivalent regulation applicable from time to time; and (ii) such additional records as may reasonably be requested from time to time by FFC which are customarily maintained by transfer agents to mutual funds, and which ADM by use of its best efforts may provide at minimal cost and inconvenience to it; with respect to these records ADM agrees that they: (i) are the property of the Trust; (ii) will be maintained by ADM for the period prescribed in Rule 31a-2 or equivalent regulation; (iii) will be made available, upon request to FFC, the Trust and the SEC; and (iv) will be surrendered promptly upon the request of the Trust; b. Determining the legality of any sale, exchange, issuance or redemption of any shares of the Funds; c. Determining the legality of any communications, oral or written, which are sent or provided by ADM, its affiliates or its agents on behalfof the Trust or FFC; d. Complying with any federal or state laws or the regulations or rules of any agency thereof or of any self-regulatory authority except those specifically applicable to ADM as a sub-transfer agent; e. Filing any documents on behalf of the Funds or any one else with any federal or state government or with any agency thereof or of any self-regulatory authority except ADM will file with the Internal Revenue Service copies of 1099-Div, 1099-B, 5498 and 1042S Forms sent to Shareholders and forms relating to withholding and non-resident alien withholding; f. Monitoring the activities of the Funds or any one else for their compliance with applicable law, rules and regulations or with the provisions of the Funds Prospectus, its Articles, By-Laws or other governing instruments; g. Compliance of the Funds or others with applicable federal and state laws, regulations and rules of any agency thereof, or of any self-regulatory authority pertaining to the registration of the Funds or of shares of the Funds or the legality of their sale although ADM will, in order to provide the Funds with assistance in complying with normal Blue Sky requirements, upon the reasonable request of FFC provide FFC with a report generated from the information readily available to ADM detailing the amount of Shares purchased and redeemed and the states of residence of the Shareholders purchasing or redeeming such Shares; or h. Paying of any penalty or assessment imposed by the Internal Revenue Service for failure to certify a shareholder's taxpayer identification number, or for an incorrect taxpayer identification number. 22. INFORMATION AND DOCUMENTS. a. FFC shall promptly provide ADM with the current Prospectus for the Funds, the Annual and Semi-Annual Reports to shareholders of the Funds, Proxy Statements and other Fund material, all in sufficient quantities and sufficiently in advance to permit ADM to provide them to Shareholders in a timely and orderly fashion. b. To the extent necessary or appropriate to enable ADM to carry out its responsibilities under this Agreement, FFC shall: 1) Promptly notify ADM of all material events which affect the Trust or any affiliate of the Trust; 2) Promptly notify ADM or any suits or other proceedings threatened or actually instituted against the Trust or any affiliate of the Trust by the federal government, any state government, or any agency thereof (including but not limited to the SEC or the Securities Commission of any state) or by the National Association of Securities Dealers, Inc., or any other self-regulatory authority; 3) Promptly notify ADM of any consent orders, stop orders or similar orders affecting the Trust or any affiliate or the Trust issued by the federal government, any state government, or any agency thereof (including but not limited to the SEC or the Securities Commission or any state) or by the National Association of Securities Dealers, Inc. or any other self-regulatory authority; 4) Promptly provide ADM with copies of the audited Annual Financial Statements for each affiliate of the Trust which is an Investment Advisor, Investment Sub-Advisor, Distributor or Administrator of a Fund; 5) Promptly provide ADM, upon request, with copies of any filings made by the Trust or any affiliate of the Trust which is an Investment Advisor, Investment Sub-Advisor, Distributor or Administrator of a Fund with the federal government or any state government or any agency thereof or with any self-regulatory authority; 6) Promptly provide ADM, upon request, with copies of any documents relating to items (2) and (3) above; and 7) Discuss with ADM the description of ADM and the services which ADM provides to Shareholders contained in the Prospectuses of the Funds at the time of filing any amendments to the registration statement of the Trust involving any such change. ADM shall use its best efforts to assure the accuracy and completeness of all material information furnished by it for inclusion in any such document. 23. INDEMNIFICATION. None of the parties nor any of their nominees shall be indemnified against any liability to the other party (or any expenses incident to such liability) arising solely out of (a) such party's or such nominee's own willful misfeasance, bad faith or gross negligence or reckless disregard of its duties in connection with the performance of any duties, obligations or responsibilities provided for in this Agreement or (b) such party's or such nominee's own negligent failure to perform its duties expressly provided for in this Agreement or otherwise agreed to in writing. 24. LIABILITY. a. ADM shall be responsible for the performance of its obligations under this Agreement notwithstanding the delegation of some or all of such obligations to others in accordance with the terms of this Agreement. b. ADM shall not be responsible for loss, liability, cost or expense arising out of occurrences beyond its control caused by fire, flood, power failure, unanticipated equipment failure, acts of God, or war or civil insurrection; provided, however, that it shall have contingency planning for equipment or electrical failure and such other contingencies as provided in this Agreement. 25. INSURANCE. ADM shall maintain fidelity, errors and omissions and other insurance coverage in amounts and on terms and conditions as set forth in information provided to FFC from time to time. 26. ADVANCEMENT OF MONIES: Nothing in this Agreement shall require ADM or any affiliate or agent of ADM to pay any monies prior to its receipt of federal funds for such payment or for ADM or any of its affiliates or agents to incur or assume any liability for the payment of any such monies prior to its receipt of federal funds for such payment. 27. EXCLUSIVITY. It is expressly understood and agreed that the services to be rendered by ADM to the Fund under the provisions of this Agreement are not deemed to be exclusive and ADM shall be free to render similar or different services to others. 28. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are reasonably necessary to effectuate the purposes hereof. 29. AMENDMENT. This Agreement or any part hereof may be changed or waived only by an instrument in writing signed by the party against which enforcement of such change or waiver is sought. 30. ASSIGNMENT. This Agreement and the performance hereunder may not be assigned by ADM without FFC written consent. Notwithstanding the previous sentence, ADM may, without FFC's consent, assign the performance of all or a portion of its responsibilities and duties hereunder to an affiliate of ADM, provided that FFC shall incur no additional cost or expense in connection therewith. 31. TERMINATION OF AGREEMENT. This Agreement shall continue unti termination by FFC or ADM on ninety (90) days' advance written notice to the other party. 32. NOTICES. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed: a. If to ADM: Administrative Data Management Corp. 10 Woodbridge Center Drive Woodbridge, New Jersey 07095 Attention: Ms. Anne Condon, Senior Vice President or to such other address as ADM shall instruct FFC, in writing from time to time; b. If to FFC at: Two Portland Square Portland, Maine 04101 Attention: Legal Department or to such other address as FFC shall instruct ADM, in writing from time to time; c. If to the Trust at: Two Portland Square Portland, Maine 04101 Attention: Forum Financial Services, Inc. Legal Dept. or to such other address as the Trust shall instruct ADM, in writing, from time to time; or d. If not to any of the foregoing at such other address as shall have been notified to the sender of any such Notice or other communication. 33. SINGULAR VERSUS PLURAL. When the context so requires, "Fund" shall mean "Funds". 34. MISCELLANEOUS. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement shall be deemed to be a contract made in New York and governed by New York law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. None of the provisions contained in this Agreement shall be deemed waived or modified because of a previous failure of a party to insist upon strict performance thereof. This Agreement shall be binding and shall inure to the benefit of the parties hereto and their respective successors. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written. ADMINISTRATIVE DATA Attest: MANAGEMENT CORP. ___________________________ By: /s/ Anne Condon ----------------------------- Anne Condon Senior Vice President Attest: FORUM FINANCIAL CORP. ___________________________ By: /s/ John Y. Keffer ---------------------------- John Y. Keffer President Attest: FORUM FUNDS ___________________________ By: /s/ John Y. Keffer ------------------------------ John Y. Keffer President APPENDIX A ACTIVITIES LIST It is understood that the Fund, its Custodian, and other persons, firms, corporations or other entities performing services for or on behalf of the Fund shall provide ADM and the Fund with such services, information, or other assistance as may be necessary or appropriate to permit ADM to properly perform the services hereunder. A. SHAREHOLDER ACCOUNTING SERVICES 1. GENERAL SCOPE. In accordance with the terms of the Agreement, ADM will provide a comprehensive accounting service for the Shareholders generally consistent with that provided to other investment companies, including: a. Dividend accounting; b. Arrangement for wire receipt and pay out of Shareholder funds; c. To the extent that it is reasonably within the control of, or can be reasonably arranged without additional cost by ADM, the rapid and efficient transfer of investment monies between various accounts, as follows: (i) Federal funds will be available immediately and (ii) monies generated from checks deposited will be available on the second business day subsequent to the date of deposit. d. To the extent that it is reasonably within the control of, or can reasonably be arranged without additional cost incurred by ADM, the effective and controlled processing of expedited redemptions and exchanges by telegraphic and telephonic means. 2. COMPUTER ACCOUNTING AND RECORD KEEPING. a. ADM will perform daily maintenance and routine file update. b. ADM will perform a dividend credit run as required in order to credit all existing Shareholder accounts with each daily dividend, monthly dividend, capital gain distribution or other distribution. ADM will establish new and adjust or close existing Shareholder accounts if necessary on or as of each business day. c. ADM will take reasonable precautions for safeguarding of all Shareholder accounts during these computer runs. d. ADM will provide continuous proof to the outstanding Shares maintained by the Fund on a daily basis, and off-line availability of all file data pertaining to Shareholder accounts. e. ADM will, to the extent technically feasible, create and maintain the ability to liquidate and back out dividends reinvested in accounts which are subsequently liquidated by or on behalf of the Fund due to nonreceipt of funds, improper registration, or other sufficient reason. 3. ESTABLISHING AND SERVICING ACCOUNTS. ADM will, as set forth in the Fund's Prospectus, or substantially in conformity with procedures established by or on behalf of the Fund, accept instructions from investors to open new accounts and perform such functions consistent with opening a new account: a. Accept applications in proper form sent directly to the Fund or its custodian when they are properly delivered to ADM; b. Accept applications in proper form sent directly to it when they are received by ADM; c. Transfer Shares accompanied by apparent proper instructions; d. Audit and verify payment items for apparent compliance with the requirements established by the Fund, e.g. minimum investment amount, apparent proper endorsements and other particulars as prescribed in the prospectus. FFC will provide ADM from time to time, with names and taxpayer identification number of individuals entitled to purchase shares at a reduced offering price as described in the prospectus; e. Process W-9 or similar forms received by ADM; and compare upon receipt of a computer tape from the Internal Revenue Service taxpayer identification numbers contained in such tape against those maintained by ADM. f. Assign account numbers as necessary and, where appropriate, indicate the account number on applications; g. Review payment items to determine whether the payee, original or by endorsement, on such payment items corresponds to the registration of the account to which it is to be credited (permitted exceptions include ADM or the Fund specified as the payee when accompanied by a valid account number or all necessary documents to establish a new account or such other exceptions as ADM and the Fund shall agree upon); h. Time stamp all incoming mail; i. Produce microfilm record of all incoming checks and other documentation on filmstrips or other microfilm retrieval method so as to be retrievable and reproducible upon request; j. Process address changes and acknowledge such changes to previous address of record; k. Answer inquiries from Shareholders or other individuals, corporations, or other entities who appear to be the Shareholder, dealer or otherwise entitled to receive information as to account information; l. Prepare confirmations in such form as may be agreed between the Fund and ADM from time to time for all "Open Accounts" after each non-dividend transaction in a Shareholder's account which affects the share balance; mailing confirmations to the Shareholder as such changes occur; m. Process on a daily basis if necessary or appropriate routine transactions such as: (1) Deposit or withdrawal of Shares from Shareholders' accounts; (2) Changes of address; (3) Miscellaneous changes; (4) Stops or holds on transfers; or (5) Instructions relating to the remittance or reinstatement of dividends and other distributions. n. Incorporate in the Shareholder accounting software and procedures the necessary flags, audits, and tests reasonably designed to assure that the various provisions and requirements specified elsewhere in this Agreement to be performed by ADM will be substantially satisfied. B. TRANSFER AGENT SERVICES In accordance with the Agreement, and in particular Section 5(d) thereof, ADM will perform the functions normally performed by the transfer agent for other investment companies of a similar type. Such functions shall include but not necessarily be limited to: 1. PROCESSING a. Keep such records in the form and manner as ADM may deem advisable but not inconsistent with the rules and regulations of appropriate governmental authorities applicable to ADM or as may otherwise be agreed from time to time in writing between FFC and ADM; b. Process transfers as requested by Shareholders or persons, firms, corporations or other entities ADM reasonably believes to be the Shareholder or authorized to act on behalf of the Shareholder including obtaining and reviewing papers and all other documents necessary to satisfy transfer requirements; FFC will, upon the request of ADM, advise ADM of the transfer requirements of ADM, and ADM will be fully protected by FFC and the Fund if ADM is following such transfer requirements; c. Process eligible initial and subsequent investments; d. Process payments into Shareholder accounts through the Automated Clearing House ("ACH") system; e. Transmit dividends to Shareholders' checking or savings accounts through the ACH system, provided that ADM has received written authorization from each such shareholder in a form approved in a form approved by ADM; f. Process and record redemption of Shares to satisfy ordinary redemptions; g. Proportionally allocate dividends, which are provided to ADM by the Fund in gross dollar amount, to the benefit of the Shareholders entitled to receive them. The procedure used must show that the amounts allocated daily substantially balance to the gross dollar amount provided by the Fund to ADM. 2. CUSTODY AND CONTROL OF SHARES. Shares will be credited to the Shareholder's account in non-certificate form. ADM will examine requests for transfer or redemption of shares for apparent genuineness or alterations; pass upon the apparent validity thereof including endorsements, signature guarantees and (if applicable) tax stamps or waivers, provided that ADM shall not be required to compare any such endorsements against other records it maintains except in accordance with written procedures agreed upon between it and the Fund. C. SUBSCRIPTION AGENT SERVICES ADM will act as Subscription Agent for the Fund. In addition to subscription functions described elsewhere in this Agreement, the Transfer Agent will: 1. MAINTAIN A SUBSCRIPTION ACCOUNT. This account shall be established and operated so as to satisfy the following criteria: a. The account shall be established in the name "FFC Subscription Account" for the benefit of Funds in accordance with the terms of the Agreement; b. The account shall be provided by First Financial Savings Bank, S.L.A. at the costs set forth in Appendix D-1 or by such other financial institution determined by ADM in its sole discretion at such financial institution's usual and customary charges; c. The account shall serve as the sole depository for subscription monies for the purchase of Shares until such funds are transferred to a Fund's custody account; d. ADM shall be prepared to receive and efficiently process incoming cash, checks, Federal Reserve Drafts and bank wire transfers of funds; e. Withdrawals from the account shall be for the purpose of transferring funds into a Fund's custody account or, where appropriate, the crediting or payment of commissions including dealer's commissions; withdrawals are also permitted to accommodate net settlements with the Fund's custodian, or required refunds to brokers due to canceled trades; f. No dividend or redemption or any other payments shall be made to Shareholders from the Subscription Account; g. ADM will cashier all items presented in payment as expeditiously a possible. 2. In connection with managing the Subscription Account, ADM will exercise all possible care in satisfying operational requirements in each of the following critical areas: a. VALIDATION OF RECEIPT OF GOOD SUBSCRIPTION FUNDS. Procedures and criteria are to be established by ADM and approved by an Authorized Person for the purpose of providing assurance that good (collected) funds were received from Shareholders prior to paying out any redemption proceeds (as a result of one or more specific redemption requests). Such procedures are to deal with: (1)Establishing and maintaining procedures reasonably designed to assure the clearance and collection of checks which are otherwise properly drawn. (a) ADM shall not honor any redemption payment until it has determined, by telephone call to the drawee bank or otherwise,that the deposit has cleared the drawee bank or fifteen (15) calendar days after the receipt of such subscription payment, in order to permit the orderly clearing thereof. (2) Returned Checks. Shareholder checks returned for account closures or check stops will be promptly processed. Shares purchased will be reversed as of the original purchase date. Upon receipt of returned checks for other reason, ADM will send a letter notifying the shareholder and allow 10 business days for response before the item will be processed for liquidation. Returned checks will be cleared promptly and processed through the Subscription Account in conjunction with the following actions: (a) Place a hold on the account to prevent redemption of the amount of such returned check or such lesser amount as is in the affected amount; (b) Determine how many shares are to be liquidated due to the investment attributable to such returned check; (c) Calculate and back out accrued dividends, if any, attributable to such investment; (d) Process the liquidation for the appropriate amount; (e) Mail the Shareholder confirmation of the liquidation and the check with a letter of explanation; (f) Take reasonable steps to recover commissions or dealer concessions applicable to such returned check, although the Distributor shall be ultimately responsible therefor. b. ESTABLISH PROCEDURES TO PROCESS EFFECTIVELY BANK WIRE TRANSFERS. Establish and maintain procedures reasonably designed by ADM and approved by an Authorized Person to maintain positive control over movements of incoming money by bank wire so as to: (1) Accept requests (WATTS and local calls) for bank wire instructions, record account information and client telephone number, assign as appropriate a wire control number, establish Shareholder pending file, and if appropriate alert the bank wire department; (2) Confirm to FFC actual bank wire receipts at selected cut- off times during the course of each business day; (3) Close out pending Shareholder files if bank wire receipts are not received as of the date agreed upon; and (4) Open new or credit existing Shareholder account in accordance with the provisions of the current prospectus upon receipt of bank wire funds. D. DIVIDEND DISBURSING AND REDEMPTION AGENT SERVICES In performance of the Dividend Disbursing and Redemption Agent functions, ADM will provide the Fund with regular checks (or electronic funds transfer if available, at the Shareholder's option) and carry out the following functional activities: 1. DIVIDENDS. a. FFC shall advise ADM of dividend amounts which shall then be applied to the Shares as described in the Prospectus or as directed by the Trust, or its officers or Trustees; b. Confirmation of dividend reinvestments shall be mailed to Shareholders after each reinvestment. c. Additional dividend information, if provided by FFC or the Trust to ADM shall then be provided to Shareholders upon written request. 2. REDEMPTION PROCEDURES. ADM with the approval of FFC shall establish procedures reasonably designed to insure that redemption requirements established by ADM and agreed to by FFC have been met, including signature guarantees and obtaining any needed papers or documents. a. ADM will provide a means to record, retrieve, and display on a monitor or otherwise an appropriate symbol or other indication that redemption authorization instructions are on file and appear to be in proper form. b. All redemption requests will be promptly reviewed to insure: (1) That there are sufficient Shares available in the Shareholder's account; (2) The applicable subscription check has not been returned to ADM or its agent and the applicable period of days has expired before using the funds for redemption (see above); (3) That no signature guarantees shall be acceptable unless they reasonably appear to have been provided by an eligible guarantor institution. Some eligible guarantor institutions include members of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or the New York Stock Exchange, Inc. Medallion Signature Program ("MSP"). 3. CHECK REPLACEMENT. A replacement check would be issued to the Shareholder, after verifying that the check to be replaced has not been cashed, and placing a stop payment order on such check, replacement dividend and redemption checks alleged to have been lost, stolen, destroyed, or not received. 4. DIVIDEND & REDEMPTION ACCOUNT. ADM will maintain a single Dividend and Redemption Account for all Funds. This account shall be established and operated so as to satisfy the following criteria: a. This account shall be used to disburse cash in payment of dividends, capital gain distributions and returns of capital. b. All withdrawals from the Disbursement Account shall be for the exclusive purpose of making payments to Shareholders. These payments are to be made only to satisfy automatic or other account liquidation payment requirements. ADM will advise FFC on the following day of all subscriptions and redemptions. c. No deposits or subscription receipts shall be made directly into the Disbursement Account. d. Each Fund agrees to fund, or cause the Custodian to fund, the Disbursement Account sufficiently. Each Fund and ADM agree that a goal of this procedure is to allow for the maximum employment of Fund assets while still adequately funding the Disbursement Account. ADM and its affiliates shall not be required to honor any demand for payment for which previously collected funds have not been received from a Fund's custodian or other Authorized Person. e. Employ due diligence in servicing redemption requests as promptly as possible. E. EXCHANGE AGENT SERVICES ADM will provide services as are required to implement the exchange privileges described from time to time in the prospectus of the Fund. ADM will install and utilize a telephonic system that is designed to afford the Shareholder the opportunity to exchange Shares among the eligible Funds and that will record the telephone request for such exchange. It is understood that ADM is only able to effect exchanges among Funds or funds for which ADM has entered into an agreement similar to this Agreement for provision of transfer agency services. F. PROXY AGENT SERVICES If agreed to by FFC and ADM, ADM, for compensation mutually agreeable to the parties hereto, shall act as Proxy Agent for Shareholders in connection with the holding of annual or special meetings of a Fund's shareholders, mailing to Shareholders notices, proxies and proxy statements in connection with the holding of such meetings, receiving and tabulating votes cast by proxy and communicating to the Fund the results of such tabulation accompanied by appropriate certificates, and preparing and communicating to the Fund certified lists of Shareholders as of such date, and in such form and containing such information as may be required by the Fund to comply with any applicable provisions relating to such meetings. ADM may at its expense employ another firm to provide all or a portion of such services. Regardless of whether the parties agree to appoint ADM as Proxy Agent, ADM shall, upon written request of an Authorized Person, provide certified lists of Shareholders, in such form and containing such information as requested by FFC. G. REPORTS TO BE PROVIDED TO FFC BY ADM: 1. DAILY. a. Copies of confirmations to dealers. b. "Stats at a Glance", showing numbers of accounts, number of outstanding shares and changes in shares. c. Purchases and redemptions. d. Paid or unpaid trade reports. e. 10-day notices required by the NASD. 2. MONTHLY. a. Sales By State and Dividends Reinvested. b. Withdrawals and Dividends Paid in Cash List (if agreed to specifically by the parties). c. Record of Out-of-Pocket Costs Incurred. 3. ANNUAL REPORTS. Provide FFC upon request with all reports reasonably required to conduct an annual review of ADM's functions relating to a Fund, including but not limited to performance, volume, error ratios, costs and other matters relating to the Fund. ADM shall also provide to FFC general information concerning its operations which might be believed to affect adversely the future services to the Fund. 4. PERIODIC MARKETING REPORT. Provided these reports are readily available from existing information and can be produced without unreasonable effort or expense by ADM, including, e.g., a. Geographic Distribution Data. b. Size of Holdings Data. H. OTHER SERVICES ADM will provide the following additional services: 1. SECURITY. a. Design and maintain security procedures reasonably designed to guard against the possible theft and/or use by others of the names and addresses of Shareholders. b. Periodically duplicate of all records (computer/microfilm/hardcopy/copy) at a frequency and in a detail reasonably designed to assure protection of Shareholder record information in the event of a disaster to ADM's facilities, including: (1) Significant voltage drop; (2) Power blackout; (3) Major destruction of ADM's central facilities. c. ADM will maintain equipment reasonably designed or represented to assure an uninterrupted power supply of at least 10 minutes at the offices of ADM to allow for orderly shut down of hardware in the event of a power outage; periodic back-up of tapes to be stored at an off-site facility of ADM's choosing; and will provide redundancy capacity in accordance with the Agreement. 2. STATEMENTS. a. Provide for up to two extra lines of print on Shareholder statements which may be employed by a Fund to advise Shareholders of such information as yield or other explanatory account information. FFC will advise ADM of such information no less than two business days in advance to permit it to properly insert such information in a timely and orderly manner. b. Provide a combined dividend check and statement to Shareholders electing cash distributions. 3. PROCESSING ROUTINE SHAREHOLDER INQUIRIES. a. Receive, control, research, and promptly reply to all routine Shareholder and other inquiries whether received by written or telephonic means which pertain to a Shareholder's account. b. Exercise due care to protect confidential information in responding to inquiries. c. Request AT&T or such other telephone company as may be appropriate to provide, at the Distributor's expense, for a dedicated transmission line between Forum Financial Services, Inc. located at 2 Portland Square, Portland, Maine 04101 and ADM, 10 Woodbridge Center Drive, Woodbridge, New Jersey 07095 for inquiry via a dedicated or P.C. terminal. d. Provide adequate personnel for live telephone response generally until 6:00PM, New York time on normal business days. e. Provide for the automated tracking of all Shareholder and broker telephone inquiries with on line update status. 4. OTHER MAILINGS. a. Mailing services include addressing, enclosing, and mailing semi-annual reports, annual reports, prospectuses and notices to all accounts will be provided. To the extent ADM utilizes the services of another firm to accomplish this for any First Investors Fund, it shall be permitted to do so for FFC, at ADM's expense. b. All routine mailings to Shareholders and brokers will, where appropriate, utilize pre-sorted zip codes. c. All month-end reinvestment statements, with any month-end dividend check attached, will generally be mailed to Shareholders, with copies to broker/dealer. d. Commission checks and statements will generally be mailed to brokerage firms on at least a weekly basis for direct investments of prior weeks. 5. OTHER SERVICES. a. Refer all Shareholder, broker or governmental inquiries of a policy or non-routine nature to FFC. b. Provide an Account Officer to serve as the primary point of contact between FFC and ADM. ADM will exercise due care in assigning an individual who is both conversant with standard investment company practices and of sufficient stature to deal quickly and efficiently with problems peculiar to placing a new investment company on line. 6. MESSENGER SERVICE. Upon request, provide messenger pick-up and delivery as necessary between FFC's or the Trust's offices provided they are located within the borough of Manhattan and the offices of ADM. The party requesting messenger service shall bear the cost of such service. APPENDIX B FORUM FUNDS We, Mark D. Kaplan and Michael D. Martins, doe hereby certify that: The following officers and employees of FORUM FINANCIAL SERVICES, INC., administrator of Forum Funds, or FORUM FINANCIAL CORP., transfer agent for the Corporation, have been duly authorized as Authorized persons to deliver oral and signed written instructions to Administrative Data Management Corp., a sub-transfer agent of the Corporation. The signatures set forth opposite their respective names are their true signatures, and each has been duly elected or appointed to and currently serves Forum Financial Services, Inc., or Forum Financial Corporation, in the position indicated. John Y. Keffer President /S/ JOHN Y. KEFFER_________ Benjamin L Niles Managing Director /S/ BENJAMIN L. NILES______ Richard C. Butt Managing Director, Operation /S/ RICHARD C. BUTT________ Lisa J. Weymouth Manager, Shareholder Services /S/ LISA J WEYMOUTH_______ Mark D. Kaplan Managing Director /S/ MARK D. KAPLAN________ David I Goldstein Managing Director, Counsel /S/ DAVID I. GOLDSTEIN____ ________5/6/96____________________ /S/ MARK D. KAPLAN Date Mark D. Kaplan, Vice President Assistant Treasurer, Assistant Secretary ________5/6/96___________________ /S/ MICHAEL D. MARTINS Date Michael D. Martins, Treasurer APPENDIX C Backup Arrangement ADM currently has in effect a redundancy arrangement with Comdisco Disaster Recovery Services, Inc. The agreement with Comdisco provides that in the event of a data processing systems disaster at ADM's facilities in Woodbridge, New Jersey, ADM may use equipment available at Comdisco's facilities for routine and other processing. The agreement with Comdisco also provides for dedicated time on Comdisco's data processing equipment each year to allow ADM to test the redundancy system. APPENDIX D FFC shall pay ADM the following amounts: 1. Set-up Charge: One time set-up charge of $3,000.00 per each Fund. 2. Account Maintenance Charges: $1.50 per account per month. 3. Account Opening Charge/Account Closing Charge: One-time charge of $1.50 per account to open or close and account. 4. Minimum Monthly Charges: $1,000.00 per active class of shares for each Fund. $ 300.00 per inactive class of shares for each Fund. 5. Disbursements: All reasonable disbursements, including, without limitation, messenger charges. 6. Late Pricing Charges: a. $50 on each day the Fund fails to notify ADM of the Fund's closing net asset value and offering price after 5:30 p.m. and before 6:15 p.m. $100 on each day the Fund fails to notify ADM of the Fund's closing net asset value and offering price after 6:15 p.m. and before 7:30 p.m. b. In the event of a subsequent price adjustment, (i) $50 per hour for actual time spent on manual corrections and (ii) $300 per hour for actual time spent for adjustments requiring computer processing. 7. Demand Deposit Account Fees: Fees payable to First Financial Savings Bank, S.L.A. in the amounts set forth on Appendix D-1. 8. Tax Forms: $1.00 for each tax form generated. 9. FundServ and Networking Fees: As incurred. APPENDIX E Maine Municipal Bond Fund New Hampshire Bond Fund Investors Bond Fund TaxSaver Bond Fund a. ADM will accept redemption requests in written, or telephonic form provided the necessary instructions and authorizations are reasonably believed by ADM to be in good form. Generally, telephonic redemption requests will be repeated for confirmation to the person making the request, and upon voice confirmation by such person, will be recorded in a log kept for that purpose. b. Requests for the redemption of Shares received without signature guarantees will be honored only if: (1) The applicable portion of the Application has been completed and the proceeds are forwarded to the previously designated bank account, address, or other destination identified on the Application; (2) Expedited Redemption Authorization instructions filed at any time other than upon the original opening of a Shareholder's account are filed on an appropriate form and bear or reasonably appear to bear a signature guarantee; (3) Shareholder accounts in the name of joint tenants shall generally be handled on the basis of jointly signed instructions and signature guarantees (where applicable) for any payments. EX-99 11 ADMINISTRATION AGREEMENT Exhibit 9(a) FORUM FUNDS ADMINISTRATION AGREEMENT AGREEMENT made as of the 19th day of June, 1997, as amended December 5, 1997, by and between Forum Funds, a Delaware business trust, with its principal office and place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"), and Forum Administrative Services, Limited Liability Company, 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 may in the future offer 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"); 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 Forum Advisors, Inc., any other investment adviser or investment subadviser to a Fund or the Funds (collectively, the "Adviser") or 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 Adviser and 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 Adviser and the Trust's custodian, transfer agent, dividend disbursing agent and fund accountant; (C) the transmission of purchase and redemption orders for Shares; (D) the notification to the Adviser of available funds for investment; and (E) 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; (xiii) 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 Advisers in monitoring Fund holdings for compliance with Prospectus investment restrictions and assist in preparation of periodic compliance reports; (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, Advisers, the officers of the Trust and other relevant parties, prepare and disseminate materials for meetings of the Board; (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; (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 (xxii) 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 or an Adviser 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 the Fund's Prospectus or any provision of the 1940 Act. 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. 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, and upon statements of accountants, brokers and other persons reasonably believed in good faith by Forum to be expert in the matters upon which they are consulted; (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; (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) 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. 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 Portfolio, 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. Any of the legal services identified in Appendix C hereto may be provided to the Trust by personnel of the Legal Department of Forum, subject to satisfaction of the conditions contained in Section 7(c) to the consents and waivers by the Trust and Forum of any general conflict of interest existing as a result of the provision of those services. Forum shall not charge the Trust for providing the legal services identified in Appendix B, except for those matters designated as Special Legal Services, as to which Forum may charge, and, subject to review and approval by the Chairman of the Audit Committee or Trust Counsel, the Trust shall pay, an additional amount as reimbursement of the cost to Forum of providing the Special Legal 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, and each of those services may be performed by an outside vendor if appropriate in the judgment of Forum or the Trust. 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) Notwithstanding anything in this Agreement to the contrary, Forum and its affiliated persons may receive compensation or reimbursement from the Trust with respect to (i) the provision of services on behalf of the Funds in accordance with any Plan or Service Plan, (ii) the provision of shareholder support or other services, (iii) service as a trustee or officer of the Trust and (iv) services to the Trust, which may include the types of services described in this Agreement, with respect to the creation of any Fund and the start-up of the Fund's operations. (c) 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 Adviser under an agreement between the 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 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 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. (d) 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 the date on which the Trust's Registration Statement relating to the 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 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. 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) without limiting the generality of the Sections 7(a) and (b), the Trust acknowledges that certain legal services may be provided to it by lawyers who are employed by Forum or its affiliates and who render services to Forum and its affiliates. A lawyer who provides 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. Provided (i) Forum agrees with any attorney performing legal services for the Trust to not direct the professional judgment of the attorney in performing those legal services and (ii) the attorney agrees to disclose to the Chairman of the Audit Committee or to Trust counsel any circumstance in which a legal service the attorney proposes to provide relates to a matter in which the Trust and Forum or the Trust and any other investment company to which the attorney is providing legal services have divergent legal or economic interests, each of Forum and the Trust hereby consents to the simultaneous representation by the attorney of both Forum and the Trust and waives any general conflict of interest existing in such simultaneous representation, and the Trust agrees that, in the event the attorney ceases to represent the Trust, whether at the request of the Trust or otherwise, the attorney may continue thereafter to represent Forum, and the Trust expressly consents to such continued representation. 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. In addition, to the extent Forum's obligations hereunder are to oversee or monitor the activities of third parties, Forum shall not be liable for any failure or delay in the performance of Forum's duties caused, directly or indirectly, by the failure or delay of such third parties in performing their respective duties or cooperating reasonably and in a timely manner with Forum. 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. (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 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. (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 officers, as of the day and year first above written. FORUM FUNDS By: /s/Mark D. Kaplan ------------------------- Mark D. Kaplan Vice President, Assistant Treasurer and Assistant Secretary FORUM ADMINISTRATIVE SERVICES, LIMITED LIABILITY COMPANY By: Forum Advisors, Inc., as Manager By: /s/John Y. Keffer ------------------------- John Y. Keffer President FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX A FUNDS AND CLASSES OF THE TRUST DECEMBER 5, 1997 Investors Bond Fund TaxSaver Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Payson Balanced Fund Payson Value Fund Equity Index Fund Small Cap Fund International Equity Fund Emerging Markets Fund Investors Equity Fund Investors Growth Fund INVESTOR SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund INSTITUTIONAL SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund INSTITUTIONAL SERVICE SHARES: Daily Assets Cash Fund Daily Assets Treasury Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX A (CONTINUED) FUNDS AND CLASSES OF THE TRUST DECEMBER 5, 1997 Austin Global Equity Fund Oak Hall Equity Fund Quadra International Equity Fund Quadra Value Equity Fund Quadra Opportunistic Bond Fund Quadra Limited Maturity Treasury Fund Quadra Growth Fund FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX B FEES AND EXPENSES DECEMBER 5, 1997 (I) ADMINISTRATIVE SERVICE FEES - ------------------------------------------------------------------------- ------------------------------------------- Fee as a % of the Annual Average Fund Daily Net Assets of Each Fund - ------------------------------------------------------------------------- ------------------------------------------- Investors Bond Fund 0.20% TaxSaver Bond Fund Maine Municipal Bond Fund New Hampshire Bond Fund Payson Balanced Fund Payson Value Fund Equity Index Fund Small Cap Fund International Equity Fund Emerging Markets Fund Investors Equity Fund Investors Growth Fund - ------------------------------------------------------------------------- -------------------------------------------
(II) OTHER SERVICES SERVICE PROVIDED FEE Preparation and filing of a document with the SEC in electronic format $200 plus (i) $5/text page and (ii) $15/tabular page Legal services Approximate cost to Forum as agreed to from time to time Legal Opinions for Section 24 Filings $1,000
FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX B FEES AND EXPENSES DECEMBER 5, 1997 (I) ADMINISTRATIVE SERVICE FEES - ------------------------------------------------------------------------- ------------------------------------------- Fee as a % of the Annual Average Fund Daily Net Assets of Each Fund - ------------------------------------------------------------------------- ------------------------------------------- - ------------------------------------------------------------------------- ------------------------------------------- Austin Global Equity Fund 0.25% Oak Hall Equity Fund - ------------------------------------------------------------------------- -------------------------------------------
(II) OTHER SERVICES SERVICE PROVIDED FEE Preparation and filing of a document with the SEC in electronic format $200 plus (i) $5/text page and (ii) $15/tabular page Legal services Approximate cost to Forum as agreed to from time to time Legal Opinions for Section 24 Filings $1,000
FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX B FEES AND EXPENSES DECEMBER 5, 1997 (I) ADMINISTRATIVE SERVICE FEES - ------------------------------------------------------------------------- ------------------------------------------- Fee as a % of the Annual Average Fund Daily Net Assets of Each Fund - ------------------------------------------------------------------------- ------------------------------------------- - ------------------------------------------------------------------------- ------------------------------------------- Quadra International Equity Fund 0.10% of the first $50 million, 0.05% Quadra Value Equity Fund over $50 million Quadra Opportunistic Bond Fund Quadra Limited Maturity Treasury Fund Quadra Growth Fund - ------------------------------------------------------------------------- -------------------------------------------
(II) OTHER SERVICES SERVICE PROVIDED FEE Preparation and filing of a document with the SEC in electronic format $200 plus (i) $5/text page and (ii) $15/tabular page Legal services Approximate cost to Forum as agreed to from time to time Legal Opinions for Section 24 Filings $1,000
FORUM FUNDS ADMINISTRATION AGREEMENT APPENDIX B FEES AND EXPENSES DECEMBER 5, 1997 (I) ADMINISTRATIVE SERVICE FEES - ------------------------------------------------------------------------- ------------------------------------------- Fee as a % of the Annual Average Fund Daily Net Assets of Each Class of the Fund - ------------------------------------------------------------------------- ------------------------------------------- - ------------------------------------------------------------------------- ------------------------------------------- Daily Assets Treasury Fund 0.05% Daily Assets Cash Fund Daily Assets Government Fund Daily Assets Tax-Exempt Fund Daily Assets Treasury Obligations Fund - ------------------------------------------------------------------------- -------------------------------------------
(II) OTHER SERVICES SERVICE PROVIDED FEE Preparation and filing of a document with the SEC in electronic format $200 plus (i) $5/text page and (ii) $15/tabular page Legal services Approximate cost to Forum as agreed to from time to time Legal Opinions for Section 24 Filings $1,000
EX-99.B11 12 INDEPENDENT AUDITORS CONSENT Exhibit 11 Consent of Independent Auditors The Board of Trustees and Shareholders Forum Funds: We consent to the use of our reports dated October 3, 1997 for Daily Assets Government Fund (formerly Daily Assets Treasury Fund) and Daily Assets Cash Fund, series of Forum Funds, and for Government Portfolio (formerly Treasury Portfolio) and Cash Portfolio, series of Core Trust (Delaware), incorporated herein by reference into the statement of additional information and to the references to our Firm under the headings, "Financial Highlights" in the prospectuses and "Auditors" in the statement of additional information. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Boston, Massachusetts May 26, 1998 EX-99.B13 13 13 REICH & TANG Exhibit 13 INVESTMENT REPRESENTATION LETTER March 24, 1980 Daily Income Extension Fund, Inc. 230 Park Avenue New York, New York 10017 Dear Sirs: We are purchasing from you today 100,000 shares of your Common Stock, par value $.01 per share, at a price of $1.00 per share for a total purchase price of $100,000. Such shares are to be newly issued shares, and the shares so issued and sold to us are herein referred to as the "Stock". We recognize that the Stock would have to be the subject of a registration statement under the Securities Act of 1933 if an exemption under that Act were not applicable to the transaction and that the investment representation contained in this letter will be relied upon by you as the basis for such exemption. In consideration of your issuing and selling the stock to us, we hereby represent to you that the Stock is being acquired for investment and not with a present view to reselling or otherwise distributing the Stock or causing the Stock to be redeemed by you. Very truly yours, REICH & TANG, INC. BY /S/___________________ EX-99.B14 14 IRA DISCLOSURE STATEMENT Exhibit 14 FORUM FUNDS INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT FORUM FUNDS INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT It is required that you be given this Disclosure Statement for the purpose of insuring that you are informed and understand the nature of an Individual Retirement Account ("IRA") sponsored by Forum Funds. This Disclosure Statement explains the rules governing IRAs including the rules adopted by the Tax Reform Act of 1986 which took effect on January 1, 1987. If you should have any questions, you may contact us at the following address and phone number: Forum Financial Corp. P.O. Box 446 Portland, Maine 04112 (207) 879-0001 YOUR RIGHT TO REVOKE THIS IRA. You may revoke this IRA at any time in writing within seven (7) days after the later of the date you received this Disclosure Statement or the day you established this IRA. For purposes of revocation, it will be assumed that you received the Disclosure Statement no later than the date of your check or transfer direction with which you opened your IRA. To revoke the IRA, you must either mail or deliver a notice of revocation to the address listed above. Oral revocations are not accepted. If after you have established an IRA and during the period in which you are entitled to revoke the IRA, there becomes effective a material adverse change in the information set forth in the Disclosure Statement or a material change in the governing instrument used in establishing the IRA, you are entitled to revoke your IRA on or before a date not less than seven days after the date on which you receive such amendment under the same revocation procedure set forth above. If a notice of revocation is mailed, it shall be deemed mailed on the date of the postmark (or if sent by certified or registered mail, the date of certification or registration) if it is so deposited in the mail in the United States, first class postage prepaid and properly addressed. If you revoke your IRA, you are entitled to a return of the entire amount contributed. TYPES OF IRAS; ELIGIBILITY IN GENERAL. There are several types of IRAs. For example, there is a "Regular IRA" to which you may make contributions for yourself. There is also a "Spousal IRA" which you may be able to set up for your spouse. There is also a "Rollover IRA" which you can set up to receive assets from a qualified plan, annuity or another IRA. Finally, there is a "SEP-IRA" (which is also known as a Simplified Employee Pension Plan) which your employer can establish for you. Following is a general description of the rules which apply to each of these types of IRAs and who is eligible to establish them. REGULAR IRA. You may contribute up to the lesser of $2,000 or 100% of your compensation if you have not reached age 70 1/2 during the taxable year. You may make this contribution even if you or your spouse is an active participant in a qualified employer plan. However, as explained below, the amount of the contribution which you may deduct may be limited. Compensation includes wages, salary, commissions, bonuses, tips, earned income of self-employed persons and any amount includable in income as alimony or separate maintenance payments, but does not include income from interest, dividends or other earnings or profits from property, or amounts not includable in your gross income. SPOUSAL IRA. You may contribute to your IRA and an IRA for your spouse who has no compensation (or elects to be treated as having no compensation) if: (1) you have received compensation during the taxable year and (2) you file a joint income tax return for the year with your spouse. Under such an arrangement, you may qualify for a total contribution equal to the lesser of $4,000 or 100% of your compensation for the taxable year. You can determine how to divide the contribution between the two accounts but you cannot contribute more than $2,000 annually into either one. While you cannot contribute to your IRA in the taxable year in which you reach 70 1/2, you can still contribute to your spouse's IRA if he or she has not reached 70 1/2. A Spousal IRA does not involve the creation of a joint account. The account of each spouse is separately owned and treated independently from the account of the other spouse. ROLLOVER IRA. All or a portion of certain distributions (other than, among others, required distributions made on account of your attaining age 70 1/2) from qualified retirement plans (or the proceeds thereof), annuities and other IRAs may be "rolled over" tax-free into an IRA within sixty (60) days after your receipt of the distribution (or directly under the retirement plan rules effective after 1992) without regard to the limits on deductible contributions, but no deduction is allowed with respect to such a rollover. In the case of a distribution from a qualified plan that contains a return of non-deductible employee contributions, the returned contributions may not be rolled over. Under certain circumstances, the law allows you to roll over a distribution from an IRA into a qualified pension or profit-sharing plan, qualified annuity plan, or tax sheltered annuity or custodial account; however, such a rollover cannot be made from an IRA to which you have made any contributions. You can also transfer assets you hold in one IRA to another IRA by directing the current trustee or custodian to transfer those assets directly to the new IRA. However, if you transfer assets other than cash, the identical property must be contributed to the new IRA. You can direct such a so-called "trustee to trustee transfer" at any time. However, you may make a rollover from one IRA to another IRA only once during a one-year period. A decision to make a rollover from a qualified plan, as signified by checking the rollover box on the Application, is irrevocable. Rollover amounts you receive may not be deposited in your spouse's IRA, but if you should die while still a participant in a qualified plan, in certain cases your spouse may be allowed to make a tax-free rollover to an IRA of all or any part of the assets distributed from the qualified plan, excluding any contributions (other than voluntary deductible employee contributions) made by you to such plan. The amount of such distributions rolled over by a spouse into an IRA may not subsequently be rolled over into another employer's qualified plan or annuity. A distribution received under a qualified domestic relations order may be eligible for rollover treatment. Strict requirements must be met to qualify for tax-free rollover treatment. Rollover treatment must be elected in writing. You should consult your personal tax advisor in connection with rollovers to and from your IRA. SIMPLIFIED EMPLOYEE PENSION (SEP-IRA). An employer may adopt a SEP and contribute to your SEP-IRA even if you are covered by another retirement plan within limits prescribed by SEP rules. The contributions are deductible to the employer and are generally not includable in your income until you receive distributions. To establish a SEP, your employer must sign a SEP agreement and provide you with a copy of the agreement as well as certain information concerning the rules applicable to such plans. Your employer can satisfy these requirements by using Form 5305-SEP which is issued by the Internal Revenue Service ("IRS"). CONTRIBUTIONS IN GENERAL. As explained in this part, the amount of your IRA contributions which you can deduct is subject to limits. Except in the case of rollover contributions or trustee to trustee transfers, contributions to your Regular IRA, Spousal IRA or SEP-IRA must be in cash. Contributions to your Regular IRA or Spousal IRA may be made up to the due date for filing your tax return for the taxable year (excluding extensions thereof) even if you file before the due date. In making contributions, you must indicate the tax year to which the contribution applies. If no tax year is designated, the Custodian will assume that the contribution is intended to apply to the calendar year in which it is received. DEDUCTIBLE CONTRIBUTIONS. If you are single and are not an "active participant" in a retirement plan maintained by your employer, you can deduct the full amount of your IRA contribution up to the lesser of $2,000 or 100% of your compensation for the year. If you are married and file a joint return, you can also deduct the full amount of your IRA contribution so long as neither you nor your spouse is an "active participant" in a retirement plan maintained by your respective employers. These plans include qualified pension, profit sharing (including 401(k)), stock bonus or money purchase plans, SEP-IRAs, qualified annuity plans, tax-sheltered annuities and custodial accounts and deferred compensation plans of governmental agencies. You are generally considered to be an active participant in a plan if you were entitled to have an employer contribution or forfeiture credited to your account during the year in the case of a defined contribution plan or, in the case of a defined benefit plan, you are eligible to participate even if you choose not to. You are considered to be an active participant in a plan if you make a contribution to the plan during a year even if your employer does not. For active participation, it does not matter whether any interest you have in a plan is vested or unvested. Your employer is required to indicate on your Form W-2 whether you were an active participant for the year covered by the form. If you or your spouse is an active participant in a plan, the amount of the deduction you can claim for an IRA contribution is reduced or totally denied depending upon the amount by which your adjusted gross income for the year exceeds the "applicable dollar amount." The applicable dollar amount is $25,000 for single people and $40,000 for married individuals filing a joint tax return. If you are married but are filing separate tax returns, your applicable dollar amount is $0. If your adjusted gross income exceeds your applicable dollar amount by more than $10,000, you may not deduct any portion of your IRA contribution. However, if it is between $0 and $10,000 more than your applicable dollar amount, you can claim a tax deduction for your contribution. To determine the amount of the deduction, follow these steps. First, determine the amount of the contribution you can make. If, for example, you have compensation in excess of $2,000 you could make a $2,000 contribution to your Regular IRA. Next, subtract the applicable dollar amount from your adjusted gross income. If you are single and your adjusted gross income is $32,000, the difference would be $7,500. Next divide this difference by $10,000. In the example $7,500/$10,000 equals 3/4. Accordingly, you may deduct 3/4 of your contribution. If the deduction limitation is not a multiple of $10, round the deduction to the next higher $10. If your adjusted gross income does not exceed $35,000 and you are single, or $50,000 and you are married and file a joint return, you can deduct $200 regardless of how the computation comes out. NONDEDUCTIBLE CONTRIBUTIONS. Even though you may not be entitled to claim a deduction for contributions to your IRA, you are still allowed to make the contributions to the extent described in "Types of IRA," above. To the extent that the amount of your contribution exceeds the deduction limit, it is considered a non-deductible contribution. Earnings on these contributions are not taxed until distributed just like the earnings on deductible contributions. You are required to specify on your tax return the amount of your nondeductible contribution. If you overstate this amount, you may be liable for a tax penalty of $100 per overstatement. INVESTMENT AND HOLDING OF CONTRIBUTIONS Contributions to your IRA, and the earnings thereon, are invested in shares of one or more separate series of Forum Funds. The assets in your account are held in a custodial account exclusively for your benefit and the benefit of such beneficiaries as you may designate in a writing delivered to the Custodian. The balance in your IRA represents a separate account which is clearly identified as your property and generally may not be combined for investment with the property of another individual. Your right to the entire balance in your account is nonforfeitable. No part of the assets of your account may be invested in life insurance contracts or in collectibles such as works of art, antiques, coins, stamps, etc. DISTRIBUTIONS FROM YOUR IRA DURING YOUR LIFE. The law permits distributions to be made from an IRA without penalty any time after you attain age 59 1/2, and requires that distributions commence no later than April 1st following the calendar year in which you attain age 70 1/2. Distributions may be in the form of a single payment or, in accordance with regulations, in monthly, quarterly, or annual payments over your life, the joint lives of you and your designated beneficiary, or over a period certain not extending beyond your life expectancy or the joint life and last survivor expectancy of you and your designated beneficiary. Unless you elect otherwise prior to the date distributions are required to begin, other than in the case of a life annuity, life expectancies will be recalculated annually. The election is irrevocable and applies to all subsequent years. The life expectancy of a nonspouse beneficiary cannot be recalculated. If you direct distributions over your life or the joint lives of you and your designated beneficiary, the Custodian will purchase with your IRA balance an immediate annuity contract from an insurance company you choose and your payments will be made under the contract. You must provide a completed annuity application from the insurance company of your choosing. Distributions may only be requested by proper completion of a distribution form available from the Custodian. AFTER YOUR DEATH. If you die after your "required beginning date," i.e., the April 1 following the year you attain age 70 1/2, the balance of your IRA generally must be distributed to your designated beneficiary at least as rapidly as under the method of distribution in effect prior to your death. If you die before your "required beginning date," the entire balance of the account must be distributed by December 31 of the year in which the 5th anniversary of your death occurs. However, distribution need not be made within this 5-year period if your beneficiary receives payments over a period measured by his or her life expectancy beginning no later than December 31 of the year following the year in which you die. If the beneficiary is your spouse, those installment payments don't have to begin until the later of December 31 of the year following the year in which you die or December 31 of the year in which you would have reached age 70 1/2. In addition, the above distribution rules will not apply if your spouse is your beneficiary and he or she elects to treat the entire interest in the IRA (or remaining part of such interest if distribution has already begun) as his or her own IRA subject to the regular IRA distribution requirements. In such a case, your spouse will be considered to be the Depositor under the IRA. If you die before the entire IRA has been distributed to you and your spouse is not your beneficiary, no additional cash contributions or rollover contributions may be accepted by the Custodian. INCOME AND PENALTY TAXES INCOME TAX TREATMENT. Income tax on deductible IRA contributions and earnings on both deductible and nondeductible IRA contributions is generally deferred until you receive distributions. If you have made both deductible and nondeductible contributions to IRAs you maintain, a portion of each distribution you receive from any IRA (whether it is the one to which you made nondeductible contributions) will be considered to be a return of nondeductible contributions and therefore not included in your income for tax purposes. The balance of each distribution will be taxed as ordinary income regardless of its original source. The amount of any distribution which is considered to be a return of nondeductible contributions (and therefore not taxed) is determined by multiplying the amount of the distribution by a fraction. The numerator of the fraction is the aggregate amount of nondeductible contributions you have made to all of your IRAs over the years (less any distribution of nondeductible contributions during those years) and the denominator is the balance in all your IRAs at the end of the year (after adding back any distributions you received during the year). The aggregate amount which can be excluded from income for all years cannot exceed the amount of nondeductible contributions that you made. Taxable distributions from your account are taxed as ordinary income regardless of their original source. They are not eligible for special tax treatment that may apply to lump sum distributions from qualified employer plans. A distribution from your account after you attain age 65 is eligible for the retirement income credit. PENALTY TAX FOR PREMATURE DISTRIBUTIONS. Your IRA is intended to provide income for you upon retirement. Accordingly, the law generally imposes a penalty on premature distributions. If you receive a taxable distribution from the IRA before reaching age 59 1/2, a nondeductible 10% tax penalty will be imposed on the portion of the distribution which is included in your gross income. This penalty is in addition to any income tax you must pay on the distribution itself. The penalty does not apply to the extent that the distribution is considered a return of nondeductible contributions or a return of an excess contribution which is permitted tax-free (see below). The penalty also will not apply if the distribution is made due to your permanent disability or death, if the distribution is one of a series of substantially equal periodic payments made over your life (or life expectancy) or over the joint lives (or life expectancies) of you and your beneficiary. Further, the penalty does not apply in the case of a qualifying rollover distribution. PENALTY TAX FOR EXCESS CONTRIBUTIONS. Contributions to an IRA above the permissible limits are nondeductible and are subject to an annual nondeductible excise tax of 6% of the amount of such excess contributions for each year that the excess is not withdrawn or eliminated. The tax is paid by the person to whom a deduction is allowed or, in the case of a Rollover IRA, by the person for whose benefit it is established. If the person who contributed the excess takes no deduction for it and withdraws the excess amount plus the net earnings attributable to such excess on or before the due date (including extensions) for filing the Federal income tax return for the year for which the contribution was made, the 6% excise tax will not be applied but the 10% tax on premature distributions will be applied to the net earnings if the person has not attained age 59 1/2 and is not disabled. Generally, if the excess is withdrawn after the due date (including extensions) for filing the tax return for the year for which the contribution was made, not only will the excess contribution be subject to the 6% excise tax, but the amount of such excess and the net income attributable to it will also be includable in income; and if you have not attained the age of 59 1/2, and are not disabled, you will also be subject to the previously mentioned 10% penalty tax on premature distributions. The law provides, however, that if an individual has made a contribution to an IRA for a year which does not exceed $2,250 (excluding rollover amounts) all or part of which is an excess contribution for which he did not claim a deduction, and he does not correct the excess contribution prior to the due date (including extensions) for filing his tax return for the year, he nevertheless may withdraw the excess amount contributed (without the net income attributable thereto) at any time without incurring the 10% penalty tax on premature distributions or being required to include the amount withdrawn in income. The 6% excise tax will be imposed even in this special situation for the year of the excess contribution and each subsequent year until the excess is withdrawn or eliminated. The rules discussed above generally apply to SEP-IRAs as well. The law also allows you to withdraw tax-free and without penalty an excess contribution, regardless of the amount, made with respect to a rollover contribution (including an attempted rollover contribution), if the excess contribution occurred because you reasonably relied on erroneous information required to be supplied by the plan, trust, or institution making the distribution that was the subject of the rollover. As an alternative to withdrawing excess contributions made to an IRA, such amounts may be eliminated by making reduced contributions; however, you will be required to pay the 6% excise tax on the amount of the excess for the year of the contribution and for each subsequent year until the amount of the excess is eliminated in a later year for which you have not contributed the maximum deductible amount. If a contribution is made to your account in an amount less than the permissible limit in order to correct an excess contribution for a previous year for which you did not claim a deduction, under certain circumstances, taking into account the limits on contributions, you may be allowed to treat the amount of the reduction in the current year's contribution as an additional contribution for the current taxable year. PENALTY TAX FOR UNDER-DISTRIBUTION. If after April 1st following the year in which you attain age 70 1/2, the amount distributed is less than the minimum amount required by law to be distributed, a 50% excise tax may be imposed on any such deficiency. The IRS may waive this penalty if the deficiency was due to reasonable error and reasonable steps are taken to correct the deficiency. PENALTY TAX FOR EXCESS DISTRIBUTIONS. A 15% penalty tax is imposed on annual distributions from retirement arrangements (including IRAs) to the extent that such distributions in a year are considered "excess distributions." A distribution is generally an "excess distribution" if, in the case of a distribution other than "lump sum" distributions, it exceeds $150,000 (or such higher amount as may be specified by the IRS) during any calendar year. A "lump sum" distribution will be an "excess distribution" if it exceeds $750,000 (or such higher amount as may be specified by the IRS). PROHIBITED TRANSACTIONS AND PLEDGING ACCOUNT ASSETS. If during any taxable year you engage in a so-called "prohibited transaction" with respect to your IRA, the account will lose its tax-exempt status. In this event, the fair market value of all account assets, valued as of the first day of such taxable year, will be deemed distributed to you and includable in your gross income. These prohibited transactions would include borrowing money from your account. If you pledge your account or any portion thereof as security for a loan, such pledged portion will be deemed distributed to you and, to the extent that it does not represent a return of nondeductible contributions, is includable in your gross income. If you have not yet attained the age of 59 1/2 and are not totally and permanently disabled, an additional tax equal to 10% of the amount pledged will be imposed on such funds includable in gross income. If your spouse engages in a prohibited transaction with respect to his or her account, the results will be the same. MISCELLANEOUS FEDERAL INCOME TAX WITHHOLDING. Distributions from an IRA to the covered individual or to a beneficiary are subject to Federal income tax withholding unless the covered individual or beneficiary elects to have no withholding apply. The current withholding rate required by the Internal Revenue Code is 10%. Additional information concerning withholding and election forms will be available no later than at the time a distribution is requested. FEDERAL ESTATE AND GIFT TAXES. Generally, your IRA will be included in your estate for Federal estate tax purposes. If your spouse is your beneficiary, your IRA may qualify for a deduction for purposes of that tax. An election under an IRA to have a distribution payable to a beneficiary on the death of the covered individual will not be treated as a gift subject to Federal gift tax. REPORTS TO THE IRS. You are not required to file Form 5329 with the IRS unless you owe one of the IRA penalty taxes. These are the taxes on excess contributions, premature distributions, prohibited transactions and under distributions after age 70 1/2. FINANCIAL INFORMATION. The growth in value of the mutual fund shares held in your account can neither be guaranteed nor projected. CUSTODIAN CHARGES. The First National Bank of Boston as the Custodian of your IRA currently charges an annual maintenance fee of $10.00 per account. An additional $10.00 fee is charged for each disbursement, other than an automatic installment payout. The Custodian may change any of its fees from time to time and may pay all or any portion of the fees to the Funds' Transfer Agent or other agents or subcontractors performing services with respect to your IRA. Further information regarding charges in connection with the administration of your IRA is contained in the IRA Application and Fund prospectus. IRS APPROVAL STATUS. Your IRA has been approved by the IRS but this determination relates only to form and not to the merits of your account. Further information concerning IRAs can be obtained from any district office of the IRS. INTRODUCTION By executing the Custodial Account Application with The First National Bank of Boston as custodian ("Custodian"), the Depositor whose name appears on the Individual Retirement Account ("IRA") Application ("Application") hereby establishes an IRA as described in Section 408(a) of the Internal Revenue Code of 1986 ("Code"), in order to provide for retirement or for the support of his or her beneficiaries after death. Forum Funds (the "Sponsor") is the sponsor of this Agreement. Articles I-VIII are from the Internal Revenue Service's model custodial account (Form 5305-A, rev. 10/92) for establishing tax qualified IRAs. The Depositor has been given the disclosure statement required under Regulations under Section 408(i) of the Code. The Depositor has deposited with the Custodian the amount shown on the Application. The Depositor and the Custodian agree as follows: ARTICLE I The Custodian may accept additional cash contributions on behalf of the Depositor for a tax year of the Depositor. The total cash contributions are limited to $2,000 for the tax year unless the contribution is a rollover contribution described in Section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified employee pension plan as described in Section 408(k). Rollover contributions before January 1, 1993, include rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), or 408(d)(3) of the Code or an employer contribution to a simplified employee pension plan as described in Section 408(k). ARTICLE II The Depositor's interest in the balance in the custodial account is nonforfeitable. ARTICLE III 1. No part of the custodial funds may be invested in life insurance contracts, nor may the assets of the custodial account be commingled with other property except in a common trust fund or common investment fund (within the meaning of Section 408(a)(5) of the Code). 2. No part of the custodial funds may be invested in collectibles (within the meaning of Section 408(m) of the Code) except as otherwise permitted by Section 408(m)(3) which provides an exception for certain gold and silver coins and coins issued under the laws of any state. ARTICLE IV 1. Notwithstanding any provision of this agreement to the contrary, the distribution of the Depositor's interest in the custodial account shall be made in accordance with the following requirements and shall otherwise comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the incidental death benefit provisions of Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are incorporated by reference. 2. Unless otherwise elected by the time distributions are required to begin to the Depositor under paragraph 3, or to the surviving spouse under paragraph 4, other than in the case of a life annuity, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Depositor and the surviving spouse and shall apply to all subsequent years. The life expectancy of a nonspouse beneficiary may not be recalculated. 3. The Depositor's entire interest in the custodial account must be or begin to be distributed by the Depositor's required beginning date (April 1 following the calendar year end in which the Depositor reaches age 70 1/2). By that date, the Depositor may elect, in a manner acceptable to the Custodian, to have the balance in the custodial account distributed in: (a) A single sum payment. (b) An annuity contract that provides equal or substantially equal monthly, quarterly, or annual payments over the life of the Depositor. (c) An annuity contract that provides equal or substantially equal monthly, quarterly, or annual payments over the joint and last survivor lives of the Depositor and his or her designated beneficiary. (d) Equal or substantially equal annual payments over a specified period that may not be longer than the Depositor's life expectancy. (e) Equal or substantially equal annual payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Depositor and his or her designated beneficiary. 4. If the Depositor dies before his or her entire interest is distributed to him or her, the entire remaining interest will be distributed as follows: (a) If the Depositor dies on or after distribution of his or her interest has begun, distribution must continue to be made in accordance with paragraph 3. (b) If the Depositor dies before distribution of his or her interest has begun, the entire remaining interest will, at the election of the Depositor or, if the Depositor has not so elected, at the election of the beneficiary or beneficiaries, either (i) Be distributed by the December 31 of the year containing the fifth anniversary of the Depositor's death, or (ii) Be distributed in equal or substantially equal payments over the life or life expectancy of the designated beneficiary or beneficiaries starting by December 31 of the year following the year of the Depositor's death. If, however, the beneficiary is the Depositor's surviving spouse, then this distribution is not required to begin before December 31 of the year in which the Depositor would have turned age 70 1/2. (c) Except where distribution in the form of an annuity meeting the requirements of Section 408(b)(3) and its related regulations has irrevocably commenced, distributions are treated as having begun on the Depositor's required beginning date, even though payments may actually have been made before that date. (d) If the Depositor dies before his or her entire interest has been distributed and if the beneficiary is other than the surviving spouse, no additional cash contributions or rollover contributions may be accepted in the account. 5. In the case of a distribution over life expectancy in equal or substantially equal annual payments, to determine the minimum annual payment for each year, divide the Depositor's entire interest in the Custodial account as of the close of business on December 31 of the preceding year by life expectancy of the Depositor (or the joint life and last survivor expectancy of the Depositor and the Depositor's designated beneficiary, or the life expectancy of the designated beneficiary, whichever applies). In the case of distributions under paragraph 3, determine the initial life expectancy (or joint life and last survivor expectancy) using the attained ages of the Depositor and designated beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2. In the case of a distribution in accordance with paragraph (4)(b)(ii), determine life expectancy using the attained age of the designated beneficiary as of the beneficiary's birthday in the year distributions are required to commence. 6. The owner of two or more individual retirement accounts may use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524 to satisfy the minimum distribution requirements described above. This method permits an individual to satisfy these requirements by taking from one individual retirement account the amount required to satisfy the requirement for another. ARTICLE V 1. The Depositor agrees to provide the Custodian with information necessary for the Custodian to prepare any reports required under Section 408(i) of the Code and related Regulations Sections 1.408-5 and 1.408-6. 2. The Custodian agrees to submit reports to the Internal Revenue Service and the Depositor prescribed by the Internal Revenue Service. ARTICLE VI Notwithstanding any other articles which may be added or incorporated, the provisions of Articles I through III and this sentence will be controlling. Any additional articles that are not consistent with Section 408(a) of the Code and the related regulations will be invalid. ARTICLE VII This agreement will be amended from time to time to comply with the provisions of the Code and related regulations. Other amendments may be made with the consent of the Depositor. ARTICLE VIII 1. INVESTMENT OF CONTRIBUTIONS. (a) All contributions to the custodial account made by or on behalf of the Depositor shall be invested in accordance with proper instructions received from time to time from the Depositor and shall be applied to purchase full and fractional shares ("Shares") of one or more of the separate series of Forum Funds (each such series referred to as a "Fund"). Fund shares held in the custodial account shall be registered in the name of the Custodian or its nominee. The Depositor shall be the beneficial owner of all the assets held in the custodial account. (b) Except in the case of a rollover contribution or employer contributions to a simplified employee pension plan as described in Article I, the Depositor shall not for any taxable year of the Depositor contribute to the custodial account an amount in excess of the lesser of 100% of the compensation includable in his gross income or $2,000, and the Depositor shall be fully and solely responsible for all taxes, interest and penalties which might accrue or be assessed by reason of any excess deposit and interest, if any, earned thereon. Contributions must be made no later than the due date for filing the Depositor's tax return for the tax year (excluding extensions) or by such other date as from time to time provided by law. If a contribution is intended to be a rollover contribution referred to in Article I, the Depositor hereby certifies that the source of the contribution qualifies the contribution as such, that no portion thereof consists of any amount considered to have been previously contributed by the Depositor as an employee (other than "deductible employee contributions" as defined in Section 72(o)(5) of the Code), that the contribution is being made to the custodial account no later than 60 days after receipt by the Depositor of the distribution giving rise to the rollover contribution, and that no previous rollover contribution has been made by the Depositor within one year of the date of the rollover contribution to or from another individual retirement account or individual retirement annuity and that the rollover is in all respects permitted by law. It shall be the sole responsibility of the Depositor to determine the amount of the contributions made hereunder. The Depositor shall execute such forms as the Custodian may require in connection with any contribution hereunder. 2. REINVESTMENT OF EARNINGS. All dividends and capital gains distributions received on Fund Shares held in the Depositor's account shall, unless received in additional Shares, be reinvested in Shares of the Fund paying such dividends and distributions, which Fund Shares shall be credited to such account. If any distributions of the Fund may be received at the election of the Depositor in additional Shares or in cash or other property, the Custodian shall elect to receive additional Shares. 3. PROXIES AND OTHER INFORMATION. The Custodian shall forward to the Depositor all notices, prospectuses, financial statements, proxies and proxy soliciting material which the Custodian receives relating to such Shares. The Custodian shall not vote any such Shares except in accordance with the written instructions of the Depositor. ARTICLE IX (DISTRIBUTIONS) The Custodian shall, from time to time, subject to the provisions of Article IV, make distributions out of the custodial account to the Depositor, in such manner and amounts as may be specified in written instructions of the Depositor. All such instructions shall be deemed to constitute a certification by the Depositor that the distribution so directed is one that the Depositor is permitted to receive. The Custodian shall have no liability with respect to any contribution to the custodial account, any investment of assets in the custodial account, or any distribution therefrom pursuant to instructions received from the Depositor or this Agreement, or for any consequences to the Depositor arising from such contributions, investments or distributions including, but not limited to, excise and other taxes and penalties which might accrue or be assessed by reason thereof, nor shall the Custodian be under any duty to make any inquiry or investigation with respect thereto. ARTICLE X (BENEFICIARIES) The Depositor may designate and redesignate his/her beneficiary or beneficiaries on a form satisfactory to the Custodian and provided by the Fund for such purpose. To be effective, such designation must be received by the Custodian prior to the death of the Depositor. Such beneficiary or beneficiaries shall be entitled to the balance in the custodial account of the Depositor as provided in paragraph 4 of Article IV. Unless otherwise provided in the designation of beneficiary form, amounts payable by reason of the Depositor's death will be paid only to the primary beneficiary or beneficiaries who survive the Depositor in equal shares, or, if no primary beneficiary or beneficiaries survive the Depositor, to the contingent beneficiary or beneficiaries who survive the Depositor in equal shares. If some but not all primary or contingent beneficiaries, as applicable, do not survive the Depositor, any amounts that such nonsurviving beneficiaries shall have been entitled to receive hereunder shall be divided among the surviving primary or contingent beneficiaries, as applicable, in proportion to the relative interests of the surviving primary or contingent beneficiaries. If no designation of beneficiary is in effect at the time of the Depositor's death or if no designated beneficiary survives the Depositor, the balance in the custodial account of the Depositor shall be paid to the legal representative of the estate of the Depositor. Unless otherwise provided in the beneficiary designation form, the beneficiary may choose the method of distribution from among those permitted by Article IV. ARTICLE XI (RESPONSIBILITY OF DEPOSITOR) Depositor acknowledges he or she has read the information distributed to him or her by the Custodian and agrees to assume full responsibility for all decisions as to deposits and withdrawals, and the Depositor indemnifies the Custodian and saves it free and harmless from any and all claims arising out of any adverse consequences experienced by the Depositor as a result of his or her own decision, including but not limited to excise taxes and penalties. Any taxes which may be imposed upon the custodial account or the income thereof, but not excise taxes imposed upon the Depositor, may, in the discretion of the Custodian, be deducted from and charged against the custodial account. ARTICLE XII (ACCEPTANCE OF REPORTS) If, within 60 days after the mailing by the Custodian to the Depositor of a report pursuant to paragraph 2 of Article V, the Depositor has not given the Custodian written notice of any exception or objection thereto, such report shall be deemed to have been approved in its entirety and in such case, or upon written approval of the Depositor, the Custodian shall be released, relieved, and discharged with respect to all matters and statements set forth therein as though the report had been settled by judgment or decree of a court of competent jurisdiction. ARTICLE XIII (RESPONSIBILITY OF CUSTODIAN) The Custodian shall have no duties whatsoever except such duties as it specifically agrees to in writing, and no implied covenants or obligations shall be read into this Agreement against the Custodian. The Custodian shall not be liable under this Agreement, except for its own bad faith, gross negligence or willful misconduct. In performing its duties under this Agreement, the Custodian may hire agents, experts and attorneys. The Custodian may also delegate any of its powers and duties hereunder to an agent. ARTICLE XIV (PROHIBITION AGAINST ASSIGNMENT) No interest right or claim in or to any part of the custodial account or any payment therefrom shall be assignable, transferable, or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind and the Custodian shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same, except as required by law. ARTICLE XV (AMENDMENT) The Depositor hereby delegates to the Custodian the power to amend this Agreement from time to time as it deems appropriate, and hereby consents to any such amendment provided, however, that all such amendments are in compliance with the provisions of the Code and the regulations thereunder. All such amendments shall be effective as of the date set forth in a written notice of amendment which will be sent to the Depositor. ARTICLE XVI (TERMINATION) This account and this Agreement may be terminated at any time by the Depositor by delivering to the Custodian a written notice of termination. In addition, in the event that either (a) all of the funds available for investment hereunder are liquidated or otherwise terminated or (b) the sponsor of this IRA ceases to act as such without a successor assuming the duties of the sponsor, the account and this Agreement shall be terminated and the assets thereof shall be delivered to the Depositor unless prior to such payment the Depositor provides written instructions to the Custodian to transfer such proceeds to the trustee or custodian of another IRA. ARTICLE XVII (RESIGNATION OR REMOVAL OF CUSTODIAN) 1. The Custodian may resign without liability, cost or expense of any kind, upon written notice to that effect delivered to the Depositor and the Fund, such resignation to be effective the 30th day following the mailing to the Depositor of such notice. The Depositor may remove the Custodian upon 30 days' written notice to that effect to the Custodian. Upon such resignation or removal, the Depositor shall forthwith appoint a successor custodian which satisfies the requirements of section 408(h) of the Code. Upon receipt of the Custodian of written acceptances by the successor custodian of such appointment, the Custodian shall deliver the assets of the custodial account to the successor custodian. In the event the Depositor fails to appoint a successor custodian which has accepted its appointment within 30 days of the mailing of the notice of resignation, or removal, the Custodian shall terminate the Account and pay the proceeds to the Depositor. 2. The Depositor and Custodian agree that the Sponsor of this Agreement may at any time remove the Custodian and appoint a successor custodian. The effective date of the removal and appointment shall be determined by the Custodian and the successor custodian. On or after such date the Custodian shall deliver the assets of the custodial account to the successor custodian. 3. The Sponsor will appoint another custodian upon notification from the Commissioner of the Internal Revenue Service that such substitution is required because the Custodian has failed to comply with the requirements of section 1.401-12(n) of the regulations or is not keeping such records, or making such returns or rendering such statements as are required by forms or regulations. 4. Notwithstanding the foregoing, the Custodian may reserve such assets of the custodial account as it may deem necessary for the payment of all its fees, compensation, costs and expenses and for the payment of all other liabilities which are a charge on or against the assets of the custodial account or on or against the Custodian, and where necessary for this purpose may liquidate reserved Fund Shares. Any balance of such reserve remaining after the payment of all such items shall be paid over to the successor custodian, or, if the Depositor has failed to appoint a successor custodian as provided in paragraph 1 above, to the Depositor. 5. The provisions of this Agreement shall apply to any successor custodian from the effective date of its appointment as such with the same force and effect as if such successor were the initial custodian hereunder. ARTICLE XVIII (NOTICES) 1. Any notice herein required or permitted to be given to the Custodian shall not be effective unless it is mailed to and actually received by the Custodian at the address specified in the Disclosure Statement, or such other address as the Custodian shall provide the Depositor from time to time in writing, stating that such other address shall be used for purposes of this Agreement. 2. Any notice herein required or permitted to be given to the Depositor shall be mailed to the Depositor at the Depositor's residence address given above or at such other address as he/she shall provide the Custodian from time to time in writing stating that such other address shall be used for purposes of this Agreement, and any such notice shall be deemed accepted by the Depositor at the time it is mailed. Depositor and his/her beneficiaries will be bound by the last address furnished to the Custodian by the Depositor or his/her beneficiary. ARTICLE XIX (MINIMUM WITHDRAWALS) The Depositor shall be fully and solely responsible for all taxes and penalties which might accrue or be assessed for having failed to make the annual minimum withdrawal commencing no later than April 1 following the calendar year in which he/she attains the age of 70 1/2 or for any year thereafter. ARTICLE XX (TAXES AND CHARGES TO ACCOUNT) Any income taxes or other taxes of any kind whatsoever that may be levied or assessed upon or in respect of the custodial account or the assets thereof, or the income therefrom, any transfer taxes incurred in connection with the investment and reinvestment of the assets of the custodial account, all other reasonable administrative expenses incurred by the Custodian in the performance of its duties hereunder, including fees for legal services rendered to the Custodian, and such reasonable compensation to the Custodian for its services under this Agreement as the Custodian may charge from time to time, may, in the discretion of the Custodian, be charged against and paid from the assets of the custodial account. Sufficient Fund Shares may be liquidated from the custodial account to pay any such taxes, expenses, and compensation. ARTICLE XXI (GOVERNING LAW) This Agreement and the custodial account created hereby shall be subject to the applicable laws, rules and regulations, as the same may from time to time be amended, of the Federal government and the Commonwealth of Massachusetts and the agencies and instrumentalities of each having jurisdiction thereof, and shall be governed by and construed, administered and enforced according to the law of the Commonwealth of Massachusetts. All contributions to the custodial account shall be deemed to take place in the Commonwealth of Massachusetts. ARTICLE XXII (FEES AND EXPENSES) The Custodian shall be entitled to receive and may charge against the Depositor's custodial account such reasonable compensation for its services in accordance with its fee schedule as from time to time in effect, and shall also be entitled to reimbursement of its expenses as Custodian under this Agreement. The Custodian will notify the Depositor in writing of any change in its fee schedule. 3/97 EX-99.B15 15 15 Exhibit 15 [FORM OF] FORUM FUNDS DISTRIBUTION PLAN Distribution Plan (the "Plan") of Forum Funds (the "Trust") with respect to Investor Shares of each of Daily Assets Treasury Fund, Daily Assets Cash Fund, Daily Assets Government Fund, Daily Assets Tax-Exempt Fund and Daily Assets Treasury Obligations Fund (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; ADVISER The Trust has entered into a Distribution Agreement with Forum Financial Services, Inc. (the "Distributor") whereby the Distributor acts as principal underwriter of the Fund's shares (the "Shares"), and has entered into an investment advisory agreement with Forum Advisors, Inc. (the "Adviser") whereby the Adviser acts as investment adviser to the Funds, each in a form satisfactory to the Trust's Board of Trustees (the "Board"). SECTION 2. DISTRIBUTION EXPENSES The Trust may reimburse the Distributor for the distribution expenses incurred by the Distributor on behalf of the Funds of up to 0.15% per annum of the Funds'average daily net assets in accordance with the following: (a) On behalf of the Funds, the Distributor may incur expenses for any distribution-related purpose it deems necessary or appropriate, including: (i) the incremental costs of printing (excluding typesetting) prospectuses, statements of additional information, annual reports and other periodic reports for use in connection with the offering or sale of Shares, to any prospective investor, (ii) preparing, printing and distributing any other literature used by the Distributor in connection with the offering of Shares for sale to the public and the cost of administering the program, compensation to and expenses (including overhead and telephone) of employees of the Distributor who engage in sales support and distribution activities, (iii) compensating other persons for providing assistance in distributing the Shares and (iv) reimbursement to the Adviser of the Adviser's distribution-related expenses, including expenses of employees of the Adviser who train or educate others with respect to the Funds and the investment techniques employed to achieve the Funds' investment objective. (b) The schedule of such reimbursements and the basis upon which they will be paid shall be determined from time to time by the Board. Unreimbursed expenses of the Distributor incurred during a fiscal year of the Trust may not be reimbursed by the Trust in subsequent fiscal years. SECTION 3. REVIEW AND RECORDS (a) The Trust and the Distributor 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 the Distributor 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 4. EFFECTIVENESS; DURATION; AND TERMINATION (a) The Plan shall become effective upon approval by (i) a vote of at least a majority of the outstanding voting securities of the Funds 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. (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 Funds. SECTION 5. 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 shall be effective only upon the additional approval a majority of the outstanding voting securities of the Funds. SECTION 6. NOMINATION OF DISINTERESTED TRUSTEES While the Plan is in effect, the selection and nomination of the Trustees of the Trust who are not interested persons of the Trust shall be committed to the discretion of the Trustees of the Trust who are not interested persons of the Trust. SECTION 7. 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. EX-27.1 16 FDS
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORUM FUNDS SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT. 0000315774 FORUM FUNDS 019 DAILY ASSETS CASH FUND 6-MOS AUG-31-1998 SEP-01-1997 FEB-28-1998 13,354,954 13,354,954 0 0 0 13,354,954 0 0 51,200 51,200 0 13,303,659 13,303,659 12,076,074 0 0 95 0 0 13,303,754 0 321,454 (8,283) 18,127 295,044 95 0 295,139 0 295,044 0 0 14,683,100 13,471,728 16,213 1,277,680 0 0 0 0 0 0 42,133 11,381,861 1.00 .03 0 0 .03 0 1.00 .47 0 0
EX-27.2 17 FDS
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORUM FUNDS SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT. 0000315774 FORUM FUNDS 027 DAILY ASSETS GOVERNMENT FUND 1-MO AUG-31-1998 JAN-30-1998 FEB-28-1998 4,971,871 4,971,871 0 6,568 0 4,978,439 0 0 26,117 26,117 0 4,952,322 4,952,322 0 0 0 0 0 0 4,952,322 0 21,189 (516) 222 20,451 0 0 20,451 0 20,451 0 0 5,493,736 541,414 0 4,952,322 0 0 0 0 0 0 4,394 4,476,935 1.00 .01 0 0 .01 0 1.00 .20 0 0
EX-27.3 18 FDS
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORUM FUNDS SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT. 0000315774 FORUM FUNDS 012 DAILY ASSETS TREASURY FUND 6-MOS AUG-31-1998 SEP-01-1997 FEB-28-1998 46,711,843 46,711,843 0 0 0 46,711,843 0 0 193,041 193,041 0 46,517,664 46,517,664 44,094,527 19,454 0 (18,316) 0 0 46,518,802 0 1,145,480 (31,958) 68,772 1,044,750 (20,126) 0 1,024,624 0 1,044,750 0 0 71,713,517 69,387,765 97,385 2,403,011 19,454 1,810 0 0 0 0 102,672 43,365,418 1.00 .02 0 0 .02 0 1.00 .47 0 0
EX-27.4 19 FDS
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORUM FUNDS SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT. 0000315774 FORUM FUNDS 026 DAILY ASSETS TREASURY OBLIGATION FUND 1-MO AUG-31-1998 NOV-26-1997 JAN-22-1998 61,193,009 61,193,009 0 4,950 0 61,197,959 0 0 270,996 270,996 0 60,926,092 60,926,092 0 0 0 871 0 0 60,926,963 0 360,197 (9,831) 3,263 347,103 871 0 347,974 0 347,103 0 0 80,339,501 19,413,109 0 60,926,963 0 0 0 0 0 0 11,966 62,660,299 1.00 .01 0 0 .01 0 1.00 .20 0 0
EX-99 20 RULE 18F-3 Exhibit 18 FORUM FUNDS MULTICLASS (RULE 18F-3) PLAN December 5, 1997 As Amended May 19, 1998 This Plan is adopted by Forum 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 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: "Institutional Shares," "Institutional Service Shares" and "Investor Shares." Each Class has a different arrangement for shareholder services or distribution or both, as follows: (a) INSTITUTIONAL SHARES. Are offered with no sales charges or distribution expenses. The investment minimum is $1,000,000. -------------------- (b) INSTITUTIONAL SERVICE SHARES. Are offered with no sales charges or distribution expenses, but are subject to a shareholder service plan. The investment minimum is $100,000. (c) INVESTOR SHARES. Are offered with no sales charges but are subject to a distribution plan adopted in accordance with Rule 12b-1 under the Act and a shareholder service plan. The investment minimum is $10,000 (subject to certain reductions for investment through an Individual Retirement Account or through exchanges of shares as described in the applicable prospectus). 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. CLASS EXPENSE ALLOCATIONS (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 or other filing 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 Administrative Services, LLC ("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 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) SETTLED SHARES METHOD 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. (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 advisory or custody agreements. SECTION 5. EXCHANGE PRIVILEGES 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 after consultation with the applicable Fund's investment adviser. (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). FORUM FUNDS MULTICLASS (RULE 18F-3) PLAN APPENDIX A: FUNDS AND EXCHANGE PRIVILEGES as of May 19, 1998 - ----------------------------------- ---------------------------------------- ---------------------------------------- Class Fund(a) Exchange Privileges(b) ---------------------------------------- ---------------------------------------- - ----------------------------------- ---------------------------------------- ---------------------------------------- Institutional Shares Daily Assets Government Fund None ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- Other Money Funds None ---------------------------------------- ---------------------------------------- - ----------------------------------- ---------------------------------------- ---------------------------------------- Institutional Service Shares Daily Assets Government Fund Institutional Shares of each series of The CRM Funds(c) Institutional Shares of each series of Memorial Funds(c) ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- Other Money Funds None ---------------------------------------- ---------------------------------------- - ----------------------------------- ---------------------------------------- ---------------------------------------- Investor Shares Daily Assets Government Fund Each series of the Trust other than the Funds Each series of Sound Shore Fund,Inc. (c) Each series of The Cutler Trust(c) Investor Shares of each series of The CRM Funds(c) Institutional Shares of each series of Memorial Funds(c) ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- Other Money Funds Each series of the Trust other than the Funds - ----------------------------------- ---------------------------------------- ----------------------------------------
(a) Other Money Funds are: (i) Daily Assets Treasury Obligations Fund, (ii) Daily Assets Government Obligations Fund, (iii) Daily Assets Cash Fund and (iv) Daily Assets Municipal Fund. (b) Shareholders of a Class also may exchange their shares for shares of the same Class of any another Fund. (c) While shareholders of the funds that are not series of the Trust may exchange into the Fund indicated, shareholders of the 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 Fund. -----END PRIVACY-ENHANCED MESSAGE-----