Doc. #338577 v.08
Doc. #338577 v.08
File No.
33-_______
As filed with the SEC on August __, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
(Check appropriate box or boxes)
STRATEVEST FUNDS
(Exact Name of Registrant as Specified in Charter)
1-800-245-0242
(Area Code and Telephone Number)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices --
Number, Street, City, State, Zip Code)
C. Todd Gibson, Esquire
Federated Services Company
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Name and Address of Agent for Service --
Number, Street, City, State, Zip Code)
Copies to:
Bruce G. Leto, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended.
It is proposed that this filing will become effective on September __, 2000,
pursuant to Rule 488.
Title of Securities Being Registered - Shares of beneficial interest
of Stratevest Intermediate Bond Fund
No filing fee is due because Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended.
36
Doc. #338577 v.08
IMPORTANT NOTICE: PLEASE COMPLETE THE ENCLOSED PROXY
BALLOT AND RETURN IT AS SOON AS POSSIBLE.
FORUM FUNDS
INVESTORS HIGH GRADE BOND FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
September __, 2000
Dear Valued Shareholder:
Enclosed is a Notice of Special Meeting of Shareholders (the
"Special Meeting"). The Special Meeting has been scheduled for November 3,
2000 at 10:00 a.m. (Eastern time), at the offices of Forum Fund Services,
LLC, Two Portland Square, Portland, Maine 04101. The accompanying
Prospectus/Proxy Statement describes a proposal being presented for your
consideration and requests your prompt attention and vote via the enclosed
proxy card.
The Special Meeting is critically important as you are being
asked to consider and approve an Agreement and Plan of Reorganization that
would provide for the acquisition of all the assets and assumption of the
liabilities of the Investors High Grade Bond Fund (the "Forum Portfolio"), a
series of Forum Funds ("Forum Funds"), in exchange for the shares of
beneficial interest of the Stratevest Intermediate Bond Fund (the "Stratevest
Fund"), a series of Stratevest Funds (the "Trust"). The Stratevest Fund is a
mutual fund that is comparable to the Forum Portfolio, and is managed by The
Stratevest Group, N.A. (the "Stratevest Adviser"). On the date of the
exchange, you will receive shares of the Stratevest Fund equal in value to
your investment in the Forum Portfolio. After the reorganization transaction
(the "Reorganization"), shareholders of the Forum Portfolio will become
shareholders of the Stratevest Fund.
The proposed reorganization is intended to be a tax-free
reorganization, which means that you will not have a taxable gain or loss on
the exchange of your shares in the Forum Portfolio.
SHAREHOLDERS OF THE FORUM PORTFOLIO WILL NOT BEAR ANY EXPENSES OF
THE REORGANIZATION. THE STRATEVEST ADVISER AND/OR ITS AFFILIATES AND/OR
SUBSIDIARIES AND OTHER PARTIES HAVE AGREED TO PAY ALL EXPENSES OF THE
REORGANIZATION.
THE BOARD OF TRUSTEES OF FORUM FUNDS HAS UNANIMOUSLY APPROVED THE
REORGANIZATION AND BELIEVES THAT IT IS IN THE BEST INTERESTS OF SHAREHOLDERS
OF THE FORUM PORTFOLIO. THE BOARD OF TRUSTEES OF FORUM FUNDS RECOMMENDS THAT
YOU APPROVE THE REORGANIZATION BY VOTING YOUR PROXY.
The anticipated benefits of the Reorganization are:
the asset size of the Stratevest Fund is expected to
be larger than the current asset size of the Forum Portfolio
(if the unitholders of various common and collective funds
authorize a conversion to the Stratevest Fund prior to the
Reorganization), thus creating an opportunity for the
Reorganization to result in greater investment leverage and
market presence;
shareholders will be able to choose from a wider
array of additional investment options, both among other
series of the Trust and other investment companies that are
managed and/or distributed by Federated Investors, Inc. or its
affiliates, and will be able to exchange into these other
investment options without incurring any transaction costs; and
the Reorganization may result in certain economies of
scale and operating efficiencies, which could ultimately
translate into lower expense ratios and enhanced returns for
shareholders.
Please read the enclosed proxy materials and consider the
information provided. We encourage you to complete and mail your proxy card
promptly. No postage is necessary if you mail it in the United States.
Very truly yours,
John Y. Keffer
President
Forum Funds
PRELIMINARY COPY
FORUM FUNDS
INVESTORS HIGH GRADE BOND FUND
Two Portland Square
Portland, Maine 04101
September __, 2000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR NOVEMBER 3, 2000
To the Shareholders of Investors High Grade Bond Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
(the "Special Meeting") of the Investors High Grade Bond Fund (the "Forum
Portfolio") of Forum Funds ("Forum Funds") will be held at the offices of
Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine 04101,
on November 3, 2000, at 10:00 a.m. (Eastern time), to consider the following:
1. An Agreement and Plan of Reorganization (the "Plan") between
Forum Funds, on behalf of the Forum Portfolio, and Stratevest
Funds (the "Trust"), on behalf of its series, the Stratevest
Intermediate Bond Fund (the "Stratevest Fund"), that provides for
the acquisition of all of the assets and assumption of the
liabilities of the Forum Portfolio in exchange for the shares of
beneficial interest of the Stratevest Fund, the distribution of
such shares to the shareholders of the Forum Portfolio, and the
termination of the Forum Portfolio.
2. Any other business that properly comes before the Special Meeting.
The attached Prospectus/Proxy Statement provides more information
concerning this transaction, and a copy of the Plan is attached as Exhibit A.
Shareholders of record as of the close of business on
, 2000, are entitled to notice of and to vote at the Special Meeting and any
related follow-up meetings.
By Order of the Board of Trustees,
Leslie K. Klenk
Secretary
Forum Funds
September __, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY
CARD (VOTING INSTRUCTION CARD).
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES YOU
OWNED ON THE RECORD DATE.
Prospectus and Proxy Statement
TABLE OF CONTENTS
Page
Cover Page...............................................................Cover
Summary..................................................................
What proposal am I voting on?......................................
How will the shareholder voting be handled?........................
Comparisons of Some Important Features...................................
How do the investment objectives, strategies and policies of the
Stratevest
Fund and the Forum Portfolio compare?........................
What are the risks of investments in the Stratevest Fund and the
Forum Portfolio?.............................................
How are the Trust and Forum Funds organized?.......................
Who manages the Stratevest Fund and the Forum Portfolio?...........
What are the fees and expenses the Stratevest Fund and the Forum
Portfolio, and what might they be after the Reorganization?..
Where can I find more financial information about the Forum Portfolio?
What are other key features of the Stratevest Fund and the
Forum Portfolio?.............................................
Reasons for the Reorganization...........................................
Information about the Reorganization.....................................
How will the Reorganization be carried out?........................
Who will pay the expenses of the Reorganization?...................
What are the tax consequences of the Reorganization?...............
What should I know about the shares of the Stratevest Fund?........
What are the capitalizations of the Stratevest Fund and the Forum
Portfolio, and what might the capitalization be after
the Reorganization?..........................................
Comparison of Investment Objectives, Strategies and Policies.............
Are there any significant differences between the investment objectives
and strategies of the Stratevest Fund and the Forum Portfolio?
How do the fundamental investment restrictions of the Stratevest
Fund and the Forum Portfolio differ?.........................
What are the risk factors associated with investments in the Stratevest
Fund and the Forum Portfolio?................................
Voting Information.......................................................
How many votes are necessary to approve the Plan?..................
How do I ensure my vote is accurately recorded?....................
Can I revoke my proxy?.............................................
What other matters will be voted upon at the Special Meeting?......
Who is entitled to vote?...........................................
What other solicitations will be made?.............................
Are there dissenters' rights?......................................
Other Information
Who are the principal holders of shares of the Forum Portfolio?....
What are the tax implications of investing in the Stratevest Fund
and the Forum Portfolio?.....................................
Information about the Stratevest Fund....................................
Information about the Forum Portfolio....................................
Exhibits to the Prospectus and Proxy Statement
Exhibit A - Agreement and Plan of Reorganization................... A-1
PROSPECTUS AND PROXY STATEMENT
Dated September __, 2000
Acquisition of the Assets of the
INVESTORS HIGH GRADE BOND FUND
a series of
FORUM FUNDS
Two Portland Square
Portland, Maine 04101
(800) 943-6786
By and in exchange for
shares of beneficial interest of the
STRATEVEST INTERMEDIATE BOND FUND
a series of
STRATEVEST FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
1-800-245-0242
This Prospectus/Proxy Statement solicits proxies to be voted at a
Special Meeting of Shareholders (the "Special Meeting") of the Investors High
Grade Bond Fund (the "Forum Portfolio"), a series of Forum Funds ("Forum
Funds"), to approve or disapprove an Agreement and Plan of Reorganization
(the "Plan"). The Plan provides for the acquisition of all the assets and
the assumption of the liabilities of the Forum Portfolio in exchange for the
shares of beneficial interest of the Stratevest Intermediate Bond Fund (the
"Stratevest Fund"), a series of Stratevest Funds (the "Trust").
If shareholders of the Forum Portfolio vote to approve the Plan, you
will receive shares of beneficial interest of the Stratevest Fund equal in
value to your investment in shares of the Forum Portfolio. The Forum
Portfolio will then be terminated and dissolved.
The Special Meeting will be held at the offices of Forum Shareholder
Services, LLC, Two Portland Square, Portland, Maine 04101, on November 3,
2000, at 10:00 a.m. (Eastern time). The Board of Trustees of Forum Funds, on
behalf of the Forum Portfolio, is soliciting these proxies. This
Prospectus/Proxy Statement will first be sent to shareholders on or about
September __, 2000.
The investment objectives of the Stratevest Fund and the Forum
Portfolio are similar, but not identical. The Stratevest Fund's investment
objective is to provide current income. The Forum Portfolio's investment
objective is to seek a high level of current income consistent with capital
preservation and prudent investment risk. Differences between the Stratevest
Fund and the Forum Portfolio include (i) the permissible maturities of the
securities in which the Stratevest Fund and Forum Portfolio may invest, (ii)
the level of anticipated investment in U.S. government securities, and (iii)
the investment styles that are used by The Stratevest Group, N.A., the
Stratevest Fund's investment adviser (the "Stratevest Adviser"), and Forum
Investment Advisors, LLC, the Forum Portfolio's investment adviser (the
"Forum Adviser"), to manage the Stratevest Fund and the Forum Portfolio,
respectively.
This Prospectus/Proxy Statement gives the information about the
proposed reorganization and the Stratevest Fund that you should know before
investing. You should retain it for future reference. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Stratevest Fund, dated
September __, 2000 has been filed with the Securities and Exchange Commission
and is incorporated by reference into this Prospectus/Proxy Statement.
Statements of Additional Information for the Stratevest Fund, dated September
__, 2000 (relating to the Stratevest Fund's Prospectus of the same date) and
September __, 2000 (relating to this Prospectus/Proxy Statement), each
containing additional information, have been filed with the Securities and
Exchange Commission (the "SEC") and are incorporated by reference into this
Prospectus/Proxy Statement. You may request a free copy of the Statements of
Additional Information without charge by calling 1-800-245-0242 or by writing
to Stratevest Funds at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000.
A prospectus (dated August 1, 2000) and a statement of additional
information (dated August 1, 2000), relating to the Forum Portfolio, are on
file with the SEC (File Nos. 2-67052; 811-3023). Forum Funds' annual report,
dated March 31, 2000, relating to the Forum Portfolio, is also on file with
the SEC. Each of these documents is incorporated by reference into this
Prospectus/Proxy Statement. You may request a free copy of the prospectus,
the statement of additional information and the annual report of the Forum
Portfolio by writing or calling Forum Shareholder Services, LLC, P.O. Box
446, Portland, Maine 04112, (207) 879-0001 or (800) 943-6786.
The SEC has not approved or disapproved these securities or passed upon
the adequacy of this Prospectus/Proxy Statement. Any representation to the
contrary is a criminal offense.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other U.S. government agency.
Mutual fund shares involve investment risks, including the possible loss of
principal.
SUMMARY
This is only a summary of certain information contained in this
Prospectus/Proxy Statement. You should read the more complete information in
the rest of this Prospectus/Proxy Statement, including the Plan (attached as
Exhibit A) and the Prospectus of the Stratevest Fund, dated September __,
2000.
The Stratevest Group, N.A. (the "Stratevest Adviser") is seeking
consent from unitholders of certain common trust funds and collective
investment funds (collectively, the "CTFs") to convert the CTFs into the
Stratevest Fund prior to the Reorganization. The approximate aggregate value
of the assets of the CTFs is $150 million.
What proposal am I voting on?
At a meeting held in September 2000, the Board of Trustees of Forum
Funds, on behalf of the Forum Portfolio, approved the Plan and determined to
recommend that shareholders of the Forum Portfolio vote to approve the Plan.
If the shareholders of the Forum Portfolio vote to approve the Plan, it will
result in the transfer of the assets and liabilities of the Forum Portfolio
to the Stratevest Fund, in exchange for an equal value of shares of
beneficial interest of the Stratevest Fund. The shares of the Stratevest
Fund will then be distributed to the Forum Portfolio shareholders and the
Forum Portfolio will be terminated and dissolved. (The proposed transaction
is referred to in this Prospectus/Proxy Statement as the "Reorganization.")
As a result of the Reorganization, you will cease to be a shareholder of the
Forum Portfolio and will become a shareholder of the Stratevest Fund. This
exchange will occur on the closing date, which is the specific date on which
the Reorganization takes place. You will receive shares of the Stratevest
Fund equal in value to your investment in shares of the Forum Portfolio.
The Stratevest Fund is a series of Stratevest Funds (the "Trust"), an
investment company that is advised by the Stratevest Adviser. The Stratevest
Fund has an investment objective and investment policies that are similar,
but not identical, to those of the Forum Portfolio. For the reasons set
forth in the "Reasons for the Reorganization" section, the Board of Trustees
of Forum Funds, on behalf of the Forum Portfolio, has determined that the
Reorganization is in the best interests of the shareholders of the Forum
Portfolio. The Board of Trustees of Forum Funds has concluded that no
dilution in value would result to the shareholders of the Forum Portfolio as
a result of the Reorganization. Similarly, the Trust's Board of Trustees has
concluded that no dilution in value would result to the shareholders of the
Stratevest Fund as a result of the Reorganization.
The Stratevest Fund and the Forum Portfolio expect to receive an
opinion from Stradley, Ronon, Stevens & Young, LLP to the effect that the
Reorganization will qualify for federal income tax purposes as a tax-free
reorganization. If so, the shareholders of the Forum Portfolio will not
recognize any gain or loss for federal income tax purposes as a result of the
exchange of their shares of the Forum Portfolio for shares of the Stratevest
Fund, and neither the Stratevest Fund nor the Forum Portfolio will recognize
any gain or loss upon the exchange of substantially all of the assets and
liabilities of the Forum Portfolio for shares of the Stratevest Fund.
THE BOARD OF TRUSTEES OF FORUM FUNDS RECOMMENDS THAT YOU
VOTE TO APPROVE THE PLAN
This Prospectus/Proxy Statement compares the key features and discusses
the material differences between the Stratevest Fund and the Forum
Portfolio. You should pay particular attention to these comparisons. You
should carefully consider the differences between the Stratevest Fund and the
Forum Portfolio in deciding whether or not to approve the Plan.
How will the shareholder voting be handled?
Shareholders who own shares of the Forum Portfolio at the close of
business on ______ ___, 2000 will be entitled to vote at the Special Meeting,
and will be entitled to one vote for each full share and a fractional vote
for each fractional share that they hold. To approve the Reorganization, a
majority of the shares of the Forum Portfolio outstanding and entitled to
vote must be voted in favor of the Plan.
Please vote by proxy as soon as you receive this Prospectus/Proxy
Statement. You may place your vote by completing and signing the enclosed
proxy card and mailing it. If you vote by proxy, your votes will be
officially cast at the Special Meeting by the persons appointed as proxies.
You can revoke your proxy or change your voting instructions at any
time until the vote is taken at the Special Meeting. For more details about
shareholder voting, see the "Voting Information" section of this
Prospectus/Proxy Statement.
COMPARISONS OF SOME IMPORTANT FEATURES
How do the investment objectives, strategies and policies of the Stratevest
Fund and the Forum Portfolio compare?
The investment objectives of the Stratevest Fund and the Forum
Portfolio are similar. The investment objective of the Stratevest Fund is to
provide current income. The Forum Portfolio's investment objective is to
seek a high level of current income consistent with capital preservation and
prudent investment risk. The investment objectives of the Stratevest Fund
and the Forum Portfolio are fundamental, and cannot be changed without
shareholder approval.
The principal differences in the investment strategies and the
investment policies of the Stratevest Fund and the Forum Portfolio include
(i) the permissible maturities of the securities in which the Stratevest Fund
and Forum Portfolio may invest, (ii) the level of anticipated investment in
U.S. government securities, and (iii) the investment styles that are used by
the Stratevest Adviser and the Forum Adviser, to manage the Stratevest Fund
and the Forum Portfolio, respectively.
The Forum Portfolio seeks to achieve its investment objective by
investing primarily in U.S. Government securities and debt securities rated
in one of the three highest rating categories by a nationally recognized
statistical ratings organization ("NRSRO"). Consistent with this investment
strategy, the Forum Portfolio normally invests at least 70% of its total
assets in U.S. Government securities and at least 40% of those assets in
obligations of the U.S. Treasury such as Treasury bonds, bills, and notes.
The Forum Portfolio limits investments in securities with maturities of
greater than ten years to no more than 25% of its total assets and generally
the average weighted maturity of the Portfolio's portfolio securities is
seven years or less.
Similarly, the Stratevest Fund pursues its investment objective by
investing primarily in high-quality corporate bonds and securities issued by
the U.S. Government, its agencies and instrumentalities. High-quality
securities are rated in one of the top three rating categories by an NRSRO or
securities that are unrated but are determined by the Stratevest Adviser to
be of comparable quality. The Stratevest Fund may also invest its assets in
mortgage-backed and asset-backed securities. While the Stratevest Fund is
permitted to invest in U.S. Government securities, it is not subject to any
stated percentage policy for investing in such securities. Generally, the
Stratevest Fund's average weighted maturity will be three to ten years.
Unlike the Forum Portfolio, the Stratevest Fund does not have any percentage
limitation for the amount of fund assets that may be invested in securities
with certain maturities.
The Stratevest Adviser's strategy in managing the Stratevest Fund is to
adjust the Fund's weightings in those types of fixed income securities which,
in the Stratevest Adviser's opinion, will create the best opportunity for
current income. The Stratevest Adviser uses macroeconomic, credit and market
analysis to select portfolio securities.
Similarly, the Forum Adviser's strategy in managing the Forum Portfolio
is to continuously monitor economic factors, such as interest rate outlooks,
and technical factors, such as the shape of the yield curve, in combination
with the Forum Portfolio's stated objective to determine an appropriate
maturity profile for its investment portfolio. The Forum Adviser then
principally searches for securities that satisfy the maturity profile of the
Forum Portfolio and that provide the greatest potential for return relative
to the risk of the security.
For more information about the investment objectives and policies of
the Stratevest Fund and the Forum Portfolio, and the investment styles
utilized by the Stratevest Adviser and the Forum Adviser, please see the
section "Comparison of Investment Objectives, Strategies and Policies."
What are the risks of investments in the Stratevest Fund and the Forum
Portfolio?
Investments in the Stratevest Fund and the Forum Portfolio involve
risks common to most mutual funds - the net asset value and total return of
each of the Stratevest Fund and the Forum Portfolio will depend upon changes
in the value of, and income produced by, their portfolio securities. There
is no guarantee against losses resulting from an investment in the Stratevest
Fund or the Forum Portfolio, nor that either the Stratevest Fund or the Forum
Portfolio will achieve its investment objective. An investment in the
Stratevest Fund or the Forum Portfolio is not by itself a complete or
balanced investment program.
The Stratevest Fund and the Forum Portfolio are subject to the risks
presented by investing in fixed income securities. For example, prices of
fixed income securities fall when interest rates rise. A decline in interest
rates may have a negative effect on the securities owned by the Stratevest
Fund and the Forum Portfolio. Also, when investing in fixed income
securities, the Stratevest Fund and the Forum Portfolio are subject to the
risk that an issuer may default on a security. Consequently, the Stratevest
Fund and the Forum Portfolio may not be able to collect interest and
principal on investments in fixed income securities subject to default by
issuers. Both the Stratevest Fund and Forum Portfolio invest in
mortgage-backed securities, and are therefore subject to the risk that the
prepayment of principal on these securities may have a negative impact on
their investment portfolios. Additionally, the Stratevest Fund and the Forum
Portfolio are subject to the risk that their respective advisers may make
poor investment decisions.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other U.S. government agency.
Mutual fund shares involve investment risks, including the possible loss of
principal.
For more information about the risks of the Stratevest Fund and the
Forum Portfolio, see the section "What are the risk factors associated with
investments in the Stratevest Fund and the Forum Portfolio?" under the
heading "Comparison of Investment Objectives, Strategies and Policies."
How are the Trust and Forum Funds organized?
The Trust was organized as a Delaware business trust on July 10, 2000,
and is registered with the SEC. The Trust is authorized to issue an
unlimited number of shares of beneficial interest. Presently, there are six
separate series of the Trust (each a "Trust Series"), including the
Stratevest Fund. The Stratevest Fund has not had investment operations prior
to the date of this Prospectus/Proxy Statement.
Forum Funds is also organized as a Delaware business trust. Forum
Funds commenced operations on March 24, 1980, as a Maryland corporation, and
was reorganized as a Delaware business trust on January 5, 1996. Forum Funds
is authorized to issue an unlimited number of shares of beneficial interest.
Presently, there are twenty separate series of Forum Funds (each a "Forum
Series"), including the Forum Portfolio. The Forum Portfolio commenced
investment operations in 1998.
The management of the business and affairs of the Stratevest Fund is
the responsibility of the Board of Trustees of the Trust. The management of
the business and affairs of the Forum Portfolio is the responsibility of the
Board of Trustees of Forum Funds. The Board of Trustees of the Trust and the
Board of Trustees of Forum Funds formulate the general policies of the
Stratevest Fund and the Forum Portfolio, respectively. The Boards of
Trustees meet periodically to review the performance, investment activity and
investment practices of the Stratevest Fund and the Forum Portfolio, as
applicable. Both the Stratevest Fund and the Forum Portfolio are open-end,
registered management investment company series, commonly referred to as
"mutual funds."
Who manages the Stratevest Fund and the Forum Portfolio?
The Stratevest Adviser is the investment adviser to the Stratevest
Fund. The Stratevest Adviser is a national banking association and is a
wholly-owned subsidiary of Banknorth Group, a New England based holding
company. The Stratevest Adviser and its affiliates have provided wealth
management services to individuals and institutional investors since 1966.
As of May 31, 2000, the Stratevest Adviser had approximately $8 billion in
assets under management. The address of the Stratevest Adviser is 111 Main
Street, Burlington, Vermont. The Stratevest Adviser has managed the
Stratevest Fund since its inception. The Stratevest Adviser has previously
served as investment adviser to one other investment company.
The Stratevest Fund is co-managed by William S. Wolff and Carol Smith.
Mr. Wolff is a Managing Director and Senior Vice President of Investments of
the Stratevest Adviser, and has been employed by the Stratevest Adviser
and/or its predecessors since 1970. Mr. Wolff's 28 years of investment
experience includes management of pooled investment vehicles (such as common
and collective trust funds) with a variety of investment styles, including
value investing, large, mid and small cap investing, and fixed income
management. He earned a B.S. degree from the University of Vermont and a
CTFA designation. Ms. Smith is a Vice President and Investment Consultant
and has been employed by the Stratevest Adviser and/or its predecessors since
1983. Ms. Smith's banking and economic experience include 17 years of
investment management. She earned a B.S. in Business Administration from the
University of Vermont and is a graduate of the New York Bankers Investment
School.
Once the Stratevest Fund commences operations, the Stratevest Adviser
will receive an investment advisory fee equal on an annual basis to 0.60% of
the Stratevest Fund's average daily net assets. The Stratevest Adviser may
voluntarily reduce its fee or reimburse the Stratevest Fund for certain
operating expenses.
Forum Investment Advisors, LLC, Two Portland Square, Portland, Maine
04101, is the investment adviser to the Forum Portfolio. The Forum Adviser
is a privately-owned company controlled by John Y. Keffer, who is Chairman of
the Board of Trustees and President of Forum Funds. As of June 30, 2000, the
Forum Adviser had approximately $3.3 billion of assets under management. The
Forum Adviser has managed the Forum Portfolio since its inception.
The individual responsible for the day-to-day management of the Forum
Portfolio's investments is Les C. Berthy. Mr. Berthy, a Senior Portfolio
Manager of the Forum Adviser, has been primarily responsible for the
day-to-day management of the Forum Portfolio since its inception. Mr. Berthy
has over 28 years of experience in the investment industry and, prior to his
association with the Forum Adviser in January 1991, was Managing Director and
Co-Chief Executive Officer of Irwin Union Capital Corp., an affiliate of
Irwin Union Bank & Trust Co.
The Forum Adviser receives an advisory fee at an annual rate of 0.40%
of the average daily net assets of the Forum Portfolio. On August 1, 2000,
the Forum Adviser and certain other service providers entered into an
agreement to waive fees and reimburse fund expenses to maintain the expense
ratio at 0.95% of the Forum Portfolio's average daily net assets. For the
fiscal year ended March 31, 2000, the Forum Adviser contractually waived a
portion of its fee and received 0.27% of the average daily net assets of the
Forum Portfolio. This contractual waiver agreement entered into by the Forum
Adviser and certain other service providers to the Forum Portfolio expired on
July 31, 2000.
What are the fees and expenses of the Stratevest Fund and the Forum Portfolio
and what might they be after the Reorganization?
The following table describes the various fees and expenses that you
will bear from an investment in the Forum Portfolio or the Stratevest Fund.
PRO FORMA FEE TABLE FOR THE FORUM PORTFOLIO AND
THE STRATEVEST FUND
As of March 31, 2000
(Unaudited)
Actual Pro Forma
Stratevest After
Forum Portfolio Fund3 Reorganization4
Shareholder Fees (fees paid
directly from your investment)
Maximum Sales Charge (Load) 3.75% None 3.75%
Imposed on Purchases (as a
percentage of the offering
price)
Maximum Sales Charge (Load) None None None
Imposed on Reinvested
Dividends (as a percentage of
the amount redeemed)
Maximum Deferred Sales Charge 1.00%1 None None
(as a percentage of amount
redeemed)
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
(as percentage of average net
assets at March 31, 2000):
Management Fees................... 0.40% None 0.60%
Distribution (12b-1) Fees......... None None 0.25%
Shareholder Services Fee.......... None None 0.25%
Other Expenses ................... 0.74% None 0.69%
Total Annual Fund Operating
Expenses ...................... 1.14% None 1.79%
Fee Waiver........................ 0.19%2 None 0.42%5
Net Expense....................... 0.95% None 1.37%6
1 Applicable only on purchases of $1 million or more.
2 Based on certain contractual fee waivers and expense reimbursements
effective through July 31, 2001.
3 The Stratevest Fund has not yet engaged in any activity and has no assets
or expenses.
4 Pro forma amounts based on combined net assets of the Forum Portfolio and
the Stratevest Fund as if the Reorganization had occurred on March 31,
2000.
5 Based on certain contractual fee waivers and expense reimbursements
effective through ____________. These waivers may not be reduced or
eliminated for a period of one year from the effective date of the
Reorganization and may be reduced or eliminated thereafter only with the
approval of the Board of Trustees of the Stratevest Funds.
6 It is expected that assets from certain collective and common trust funds
will merge into the Stratevest Fund at the end of September 2000. Based on
these additional assets, the total and net expense ratios for the
Stratevest Fund are approximately 1.39% and 1.09% of the Stratevest Fund's
average net assets, respectively.
Examples:
The following are hypothetical examples intended to help you compare
the cost of investing in the Stratevest Fund and the Forum Portfolio. This
example assumes that you invest $10,000 in the Stratevest Fund and the Forum
Portfolio for the time periods indicated, you pay the maximum sales charge
and then redeem all of your shares at the end of those periods. The examples
also assume that your investment has a 5% annual rate of return, that the
Stratevest Fund's and the Forum Portfolio's operating expenses remain the
same as stated in the above tables and that all dividends and distributions
are reinvested.
Although your actual costs may be higher or lower, under these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Forum Portfolio $444 $590 $750 $1,213
Stratevest Fund $482 $851 $1,244 $2,343
(After proposed
Reorganization)
This is just an example. It does not represent past or future expenses
or returns. Each of the Stratevest Fund and the Forum Portfolio pays its
operating expenses. The effects of these expenses are reflected in the net
asset value and are not directly charged to your account.
The expenses of each of the Stratevest Fund and the Forum Portfolio are
comprised of expenses attributable to the Fund or Forum Portfolio,
respectively, as well as expenses not attributable to any particular Trust
Series or Forum Series that are allocated among the various Trust Series or
Forum Series.
Certain service providers contractually undertook, through July 31,
2000, to reduce a portion of their fees and/or reimburse certain expenses of
the Forum Portfolio in order to limit the Forum Portfolio's expenses
(excluding taxes, interest, portfolio transaction expenses and extraordinary
expenses) to 0.70% or less of the average daily net assets of the Forum
Portfolio. On August 1, 2000, certain service providers for the Forum
Portfolio entered into an agreement to waive fees and reimburse fund expenses
to maintain the expense ratio of the Forum Portfolio at 0.95% of the Forum
Portfolio's average daily net assets until July 31, 2001. Without such
adjustments, the total annual operating expenses for the Forum Portfolio
would have been 1.14%. Any fee reduction or expense reimbursement has the
effect of increasing the Forum Portfolio's performance for the period during
which the reduction or reimbursement was in effect and may not be recouped at
a later date. There is no assurance that these fee waivers and expense
reimbursements would continue after July 31, 2001.
For the fiscal year ending August 31, 2001, the estimated annualized
ratio of operating expenses to average net assets for the Stratevest Fund is
1.37%. Assuming that certain collective and common trust fund assets merge
into the Stratevest Fund at the end of September 2000, the estimated total
and net operating expenses of the Stratevest Fund will be 1.39% and 1.09%,
respectively, of the Stratevest Fund's average daily net assets.
Where can I find more financial information about the Forum Portfolio?
For the Forum Portfolio, per share income information since the
Portfolio's commencement of operations is shown under the heading "Financial
Highlights" in the current annual report to shareholders of the Forum
Portfolio. The annual report also contains a discussion of the Forum
Portfolio's performance during the fiscal year ended March 31, 2000. You may
request a free copy of the annual report by calling 800-943-6786.
What are other key features of the Stratevest Fund and the Forum Portfolio?
Administrative and Shareholder Services. Federated Services Company
("FSC") provides administrative services to the Trust, including the
Stratevest Fund, under a services agreement. The services furnished include
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust Series. Under the
services agreement with the Trust, FSC provides these services at the
following annual rates of the average aggregate daily net assets of the
Trust: 0.150 of 1% on the first $500 million; 0.125 of 1% on the next $500
million; 0.110 of 1% on the next $1 billion; and 0.100 of 1% on assets in
excess of $2 billion. After each Trust Series' first year of operations, the
administrative fee received by FSC during any fiscal year shall be at least
$75,000 per Trust Series. FSC may voluntarily reduce its fee and reimburse
the Trust for its expenses. FSC is an indirect, wholly-owned subsidiary of
Federated Investors, Inc. ("Federated").
The Trust has entered into a Shareholder Services Agreement with The
Stratevest Group N.A. (the "Shareholder Services Agent"), under which each
Trust Series, including the Stratevest Fund, may make payments of up to 0.25
of 1% of the average daily net asset value of the shares of the Trust Series
to obtain certain personal services for shareholders and the maintenance of
shareholder accounts. The Shareholder Services Agreement provides that the
Shareholder Services Agent either will perform shareholder services directly
or will select financial institutions to perform such services. Financial
institutions may receive fees based upon shares owned by such institutions'
clients or customers. The schedule of such fees and the basis upon which
such fees will be paid is determined from time to time by the Trust and the
Shareholder Services Agent. However, the Shareholder Services Agent has
agreed contractually to waive 0.05% of its fee for the period ending October
31, 2001.
The Forum Financial Group, LLC ("Forum") of companies provides
administration and distribution services to Forum Funds. As of June 30,
2000, Forum provided administration and distribution services to investment
companies and collective investment funds with assets of approximately $120
billion. Forum Administrative Services, LLC ("FAdS") provides certain
administrative services to Forum Funds, including the Forum Portfolio. The
services furnished by FAdS under the administration agreement with Forum
Funds include supervision of the overall management of Forum Funds, providing
Forum Funds with general office facilities and providing persons satisfactory
to the Board of Trustees to serve as officers of Forum Funds. For these
services, the Forum Portfolio pays FAdS a fee which is accrued daily and paid
monthly, equal, on an annual basis, to 0.20% of the average daily net assets
of the Forum Portfolio.
The Forum Portfolio is not subject to a shareholder services fee.
Transfer Agency and Custody Services. FSC serves as the transfer agent
and dividend disbursing agent for the Trust. The Trust Series pay FSC a fee
based on the size, type and number of accounts and transactions made by
shareholders, and is estimated to be approximately $23,000 for the fiscal
year ending August 31, 2001. Forum Shareholder Services, LLC ("FSS") serves
as the transfer agent for Forum Funds. For its services, FSS receives a fee
equal to 0.25% of the average daily net assets of the Forum Portfolio, an
annual fee of $12,000, plus annual shareholder account fees of $18.00 per
shareholder account. Forum Trust, LLC serves as the custodian of the assets
of the Stratevest Fund and the Forum Portfolio. The address of Forum Trust,
LLC is Two Portland Square, Portland, Maine 04101.
Distribution Services and Rule 12b-1 Plan. Edgewood Services, Inc.
("Edgewood Services"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. ("NASD"), serves as the principal
distributor of the shares of the Trust, including the Stratevest Fund.
Edgewood Services offers the shares on a continuous, best-efforts basis.
Edgewood Services is an indirect, wholly-owned subsidiary of Federated.
The Trust has adopted a Rule 12b-1 distribution plan (the "Distribution
Plan") pursuant to which the Stratevest Fund may pay a fee to Edgewood
Services in an amount computed at a maximum annual rate of 0.25 of 1% of the
average daily net assets of the Stratevest Fund's shares to finance any
activity which is principally intended to result in the sale of shares
subject to the Distribution Plan. Edgewood Services has agreed to
contractually waive 12b-1 fees for the period ending October 31, 2001. For
more information regarding the Distribution Plan, please refer to the
Prospectus of the Stratevest Fund.
Edgewood Services, from its own assets, may pay investment
professionals supplemental fees as financial assistance for providing
distribution and administrative services with respect to the Stratevest
Fund. Such assistance will be based upon shares owned by such investment
professionals' clients or customers. If Edgewood Services pays any fees for
these services, the fees will be reimbursed by the Stratevest Adviser and not
the Stratevest Fund.
For sales of the shares of the Stratevest Fund, a broker/dealer will
normally receive up to 90% of the applicable sales charge. Any portion of
the sales charge which is not paid to a broker/dealer will be retained by
Edgewood Services. However, Edgewood Services will, periodically, uniformly
offer to pay to broker/dealers additional amounts in the form of cash, items
of nominal value or promotional incentives.
Forum Fund Services, LLC ("FFS"), a registered broker-dealer and member
of the NASD, is the distributor (principal underwriter) of the Forum
Portfolio's shares. FFS acts as the agent of the Forum Portfolio in
connection with the offering of the Forum Portfolio's shares. FFS may enter
into arrangements with banks, broker-dealers or other financial institutions
through which investors may purchase or redeem shares and may, at its own
expense, compensate persons who provide services in connection with the sale
or expected sale of the Forum Portfolio's shares. FFS receives, and may
reallow to certain financial institutions, the sales charge paid by investors
in the Forum Portfolio's shares.
The Forum Portfolio has not adopted a Rule 12b-1 plan.
Purchases, Exchanges and Redemptions. The shares of the Stratevest
Fund and the shares of the Forum Portfolio are sold on a continuous basis at
their respective net asset values, next determined after orders are received,
plus the applicable sales charge. In the case of both the Stratevest Fund
and the Forum Portfolio, the maximum sales charge is 3.75%. Certain
investors and transactions in the Stratevest Fund and the Forum Portfolio may
be subject to reduced or waived sales charges. No sales charge will be
imposed in connection with the issuance of the Stratevest Fund's shares to
the shareholders of the Forum Portfolio as a result of the Reorganization.
For a complete description of the sales charges and the exemptions from the
sales charges, please refer to the Prospectus of the Stratevest Fund and to
the prospectus for the Forum Portfolio, which is incorporated by reference.
The minimum initial investment in the Stratevest Fund is $2,500, except
that the minimum initial investment is $250 for retirement plans. The
minimum subsequent investment for all investors in the Stratevest Fund is
$100. The minimum initial investment in the Forum Portfolio is $2,000,
except that the minimum initial investment is $1,000 for traditional and Roth
IRA accounts, and $250 for accounts with systematic investment plans. The
minimum subsequent investment for all investors in the Forum Portfolio is
$250. The Stratevest Fund and the Forum Portfolio reserve the right to
reject any purchase request. The Stratevest Fund and the Forum Portfolio
also reserve the right to waive minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
The purchase price of shares of each of the Stratevest Fund and the
Forum Portfolio is based on net asset value ("NAV"), plus a sales charge.
The NAV per share for each of the Stratevest Fund and the Forum Portfolio is
calculated as of the close of trading (normally 4:00 p.m., Eastern time) on
the New York Stock Exchange, Inc. (the "NYSE") on each day on which the NYSE
is open for business. The time at which NAV is calculated may change in case
of an emergency. The NAV of each of the Stratevest Fund and the Forum
Portfolio is determined by taking the market value of all securities owned by
the Fund or Portfolio, as applicable (plus all other assets, such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. Purchase orders must be placed by 4:00 p.m.,
Eastern time, in order to be priced at that day's NAV. So, for example, if
the Stratevest Fund or the Forum Portfolio receives your purchase request in
proper form after 4:00 p.m., Eastern time, your transaction will be priced at
the next day's NAV, plus the applicable sales charge. Neither the Stratevest
Fund nor the Forum Portfolio can accept orders that request a particular day
or price for the transaction or any other special conditions.
The Stratevest Fund and the Forum Portfolio each value their portfolio
securities for which market quotations are readily available at current
market value. If market quotations are not readily available, then the
Stratevest Fund and the Forum Portfolio value their portfolio securities at
estimated fair value under procedures adopted by their respective Board of
Trustees.
Neither the Stratevest Fund nor the Forum Portfolio issues share
certificates. If you purchase shares directly from the Stratevest Fund or
the Forum Portfolio, you will receive monthly statements and a confirmation
of each transaction. You should verify the accuracy of all transactions in
your account as soon as you receive your confirmations.
Shares of the Stratevest Fund may be exchanged for shares of the other
Trust Series, and shares of other investment companies that are distributed
by Edgewood Services or Federated Securities Corp. (the "Federated Funds"),
subject to certain limitations, as described in the Prospectus of the
Stratevest Fund. Federated Securities Corp., a registered broker-dealer, is
a wholly-owned subsidiary of Federated. It serves as the distributor of more
than 100 open-end investment companies.
Shares of the Forum Portfolio may be exchanged for shares of certain
other Forum Funds. Exchanges are subject to any initial or subsequent
minimum investment amounts of the funds into which the exchange is being
made. Exchanges are treated as a redemption and new purchase for federal
income tax purposes and, accordingly, may have tax consequences for the
shareholder. With respect to the Forum Portfolio only, exchanges are made at
net asset value plus the difference between the sales charge already paid and
any applicable sales charge on shares to be acquired in the exchange.
Redemptions of shares of the Stratevest Fund or the Forum Portfolio may
be made by telephone, by wire, by mailing a written request, or through a
systematic withdrawal program. The Stratevest Fund redeems shares at the NAV
per share next determined after the redemption request is received. The
Forum Portfolio redeems shares at the NAV (minus any applicable charge) next
calculated after the transfer agent receives the request in proper form. A
contingent deferred sales charge ("CDSC") is assessed on redemptions of
shares of the Forum Portfolio that were part of a purchase of $1 million or
more. The Stratevest Fund does not assess a CDSC. For both the Stratevest
Fund and the Forum Portfolio, proceeds will ordinarily be distributed by
check within seven days after receipt of a redemption request.
If you invest through a broker or other financial institution, the
policies and fees (other than sales charges) charged by that institution may
be different than those of the Stratevest Fund or the Forum Portfolio.
Financial institutions may charge transaction fees and may set different
minimum investments or limitations on buying or selling shares. These
institutions may also provide you with certain shareholder services such as
periodic account statements and trade confirmations summarizing your
investment activity. Consult a representative of your financial institution
for further information.
For a complete description of the purchase, exchange and redemption
procedures applicable to the Stratevest Fund and the Forum Portfolio, please
refer to the prospectus of the Stratevest Fund, and to the prospectus of the
Forum Portfolio, which is incorporated by reference.
Dividends and Distributions. The Stratevest Fund and the Forum
Portfolio each intends to declare and pay dividends (if any) monthly.
Capital gains realized by the Stratevest Fund and the Forum Portfolio, if
any, will be distributed at least annually. The amount of these
distributions will vary and there is no guarantee the Stratevest Fund or the
Forum Portfolio will pay dividends. Normally, the Stratevest Fund and the
Forum Portfolio reinvest a shareholder's distributions in additional shares
of the Fund or Portfolio, as applicable, unless a shareholder elects to
receive distributions in cash. For federal income tax purposes,
distributions are treated the same whether they are received in cash or
reinvested. For both the Stratevest Fund and the Forum Portfolio,
shareholders become entitled to receive distributions on the day after the
shares are issued.
For more information about the tax consequences of investments in the
Stratevest Fund or the Forum Portfolio, see "What are the tax implications of
investing in the Stratevest Fund and the Forum Portfolio" in this
Prospectus/Proxy Statement.
REASONS FOR THE REORGANIZATION
The Board of Trustees of Forum Funds (the "Forum Board"), on behalf of
the Forum Portfolio, has recommended the Reorganization in order to combine
the Forum Portfolio with a larger fund that has similar investment objectives
and investment policies. A larger fund may be expected to have a lower
expense ratio because certain costs may be spread over a larger asset base.
However, variable expenses that are based on the value of assets or the
number of shareholder accounts, such as custody and transfer agency fees,
would be largely unaffected by the Reorganization.
The proposed Reorganization and Plan was presented to the Forum Board
at a meeting held on August __, 2000. In considering the Reorganization, the
Forum Board was advised by independent legal counsel as to its fiduciary
duties under the 1940 Act with respect to the Forum Portfolio, and the
required determinations that must be made under the 1940 Act in connection
with the Reorganization.
During its deliberations, the Forum Board (with the advice and
assistance of independent legal counsel) reviewed, among other things:
(i) the terms and conditions of the Plan, including those provisions that
were intended to avoid dilution of the interests of the Forum Portfolio's
shareholders; (ii) the potential effect of the Reorganization on the
shareholders of the Forum Portfolio; (iii) the investment advisory and other
fees paid by the Stratevest Fund, and the projected expense ratio of the
Stratevest Fund as compared to that of the Forum Portfolio; (iv) the
investment objective, strategies, techniques, investment risks and
limitations of the Forum Portfolio, and their relative compatibility with
those of the Stratevest Fund; (v) the potential economies of scale to be
gained from combining the assets of the Forum Portfolio into the Stratevest
Fund as a result of the Reorganization; (vi) the historical investment
performance record of the Stratevest Fund; (vii) the anticipated tax
consequences of the Reorganization for the Forum Portfolio and its
shareholders; (viii) the fact that the costs of the Reorganization would be
borne by the Stratevest Adviser and/or other third parties; and (ix) the
shareholder services and other fees applicable to the shares of the
Stratevest Fund as compared to those applicable to the shares of the Forum
Portfolio.
In considering whether to approve the proposed Reorganization, the
Forum Board considered the small asset size of the Forum Portfolio, the
likelihood that the Forum Portfolio's service providers may not be able to
maintain their current fee waivers, and the fact that if the Forum Portfolio
was no longer viable, a reorganization would permit shareholders of the Forum
Portfolio to own shares in a new fund without realizing tax consequences that
would be present if the Forum Portfolio were to liquidate. In addition, the
Forum Board considered the potential for greater asset size as a result of
the Reorganization, which may enable the Stratevest Fund to purchase
portfolio securities in greater volume, creating the potential for more
favorable pricing of the securities purchased. To the extent that these
operational and economic benefits are realized, the benefits will work to the
advantage of shareholders of the Forum Portfolio and the Stratevest Fund.
In view of the foregoing characteristics of the Forum Portfolio and the
Stratevest Fund, the Forum Board concluded that the investment objectives,
strategies, techniques and limitations of the Forum Portfolio and the
Stratevest Fund are substantially similar to and compatible with one
another. The Forum Board also considered that the higher net expenses of the
Stratevest Fund was comparable to the gross expenses of the Forum Portfolio,
which are subject to service provider fee waivers that may not be
maintained. In this connection, the Forum Board took note of the undertaking
by the Stratevest Adviser to maintain the net expense ratio of the Stratevest
Fund for at least one year following the Reorganization, and thereafter the
Stratevest Adviser will not reduce its fee waivers, unless the reduction is
approved by the Board of Trustees of the Trust.
The Forum Board, including a majority of the trustees of Forum Funds
who are not "interested persons" (as that term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of Forum Funds, concluded
as contemplated by Rule 17a-8(a) of the 1940 Act, that the proposed
Reorganization would be in the best interests of the Forum Portfolio and the
shareholders of the Forum Portfolio. The Forum Board also concluded, in
accordance with Rule 17a-8(a) of the 1940 Act, that no dilution of value
would result to the shareholders of the Forum Portfolio from the
Reorganization, and approved the Plan and recommended that shareholders of
the Forum Portfolio vote to approve the Reorganization.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES OF FORUM FUNDS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PLAN.
If a majority of the shares of the Forum Portfolio do not approve the
Plan, the Reorganization will not occur, and the Forum Board will consider
other possible courses of action for the Forum Portfolio, including
liquidation and dissolution.
INFORMATION ABOUT THE REORGANIZATION
This is only a summary of the important terms of the Plan. You should
read the actual Plan. It is attached as Exhibit A.
How will the Reorganization be carried out?
If the shareholders of the Forum Portfolio approve the Plan, the
Reorganization will take place after various conditions are satisfied by
Forum Funds, on behalf of the Forum Portfolio, and the Trust, on behalf the
Stratevest Fund, including the preparation of certain documents. Forum Funds
and the Trust will determine a specific date for the actual Reorganization to
take place. This is called the Closing Date. If the shareholders of the
Forum Portfolio do not approve the Plan, the Reorganization will not take
place.
If shareholders of the Forum Portfolio approve the Plan at the Special
Meeting, shares of the Forum Portfolio will no longer be offered for sale to
existing shareholders, except for the reinvestment of dividend and capital
gain distributions or through established automatic investment plans. Until
the close of business on Closing Date, you may continue to add to your
existing account, subject to an established automatic investment plan, or buy
additional shares through the reinvestment of dividend and capital gain
distributions.
If the shareholders of the Forum Portfolio approve the Plan, the Forum
Portfolio will deliver to the Stratevest Fund all of its assets, subject to
its liabilities, on the Closing. The Forum Portfolio will receive full and
fractional shares of beneficial interest of the Stratevest Fund that have a
value equal to the dollar value of the net assets delivered to the Forum
Portfolio in connection with the Reorganization as of 4:00 p.m., Eastern
time, on the Closing Date. The Forum Portfolio will then distribute, in
complete liquidation, pro rata to its shareholders of record, all of the
Stratevest Fund shares received by the Forum Portfolio.
The stock transfer books of the Forum Portfolio will be permanently
closed as of 4:00 p.m., Eastern time, on the Closing Date. The Forum
Portfolio will only accept requests for redemption received in proper form
before 4:00 p.m., Eastern time, on the business day immediately preceding the
Closing Date. Requests received after that time will be considered requests
to redeem shares of the Stratevest Fund. The Forum Portfolio will then be
terminated under Delaware law. No front-end sales loads or CDSCs will be
imposed in connection with the Reorganization.
The Plan provides that the consummation of the Reorganization is
contingent upon, among other things: (i) approval of the Plan by the Forum
Portfolio shareholders; and (ii) the receipt by the Forum Portfolio and the
Stratevest Fund of a tax opinion to the effect that the Reorganization will
be tax-free to the Forum Portfolio, the Stratevest Fund and the Forum
Portfolio shareholders.
The Plan may be amended only by the mutual consent of the Trust and
Forum Funds in writing. The Trust and Forum Funds may also agree to
terminate and abandon the Reorganization at any time before or, to the extent
permitted by law, after the approval of shareholders of the Forum Portfolio.
Who will pay the expenses of the Reorganization?
The expenses resulting from the Reorganization will be paid by the
Stratevest Adviser and/or its affiliates and/or subsidiaries and other
parties.
What are the tax consequences of the Reorganization?
The Reorganization is intended to qualify as a tax-free reorganization
for federal income tax purposes within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended. Based on certain assumptions
and representations received from Forum Funds, on behalf of the Forum
Portfolio, and the Trust, on behalf of the Stratevest Fund, it is the opinion
of Stradley Ronon Stevens & Young, LLP, that shareholders of the Forum
Portfolio will not recognize any gain or loss for federal income tax purposes
as a result of the exchange of their shares of the Forum Portfolio for shares
of the Stratevest Fund, and that neither the Stratevest Fund nor the Forum
Portfolio will recognize any gain or loss upon the exchange of substantially
all of the assets of the Forum Portfolio, subject to its liabilities, for
shares of the Stratevest Fund.
Prior to the Reorganization, the Stratevest Fund does not intend to
distribute to shareholders any undistributed ordinary income or capital gain
net income. Shareholders of the Forum Portfolio who receive shares of the
Stratevest Fund as part of the Reorganization could potentially be taxed on
this income or gain in the event it is distributed after the Reorganization.
You will continue to be responsible for tracking the purchase cost and
holding period of your shares and should consult your tax advisor regarding
the effect, if any, of the Reorganization in light of your individual
circumstances. You should also consult your tax advisor as to state and
local tax consequences, if any, of the Reorganization, because this
discussion only relates to the federal income tax consequences.
What should I know about the shares of the Stratevest Fund?
While the Trust and Forum Funds are different entities, and thus,
governed by different organizational documents, the Reorganization will not
result in material differences in shareholder rights. The shares of the
Stratevest Fund that will be distributed to shareholders of the Forum
Portfolio will have the same legal characteristics as the shares of the Forum
Portfolio with respect to such matters as voting rights, assessibility,
conversion rights, and transferability.
The Trust, under its Agreement and Declaration of Trust, and Forum
Funds, under its Trust Instrument, both have an unlimited number of
authorized shares of beneficial interest. The Boards of Trustees of the
Trust and of Forum Funds (the "Boards") may, without shareholder approval,
divide the authorized shares of the Trust and Forum Funds into an unlimited
number of separate portfolios or series ("series"). The Boards may also,
without shareholder approval, divide the series into two or more classes of
shares ("classes"). Each of the Stratevest Fund and the Forum Portfolio
currently offers only one class. The Trust and each Trust Series, as well as
Forum Funds and each Forum Series, will continue indefinitely until
terminated.
Each share of each series and each class of the Trust and Forum Funds
has equal dividend, distribution, liquidation and voting rights, and
fractional shares have those rights proportionately. Each series or class
bears its own expenses related to its distribution of shares (and other
expenses such as transfer agency, shareholder service and administration
expenses). Generally, shares of a series will be voted separately by
individual series except if: (1) the 1940 Act requires shares to be voted in
the aggregate and not by individual series; (2) the 1940 Act requires a
class vote; or (3) a Board determines that the matter affects more than one
series and all affected series must vote.
Delaware law does not require the Trust or Forum Funds to hold annual
meetings of shareholders, and generally, the Trust and Forum Funds will hold
shareholder meetings only when specifically required by federal or state
law. Shareholders representing 10% or more of Forum Funds' (or its
respective series') outstanding shares may, under the Forum Funds' By-laws,
call meetings of Forum Funds (or its series) for any purpose related to Forum
Funds (or its series), including, in the case of a meeting of Forum Funds,
the purpose of voting on removal of one or more Trustees. The Trust's
Agreement and Declaration of Trust does not contain any statement concerning
the ability of shareholders to call meetings.
Like Forum Funds, there are no conversion or preemptive rights in
connection with shares of the Trust. When issued, all shares will be fully
paid and non-assessable. A shareholder of a series will receive a pro rata
share of all distributions arising from that series' assets and, upon
redeeming shares, will receive the portion of the series' net assets
represented by the redeemed shares.
What are the capitalizations of the Stratevest Fund and the Forum Portfolio
and what might the capitalization be after the Reorganization?
The following table(1) sets forth, as of March 31, 2000, (i) the
capitalization of the Forum Portfolio, (ii) the capitalization of the
Stratevest Fund, and (iii) the pro forma capitalization of the Stratevest
Fund as adjusted to give effect to the proposed Reorganization. The
capitalization of the Stratevest Fund is likely to be different when the
Reorganization is consummated.
Forum Funds - Stratevest
Investors Funds - Pro Forma
High Grade Intermediate After )
Bond Fund Bond Fund Reorganization(2
Net assets........................... $0 $28,239,064
$28,234,064
Net asset value per share............ $9.46 $0 $10.00
Shares outstanding................... 2,984,835 0 2,823,406
(1) Full pro forma financial statements are included in the Statement of
Additional Information to this Prospectus/Proxy Statement.
(2) It is expected that certain collective and common trust funds will merge
into the Stratevest Fund beginning at the end of September, 2000. Based on
the addition of these assets, it is estimated that the net assets of the
Stratevest Fund would be approximately $169,000. The net asset value per
share and the number of shares outstanding would be determined on the Closing
Date of the Reorganization, in accordance with the Stratevest Fund's
prospectus.
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
This section describes the key differences between the investment
strategies and policies of the Stratevest Fund and the Forum Portfolio, and
certain noteworthy differences between the investment restrictions of the
Stratevest Fund and Forum Portfolio. For more information on the Stratevest
Fund's investment policies, see the Prospectus, dated September ___, 2000.
Are there any significant differences between the investment objectives and
strategies of the Stratevest Fund and the Forum Portfolio?
The investment objectives of the Stratevest Fund and the Forum
Portfolio are similar. The investment objective of the Stratevest Fund is to
provide current income. The investment objective of the Forum Portfolio is
to seek a high level of current income consistent with capital preservation
and prudent investment risk.
There are several important differences in the investment strategies
and policies of the Stratevest Fund and the Forum Portfolio. While both the
Stratevest Fund and the Forum Portfolio seek current income, the Forum
Portfolio, in attempting to achieve its objective, takes into consideration
the preservation of capital and the risk to its portfolio. As a result, the
Forum Portfolio's NAV may be subject to less fluctuation than the NAV of the
Stratevest Fund.
The Stratevest Fund pursues its investment objective by investing
primarily in high-quality corporate bonds and securities issued by the U.S.
Government, its agencies and instrumentalities. High-quality securities are
rated in one of the top three rating categories by a nationally recognized
statistical rating organization (NRSRO), or securities that are unrated but
are determined by the Stratevest Adviser to be of comparable quality. The
Stratevest Fund may also invest its assets in mortgage-backed and
asset-backed securities.
The Stratevest Adviser's strategy in managing the Stratevest Fund is to
adjust the Fund's weightings in those types of fixed income securities which,
in the Adviser's opinion, will create the best opportunity for current
income. The Stratevest Adviser uses macroeconomic, credit and market
analysis to select portfolio securities. The Stratevest Fund will maintain
an average dollar-weighted portfolio maturity of three to ten years.
The Forum Portfolio seeks to achieve its investment objective by
investing primarily in U.S. Government securities and debt securities rated
in one of the three highest rating categories by an NRSRO. Like the
Stratevest Fund, the debt securities in which the Forum Portfolio may invest
include corporate, asset-backed and mortgage-backed securities. The Forum
Portfolio normally invests at least 70% of its total assets in U.S.
Government securities and at least 40% of those assets in obligations of the
U.S. Treasury, such as Treasury bonds, bills and notes. The Forum Portfolio
may invest up to 30% of its total assets in mortgage-backed and asset-backed
securities. The Forum Portfolio only invests in mortgage-backed securities
that are U.S. Government securities or are rated in the two highest rating
categories of an NRSRO. The Forum Portfolio may invest up to 10% of its
total assets in adjustable rate mortgage-backed securities and up to 10% of
its total assets in asset-backed securities. These securities must be rated
in the highest rating category by an NRSRO.
The Forum Adviser continuously monitors economic factors, such as
interest rate outlooks, and technical factors, such as the shape of the yield
curve, in combination with the stated investment objective of the Forum
Portfolio, to determine an appropriate maturity profile for the Portfolio.
The Forum Adviser then principally searches for securities that satisfy the
maturity profile of the Forum Portfolio and that provide the greatest
potential for return relative to the risk of the security. The Forum
Portfolio invests in securities with varying maturities, from overnight to
more than 30 years, but will not invest more than 25% of its total assets in
securities with maturities greater than 10 years. Generally, the average
weighted maturity of the Forum Portfolio's portfolio securities is seven
years or less. The Forum Adviser may sell a debt security if: (i) revised
economic forecasts or interest rate outlooks require a repositioning of the
portfolio; (ii) the security subsequently fails to meet the Forum Adviser's
investment criteria; (iii) a more attractive security is found or funds are
needed for another purpose; or (iv) the Forum Adviser believes that the
security has reached its appreciation potential.
The Forum Portfolio may borrow money for temporary or emergency
purposes (including the meeting of redemption requests), and for the purpose
of entering into reverse repurchase agreements, but not in excess of 33 1/3%
of the value of the Forum Portfolio's total assets (computed immediately
after the borrowing). The Stratevest Fund may borrow money, directly or
indirectly, to the maximum extent permitted under the 1940 Act, any rule or
order thereunder, or any SEC staff interpretation thereof.
The Stratevest Fund and the Forum Portfolio may each engage in certain
types of leverage transactions in order to increase their potential returns.
Both the Stratevest Fund and the Forum Portfolio may purchase securities on a
when-issued or on a delayed delivery basis. In these types of transactions,
the Stratevest Fund or the Forum Portfolio purchases securities for a set
price, with payment and delivery of the securities scheduled for a future
time. The Forum Portfolio may also purchase and sell securities on a forward
commitment basis, while the Stratevest Fund may purchase To Be Announced
securities (TBAs). TBAs are delayed delivery transactions in which the
Stratevest Fund does not specify certain securities to be delivered but
rather agrees to accept any security that meets certain specified terms.
TBAs may be subject to greater interest rate risk than other securities. The
Forum Portfolio will not enter into when-issued or forward commitment
transactions if, as a result, more than 15% of the Portfolio's total assets
would be committed to such transactions. The Stratevest Fund does not have a
similar percentage limitation with regard to when-issued transactions or TBAs.
The Forum Portfolio is subject to stricter quality standards for
certain types of money market instruments, mortgage-backed securities and
asset-backed securities that the Portfolio may purchase. The Forum
Portfolio's investments in mortgage-backed securities are limited to
securities rated in the two highest rating categories of an NRSRO, and its
investments in adjustable rate mortgage-backed securities and asset-backed
securities are limited to securities rated in the highest rating category of
an NRSRO. The Forum Portfolio, by investing in securities with higher
quality standards, reduces the risk of default on the securities but these
securities are likely to produce lower yields than lower rated securities.
The Forum Portfolio has other policies that attempt to reduce the level of
risk associated with its portfolio securities. The Forum Portfolio has a
stated policy that it may not invest in stripped mortgage-backed securities
or privately issued mortgage-backed securities, while the Stratevest Fund has
no stated policy concerning these types of investments. As noted in the
discussion above, the Forum Portfolio is subject to an investment policy that
provides that 70% of its total assets will be invested in U.S. Government
securities. In addition, the Forum Portfolio is subject to limitations on
the percentage of its assets that may be invested in mortgage-backed and
asset-backed securities The Stratevest Fund is not subject to similar
policies, giving the Stratevest Adviser greater flexibility in managing the
Stratevest Fund's portfolio. Although this flexibility creates an opportunity
for higher returns, it also has additional risks.
While the Stratevest Fund and Forum Portfolio are generally permitted
to invest in a wide array of fixed income securities, the Stratevest Fund,
but not the Forum Portfolio, may engage in dollar roll transactions. Dollar
roll transactions are transactions where a fund sells mortgage-backed
securities with a commitment to buy similar, but not identical, securities on
a future date at a lower price. Dollar roll transactions are subject to
interest rate risks, credit risks and leverage risks. The Forum Portfolio
may invest in variable and floating rate demand notes of corporations, while
the Stratevest Fund may not. The Stratevest Fund may invest in zero coupon
securities, credit enhancements, insurance contracts and bank instruments,
while the Forum Portfolio does not have a stated investment policy concerning
these instruments. Zero coupon securities are debt securities that do not
pay interest or principal until final maturity, unlike other debt securities
that provide periodic payments of interest (referred to as a coupon
payment). Investors must wait until maturity to receive interest and
principal, which increases the interest rate risks and credit risks of a zero
coupon security.
Each of the Stratevest Fund and the Forum Portfolio is a diversified
portfolio of securities. As a "diversified" fund, 75% of each of the
Stratevest Fund's and the Forum Portfolio's total assets may not be invested
in more than 5% of a single issuer's securities, or be used to purchase 10%
or more of the outstanding voting securities of a single issuer.
How do the fundamental investment restrictions of the Stratevest Fund and the
Forum Portfolio differ?
The Stratevest Fund and the Forum Portfolio have adopted similar
restrictions as fundamental policies, which may not be changed without the
approval of a Majority Vote (as defined below). This section highlights the
differences between their restrictions. The Stratevest Fund has slightly
increased investment flexibility that will allow the Stratevest Fund to
respond to future investment opportunities. Despite this increased
investment flexibility, however, it is not anticipated that the differences
in investment restrictions will result in a material change in the level of
investment risk that is currently associated with an investment in the Forum
Portfolio.
The Forum Portfolio is subject to a fundamental investment restriction
that provides that the Portfolio will not invest in oil or gas or interests
in other mineral exploration or development programs. The Stratevest Fund is
not subject to a comparable investment restriction.
Both the Stratevest Fund and the Forum Portfolio are subject to
fundamental investment restrictions on their ability to make loans, including
limitations with respect to lending their portfolio securities. While the
Stratevest Fund may lend portfolio securities to brokers, dealers or
institutional investors to the extent permitted by the 1940 Act, the
Stratevest Fund has no current intention to do so. The Forum Portfolio is
only permitted to lend securities to brokers, dealers and other financial
institutions in an amount up to 10% of its total assets.
Policies or restrictions that are deemed fundamental may not be changed
without the approval of the lesser of (i) a majority of the outstanding
shares of the Stratevest Fund or the Forum Portfolio, as applicable, or (ii)
67% or more of the shares represented at a meeting of shareholders at which
the holders of more than 50% of the outstanding shares are represented
("Majority Vote").
For more information regarding the Stratevest Fund's and the Forum
Portfolio's investment restrictions, please refer to the Statement of
Additional Information to this Prospectus/Proxy Statement, for the Stratevest
Fund, and to the Forum Portfolio's current statement of additional
information, for the Forum Portfolio, both of which are incorporated by
reference.
What are the risk factors associated with investments in the Stratevest Fund
and the Forum Portfolio?
Like all investments, an investment in the Stratevest Fund and the
Forum Portfolio involves risk.
General.
The Stratevest Fund's and the Forum Portfolio's net asset values and
investment returns will fluctuate, based upon changes in the value of their
individual portfolio securities. The market values of the securities in
which the Stratevest Fund and the Forum Portfolio invest are based on the
market's perception of value and are not necessarily objective measures of
the securities' values. There is no assurance that the Stratevest Fund or
the Forum Portfolio will achieve its investment objective, and their share
prices may decline. Both the Stratevest Fund and the Forum Portfolio are
subject to the risk that the Stratevest Adviser or Forum Adviser,
respectively, may make poor investment decisions.
Fixed Income Securities.
Both the Stratevest Fund and the Forum Portfolio invest primarily in
fixed income securities. One of the risks of investing in any fixed income
security is the possibility of changes in interest rates. When interest
rates rise, prices of fixed income securities fall. In general, securities
with longer maturities are more sensitive to these price changes.
In addition to the risk of changing interest rates, there is also the
risk that an issuer may redeem a fixed income security before maturity (a
call) at a price below its current market price. An increase in the
likelihood of a call may reduce the security's price. If a fixed income
security is called, the Stratevest Fund or the Forum Portfolio may have to
reinvest the proceeds in other fixed income securities with lower interest
rates, higher credit risks, or other less favorable characteristics.
Fixed income securities are subject to credit risks. Credit risk is
the possibility that an issuer will be unable to pay interest or principal
when due. This risk generally increases as security credit ratings
decrease. Changes in an issuer's financial strength or in a security's
credit rating may affect its value, and, thus, impact the NAV of the
Stratevest Fund or the Forum Portfolio.
Fixed income securities that are not widely held or have not received
credit ratings may have limited trading opportunities. With limited trading
opportunities, the Stratevest Fund or Forum Portfolio may not be able to sell
a security when it wants to, requiring it to continue to hold the security,
which may cause the Stratevest Fund or Forum Portfolio to incur losses.
Mortgage-backed Securities.
In addition to the general risks for fixed income securities,
mortgage-backed securities are subject to prepayment risk. Prepayment risk
is the possibility of unscheduled payments on principal from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans backing the
mortgage-backed securities. These unscheduled prepayments of principal
create risks that can adversely affect the Stratevest Fund or the Forum
Portfolio.
For example, when interest rates decline, the values of mortgage-backed
securities generally rise. However, when interest rates decline, unscheduled
prepayments or underlying mortgages can be expected to accelerate, and the
Stratevest Fund or the Forum Portfolio would be required to reinvest the
unscheduled payments on principal of the mortgage based securities at the
lower interest rates then available. Unscheduled prepayments would also
limit the potential for capital appreciation on mortgage-backed securities.
Conversely, when interest rates rise, the values of mortgage-backed
securities generally fall. Since rising interest rates typically result in
decreased prepayments, this could lengthen the average lives of
mortgage-backed securities, and cause their value to decline more than
traditional fixed income securities.
Asset-backed Securities.
Like mortgages underlying mortgage-backed securities, the collateral
underlying asset-backed securities are subject to prepayment, which may
reduce the overall return to the Stratevest Fund or Forum Portfolio as
holders of asset-backed securities. Another risk of asset-backed securities
is that these securities do not always have the benefit of a security
interest in collateral comparable to the security interests associated with
mortgage-backed securities.
Leverage Transactions.
Leverage creates the risk of magnified capital losses. Borrowings and
other liabilities that exceed the equity base of the Stratevest Fund and
Forum Portfolio may magnify losses incurred by the Stratevest Fund or the
Forum Portfolio. The risks of leverage include a higher volatility of the
net asset values of the Stratevest Fund's and the Forum Portfolio's
securities.
When-Issued Securities, Delayed Delivery Securities, TBAs and Forward
Commitments.
At the time of settlement, these securities may be valued at less than
their purchase prices. When entering into a transaction for when-issued
securities, delayed delivery securities, TBAs and dollar rolls, the
Stratevest Fund or the Forum Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the Stratevest
Fund or the Forum Portfolio may be disadvantaged. A change in interest rates
may also adversely effect these instruments.
VOTING INFORMATION
How many votes are necessary to approve the Plan?
This Prospectus/Proxy Statement is being furnished by the Board of
Trustees of Forum Funds in connection with the solicitation of proxies of the
Special Meeting. Solicitation of proxies will be primarily by mail.
Officers and service contractors of Forum Funds may also solicit proxies by
telephone, facsimile, Internet, or in person. The costs of solicitation will
be borne by the Stratevest Adviser and/or its affiliates and/or subsidiaries
and other parties.
Each share of the Forum Portfolio is entitled to one vote. To approve
the Reorganization, a majority of the shares of the Forum Portfolio
outstanding and entitled to vote must be voted in favor of the Plan. For
these purposes, the approval of the Plan requires the lesser of (a) 67% or
more of the voting shares present at the Special Meeting, if the holders of
more than 50% of the outstanding voting shares of the Forum Portfolio are
present or represented by proxy; or (b) more than 50% of the outstanding
voting shares of the Forum Portfolio.
How do I ensure my vote is accurately recorded?
Please use the Proxy card (the "Proxy Card") enclosed with the
Prospectus/Proxy Statement to vote on the Reorganization. You should
complete the Proxy Card by:
(1) Indicating whether you vote "FOR," "AGAINST," or "ABSTAIN" from
voting on the Reorganization by checking the appropriate box on
the Proxy Card;
(2) Signing and dating the Proxy Card; and
(3) Returning it to [_____________] in the enclosed postage-paid
envelope.
The Proxy Card is, in essence, a ballot. If you simply sign and date the
Proxy Card but give no voting instructions, your shares will be voted in
favor of the Plan and in accordance with the views of management upon any
unexpected matters that come before the Special Meeting or adjournment of the
Special Meeting.
Can I revoke my proxy?
To change a vote after returning a Proxy Card, you must provide
[__________] with a "Revocation Letter" that:
(1) Identifies yourself;
(2) States that as shareholder of the Forum Portfolio, you revoke
your prior decisions as set forth in the previously returned
Proxy Card;
(3) Indicates your approval, disapproval or abstention from voting on
the Reorganization.
[__________] must receive your Proxy Card or Revocation Letter on or
before October __, 2000. If you do not return your Proxy Card by that date
or you abstain from voting, you will be treated as having voted "AGAINST" the
Reorganization.
Who is entitled to vote?
Only shareholders of record of the Forum Portfolio at the close of
business on __________, 2000 (the "Record Date") are entitled to notice of
and to vote at the Special Meeting and any postponement or adjournment
thereof. Shareholders owning one-third of the outstanding shares of the
Forum Portfolio as of the Record Date, present in person or by proxy, shall
constitute a quorum for the transaction of business regarding the Forum
Portfolio at the Special Meeting.
For purposes of determining the presence of a quorum and counting votes
on the matters presented, shares represented by abstentions and "broker
non-votes" will be counted as present, but not as votes cast at the Special
Meeting. Broker non-votes are shares held in street name for which the
broker indicates that instructions have not been received from the beneficial
owners and other persons entitled to vote and for which the broker lacks
discretionary voting authority.
If you do not specify a choice on the proxy, properly executed proxies
that are returned in time to be voted at the Special Meeting will be voted
"FOR" the approval of the Plan described in this Prospectus/Proxy Statement.
What other matters will be voted upon at the Special Meeting?
It is not anticipated that any matters other than the approval of the
Plan will be brought before the Special Meeting. Should other business be
brought before the Special Meeting, it is intended that the accompanying
proxies will be voted in accordance with the judgment of the persons named as
proxies.
If sufficient votes in favor of approving the Plan are not received by
the time scheduled for the Special Meeting, the persons named as proxies may
propose one or more adjournments of the Special Meeting for a reasonable
period of time to permit further solicitation of proxies. Any adjournment
will require the affirmative vote of a majority of the votes cast on the
question in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote "FOR" adjournment those
proxies required to be voted "FOR" the approval of the proposal. The persons
named as proxies will vote "AGAINST" adjournment those proxies required to be
voted "AGAINST" the approval of the proposal. The costs of any additional
solicitation and of any adjourned session will be borne by the Stratevest
Adviser and/or its subsidiaries and/or affiliates and other parties.
Are there dissenters' rights?
Shareholders of the Forum Portfolio will not be entitled to any
"dissenters' rights" since the proposed Reorganization involves two open-end
investment companies registered under the 1940 Act. Although no dissenters'
rights may be available, you have the right to redeem your shares at net
asset value until the Closing Date. After the Closing Date, you may redeem
your Stratevest Fund shares or exchange them for shares of other Trust Series
or of certain Federated Funds, subject to the terms in the prospectus of the
respective fund.
OTHER INFORMATION
Who are the principal holders of shares of the Forum Portfolio?
As of the Record Date, there were ____ shares of the Forum Portfolio
outstanding. As of the Record Date, the officers and Trustees of Forum
Funds, as a group, beneficially owned less than 1% of the outstanding shares
of the Forum Portfolio. As of the Record Date, the following persons owned
of record or beneficially 5% or more of the outstanding shares of the Forum
Portfolio:
Name and Address Percentage Ownership
----%
[TO BE INSERTED]
The Stratevest Adviser, in its capacity as a fiduciary, may also hold,
as record owner for the benefit of its trust customers, more than 5% of the
outstanding shares of the Forum Portfolio. As of the Record Date, Stratevest
held, as record owner, ___% of the outstanding shares of the Forum Portfolio.
As of the Record Date, there were no shares of the Stratevest Fund
outstanding. However, it is expected that certain collective and common
trust funds will merge into the Stratevest Fund at the end of September,
2000. If these collective and common trust funds merge into the Stratevest
Fund, the Stratevest Adviser, in its capacity as fiduciary to the collective
and common trust funds, will hold more than 25% of the outstanding shares of
the Stratevest Fund.
How do I contact the Stratevest Fund and the Forum Portfolio?
Write to the Forum Portfolio at: Forum Shareholder Services, LLC
P.O. Box 446
Two Portland Square
Portland, ME 04112
Telephone the Forum Portfolio at: (800) 943-6786 (toll free)
(207) 879-0001
Write to the Stratevest Fund at: Federated Shareholder Services
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Telephone the Stratevest Fund at: 1-888-247-4505
What are the tax implications of investing in the Stratevest Fund and the
Forum Portfolio?
Each of the Stratevest Fund and the Forum Portfolio generally intends
to operate in a manner such that it will not be liable for Federal income or
excise tax.
The distributions of net investment income (or short-term capital gain)
by the Stratevest Fund and the Forum Portfolio are taxable to you as ordinary
income. The distributions of net long-term capital gain by the Stratevest
Fund and the Forum Portfolio are taxable to you as long-term capital gain.
Distributions are taxable in this manner regardless of whether you receive
cash or additional shares. Distributions may also be subject to 31% backup
withholding for certain shareholders. The distributions by the Stratevest
Fund and the Forum Portfolio also may be subject to certain state and local
taxes. Non-U.S. investors may be subject to U.S. withholding and estate tax.
If you buy shares shortly before the Stratevest Fund or the Forum
Portfolio declares a dividend, you may pay the full price for the shares and
then receive a portion of the price back as a taxable distribution. The sale
or exchange of shares of the Stratevest Fund or the Forum Portfolio is a
taxable transaction for federal income tax purposes.
The Stratevest Fund and the Forum Portfolio will send you information
about the income tax status of distributions paid during the year shortly
after December 31 of each year.
INFORMATION ABOUT THE STRATEVEST FUND
Information about the Stratevest Fund is included in its Prospectus,
dated September __, 2000, and in the Statement of Additional Information
related to this Prospectus/Proxy Statement, which is dated September __,
2000. Further information is contained in the Stratevest Fund's Statement of
Additional Information, dated September ___, 2000. These documents have been
filed with the SEC and are incorporated by reference herein. Copies of the
Statements of Additional Information may be obtained without charge by
writing to the Trust or calling 1-800-245-0242. The Stratevest Fund files
proxy materials, reports and other information with the SEC in accordance
with the informational requirements of the Securities Exchange Act of 1934
and the 1940 Act. These materials can be inspected and copied at: the SEC's
Public Reference Room at 450 Fifth Street NW, Washington, DC 20549, and at
the Regional Offices of the SEC located in New York City at 7 World Trade
Center, Suite 1300, New York, NY 10048 and in Chicago at 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Also, copies of such material can be
obtained from the SEC's Public Reference Section, Washington, DC 20549-6009
(duplicating fee required), or from the SEC's Internet address at
http://www.sec.gov.
INFORMATION ABOUT THE FORUM PORTFOLIO
Information about the Forum Portfolio is included in its prospectus,
dated August 1, 2000, its statement of additional information, dated August
1, 2000, and in the Forum Portfolio's annual report to shareholders, dated
March 31, 2000. These documents have been filed with the SEC, and are
incorporated by reference into this Prospectus/Proxy Statement. You may
request free copies of these documents by writing Forum Shareholder Services,
LLC, P.O. Box 446, Portland, Maine 04112 or by calling Forum Shareholders
Services, LLC at (207) 879-0001 or (800) 943-6786. Reports and other
information filed by the Forum Portfolio can be inspected and copied at: the
SEC's Public Reference Room at 450 Fifth Street NW, Washington, DC 20549,
and at the Regional Offices of the SEC located in New York City at 7 World
Trade Center, Suite 1300, New York, NY 10048 and in Chicago at 500 West
Madison Street, Suite 1400, Chicago, IL 60661. Also, copies of such material
can be obtained from the SEC's Public Reference Section, Washington, DC
20549-6009 (duplicating fee required), or from the SEC's Internet address at
http://www.sec.gov.
FORUM FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FORUM FUNDS
Revoking any such prior appointments, the undersigned appoints
David I. Goldstein, Don L. Evans and Leslie K. Klenk and (or, if only one
shall act, that one) proxies with power of substitution to vote all of the
shares of the Investors High Grade Bond Fund (the "Forum Portfolio"), a
series of Forum Funds, registered in the name of the undersigned at the
Special Meeting of Shareholders of the Forum Portfolio (the "Special
Meeting") to be held at the offices of Forum Fund Services, LLC, Two Portland
Square, Portland, Maine 04101, on November 3, 2000, at 10:00 a.m. (Eastern
time), and at any postponement or adjournment thereof.
The shares of beneficial interest represented by this Proxy will
be voted in accordance with the instructions given by the undersigned below.
IF NO INSTRUCTIONS ARE GIVEN, SUCH SHARES WILL BE VOTED FOR PROPOSAL 1 SET
FORTH BELOW REGARDING THE REORGANIZATION OF THE FORUM PORTFOLIO WITH THE
STRATEVEST INTERMEDIATE BOND FUND. IF ANY OTHER MATTERS COME BEFORE THE
SPECIAL MEETING ABOUT WHICH THE PROXIES WERE NOT AWARE PRIOR TO THE TIME OF
THE SOLICITATION, AUTHORIZATION IS GIVEN TO THE PROXIES TO VOTE IN THEIR
DISCRETION. Forum Funds has proposed the Proposals. The Board of Trustees
recommends voting FOR Proposal 1.
1. PROPOSAL: To approve the Agreement and Plan of Reorganization
(the "Plan") between Forum Funds, on behalf of the Investors High
Grade Bond Fund (the "Forum Portfolio"), and the Stratevest
Intermediate Bond Fund (the "Stratevest Fund"), a series of
Stratevest Funds (the "Trust"), that provides for the acquisition
of all of the assets and assumption of the liabilities of the
Forum Portfolio in exchange for shares of beneficial interest of
the Stratevest Fund. The Forum Portfolio will then distribute
Stratevest Fund shares pro rata to the shareholders of the Forum
Portfolio.
FOR _______ AGAINST _______ ABSTAIN _______
2. PROPOSAL: To grant the proxies the authority to vote upon any
other business that may legally come before the Special Meeting
or by adjournment thereof.
FOR _______ WITHHOLD _______ ABSTAIN _______
(NOTE: Checking the box labeled ABSTAIN will result in the shares covered by
the Proxy being treated as if they were voted AGAINST the Proposal.) Receipt
is acknowledged of the Notice and Proxy Statement for the Special Meeting to
be held on November 3, 2000. PLEASE SIGN AND DATE THIS PROXY IN THE SPACE
PROVIDED. Execution by shareholders who are not individuals must be made by
an authorized signatory. Executors, administrators, trustees, guardians and
others signing in a representative capacity should give their full title as
such.
Authorized Signature Date
Printed Name (and Title if Applicable)
Authorized Signature (Joint Investor or Second Signatory) Date
Printed Name (and Title if Applicable)
EXHIBITS TO COMBINED
PROSPECTUS AND PROXY STATEMENT
Exhibit
A Agreement and Plan of Reorganization between Forum Funds, on
behalf of the Investors High Grade Bond Fund, and Stratevest
Funds, on behalf of the Stratevest Intermediate Bond Fund (the
"Stratevest Fund")
Doc. #338577 v.08
Doc. #338577 v.08
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
......AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), made as
of this ____ day of August __, 2000, by and between Stratevest Funds (the
"Trust"), a business trust created under the laws of the State of Delaware,
with its principal place of business at 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7000, and Forum Funds, a business trust created under the
laws of the State of Delaware, with its principal place of business at Two
Portland Square, Portland, Maine 04101.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by the Stratevest
Intermediate Bond Fund series (the "Stratevest Fund") of the Trust of
substantially all of the property, assets and goodwill of the Investors High
Grade Bond Fund series (the "Forum Portfolio") of Forum Funds, and the
assumption by the Stratevest Fund of all of the liabilities of the Forum
Portfolio, in exchange solely for full and fractional shares of beneficial
interest, no par value, of the Stratevest Fund, (ii) the distribution of such
shares of beneficial interest of the Stratevest Fund to the shareholders of
the Forum Portfolio according to their respective interests, and (iii) the
dissolution of the Forum Portfolio as soon as practicable after the closing
(as defined in Section 3, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of this Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in
consideration of the premises and of the covenants and agreements hereinafter
set forth, and intending to be legally bound, the parties hereto covenant and
agree as follows:
1. Sale and Transfer of Assets and Liabilities, Liquidation and
Dissolution of the Forum Portfolio
(a)...Subject to the terms and conditions of this Agreement, and
in reliance on the representations and warranties of the Trust herein
contained, and in consideration of the delivery by the Trust of the number of
its shares of beneficial interest of the Stratevest Fund hereinafter
provided, Forum Funds, on behalf of the Forum Portfolio, agrees that it will
convey, transfer and deliver to the Trust at the Closing provided for in
Section 3 all of the then existing liabilities and the assets of the Forum
Portfolio free and clear of all liens, encumbrances, and claims whatsoever
(other than shareholders' rights of redemption and such restrictions as might
arise under the Securities Act of 1933, as amended (the "1933 Act"), with
respect to privately placed or otherwise restricted securities that the Forum
Portfolio may have acquired in the ordinary course of business), except for
cash, bank deposits, or cash equivalent securities in an estimated amount
necessary (1) to discharge all of the Forum Portfolio's liabilities on its
books at the closing date (as defined in Section 3, hereinafter called the
"Closing Date"), including, but not limited to, its income dividends and
capital gains distributions, if any, payable for any period prior to, and
through, the Closing Date, and excluding those liabilities and obligations
that would otherwise be discharged at a later date in the ordinary course of
business, and (2) to pay such contingent liabilities as the trustees shall
reasonably deem to exist against the Forum Portfolio, if any, at the Closing
Date, for which contingent and other appropriate liability reserves shall be
established on the books of the Forum Portfolio (hereinafter "Net Assets").
Forum Funds, on behalf of the Forum Portfolio, shall also retain any and all
rights that it may have over and against any person that may have accrued up
to and including the close of business on the Closing Date.
(b)...Subject to the terms and conditions of this Agreement, and
in reliance on the representations and warranties of the Trust herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, the Trust agrees at the Closing to deliver to the Forum Portfolio
the number of full and fractional shares of beneficial interest of the
Stratevest Fund, no par value, determined by dividing the net asset value per
share of beneficial interest of the Forum Portfolio on the Closing Date by
the net asset value per share of beneficial interest of the Stratevest Fund
on the Closing Date, and multiplying the result by the number of outstanding
shares of the Forum Portfolio on the Closing Date. All such values shall be
determined in the manner and as of the time set forth in Section 2 hereof.
(c)...Immediately following the Closing, the Forum Portfolio
shall distribute pro rata to its shareholders of record as of the close of
business on the Closing Date the full and fractional shares of beneficial
interest of the Stratevest Fund received by the Forum Portfolio pursuant to
this Section 1, and then shall terminate and dissolve. The Forum Portfolio
shall terminate and dissolve as soon as reasonably practicable. Such
termination and distribution shall be accomplished by the establishment of
accounts on the share records of the Stratevest Fund of the type and in the
amounts due such shareholders based on their respective holdings as of the
close of business on the Closing Date. Fractional shares of beneficial
interest of the Stratevest Fund shall be carried to the third decimal place
in book-entry form for the account of shareholders.
2. Valuation
(a)...The value of the Forum Portfolio's Net Assets to be
acquired by the Stratevest Fund hereunder shall be computed as of the close
of business (which shall be deemed to be the close of the New York Stock
Exchange, Inc. ("NYSE")) on the Closing Date using the valuation procedures
set forth in the Forum Portfolio's currently effective prospectus.
(b)...In the event that the Stratevest Fund has assets as of the
Closing Date, the net asset value of a share of beneficial interest of the
Stratevest Fund shall be determined to the nearest full cent as of the close
of business (which shall be deemed to be the close of the NYSE) on the
Closing Date, using the valuation procedures set forth in the Stratevest
Fund's currently effective prospectus. In the event that the Stratevest Fund
has no assets as of the Closing Date, the net asset value of a share of
beneficial interest of the Stratevest Fund shall be $10.00 per share.
(c)...The net asset value of a share of beneficial interest of
the Forum Portfolio shall be determined to the nearest full cent as of the
close of business (which shall be deemed to be the close of the NYSE) on the
Closing Date, using the valuation procedures as set forth in the Forum
Portfolio's currently effective prospectus.
3. Closing and Closing Date
The Closing Date shall be November 9, 2000, or such later date as
the parties may mutually agree in writing. The Closing shall take place at
the principal office of the Trust, 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7000 at 10:00 a.m. Eastern time on the first business day
following the Closing Date. Forum Funds shall have provided for delivery, as
of the Closing, of those Net Assets of the Forum Portfolio to be transferred
to the Trust's Custodian, Forum Trust, LLC, Two Portland Square, Portland,
Maine 04101, for the benefit of the Stratevest Fund. Also, Forum Funds
shall deliver at the Closing a list of names and addresses of the
shareholders of record of the Forum Portfolio and the number of full and
fractional shares of beneficial interest of the Forum Portfolio owned by each
such shareholder, indicating thereon which such shares are represented by
outstanding certificates and which by book-entry accounts, all as of the
close of business on the Closing Date, certified by its transfer agent, or by
its Secretary to the best of their knowledge and belief. The Trust shall
issue and deliver a certificate or certificates evidencing the shares of
beneficial interest of the Stratevest Fund to be delivered at the Closing to
the Forum Portfolio registered in such manner as Forum Funds may request, or
provide evidence satisfactory to Forum Funds that such shares of beneficial
interest of the Stratevest Fund have been registered in an open account on
the books of the Stratevest Fund in such manner as Forum Funds may request.
4. Representations and Warranties by Forum Funds
Forum Funds represents and warrants to the Trust that:
(a)...Forum Funds is a business trust created under the laws of
the State of Delaware on August 29, 1995, and is validly existing and in good
standing under the laws of that state. Forum Funds, of which the Forum
Portfolio is a diversified separate series of shares, is duly registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company and all of its shares sold have been
sold pursuant to an effective registration statement filed under the 1933
Act, except for those shares sold pursuant to the private offering exemption
for the purpose of raising the required initial capital.
(b)...Forum Funds is authorized to issue an unlimited number of
shares of beneficial interest, without par value. Each outstanding share is
fully paid, non-assessable, fully transferable and has full voting rights.
(c)...The financial statements appearing in Forum Funds' Annual
Report to Shareholders for the fiscal year ended May 31, 2000, audited by
Deloitte & Touche LLP, copies of which have been delivered to the Trust,
fairly present the financial position of the Forum Portfolio as of the date
indicated, and the results of its operations for the period indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis.
(d)...The books and records of the Forum Portfolio made available
to the Trust and/or its counsel are true and correct and contain no material
omissions with respect to the business and operations of the Forum Portfolio.
(e)...Forum Funds has the necessary power and authority to
conduct its business as such business is now being conducted.
(f)...Forum Funds is not a party to or obligated under any
provision of its Trust Instrument, By-laws, or any contract or any other
commitment or obligation, and is not subject to any order or decree, which
would be violated by its execution of or performance under this Agreement and
Plan of Reorganization.
(g)...Forum Funds is not under the jurisdiction of a Court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
(h)...The Forum Portfolio does not have any unamortized or unpaid
organizational fees or expenses.
(i)...The Forum Portfolio has since its inception satisfied and
will at the Closing satisfy, and consummation of this Agreement will not
cause it to fail to satisfy, for any period, the requirements of Subchapter M
of the Code.
(j)...At the Closing, the Forum Portfolio will have good and
marketable title to all of the securities and other assets shown on the
statement of assets and liabilities referred to in Section 6(a) hereof, free
and clear of all liens or encumbrances of any nature whatsoever except such
restrictions as might arise under the 1933 Act with respect to privately
placed or otherwise restricted securities that the Forum Portfolio may have
acquired in the ordinary course of business and such imperfections of title
or encumbrances as do not materially detract from the value or use of the
assets subject thereto, or materially affect title thereto.
5. Representations and Warranties by the Trust
The Trust represents and warrants to Forum Funds that:
(a)...The Trust is a business trust created under the laws of the
State of Delaware on July 10, 2000, and is validly existing and in good
standing under the laws of that state. The Trust, of which the Stratevest
Fund is a diversified separate series of shares, is duly registered under the
1940 Act, as an open-end, management investment company and all of its shares
sold have been sold pursuant to an effective registration statement filed
under the 1933 Act, except for those shares sold pursuant to the private
offering exemption for the purpose of raising the required initial capital.
(b)...The Trust is authorized to issue an unlimited number of
shares of beneficial interest, without par value. Each outstanding share is
fully paid, non-assessable, fully transferable, and has full voting rights.
The shares of beneficial interest of the Stratevest Fund to be issued
pursuant to this Agreement will be fully paid, non-assessable, fully
transferable and have full voting rights.
(c)...At the Closing, the shares of beneficial interest of the
Stratevest Fund will be eligible for offering to the public in those states
of the United States and jurisdictions in which the shares of the Forum
Portfolio are presently eligible for offering to the public, and there are a
sufficient number of such shares registered under the 1933 Act, to permit the
transfers contemplated by this Agreement to be consummated.
(d)...The books and records of the Stratevest Fund made available
to Forum Funds and/or its counsel are true and correct and contain no
material omissions with respect to the business and operations of the
Stratevest Fund.
(e)...The Trust has the necessary power and authority to conduct
its business as such business is now being conducted.
(f)...The Trust is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, By-laws, or any contract
or any other commitment or obligation, and is not subject to any order or
decree, which would be violated by its execution of or performance under this
Agreement.
(g)...Neither the Trust nor the Stratevest Fund is under the
jurisdiction of a Court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(h) ..The Stratevest Fund shall qualifiy as a regulated
investment company under Part I of Subchapter M of the Code in respect of its
current taxable year.
6. Representations and Warranties by Forum Funds and the Trust
Forum Funds and the Trust each represents and warrants to the
other that:
(a)...The statement of assets and liabilities to be furnished by
it as of the close of business on the Closing Date for the purpose of
determining the number of shares of beneficial interest of the Stratevest
Fund to be issued pursuant to Section 1 of this Agreement will accurately
reflect its Net Assets in the case of the Forum Portfolio and its net assets
in the case of the Stratevest Fund, and outstanding shares of beneficial
interest, as of such date, in conformity with generally accepted accounting
principles applied on a consistent basis.
(b)...There are no legal, administrative or other proceedings
against, or, to its knowledge, threatened against it which would materially
affect its financial condition or its ability to consummate the transactions
contemplated by this Agreement. It is not charged with or, to the best of
its knowledge, threatened with any violation or investigation of any possible
violation of any provisions of any federal, state or local law or regulation
or administrative ruling relating to any aspect of its business.
(c)...There are no known actual or proposed deficiency
assessments with respect to any taxes payable by it.
(d)...It has duly filed all Tax (as defined below) returns and
reports (including information returns), which are required to be filed by
it, and all such returns and reports accurately state the amount of Tax owed
for the periods covered by the returns, or, in the case of information
returns, the amount and character of income required to be reported by it.
It has paid all Taxes shown to be due on such returns and reports. The
amounts set up as provisions for Taxes in its books and records as of the
Closing Date will, to the extent required by generally accepted accounting
principles, be sufficient for the payment of all Taxes of any kind, whether
accrued, due, absolute, contingent or otherwise, which were or which may be
payable by it for any periods or fiscal years prior to or including the
Closing Date, including all Taxes imposed before or after the Closing Date
which are attributable to any such period or fiscal year. No return filed by
it is currently being audited by the Internal Revenue Service or by any state
or local taxing authority. As used in this Agreement, "Tax" or "Taxes" means
all federal, state, local and foreign (whether imposed by a country or
political subdivision or authority thereunder) income, gross receipts,
excise, sales, use, value added, employment, franchise, profits, property, ad
valorem or other taxes, stamp taxes and duties, fees, assessments or charges,
whether payable directly or by withholding, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (foreign or domestic) with respect thereto.
(e)...It has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action of its Board of Trustees, and this Agreement constitutes its valid and
binding obligation enforceable in accordance with its terms.
(f) ..All information provided to Forum Funds by the Trust
relating to the Trust and The Stratevest Group, N.A. and other Trust service
providers, and by Forum Funds to the Trust relating to the Forum Portfolio
and Forum Investment Advisors, LLC, and their respective affiliates, for
inclusion in, or transmittal with, the Combined Proxy Statement and
Prospectus with respect to this Agreement and Plan of Reorganization pursuant
to which approval of the Forum Portfolio's shareholders will be sought, shall
not contain any untrue statement of a material fact, or omit to state a
material fact required to be stated in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
7. Covenants of Forum Funds and the Trust
(a)...Forum Funds and the Trust each covenant to operate their
respective businesses as presently conducted between the date hereof and the
Closing.
(b)...Forum Funds undertakes that it will not acquire the
Stratevest Fund's shares for the purpose of making distributions thereof
other than to the Forum Portfolio's shareholders.
(c)...Forum Funds and the Trust each agree that by the Closing,
all of its federal and other Tax returns and reports required by law to be
filed on or before such date shall have been filed and all federal and other
Taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such Taxes.
(d)...Forum Funds will at the Closing provide the Trust with:
(1) A statement of the respective tax basis of all
investments to be transferred by the Forum Portfolio to the
Stratevest Fund certified by ________________.
(2) A copy of the shareholder ledger accounts for all the
shareholders of record of the Forum Portfolio as of the close of
business on the Closing Date, who are to become shareholders of
the Stratevest Fund as a result of the transfer of assets which
is the subject of this Agreement, certified by its transfer agent
or the Forum Portfolio's Vice President or Secretary to the best
of their knowledge and belief.
(e)...Forum Funds agrees to mail to each shareholder of record of
the Forum Portfolio entitled to vote at the meeting of shareholders at which
action on this Agreement is to be considered, in sufficient time to comply
with requirements as to notice thereof, a Combined Proxy Statement and
Prospectus as provided by the Trust.
(f)...The Trust will file with the United States Securities and
Exchange Commission (the "Commission") a Registration Statement on Form N-14
under the 1933 Act ("Registration Statement"), relating to the shares of
beneficial interest of the Stratevest Fund issuable hereunder, and will use
its best efforts to provide that such Registration Statement becomes
effective as promptly as practicable. At the time such Registration
Statement becomes effective, it (i) will comply in all material respects with
the applicable provisions of the 1933 Act, and the rules and regulations
promulgated thereunder; and (ii) will not contain 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. At the time the
Registration Statement becomes effective, at the time of the Forum
Portfolio's shareholders' meeting, and at the Closing, the prospectuses and
statements of additional information included in the Registration Statement
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8. Conditions Precedent to be Fulfilled by Forum Funds and the Trust
The obligations of Forum Funds and the Trust to effectuate this
Agreement and the Plan of Reorganization hereunder shall be subject to the
following respective conditions:
(a)...That (1) all the representations and warranties of the
other party contained herein shall be true and correct as of the Closing with
the same effect as though made as of and at such date; (2) the other party
shall have performed all obligations required by this Agreement to be
performed by it prior to the Closing; and (3) the other party shall have
delivered to such party a certificate signed by its Secretary or equivalent
officer to the foregoing effect.
(b)...That the other party shall have delivered to such party a
copy of the resolutions approving this Agreement adopted by the other party's
Board of Trustees, certified by the Secretary or equivalent officer.
(c)...That the Commission shall not have issued an unfavorable
advisory report under Section 25(b) of the 1940 Act, nor instituted nor
threatened to institute any proceeding seeking to enjoin consummation of the
reorganization contemplated hereby under Section 25(c) of the 1940 Act, and
no other legal, administrative or other proceeding shall be instituted or
threatened which would materially affect the financial condition of either
party or would prohibit the transactions contemplated hereby.
(d)...That the adoption of this Agreement and the Plan of
Reorganization contemplated hereby shall have been approved by the holders of
at least a majority of the outstanding shares of the Forum Portfolio at a
special meeting to be held no later than _________, 2000 or such other date
as the parties may agree.
(e)...That the Forum Portfolio shall have declared a distribution
or distributions prior to the Closing Date which, together with all previous
distributions, shall have the effect of distributing to its shareholders (i)
all of its ordinary income and all of its capital gain net income, if any,
for the period from the close of its last fiscal year to the close of
business on the Closing Date, and (ii) any undistributed ordinary income and
capital gain net income from any prior period. Capital gain net income has
the meaning given such term by Section 1222(9) of the Code.
(f)... That prior to or at the Closing, Forum Funds and the Trust
shall receive an opinion from Stradley, Ronon, Stevens & Young LLP, to the
effect that, provided the acquisition contemplated hereby is carried out in
accordance with this Agreement and in accordance with customary
representations provided by Forum Funds and the Trust in certificates
delivered to officers of the Trust:
(1) The acquisition by the Stratevest Fund of
substantially all of the assets of the Forum Portfolio, as
provided for herein, in exchange for the Stratevest Fund voting
shares and the assumption by the Stratevest Fund of the Forum
Portfolio's liabilities, followed by the distribution by the
Forum Portfolio to its shareholders of the Stratevest Fund voting
shares, in complete liquidation, will qualify as a reorganization
within the meaning of Section 368(a)(1) of the Code, and the
Stratevest Fund and the Forum Portfolio will each be a "party to
the reorganization" within the meaning of Section 368(b) of the
Code;
(2) No gain or loss will be recognized by the Forum
Portfolio upon the transfer of substantially all of its assets to
the Stratevest Fund in exchange solely for voting shares of the
Stratevest Fund and the assumption by the Stratevest Fund of the
Forum Portfolio's liabilities (Section 361(a) and Section 357(a)
of the Code);
(3) No gain or loss will be recognized by the Forum
Portfolio upon the distribution of voting shares of the
Stratevest Fund to its shareholders pursuant to the liquidation
of the Forum Portfolio (in pursuance of the Plan of
Reorganization) (Section 361(c)(1) of the Code);
(4) No gain or loss will be recognized by the Stratevest
Fund upon the receipt by it of substantially all of the assets of
the Forum Portfolio in exchange solely for voting shares of the
Stratevest Fund (Section 1032(a) of the Code);
(5) The basis of the assets of the Forum Portfolio
received by the Stratevest Fund will be the same as the basis of
such assets to the Forum Portfolio immediately prior to the
exchange (Section 362(b) of the Code);
(6) The holding period of the assets of the Forum
Portfolio received by the Stratevest Fund will include the period
during which such assets were held by the Forum Portfolio
(Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the
shareholders of the Forum Portfolio upon the exchange of their
shares in the Forum Portfolio for voting shares of the Stratevest
Fund (including fractional shares to which they may be entitled)
(Section 354(a) of the Code);
(8) The basis of the Stratevest Fund's shares received by
the Forum Portfolio shareholders (including fractional shares to
which they may be entitled) shall be the same as the basis of the
shares of the Forum Portfolio exchanged therefor (Section
358(a)(1) of the Code);
(9) The holding period of the Stratevest Fund's shares
received by the Forum Portfolio's shareholders (including
fractional shares to which they may be entitled) will include the
holding period of the Forum Portfolio's shares surrendered in
exchange therefor, provided that the Forum Portfolio shares were
held as a capital asset on the effective date of the
Reorganization (Section 1223(l) of the Code); and
(10) The Stratevest Fund will succeed to and take into
account as of the date of the transfer (as defined in Section
1.381(b)-1(b) of the Treasury Regulations) the items of the Forum
Portfolio described in Section 381(c) of the Code, subject to the
conditions and limitations specified in Sections 381, 382, 383
and 384 of the Code and the Treasury Regulations thereunder.
(g)... That the Trust shall have received an opinion in form and
substance satisfactory to it from Seward & Kissel LLP, counsel to Forum
Funds, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws now or hereafter affecting generally the enforcement of
creditors' rights:
(1) Forum Funds was created as a business trust under the
laws of the State of Delaware on August 29, 1995, and is validly
existing and in good standing under the laws of the State of
Delaware;
(2) Forum Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, and
assuming that the initial shares of beneficial interest of the
Forum Portfolio were issued in accordance with the 1940 Act, and
the Trust Instrument and By-laws of Forum Funds, and that all
other outstanding shares of the Forum Portfolio were sold, issued
and paid for in accordance with the terms of the Forum
Portfolio's prospectus in effect at the time of such sales, each
such outstanding share is fully paid, non-assessable, fully
transferable and has full voting rights;
(3) Forum Funds is an open-end, investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in the Forum Portfolio's
currently effective prospectus, such counsel does not know of any
material suit, action, or legal or administrative proceeding
pending or threatened against Forum Funds, the unfavorable
outcome of which would materially and adversely affect Forum
Funds or the Forum Portfolio;
(5) All actions required to be taken by Forum Funds to
authorize this Agreement and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary
action on the part of Forum Funds;
(6) Neither the execution, delivery nor performance of
this Agreement by Forum Funds violates any provision of its Trust
Instrument, its By-Laws, or the provisions of any agreement or
other instrument, known to such counsel to which Forum Funds is a
party or by which Forum Funds is otherwise bound; and
(7) This Agreement is the legal, valid and binding
obligation of Forum Funds and is enforceable against Forum Funds
in accordance with its terms.
In giving the opinions set forth above, this counsel may state
that it is relying on certificates of the officers of Forum Funds with regard
to matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of Forum Funds and
Forum Portfolio.
(h)...That Forum Funds shall have received an opinion in form and
substance satisfactory to it from Stradley, Ronon, Stevens & Young LLP to the
effect that, subject in all respects to the effects of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other laws
now or hereafter affecting generally the enforcement of creditors' rights:
(1) The Trust was created as a business trust under the
laws of the State of Delaware on July 10, 2000, and is validly
existing and in good standing under the laws of the State of
Delaware;
(2) The Trust is authorized to issue an unlimited number
of shares of beneficial interest, without par value, and,
assuming that the initial shares of beneficial interest of the
Stratevest Fund were issued in accordance with the 1940 Act and
the Trust's Agreement and Declaration of Trust and By-laws, and
that all other outstanding shares of the Stratevest Fund were
sold, issued and paid for in accordance with the terms of the
Stratevest Fund's prospectus in effect at the time of such sales,
each such outstanding share is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Trust is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in the Stratevest Fund's
currently effective prospectus, such counsel does not know of any
material suit, action, or legal or administrative proceeding
pending or threatened against the Trust, the unfavorable outcome
of which would materially and adversely affect the Trust or the
Stratevest Fund;
(5) The shares of beneficial interest of the Stratevest
Fund to be issued pursuant to the terms of this Agreement have
been duly authorized and, when issued and delivered as provided
in this Agreement, will have been validly issued and fully paid
and will be nonassessable by the Trust or the Stratevest Fund;
(6) All actions required to be taken by the Trust to
authorize this Agreement and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary
action on the part of the Trust;
(7) Neither the execution, delivery nor performance of
this Agreement by the Trust violates any provision of its
Agreement and Declaration of Trust, its Bylaws, or the provisions
of any agreement or other instrument, known to such counsel to
which the Trust is a party or by which the Trust is otherwise
bound;
(8) This Agreement is the legal, valid and binding
obligation of the Trust and is enforceable against the Trust in
accordance with its terms; and
(9) The registration statement of the Trust filed with
the Commission on July 17, 2000, is, at the time of the signing
of this Agreement, effective under the 1933 Act, and, to the best
knowledge of such counsel, no stop order suspending the
effectiveness of the registration statement has been issued, and
no proceedings for such purpose have been instituted or are
pending before or threatened by the Commission under the 1933
Act, and nothing has come to its attention that causes it to
believe that at the time the registration statement became
effective, or at the time of the signing of this Agreement, such
registration statement (except for the financial statements and
other financial and statistical data included therein, as to
which counsel need express no opinion), contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and such counsel knows of no legal or
government proceedings required to be described in the
registration statement or of any contract or document of a
character required to be described in the registration statement
that is not described as required.
In giving the opinions set forth above, this counsel may state
that it is relying on certificates of the officers of the Trust with regard
to matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of the Trust and the
Stratevest Fund.
(i)...That Forum Funds shall have received a certificate from the
Vice President and Secretary of the Trust to the effect that the statements
contained in the registration statement of the Trust filed with the
Commission on July 17, 2000, at the time the registration statement became
effective, at the date of the signing of this Agreement, at the Closing, and
at all times during this period did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(j)...That the Trust's Registration Statement with respect to the
shares of beneficial interest of the Stratevest Fund to be delivered to the
Forum Portfolio's shareholders in accordance with this Agreement shall have
become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have
been issued prior to the Closing or shall be in effect at the Closing, and no
proceedings for the issuance of such an order shall be pending or threatened
on that date.
(k)...That the shares of beneficial interest of the Stratevest
Fund to be delivered hereunder shall be eligible for sale by the Trust with
each state commission or agency with which such eligibility is required in
order to permit the shares lawfully to be delivered to each Forum Portfolio
shareholder.
(l)...That at the Closing, Forum Funds transfers to the
Stratevest Fund aggregate Net Assets of the Forum Portfolio comprising at
least 90% in fair market value of the total net assets and 70% in fair market
value of the total gross assets recorded on the books of the Forum Portfolio
on the Closing Date.
(m)...That the Forum Portfolio shall receive from the Trust a
duly executed instrument whereby the Trust on behalf of the Stratevest Fund
assumes all of the stated liabilities of the Forum Portfolio.
(n)...The Forum Portfolio and the Stratevest Fund shall have
received a letter dated as of the Closing Date from _______________ in form
and substance reasonably satisfactory to them to the effect that on the basis
of limited procedures as agreed to by them and described in such letter (but
not an examination in accordance with generally accepted auditing standards):
(1) nothing came to their attention that caused them to
believe that the relevant unaudited pro forma financial
statements included in the Registration Statement do not comply
as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that
the relevant pro forma adjustments have not properly been applied
to the historical amounts in the compilation of those amounts;
(2) the data used in the calculation of the current and
pro forma expense ratios of the Forum Portfolio and the
Stratevest Fund appearing in the Registration Statement,
including the proxy materials, agree with the underlying
accounting records of the Forum Portfolio and the Stratevest
Fund, as appropriate, or with written estimates provided by
officers of Forum Funds and the Trust, as applicable, having
responsibility for financial and reporting matters; and
(3) the information relating to the Stratevest Fund and
the Forum Portfolio appearing in the Registration Statement that
is expressed in dollars or percentages of dollars has been
obtained from the accounting records of the Stratevest Fund or
the Forum Portfolio, as appropriate, or from schedules prepared
by officers of the Trust and Forum Funds, as applicable, having
responsibility for financial and reporting matters and such
information is in agreement with such records or schedules or
with computations made therefrom.
(o)...That all required consents of other parties and all other
consents, orders, and permits of federal, state and local regulatory
authorities (including those of the Commission and of state Blue Sky
securities authorities, including any necessary "no-action" positions or
exemptive orders from such federal and state authorities) to permit
consummation of the transaction contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order, or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Stratevest Fund or the Forum Portfolio, provided that either party hereto
may for itself waive any of such conditions.
9. Brokerage Fees and Expenses; Other Agreements
(a)...Forum Funds and the Trust each represents and warrants to
the other that there are no broker or finders' fees payable by it in
connection with the transactions provided for herein.
(b)...The expenses of entering into and carrying out the
provisions of this Agreement, including all legal and accounting expenses in
connection herewith whether or not consummated, shall be borne exclusively by
The Stratevest Group, N.A. and/or its affiliates and/or subsidiaries and
other parties, and neither Forum Funds nor the Trust will bear any such
expenses.
(c)...Any other provision of this Agreement to the contrary
notwithstanding, any liability of the Forum Portfolio under this Agreement or
in connection with the transaction contemplated herein with respect to the
Forum Portfolio, shall be discharged only out of the assets of the Forum
Portfolio, and no other series of Forum Funds shall be liable with respect
thereto.
(d)...Any other provision of this Agreement to the contrary
notwithstanding, any liability of the Stratevest Fund under this Agreement or
in connection with the transaction contemplated herein with respect to the
Stratevest Fund, shall be discharged only out of the assets of the Stratevest
Fund, and no other series of the Stratevest Funds shall be liable with
respect thereto.
10. Termination; Waiver; Order
(a)... Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after adoption
thereof by the shareholders of the Forum Portfolio) prior to the Closing as
follows:
(1) by mutual consent of Forum Funds and the Trust;
(2) by the Trust if any condition precedent to its
obligations set forth in Section 8 has not been fulfilled or
waived by the Trust; or
(3) by Forum Funds if any condition precedent to its
obligations set forth in Section 8 has not been fulfilled or
waived by Forum Funds.
An election by Forum Funds or the Trust to terminate this
Agreement and to abandon the Plan of Reorganization shall be exercised,
respectively, by the Board of Trustees of Forum Funds or the Board of
Trustees of the Trust.
(b)...In the event of termination of this Agreement pursuant to
the provisions hereof, the same shall become void and have no further effect,
and there shall not be any liability on the part of either Forum Funds or the
Trust or persons who are their trustees, officers, agents or shareholders in
respect of this Agreement.
(c)...At any time prior to the Closing, any of the terms or
conditions of this Agreement may be waived by either Forum Funds or the
Trust, respectively (whichever is entitled to the benefit thereof), by action
taken by the Board of Trustees of Forum Funds or the Board of Trustees of the
Trust, if, in the judgment of the Board of Trustees of Forum Funds or the
Board of Trustees of the Trust (as the case may be), such action or waiver
will not have a material adverse affect on the benefits intended under this
Agreement to the holders of shares of the Forum Portfolio or the Stratevest
Fund, on behalf of which such action is taken.
(d)... The respective representations, warranties and covenants
contained in Sections 4-7 hereof shall expire with, and be terminated by, the
consummation of the Plan of Reorganization, and neither Forum Funds nor the
Trust nor any of their officers, trustees, agents or shareholders shall have
any liability with respect to such representations or warranties after the
Closing. This provision shall not protect any officer, trustee, agent or
shareholder of Forum Funds or the Trust against any liability to the entity
for which that officer, trustee, agent or shareholder so acts or to its
shareholders to which that officer, trustee, agent or shareholder would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.
(e)...If any order or orders of the Commission with respect to
this Agreement shall be issued prior to the Closing and shall impose any
terms or conditions which are determined by action of the Board of Trustees
of Forum Funds or the Board Trustees of the Trust to be acceptable, such
terms and conditions shall be binding as if a part of this Agreement without
further vote or approval of the shareholders of the Forum Portfolio, unless
such terms and conditions shall result in a change in the method of computing
the number of shares of beneficial interest of the Stratevest Fund to be
issued to the Forum Portfolio in which event, unless such terms and
conditions shall have been included in the proxy solicitation material
furnished to the shareholders of the Forum Portfolio prior to the meeting at
which the transactions contemplated by this Agreement shall have been
approved, this Agreement shall not be consummated and shall terminate unless
Forum Funds shall promptly call a special meeting of shareholders of the
Forum Portfolio at which such conditions so imposed shall be submitted for
approval.
11. Indemnification by Forum Funds and the Forum Portfolio
Forum Funds and the Forum Portfolio hereby agree to indemnify and hold
the Trust and the Stratevest Fund and each of them harmless from all loss,
liability and expense (including reasonable counsel fees and expenses in
connection with the contest of any claim) which the Trust or the Stratevest
Fund may incur or sustain by reason of the fact that (i) the Trust or the
Stratevest Fund shall be required to pay any corporate obligation of Forum
Funds or the Forum Portfolio, whether consisting of Tax deficiencies or
otherwise, based upon a claim or claims against Forum Funds or the Forum
Portfolio which were omitted or not fully reflected in the financial
statements to be delivered to the Trust in connection with the Closing; (ii)
any representations or warranties made by Forum Funds in Sections 4 and 6
hereof should prove to be false or erroneous in any material respect; (iii)
any covenant has been breached in any material respect; or (iv) any claim is
made alleging that (a) the Combined Proxy Statement and Prospectus delivered
to the shareholders of the Forum Portfolio in connection with this
transaction, or (b) the Registration Statement and Prospectus on Form N-14 of
which such Combined Proxy Statement and Prospectus forms a part, included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such claim is based
on written information furnished to Forum Funds by the Trust, its investment
adviser or distributor.
12. Indemnification by the Trust
The Trust hereby agrees to indemnify and hold Forum Funds and the Forum
Portfolio harmless from all loss, liability and expenses (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which Forum Funds or the Forum Portfolio may incur or sustain by
reason of the fact that (i) any representations or warranties made in
Sections 5 and 6 hereof should prove false or erroneous in any material
respect, (ii) any covenant has been breached in any material respect, or
(iii) any claim is made alleging that (a) the Combined Proxy Statement and
Prospectus delivered to the shareholders of the Forum Portfolio in connection
with this transaction or (b) the Registration Statement on Form N-14 of which
such Combined Proxy Statement and Prospectus forms a part, included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such claim is based
on written information furnished to the Trust by Forum Funds, its investment
adviser or distributor.
13. Notice of Claim of Indemnification
In the event that any claim is made against the Stratevest Fund in
respect of which indemnity may be sought by the Trust or the Stratevest Fund
from Forum Funds or the shareholders of the Forum Portfolio under Section 11
of this Agreement, or, in the event that any claim is made against Forum
Funds or the Forum Portfolio in respect of which indemnity may be sought by
Forum Funds or the Forum Portfolio from the Trust under Section 12 of this
Agreement, then the party seeking indemnification (the "Indemnified Party")
shall, with reasonable promptness and before payment of such claim, give
written notice of such claim to the other party (the "Indemnifying Party").
If no objection as to the validity of the claim is made in writing to the
Indemnified Party by the Indemnifying Party within thirty (30) days after
giving notice hereunder, then, the Indemnified Party may pay such claim and
shall be entitled to reimbursement therefor, pursuant to this Agreement. If,
prior to the termination of such thirty-day period, objection in writing as
to the validity of such claim is made to the Indemnified Party, the
Indemnified Party shall withhold payment thereof until the validity of the
claim is established (i) to the satisfaction of the Indemnifying Party, or
(ii) by a final determination of a court of competent jurisdiction, whereupon
the Indemnified Party may pay such claim and shall be entitled to
reimbursement thereof, pursuant to this Agreement and Plan of Reorganization,
or (iii) with respect to any Tax claims, within seven (7) calendar days
following the earlier of (A) an agreement between Forum Funds and the Trust
that an indemnity amount is payable, (B) an assessment of a Tax by a taxing
authority, or (C) a "determination" as defined in Section 1313(a) the Code.
For purposes of this Section 13, the term "assessment" shall have the same
meaning as used in Chapter 63 of the Code and Treasury Regulations
thereunder, or any comparable provision under the laws of the appropriate
taxing authority. In the event of any objection by the Indemnifying Party,
the Indemnifying Party shall promptly investigate the claim, and if it is not
satisfied with the validity thereof, the Indemnifying Party shall conduct the
defense against such claim. All costs and expenses incurred by the
Indemnifying Party in connection with such investigation and defense of such
claim shall be borne by it. These indemnification provisions are in addition
to, and not in limitation of, any other rights the parties may have under
applicable law.
14. Final Tax Returns and Forms 1099 of the Forum Portfolio
(a)...After the Closing, Forum Funds shall or shall cause its
agents to prepare any federal, state or local Tax returns, including any
Forms 1099, required to be filed by Forum Funds with respect to the Forum
Portfolio's final taxable year ending with its complete liquidation and for
any prior periods or taxable years and shall further cause such Tax returns
and Forms 1099 to be duly filed with the appropriate taxing authorities.
(b)...Notwithstanding the provisions of Section 1 hereof, any
expenses incurred by Forum Funds (other than for payment of Taxes) in
connection with the preparation and filing of said Tax returns and Forms 1099
after the Closing, shall be borne by the Forum Portfolio to the extent such
expenses have been accrued by the Forum Portfolio in the ordinary course
without regard to the Plan of Reorganization contemplated by this Agreement;
any excess expenses shall be borne by the investment adviser to the
Stratevest Fund at the time such Tax returns and Forms 1099 are prepared
pursuant to an agreement between Forum Advisors, LLC and The Stratevest
Group, N.A. or their corporate parents.
15. Entire Agreement and Amendments
This Agreement embodies the entire Agreement between the parties
and there are no agreements, understandings, restrictions, or warranties
between the parties other than those set forth herein or herein provided
for. This Agreement may be amended only by mutual consent of the parties in
writing. Neither this Agreement nor any interest herein may be assigned
without the prior written consent of the other party.
16. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts
together shall constitute but one instrument.
17. Notices
Any notice, report, or demand required or permitted by any
provision of this Agreement shall be in writing and shall be deemed to have
been given if delivered or mailed, first class postage prepaid, addressed to
Forum Funds at Forum Financial Group, Two Portland Square, Portland, Maine
04101, Attention: David I. Goldstein, Esquire, with copies to Anthony C.J.
Nuland, Seward & Kissel LLP, 1200 G Street, N.W., Suite 350, Washington, DC
20005, or to the Trust, at 5800 Corporate Drive, Pittsburgh, PA 15237-7000,
Attention: C. Todd Gibson, as the case may be.
18. Governing Law
This Agreement shall be governed by and carried out in accordance
with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Forum Funds and the Trust have each caused
this Agreement and Plan of Reorganization to be executed on its behalf by its
duly authorized officers, all as of the day and year first above written.
FORUM FUNDS, on behalf of the
Investors High Grade Bond Fund
Attest:
......
By: Leslie K. Klenk By: John Y. Keffer
Title: Secretary Title: President
STRATEVEST FUNDS, on behalf of the
Stratevest Intermediate Bond Fund
Attest:
......
By: ...... By:
Title: Assistant Secretary Title: Vice
President
STATEMENT OF ADDITIONAL INFORMATION
STRATEVEST FUNDS
RELATING TO THE ACQUISITION OF THE ASSETS OF
INVESTORS HIGH GRADE BOND FUND OF FORUM FUNDS
This Statement of Additional Information relates specifically to
the proposed acquisition (the "Transaction") of the assets of the Investors
High Grade Bond Fund (the "Forum Portfolio") of Forum Funds ("Forum Funds")
by the Stratevest Intermediate Bond Fund (the "Stratevest Fund") of
Stratevest Funds (the "Trust").
This Statement of Additional Information relating to the
Transaction also includes the following documents, which are attached hereto
or incorporated herein by reference:
o The Prospectus for the Stratevest Fund, dated September __, 2000.
o The Statement of Additional Information for the Stratevest Fund, dated
September __, 2000.
o The Statement of Additional Information for the Forum Portfolio, dated
August 1, 2000.
o The Annual Report of the Forum Portfolio, dated March 31, 2000.
o Pro forma financial statements reflecting the financial situation of
the Stratevest Fund following the Transaction as if
the Transaction had taken place on March 31, 2000.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus/Proxy Statement.
This Statement of Additional Information is not a Prospectus; a
Prospectus/Proxy Statement dated September __, 2000, relating to the
Transaction may be obtained without charge from the Trust, 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7000, or by calling 1-800-245-0242.
This Statement of Additional Information relates to, and should be read in
conjunction with, such Prospectus/Proxy Statement. The date of this
Statement of Additional Information is September __, 2000.
4
Doc. #338577 v.08
Doc. #338577 v.08
PRO FORMA FINANCIAL STATEMENTS
Pro Forma Combined Financial
Information for the period ended March 31, 2000
The following unaudited pro forma combined financial information relates to the
acquisition of all the assets and liabilities of Investors High Grade Bond Fund,
a series of Forum Funds, by and in exchange for shares of beneficial interest of
Stratevest Intermediate Bond Fund ("Intermediate Bond Fund"), a series of
Stratevest Funds (the "Reorganization"). The information gives effect to the
Reorganization as if it had occurred on March 31, 2000, and consists of a
statement of the pro forma combined portfolio of investments, a statement of
assets and liabilities as of March 31, 2000, and a statement of operations for
the year ended March 31, 2000. The pro forma combined results of operations
represent the level of expenses of the Stratevest Intermediate Bond Fund
following the Reorganization as if the Reorganization had been consummated on
March 31, 2000. There is no guarantee that the pro forma financial information
will accurately predict the actual results of the Reorganization. This unaudited
information should be read in conjunction with the separate financial statements
of Investors High Grade Bond Fund.
[OBJECT OMITTED]
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Doc. #341816 v.03
PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF INVESTORS HIGH GRADE BOND
FUND INTO STRATEVEST INTERMEDIATE BOND FUND (UNAUDITED)
MARCH 31,2000
Note 1. General
The accompanying pro forma financial statements are presented to show the
effect of the proposed reorganization of Investors High Grade Bond Fund, a
series of Forum Funds, into Stratevest Intermediate Bond Fund (the "Fund), a
series of Stratevest Funds, as if such merger had taken place as of March 31,
2000, the fiscal year end of Investors High Grade Bond Fund. The following
notes refer to the accompanying pro forma financial statements as if the
above mentioned reorganization of Investors High Grade Bond Fund into the
Fund had taken place as of March 31, 2000.
Under the terms of the Agreement and Plan of Reorganization, the
reorganization of Investors High Grade Bond Fund and the Fund should be
treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies
(sometimes referred to as the pooling without restatement method). The
acquisition would be accomplished by an acquisition of the net assets of
Investors High Grade Bond Fund in exchange for shares of beneficial interest
of the Fund at net asset value. The statements of assets and liabilities and
the related statements of operations of the Fund and Investors High Grade
Fund have been combined as of March 31, 2000.
The Fund seeks to achieve its investment objective of providing current
income by investing primarily in high-quality corporate bonds and securities
issued by the U.S. government, its agencies and instrumentalities.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements and schedules of investments of Investors High
Grade Bond Fund which are included in its annual report dated March 31, 2000.
Note 2. Summary of Significant Accounting Policies
Stratevest Funds (the "Trust") is a Delaware business trust that is
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "Act"). The Trust currently has six
active investment portfolios. Under its Trust Instrument, the Trust is
authorized to issue an unlimited number of shares of beneficial interest for
each series of the Trust without par value.
The significant accounting policies consistently followed by the Fund are as
follows:
Security Valuation - On each business day, the Trust determines the net asset
value per share of the Fund as of the close of the regular trading day on the
New York Stock Exchange. Securities, other than short-term securities, for
which market quotations are readily available, are valued using the last
reported sales price provided by independent pricing services. If no sales
price is reported, the mean of the last bid and asked price is used. In the
absence of readily available market quotations, securities are valued at fair
value as determined by the Trust's Board of Trustees pursuant to the Trust's
valuation procedures. Securities held by the Fund that have a maturity of 60
days or less are valued at amortized cost, which approximates market value.
Security Transactions and Interest and Dividend Income - Investment
transactions are accounted for on trade date. Dividend income is recorded on
the ex-dividend date. Interest income is recorded as earned. Identified
cost of investments sold is used to determine gain or loss for both financial
statements and federal income tax purposes.
Repurchase Agreements - The Fund may invest in repurchase agreements. The
Fund, through its custodian, receives delivery of the underlying securities,
whose market value must always exceed the repurchase price.
Distributions to Shareholders - Distributions of net investment income are
declared and paid monthly. Distributions of net capital gain, if any, are
declared and paid at least annually. Distributions are based on amounts
calculated in accordance with applicable income tax regulations, which may
differ from generally accepted accounting principles. These differences are
due primarily to differing treatments of income and gain on various
investment securities held by the Fund, timing differences and differing
characterizations of distributions made by the Fund.
Federal Taxes - The Fund intends to qualify each year as a regulated
investment company and distribute all of its taxable income. In addition, by
distributing in each calendar year substantially all of its net investment
income, capital gain and certain other amounts, if any, the Fund will not be
subject to a federal excise tax. Therefore, no federal income or excise tax
provision is required.
Expense Allocation - The Trust accounts separately for the assets,
liabilities and operations of each of its series. Expenses that are directly
attributable to more than one series are allocated among the respective
series in proportion to each series' average daily net assets.
Note 3. Advisory, Servicing Fees and Other Transactions with Affiliates
Investment Adviser-- The investment adviser for the Fund is The Stratevest
Group, N.A. ("Stratevest"), a wholly-owned subsidiary of Banknorth Group.
Pursuant to an Investment Advisory Agreement, Stratevest receives an advisory
fee from the Fund at an annual rate of 0.60% of the Fund's average daily net
assets.
Administrator - The administrator for the Fund is Federated Services Company,
a subsidiary of Federated Investors, Inc. For its services, Federated
Services Company receives a fee at an annual rate of the average daily net
assets of the Trust as specified below:
Average Aggregate Daily
Maximum Administrative Fee Net Assets of the Trust
0.150 of 1% on the first $500 million
0.125 of 1% on the next $500 million
0.110 of 1% on the next $1 billion
0.100 of 1% on assets in excess of $2 billion
After the Fund's first year of operations, the administrative fee received
during any fiscal year shall be at least $75,000 per series. Federated
Services Company may voluntarily waive a portion of its fee and may reimburse
the Fund for expenses.
Transfer Agent - The transfer agent and dividend disbursing agent for the
Fund is Federated Services Company, through its registered transfer agent
subsidiary. Federated Shareholder Services Company maintains all necessary
shareholder records. For its services, Federated Shareholder Services
Company receives an annual fee per fund of $18,000 plus shareholder account
fees of $10.00 plus certain surcharges.
Other Service Provider - Forum Accounting Services, LLC ("FAcS") provides
fund accounting services to the Fund. For its services, FAcS receives an
annual fee of $45,000 per fund plus certain surcharges. Forum Trust, LLC
("Forum Trust"), is custodian for the securities and cash of the Funds. For
its services, Forum Trust receives a fee from each fund at an annual rate of
0.01% of the fund's average daily net assets, a yearly fee of approximately
$5,000, plus certain service charges.
Note 4. Pro Forma Adjustments
An adjustment was made to shares of beneficial interest of Investors High
Grade Bond Fund as if the reorganization had taken place on March 31, 2000.
The number of shares were adjusted to reflect the same net asset value per
share for the combined entity as for the Fund.
Adjustments were made to expenses to reflect the expenses as they would have
appeared based on projected expenses of the Fund. Expenses for the combined
entity are reflected as if the reorganization had occurred as of April 1,
2000.
Note 5. Subsequent Events
It is expected that approximately $140 million of common and collective trust
funds will be deposited into the Fund prior to the actual reorganization of
Investors High Grade Fund into the Fund. The common and collective fund
assets are not included in the financial information of the Fund, as they did
not constitute assets of the Fund as of March 31, 2000. Had the common and
collective fund assets been included in the pro forma financial statements as
assets of the Fund, estimated total expenses would be 1.39% and net assets
would be 1.09%.
As of August 1, 2000, the service providers for Investors High Grade Bond
Fund reduced fee waivers so that total annual expenses of the Fund would not
exceed 0.95% of the Fund's average daily net assets. Prior to August 1,
2000, fee waivers reduced the Fund's total annual expenses to 1.10% of the
Fund's average daily net assets. Had the Fund's current expense ratio been
used in the pro forma financial statements, estimated expenses of the Fund
would be 1.14% and estimated net expenses of the Fund would be 0.95%.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to officers and Trustees of the
Registrant pursuant to Section 4 of Article VII of the
Registrant's Agreement and Declaration of Trust ("Declaration of
Trust"). The Investment Advisory Contract between the Registrant
and The Stratevest Group, N.A. ("Adviser") provides that, in the
absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under the
Investment Advisory Contract on the part of Adviser, Adviser
shall not be liable to the Registrant or to any shareholder for
any act or omission in the course of or connected in any way with
rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security. The Registrant's
officers and Trustees are covered by an Investment Trust Errors
and Omissions Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be
permitted to Trustees, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware that, in the opinion of the
Securities and Exchange Commission ("SEC"), such indemnification
is against public policy as expressed in the 1933 Act, and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by Trustees,
officers, or controlling persons of the Registrant in connection
with the successful defense of any act, suit, or proceeding) is
asserted by such Trustees, officers, or controlling persons in
connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended (the "1940 Act"), for Trustees, officers, and controlling
persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the
position of the SEC as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that,
in addition to complying with the applicable provisions of the
Declaration of Trust or otherwise, in the absence of a final
decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not
be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party Trustees who are not
"interested persons" of the Registrant or (ii) by independent
legal counsel in a written opinion that the indemnitee was not
liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant
further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it
is ultimately determined that indemnification is appropriate)
against an officer, Trustee, or controlling person of the
Registrant will not be made absent the fulfillment of at least
one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Registrant is insured
against losses arising by reason of any lawful advances; or (iii)
a majority of a quorum of disinterested non-party Trustees, or
independent legal counsel in a written opinion, makes a factual
determination that there is reason to believe the indemnitee will
be entitled to indemnification.
Item 16. Exhibits
(1) Copies of the Charter of the Registrant as now in effect.
(a) Certificate of Trust of the Registrant, dated July 7, 2000,
as filed with the Office of the Secretary of State of the
State of Delaware on July 10, 2000, is incorporated herein
by reference to the Registrant's Registration Statement on
Form N-1A, as filed electronically with the SEC on July 17,
2000. (Accession Number: 0001119381-00-000002).
(b) Agreement and Declaration of Trust of the Registrant, dated
July 7, 2000, is incorporated herein by reference to the
Registrant's Registration Statement on Form N-1A, as filed
electronically with the SEC on July 17, 2000. (Accession
Number: 0001119381-00-000002).
(2) By-Laws.
By-Laws of the Registrant, dated as of June 30, 2000, are
incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A, as filed electronically with the SEC on
July 17, 2000. (Accession Number: 0001119381-00-000002).
(3) Voting Trust Agreement.
Not applicable.
(4) Copies of the agreement of acquisition, reorganization, merger,
liquidation and any amendments to it:
Form of Agreement and Plan of Reorganization is filed herewith as
Exhibit A to the Combined Prospectus/Proxy Statement.
(5) Instruments defining the rights of security holders.
The rights of security holders of the Registrant are defined in
the following sections of the Registrant's Agreement and
Declaration of Trust and By-Laws:
(a) Agreement and Declaration of Trust.
See Article III, "Shares," Section 4 and Section 6; Article
V, "Shareholders' Voting Powers and Meetings," Section 1;
and Article VI, "Net Asset Value, Distributions and
Redemptions," Section 2.
(b) By-Laws.
See Article II, "Meetings of Shareholders," Section 6 and
Section 9.
(6) Investment Advisory Contracts.
Investment Advisory Agreement, dated _____________, 2000, between
The Stratevest Group, N.A. and the Registrant, on behalf of the
Stratevest Fund, is to be filed by amendment.
(7) Underwriting or Distribution Contracts.
Distribution Agreement, dated _____________, 2000, between
Edgewood Services, Inc. and the Registrant, on behalf of each
series, is to be filed by amendment.
(8) Bonus, Profit Sharing, Pension or other similar contracts.
Not Applicable.
(9) Custodian Agreements.
Custodian Agreement, dated _____________, 2000, between Forum
Trust, LLC and the Registrant, on behalf of each series, is to be
filed by amendment.
(10) Rule 12b-1 Plan and Rule 18f-3 Plan.
(a) Distribution Plan, dated __________, 2000, of the
Registrant, on behalf of each series, is to be filed by
amendment.
(b) Mutual Funds Sales and Service Agreement, dated
____________, 2000, of the Registrant, on behalf of each
series, is to be filed by amendment.
(11) Opinion of Counsel.
Legal opinion of ____________________, counsel to the Registrant,
as to the legality of the securities being registered, is to be
filed by amendment.
(12) Opinion of Counsel supporting the tax matters and consequences to
shareholders.
Tax opinion of Stradley, Ronon, Stevens & Young, LLP, special
counsel to Federated Services Company, the administrator for the
Registrant, supporting the tax matters and consequences to
shareholders discussed in the Prospectus/Proxy Statement for the
Reorganization, is filed electronically herewith as Exhibit No.
EX-99.(12).
(13) Other material contracts.
(a) Agreement for Fund Accounting Services, Administrative
Services and Transfer Agency Services, dated _____________,
2000, between Federated Services Company and the
Registrant, on behalf of each series, is to be filed by
amendment.
(b) Shareholder Services Agreement, dated _____________, 2000,
between The Stratevest Group, N.A. and the Registrant, on
behalf of each series, is to be filed by amendment.
(14) Other opinions and consents.
(a) Consent of Deloitte & Touche, LLP, independent auditors to
the Registrant, is filed electronically herewith as Exhibit
No. EX-99.(14)(a).
(b) Consent of Deloitte & Touche, LLP, independent auditors to
Forum Funds, is filed electronically herewith as Exhibit
No. EX-99.(14)(b).
(15) Omitted financial statements.
Not Applicable.
(16) Power of Attorney.
Power-of-Attorney appointing C. Todd Gibson as attorney-in-fact
and agent, is incorporated herein by reference to the
Registrant's Registration Statement on Form N-1A, as filed
electronically with the SEC on July 17, 2000. (Accession
Number: 0001119381-00-000002).
Item 17. Undertakings
(1) The undersigned registrant agrees that, prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of 1933, as amended
(the "1933 Act"), the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on the ___ day of September 8, 2000.
STRATEVEST FUNDS
By: /s/ C. Todd Gibson
C. Todd Gibson
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE: TITLE: DATE:
/s/ C. Todd Gibson President, on behalf September 8, 2000
of the Trust and
himself, as President
and Trustee of the
Trust
---------------------------------
C. Todd Gibson
/s/ Peter J. Germain Trustee September 8, 2000
---------------------------------
Peter J. Germain
/s/ Beth S. Broderick Treasurer, Chief September 8, 2000
Accounting Officer and
Trustee
---------------------------------
Beth S. Broderick
EXHIBIT INDEX
Sequentially
Exhibit No. Document Numbered Page
EX-99.(12) Form of Tax Opinion of Stradley, Ronon, Stevens
& Young, LLP
EX-99.(14)(a) Consent of Deloitte & Touche, LLP, independent
auditors to Registrant
EX-99.(14)(b) Consent of Deloitte & Touche, LLP, independent
auditors to Forum Funds
3
Doc. #341816 v.03
[EX-99.(12)]
______________, 2000
Board of Trustees
Stratevest Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Board of Trustees
Forum Funds
P.O. Box 446
Portland, Maine 04112
Re: Agreement and Plan of Reorganization, dated as of the [___]
day of [ ], 2000 (the "Plan"), made by Forum Funds,
on behalf of its series, the Investors High Grade Bond Fund
(the "Acquired Fund") and Stratevest Funds, on behalf of
its series, the Stratevest Intermediate Term Bond Fund (the
"Acquiring Fund")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of the Acquired Fund, which will consist
of: (i) the acquisition, by the Acquiring Fund, of substantially all of the
property, assets and goodwill of the Acquired Fund, in exchange solely for
shares of beneficial interest, without par value, of the Acquiring Fund (the
"Acquiring Fund Shares"); (ii) the distribution by the Acquired Fund of the
Acquiring Fund Shares to the shareholders of the Acquired Fund; and (iii)
the subsequent dissolution of the Acquired Fund, as soon as practicable after
the closing (the "Reorganization"), all upon and subject to the terms and
conditions of the Plan.
In rendering our opinion, we have reviewed and relied upon: (a)
the Plan, dated as of the [___] day of [ ], 2000, made by Stratevest
Funds and Forum Funds; (b) the proxy materials provided to shareholders of
the Acquired Fund in connection with the Special Meeting of Shareholders of
the Acquired Fund held on the 3rd day of November, 2000; (c) certain
representations concerning the Reorganization made to us by Stratevest Funds,
on behalf of the Acquiring Fund and the Acquired Fund, in a letter dated
[___________], 2000 (the "Representation Letter"); (d) all other documents,
financial and other reports and corporate minutes which we deemed relevant or
appropriate; and (e) such statutes, regulations, rulings and decisions as we
deemed material to the rendition of this opinion. All terms used herein,
unless otherwise defined, are used as defined in the Plan.
For purposes of this opinion, we have assumed that the Acquired
Fund, on the effective date of the Reorganization, satisfies, and following
the Reorganization, the Acquiring Fund will continue to satisfy, the
requirements of subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury
under Section 1276(d) of the Code, certain transfers of market discount bonds
will be excepted from the requirement that accrued market discount be
recognized on disposition of a market discount bond under Section 1276(a) of
the Code. Such regulations are to provide, in part, that accrued market
discount will not be included in income if no gain is recognized under
Section 361(a) of the Code where a bond is transferred in an exchange
qualifying as a tax-free reorganization. As of the date hereof, the
Secretary of Treasury has not issued any regulations under Section 1276 of
the Code.
Based on the foregoing, and provided the Reorganization is
carried out in accordance with the applicable laws of the State of Delaware,
the Plan and the Representation Letter, it is our opinion that:
1. The acquisition by the Acquiring Fund of substantially all
of the assets of the Acquired Fund, as provided for herein, in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
Acquired Fund's liabilities, followed by the distribution by the Acquired
Fund to its shareholders of the Acquiring Fund Shares, in complete
liquidation, will qualify as a reorganization within the meaning of Section
368(a)(1) of the Code, and the Acquired Fund and the Acquiring Fund will each
be a "party to the reorganization" within the meaning of Section 368(b) of
the Code.
2. No gain or loss will be recognized by the Acquired Fund
upon the transfer of substantially all of its assets to the Acquiring Fund in
exchange solely for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the Acquired Fund's liabilities pursuant to Section 361(a)
and Section 357(a) of the Code.
3. No gain or loss will be recognized by the Acquired Fund
upon the distribution of the Acquiring Fund Shares to its shareholders
pursuant to the liquidation of the Acquired Fund (in pursuance of the Plan)
under Section 361(c)(1) of the Code.
4. No gain or loss will be recognized by the Acquiring Fund
upon the receipt by it of substantially all of the assets of the Acquired
Fund in exchange solely for the Acquiring Fund Shares pursuant to Section
1032(a) of the Code.
5. The basis of the assets of the Acquired Fund received by
the Acquiring Fund will be the same as the basis of such assets to the
Acquired Fund immediately prior to the exchange pursuant to Section 362(b) of
the Code.
6. The holding period of the assets of the Acquired Fund
received by the Acquiring Fund will include the period during which such
assets were held by the Acquired Fund pursuant to Section 1223(2) of the Code.
7. No gain or loss will be recognized by the shareholders of
the Acquired Fund upon the exchange of their shares of the Acquired Fund (the
"Acquired Fund Shares") for the Acquiring Fund Shares (including fractional
shares to which they may be entitled), pursuant to Section 354(a) of the Code.
8. The basis of the Acquiring Fund Shares received by the
shareholders of the Acquired Fund (including fractional shares to which they
may be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
9. The holding period of the Acquiring Fund Shares received by
the shareholders of the Acquired Fund (including fractional shares to which
they may be entitled) will include the holding period of the Acquired Fund
Shares surrendered in exchange therefor, provided that the Acquired Fund
Shares were held as a capital asset on the effective date of the
Reorganization, pursuant to Section 1223(1) of the Code.
10. The Acquiring Fund will succeed to and take into account,
as of the date of the transfer (as defined in Section 1.381(b)-1(b) of the
Treasury Regulations), the items of the Acquired Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations
thereunder.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present position of the Internal
Revenue Service as set forth in published revenue rulings and revenue
procedures, present administrative positions of the Internal Revenue Service,
and existing judicial decisions, all of which are subject to change either
prospectively or retroactively. We do not undertake to make any continuing
analysis of the facts or relevant law following the date of this opinion.
Our opinion is conditioned upon the performance by the Acquiring
Fund and the Acquired Fund of their undertakings in the Plan and the
Representation Letter.
This opinion is being rendered to the Acquiring Fund and the
Acquired Fund, and may be relied upon only by such funds and the shareholders
of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:
Doc. #338577 v.08
Doc. #338577 v.08
[EX-99.(14)(b)]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-14 (the "Registration Statement on Form N-14") of our
report dated May 12, 2000 relating to the financial statements and financial
highlights of the Investors High Grade Bond Fund appearing in the March 31,
2000 Annual Report to Shareholders of the Investors High Grade Bond Fund,
which is also incorporated by reference into the Registration Statement on
Form N-14.
/s/ DELIOTTE & TOUCHE LLP
Boston, Massachusetts
September 8, 2000
