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
October 31, 2000
Dear Valued Shareholder:
Enclosed is a Notice of Special Meeting of Shareholders (the
"Special Meeting"). The Special Meeting has been scheduled for December 1, 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:
o the asset size of the Stratevest Fund is larger than the
current asset size of the Forum Portfolio, thus creating an
opportunity for the Reorganization to result in greater
investment leverage and market presence;
o 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
o 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
FORUM FUNDS
INVESTORS HIGH GRADE BOND FUND
Two Portland Square
Portland, Maine 04101
October 31, 2000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR DECEMBER 1, 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 Fund
Services, LLC, Two Portland Square, Portland, Maine 04101, on December 1, 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 October 13,
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
October 31, 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.................................................................. 9
What proposal am I voting on?...................................... 9
How will the shareholder voting be handled?........................ 10
COMPARISONS OF SOME IMPORTANT FEATURES................................... 10
How do the investment objectives, strategies and policies of the
Stratevest
Fund and the Forum Portfolio compare?........................ 10
What are the risks of investments in the Stratevest Fund and the
Forum Portfolio?............................................. 11
How are the Trust and Forum Funds organized?....................... 12
Who manages the Stratevest Fund and the Forum Portfolio?........... 13
What are the fees and expenses the Stratevest Fund and the Forum
Portfolio, and what might they be after the Reorganization?.. 14
Where can I find more financial information about the Forum Portfolio?
16
What are other key features of the Stratevest Fund and the
Forum Portfolio?............................................. 16
REASONS FOR THE REORGANIZATION........................................... 20
INFORMATION ABOUT THE REORGANIZATION..................................... 22
How will the Reorganization be carried out?........................ 22
Who will pay the expenses of the Reorganization?................... 23
What are the tax consequences of the Reorganization?............... 23
What should I know about the shares of the Stratevest Fund?........ 23
What are the capitalizations of the Stratevest Fund and the Forum
Portfolio, and what might the capitalization be after
the Reorganization?.......................................... 24
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES............. 25
Are there any significant differences between the investment objectives
and strategies of the Stratevest Fund and the Forum Portfolio?
25
How do the fundamental investment restrictions of the Stratevest
Fund and the Forum Portfolio differ?......................... 27
What are the risk factors associated with investments in the Stratevest
Fund and the Forum Portfolio?................................ 28
VOTING INFORMATION....................................................... 30
How many votes are necessary to approve the Plan?.................. 30
How do I ensure my vote is accurately recorded?.................... 30
Can I revoke my proxy?............................................. 31
Who is entitled to vote?........................................... 31
What other matters will be voted upon at the Special Meeting?...... 31
Are there dissenters' rights?...................................... 32
OTHER INFORMATION
Are there interested persons of the Reorganization?................ 32
Who are the principal holders of shares of the Forum Portfolio?.... 32
Who are the principal holders of shares of the Stratevest Fund?.... 32
What are the tax implications of investing in the Stratevest Fund
and the Forum Portfolio?..................................... 33
INFORMATION ABOUT THE STRATEVEST FUND.................................... 34
INFORMATION ABOUT THE FORUM PORTFOLIO.................................... 34
EXHIBITS TO THE PROSPECTUS AND PROXY STATEMENT
EXHIBIT A - AGREEMENT AND PLAN OF REORGANIZATION................... A-1
PROSPECTUS AND PROXY STATEMENT
DATED OCTOBER 31, 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 Fund Services,
LLC, Two Portland Square, Portland, Maine 04101, on December 1, 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 October 31, 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 19, 2000
(Revised September 25, 2000) which 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 19, 2000 (relating to the Stratevest Fund's Prospectus) and October
31, 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 1-888-247-4505 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 19, 2000 (Revised
September 25, 2000).
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 to the current value
of your shares in the Forum Portfolio.
The Stratevest Fund is a series of Stratevest Funds (the "Trust"), an
investment company that is advised by The Stratevest Group, N.A. ("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 October 13, 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 like the Forum Portfolio - it is expected that
the Stratevest Fund will generally invest to a lesser extent in these
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. Moreover, prices of fixed income securities with longer
maturities are generally more sensitive to changes in interest rates (i.e.,
their prices fluctuate to a greater extent than shorter-term fixed income
securities in response to changes in prevailing interest rates). 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. However, the Stratevest Fund may be subject to greater
risks of issuer default since it invests a higher percentage of its assets in
non-government fixed income securities. 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-one 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.
The Stratevest Adviser receives 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 until July 31, 2001. 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 STRATEVEST
FUND 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 did not exist as of March 31, 2000 and therefore had 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 October 31, 2001. 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 The assets from certain collective and common trust funds managed by the
Stratevest Adviser were merged 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 $468 $724 $979 $1,709
Stratevest Fund $509 $877 $1,269 $2,364
(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%.
Due to the merger of certain collective and common trust fund assets merged into
the Stratevest Fund at the end of September 2000, the estimated total and net
operating expenses of the Stratevest Fund are 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 12b-1 fee or 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. For the fiscal year
ended March 31, 2000, FSS waived a portion of its fee. The total gross fee
payable to FSS for the fiscal year ended March 31, 2000 was $94,997 and the
total fee received was $45,612. 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.
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. Forum Portfolio
shareholders whose account value is less than the minimum investment amount for
the Stratevest Fund will not be required to meet the minimum investment amount
of the Stratevest Fund in order to participate in the Reorganization.
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 by the Fund or
its transfer agent. 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 in October 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 anticipated tax
consequences of the Reorganization for the Forum Portfolio and its shareholders;
(vii) the fact that the costs of the Reorganization would be borne by the
Stratevest Adviser and/or other third parties; and (viii) 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. The Forum Board also considered the potential for greater assets that
could result from a concerted marketing effort of a fund family with a common
investment manager. 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 and/or other
service providers 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.
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, although a shareholder may be able to do so under applicable
provisions of Delaware law or the Investment Company Act of 1940, as amended.
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.
<TABLE>
<CAPTION>
Forum Funds - Stratevest Stratevest
Investors Funds - Fund Pro Forma
High Grade Intermediate After
-
BOND FUND BOND FUND REORGANIZATION(2)
---------- ---------- --------------
<S> <C> <C> <C>
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
</TABLE>
(1) Full pro forma financial statements are included in the Statement of
Additional Information to this Prospectus/Proxy Statement.
(2) Certain collective and common trust funds managed by the Stratevest Adviser
were merged 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 $169,000,000. 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.
In addition, the capitalization of the Stratevest Fund will be different when
the Reorganization is consummated.
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 19, 2000
(Revised September 25, 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 than the Portfolio may purchase. The Forum Portfolio's investments in
mortgage-backed securities are limited to those that are U.S. government
securities or are 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 securities, 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. However, none of these securities are expected to constitute a
principal portion of the Stratevest Fund's assets.
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 significant change in the level of investment risk
that is currently associated with an investment in the Forum Portfolio. The
differences in investment restrictions summarized below are expected to have
little practical effect on any difference in how the funds are managed.
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. However, this difference is not
material since these investments are not expected to be held by the Stratevest
Fund.
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").
You should note that non-fundamental investment policies may be changed by the
Board of Trustees of the applicable Fund without shareholder approval.
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. Since the Stratevest Fund does not invest to the same
extent as the Forum Portfolio in U.S. government securities, it may be subject
to a higher degree of credit 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 of principal on the mortgage-backed 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 Forum Shareholder Services, LLC 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 Forum
Shareholder Services, LLC 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.
Forum Shareholder Services, LLC must receive your Proxy Card or Revocation
Letter on or before November 20, 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 October 13, 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
ARE THERE INTERESTED PERSONS OF THE REORGANIZATION?
John Y. Keffer will realize a financial benefit from each Reorganization
in that an affiliate of Forum will provide service to and will receive
compensation from the Trust.
Stratevest & Co. is the nominee name for the Stratevest Adviser. The
Stratevest Adviser, in its capacity as a fiduciary, holds, as record owner for
the benefit of its trust customers. The Stratevest Adviser will receive an
investment advisory fee from the Stratevest Fund into which the Forum Portfolio
will merge.
WHO ARE THE PRINCIPAL HOLDERS OF SHARES OF THE FORUM PORTFOLIO?
As of the Record Date, there were 2,449,406.190 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
Stratevest & Co.
P.O. Box 2499
Brattleboro, VT 05303-2499 98.99%
WHO ARE THE PRINCIPAL HOLDERS OF SHARES OF THE STRATEVEST FUND?
As of the Record Date, there were 12,915,005 shares of the Stratevest Fund
outstanding. As of the Record Date, the officers and Trustees of Stratevest
Fund, as a group, beneficially owned less than 1% of the outstanding shares of
the Stratevest Fund. As of the Record Date, the following persons owned of
record or beneficially 5% or more of the outstanding shares of the Stratevest
Fund:
NAME AND ADDRESS PERCENTAGE OWNERSHIP
Stratevest & Co.
P.O. Box 2499
Brattleboro, VT 05303-2499 99.92%
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 19, 2000 (Revised September 25, 2000), and in the Statement of
Additional Information related to this Prospectus/Proxy Statement which is dated
October 31, 2000. Further information is contained in the Stratevest Fund's
Statement of Additional Information, dated September 19, 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 1-888-247-4505. 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.
EXHIBITS TO COMBINED
PROSPECTUS AND PROXY STATEMENT
EXHIBIT
A Form of 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
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 December 4, 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,
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 March 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 its transfer agent or the Forum Portfolio's Vice
President or Secretary to the best of their knowledge and belief.
(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.
(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 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
25953 (10/00)
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 19, 2000
(Revised September 25, 2000).
o The Statement of Additional Information for the Stratevest Fund,
dated September 19, 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 October 31, 2000, relating to the Transaction
may be obtained without charge from the Trust, 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7000, or by calling 1-888-247-4505. 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 October 31, 2000.
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]
[OBJECT OMITTED]
[OBJECT OMITTED]
A-12
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.
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 0.70% 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%.
25956 (10/00)
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, Linda J. Cohen 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 December 1, 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
THE PROXY IS RETURNED SIGNED AND NO INSTRUCTIONS ARE GIVEN, SUCH SHARES WILL BE
VOTED FOR THE PROPOSAL 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 Proposal. The Board of Trustees
recommends voting FOR the Proposal.
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 _______
------- ------- -------
(NOTE: Checking 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 December 1,
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)
