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(File Nos. 2-67052 and 811-3023)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FORUM FUNDS, INC.
(Name of Registrant as Specified in its Charter)
BOARD OF DIRECTORS OF REGISTRANT
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2), or Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
[ X ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
$125.00
2) Form, Schedule or Registration Statement No.:
Schedule 14A
3) Filing Party:
Board of Directors of Forum Funds, Inc.
4) Date Filed:
October 25, 1995
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FORUM FUNDS, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
November 13, 1995
Dear Shareholder:
We are pleased to enclose the Notice and Proxy Statement for the Special
Meeting of Shareholders of Investors Bond Fund, TaxSaver Bond Fund, Maine
Municipal Bond Fund, New Hampshire Bond Fund, Daily Assets Treasury Fund, Payson
Balanced Fund and Payson Value Fund (each a "Fund" and, collectively, the
"Funds"), series of Forum Funds, Inc. (the "Company"), to be held on December 6,
1995. The Proxy Statement contains four proposals. Some of the proposals may
not affect your Fund. Please take the time to read these materials and cast
your vote, as the proposals to be voted on are important to the affected Funds
and to you as a shareholder.
REORGANIZATION OF THE COMPANY AS A DELAWARE BUSINESS TRUST
ALL FUNDS
In Proposal 1, the Board of Directors (the "Board") asks that shareholders
of all Funds approve the reorganization of the Company from a Maryland
corporation, the Company's present corporate form, to a Delaware business trust.
This reorganization will allow the Company to enjoy certain advantages afforded
under Delaware law. As detailed in the Proxy Statement, the Board believes that
reorganization as a Delaware business trust will provide the Company more
flexibility in managing the operations of the Funds -- both in managing day to
day operations and in adapting to meet future opportunities -- without
materially affecting the economic interests of shareholders. As part of the
reorganization, the attached "Agreement and Plan of Reorganization" is being
submitted for shareholder approval.
AUTHORIZATION TO CONVERT TO CORE AND GATEWAY-Registered Trademark- FUND
STRUCTURE
ALL FUNDS, EXCEPT DAILY ASSETS TREASURY FUND
In Proposal 2, the Board seeks shareholder approval of the adoption of a
new investment policy with respect to Investors Bond Fund, TaxSaver Bond Fund,
Maine Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund and
Payson Value Fund that would allow each of these Funds to convert to the Core
and Gateway-Registered Trademark- fund structure upon action by the Board of
Directors and notice to shareholders. The Core and Gateway fund structure,
commonly known as a master-feeder fund structure, is an arrangement whereby one
or more investment companies or other collective investment vehicles
("Gateways") that share investment objectives -- but offer their shares through
distinct distribution channels -- pool their assets by investing in a single
investment company having substantially the same investment objective and
policies (a "Core Portfolio"). This structure allows several funds with
different shareholder-related features or distribution channels, but having the
same investment objective, policies and restrictions, to combine their
investments by investing all of their assets in a single portfolio instead of
managing them separately, thereby achieving certain economies of scale. At
present the Board has not considered any specific proposal and has no current
intention to authorize investment by any of these Funds in a Core Portfolios.
The Board will authorize investing a Fund's assets in a Core Portfolio only if
it first determines that doing so is in the best interests of such Fund and its
shareholders. In determining whether to invest in a Core Portfolio, the Board
will consider, among other things, the opportunity to reduce costs and achieve
operational efficiencies. Upon approval of this Proposal, no subsequent action
by the shareholders of a Fund would be necessary to convert the Fund to a Core
and Gateway fund structure.
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CONVERSION TO A CORE AND GATEWAY FUND STRUCTURE
DAILY ASSETS TREASURY FUND
In Proposal 3, the Board seeks shareholder approval of the adoption of a
new investment policy with respect to Daily Assets Treasury Fund that would
permit the Fund to convert to a Core and Gateway fund structure, commonly known
as a master-feeder fund structure, which is an arrangement whereby one or more
investment companies or other collective investment vehicles that share
investment objectives -- but offer their shares through distinct distribution
channels -- pool their assets by investing in a single investment company having
substantially the same investment objective and policies. This structure allows
several funds with different shareholder-related features or distribution
channels, but having the same investment objective, policies and restrictions,
to combine their investments by investing all of their assets in a single
portfolio instead of managing them separately, thereby achieving certain
economies of scale. If Proposal 3 is approved, the Fund will convert to a Core
and Gateway fund structure by investing all of the assets of the Fund in a Core
Portfolio, the Daily Assets Treasury Portfolio (the "Treasury Portfolio"), of
Core Trust (Delaware) ("Core Trust"). The Board believes that conversion of
the Fund to a Core and Gateway fund structure and investment in the Treasury
Portfolio will benefit shareholders of the Fund by permitting the Fund to
realize certain economies of scale and to reduce certain contractual fees
payable by the Fund for certain investment advisory and administrative services.
The methods of operation and shareholder services of Daily Assets Treasury Fund
would not be materially affected by its investment in the Treasury Portfolio,
except that the assets of the Fund may be managed as part of a larger pool.
The Fund would hold an interest in the Treasury Portfolio issued by Core Trust,
and the Treasury Portfolio would directly invest in individual securities of
other issuers. Daily Assets Treasury Fund would otherwise continue its normal
operation. The Board would retain the right to redeem the Fund's interest in
the Treasury Portfolio at any time.
TREASURY PORTFOLIO INVESTMENT ADVISER
DAILY ASSETS TREASURY FUND
In Proposal 4, the Board seeks approval of an Investment Advisory Agreement
(the "proposed Agreement") among the Treasury Portfolio, Linden Asset
Management, Inc. ("Linden") and Forum Advisors, Inc. ("Forum Advisors"). Forum
is currently the sole investment adviser to Daily Assets Treasury Fund and the
Treasury Portfolio. Subject to the general control of the Board of Core Trust,
if Proposal 4 is approved Linden will be co-investment adviser to the Treasury
Portfolio and will, along with Forum Advisors, make investment decisions for,
and monitor and manage the investments of, the Treasury Portfolio. Pursuant to
the Proposed Agreement, Forum Advisors (and not Core Trust) will pay Linden a
fee for its investment advisory services to the Treasury Portfolio. That
compensation will not increase the amount paid by Core Trust to Forum Advisors
(or indirectly by the Fund as sole shareholder of Treasury Portfolio) pursuant
to Forum Advisors' investment advisory agreements with the Company or Core
Trust. If Proposal 4 is approved, but Proposal 3 is not, then Proposal 4 will
not be implemented.
* * *
THE BOARD SEEKS AND RECOMMENDS APPROVAL OF EACH PROPOSAL THAT APPLIES TO
YOUR FUND. THE BOARD URGES YOU TO COMPLETE YOUR PROXY CARD AND RETURN IT AS
SOON AS POSSIBLE.
We appreciate your participation and prompt response to this matter and
thank you for your continued support.
Yours sincerely,
/s/ John Y. Keffer
John Y. Keffer
CHAIRMAN
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FORUM FUNDS, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________________________
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 6, 1995
____________________________
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Investors
Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond
Fund, Daily Assets Treasury Fund, Payson Balanced Fund and Payson Value Fund
(each a "Fund" and, collectively, the "Funds"), the seven series of Forum Funds,
Inc. (the "Company"), will be held at the offices of Forum Financial Services,
Inc., the Company's manager and distributor, at Two Portland Square, Portland,
Maine 04101, on Wednesday, December 6, 1995 at 9:00 a.m., for the following
purposes:
1. Approval of the reorganization of the Company from a Maryland
corporation to a Delaware business trust under the name Forum Funds
and the subsequent dissolution of the Company;
2. Approval of a fundamental investment limitation for each Fund,
excluding Daily Assets Treasury Fund, regarding investment of all of
the Fund's assets in a single, pooled investment fund;
3. Approval of (i) a fundamental investment limitation for Daily Assets
Treasury Fund regarding investment of all of the Fund's assets in a
single, pooled investment fund and (ii) the conversion of the Daily
Assets Treasury Fund to a Core and Gateway-Registered Trademark-
structure by permitting Daily Assets Treasury Fund to invest all of
its assets in the Daily Assets Treasury Portfolio of Core Trust
(Delaware), a pooled investment fund;
4. Approval of an Investment Advisory Agreement between Linden Asset
Management, Inc., Forum Advisors, Inc. and Core Trust (Delaware) with
respect to the portfolio of Core Trust (Delaware) in which the assets
of Daily Assets Treasury Fund would be invested if Proposal 3 is
approved; and
5. To transact such other business as may properly come before the
meeting.
Each Proposal is discussed more fully in the accompanying Proxy Statement
You are entitled to vote at the meeting and any adjournment thereof if you owned
shares of any of the Funds at the close of business on October 27, 1995. IF YOU
DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board of Directors,
/s/ David I. Goldstein
David I. Goldstein
Secretary
Portland, Maine
November 13, 1995
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT, AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
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FORUM FUNDS, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
________________________
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 6, 1995
________________________
VOTING INFORMATION
This is a Proxy Statement for Forum Funds, Inc. (the "Company"), an investment
company that currently has seven series of shares outstanding: Investors Bond
Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund,
Daily Assets Treasury Fund, Payson Balanced Fund and Payson Value Fund (each a
"Fund" and, collectively, the "Funds"). This Proxy Statement is being furnished
to the shareholders of the Funds in connection with the Board of Directors' (the
"Board") solicitation of proxies to be voted at the special meeting of the
shareholders of the Funds to be held on December 6, 1995 or any adjournment or
adjournments thereof (the "Meeting"). This Notice of Meeting, Proxy Statement,
and proxy card will first be mailed to shareholders on or about November 3,
1995.
The table on the next page summarizes the proposals about which shareholders are
being asked to vote (each a "Proposal" and collectively the "Proposals") and
indicates which shareholders are entitled to vote on each Proposal. PROPOSAL 1
is the only Proposal that relates to all Funds, and all shareholders will vote
together on this Proposal. PROPOSAL 2 relates to each Fund, except Daily Assets
Treasury Fund, and shareholders of such Funds will vote separately on this
Proposal. Thus, if Proposal 2 is approved by shareholders of one Fund and
disapproved by shareholders of another Fund, the Proposal will be implemented
for the Fund whose shareholders approved the Proposal and will not be
implemented for the Fund whose shareholders did not approve the Proposal.
PROPOSAL 3 AND PROPOSAL 4 relate only to Daily Assets Treasury Fund, and only
shareholders of Daily Assets Treasury Fund will vote on these Proposals.
Proposal 4, if approved, may be implemented by the Company if and only if
Proposal 3 is approved and is implemented by the Company. Separate proxy cards
are enclosed for each Fund in which a shareholder is a record owner of shares.
The approval of Proposal 1 requires the affirmative vote of a majority of the
outstanding shares of the Company entitled to vote thereon. The approval of
Proposal 2 for each Fund requires the affirmative vote of "a majority of the
outstanding voting securities" of that Fund as defined under the Investment
Company Act of 1940, as amended (the "1940 Act"). The approval of Proposal 3
and Proposal 4 with respect to Daily Assets Treasury Fund requires the
affirmative vote of "a majority of the outstanding voting securities" of that
Fund, as defined in the 1940 Act. As defined by the 1940 Act, "a majority of
the outstanding voting securities" means the lesser of (i) 67% of the respective
Fund's shares present at a meeting of shareholders if the owners of more than
50% of the shares of the Fund then outstanding are present in person or by proxy
or (ii) more than 50% of the respective Fund's outstanding shares.
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PROPOSAL BRIEF DESCRIPTION OF PROPOSAL SHAREHOLDERS WHO WILL VOTE
ON PROPOSAL
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Proposal
One To reorganize the Company from a SHAREHOLDERS OF ALL FUNDS
Maryland corporation to a Delaware
business trust.
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Proposal
Two To adopt a new investment policy that SHAREHOLDERS OF:
authorizes a Fund to invest all or a
part of its investment assets in a Investors Bond Fund
registered, open-end investment company TaxSaver Bond Fund
having substantially the same investment Maine Municipal Bond Fund
objective and policies as the Fund. New Hampshire Bond Fund
Payson Balanced Fund
Payson Value Fund
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Proposal
Three To adopt a new investment policy that SHAREHOLDERS OF:
authorizes Daily Assets Treasury Fund
to invest all or a part of its Daily Assets Treasury Fund
investment assets in a portfolio of
Core Trust (Delaware), a registered,
open-end investment company, which
portfolio would have substantially the
same investment objective and policies
as the Fund.
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Proposal
Four To approve an Investment Advisory SHAREHOLDERS OF:
Agreement among Linden Asset Management,
Inc., Forum Advisors, Inc. and Core Trust Daily Assets Treasury Fund
(Delaware) with respect to the portfolio
of Core Trust (Delaware) into which the
assets of Daily Assets Treasury Fund will
be invested if Proposal 3 is approved.
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One third of the Company's shares outstanding on October 27, 1995, the record
date, represented in person or by proxy, must be present to form a quorum for
the transaction of business at the meeting. In the event that a quorum is
present at the meeting but sufficient votes to approve any of the proposals are
not received, the persons named as proxies may propose one or more adjournments
of the meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares represented at
the meeting in person or by proxy. If a quorum is present, the persons named as
proxies will vote those proxies that they are entitled to vote for any such
proposal FOR such adjournment and will vote those proxies required to be voted
against any such proposal against such adjournment. A shareholder vote may be
taken on one or more of the Proposals in this Proxy Statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
The persons named as proxies on the enclosed proxy card(s) will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed. If you give no voting instructions, your shares
will be voted in favor of the proposals described in this Proxy Statement. The
proxy card may be revoked by giving another proxy, by letter or telegram
revoking your proxy received by the Company prior to the meeting, or by
appearing and voting at the meeting.
Abstentions and broker non-votes will be counted as shares present for
determining whether a quorum is present but will not be counted for or against
any adjournment. Accordingly, abstentions and broker non-votes effectively will
be a vote against adjournment. Abstentions and broker non-votes will also not
be counted as votes cast for the purpose of determining whether sufficient votes
have been received to approve a proposal. Broker non-votes are shares held by a
broker or nominee as to which instructions have not been received from the
beneficial owners or
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persons entitled to vote and the broker or nominee does not have discretionary
voting power. Shareholders on the record date will be entitled to one vote for
each share held on that date.
The solicitation of proxies, the cost of which will be borne by the Company,
will be made primarily by mail but also may include telephone or oral
communications by regular employees of Forum Financial Services, Inc. ("Forum"),
the Company's manager and distributor, which persons will not receive any
compensation therefor from the Company. The address of Forum is Two Portland
Square, Portland, Maine 04101.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF THE COMPANY'S SEMI-ANNUAL
REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1995 TO ANY SHAREHOLDER UPON REQUEST.
Copies of the Company's semi-annual report are expected to be mailed to the
Company's shareholders on or about November 22, 1995. Shareholders that have
not received a copy of the semi-annual report should contact the Company's
transfer agent, Forum Financial Corp., Two Portland Square, Portland, Maine
04101. When you return your proxy card in the enclosed, self-addressed, postage
paid envelope, please indicate whether you would like a copy of the Company's
semi-annual report.
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PROPOSAL 1
TO APPROVE THE REORGANIZATION OF THE COMPANY AS A DELAWARE BUSINESS TRUST
SHAREHOLDERS OF ALL FUNDS, VOTING TOGETHER, ARE ENTITLED TO VOTE ON THIS
PROPOSAL
At a meeting held on August 30, 1995, the Board considered and voted to approve
an Agreement and Plan of Reorganization (the "Plan of Reorganization") in the
form attached to this Proxy Statement as Exhibit A. The Plan of Reorganization
provides for a reorganization (the "Reorganization") of the Company from a
Maryland corporation to a Delaware business trust under the name Forum Funds
(the "Delaware Trust"). Subsequent to the Reorganization, Forum Funds, Inc.
will be liquidated and terminated and the business of the Company -- of being a
registered, open-end management investment company -- will be carried on by the
Delaware Trust. For a discussion of the principal differences between a
Maryland corporation and a Delaware business trust, see "Certain Comparative
Information About the Company and the Delaware Trust" below.
The investment objectives, policies and restrictions of each of the Funds
(referred to in this Proposal as the "current Funds") will not change as a
result of the Reorganization. Separate series of the Delaware Trust (the
"successor Funds"), corresponding to each of the current Funds, will carry on
the business of the current Funds of the Company following the Reorganization.
The investment advisers to the current Funds will advise the successor Funds,
subject to the supervision of the Trustees of the Delaware Trust, under
investment advisory agreements (the "new Investment Advisory Agreements") with
the Delaware Trust. Forum Advisors, Inc. ("Forum Advisors") will continue as
the investment adviser to Investors Bond Fund, TaxSaver Bond Fund, Maine
Municipal Bond Fund, New Hampshire Bond Fund and Daily Assets Treasury Fund; and
H.M. Payson & Co. ("Payson" and, with Forum Advisors, an "Advisor"), will
continue as the investment adviser to Payson Balanced Fund and Payson Value
Fund. The new Investment Advisory Agreements for each Advisor will be the same
in every material respect to the investment advisory agreements currently in
effect between the Company and such Advisors (the "Investment Advisory
Agreements"). If Proposal 1 is approved, there will be no change in the
advisory fees payable by the successor Funds to any Advisors.
Forum Financial Services, Inc. ("Forum") will continue to act as manager and
distributor for the successor Fund to each current Fund for which it so acts
currently, pursuant to management and distribution agreements with the Delaware
Trust that will be the same in every material respect to the management and
distribution agreements currently in effect between Forum and the Company with
respect to the current Funds. Forum Financial Corp. and The First National Bank
of Boston, N.A. currently act as transfer agent (the "Transfer Agent") and
custodian (the "Custodian"), respectively, for the Company and will continue to
so act with respect to the Delaware Trust pursuant to transfer agency and
custody agreements with the Delaware Trust that are the same in every material
respect to the transfer agency agreement and custodian agreement currently in
effect between these entities and the Company. If Proposal 1 is approved, there
will be no change in the management, transfer agency, and custodial fees payable
by the successor Funds to Forum, the Transfer Agent or the Custodian. Approval
of Proposal 2 by shareholders of Investors Bond Fund, TaxSaver Bond Fund, Maine
Municipal Bond Fund, New Hampshire Bond Fund, Payson Balanced Fund and Payson
Value Fund and Proposal 3 and Proposal 4 by shareholders of Daily Assets
Treasury Fund will authorize, in part, a restructuring of these contractual
relationships, including changes in the overall expenses borne by each of these
Funds and how fees are calculated. See Proposal 2, Proposal 3 and Proposal 4.
REASONS FOR THE PROPOSED REORGANIZATION
The Board believes that operating the Company under the Delaware business trust
form of organization is preferable to operating the Company as a Maryland
corporation. In general, Delaware trust law will provide greater flexibility to
the Company than Maryland corporation law in structuring the Company's
operations and will eliminate both the
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need to obtain shareholder approval for certain routine or nonmaterial actions
and the expense and delays involved in doing so. For example, under Maryland
corporation law, routine or nonmaterial changes to the charter of the Company,
such as those in response to regulatory developments, would typically require
shareholder approval; Delaware law permits such changes to the trust instrument
of a Delaware trust to be made without first seeking shareholder approval. In
addition, unlike Maryland corporation law, which restricts the delegation of a
board of directors' functions, Delaware law permits the board of trustees of a
Delaware trust to delegate certain of their responsibilities, such as those
pertaining to the declaration of dividends, to duly empowered committees of the
board of trustees or to appropriate officers. Finally, Delaware law permits the
trustees to adapt a Delaware trust to future contingencies; for example, without
a shareholder vote the trustees may incorporate a Delaware trust, merge or
consolidate with another entity, cause each series to become a separate trust
and change the Delaware trust's domicile. Any exercise of this authority by the
Trustees of the Delaware Trust would be subject to applicable Federal law.
The Board and the Company believe that reorganizing the Company into the
Delaware Trust will better serve and protect the investment needs and goals of
the shareholders. The Reorganization will have no material impact on the
economic interests of the shareholders of the Company: the interest of a
shareholder in a current Fund will be virtually identical to that shareholder's
interest in the successor Fund. The investment objectives and policies of the
current Funds that are fundamental will remain fundamental upon the current
Funds' reorganization into the successor Funds and will not be subject to change
except by shareholder vote. In the event the Reorganization is approved by
shareholders, the adoption of a new investment policy and modification of
certain investment restrictions of a Fund by that Fund's shareholders under
Proposal 2 or Proposal 3 will apply to the corresponding successor Fund. See
Proposal 2 and Proposal 3.
SHAREHOLDER APPROVAL
The Board recommends that the shareholders of the Company vote for the approval
of the Reorganization provided for in the Plan of Reorganization, as described
below. A vote of approval encompasses approval of (i) the reorganization of the
Company from a Maryland corporation with seven separate, active series to a
Delaware business trust under the name Forum Funds with seven separate, active
series, (ii) the temporary waiver of certain investment restrictions of the
current Funds to permit the Reorganization (see "Temporary Waiver of Investment
Restrictions"), and (iii) certain other actions, including the Trust's
engagement of the Company's current independent auditors and approval of the new
Investment Advisory Agreements, as summarized under "Summary of the Plan of
Reorganization" below.
SUMMARY OF THE PLAN OF REORGANIZATION
The following discussion summarizes the important terms of the Plan of
Reorganization. This summary is qualified in its entirety by reference to the
Plan of Reorganization itself, which is included as Exhibit A to this Proxy
Statement.
In order to accomplish the Reorganization, the Delaware Trust has been formed as
a Delaware business trust under the name Forum Funds pursuant to a Trust
Instrument dated August 29, 1995 (the "Trust Instrument'). Shares of the
Delaware Trust have been divided into separate series corresponding to each of
the current Funds. On the closing date of the Reorganization (the "Closing
Date"), each of the current Funds will transfer all of its assets to the
corresponding successor Fund in exchange for the assumption by that successor
Fund of all the liabilities of the current Fund and the issuance of shares of
beneficial interest of that successor Fund ("Trust Shares") to the current Fund.
The Trust Shares issued to a current Fund on the Closing Date will have an
aggregate net asset value equal to the aggregate net asset value (as determined
by using the procedures set forth in the current Fund's Prospectus) of the
current Fund's common stock as of the close of business on the business day
immediately preceding the Closing Date.
Immediately thereafter, each current Fund will distribute its Trust Shares to
each of its respective shareholders pro rata, in proportion to each
shareholder's respective interest in the current Fund in liquidation of that
interest. Following distribution of Trust Shares to all the current Funds, and
as soon as practicable thereafter, Forum Funds,
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Inc. will be liquidated and terminated. Upon completion of the Reorganization,
each shareholder will be the owner of full and fractional Trust Shares equal in
number, denomination and aggregate net asset value to the shareholder's current
Fund shares. Certificates representing shares of common stock of a current Fund
outstanding at the Closing Date will not represent Trust Shares distributed to
the record holder thereof as a result of the liquidation of the current Fund.
New certificates for the successor Funds' shares will be issued only upon
written shareholder request, and any certificate representing shares of a
successor Fund to be issued in replacement of a certificate representing shares
of a current Fund will be issued only upon the surrender of the latter
certificate.
The Plan of Reorganization authorizes the Board on behalf of the Company, as the
then initial shareholder of the Delaware Trust: (i) to elect as trustees of the
Delaware Trust (the "Trustees") the persons who currently serve as Directors of
the Company (see "Certain Comparative Information About the Company and the
Delaware Trust -- Trustees and Officers of the Delaware Trust" below), (ii) to
appoint Deloitte & Touche LLP ("Deloitte & Touche"), currently the independent
accountants of the Company for the fiscal year ending March 31, 1996, to
continue their current engagement with respect to the Delaware Trust, and (iii)
to approve the new Investment Advisory Agreements between the Delaware Trust and
the Advisors with respect to each of the successor Funds. The Plan of
Reorganization also authorizes the transfer of substantially all of the assets
of each current Fund to the corresponding successor Fund and the subsequent
liquidation and termination of the Company after the Reorganization has been
completed.
The obligations of the Company and the Delaware Trust under the Plan of
Reorganization are subject to various conditions as stated therein. In order to
protect against unforeseen events, the Plan of Reorganization may be terminated
or amended at any time prior to the Reorganization by action of the Board
notwithstanding the approval of the Plan of Reorganization by the shareholders
of the Company, if (i) there is a material breach of the Agreement and Plan of
Reorganization, (ii) it reasonably appears that either the Company or the
Delaware Trust cannot meet a condition of the Plan of Reorganization, or (iii)
the Board determines that proceeding with the Plan of Reorganization is not in
the best interests of the shareholders of the Company. The Company and the
Delaware Trust may at any time waive compliance with any of the covenants and
conditions contained in, or may amend, the Plan of Reorganization, provided that
such waiver or amendment does not materially adversely affect the interests of
the current Fund shareholders.
Assuming the Plan of Reorganization is approved, it is currently contemplated
that the Reorganization will become effective at the close of business on
December 6, 1995. However, the Reorganization may become effective on a later
date if circumstances warrant.
FUND AGREEMENTS
Each of the Investment Advisory Agreements with the Advisors and the management
agreement with Forum (the "Management Agreement") entered into by the Delaware
Trust will continue in force from year to year with respect to a successor Fund
covered by that Agreement so long as its continuance is approved at least
annually by the vote of a majority of the Trustees who are not parties to such
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Each of the distribution,
transfer agency, custodian and other agreements entered into by the Delaware
Trust, along with the Investment Advisory Agreements and the Management
Agreement, will be terminable without penalty on sixty days' written notice by
either party to that Agreement and will terminate automatically in the event of
its assignment.
SHAREHOLDER ACCOUNTS AND PLANS
In connection with the Reorganization, the Transfer Agent will establish an
account for each shareholder containing the appropriate number and denominations
of Trust Shares to be received by that shareholder under the Plan of
Reorganization. These accounts will be the same in all material respects to the
accounts currently maintained by the Transfer Agent. No further action will be
necessary in order to continue any retirement plan currently maintained by a
shareholder of the current Funds with respect to shares of the Company.
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TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of the current Funds might be
construed as restricting the current Funds' ability to carry out the
Reorganization. By approving Proposal 1, shareholders will be deemed to waive,
only for the purpose of the Reorganization, any fundamental investment
restriction that prohibits (i) any Fund from acquiring more than a stated
percentage of ownership of another company or (ii) any Fund from investing for
the purpose of exercising control over or management of any company.
TAX CONSEQUENCES OF THE REORGANIZATION; EXPENSES
The Company and the Delaware Trust will receive an opinion from their counsel,
Seward & Kissel, to the effect that, on the basis of existing provisions of the
Internal Revenue Code of 1986, as amended, current administrative rules and
court decisions, for Federal income tax purposes: (i) no gain or loss will be
recognized by the successor Funds or the current Funds upon the transfer of all
of the assets of each current Fund to its corresponding successor Fund in
exchange for Trust Shares of the successor Fund and the successor Fund's
assumption of the liabilities of such current Fund, and (ii) the holding period
and tax basis of the Trust Shares of the successor Fund received by each
shareholder of each current Fund will be the same as the holding period and tax
basis of the shareholder's current Fund shares held immediately prior to the
exchange. The successor Funds shall be responsible for all expenses in
connection with the Reorganization.
CERTAIN COMPARATIVE INFORMATION ABOUT THE COMPANY AND THE DELAWARE TRUST
As a Delaware business trust, the Delaware Trust's operations will be governed
by its Trust Instrument, By-Laws and applicable Delaware law rather than by the
Articles of Incorporation, By-Laws and Maryland law, which presently govern the
Company's operations. The operations of the Delaware Trust, like those of the
Company, will be subject to the provisions of the 1940 Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC") thereunder and
applicable state securities laws.
TRUSTEES AND OFFICERS OF THE DELAWARE TRUST. Subject to the provisions of the
Trust Instrument, the business of the Delaware Trust will be supervised by its
Trustees, who will serve indefinite terms and who will have all powers necessary
or convenient to carry out their responsibilities. The responsibilities, powers
and fiduciary duties of the Trustees of the Delaware Trust are substantially the
same as those of the Directors of the Company. The Trustees of the Delaware
Trust will be the current Directors of the Company.
In the event that this Proposal 1 is approved by shareholders, the Trustees of
the Delaware Trust shall hold office indefinitely, except that (i) any Trustee
may resign, (ii) any Trustee may be removed by written instrument signed by at
least two-thirds of the number of Trustees prior to removal, and (iii) a Trustee
may be removed at any meeting of the shareholders by a vote of two-thirds of the
outstanding shares of the Delaware Trust. In case a vacancy exists for any
reason, the remaining Trustees could fill that vacancy by appointing another
Trustee so long as, immediately after such appointment, at least two-thirds of
the Trustees have been elected by shareholders. If, at any time, less than a
majority of the Trustees holding office have been elected by shareholders, the
Trustees then in office will promptly call a shareholders' meeting for the
purpose of electing Trustees. Otherwise, there will normally be no meeting of
shareholders for the purpose of electing Trustees.
It is anticipated that the Trustees of the Delaware Trust will continue the
appointment of the present officers of the Company to serve as officers of the
Delaware Trust and that those persons will continue to perform the same
functions on behalf of the Delaware Trust that they now perform on behalf of the
Company.
CAPITAL SHARES. The Trust Instrument will permit the Trustees to create one or
more additional series or portfolios of the Delaware Trust and to divide the
shares of a series into two or more separate classes and, with respect to each
series, to issue an unlimited number of full or fractional shares of that series
or of one or more of that series' classes. Under Maryland law, the Articles of
Incorporation of the Company must specify the number of shares authorized to be
issued. The Delaware Trust initially will have eight series -- corresponding to
the seven current funds of the Company, plus one additional series for Daily
Assets Cash Fund, which has not yet commenced operations and has
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no shareholders. Additional series may be created at any time. Each share of
each series of the Delaware Trust, like each share of each series of the
Company, will represent an equal proportionate interest with each other share in
that series, with none having priority or preference over another.
SHAREHOLDER LIABILITY. Under Delaware law, the Delaware Trust's shareholders
will not be personally liable for the obligations of the Delaware Trust. The
Delaware Business Trust Act provides that a shareholder of a Delaware business
trust is entitled to the same limitation of liability extended to shareholders
of private, for-profit Delaware corporations. Shareholders of a for-profit
Delaware corporation -- like those of a Maryland corporation, such as the
Company, under Maryland corporation law -- may not be held personally liable
under Delaware law for the obligations of the corporation. It is possible that
in some states, courts may decline to apply Delaware law on this point. As a
result, to the extent that the Delaware Trust or a shareholder will be subject
to the jurisdiction of courts in those states, there is a risk that such courts
might not apply Delaware law, and could thereby subject the Delaware Trust
shareholders to liability. The Board believes this risk to be minimal. To
guard against this risk, the Trust Instrument (i) contains an express disclaimer
of shareholder liability for acts or obligations of the Delaware Trust and (ii)
provides for indemnification out of Delaware Trust property of any shareholder
held personally liable for the obligations of the Delaware Trust. Thus, the
risk of a Delaware Trust shareholder incurring financial loss beyond his
investment because of shareholder liability would be limited to circumstances in
which (1) a court refused to apply Delaware law or otherwise failed to give full
effect to Trust Instrument or contractual provisions limiting shareholder
liability, (2) no contractual limitation of liability was in effect, and (3) the
Delaware Trust itself was unable to meet its obligations. In light of Delaware
law, the nature of the Delaware Trust's business, and the nature of its assets,
the Board believes that the risk of personal liability to a Delaware Trust
shareholder is extremely remote.
SHAREHOLDER VOTING RIGHTS. The Company does not and the Delaware Trust will not
hold annual meetings. The Trust Instrument, in substance, will provide that a
special meeting of shareholders for the purpose of voting on the removal of any
Trustee may be called by the holders of 10% or more of the outstanding shares of
the Delaware Trust, and that ten or more holders of shares having an aggregate
net asset value of at least $25,000 or at least 1% of the outstanding shares,
whichever is less, and who had held those shares for at least six months, may
apply to the Trustees stating that they wished to communicate with shareholders
in order to call a meeting for the purpose of voting on the removal of any
Trustee, in which case the Trustees would cooperate with those shareholders as
required under Section 16(c) of the 1940 Act. The By-Laws of the Company
provide that a special meeting of the shareholders will be called by the
Secretary of the Company upon written request of holders of shares entitled to
cast not less than 10% of all votes entitled to be cast at such meeting, which
request must state the purpose of the meeting and the matters proposed to be
acted upon at such meeting.
The Delaware Trust, like the Company, will operate as an open-end management
investment company registered with the SEC under the 1940 Act. Shareholders of
the successor Funds will therefore have the power to vote at special meetings
with respect to, among other things, changes in fundamental investment policies
and restrictions of the successor Funds; approval of changes to investment
advisory agreements; and such additional matters relating to the Delaware Trust
as might be required by the 1940 Act. Upon approval of this Proposal, the
Company will notify the SEC that the Delaware Trust will adopt the Company's
existing registration statement under the Securities Act of 1933 with respect to
each Fund.
The Trust Instrument provides that shareholders have the power to vote only with
respect to the election of Trustees, the removal of Trustees, the approval of
investment advisory agreements, and such additional matters as may be required
by law or the Trustees might consider desirable. The Trust Instrument also
permits the Trustees to amend the Trust Instrument, except that shareholders
have the right to vote on, among other things, any amendment affecting their
right to vote or on any other matter submitted to shareholders by the Trustees.
The Company's Articles of Incorporation, on the other hand, generally give
shareholders, except with respect to minor amendments, exclusive power to amend
the Articles of Incorporation.
LIABILITY OF TRUSTEES. The Trust Instrument provides that the Trustees shall
not be liable to any person other than the Delaware Trust or a shareholder and
that a Trustee would not be liable for any act or omission as Trustee, but
nothing in the Trust Instrument would protect a Trustee against any liability to
which he would otherwise be subject
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by reason of willful malfeasance, bad faith, gross negligence or reckless
disregard. Furthermore, the Trust Instrument entitles the Trustees to
indemnification against any foregoing liability and to all reasonable expenses,
under certain conditions, to be paid from the assets of the Delaware Trust. The
Trust Instrument also provides that the Delaware Trust may purchase and maintain
insurance policies against such liabilities.
Directors of a Maryland corporation such as the Company may not be held
personally liable under Maryland law if the Director acts in good faith, in a
manner reasonably believed by the Director to be in the best interests of the
corporation, and with the care that an ordinarily prudent person in a similar
position would use in a similar situation. The By-Laws of the Company entitle
the Directors of the Company to indemnification out of Company assets under
certain circumstances. Similar to the Trust Instrument's provisions discussed
above, neither Maryland law nor the Company's Articles of Incorporation or By-
Laws would protect a Director against any liability to which he or she would
otherwise be subject by reason of willful malfeasance, bad faith, gross
negligence or reckless disregard.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
PROPOSAL 1
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PROPOSAL 2
TO APPROVE A NEW INVESTMENT POLICY PERMITTING INVESTORS BOND FUND, TAXSAVER BOND
FUND, MAINE MUNICIPAL BOND FUND, NEW HAMPSHIRE BOND FUND, PAYSON BALANCED FUND
AND PAYSON VALUE FUND TO INVEST THEIR RESPECTIVE ASSETS IN ANOTHER INVESTMENT
COMPANY AND TO AMEND CERTAIN INVESTMENT RESTRICTIONS OF EACH FUND
SHAREHOLDERS OF EACH SUCH FUND, VOTING BY FUND, ARE ENTITLED TO VOTE ON THIS
PROPOSAL.
INTRODUCTION: CORE AND GATEWAY
At a meeting held on August 30, 1995, the Board considered, voted to approve,
and recommended shareholder approval of the adoption of a new investment policy
with respect to Investors Bond Fund, TaxSaver Bond Fund, Maine Municipal Bond
Fund, New Hampshire Bond Fund, Payson Balanced Fund and Payson Value Fund that
would allow each of these Funds to convert to the Core and Gateway-Registered
Trademark- fund structure upon action by the Board of Directors and notice to
shareholders. Upon approval of this Proposal, no subsequent action by the
shareholders of a Fund would be necessary for the Fund to convert to the Core
and Gateway fund structure. The Core and Gateway fund structure, commonly known
as a master-feeder fund structure, is an arrangement whereby one or more
investment companies or other collective investment vehicles that share
investment objectives -- but offer their shares through distinct distribution
channels -- pool their assets by investing in a single investment company having
substantially the same investment objective and policies. For example, a fund
offering its shares at net asset value (not subject to a sales charge) might
pool its investments with another fund having the same investment objective and
policies that offers its shares subject to a front-end or contingent deferred
sales charge. This structure allows several funds with different shareholder-
related features or distribution channels, but having substantially the same
investment objective and policies to combine their investments by investing all
of their assets in a single portfolio instead of managing them separately,
thereby achieving certain economies of scale.
Under the Core and Gateway fund structure, each Fund will have the ability to
invest all of its investment assets in another investment company (a "Core
Portfolio") having substantially the same investment objectives and policies as
the Fund in exchange for shares of beneficial interest in the Core Portfolio.
This means that the only investment securities that will be held by the Fund
will be the Fund's interest in the Core Portfolio. Each Core Portfolio may be
one series of an investment company (a "Core"), as each Fund is a series of the
Company. Adopting this structure will permit other collective investment
vehicles (each, along with the Fund, a "Gateway Portfolio"), to invest
collectively in one Core Portfolio, allowing for greater economies of scale in
managing operations of the single Core Portfolio. The following illustration
compares a traditional mutual fund structure, whereby a fund invests directly in
the securities that make up its investment portfolio, to the Core and Gateway
fund structure, whereby one or more Gateway Portfolios invest in a Core
Portfolio, which in turn invests in portfolio securities.
TRADITIONAL FUND STRUCTURE CORE AND GATEWAY FUNDS STRUCTURE
OOO Investments in OOO CORE PORTFOLIO
FUND O O ---- Fund A O O \ /
OOO Portfolio OOO \ OOO /
Securities OOO \ O O Investments in
Fund B O O ----O O ----
OOO O O Portfolio
OOO Securities
OOO
Fund C O O
OOO
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Conversion to the Core and Gateway fund structure may serve to attract other
collective investment vehicles with different shareholder servicing or
distribution arrangements and with shareholders that would not have invested in
a Fund. In this event, additional assets may allow for expenses incurred in
operating the Fund to be spread over a larger asset base. In addition, the Core
and Gateway fund structure may serve as an alternative for large, institutional
investors of a Fund, such as banks or other asset managers, who may prefer to
offer separate, proprietary investment vehicles with substantially the same
fundamental investment objective and policies as the Fund and who otherwise
might establish such vehicles outside of the Fund's operational structure.
At present the Board has not considered any specific proposal and has no current
intention to authorize investment by any Fund, other than Daily Assets Treasury
Fund, in a Core Portfolio. The Board will authorize investing a Fund's assets in
a Core Portfolio only if it first determines that doing so is in the best
interests of such Fund and its shareholders. By investing in a Core Portfolio,
the Fund and its shareholders will be deemed to have approved (i) the then-
current directors or trustees of the Core Portfolio and (ii) the investment
advisory agreements of the Core Portfolio. In determining whether to invest in
a Core Portfolio, the Board will consider, among other things, the opportunity
to reduce costs and achieve operational efficiencies. The Board will not
authorize investment in a Core Portfolio if it would materially increase costs
to the Fund's shareholders, unless, of course, there were perceived to be a
corresponding increase in benefits to shareholders. Upon approval of this
Proposal, no subsequent action by the shareholders of a Fund would be necessary
to convert the Fund to the Core and Gateway structure.
NEW INVESTMENT POLICY
With respect to each Fund, the Board has approved the adoption of a new
fundamental investment policy and the amendment of certain investment
restrictions that would permit the Fund to convert to the Core and Gateway Fund
Structure by investing all of its assets in one or more Core Portfolios. As
discussed above under "Introduction: Core and Gateway," the purpose of this
Proposal is to allow a Fund to enhance its flexibility and permit it to take
advantage of potential efficiencies available through investment of all of its
assets in another investment company. If this Proposal is approved, each Fund
would be subject to the following fundamental investment policy:
Notwithstanding any other investment policy or restriction (whether or
not fundamental) of the Fund, the Fund may seek to achieve its
investment objective by holding, as its only investment securities,
the securities of an investment company having substantially the same
investment objective and policies as the Fund.
At present, certain of the fundamental investment restrictions of each Fund may
prevent it from investing all of its assets in another registered investment
company, and require a vote of that Fund's shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that shareholders vote at this meeting to permit
the assets of the Funds to be invested in a single Core Portfolio, without a
further vote of shareholders. If the shareholders of a Fund approve this
Proposal with respect to the Fund, the fundamental investment restrictions of
the Fund that currently may prohibit investment in one Core Portfolio would be
superseded to permit investment in a Core Portfolio with substantially the same
investment objective, policies and restrictions as the Fund, including, without
limitation, the restrictions on investing in (i) a single issuer, (ii) issuers
having a record of less than three years of continuous operations, and (iii)
issuers in a single industry.
A Fund's methods of operation and shareholder services would not be materially
affected by its investment in a corresponding Core Portfolio, except that the
assets of the Fund may be managed as part of a larger pool. If a Fund invested
all of its assets in a Core Portfolio, it would hold only investment securities
issued by the Core Portfolio; the Core Portfolio would directly invest in
individual securities of other issuers. The Fund would otherwise continue its
normal operation. The Board would retain the right to withdraw a Fund's
investments from its corresponding Core Portfolio at any time; the Fund would
then resume investing directly in individual securities of other issuers or
could re-invest all of its assets in another Core Portfolio. If the Fund
resumed directly investing in securities, it would be with the applicable
Advisor under the same terms that were in effect at the time the Fund converted
to a Core and Gateway fund structure.
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FUND SHAREHOLDERS' VOTING RIGHTS
A Core Portfolio and Core Trust normally will not hold meetings of shareholders
except as required under the 1940 Act. As a shareholder in a Core Portfolio,
the Fund will be entitled to vote in proportion to its relative interest in that
Core Portfolio. On any issue, the Fund will vote its shares in a Core Portfolio
in proportion to the votes cast by its shareholders. If there are other
investors in a Core Portfolio, there can be no assurance that any issue that
receives a majority of the votes cast by a Fund's shareholders will receive a
majority of votes cast by all Core Portfolio shareholders. Generally, a Fund
will hold a meeting of its shareholders to obtain instructions on how to vote
its interest in a Core Portfolio when the Core Portfolio is conducting a meeting
of its shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund will not seek instructions from its shareholders with
respect to (i) any proposal relating to a Core Portfolio that, if made with
respect to the related Fund, would not require the vote of Fund shareholders, or
(ii) any proposal relating to the Core Portfolio that is substantially the same
as to a proposal previously approved by the Fund's shareholders. In addition,
the Fund will not seek shareholder approval with respect to the directors or
trustees of the Core Portfolio or the investment advisory agreements for the
Core Portfolio in effect at the time the Fund invests in the Core Portfolio,
except as required by applicable law.
In addition to a vote to remove a director or trustee or change a fundamental
policy, examples of matters that will require approval of shareholders of a Core
Portfolio include, subject to applicable statutory and regulatory requirements:
the election of directors or trustees; approval of an investment advisory
contract; the dissolution of a Core Portfolio; certain amendments of the
organizational documents for the Core Portfolio; a merger, consolidation or sale
of substantially all of a Core Portfolio's assets; or any additional matters
required or authorized by the Charter or Trust Instrument and By-Laws of a Core
Portfolio or any registration statement of a Core Portfolio, or as the directors
or trustees of the Core Portfolio may consider desirable. The board of directors
or trustees of a Core Portfolio will typically reserve the power to change
nonfundamental policies without prior shareholder approval.
EVALUATION BY THE BOARD
After considering the matters described in this Proposal 2 at a meeting held on
August 30, 1995, the Board determined to seek shareholder approval of a new
investment policy for each Fund permitting each Fund to convert to the Core and
Gateway fund structure. Management of the Funds presented to the Board the
potential benefits, along with potential risks, of the Fund converting to this
structure. In this regard the Board considered the following.
First, management stated that because the Core and Gateway fund structure allows
multiple institutional investors to pool their assets, it is possible that this
structure will achieve certain economies of scale not realized by a Fund
currently. In general, to the extent that certain operating costs are fixed and
borne by a Fund alone, these expenses would instead be shared by the Fund and
other investors in the Fund's corresponding Core Portfolio. In addition, in the
view of management, a larger asset base may allow the purchase of individual
investment securities in larger amounts, which may reduce certain transactional
and custodial expenses.
Second, management noted that some mutual funds have converted to a Core and
Gateway fund structure to enhance their ability to retain assets under
management while developing a competitive advantage in the mutual funds
marketplace. Authorization for each Fund to convert to a Core and Gateway fund
structure is designed to give each Fund the structural flexibility not only to
attract new assets, but also enhance the Fund's ability to retain current assets
under management.
Finally, the Board recognized that certain of the foregoing benefits would
likely arise only if a Fund's corresponding Core Portfolio were to grow through
investments in the Core Portfolio by investors other than the Fund. These is no
assurance that, even if other investors invest in a Core Portfolio, expense
savings or other benefits will be realized. In addition, the Board recognized
that Forum, the Advisors, and other service providers to the Funds may benefit
through increased economies of scale in the event that assets rise, without a
corresponding benefit to Fund shareholders. In particular, conversion to the
Core and Gateway fund structure may enable Forum and the Advisors to increase
assets under management through attraction and development of new investment
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vehicles with less risk than would be possible without this structure. As a
result, Forum and the Advisors could earn fees with less risk of limited success
than is typical in the early, developmental years of an investment vehicle,
since new investors in a Core Portfolio will be presented with the ability to
pool their assets in an established vehicle.
The Board also considered, among other things, (i) the costs of the proposed
change in fund structure, (ii) other options to the proposed change, and (iii)
the tax-free nature of the proposed change.
Based on the foregoing, the Board, including a majority of the independent
Directors, determined that it would be in the best interests of each Fund and
its respective shareholders for shareholders to approve a new investment policy
for each Fund permitting each Fund to convert to the Core and Gateway fund
structure. Even if Proposal 2 is approved by shareholders of each of a Fund,
the Board will authorize investing the Fund's assets in a Core Portfolio only if
it first determines that pooling is in the best interests of the Fund and its
shareholders. In determining whether to invest in a Core Portfolio, the Board
will consider, among other things, the opportunity to reduce costs and achieve
operational efficiencies. The Board will not authorize investment in a Core
Portfolio if it would materially increase costs to the Fund's shareholders,
unless, of course, there were perceived to be a corresponding increase in
benefits to shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2
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PROPOSAL 3
TO APPROVE A NEW INVESTMENT POLICY PERMITTING DAILY ASSETS TREASURY FUND TO
INVEST ALL OF ITS ASSETS IN A PORTFOLIO OF CORE TRUST (DELAWARE) AND TO AMEND
CERTAIN INVESTMENT RESTRICTIONS OF DAILY ASSETS TREASURY FUND
SHAREHOLDERS OF DAILY ASSETS TREASURY FUND ARE ENTITLED TO VOTE ON THIS
PROPOSAL.
At a meeting held on August 30, 1995, the Board considered, voted to approve,
and recommended shareholder approval of the adoption of a new investment policy
with respect to Daily Assets Treasury Fund. The purpose of the new investment
policy is to permit the Fund to convert to a Core and Gateway fund structure,
commonly known as a master-feeder fund structure, which is an arrangement
whereby one or more investment companies or other collective investment vehicles
that share investment objectives -- but offer their shares through distinct
distribution channels -- pool their assets by investing in a single investment
company having substantially the same investment objective and policies. See
"Introduction: Core and Gateway" under Proposal 2 above for a general discussion
of the Core and Gateway Fund Structure. At the August 30, 1995 meeting, the
Board also considered, voted to approve, and recommended shareholder approval of
the investment of all of the assets of the Fund in a portfolio, the Daily
Assets Treasury Portfolio (the "Treasury Portfolio"), of Core Trust (Delaware)
("Core Trust").
If this Proposal is approved, the Fund would be subject to the following
fundamental investment policy:
Notwithstanding any other investment policy or restriction (whether or
not fundamental) of the Fund, the Fund may seek to achieve its
investment objective by holding, as its only investment securities,
the securities of one or more investment companies having
substantially the same investment objective and policies as the Fund.
In addition, if this Proposal is approved the Fund would be authorized and
intends to invest all of the assets of the Fund in the Treasury Portfolio, which
has the same investment objective and policies as the Fund.
At present, certain of the fundamental investment restrictions of Daily Assets
Treasury Fund prevent it from investing all of its assets in another registered
investment company, and require a vote of the Fund's shareholders before such a
structure could be adopted. If this Proposal is approved, the fundamental
investment restrictions of the Fund that currently may prohibit investment in
one Core Portfolio would be superseded to permit investment in a Core Portfolio
- - -- in particular, the Treasury Portfolio -- with substantially the same
investment objective, policies and restrictions as the Fund. The superseded
investment restrictions include, without limitation, the restrictions on
investing in (i) a single issuer, (ii) issuers having a record of less than
three years of continuous operations, and (iii) issuers in a single industry.
The methods of operation and shareholder services of Daily Assets Treasury Funds
would not be materially affected by its investment in the Treasury Portfolio,
except that the assets of the Fund may be managed as part of a larger pool. If
the Fund invested all of its assets in the Treasury Portfolio, it would hold
only an interest in theTreasury Portfolio issued by Core Trust; the Treasury
Portfolio would directly invest in individual securities of other issuers.
Daily Assets Treasury Fund would otherwise continue its normal operation. The
Board would retain the right to redeem the Fund's interest in the Treasury
Portfolio at any time; the Fund would then resume investing directly in
individual securities of other issuers or could re-invest all of its assets in
another Core Portfolio under substantially the same conditions as it first
invested in the Treasury Portfolio.
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INFORMATION REGARDING CORE TRUST AND THE TREASURY PORTFOLIO
Core Trust is an open-end, registered investment company that was formed as a
Delaware business trust in 1994. Core Trust currently has seven active
portfolios; in which four funds sponsored by Norwest Advantage Funds and three
funds sponsored by Monarch Funds invest. The Treasury Porfolio will be the
eighth portfolio of Core Trust. The investment objective and policies of the
Treasury Portfolio will be substantially the same as those of Daily Assets
Treasury Fund. In seeking to achieve the same objective as the Fund, the
Treasury Portfolio will be unable to invest in any security or engage in any
transaction that would not be permitted by the investment policies and
restrictions of the Fund.
Forum Advisors, the Fund's investment adviser, will be the investment adviser
for the Treasury Portfolio. See "Advisory Services" below. Forum, which
currently performs management services for the Fund, will perform similar
services for the Treasury Portfolio. See "Management Services" below.
Likewise, other entities that currently perform services for the the Fund, such
as the Fund's custodian, will perform substantially similar services for the
Treasury Portfolio.
The Treasury Portfolio will calculate its net asset value at the same time, on
the same days, and in substantially the same manner that the Fund calculates its
net asset value. Investors in the Treasury Portfolio -- initially the Fund --
will have no preemptive rights and no conversion rights. Normally, the Treasury
Portfolio will not hold meetings of its shareholders except as required under
the 1940 Act. As a shareholder in the Treasury Portfolio, the Fund will be
entitled to vote in proportion to its relative interest in the Treasury
Portfolio. On any issue, the Fund will vote its shares in the Treasury
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Treasury Portfolio, there can be no assurance that
any proposal that receives a majority of the votes cast by the Fund's
shareholders will receive a majority of votes cast by all Treasury Portfolio
shareholders. Investors holding at least a 10% interest in Treasury Portfolio
will be able to call a meeting of shareholders for certain purposes affecting
only the Treasury Portfolio, and shareholders holding at least a 10% interest in
Core Trust will be able to call a meeting to remove any Trustee of Core Trust.
A trustee of Core Trust may be removed upon the vote of two-thirds of
shareholders of Core Trust qualified to vote.
Changing a fundamental policy of the Treasury Portfolio will require approval of
the holders of a majority of the Fund's outstanding shares. The Board of
Trustees of Core Trust will have the ability to change nonfundamental policies
without prior shareholder approval.
In addition to a vote to remove a Trustee or change a fundamental policy,
examples of matters that will require the approval of the shareholders of Core
Trust include, subject to applicable statutory and regulatory requirements: the
election of Trustees; approval of an investment advisory agreement; the
dissolution of Treasury Portfolio; certain amendments of the trust instrument of
Core Trust; a merger, consolidation or sale of substantially all of Treasury
Portfolio's assets; any additional matters required or authorized by the trust
instrument of Core Trust or any registration statement of Core Trust; and as the
Trustees may consider desirable.
Generally, the Fund will hold a meeting of its shareholders to obtain
instructions on how to vote its interest in the Treasury Portfolio when the
Treasury Portfolio is conducting a meeting of its shareholders. However,
subject to applicable statutory and regulatory requirements, the Fund will not
seek instructions from its shareholders with respect to (i) any proposal
relating to the Treasury Portfolio that, if made with respect to the Fund, would
not require the vote of Fund shareholders, or (ii) any proposal relating to the
Treasury Portfolio that is the same as a proposal previously approved by the
Fund's shareholders.
As a Delaware business trust, Core Trust's operations are governed by its trust
instrument and applicable Delaware law rather than by the Articles of
Incorporation, By-Laws and Maryland law, which presently govern the Company's
operations. Differences in these two corporate forms are summarized in Proposal
1, wherein shareholders are being asked to approve the reorganization of the
Company to a Delaware business trust to allow the Funds to enjoy certain
advantages afforded under Delaware law. See "Certain Comparative Information
about the Company and the Delaware Trust" in Proposal 1. The operations of Core
Trust and Treasury Portfolio, like those of
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the Company and Fund, will be subject to the provisions of the 1940 Act and the
rules and regulations of the SEC thereunder and applicable state securities
laws.
TRUSTEES AND OFFICERS OF CORE TRUST
The Trustees of Core Trust are Dr. Costas Azariadis, James C. Cheng, John Y.
Keffer and J. Michael Parish, who are also the directors of the Company.
Subject to the provisions of its Trust Instrument, the business of Core Trust
will continue to be supervised by its Trustees, who serve indefinite terms and
who have all powers necessary or convenient to carry out their responsibilities.
Under the trust instrument for Core Trust, the Treasury Portfolio not be
required to hold meetings of shareholders on a regular basis. A majority of
Trustees then in office generally would be able to appoint successor Trustees
and fill vacancies, provided that at least a requisite majority of the Trustees
has been elected by shareholders. The officers of Core Trust are the same
persons, and serve in the same offices for Core Trust, as the officers of the
Company.
ADVISORY SERVICES
Forum Advisors, Inc. ("Forum Advisors") provides investment advisory services to
the Fund pursuant to an investment advisory agreement between Forum Advisors and
the Company dated October 2, 1989, as amended (the "Fund Advisory Agreement").
The Fund Advisory Agreement was last submitted to a vote of the shareholders of
the Fund for approval on December 1, 1992 and was last approved by the Board of
Directors on June 6, 1995 at a meeting of the Board called for the purpose of
approving the Fund Advisory Agreement. Forum Advisors currently serves as
investment adviser to the Fund and will act as investment adviser to the
Treasury Portfolio pursuant to an investment advisory agreement with Core Trust
(the "Core Advisory Agreement"). Subject to the general control of Core Trust's
Board of Trustees, Forum Advisors will make investment decisions for the
Treasury Portfolio and will continuously review, supervise and administer the
Treasury Portfolio's investment program. The Core Advisory Agreement with
respect to the Treasury Portfolio is the same in all material respects as the
Fund Advisory Agreement except as to the parties, the jurisdiction whose laws
govern the agreement, the circumstances under which fees will be paid and the
fees payable thereunder.
Like its corresponding Fund Advisory Agreement, the Core Advisory Agreement will
continue in effect provided such continuance is approved annually (i) by the
holders of a majority of the outstanding voting securities of the Treasury
Portfolio or by the Board of Trustees and (ii) by a majority of the Trustees who
are not parties to such contract or "interested persons" (as defined in the 1940
Act) of any such party. Like the Fund Advisory Agreement, the Core Advisory
Agreement will be non-assignable and will be terminable by either party without
penalty on 60 days' written notice to the other.
Leslie C. Berthy will be primarily responsible for the day to day management of
the investments of the Treasury Portfolio, a function he currently performs for
the Fund. Mr. Berthy has been a Managing Director of Forum Advisors and has
managed the Fund's portfolio since October 1991.
To the extent the Fund invests all of its investment assets in Treasury
Portfolio, the Fund will have a reduced need for direct investment management
services. Thus, Forum Advisors will not receive an advisory fee under the Fund
Advisory Agreement if the Fund invests all of its assets in the Treasury
Portfolio. However, under the Core Advisory Agreement, the Treasury Portfolio
will pay advisory fees to Forum Advisors with respect to the Treasury Portfolio.
See "Comparative Expense Information" below.
The Board will retain the right to withdraw the Fund's investments from the
Treasury Portfolio at any time. Forum Advisors will continue to serve as the
Fund's investment adviser pursuant to the Fund Contract, except that the Fund
Advisory Agreement will be amended to provide that Forum Advisors will receive
no advisory fee with respect to that Fund if the Fund is completely invested in
the Treasury Portfolio or another Core Portfolio. Thus, in the event the Board
withdrew the Fund's investments from the Treasury Portfolio, the Fund could then
resume investing directly in individual securities of other issuers, with no
interruption in investment advisory services, under the terms of the Fund
Advisory Agreement.
-16-
<PAGE>
For its advisory services to the Fund, Forum Advisors currently receives a
monthly advisory fee equal on an annual basis to 0.20% of the Fund's average
daily net assets. For its investment advisory services under the Core Contract
with respect to the Treasury Portfolio, Forum Advisors will receive an advisory
fee equal on an annual basis to 0.05% of the Treasury Portfolio's average daily
net assets. For the fiscal year ended March 31, 1995, the Fund paid Forum
Advisors, after deducting expense reimbursements and fee waivers, a fee of
$6,000 or 0.0002% of the Fund's average net assets. The Fund has never paid
brokerage commissions.
MANAGEMENT SERVICES
Pursuant to management and distribution agreements with the Company, Forum
currently supervises all aspects of the Fund's operations, including the receipt
of services for which the Company is obligated to pay, provides the Company with
general office facilities and provides, at the Company's expense, the services
of persons necessary to perform such supervisory, administrative and clerical
functions as are needed effectively to operate the Company. Pursuant to
Management and Distribution Agreements with Core Trust, Forum will provide
substantially the same management services for the Treasury Portfolio. The
management services agreements with respect to the Fund and the Treasury
Portfolio are terminable with respect to the Fund and the Treasury Portfolio
without penalty, at any time, by either party to such agreements upon not more
than 60 days' written notice to the other party, and will terminate
automatically in the event of assignment. In addition, under its agreement
with the Fund, Forum acts as distributor of the Fund's shares and as the agent
of the Company in connection with the offering of shares of the Fund. For these
services and facilities, Forum currently receives with respect to the Fund a
management fee at an annual rate of 0.30% of the Fund's average daily net
assets.
If the Fund were completely invested in Treasury Portfolio, Forum would receive
management services fees equal on an annual basis to 0.10% of the Fund's average
daily net assets. In addition, the Fund will be responsible for its pro rata
portion of the administrative services fee paid by the Treasury Portfolio
relating to management services performed on behalf of the Treasury Portfolio by
Forum. For these services, Forum will receive an management services fee equal
on an annual basis to 0.10% of Treasury Portfolio's average daily net assets.
Persons engaged by Forum to provide supervisory, administrative, and clerical
functions may be (and persons providing services to the Company may include)
directors, officers or employees of Forum and its affiliates. Forum, Forum
Advisors and the Transfer Agent are members of the Forum Financial Group of
companies and together provide a full range of services to the investment
company and financial services industry. As of the date hereof, Forum acted as
manager and distributor of registered investment companies and collective trust
funds with assets of approximately $12 billion. Forum, whose address is Two
Portland Square, Portland, Maine 04101, is a registered broker-dealer and
investment adviser and is a member of the National Association of Securities
Dealers, Inc. As of the date of this Proxy Statement, Forum, Forum Advisors and
the Transfer Agent were controlled by John Y. Keffer, President and Chairman of
the Company.
COMPARATIVE EXPENSE INFORMATION
The following information relating to Daily Assets Treasury Fund is intended to
show the various expenses that an investor in the Fund would bear directly or
indirectly after conversion by the Fund to the Core and Gateway fund structure
in comparison to those borne under the existing fund structure. The principal
effect of the Core and Gateway conversion of the Fund would be to reduce the
contractual fees payable by the Fund with respect to investment advisory and
management services -- which are currently 0.20% and 0.30%, respectively -- to
0.05% and 0.20%, respectively, for the Fund and the Treasury Portfolio in the
aggregate.
The table on the following page shows the actual expenses of Daily Assets
Treasury Fund for the fiscal year ended March 31, 1995 and a pro forma
adjustment thereof assuming the Fund had invested all of its investment assets
in the Treasury Portfolio for the period presented. The table also assumes that
there were no investors in the Treasury Portfolio other than the Fund and that
that the average assets invested by the Fund were the same as the average net
assets of the Fund during the same period.
-17-
<PAGE>
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
ProForma
-------------------------------------------------
(Core and
(Gateway) (Core) Gateway)
--------------- --------------- ---------------
Daily Assets Daily Assets
Treasury Treasury Treasury
Fund(1) Fund Portfolio Total(2)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Management Fees(3)
(after fee waivers) 0.25% 0.10% 0.15% 0.25%
Rule 12b-1 Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses
(after expense reimbursements) 0.25% 0.15% 0.10% 0.25%
Total Operating Expenses 0.50% 0.25% 0.25% 0.50%
</TABLE>
(1) Actual expenses for the fiscal year ended March 31, 1995 have been
restated to reflect current fees borne by the Fund, after the
elimination of certain voluntary fee waivers. Absent all other fee
waivers and expense reimbursements of Forum and Forum Advisors during
the fiscal year ended March 31, 1995, the expenses of the Fund would
have been: Management Fees, 0.50%; Other Expenses, 0.60%; and Total
Operating Expenses, 1.10%.
(2) Absent expense reimbursements of Forum and Forum Advisors, the pro
forma, combined expenses of Daily Assets Treasury Fund and the Daily
Assets Treasury Portfolio for the fiscal year ended March 31, 1995
would have been: Management Fees, 0.25%; Other Expenses, 0.70%; and
Total Operating Expenses, 0.95%.
(3) Includes Forum Advisor's advisory fee and Forum's management fee.
EXAMPLE
The following illustrates the expenses attributable to a $1,000 investment in
Daily Assets Treasury Fund under the existing fund structure and the Core and
Gateway fund structure, assuming (i) combined expense reimbursements and fee
waivers of Forum and Forum Advisors at the same level as are currently in effect
for the Fund, (ii) a 5% percent annual return, (iii) reinvestment of all
dividends and distributions, and (iv) full redemption at the end of each period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Existing Fund Structure $5 $10 $28 $63
Core and Gateway Fund Structure $5 $10 $28 $63
THE TABLE AND EXAMPLE ABOVE RELATING TO DAILY ASSETS TREASURY FUND ARE INTENDED
TO SHOW THE VARIOUS EXPENSES THAT AN INVESTOR IN THE FUND WOULD BEAR DIRECTLY OR
INDIRECTLY AFTER CONVERSION BY THE FUND TO THE CORE AND GATEWAY FUND STRUCTURE
IN COMPARISON TO THOSE BORNE UNDER THE EXISTING FUND STRUCTURE. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN.
ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED.
-18-
<PAGE>
INDEPENDENT ACCOUNTANTS FOR CORE TRUST
KPMG Peat Marwick LLP serve as independent accountants for the Treasury
Portfolio. Deloitte and Touche LLP currently serve as the independent
accountants for the Company and will serve in this capacity with respect to the
Delaware Trust in the event that Proposal 1 is approved by shareholders. The
professional services that are expected to be rendered by KPMG Peat Marwick LLP
include the issuance of an opinion on the financial statements of Treasury
Portfolio. KPMG Peat Marwick LLP's address is 99 High Street, Boston,
Massachusetts, 02110. Deloitte & Touche LLP's address is Two World Trade
Center, New York, New York 10019.
TAX CONSEQUENCES OF INVESTMENT IN A CORRESPONDING TREASURY PORTFOLIO
The Company shall have received an opinion from its tax counsel, Seward &
Kissel, on or prior to the date of the Fund's conversion to the Core and Gateway
Structure, that the Fund's investment of all of its assets in the Treasury
Portfolio will not have tax effects with regard to the Fund, the Company and the
Fund's shareholders. Although no ruling has been requested from the Internal
Revenue Service ("IRS") concerning the foregoing, and the IRS is not bound by
the opinion of counsel, the Board believes that an opinion of counsel provides
sufficient authority on the tax effects of each Fund's investment in the
Treasury Portfolio, in view of the nature and complexity of such investment.
It is intended that the Fund will continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986. In each
taxable year that the Fund so qualifies, the Fund (but not its shareholders)
will be relieved of Federal income tax on that part of its investment company
taxable income (consisting of net investment income and the excess of net
short-term capital gain over net long-term capital loss) and net capital gain
(the excess of net long-term capital gain over net short-term capital loss) that
is distributed to its shareholders. Neither the Fund nor the Treasury Portfolio
is expected to be required to pay any Federal income or excise taxes.
Distributions from the Fund, except for interest earned on municipal securities,
if any, will continue to be taxable to its shareholders as ordinary income,
whether received in cash or reinvested in Fund shares.
EVALUATION BY THE BOARD
After considering the matters in Proposal 3 at a meeting held on August 30,
1995, the Board determined to seek shareholder authorization of the actions
necessary for Daily Assets Treasury Fund to convert to the Core and Gateway Fund
Structure. Management of the Fund presented to the Board the potential
benefits, along with potential risks, of the Fund converting to this structure.
In this regard the Board considered the following.
First, management believes that, depending upon the relative sizes of the
Treasury Portfolio and the Fund, the combined expense ratio of the Fund and the
Treasury Portfolio will be approximately equal to the expense ratio of the Fund
if it continued to invest directly in investment securities. The Fund currently
benefits from voluntary fee waivers and expense reimbursements of Forum Advisors
and Forum that may be terminated at any time. The combined expense ratio of the
Fund and the Treasury Portfolio reflect no such fee waivers or expense
reimbursements.
Second, management stated that because the Core and Gateway Fund Structure
allows multiple institutional investors to pool their assets, it is possible
that this structure will achieve certain economies of scale not realized by the
Fund currently. In general, to the extent that certain operating costs are
fixed and borne by the Fund alone, these expenses would instead be shared by the
Fund and other investors in the Treasury Portfolio. In addition, in the view of
management, a larger asset base may allow the purchase of individual investment
securities in larger amounts, which may reduce certain transactional and
custodial expenses.
Third, management noted that some mutual funds have converted to a Core and
Gateway fund structure to enhance their ability to retain assets under
management while developing a competitive advantage in the mutual funds
marketplace. Conversion of the Fund to convert to a Core and Gateway fund
structure is designed to give the Fund the structural flexibility not only to
attract new assets, but also to enhance the Fund's ability to retain current
assets under management.
-19-
<PAGE>
Finally, the Board recognized that certain of the foregoing benefits would
likely arise only if the Treasury Portfolio were to grow through investments in
the Treasury Portfolio by investors other than the Fund. These is no assurance
that, even if other investors invest in the Treasury Portfolio, expense savings
or other benefits will be realized. In addition, the Board recognized that
Forum, Forum Advisors, and other service providers to the Fund may benefit
through increased economies of scale in the event that assets rise, without a
corresponding benefit to Fund shareholders. In particular, conversion to the
Core and Gateway Fund Structure may enable Forum and Forum Advisors to increase
assets under management through attraction and development of new investment
vehicles with less risk than would be possible without this structure. As a
result, Forum and Forum Advisors could earn fees with less risk of limited
success than is typical in the early, developmental years of an investment
vehicle, since new investors in the Treasury Portfolio will be presented with
the ability to pool their assets in an established vehicle.
The Board also considered, among other things, (i) the costs of the proposed
change in fund structure, (ii) other options to the proposed change, and (iii)
the tax-free nature of the proposed change.
Based on the foregoing, the Board, including a majority of the independent
Directors, determined that it would be in the best interests of Daily Assets
Treasury Fund and its shareholders for shareholders to authorize those actions
necessary to convert the Fund to a Core and Gateway fund structure. Even if
Proposal 3 is approved by shareholders of the Fund, the Board will retain the
right to delay or not to proceed with such conversion with respect to the Fund
if for any reason it would not be in the best interests of shareholders of the
Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3
-20-
<PAGE>
PROPOSAL 4
TO APPROVE A NEW INVESTMENT SUBADVISORY AGREEMENT AMONG FORUM ADVISORS, INC.,
LINDEN ASSET MANAGEMENT, INC. AND CORE TRUST (DELAWARE)
SHAREHOLDERS OF DAILY ASSETS TREASURY FUND ARE ENTITLED TO VOTE ON THIS
PROPOSAL.
At a meeting held on August 30, 1995, the Board of Trustees of Core Trust
considered, voted to approve, and recommended approval by the shareholders of
the Treasury Portfolio a new Investment Subadvisory Agreement (the "Proposed
Agreement") among Core Trust, Forum Advisors, and Linden Asset Management, Inc.
("Linden") with respect to the Treasury Portfolio. Approval of the Agreement
requires a vote of the Fund's shareholders. See "Fund Shareholders' Voting
Rights" under Proposal 2 above. Accordingly, the Board of Directors is seeking a
vote of the Fund's shareholders in order to have instructions on how to vote the
Fund's shares in Treasury Portfolio with respect to the Proposed Agreement. The
Fund will vote its shares in the Treasury Portfolio in proportion to the votes
cast by the Fund's shareholders in connection with this Proposal 4. See
"Information Regarding Core Trust and the Treasury Portfolio" under Proposal 3
above. If Proposal 4 is approved by the shareholders of the Fund, it will be
implemented if and only if Proposal 3 is also approved.
Subject to the general control of the Board of Core Trust and Forum Advisors, if
Proposal 4 is approved Linden will assist Forum Advisors in performing its
services under the Investment Advisory Agreement between Forum Advisors and Core
Trust relating to the Treasury Portfolio, including assistance in making
investment decisions for, and monitoring the investments of, the Treasury
Portfolio and managing part or all of the Treasury Portfolio's investment
portfolios. Forum Advisors' investment advisory agreements with respect to the
Fund and the Treasury Portfolio are described in detail under "Advisory
Services" in Proposal 3. Pursuant to the Proposed Agreement, Forum Advisors
(and not Core Trust) will pay Linden a fee for its investment advisory services.
That compensation will not increase the amount paid by Core Trust to Forum
Advisors (or indirectly by the Fund as sole shareholder of Treasury Portfolio)
pursuant to Forum Advisors' investment advisory agreements with the Company or
Core Trust. Approval of this Proposal also constitutes approval of conforming
changes to the Investment Advisory Agreement with Forum Advisors that would
permit Forum Advisors to enter into the Agreement.
Linden is located at 812 N. Linden Drive, Beverly Hills, California 90210, is a
registered investment adviser and was was incorporated in 1992. Linden is
controlled by Anthony R. Fischer, Jr., who is its sole stockholder, director and
officer. Linden currently advises three other portfolios of Core Trust: the
Treasury Cash Portfolio, the Government Cash Portfolio and the Cash Portfolio
(the "Monarch Portfolios"). Linden has been the investment adviser to the
Monarch Portfolios and their related Gateways since the creation of the Monarch
Funds in 1992. As of October 31, 1995, the net assets of the Monarch Portfolios
were: Treasury Cash Portfolio, $28,046,504; Government Cash Portfolio,
$401,911,880; and Cash Portfolio, $76,804,451. No Director of the Company or
Trustee of the Delaware Trust or Core Trust now holds, or has ever held, any
securities issued by Linden. For its advisory services to each of the three
Monarch Portfolios for the fiscal year ended August 31, 1995, Linden received
the following advisory fees, as a percentage of the average daily net assets of
each such Monarch Portfolio: Treasury Cash Portfolio, 0.05%; Government Cash
Portfolio, 0.05%; and Cash Portfolio, 0.05%.
Based on the foregoing, the Board, including a majority of the independent
Directors, determined that it would be in the best interests of Daily Assets
Treasury Fund and its shareholders for shareholders to approve the Agreement
among Linden, Forum Advisors and Core Trust.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 4
-21-
<PAGE>
SHAREHOLDERS AS OF THE RECORD DATE
As of the record date, October 27, 1995 (the "Record Date"), the Company had
48,348,339 shares outstanding, and each Fund had the following shares
ouststanding: Investors Bond Fund, 2,650,844; TaxSaver Bond Fund, 1,663,557;
Maine Municipal Bond Fund, 2,458,841; New Hampshire Bond Fund, 564,399; Daily
Assets Treasury Fund, 39,172,655; Payson Balanced Fund, 1,223,233; and Payson
Value Fund, 614,810. The table below shows, as of the Record Date (i) the total
number of shares that were oustanding for each Fund and for the Company and (ii)
the name and address of any persons or entities that owned of record or
beneficially more than five percent of the outstanding shares of any Fund. As
of the Record Date, (i) directors and officers of the Company, as a group, owned
no shares of any Fund and (ii) Payson & Co. and its affiliates, as trustee,
nominee or custodian, owned of record 72.87% of the outstanding shares of the
Company; the Company has been advised that such entities disclaim beneficial
ownership of such shares. Except as listed in the table, management does not
know of any other person who owns of record or beneficially 5% or more of the
shares of any Fund.
PERCENTAGE
SHARES OF OUTSTANDING
NAME AND ADDRESS OWNED SHARES
- - ---------------- --------- --------------
INVESTORS BOND FUND
Irwin Union Bank & Trust Co. 1,792,766 67.63%
500 Washington Street
Columbus, IN 47203
EBIU & Co. 246,446 9.29%
Irwin Union Bank & Trust Co., trustee
500 Washington Street
Columbus, IN 47203
Post & Co. 138,723 5.23%
P.O. Box 1066 Wall Street Station
New York, NY 10268
TAXSAVER BOND FUND
Irwin Union Bank & Trust Co. 798,295 47.98%
500 Washington Street
Columbus, IN 47203
Leonore Zussman Living Trust 183,273 11.02%
1st National Plaza - Suite 1708
Dayton, OH 45402
Lawrence A. Zussman Living Trust 164,263 9.87%
1st National Plaza - Suite 1708
Dayton, OH 45402
MAINE MUNICIPAL BOND FUND
Merril, Lynch, Pierce, Fenner & Smith 196,116 16.11%
4800 Deer Lake Drive
Jacksonville, FL 32216
Barnhart & Co. 127,496 5.18%
P.O. Box 218
Bar Harbor, ME 04689
NEW HAMPSHIRE BOND FUND
Independence Trust 126,683 22.45%
200 Bedford Street
Manchester, NH 03185
Merril, Lynch, Pierce, Fenner & Smith 30,454 5.39%
4800 Deer Lake Drive
Jacksonville, FL 32216
PAYSON BALANCED FUND
ALA & Co.,c/o H.M Payson & Co. 253,352 20.71%
Box 31
Portland, ME 04112
Payse & Co., c/o H.M Payson & Co. 191,950 15.69%
Box 31
Portland, ME 04112
PAYSON VALUE FUND
ALA & Co., c/o H.M Payson &Co. 141,238 22.97%
Box 31
Portland, ME 04112
Payse & Co., c/o H.M Payson & Co. 108,556 17.66%
Box 31
Portland, ME 04112
DAILY ASSETS TREASURY FUND
Payson & Co., custodian 20,540,244 52.43%
Box 31
Portland, ME 04112
Payson & Co., trustee 13,999,071 35.74%
Box 31
Portland, ME 04112
OTHER BUSINESS
Management knows of no other business to be presented at the Meeting. If any
additional matters should be properly presented, it is intended that the
enclosed proxy will be voted on such matters in accordance with the judgment of
the persons designated in the proxy.
-22-
<PAGE>
ADDITIONAL INFORMATION
SUBMISSION OF SHAREHOLDER PROPOSALS
It is anticipated that, following the Meeting, neither the Company nor any of
the Funds will hold any shareholder meetings except as required by Federal law,
Delaware state law or Maryland state law. The Company is required to hold an
annual meeeting only when election of directors is required to be acted on by
shareholders under the 1940 Act. Shareholders wishing to submit proposals,
including proposals to nominate persons for election as directors, for inclusion
in a proxy statement for a subsequent shareholder meeting should send proposals
to the Secretary of Forum Funds, Inc., David I. Goldstein, in care of Forum
Financial Group, Two Portland Square, Portland, Maine 04101.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Banks, broker-dealers and voting trustees and their nominees should advise the
Secretary of Forum Funds, Inc., David I. Goldstein, in care of Forum Financial
Group, Two Portland Square, Portland, Maine 04101, whether, with respect to
shares of record held by them, other persons are beneficial owners of shares for
which proxies are being solicited and if so, the number of copies of the Proxy
Statement needed in order to supply copies to the beneficial owners of the
shares.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY
November 13, 1995 By order of the Board of Directors,
David I. Goldstein
Secretary
-23-
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of August
30, 1995 between Forum Funds, Inc., a corporation formed under the laws of the
State of Maryland (the "Company") and Forum Funds, a business trust formed under
the laws of the State of Delaware (the "Trust").
WHEREAS, this Agreement is intended to effect the reorganization of the
Company into a Delaware business trust by the transfer of all of the assets of
each of the Company's Investors Bond Fund, TaxSaver Bond Fund, Maine Municipal
Bond Fund, New Hampshire Bond Fund and Daily Assets Treasury Fund (each a "Forum
Fund," and, collectively, the "Forum Funds"), Payson Balanced Fund and Payson
Value Fund (each a "Payson Fund," and, collectively, the "Payson Funds") and
Daily Assets Cash Fund (with each Forum Fund and Payson Fund, individually, a
"current Fund" and collectively, the "current Funds") to a corresponding
portfolio of the Trust with the same name (each a "successor Fund" and
collectively the "successor Funds") solely in exchange for assumption by each
successor Fund of all of the liabilities of the current Fund and issuance to
each current Fund of shares of beneficial interest of the corresponding
successor Fund (the "Trust Shares") followed by the distribution, on the Closing
Date, as hereinafter defined, of the Trust Shares of each successor Fund to the
holders of shares of the corresponding current Fund (the "Fund Shareholders")
and by the liquidation and termination of the Company as provided herein, all
upon the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. SHAREHOLDER APPROVAL.
A special meeting (the "Special Meeting") of the Fund Shareholders shall be
called and held for the purpose of approving this Agreement and the transactions
contemplated herein.
2. REORGANIZATION.
The transactions described in this section are hereinafter referred to as
the "Reorganization." The Reorganization shall occur with respect each current
Fund and its corresponding successor Fund and, unless the context otherwise
requires, all transactions contemplated hereby are to be entered into by each
current Fund with its corresponding successor Fund and no other successor Fund.
2.1. Subject to the terms and conditions set forth herein and on the basis
of the representations and warranties contained herein, each current Fund agrees
to transfer substantially all of its assets as set forth in paragraph 2.2 to its
corresponding successor Fund. The Trust, on behalf of each successor Fund,
agrees in exchange therefor (1) that the successor Fund shall assume all of the
corresponding current Fund's liabilities, whether contingent or otherwise,
existing as of the Closing Date, and further (2) that on the Closing Date the
successor Fund shall deliver to the Company the number of full and fractional
Trust Shares equal to the value and number of full and fractional shares of the
corresponding current Fund outstanding on the Closing Date.
2.2 The assets of the current Funds transferred to the successor Funds
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividend receivables), claims or rights of
action or rights to register shares under applicable securities laws, books and
records of the current Funds, all other property owned by the current Funds and
all deferred or prepaid expenses shown as assets on the books of the current
Funds on the Closing Date.
2.3 Immediately upon delivery of the Trust Shares to the current Funds,
the Directors are authorized, on behalf of the Company as the then initial
shareholder of the Trust, (1) to elect as trustees of the Trust ("Trustees") the
persons who currently serve as directors of the Company; and (2) to approve the
following:
<PAGE>
(i) (A) the investment advisory agreement between the Trust and Forum
Advisors, Inc. ("Forum Advisors"), investment adviser with respect to each
Forum Fund and (B) the investment advisory agreement between the Trust and
H.M. Payson & Co.("Payson"), investment adviser with respect to each Payson
Fund (the "Advisory Agreements"), as such agreements have been approved by
the Board of Trustees of the Trust, and
(ii) the continuation for each sucessor Fund's current fiscal year of
the engagement of the independent accountants who currently serve in that
capacity for the current funds.
2.4 On the Closing Date, each current Fund will distribute to each Fund
Shareholder of record Trust Shares of the corresponding successor Fund pro rata
in proportion to the Fund Shareholder's interest in the current Fund in
liquidation and redemption of the Fund Shareholder's current Fund shares. The
Trust will not issue certificates evidencing Trust Shares in connection with
such distribution except upon written shareholder request.
2.5 As soon as practicable after the distribution pursuant to paragraph
2.4 of Trust Shares with respect to all the Funds, the Company shall be
liquidated and terminated.
2.6. Ownership of Trust Shares by the former Fund Shareholders will be
reflected on the books of the Trust's transfer agent.
2.7 Any transfer taxes payable upon issuance of Trust Shares in a name
other than the name of the registered owner of the corresponding current Fund
Shares on the books of the current Fund as of the Closing Date shall be paid by
the person to whom such Trust Shares are to be distributed as a condition of
such transfer.
2.8. Any reporting responsibility of a current Fund is and shall remain its
responsibility up to and including the later of the Closing Date and any date on
which the Company may be liquidated and terminated.
3. CLOSING AND CLOSING DATE.
3.1 The closing shall occur at the later of (i) the final adjournment of
the Special Meeting and (ii) such later time as the parties may mutually agree
(the "Closing Date"). The transfer of substantially all of the current Funds'
assets in exchange for the assumption by the successor Funds of the liabilities
of the current Funds and the issuance of Trust Shares, as described above,
together with all related acts necessary to consummate such acts (the "Closing")
shall occur on the Closing Date at the offices of Forum Financial Services,
Inc., manager of the Company, at Two Portland Square, Portland, Maine or at such
other place or later date as the parties may agree. All acts taking place at
the Closing shall be deemed to take place simultaneously as of the last daily
determination of each current Fund's net asset value or at such other time and
place as the parties may agree.
3.2 In the event that on the Closing Date, (a) the New York Stock Exchange
is closed to trading, or trading thereon is restricted, or (b) trading or
reporting of trading on said Exchange or in any market in which portfolio
securities of a current Fund are traded is disrupted so that accurate appraisal
of the value of the total net assets of a current Fund is impracticable, the
closing shall be postponed until the first business day upon which trading shall
have been fully resumed and reporting shall have been restored.
3.3 The Company shall deliver at the Closing a certificate of an
authorized officer of the Company stating that it has notified the custodian of
the Company of the transfer of the assets of each current Fund to its
corresponding successor Fund.
3.4 The transfer agent for the current Funds shall deliver at the Closing
a certificate as to the transfer on its books and records of each current Fund
Shareholder's account to an account of a holder of Trust Shares of the
corresponding successor Fund. The Trust shall issue and deliver a confirmation
to the Company of the number of Trust Shares to be credited to the Company with
respect to each successor Fund on the Closing Date or provide
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evidence satisfactory to the Company that such Trust Shares have been credited
to the Company's account on the books of the Trust.
3.5 At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts and other documents as
such other party may reasonably request.
4. VALUATION.
4.1 The value of each current Fund's net assets to be acquired by the
Trust on behalf of each successor Fund hereunder shall be the net asset value
computed as of the close of business on the last business day preceding the
Closing Date, using the valuation procedures set forth in the current Fund's
then current prospectus or statement of additional information (each a
"Prospectus"). For purposes of this Agreement, a "business day" shall have the
meaning ascribed to such term in the current Fund's Prospectus.
4.2 The number, value and denominations of full and fractional Trust
Shares to be issued in exchange for the current Funds' net assets shall be equal
to the number, value and denominations of full and fractional current Fund
shares outstanding as of the close of business on the last business day
preceding the Closing Date.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
5.1. ORGANIZATION, EXISTENCE, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted. The Company is not, and is not required to be, qualified to do
business as a foreign corporation under the laws of any jurisdiction. The
Company has all necessary Federal, state and local authorizations to own all of
its properties and assets and to carry on its business as it is now being
conducted.
5.2. REGISTRATION AS AN INVESTMENT COMPANY. The Company is registered
under the Act as an open-end management investment company; such registration
has not been revoked or rescinded and is in full force and effect.
5.3. CAPITALIZATION. The authorized capital stock of the Company consists
of 20,000,000,000 shares of Common Stock, each having a par value of $.001 per
share. No shares are held in the treasury of the Company. Because the Company
is an open-end investment company engaged in the continuous offering and
redemption of its shares, the number of outstanding shares may change prior to
the Closing Date.
5.4. FINANCIAL STATEMENTS. The audited financial statements of the Company
for the fiscal year ended March 31, 1995 (the "Company Financial Statements")
fairly present the financial position of each current Fund as of the date
thereof and the results of its operations and changes in its net assets for the
periods indicated.
5.5 CURRENT FUND SHARES. The outstanding shares of the current Funds are
duly and validly issued and outstanding, fully paid and nonassessable.
5.6. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Company's
Board of Directors and no other corporate proceedings by the Company, other than
the approval of this Agreement by the Fund Shareholders at the Annual Meeting,
are necessary to authorize its officers to effectuate this Agreement and the
transactions contemplated hereby. The Company is not a party to or obligated
under any charter, by-law, indenture or contract provision or any other
commitment or obligation, or subject to any order or decree, which would be
violated by its executing and carrying out this Agreement.
5.7. LIABILITIES. There are no liabilities of the current Funds, whether
or not determined or determinable, other than liabilities disclosed or provided
for in the Company Financial Statements and liabilities incurred in the ordinary
course of business subsequent to March 31, 1994, none of which has been
materially
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adverse to the business, assets or results of operations of the current Funds.
All liabilities of the current Funds to be assumed by the successor Funds were
incurred by the current Funds in the ordinary course of business.
5.8. LITIGATION. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened which would adversely
affect the current Funds' assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby. Neither the Company nor
any of the current funds is under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning of
section 368(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
5.9. CONTRACTS. Except for contracts and agreements described in the
current prospectuses and statements of additional information of the current
Funds, under which no default exists, the Company is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise, license or
permit of any kind or nature whatsoever with respect to the current Funds.
5.10. TAXES. The Federal income tax returns of each current Fund have
been filed for all taxable years to and including the taxable year ended
March 31, 1995, and all taxes payable pursuant to such returns have been
paid. Each current Fund has qualified as a regulated investment company
("RIC") under Subchapter M of the Code, for each taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year.
5.11. REGISTRATION STATEMENT. The Company will notify the Securities
and Exchange Commission (the "Commission") that the Trust will adopt the
Company's existing registration statement (the "Registration Statement")
under the Securities Act of 1933 ("Securities Act") with respect to the
shares of the current Funds. At the time the Registration Statement becomes
effective, the Registration Statement (i) will comply in all material
respects with the provisions of the Securities Act and the Rules and
Regulations of the Commission thereunder (the "Regulations") 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; and at the time Registration Statement
becomes effective, at the time of the Annual Meeting and at the Closing Date,
the prospectuses and statements of additional information, as amended or
supplemented by any amendments or supplements filed by the Company, 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.
5.12. LIQUIDATION AND TERMINATION. The Company will be liquidated and
terminated as soon as practicable after completion of the Reorganization.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUST.
The Trust represents and warrants to the Company as follows:
6.1. ORGANIZATION, EXISTENCE, ETC. The Trust is a Delaware business trust
duly organized, validly existing and in good standing under the laws of the
State of Delaware; the Trust filed its Trust Certificate with the Secretary of
State of Delaware; and each successor Fund has been duly established and
designated as a fund of the Trust by resolution of the Trustees.
6.2. REGISTRATION AS AN INVESTMENT COMPANY. On the Closing Date and upon
the adoption of the Registration Statement, the Trust will be registered under
the Act as an open-end management investment company.
6.3. CAPITALIZATION. Prior to the Closing Date, there shall be no issued
and outstanding Trust Shares. Trust Shares issued on the Closing Date in
connection with the transactions contemplated herein will be duly and validly
issued and outstanding, fully paid and non-assessable under Delaware law.
6.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Trust has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Trustees, and
no other proceedings are
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<PAGE>
necessary to authorize its officers to effectuate this Agreement and the
transactions contemplated hereby. The Trust is not a party to or obligated
under any charter, by-law, indenture or contract provision or any other
commitment or obligation, or subject to any order or decree, which would be
violated by its executing and carrying out this Agreement.
6.5. LIABILITIES. There are no liabilities of the Trust, whether or not
determined or determinable, other than liabilities otherwise previously
disclosed to the Company, none of which has been materially adverse to the
business, assets or results of operations of the Trust.
6.6. LITIGATION. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Trust, threatened which would adversely
affect the Trust or its assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby.
6.7. CONTRACTS. Except for contracts and agreements disclosed to the
Company, under which no default exists, the Trust is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise, license or
permit of any kind or nature whatsoever.
6.8. TAXES. The Trust intends that each successor Fund will be a "fund" as
defined in section 851(h)(2) of the Code and will meet all the requirements to
qualify as a RIC under Subchapter M of the Code for each of the taxable years
following the Reorganization.
6.9. REGISTRATION STATEMENT. In connection with the Reorganization, the
Trust will adopt the Registration Statement. At the time the Registration
Statement becomes effective, the Registration Statement (i) will comply in all
material respects with the provisions of the Securities Act and the Regulations
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; and at the time the Registration Statement
becomes effective, at the time of the Annual Meeting and at the Closing Date,
the prospectuses and statements of additional information, as amended or
supplemented by any amendments or supplements filed by the Company, 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.
6.10. CONTINUATION OF THE COMPANY'S BUSINESS. The Trust has no plan or
intention to issue additional Trust Shares following the Reorganization
except for shares issued in the ordinary course of the Trust's business as an
open-end investment company; nor does the Trust have any plan or intention to
redeem or otherwise reacquire any Trust Shares issued to Fund Shareholders
pursuant to the Reorganization, other than through redemptions arising in the
ordinary course of that business. The Trust will actively continue the
Company's business in the same manner that the Company conducted it
immediately before the Reorganization and has no plan or intention to sell or
otherwise dispose of any of the assets to be acquired by the Trust in the
Reorganization, except for dispositions made in the ordinary course of its
business and dispositions necessary to maintain the Trust's status as a RIC
under Subchapter M of the Code
7. CONDITIONS TO OBLIGATIONS OF THE TRUST.
The obligations of the Trust hereunder with respect to the consummation of
the Reorganization as it relates to each successor Fund are subject to the
satisfaction of the following conditions:
7.1. APPROVAL BY SHAREHOLDERS. This Agreement and the transactions
contemplated hereby, including, as necessary, any temporary amendment of any
investment restrictions of a current Fund that might otherwise preclude the
consummation of the Reorganization, shall have been approved by the affirmative
vote of a majority of the outstanding shares of the Company entitled to vote on
the matter.
7.2. COVENANTS, WARRANTIES AND REPRESENTATIONS. The Company shall have
complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all material
respects as of the Closing Date, there shall have been no material adverse
change in the financial condition, results
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<PAGE>
of operations, business, properties or assets of the current Funds since March
31, 1995, and the Trust shall have received a certificate of the President of
the Company satisfactory in form and substance to the Trust so stating.
7.3. REGULATORY APPROVAL. Each Registration Statement under the Act and
the Securities Act relating to the Trust and the current Funds shall have been
declared effective by the Commission and no stop orders under the Securities Act
pertaining thereto shall have been issued; all necessary orders of exemption
under the Act with respect to the transactions contemplated hereby shall have
been granted by the Commission; and all approvals, registrations, and exemptions
under Federal and state laws considered to be necessary shall have been
obtained.
7.4. TAX OPINION. The Company and the Trust shall have received an opinion
of Seward & Kissel dated on or before the Closing Date, to the effect that, on
the basis of existing provisions of the Code, current administrative rules and
court decisions, for Federal income tax purposes: (i) no gain or loss will be
recognized by the current Funds or the successor Funds upon the Reorganization;
(ii) the holding period and tax basis of the Trust Shares received by each Fund
Shareholder will be the same as the holding period and tax basis of the Fund
Shareholder's current Fund shares held immediately prior to the exchange. For
purposes of rendering their opinion, such counsel may rely exclusively, and
without independent verification as to factual matters, upon the statements made
in this Agreement, upon the proxy statement which will be distributed to the
Fund Shareholders in connection with the Reorganization, and upon such other
written representations as the Trust and the Company will have verified as of
the Closing Date.
7.5. OPINION OF COUNSEL. The Company and the Trust shall have received the
opinion of Seward & Kissel dated as of the Closing Date and addressed to each of
them, to the effect that: (i) the Company is a corporation duly organized and
existing under the laws of the State of Maryland and the Trust is a Delaware
business trust duly organized and validly existing under the laws of the State
of Delaware; (ii) each of the Company and the Trust is an open-end management
investment company registered under the Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this Agreement have been
duly authorized and approved by all requisite action of the Company and the
Trust, and this Agreement has been duly executed and delivered by the Company
and the Trust, and is a valid and binding obligation of the Company and the
Trust, subject to applicable bankruptcy, insolvency, fraudulent conveyance and
similar laws or court decisions regarding enforcement of creditors' rights
generally; (iv) the Registration Statement has been declared effective under the
Securities Act and to the best of counsel's knowledge after reasonable
investigation no stop order has been issued or threatened suspending their
effectiveness; (v) to the best of counsel's knowledge after reasonable
investigation no consent, approval, order or other authorization of any Federal
or state court or administrative or regulatory agency is required for the
Company or the Trust to enter into this Agreement or to carry out its terms that
has not already been obtained, other than where the failure to obtain any such
consent, approval, order or authorization would not have a material adverse
effect on the operations of the Company or the Trust; and (vi) the Trust Shares
of the successor Fund to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this Agreement will be
validly issued, fully paid and nonassessable.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company hereunder with respect to the consummation
of the Reorganization as it relates to each current Fund are subject to the
satisfaction of the following conditions:
8.1. COVENANTS, WARRANTIES AND REPRESENTATIONS. The Trust shall have
complied with each of its covenants contained herein, and each of the
representations and warranties contained herein shall be true in all material
respects as of the Closing Date.
8.2. REGULATORY APPROVAL. All necessary orders of exemption under the Act
with respect to the transactions contemplated hereby shall have been granted by
the Commission; and all approvals, registrations, and exemptions under Federal
and state laws considered to be necessary shall have been obtained.
8.3. TAX OPINION. The Company and the Trust shall have received the
opinion referred to in Section 7.4 of this Agreement.
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<PAGE>
8.4. OPINION OF COUNSEL. The Company and the Trust shall have received the
opinion referred to in Section 7.5 of this Agreement.
9. AMENDMENTS; TERMINATION; NON-SURVIVAL OF COVENANTS, WARRANTIES AND
REPRESENTATIONS.
9.1. WAIVERS. At any time prior to the Closing Date either of the parties
may waive compliance with any of the covenants or conditions made for its
benefit contained herein.
9.2. TERMINATION BY EITHER PARTY. This Agreement may be terminated at any
time prior to the Closing Date without liability on the part of either party
hereto or its respective trustees, directors, officers or shareholders by any
party on notice to the other party.
9.3. SURVIVAL. No representations, warranties or covenants made in or
pursuant to this Agreement (including certifications of officers) shall survive
the Reorganization.
10. EXPENSES AND LIABILITIES.
The current Funds and the successor Funds shall be responsible for all of
their expenses in connection with the Reorganization.
11. GENERAL.
This Agreement supersedes all prior agreements between the parties (written
or oral), is intended as a complete and exclusive statement of the terms of the
Agreement between the parties and may not be changed or terminated orally. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been executed by the Trust and the Company and delivered
to each of the parties hereto. The heading contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Nothing in this Agreement, expressed or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Attest: FORUM FUNDS, INC., a
Maryland corporation
By By
-------------------------- ----------------------------
Secretary President
Attest: FORUM FUNDS, a
Delaware business trust
By By
-------------------------- ----------------------------
Secretary President
COPIES OF THE TRUST'S CERTIFICATE OF TRUST AND TRUST INSTRUMENT ARE ON FILE WITH
THE SECRETARY OF THE TRUST, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT AND
PLAN OF REORGANIZATION IS EXECUTED ON BEHALF OF THE TRUST BY OFFICERS OF THE
TRUST AS OFFICERS AND NOT INDIVIDUALLY AND THAT THE TRUST'S OBLIGATIONS OF OR
ARISING OUT OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES,
OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS OF THE TRUST INDIVIDUALLY BUT ARE
BINDING ONLY UPON THE ASSETS AND PROPERTY OF THE TRUST.
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<PAGE>
FORUM FUNDS, INC.
INVESTORS BOND FUND
TAXSAVER BOND FUND
MAINE MUNICIPAL BOND FUND
NEW HAMPSHIRE BOND FUND
PAYSON BALANCED FUND
PAYSON VALUE FUND
DAILY ASSETS TREASURY FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned appoints David I.
Goldstein and Dana A. Lukens (or, if only one shall act, that one) proxies
with the power of substitution to vote all of the shares of Investors Bond
Fund, TaxSaver Bond Fund, Maine Municipal Bond Fund, New Hampshire Bond Fund,
Daily Assets Treasury Fund, Payson Balanced Fund and Payson Value Fund (each
a "Fund" and, collectively, the "Funds"), each a series of Forum Funds, Inc.,
registered in the name of the undersigned at the Special Meeting of
Shareholders of the Funds to be held at the offices of the Funds'
administrator, Forum Financial Services, Inc., Two Portland Square, Portland,
Maine on December 6, 1995 at 9:00 a.m. Eastern Time, and at any adjournment
or adjournments thereof.
PROPOSAL 1:
(NOTE: SHAREHOLDERS OF ALL FUNDS VOTE ON PROPOSAL 1)
To reorganize the Company from a Maryland corporation to a Delaware
business trust under the name Forum Funds and thereafter to dissolve the
Company.
For ______ Against _____ Abstain _____
PROPOSAL 2:
(NOTE: SHAREHOLDERS OF ALL FUNDS, EXCEPT DAILY ASSETS TREASURY FUND, VOTE
ON PROPOSAL 2)
To approve a fundamental investment limitation for each Fund, excluding
Daily Assets Treasury Fund, that would permit the Fund to invest all or a
part of its investment assets in an investment company having substantially
the same investment objective and policies as the Fund.
For ______ Against _____ Abstain _____
<PAGE>
PROPOSAL 3:
(NOTE: ONLY SHAREHOLDERS OF DAILY ASSETS TREASURY FUND, VOTE ON PROPOSAL 3)
To approve a fundamental investment limitation for Daily Assets Treasury
Fund that authorizes Daily Assets Treasury Fund to invest all or a part of
its investment assets in a portfolio of Core Trust (Delaware), a
registered, open-end investment company, which portfolio would have
substantially the same investment objective and policies as the Fund
For ______ Against _____ Abstain _____
PROPOSAL 4
(NOTE: ONLY SHAREHOLDERS OF DAILY ASSETS TREASURY FUND, VOTE ON PROPOSAL
4)
To approve an Investment Advisory Agreement among Linden Asset Management,
Inc., Forum Advisers, Inc. and Core Trust (Delaware) with respect to the
portfolio of Core Trust (Delaware) into which the assets of Daily Assets
Treasury Fund would be invested if Proposal 3 is approved.
For ______ Against _____ Abstain _____
Receipt is acknowledged of the Proxy Statement for the Special Meeting of
Shareholders to be held on December 6, 1995 (NOTE: Checking the box labeled
ABSTAIN will result in the shares covered by the Proxy being treated as if they
were voted AGAINST the proposal.)
________________________________________ ___________________
Authorized Signature Date
________________________________________
Printed Name (and Title of Applicable)
________________________________________ ___________________
Authorized Signature (Joint Investor) Date
________________________________________
Printed Name (and Title of Applicable)
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
