Schedule 14A Information required in proxy statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.149-11(c) or Section 240.14a-12
Stone Bridge Funds, Inc.
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(Name of Registrant as Specified in its Charter)
Joanne Doldo
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check appropriate box:
[ ] $125 per Exchange Act Rule 20a-1(c)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(j) (3) [ ] Fee computed on table below per Exchange Act Rules 14a-6(j)(4)
and 0-11
1. Title of each class of securities to which transaction applies:
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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 value of transaction
Set forth the amount on which the filing fee is calculated and state how it was
determined.
[ ] 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
<PAGE>
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
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2. Form, Schedule or Registration Statement No.:
PREM14A
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3. Filing Party:
Registrant
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4. Date Filed:
August 22, 1996
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<PAGE>
STONE BRIDGE FUNDS, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 15, 1996
A special meeting of the shareholders of the Oak Hall Equity Fund (the
"Oak Hall Fund") and the Austin Global Equity Fund (the "Austin Global Fund"
and, collectively with the Oak Hall Fund, the "Funds"), series of the Stone
Bridge Funds, Inc. (the "Stone Bridge Funds") will be held at 10:00 a.m.
(Eastern time) at Two Portland Square, Portland, Maine 04101 on October 15,
1996, for the purposes indicated below:
The following proposal applies to shareholders of EACH FUND:
1. To approve or disapprove the reorganization of each Fund into a
separate newly-created series of the Forum Funds (each, a "New
Series"). A vote for approval of this proposal will also be a
vote to (a) approve an Agreement and Plan of Reorganization (the
"Plan") on behalf of the Funds and (b) authorize each Fund, as
the sole shareholder of the corresponding New Series, to approve
(i) the proposed Investment Advisory Agreement for the New Series
and (ii) the proposed Distribution Plan for the shares of the New
Series.
In addition, for shareholders of each Fund, to transact such other business as
may properly come before the meeting or any adjournment thereof.
2. To consider the following proposals relating to EACH FUND'S
fundamental investment restrictions:
a. To approve or disapprove an amendment to each Fund's
fundamental investment restriction concerning senior
securities;
b. To approve or disapprove an amendment to each Fund's
fundamental investment restriction concerning borrowing;
c. To approve or disapprove an amendment to each Fund's
fundamental investment restriction concerning commodities;
3. To consider the following proposals relating to the OAK HALL
EQUITY FUND ONLY:
a. To approve or disapprove of the elimination of the Oak Hall
Equity Fund's fundamental investment restriction concerning
investment for the purpose of exercising control;
b. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
concerning purchases of securities on margin and the
elimination of the Oak Hall Equity Fund's fundamental
investment restriction concerning short sales;
c. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
concerning investment in interests in oil or gas;
d. To approve or disapprove an amendment to the Oak Hall Equity
Fund's fundamental investment restriction concerning
investment in other investment companies;
e. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
concerning securities in which affiliates have invested;
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f. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
concerning securities of unseasoned issuers;
g. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
regarding the pledging, mortgaging or hypothecation of
assets; and
h. To approve or disapprove the reclassification of the Oak
Hall Equity Fund's fundamental investment restriction
regarding investment in securities that are not readily
marketable.
Shareholders of record as of the close of business on August 23,
1996 are entitled to receive notice of, and to vote at, the Meeting and any and
all adjournments thereof. Your attention is called to the accompanying proxy
statement.
BY ORDER OF THE BOARD OF DIRECTORS
MAX BERUEFFY
SECRETARY
September 9, 1996
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO
ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
STONE BRIDGE FUNDS, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of the STONE BRIDGE
FUNDS, INC. (the "Stone Bridge Funds") on behalf of the Oak Hall Equity Fund
(the "Oak Hall Fund") and the Austin Global Equity Fund (the "Austin Global
Fund", and collectively with the Oak Hall Fund, the "Funds"). The Stone Bridge
Funds is a registered open-end investment company having its executive offices
at Two Portland Square, Portland, Maine 04101. The proxy is revocable at any
time before it is voted by sending written notice of the revocation to the Stone
Bridge Funds or by appearing personally at the October 15, 1996 special meeting
of shareholders (the "Meeting").
A copy of each Fund's Annual Report (which contains information
pertaining to the Fund) may be obtained, without charge, by calling the Fund's
Transfer Agent, Forum Financial Corp., Two Portland Square, Portland, Maine
04112, at (207) 879-0001.
This proxy statement and the enclosed notice of meeting and proxy card
are first being mailed to shareholders on or about September 9, 1996.
INTRODUCTION
The Meeting is being called for the following purposes.
With respect to each of the Funds: (1) to approve or disapprove a
reorganization into a separate new series (each, a "New Series") of the Forum
Funds and to transact such other business as may properly come before the
Meeting or any adjournment thereof, and (2) to consider proposals pertaining to
the amendment, reclassification or elimination of various fundamental investment
restrictions of the Funds.
The following proposal applies only to the Oak Hall Equity Fund: (3) to
consider proposals pertaining to the amendment, reclassification or elimination
of various fundamental investment restrictions of the Oak Hall Fund.
The following chart summarizes which proposals will be considered by each Fund:
PROPOSAL NUMBER
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NAME OF FUND 1 2 3
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Oak Hall Equity x x x
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Austin Global Equity x x
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DESCRIPTION OF VOTING
Approval of Proposal 1 requires the vote of a majority of the
outstanding shares of common stock ("Shares") of a Fund. Approval of each item
in Proposal 2 requires the vote of a "majority of the outstanding voting
securities," within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), of each Fund to which the proposal is applicable. The
term "majority of the outstanding voting securities" is defined under the 1940
Act to mean: (a) 67% or more of the outstanding Shares present at the Meeting,
if the holders of more than 50% of the outstanding Shares are present or
represented by proxy, or (b) more than 50% of the outstanding Shares of a Fund,
whichever is less.
Shareholders of record at the close of business on August 23, 1996 (the
"Record Date"), will be entitled to notice of and to vote at the Meeting,
including any adjournment thereof. As of the Record Date, there were 782,458.815
outstanding Shares of the Oak Hall Fund and 787,352.110 outstanding Shares of
the Austin Global Fund. Each Shareholder will be entitled to one vote for each
share and a fractional vote for each fractional share held. Shareholders holding
one-third of the outstanding Shares of each Fund at the close of business on the
Record Date present in person or by proxy will constitute a quorum for the
transaction of business regarding the respective Fund at the Meeting.
For purposes of determining the presence of a quorum and counting votes
on the matters presented, Shares represented by abstentions and "broker
non-votes" will be counted as present, but not as votes cast, at the Meeting.
Under the 1940 Act, the affirmative vote necessary to approve a matter under
consideration may be determined with reference to a percentage of votes present
at the Meeting. For this reason, abstentions and non-votes have the effect of
votes against the proposal.
Any proxy which is properly executed and returned in time to be voted
at the Meeting will be counted in determining whether a quorum is present and
will be voted as marked. In the absence of any instructions, such proxy will be
voted to approve each applicable Proposal. If a quorum is not present at the
Meeting, or if a quorum is present 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. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the Proposals that are the subject of the Meeting, the
percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
represented at the Meeting in person or by proxy. A shareholder vote may be
taken for one or more of the Proposals in this proxy statement prior to any
adjournment if sufficient votes have been received for approval. If a
shareholder abstains from voting as to any matter, then the shares held by such
shareholder shall be deemed present at the Meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to such matter, but
shall not be deemed to have been voted in favor of such matter. A Shareholder
may revoke his or her proxy at any time prior to its exercise by delivering
written notice of revocation or by executing and delivering a later dated proxy
to the address set forth on the cover page of this Proxy Statement, or by
attending and voting at the Meeting.
The cost of preparing and mailing proxy materials will be borne by the
Stone Bridge Funds on a pro rata basis. Proxy solicitations will be made
primarily by mail, but may also be made by telephone, facsimile or personal
interview conducted by certain officers or employees of the Stone Bridge Funds
or the Funds' investment advisers. Forum Financial Services, Inc., the
administrator to the Stone Bridge Funds, has engaged Shareholder Communications
Corporation on behalf of the Stone Bridge Funds to mail proxy materials and
tabulate voting results, at an estimated cost of $3,000, including out of pocket
expenses.
If the Proposals are approved, it is anticipated that they will become
effective as soon as practical thereafter, and in any event by October 31, 1996.
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<PAGE>
MATTERS TO BE ACTED ON
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF
THE REORGANIZATION
The Board of Directors of the Stone Bridge Funds has approved an
Agreement and Plan of Reorganization (the "Plan") which provides for the
reorganization (the "Reorganization") of the Oak Hall Fund into the Oak Hall
Equity Fund Series (the "Oak Hall Series") and the Austin Global Fund into the
Austin Global Equity Fund Series (the "Austin Global Series" and, collectively
with the Oak Hall Series, the "New Series"). Each of the New Series is a series
of the Forum Funds (the "Forum Funds"), an investment company that is managed
and distributed by Forum Financial Services, Inc., the Stone Bridge Funds'
administrator/distributor. The New Series do not currently have any assets; they
are shell funds which are being registered as series of the Forum Funds for the
sole purpose of receiving the assets of the corresponding Funds. Each New Series
has the same investment objectives, policies and restrictions as its
corresponding Fund. Each New Series also has the same investment adviser,
administrator/distributor and transfer agent as its corresponding Fund. Each New
Series differs from its corresponding Fund in that each New Series is a series
of the Forum Funds, which is a Delaware business trust. In addition, the Forum
Funds has a Board of Trustees which is different from the Board of Directors of
the Stone Bridge Funds, except for John Y. Keffer, who is currently Chairman of
both the Stone Bridge Funds and the Forum Funds.
Each New Series has been organized and registered for the purpose of
continuing the investment operations of its corresponding Fund. Because of the
continuation of investment operations, and to avoid the need to call another
shareholders' meeting after a Reorganization, Shareholders of each Fund are also
being asked to authorize the Fund, as the sole shareholder of the New Series
during the Reorganization, to approve the proposed Investment Advisory Agreement
and the proposed Distribution Plan for the New Series, which are identical to
the current investment advisory agreement and distribution plan in all material
respects except for their effective dates. A vote in favor of the Reorganization
is also a vote to authorize the relevant Fund to take such actions. In the event
the Reorganization is approved by Shareholders of only one Fund, the Board of
Directors will consider what other course of action, if any, should be taken
with respect to the other Fund, which could include the adoption of a plan to
liquidate such Fund.
NO COMMISSIONS, SALES LOADS OR OTHER SIMILAR CHARGES WILL BE INCURRED
BY SHAREHOLDERS IN CONNECTION WITH THE REORGANIZATION.
REASONS FOR THE PROPOSED REORGANIZATION
After considering various factors, including continuity of the Funds'
service providers and alternatives to, and the tax consequences of, the
Reorganization, the Board of Directors recommended that the Funds be reorganized
into newly-created series of the Forum Funds, a family of ten funds ranging from
stock and bond to money market funds. The Board believes that the proposed
reorganization will allow the Funds to operate more efficiently and offer
substantial benefits to the shareholders because through the reorganization the
Funds would be part of a larger combined fund family, allowing the shareholders
to take advantage of the benefits that size and a diverse array of products
offer, and because the resulting increase in the assets under management of the
Forum Funds should reduce individual fund expenses by spreading certain fixed
costs over a larger asset base.
The Board of Directors considered the facts that the investment
adviser, distributor, administrator and transfer agent will remain the same, the
fact that the fee schedule will remain the same, and the fact that the
investment objectives and policies of the New Series will be the same as those
of the Funds (except to the extent that Shareholders approve changes described
in this Proxy Statement). Based upon these considerations, at a meeting of the
Board of Directors held on May 8, 1996, the Directors, including a majority of
the Directors who are not interested persons of the Stone Bridge Funds,
unanimously approved the Plan and determined that the
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<PAGE>
transactions contemplated by the Plan, including the Reorganization, would be in
the best interests of the Funds and their Shareholders and would not dilute the
interests of Shareholders in the Funds.
DESCRIPTION OF THE NEW SERIES
The New Series are series of the Forum Funds, an investment company
that is managed and distributed by Forum Financial Services, Inc. ("Forum"), the
current administrator/distributor of the Stone Bridge Funds. The Forum Funds was
originally incorporated in Maryland on March 24, 1980 and assumed the name of
Forum Funds, Inc. on March 16, 1987. On January 5, 1996, Forum Funds, Inc. was
reorganized as a Delaware business trust. The Forum Funds has an unlimited
number of authorized shares of beneficial interest. The Board of Trustees may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series and may in the future divide portfolios
or series into two or more classes of shares. Currently the authorized shares of
the Forum Funds are divided into ten separate series. Each share of each fund of
the Forum Funds and each class of shares has equal dividend, distribution,
liquidation and voting rights, and fractional shares have those rights
proportionately, except that expenses related to the distribution of the shares
of each class (and certain other expenses such as transfer agency and
administration expenses) are borne solely by those shares and each class votes
separately with respect to the provisions of any Rule 12b-1 plan which pertain
to the class and other matters for which separate class voting is appropriate
under applicable law. Generally, shares will be voted in the aggregate without
reference to a particular portfolio or class, except if the matter affects only
one portfolio or class or voting by portfolio or class is required by law, in
which case shares will be voted separately by portfolio or class, as
appropriate. Delaware law does not require the Forum Funds to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
have available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Forum Funds.
In approving the Reorganization of the Funds into the New Series, one
of the factors the Directors considered was certain advantages that a Delaware
business trust has over a Maryland corporation, such as the Stone Bridge Funds.
These advantages would include having more flexibility and efficiency in the
administration of the Forum Funds and having the potential to avoid certain
expenses or obtain certain cost savings for the Forum Funds and its
shareholders.
INVESTMENT ADVISERS
Oak Hall(R) Capital Advisors, L.P. ("Oak Hall Advisors") is the
investment adviser to the Oak Hall Fund and Austin Investment Management, Inc.
("AMI") is the investment adviser to the Austin Global Fund pursuant to
investment advisory agreements with the Stone Bridge Funds. For their services
under the current investment advisory agreements, Oak Hall Advisors and AMI,
respectively, receive an advisory fee that is accrued daily and paid monthly at
an annual rate of 0.75% and 1.50%, respectively, of the average daily net assets
of the Oak Hall Fund and the Austin Global Fund, respectively.
If the Reorganization is approved, Oak Hall Advisors will continue as
investment adviser to the Oak Hall Series and AMI will continue as investment
adviser to the Austin Global Series. Oak Hall Advisors and AMI will each enter
into an investment advisory agreement with the Forum Funds which is identical in
all respects, including the terms and conditions of the agreement, the fees
charged and services provided, as the current investment advisory agreements. A
vote in favor of the Reorganization is also a vote to authorize the Fund, as the
sole shareholder of each New Series, to approve the new investment advisory
agreements.
Each new investment advisory agreement will remain in effect for a
period of two years from the date of its effectiveness and will continue in
effect thereafter only if its continuance is specifically approved at least
annually by the Board of Trustees or by vote of the shareholders, and in either
case by a majority of the Trustees who are not parties to an agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on an agreement.
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<PAGE>
ADMINISTRATOR/DISTRIBUTOR
Forum Financial Services, Inc. ("Forum") supervises the overall
management of the Stone Bridge Funds. Forum's responsibilities include
negotiating contracts and fees with, and monitoring performance and billing of,
the transfer agent, fund accountant and custodian. Forum also arranges for
maintenance of books and records of the Stone Bridge Funds pursuant to an
administration and distribution agreement. Forum provides persons satisfactory
to the Board of Directors to serve as officers of the Stone Bridge Funds.
Forum also acts as distributor of the Funds' shares pursuant to the
current administration and distribution agreement. In accordance with Rule 12b-1
adopted by the Securities and Exchange Commission, the Stone Bridge Funds has
adopted a distribution plan, which provides that all written agreements relating
to the distribution plan must be in a form satisfactory to the Board of
Directors. In addition, the current distribution plan requires the Stone Bridge
Funds and Forum to prepare, at least quarterly, written reports setting forth
all amounts expended for distribution purposes by Forum pursuant to the current
distribution plan and identifying the distribution activities for which those
expenditures were made.
If the Reorganization is approved, Forum will continue to supervise the
overall management of the New Series by providing the same services at the same
fees to each New Series pursuant to a management and distribution agreement
currently in place between the Forum Funds and Forum, which is identical in all
respects, including the terms and conditions of the agreements, the fees charged
and management services provided under the current administration and
distribution agreement, with respect to each New Series. The management and
distribution agreement will remain in effect for a period of one year from the
date of its effectiveness and will continue in effect thereafter only if its
continuance is specifically approved at least annually by the Board of Trustees
or by the shareholders and, in either case, by a majority of the Trustees who
are not parties to the agreement or interested persons of any such party and do
not have any direct or indirect financial interest in the agreement.
If the Reorganization is approved, the Forum Funds will adopt a
separate distribution plan, on behalf of each New Series, which is identical in
its terms and conditions, fees payable and services provided to the current
distribution plan. A vote in favor of the Reorganization is also a vote to
authorize each Fund, as the sole shareholder of the corresponding New Series, to
approve the new distribution plan.
Each new distribution plan provides that it will remain in effect for
one year from the date of its adoption and thereafter may continue in effect for
successive annual periods provided it is approved by the shareholders or by the
Board of Trustees, including a majority of Trustees who are not interested
persons of the Forum Funds and who have no direct or indirect interest in the
operation of the new distribution plan or in any agreement related to the new
distribution plan. Each new distribution plan further provides that it may not
be amended to increase materially the costs which may be borne by the Forum
Funds for distribution pursuant to the plan without shareholder approval and
that other material amendments of the new distribution plan must be approved by
the Trustees in the manner described in the preceding sentence. Each new
distribution plan may be terminated at any time by a vote of the Board of
Trustees or, with respect to the New Series, by the New Series' shareholders.
TRANSFER AGENT
Forum Financial Corp. ("FFC") acts as transfer agent and divided
disbursing agent of the Stone Bridge Funds pursuant to a transfer agency
agreement. For its services, FFC receives with respect to each Fund an annual
fee of $12,000 plus $25 per shareholder account. Pursuant to a fund accounting
agreement, FFC also provides each Fund with portfolio accounting, including the
calculation of the Fund's net asset value. For these services, FFC receives with
respect to each Fund an annual fee ranging from $36,000 to $60,000 depending
upon the amount and type of the Fund's portfolio transactions and positions.
If the Reorganization is approved, FFC will continue to serve as
transfer agent and fund accountant, respectively, to each New Series under a new
transfer agency agreement and new fund accounting agreement which are identical
in their terms and conditions, fees payable and services provided to the current
agreements. Each of these agreements will remain in effect for a period of one
year and will continue in effect thereafter only if its continuance is
specifically approved at least annually by the Board of Trustees or by a vote of
the shareholders and
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<PAGE>
in either case by a majority of the Trustees who are not parties to the
respective agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the respective agreement.
DESCRIPTION OF TRUSTEES OF THE FORUM FUNDS
The Board of Trustees of the Forum Funds is comprised of the
individuals listed below. With the exception of John Y. Keffer, who currently
serves as Chairman for both the Stone Bridge Funds and the Forum Funds, these
individuals are not the same as the current Directors of the Stone Bridge Funds.
If the Reorganization is approved however, the Directors have agreed that the
investment objectives and policies of each Fund will remain the same, and the
Funds will continue to be managed in the same manner by the current investment
advisers.
John Y. Keffer, Chairman and Trustee
President and Director, Forum Financial Services, Inc. (a
registered broker-dealer), Forum Financial Corp. (a registered
transfer agent) and Forum Advisors, Inc. (a registered
investment adviser). Mr. Keffer is also a Trustee and/or
officer of various registered investment companies for which
Forum Financial Services, Inc. serves as manager,
administrator and/or distributor.
Costas Azariadis, Trustee
Professor of Economics, University of California, Los Angeles,
since July 1992. Prior thereto, Dr. Azariadis was Professor of
Economics at the University of Pennsylvania.
James C. Cheng, Trustee
President of Technology Marketing Associates (a marketing
consulting company) since September 1991. Prior thereto, Mr.
Cheng was President and Chief Executive Officer of Network
Dynamics, Incorporated (a software development company).
J. Michael Parish, Trustee
Partner at the law firm of Reid & Priest LLP since 1995. Prior
thereto, he was a partner at the law firm of Winthrop Stimson
Putnam & Roberts since 1989.
THE AGREEMENT AND PLAN OF REORGANIZATION
The Plan provides that all of the assets of the Oak Hall Fund will be
transferred to the Oak Hall Series in exchange for shares of the Oak Hall Series
and the assumption by the Oak Hall Series of all of the liabilities of the Oak
Hall Fund. The Plan provides also that all of the assets of the Austin Global
Fund will be transferred to the Austin Global Series in exchange for shares of
the Austin Global Series and the assumption by the Austin Global Series of all
of the liabilities of the Austin Global Fund. A copy of the Plan is included as
Exhibit A to this Proxy Statement.
As a result of each Reorganization, an account will be established for
each Shareholder in the relevant New Series, which will be credited with full
and fractional shares of the New Series equal in value to the value of the
shares of the Fund held by the Shareholder immediately prior to the
Reorganization.
On the effective date of the Reorganization (the "Closing Date") each
of the Funds will transfer all of its assets to the corresponding New Series in
exchange for the assumption by the New Series of all the liabilities of the
current Fund and the issuance of shares of beneficial interest of that New
Series ("New Series Shares") to the current Fund. The New Series Shares issued
with respect to a current Fund will have an aggregate net asset value equal to
the aggregate net asset value of the current Fund's common stock (as determined
by using the procedures set forth in the current Prospectus) on the Closing
Date. Following distribution of the New Series Shares to each
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of the current Funds, and as soon as practicable thereafter, the Stone Bridge
Funds will be liquidated and terminated. Upon completion of the Reorganization,
each shareholder will be the owner of full and fractional New Series Shares
equal in number, denomination and aggregate net asset value to the shareholder's
current Fund Shares. Shares of the New Series will be represented by book
entries and no share certificates will be issued.
The Reorganization is subject to the satisfaction of a number of
conditions set forth in the Plan, including approval of the Plan and the
transactions contemplated by the Plan by Shareholders of the Funds and by the
Directors of the Stone Bridge Funds. The Plan may be terminated and the
Reorganization abandoned at any time, before or after approval by Shareholders,
by the mutual written consent of the Fund and the New Series, or by either of
them without liability to the other (unless the terminating party is in default
or in breach of the Plan) if certain conditions exist.
Shareholders in the Funds have no dissenters' rights or appraisal
rights. All Shareholders have the right at any time up to the business day
preceding the Closing Date to redeem their Fund shares at their then current net
asset value.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the
Funds receive an opinion from Kramer, Levin, Naftalis & Frankel, counsel to the
Funds, stating that for Federal income tax purposes: (i) the transfer of all of
the assets of a Fund to its New Series in exchange for the assumption of all the
liabilities of such Fund by such New Series, the delivery to such Fund of shares
of such New Series, the distribution by such Fund pro rata to its shareholders
of such shares of such New Series and the termination of such Fund, pursuant to
the Reorganization Plan, will constitute a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended; (ii) a Fund
will not recognize any gain or loss as a result of the Reorganization; (iii) a
New Series will not recognize any gain or loss on the receipt of the assets of a
Fund in exchange for shares of the New Series; (iv) the shareholders of a Fund
will not recognize any gain or loss on the exchange of their shares of a Fund
for shares of a New Series; (v) the aggregate tax basis of the New Series shares
received by each shareholder of a Fund in the Reorganization will be the same as
the aggregate tax basis of the shares of the Fund exchanged therefore; (vi) a
New Series' adjusted tax bases in the assets received from a Fund in the
Reorganization will be the same as the adjusted tax bases of such assets in the
hands of a Fund immediately prior to the Reorganization; (vii) the holding
period of each former shareholder of a Fund in the shares of the New Series
received in the Reorganization will include the period for which such
shareholder held his shares of the Fund as a capital asset; and (viii) the New
Series' holding periods in the assets received from a Fund in the Reorganization
will include the holding periods of such assets in the hands of the
corresponding Fund immediately prior to the Reorganization.
The Funds and the New Series have not sought a tax ruling from the
Internal Revenue Service (the "IRS") with respect to the tax aspects of the
Reorganization, but will act in reliance upon the opinion of counsel discussed
in the previous paragraph. Such opinion is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. If for any reason the
Reorganization did not qualify as a tax-free Reorganization for Federal income
tax purposes, then the Reorganization would be treated as a taxable asset sale
and purchase. In such event, a Fund would recognize gain or loss on the
transaction measured by the difference between the consideration received by a
Fund and the tax basis of Fund assets; the tax basis of the assets acquired by
the New Series would equal the purchase price plus the amount of any liabilities
transferred to the New Series; and upon distribution of the shares of the New
Series in dissolution of the Fund, the shareholders of the Fund would recognize
gain or loss on the disposition of their Fund shares measured by the difference
between the fair market value of the New Series shares received by them and the
basis of Fund shares held by them. Shareholders should consult their own
advisers concerning the potential tax consequences of the Reorganization to
them, including state and local income tax consequences.
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REQUIRED VOTE AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of the Reorganization with respect to a Fund requires the
affirmative vote of the holders of not less than a majority of the outstanding
Shares of that Fund. Approval of the Reorganization by Shareholders will
constitute approval of the amendment of any investment restrictions of the Funds
which might be deemed to prohibit the transactions contemplated by the
Reorganization. After carefully considering all the issues involved, the Board
of Directors has unanimously concluded that the proposal is in the best
interests of the Funds and their shareholders and that the interest of existing
shareholders in the Funds will not be diluted as a result of the Reorganization.
If the Reorganization is approved at the Meeting, the Closing Date is expected
to be on or about October 31, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE FOREGOING PROPOSAL.
PROPOSALS 2 AND 3
APPROVAL OR DISAPPROVAL OF CERTAIN CHANGES TO
THE FUNDAMENTAL INVESTMENT POLICIES
OF THE FUNDS
The 1940 Act requires investment companies such as the Stone Bridge
Funds to adopt certain specific investment policies that can be changed only by
the vote of its shareholders. An investment company may also designate other
policies that may be changed only by shareholder vote. Both types of policies
are often referred to as "fundamental policies."
At the request of the Board of Directors, Oak Hall Advisors and AMI
(collectively, the "Advisers") and Forum analyzed the fundamental investment
restrictions of each Fund. Based upon this analysis, the Board has determined
that certain of the Funds' fundamental policies were adopted in the past to
reflect regulatory, business or industry conditions that are no longer in
effect. Accordingly, the Board has approved, and has authorized the submission
to the shareholders of the Funds for their approval, Proposals 2a-c and 3a-h
described below. These proposals would (i) reclassify as nonfundamental certain
investment policies that are not required to be fundamental under the 1940 Act
and (ii) simplify and clarify certain policies that are required to be
fundamental under the Act. The Board believes that these proposals would
increase a Fund's ability to achieve its investment objectives and would insure
that the Fund's investments are not more limited than required by law.
The Board has determined that those investment policies and
restrictions of a Fund that are not required to be fundamental by Federal or
state securities law should be made nonfundamental. The Board believes this will
give a Fund greater flexibility to react to future regulatory or market changes.
Policies of a Fund (including investment restrictions) deemed to be fundamental
may only be changed pursuant to shareholder approval. Nonfundamental policies
may be changed by the Board without shareholder approval. These changes will not
be implemented until appropriate changes have been made to the relevant Fund
prospectus, however. Making an investment restriction nonfundamental is not
expected to affect significantly the way in which the Funds are managed or the
instruments in which the Funds will invest.
In addition, the Board has determined that certain of the restrictions
are unnecessarily limiting and could, under certain circumstances, affect the
ability of the Funds to react to future regulatory or market changes. The extent
to which any proposed amendment would allow the Funds greater freedom to make
investments is described in the separate discussions following the Proposal
relating to the amendment.
Upon shareholder approval, each amendment changing, replacing or
deleting an investment restriction will become effective immediately. If a
proposed amendment is not approved with respect to a Fund, that Fund's current
fundamental restriction will remain in effect.
-8-
<PAGE>
The Board concluded that each of the proposed amendments to the Funds'
fundamental investment restrictions is in the best interests of each Fund and
its shareholders. Approval of an amendment to a fundamental restriction with
respect to a Fund requires the affirmative vote of a majority of the
"outstanding voting securities", as defined above, of the Fund entitled to vote
thereon.
The proposals regarding the Restrictions are presented in Proposals
2a-c and 3a-h, below, categorized by topic (e.g., diversification,
concentration, etc.). In each case, the current Restriction is set forth in the
left hand column under "Current" and, for the Fund(s) to which the current
Restriction applies, it is proposed that the Restriction be restated,
eliminated, reclassified, or otherwise changed as indicated in the right hand
column under "Proposed". In each case, the reason for, and an explanation of,
the proposed change, is set forth below the comparison.
Approval of any of the following proposals is not contingent upon
approval of the Reorganization by Shareholders. If the Reorganization is
approved, the following proposed restrictions will go into effect for the New
Series; if the Reorganization is not approved, the proposed restrictions will
apply to the current Funds, as applicable.
PROPOSALS 2A-C PERTAIN TO EACH FUND.
PROPOSAL 2A
AMENDMENT TO EACH FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING SENIOR SECURITIES
CURRENT:
- - --------
Austin Global Fund:
The Fund may not issue senior securities except to extent permitted by the 1940
Act.
Oak Hall Fund:
The Fund may not issue senior securities except pursuant to Section 18 of the
Investment Company Act and except that the Fund may borrow money subject to its
investment limitation on borrowing.
PROPOSED:
- - ---------
FUNDAMENTAL RESTRICTION
No Fund may issue any senior security (as defined in the 1940 Act), except that
(a) a Fund may engage in transactions that may result in the issuance of senior
securities to the extent permitted under applicable regulations and
interpretations of the 1940 Act or an exemptive order; (b) a Fund may acquire
securities to the extent otherwise permitted by its investment policies, the
acquisition of which may result in the issuance of a senior security, to the
extent permitted under applicable regulations or interpretations of the 1940
Act; and (c) subject to the restrictions set forth below, a Fund may borrow
money as authorized by the 1940 Act.
EXPLANATION OF THE PROPOSED CHANGE: Under the 1940 Act, an open-end investment
company (such as the Stone Bridge Funds) cannot issue senior securities except
under certain very limited conditions. The proposed amendment clarifies and
modernizes the language concerning senior securities to conform to provisions of
the 1940 Act. It is proposed that this restriction exclude those transactions
which are allowed by current regulatory interpretations and policies, and which
are consistent with current investment marketplace practices.
-9-
<PAGE>
PROPOSAL 2B
AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING BORROWING
CURRENT:
- - --------
Austin Global Fund:
The Fund may not borrow money (including entering into reverse repurchase
agreements); provided that borrowings do not exceed 33 1/3% of the Fund's total
assets (computed immediately after the borrowing).
Oak Hall Fund:
The Fund may not borrow money, except for temporary or emergency purposes
(including the meeting of redemption requests which might require the untimely
disposition of securities). Total borrowings may not exceed 33 1/3% of the
Fund's total assets. Borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Fund's total assets at the time the borrowing
is made. Outstanding borrowings in excess of 5% of the value of the Fund's total
assets must be repaid before any subsequent investments are made by the Fund.
PROPOSED:
- - ---------
FUNDAMENTAL RESTRICTION
No Fund may borrow money, except that a Fund may enter into commitments to
purchase securities in accordance with its investment program, including
delayed-delivery and when-issued securities and reverse repurchase agreements,
provided that the total amount of any such borrowing does not exceed 33 1/3% of
the Fund's total assets.
NONFUNDAMENTAL RESTRICTION
A Fund may borrow money for temporary or emergency purposes in an amount not
exceeding 5% of the value of its total assets at the time when the loan is made;
provided that any such temporary or emergency borrowings representing more than
5% of a Fund's total assets must be repaid before the Fund may make additional
investments.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment clarifies and
modernizes the restriction on borrowing by treating borrowings for temporary or
emergency purposes separately from other borrowings. Borrowing for emergency
purposes may be necessary to address excessive or unanticipated liquidations of
Fund shares that exceed available cash. To increase flexibility with respect to
the Funds, delayed-delivery and when- issued securities and reverse repurchase
agreements would be allowable outside the context of borrowings implemented for
temporary purposes, and would be subject to a limitation of 33 1/3% of a Fund's
assets. Leveraging by means of borrowing would exaggerate the effect of any
increase or decrease in the value of portfolio securities on a Fund's net asset
value; however, the Funds do not presently intend to borrow for purposes of
leveraging. Money borrowed will be subject to interest and other costs.
-10-
<PAGE>
PROPOSAL 2C
AMENDMENT TO EACH FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING COMMODITIES
CURRENT:
- - --------
Austin Global Fund:
The Fund may not purchase or sell physical commodities or contracts relating to
physical commodities, provided that currencies and currency- related contracts
will not be deemed to be physical commodities.
Oak Hall Fund:
The Fund may not invest in commodities or in commodity contracts, except that,
as described herein and in the Prospectus, the Fund may enter into certain
options, future contracts and options on those futures contracts.
PROPOSED:
- - ---------
FUNDAMENTAL RESTRICTION
No Fund may purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a Fund
from purchasing or selling options and futures contracts or from investing in
securities or other instruments backed by physical commodities).
EXPLANATION OF THE PROPOSED CHANGES: The proposed change modernizes and
clarifies the application of the Restriction pertaining to commodities, and to a
large extent would standardize the Restriction applicable to each of the Funds.
This Restriction would permit investments in futures with respect to each Fund.
The revised Restriction would continue to prohibit the Funds from investing in
agricultural and other tangible commodities, while reserving the freedom of the
Funds to continue to invest in certain financial and other non-physical
commodities, futures and related instruments as currently described in each
Fund's prospectus.
-11-
<PAGE>
PROPOSALS 3A-H PERTAIN TO THE OAK HALL FUND ONLY.
PROPOSAL 3A
ELIMINATION OF THE OAK HALL FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING INVESTMENT
FOR THE PURPOSE OF EXERCISING CONTROL
CURRENT:
- - --------
The Fund may not invest for the purpose of exercising control over (i) any
issuer or other person or (ii) management of any company.
PROPOSED:
- - ---------
It is proposed that this restriction be eliminated.
EXPLANATION OF THE PROPOSED CHANGES: Pursuant to the Fund's fundamental
investment restriction concerning diversification, with respect to 75% of its
total assets the Fund may not purchase a security if, as a result, it would own
more than 10% of the outstanding voting securities of a single issuer. The Fund
has no current intention of investing in any issuer for the purpose of
exercising control. In the event that at some point in time the Fund has an
intention of investing for the purpose of exercising control, the Fund's
Prospectus and Statement of Additional Information will be revised accordingly.
The proposed elimination of this fundamental Restriction would give the Fund
additional flexibility in taking, or adding to, certain investment positions.
PROPOSAL 3B
RECLASSIFICATION OF THE OAK HALL FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING PURCHASES OF SECURITIES ON MARGIN AND
ELIMINATION OF THE OAK HALL FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING SHORT SALES
CURRENT:
- - --------
The Fund may not purchase securities on margin, or make short sales of
securities (except short sales against the box), except for the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities, but the Fund may make margin deposits in connection with
permitted transactions in options, futures and options on futures.
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION
The Fund may not purchase securities on margin, except for the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities, but the Fund may make margin deposits in connection with permitted
transactions in options, futures and options on futures.
EXPLANATION OF THE PROPOSED CHANGE. This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. The restriction against short sales has been removed, thereby allowing
the Fund to engage in short-selling to seek to hedge investments or realize
additional gains. Short sales are transactions in which the Fund sells a
security it does not own, in anticipation of a decline in the market value of
that security. To complete such a transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at or prior to the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. The Fund will incur a loss as a result
of the short sale if the price of the security increases between the date of the
short sale and the date on which the Fund replaces the borrowed security. The
Fund will realize a gain if the security declines in price between those dates.
The amount of any gain will be decreased, and the amount of any loss increased,
by the amount of the premium, dividends, interest or expenses the Fund may be
required to pay in connection with a short sale.
-12-
<PAGE>
PROPOSAL 3C
RECLASSIFICATION OF THE OAK HALL FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
INVESTMENT IN INTERESTS IN OIL OR GAS
CURRENT:
- - --------
The Fund may not invest in oil or gas or interests in other mineral exploration
or development programs.
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION
It is proposed that this restriction be made nonfundamental.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval.
PROPOSAL 3D
AMENDMENT TO THE OAK HALL FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
INVESTMENTS IN OTHER INVESTMENT COMPANIES
CURRENT:
- - --------
The Fund may not invest in securities of another registered investment company,
except in connection with a merger, consolidation, acquisition or
reorganization; and except that the Fund may invest in money market funds to the
extent permitted by the Investment Company Act of 1940 ("Investment Company
Act").
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION The Fund may invest in other investment companies to
the extent permitted by the 1940 Act.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. The proposed change will permit investments in funds other than money
market funds.
PROPOSAL 3E
RECLASSIFICATION OF THE OAK HALL FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING SECURITIES IN
WHICH AFFILIATES HAVE INVESTED
CURRENT:
- - --------
The Fund may not invest in or hold securities of any issuer if officers and
directors of the Stone Bridge Funds or the Adviser, individually owning
beneficially more than 1/2 of 1% of the securities of the issuer, if in the
aggregate own more than 5% of the issuer's securities.
PROPOSED:
- - ---------
NONFUNDAMENTAL\ RESTRICTION
It is proposed that this restriction be reclassified as nonfundamental.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. This would have no immediate effect on the Fund's investment program,
since the Fund will continue to be subject to the same nonfundamental investment
restriction.
-13-
<PAGE>
PROPOSAL 3F
RECLASSIFICATION OF THE OAK HALL FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING
SECURITIES OF UNSEASONED ISSUERS
CURRENT:
- - --------
The Fund may not invest in securities (other than fully-collateralized debt
obligations) issued by the companies that have conducted continuous operations
for less than three years, including the operations of predecessors, unless
guaranteed as to principal and interest by an issuer in whose securities the
Fund could invest, if as a result, more than 5% of the value of the fund's total
assets would be so invested.
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION
It is proposed that this restriction be reclassified as nonfundamental.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. This would have no immediate effect on the Fund's investment program,
since the Fund will continue to be subject to the same nonfundamental investment
restriction.
PROPOSAL 3G
RECLASSIFICATION OF THE OAK HALL FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
THE PLEDGING, MORTGAGING OR HYPOTHECATION OF ASSETS
CURRENT:
- - --------
The Fund may not pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted to be incurred by the Fund. The deposit in escrow of
securities in connection with the writing of put and call options,
collateralized loans of securities and collateral arrangements with respect to
margin for futures contracts are not deemed to be pledges or hypothecations for
this purpose.
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION It is proposed that this restriction be made
nonfundamental.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. This would have no immediate effect on the Fund's investment program,
since the Fund will continue to be subject to the same nonfundamental investment
restriction.
-14-
<PAGE>
PROPOSAL 3H
RECLASSIFICATION OF THE OAK HALL FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENT
IN SECURITIES THAT ARE NOT READILY MARKETABLE
CURRENT:
- - --------
The Fund may not invest more than 15% of its net assets in securities that are
not readily marketable, including repurchase agreements maturing in more than
seven days.
PROPOSED:
- - ---------
NONFUNDAMENTAL RESTRICTION
It is proposed that this restriction be made nonfundamental.
EXPLANATION OF THE PROPOSED CHANGE: This Restriction is proposed to be
reclassified as nonfundamental so that it may be changed without shareholder
approval. This would have no immediate effect on the Fund's investment program,
since the Fund will continue to be subject to the same nonfundamental investment
restriction.
ADDITIONAL INFORMATION REGARDING PROPOSALS 2 AND 3
Unless otherwise noted, whenever an amended or restated investment
policy or limitation states a maximum percentage of a Fund's assets that may be
invested, such percentage limitation will be determined immediately after and as
a result of the acquisition of such security or other asset. Any subsequent
change in values, assets, or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment policies
and limitations.
If any of Proposals 2 and 3 are not approved by shareholders, the
current Restriction will remain unchanged.
REQUIRED VOTE AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of the Proposals to change a Fund's Restriction will require
the affirmative vote of a "majority of the outstanding voting securities" of a
Fund, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding Shares of a Fund or (2) 67% or more of the
Shares of a Fund present at the meeting if more than 50% of the outstanding
shares of a Fund are represented at the meeting in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE FOREGOING PROPOSALS.
VOTING INFORMATION AND DISCRETION
OF ATTORNEYS NAMED IN THE PROXY
While the Meeting is called to act upon any other business that may
properly come before it, at the date of this proxy statement the only business
which the management intends to present or knows that others will present is the
business mentioned in the Notice of Meeting. If any other matters lawfully come
before the Meeting, and in all procedural matters at the Meeting, it is the
intention that the enclosed proxy shall be voted in accordance with the best
judgment of the attorneys named therein, or their substitutes, present and
acting at the Meeting.
If a quorum is not present at the Meeting, or if a quorum is present
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. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the Proposals
that are the subject of the Meeting, the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be
-15-
<PAGE>
provided to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
represented at the Meeting in person or by proxy. A vote may be taken on one or
more of the proposals in this proxy statement prior to any such adjournment if
sufficient votes for its approval have been received and it is otherwise
appropriate.
As of the August 23, 1996, the Stone Bridge Funds believed that the
following persons beneficially owned more than 5% of Shares of the Funds:
OAK HALL EQUITY FUND
Name Number of Percentage of
Shares Owned Fund Outstanding
- - --------------------------------------------------------------------------------
Andrea Straus 73,032.744 9.33%
2737 Stevens Street
Madison, WI 53705
MaryAnn Wolf 40,946.955 5.23%
55 Central Park West Apt 12-13
New York, NY 10023
SUBMISSION OF PROPOSALS FOR THE
NEXT MEETING OF SHAREHOLDERS
Under the Stone Bridge Funds's Articles of Incorporation and By-Laws,
annual meetings of shareholders are not required to be held unless necessary
under the 1940 Act (for example, when fewer than a majority of the Directors
have been elected by shareholders). Therefore, the Stone Bridge Funds does not
hold shareholder meetings on an annual basis. A shareholder proposal intended to
be presented at any meeting hereafter called should be sent to the Stone Bridge
Funds at Two Portland Square, Portland, Maine 04101, and must be received by the
Stone Bridge Funds within a reasonable time before the solicitation relating
thereto is made in order to be included in the notice or proxy statement related
to such meeting. The submission by a shareholder of a proposal for inclusion in
a proxy statement does not guarantee that it will be included. Shareholder
proposals are subject to certain regulations under federal securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
September 9, 1996
BY ORDER OF THE BOARD OF DIRECTORS OF
STONE BRIDGE FUNDS, INC.
Max Berueffy, Secretary
-16-
<PAGE>
Exhibit A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is made as of the ____ day of _______, 1996, by and among the Stone Bridge
Funds, Inc., a Maryland corporation ("Stone Bridge"), for itself and on behalf
of each one of its existing investment portfolios set forth on Schedule A hereto
(each, a "Fund"), and the Forum Funds, a Delaware business trust (the "Forum
Funds"), for itself and on behalf of each of its newly-established series set
forth on Schedule A hereto as corresponding to a Fund (each, a "Successor
Series").
This Agreement shall constitute a separate Agreement and Plan
of Reorganization for each Fund and its corresponding Successor Series. It is
expressly agreed that the respective rights and obligations of each Fund and the
Successor Series, as provided for hereunder, are separate from the rights and
obligations of each of the other investment portfolios of Stone Bridge and
series of the Forum Funds, and that neither the rights and obligations of any
Fund nor of any Successor Series shall be construed to be joint rights or
obligations of the other investment portfolios of Stone Bridge or corresponding
successor series of the Forum Funds, respectively, notwithstanding the fact that
such other corresponding investment portfolios and series may be (i) included in
Schedule A to this Agreement (and thereby subject to the terms of this form of
the Agreement) or (ii) subject to another agreement and plan of reorganization
containing terms and conditions which are substantially the same as the terms
and conditions set forth herein.
In consideration of the mutual promises herein contained,
Stone Bridge, for itself and on behalf of each Fund, and the Forum Funds, for
itself and on behalf of each Successor Series, hereby agree as follows:
1. APPROVAL BY SHAREHOLDERS.
A special meeting of the shareholders of the Fund (the
"Meeting") will be called for the purposes of (i) considering adoption of this
Agreement and Plan of Reorganization, (ii) considering a proposal to authorize
the Fund, as the sole shareholder of the Successor Series immediately prior to
the reorganization contemplated by this Agreement, to: (A) approve the proposed
Investment Advisory Agreement for the Successor Series, (B) approve the proposed
Distribution Plan for the Successor Series and (C) provide such other approvals
or ratifications as may be necessary to consummate the transactions contemplated
herein, and (iii) considering such other business as may properly come before
the Meeting. The agenda for such Meeting may include such other proposals as the
Board of Directors of Stone Bridge may deem appropriate.
2. PLAN OF REORGANIZATION.
(i) Subject to the terms and conditions set forth in
this Agreement, the Fund will convey, transfer and deliver to the Successor
Series at the closing provided for in Section 3 (hereinafter called the
"Closing") all of the then-existing assets of the Fund. In consideration
thereof, and subject to the terms and conditions set forth in this Agreement, at
the Closing the Successor Series will (a) assume all of the obligations and
liabilities attributable to the Fund, of whatever kind or nature, whether
absolute, accrued, contingent or otherwise, and whether or not determinable as
of the Closing, and (b) deliver to the Fund a number of full and fractional
shares of beneficial interest of the Successor Series, no par value (the
"Shares"), having an aggregate net asset value ("NAV") equal to the aggregate
net asset value of the current Fund's common stock (as determined in accordance
with the Investment Company Act of 1940, as amended (the "1940 Act") and the
Fund's current Prospectus) on the Closing Date.
(ii) Upon consummation of the transactions described
in Section 2(i) hereof, the Fund will distribute to persons who are shareholders
of record of the Fund at the Closing the Shares received by the Fund pursuant to
Section 2(i), such distribution to be made pro rata to the shareholders based
upon the ratio that the percentage of the outstanding shares of the Fund owned
by each such shareholder at the Closing bears to the total number of Shares
received by the Fund from the Successor Series. Such distribution will be
accomplished by the establishment of an open account on the stock records of the
Successor Series in the name of each such shareholder
<PAGE>
of the Fund and setting forth the number of Shares due such shareholder in
accordance with the foregoing. Fractional Shares will be carried to the third
decimal place. Certificates representing Shares will not be issued.
(iii) As soon as is reasonably practicable after the
Closing, Stone Bridge will take all necessary steps under its Articles of
Incorporation and Maryland law to effect a complete liquidation and dissolution
of the Fund.
(iv) The transactions contemplated in this Section 2
are referred to as the "Reorganization."
3. CLOSING.
The Closing will occur at 9:00 a.m. on October 31, 1996 or
such other time and date as may be mutually agreed upon by the parties. In the
event that the NAV calculations of the Fund or the Successor Series are not
readily determinable for purposes of the Reorganization due to market
disruption, the Closing shall occur on the next successive business day.
4. CONDITIONS TO OBLIGATIONS OF STONE BRIDGE AND THE
FUND.
The obligations of Stone Bridge and the Fund in connection
with the consummation of the Reorganization shall be subject to the satisfaction
of each of the following conditions:
(i) Stone Bridge shall have received the opinion of
legal counsel for the Forum Funds, dated as of the date of the Closing and
addressed to Stone Bridge, to the effect that: (a) the Forum Funds is
established as a Delaware business trust and is validly existing under the laws
of the State of Maryland, (b) the Forum Funds is an open-end investment company
of the management type registered under the 1940 Act, and the Successor Series
is a duly established series of the Forum Funds, (c) this Agreement and the
Reorganization provided for herein and the execution and delivery of this
Agreement have been duly authorized and approved by all requisite action of the
Board of Trustees of the Forum Funds, and (d) the Shares to be issued in the
Reorganization will be duly authorized and upon issuance thereof in accordance
with this Agreement will be validly issued, fully paid and non-assessable Shares
of the Successor Series. In rendering such opinion, such legal counsel may rely
on an opinion of Delaware counsel reasonably acceptable to Stone Bridge with
respect to matters of Delaware law, and on certificates of officers or trustees
of the Forum Funds, in each case reasonably acceptable to Stone Bridge.
(ii) The Forum Funds and the Successor Series shall
have complied with each of their covenants contained herein and each of the
representations and warranties of the Forum Funds and the Successor Series
contained herein shall be true in all material respects as of the Closing, and
the Forum Funds shall have delivered to Stone Bridge a certificate from
appropriate officers of the Forum Funds reasonably acceptable to the Fund to
such effect.
5. CONDITIONS TO OBLIGATIONS OF THE FORUM FUNDS AND THE
SUCCESSOR SERIES.
The obligations of the Forum Funds and the Successor Series in
connection with the consummation of the Reorganization shall be subject to the
satisfaction of each of the following conditions:
(i) The Forum Funds shall have received the opinion
of legal counsel for Stone Bridge, dated as of the Date of the Closing and
addressed to the Forum Funds, to the effect that: (a) Stone Bridge is
established as a Maryland corporation and is validly existing under the laws of
the State of Maryland, (b) Stone Bridge is an open-end investment company of the
management type registered under the 1940 Act, (c) this Agreement and the
Reorganization provided for herein and the execution and delivery of this
Agreement have been duly authorized and approved by all requisite action of the
Board of Directors of Stone Bridge and this Agreement has been duly executed and
delivered by Stone Bridge and is a valid and binding obligation of Stone Bridge
and the
A-2
<PAGE>
Fund, and (d) the outstanding shares of the Fund have been duly authorized. In
rendering such opinion, such legalcounsel may rely on an opinion of Maryland
counsel reasonably acceptable to the Forum Funds with respect to matters of
Maryland law, and on certificates of officers or directors of Stone Bridge, in
each case reasonably acceptable to the Forum Funds.
(ii) Stone Bridge shall have complied with each of
its covenants contained herein and each of the representations and warranties of
Stone Bridge shall be true in all material respects as of the Closing, and Stone
Bridge shall have delivered to the Forum Funds a certificate from appropriate
officers of Stone Bridge reasonably acceptable to the Forum Funds to such
effect.
(iii) The Board of Directors of Stone Bridge,
including a majority of the directors who are not "interested persons" of Stone
Bridge (as defined by the 1940 Act) shall have determined that this Agreement
and the transactions contemplated hereby are in the best interests of the Fund
and that the interests of the shareholders in the Fund would not be diluted as a
result of such transactions.
6. CONDITIONS TO OBLIGATIONS OF STONE BRIDGE AND THE
FORUM FUNDS.
The obligations of Stone Bridge and the Forum Funds in
connection with the consummation of the Reorganization shall be subject to the
satisfaction of each of the following conditions:
(i) The Forum Funds and Stone Bridge shall have
received an opinion of legal counsel to Stone Bridge, dated as of the date of
the Closing, addressed to and in form and substance satisfactory to the Forum
Funds and Stone Bridge to the effect that: (a) the transfer of all of the assets
of the Fund to the Successor Series in exchange for the assumption of all the
liabilities of the Fund by the Successor Series, the delivery to the Fund of
shares of the Successor Series, the distribution by the Fund pro rata to its
shareholders of such shares of the Successor Series, and the termination of such
Fund, pursuant to the Reorganization Plan, will constitute a reorganization
within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended; (b) the Fund will not recognize any gain or loss as a result of the
Reorganization; (c) the Successor Series will not recognize any gain or loss on
the receipt of the assets of the Fund in exchange for shares of the Successor
Series; (d) the shareholders of the Fund will not recognize any gain or loss on
the exchange of their shares of the Fund for shares of the Successor Series; (e)
the aggregate tax basis of the Successor Series received by each shareholder of
the Fund in the Reorganization will be the same as the aggregate tax basis of
the shares of the Fund exchanged therefore; (f) the Successor Series' adjusted
tax bases in the assets received from the Fund in the Reorganization will be the
same as the adjusted tax bases of such assets in the hands of the Fund
immediately prior to the Reorganization; (g) the holding period of each former
shareholder of the Fund in the shares of the Successor Series received in the
Reorganization will include the period for which such shareholder held his
shares of the Fund as a capital asset; and (h) the Successor Series' holding
periods in the assets received from the Fund in the Reorganization will include
the holding periods of such assets in the hands of the Fund immediately prior to
the Reorganization.
(ii) Such authority, including "no-action" letters
and orders from the Securities and Exchange Commission (the "Commission") and
state securities commissions, as may be necessary to permit the parties to carry
out the transactions contemplated by this Agreement shall have been received.
(iii) Any post-effective amendments to the Successor
Series' Registration Statement on Form N-1A under the 1933 Act and the 1940 Act
as are determined by the Trustees of the Forum Funds to be necessary and
appropriate shall have been filed with the Commission and shall have become
effective.
(iv) The Shares shall have been duly qualified for
offering to the public in such jurisdictions (except where such qualifications
are not required) so as to permit the transfers contemplated by this Agreement
to be consummated.
(v) This Agreement and the Reorganization and, if
necessary, a temporary amendment of the investment restrictions that might
otherwise preclude the consummation of the Reorganization,
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<PAGE>
shall have been approved by the holders of the requisite number of shares of
common stock of the Fund entitled to vote on the matter under Stone Bridge's
Articles of Incorporation.
(vi) On the Closing Date, (a) the Commission shall
not have issued an unfavorable advisory report under Section 25(b) of the 1940
Act nor instituted nor threatened to institute any proceeding seeking to enjoin
consummation of the Reorganization contemplated hereby under Section 25(c) of
the 1940 Act and (b) no other action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(vii) The Fund, as the sole shareholder of the
Successor Series at the time of the Reorganization, shall have (A) approved the
proposed investment advisory agreement for the Successor Series, (B) approved
the Distribution Plan for the Successor Series, and (C) provided such other
approvals or ratifications, if any, as may be necessary to consummate the
transactions contemplated herein; provided, however, that if the approval of
shareholders is necessary in order to approve the Distribution Plan for the
Successor Series, the Successor Series' failure to approve such Distribution
Plan due to the lack of shareholder approval shall not be a condition to the
consummation of the other transactions comprising the Reorganization, and the
term "Reorganization," as used herein, shall be understood as being modified
accordingly.
At any time prior to the Closing, any of the foregoing
conditions in Section 4, 5 or 6 may be waived by the Fund or the Successor
Series, as the case may be, if, in the judgment of such party, such waiver will
not have a material adverse effect on the benefits intended under this Agreement
to the shareholders of the Fund or the Successor Series, as the case may be.
7. REPRESENTATIONS AND WARRANTIES.
a. STONE BRIDGE. Stone Bridge, with respect to itself
and the Fund, represents and warrants to the Forum Funds as follows:
(i) Stone Bridge is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland;
(ii) Stone Bridge is a registered investment company,
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(iii) The Fund is a duly established series of Stone
Bridge;
(iv) Stone Bridge is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
Stone Bridge's Articles of Incorporation or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Stone
Bridge is a party or is bound;
(v) Stone Bridge has no material contracts or other
commitments (other than this Agreement) which will be terminated with liability
to the Fund prior to the Closing, except contracts entered into in the ordinary
course of its business and this Agreement;
(vi) Except as otherwise disclosed on Schedule ___
hereto, there is no litigation or administrative proceeding or investigation of
or before any court or governmental body pending or to Stone Bridge's knowledge
threatened against Stone Bridge with respect to the Fund or its properties or
assets, and Stone Bridge knows of no fact which might form the basis for the
institution of such proceedings, and neither Stone Bridge nor the Fund is a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects their
respective businesses or their ability to consummate the transactions
contemplated herein;
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<PAGE>
(vii) The Statement of Assets and Liabilities of the
Fund at the last day of its most recently completed fiscal year, certified by
Deloitte & Touche as independent accountants (as supplemented by any unaudited
semi-annual report as of the last day of its most recently completed semi-annual
fiscal period, if available) has been prepared in accordance with generally
accepted accounting principles consistently applied, fairly reflects the
financial condition of the Fund as of such date, and there are no known
contingent liabilities of the Fund as of such date which are required to be and
are not disclosed therein;
(viii) From the date of the most recent report
referred to in paragraph (vii) above, there has not been any material adverse
change in the Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business or as a result of this
transaction except as otherwise disclosed on Schedule ___ hereto (for the
purposes of this paragraph (viii), a decline in net assets of the Fund shall not
constitute a material adverse change);
(ix) All shares of common stock, $.001 par value, of
the Fund are, and at the Closing will be, duly authorized, legally issued, fully
paid and non-assessable, and the Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the Fund
(other than dividend reinvestment plans of the Fund or as set forth in this
Agreement) nor are there outstanding any securities convertible into any shares
of the Fund (except pursuant to any exchange privileges described in the current
Prospectus or Registration Statement of the Fund under the 1933 Act);
(x) At the Closing, the Fund will have good and
marketable title to the Fund's assets to be transferred to the Successor Series
and full right, power and authority to assign, transfer and deliver such assets
hereunder, and, upon delivery and payment for such assets, the Successor Series
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed on Schedule ___ hereto;
(xi) Stone Bridge has full power and authority to
enter into and perform its obligations under this Agreement; the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of the Board of Directors of Stone Bridge; and,
subject to the approval of the shareholders of the Fund, this Agreement
constitutes a valid and binding obligation of Stone Bridge and the Fund,
enforceable against Stone Bridge and the Fund in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and by equitable principles;
(xii) Stone Bridge has provided the Forum Funds with
the Fund's most recent Form N-1A Registration Statement under the 1933 Act,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(xiii) The information furnished by the Fund for use
in proxy materials and other documents in connection with the transactions
contemplated hereby, and the Registration Statement on Form N-1A of the
Successor Series (other than the portions of such materials which relate to this
transaction), is accurate and complete in all material respects and complies in
all material respects with Federal securities and other laws and regulations
thereunder applicable thereto; and
(xiv) The Proxy Statement to be used in connection
with the transactions contemplated hereby (only insofar as it relates to Stone
Bridge) on its effective date and at the Closing, will comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the 1940 Act and the rules and
regulations thereunder, and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
A-5
<PAGE>
b. THE FORUM FUNDS. The Forum Funds, with respect to
itself and the Successor Series, represents and warrants to Stone Bridge as
follows:
(i) The Forum Funds is a business trust duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(ii) The Forum Funds is a registered investment
company classified as a management company of the open-end type, and its
registration with the Commission as an investment company under the 1940 Act is
in full force and effect;
(iii) The Successor Series is a duly established
series of the Forum Funds;
(iv) The Forum Funds is not, and the execution,
delivery and performance of this Agreement will not result, in material
violation of the Forum Funds's Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Forum Funds is a party or is bound;
(v) Except as otherwise set forth on Schedule ___
hereto, there is no litigation or administrative proceeding or investigation of
or before any court or governmental body pending or to the Forum Funds'
knowledge threatened against the Forum Funds with respect to the Successor
Series or its properties or assets, and the Forum Funds knows of no fact which
might form the basis for the institution of such proceedings, and neither the
Forum Funds nor the Successor Series is a party or subject to the provisions of
any order, decree or judgment of any court or governmental body which materially
and adversely affects their respective businesses or their respective abilities
to consummate the transactions contemplated herein;
(vi) At the Closing all shares of beneficial interest
in the Successor Series will be duly authorized, legally issued, fully paid and
non-assessable, and the Successor Series does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Successor Series (other than dividend reinvestment plans of the Successor Series
or as set forth in this Agreement), nor are there outstanding any securities
convertible into any shares of the Successor Series (except pursuant to exchange
privileges described in the current Prospectus or Registration Statement of the
Successor Series under the 1933 Act);
(vii) The Forum Funds has full power and authority to
enter into and perform its obligations under this Agreement; the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of the Board of Trustees of the Forum Funds; and
this Agreement constitutes a valid and binding obligation of the Forum Funds and
the Successor Series, enforceable against the Forum Funds and the Successor
Series in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and by equitable principles;
(viii) The Forum Funds will provide to the Fund the
Form N-1A Registration Statement under the 1933 Act concerning the Successor
Series, which does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make any
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(ix) The information to be furnished by the Forum
Funds for use in Registration Statements, proxy materials and other documents,
in connection with the transactions contemplated hereby, will be accurate and
complete in all material respects and will comply in all material respects with
Federal securities laws and other laws and regulations thereunder applicable
thereto; and
(x) The Proxy Statement to be used in connection with
the transactions contemplated hereby (only insofar as it relates to the
Successor Series or the Forum Funds), on its effective date and at the Closing,
will conform in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder, and will not
contain any untrue statement of a material fact or omit to state
A-6
<PAGE>
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
8. COVENANTS OF THE FORUM FUNDS
The Forum Funds covenants to Stone Bridge and the Fund as
follows:
(i) The Forum Funds will use its best efforts and
take all actions as may be necessary or advisable to effectuate the
Reorganization and to continue the Successor Series in operation thereafter,
including the obtaining of any regulatory approvals required to be obtained by
it.
(ii) The Forum Funds agrees to indemnify and hold
harmless each person who is a director of Stone Bridge at the time of execution
of this Agreement, whether or not such person is or becomes a trustee of the
Forum Funds subsequent to the Closing, against all costs and expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such person in connection with any claim that is asserted
against such person arising out of such person's service as a director of Stone
Bridge, provided that such indemnification shall be limited to the full extent
of the indemnification that is available to trustees of the Forum Funds pursuant
to the provisions of the Forum Funds's Declaration of Trust and applicable law.
(iii) For the period beginning at the Closing and
ending not less than six years thereafter, the Forum Funds shall provide for a
liability policy covering the actions of the current directors of Stone Bridge
during the period they served as such by causing the liability policy carried by
Stone Bridge at the Closing to be continued in full force and effect at the
current coverage and deductible amounts, or by obtaining a new policy providing
comparable coverage.
9. COVENANTS OF STONE BRIDGE
Stone Bridge covenants to the Forum Funds and the Successor
Series as follows:
(i) Stone Bridge will use its best efforts and take
all actions as may be necessary or advisable to effectuate the Reorganization,
including the obtaining of any regulatory approvals, as may be required to be
obtained by it.
(ii) Except as otherwise contemplated by this
Agreement, Stone Bridge will use its best efforts to conduct the business of the
Fund in the ordinary course until the consummation of the Reorganization.
(iii) The Fund will duly supplement its Prospectus in
the manner prescribed by Rule 497(e) of the 1933 Act and all other applicable
law and regulations.
10. BROKERAGE FEES AND EXPENSES
(i) Stone Bridge represents and warrants to the Forum
Funds, and the Forum Funds represents and warrants to Stone Bridge, that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
(ii) Stone Bridge and the Forum Funds confirm their
understanding that the Fund will be responsible for its own expenses in
connection with the Reorganization.
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<PAGE>
11. TERMINATION.
The Board of Directors of Stone Bridge may terminate this
Agreement and abandon the Reorganization contemplated hereby at any time prior
thereto, notwithstanding approval thereof by the shareholders of the Fund if, in
the judgment of such Board proceeding with the Reorganization would be
inadvisable or if any of the conditions set forth in Sections 4 or 6 hereof have
not been satisfied. The Board of Trustees of the Forum Funds may terminate this
Agreement and abandon the Reorganization contemplated hereby if any of the
conditions set forth in Sections 5 or 6 hereof have not been satisfied. In the
event of any such termination, there shall be no liability for damages on the
part of either party to the other.
12. ENTIRE AGREEMENT.
This Agreement embodies the entire Agreement between the
parties and there are no agreements, understandings, restrictions or warranties
among the parties other than those set forth herein or herein provided for. This
Agreement may not be amended without the consent in writing of both parties
hereto. Furthermore, after approval of this Agreement by the shareholders of the
Fund, no amendments may be made that materially adversely affect the interests
of shareholders of the Fund unless such amendments are submitted for shareholder
approval.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made in this Agreement
shall not survive the Closing.
14. FURTHER ASSURANCES.
Stone Bridge and the Forum Funds shall take such further
action as may be reasonably necessary or desirable and proper to consummate the
transactions contemplated hereby.
15. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall
be governed by and construed and enforced in accordance with the laws of the
State of ____________, without regard to principles of conflicts of law.
16. LIMITATION OF LIABILITY OF THE DIRECTORS/TRUSTEES AND
SHAREHOLDERS.
Copies of the Articles of Incorporation of Stone Bridge and
the Declaration of Trust of the Forum Funds are on file with the Secretary of
State of the States of Maryland and Delaware, respectively, and notice is hereby
given that each such instrument is executed on behalf of the directors and
trustees of Stone Bridge and the Forum Funds, respectively, as directors and
trustees, respectively, and not individually and that the obligations of each of
Stone Bridge and Forum Funds pursuant to this Agreement and the other agreements
contemplated hereby are not binding upon any of the directors, trustees or
shareholders individually but binding only upon the assets and property of Stone
Bridge and the Forum Funds, respectively.
A-8
<PAGE>
17. NOTICES.
All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and deemed properly given if
hand delivered or deposited in the U.S. mail, return receipt requested or
certified, postage prepaid, or with an overnight delivery service, as follows:
a. if to Stone Bridge:
with a copy to:
and an additional copy to:
Kramer, Levin, Naftalis
& Frankel
919 Third Avenue
New York, New York 10022
Attention: Jay G. Baris, Esq.
b. if to the Forum Funds:
with a copy to:
and to:
Kramer, Levin, Naftalis,
& Frankel
919 Third Avenue
New York, New York 10022
Attention: Jay G. Baris, Esq.
or to such other person or address as Stone Bridge or the Forum Funds,
respectively, shall furnish to the other in writing.
A-9
<PAGE>
IN WITNESS WHEREOF, each of Stone Bridge and the Forum Funds
have caused this Agreement and Plan of Reorganization to be executed on its
behalf by its Chairman, President or a Vice President and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Stone Bridge, for itself and
on behalf of the Funds
Attest: By:___________________________________
Name:_________________________________
By:___________________________ Title: President
Name:_________________________
Title: Secretary
Forum Funds, for itself and
on behalf of the Successor Series
By: __________________________________
Name: _______________________________
Title: President
ATTEST:
By:___________________________
Name:_________________________
Title: Secretary
A-10
<PAGE>
SCHEDULE A
FUNDS OF STONE BRIDGE
(1) Oak Hall Equity Fund
(2) Austin Global Equity Fund
CORRESPONDING SUCCESSOR SERIES OF THE FORUM FUNDS
(1) Oak Hall Equity Series
(2) Austin Global Equity Series
A-11
<PAGE>
FORM OF
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____day of _______________, 1996, between Forum Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Oak Hall(R) Capital Advisors, Inc. (the "Adviser"), a
corporation organized under the laws of State of New York with its principal
place of business at 122 East 42nd Street, New York, New York 10168.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and is
authorized to issue its shares in separate series and classes; and
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for certain investment portfolios of the Trust as listed on Schedule A
hereto (each a "Fund" and, collectively, the "Funds") and the Adviser is willing
to provide those services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. APPOINTMENT
The Trust hereby appoints the Adviser, and the Adviser hereby agrees, to
act as investment adviser to the Funds for the period and on the terms set forth
in this Agreement. In connection therewith, the Trust has delivered to the
Adviser copies of its Trust Instrument and By-laws, the Trust's Registration
Statement and all amendments thereto filed pursuant to the Act or the Securities
Act of 1933, as amended (the "Registration Statement") and the current
Prospectus and Statement of Additional Information of the Funds (collectively,
as currently in effect and as amended or supplemented, the "Prospectus") and,
will from time to time furnish the Adviser with all amendments of or supplements
to the foregoing.
SECTION 2. DUTIES OF THE ADVISER
Subject to the direction and control of the Trust's Board of Trustees (the
"Board"), the Adviser shall manage the investment and reinvestment of the assets
of the Funds, and, without limiting the generality of the foregoing, shall
provide the management and other services specified below, all in such manner
and to such extent as may be authorized by the Board.
(a) The Adviser shall make decisions with respect to all purchases and
sales and other transactions of securities and other investment assets of the
Funds, including the selection of brokers, dealers and other persons to
introduce or execute those transactions. To carry out such decisions, the
Adviser is authorized, as agent and attorney-in-fact for the Trust, for the
account of, at the risk of and in the name of the Trust, to place orders and
issue instructions with respect to those transactions of the Funds. In all
purchases, sales and other transactions in securities or other assets for the
Funds, the Adviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.
<PAGE>
(b) In making decisions with respect to all purchases and sales and other
transactions of securities and other investment assets of the Funds, the Adviser
shall follow and comply with the policies set forth from time to time by the
Board (to the extent communicated to the Adviser in writing or at a Board
meeting attended by a representative of the Adviser) as well as the limitations
imposed by the Trust's Trust Instrument and By-laws, the Trust's Registration
Statement and the Funds' Prospectuses (in each case, to the extent copies
thereof are furnished to the Adviser) and, the limitations in the Act and in the
Internal Revenue Code of 1986, as amended, in respect of regulated investment
companies.
(c) The Adviser shall either monitor the performance of brokers, dealers
and other persons who introduce or execute purchases, sales and other
transactions of securities and other investment assets of the Funds or select an
introducing broker who shall, as part of its transaction charges, monitor such
performance. Such persons may be affiliated persons of the Adviser to the extent
permitted by the Act.
(d) The Adviser shall maintain such records relating to portfolio
transactions and the placing and allocation of brokerage orders as are required
to be maintained by the Trust under the Act and will provide copies of such
records to the Trust's fund accountant as the accountant reasonably may request.
The Adviser shall prepare and maintain, or cause to be prepared and maintained,
in such form, for such periods and in such locations as may be required by
applicable law, all documents and records relating to the services provided by
the Adviser pursuant to this Agreement required to be prepared and maintained by
the Trust pursuant to the rules and regulations of any national, state, or local
government entity with jurisdiction over the Trust, including the Securities and
Exchange Commission and the Internal Revenue Service. The books and records of
the Trust which are in the possession of the Adviser shall be the property of
the Trust. The Trust, or the Trust's authorized representatives, shall have
access to such books and records at all times during the Adviser's normal
business hours. Upon the reasonable request of the Trust, copies of any such
books and records shall be provided promptly by the Adviser to the Trust or the
Trust's authorized representatives.
(e) The Adviser shall determine in its sole discretion the propriety of (i)
honoring requests for orders to purchase Fund shares "in kind" for a
consideration consisting of securities determined to be suitable to purchase,
(ii) honoring requests by shareholders for proceeds upon redemption of Fund
shares to be paid "in kind" by delivery of portfolio securities, and (iii)
decisions to pay redemption proceeds "in kind" even though not requested by a
Fund shareholder, consistent with any elections or undertakings the Trust may
have made to certain redemption proceeds in cash
(f) The Adviser shall provide to the Board at each regularly scheduled
meeting thereof (or such other meetings as may be requested by the Trust) a
report containing an appropriate summary of all changes in the Funds since the
prior report, will inform the Board of important developments affecting the
Funds, and on its own initiative will furnish the Board from time to time with
such information as it believes appropriate for this purpose, whether concerning
the individual companies whose securities are included in the Funds, the
industries in which they engage, or the economic, social or political conditions
prevailing in each country in which the Funds maintain investments. The Adviser
also shall provide the Board with such statistical and analytical information
with respect to securities in the Funds as the Adviser believes appropriate or
as the Trust reasonably may request. The Adviser shall provide the Trust's fund
accountant, in such forms and at such times as the fund accountant shall
request, complete information about all portfolio transactions and borrowings
and the requested information about prices or yield quotations of portfolio
securities.
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<PAGE>
(g) The Adviser shall from time to time employ or associate with such
persons as it believes to be particularly fitted to assist it in the execution
of its duties under this Agreement, the cost of performance of such duties to be
borne and paid by the Adviser. No obligation may be incurred on behalf of the
Trust in any such respect.
SECTION 3. EXPENSES
The Adviser shall be responsible for the portion of the net expenses that
relate to each of the Funds (except interest, taxes, brokerage, fees and
expenses paid by the Trust in accordance with an effective plan pursuant to Rule
12b-1 under the Act and organization expenses, all to the extent such exclusions
are permitted by applicable state law) incurred by the Trust during each of its
fiscal years or portion thereof that this Agreement is in effect which, as to a
Fund, in any such year exceeds the limits applicable to the Fund under the laws
of any state in which its shares are qualified for sale (reduced pro rata for
any portion of less than a year). Subject to the foregoing and any other
agreement by the Adviser to reimburse the Trust, the Trust shall be responsible
and assumes the obligation for payment of all its other expenses.
SECTION 4. STANDARD OF CARE
The Adviser shall give the Trust the benefit of its best judgment and
efforts in rendering its services to the Trust and shall not be liable for error
of judgment or mistake of law, for any loss arising out of any investment, or in
any event whatsoever, provided that nothing herein shall be deemed to protect,
or purport to protect, the Adviser against any liability to the Trust or to the
security holders of the Trust to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of reckless disregard of its obligations and
duties under hereunder.
SECTION 5. COMPENSATION
(a) For the services provided by the Adviser pursuant to this Agreement,
the Trust shall pay the Adviser, with respect to each of the Funds, a fee at an
annual rate equal to the amount set forth in Schedule B hereto. Such fees shall
be accrued by the Trust daily and shall be payable monthly in arrears on the
first day of each calendar month for services performed under this Agreement
during the prior calendar month. Any reimbursement provided for in Section 3 of
this Agreement shall be estimated and paid to the Trust monthly in arrears, at
the same time as payment to the Adviser for such month. Payment of the fees
hereunder will be reduced or postponed, if necessary, with any adjustments made
after the end of the year.
(b) Notwithstanding anything in this Agreement to the contrary, the Adviser
and its affiliated persons may receive compensation or reimbursement from the
Trust with respect to (i) the provision of distribution services on behalf of
the Funds in accordance with any distribution plan adopted by the Trust pursuant
to Rule 12b-1 under the Act or (ii) the provision of shareholder support or
other services.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
latter of the date on which the Trust's Registration Statement relating to the
shares of the Fund becomes effective and date of its approval by a vote of a
majority of the outstanding voting securities of the Fund. Upon the
effectiveness of this Agreement, it shall supersede all previous agreements
between the Trust and the Adviser covering the subject matter hereof.
-3-
<PAGE>
(b) This Agreement shall continue in effect with respect to a Fund for
twelve months and, thereafter, shall continue in effect for successive
twelve-month periods (computed from each anniversary date of the approval),
provided that such continuance is specifically approved at least annually (i) by
the Board or by a vote of a majority of the outstanding voting securities of the
Fund and (ii) by a vote of a majority of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party at a meeting
called for the purpose of voting on such approval. If the continuation of this
Agreement is not approved as to a Fund, the Adviser may continue to render to
the Fund the services described herein in the manner and to the extent permitted
by the Act.
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Fund on 60 days' written notice to
the Adviser or (ii) by the Adviser on 60 days' written notice to the Trust. This
Agreement shall terminate with respect to a Fund if it has not been approved in
the manner specified in clauses (i) and (ii) of Section 6(b) within two years
from its effective date. This Agreement also shall automatically terminate in
the event of its assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
(a) Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Adviser's
right, or the right of any of its officers, directors or employees (whether or
not they are a trustee, officer, employee or other affiliated person of the
Trust) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
(b) The Adviser represents that it is currently registered as an investment
adviser under the Investment Advisers Act of 1940 and will continue to be
registered as such so long as this agreement remains in effect.
SECTION 8. "OAK HALL" NAME
If the Adviser ceases to act as investment adviser to the Oak Hall Equity
Fund or any other Fund whose name includes the words "Oak Hall," or if the
Adviser requests in writing, the Trust shall take prompt action to change the
name of any such Fund to a name that does not include the words "Oak Hall." The
Adviser may from time to time make available without charge to the Trust for the
Trust's use any marks or symbols owned by the Adviser, including marks or
symbols containing the words "Oak Hall" or any variation thereof, as the Adviser
deems appropriate. Upon the Adviser's request in writing at any time, the Trust
shall cease to use any such mark or symbol. The Trust acknowledges that any
rights in or to the words "Oak Hall" and any such marks or symbols which may
exist on the date of this Agreement or arise hereafter are, and under any and
all circumstances shall continue to be, the sole property of the Adviser. The
Adviser may permit other parties, including other investment companies, to use
the words "Oak Hall" in their names without the consent of the Trust. The Trust
shall not use the words "Oak Hall" in conducting any business other than that of
an investment company registered under the Act without the permission of the
Adviser.
-4-
<PAGE>
SECTION 9. MISCELLANEOUS
(a) Except for the Schedules, no provisions of this Agreement may be
amended or modified in any manner except by a written agreement properly
authorized and executed by both parties hereto and, if required by the Act, by a
vote of a majority of the outstanding voting securities of any Fund thereby
affected.
(b) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FORUM FUNDS
------------------------
John Y. Keffer
Chairman and President
OAK HALL CAPITAL ADVISORS, INC.
------------------------
David P. Steinmann
Executive Vice President
-5-
<PAGE>
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
FUNDS OF THE TRUST
Oak Hall Equity Fund
SCHEDULE B
ADVISORY FEES
Advisory Fee as a % of the Annual Average Daily Net
Fund Assets of the Fund
- - -------------------------------------------------------------------------------
Oak Hall Equity Fund 0.75%
<PAGE>
FORM OF
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____day of _______________, 1996, between Forum Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Austin Investment Management, Inc. (the "Adviser"), a
corporation organized under the laws of State of New York with its principal
place of business at 375 Park Avenue, Suite 2207, New York, New York 10152-2207.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and is
authorized to issue its shares in separate series and classes; and
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for certain investment portfolios of the Trust as listed on Schedule A
hereto (each a "Fund" and, collectively, the "Funds") and the Adviser is willing
to provide those services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. APPOINTMENT
The Trust hereby appoints the Adviser, and the Adviser hereby agrees, to
act as investment adviser to the Funds for the period and on the terms set forth
in this Agreement. In connection therewith, the Trust has delivered to the
Adviser copies of its Trust Instrument and By-laws, the Trust's Registration
Statement and all amendments thereto filed pursuant to the Act or the Securities
Act of 1933, as amended (the "Registration Statement") and the current
Prospectus and Statement of Additional Information of the Funds (collectively,
as currently in effect and as amended or supplemented, the "Prospectus") and,
will from time to time furnish the Adviser with all amendments of or supplements
to the foregoing.
SECTION 2. DUTIES OF THE ADVISER
Subject to the direction and control of the Trust's Board of Trustees (the
"Board"), the Adviser shall manage the investment and reinvestment of the assets
of the Funds, and, without limiting the generality of the foregoing, shall
provide the management and other services specified below, all in such manner
and to such extent as may be authorized by the Board.
(a) The Adviser shall make decisions with respect to all purchases and
sales and other transactions of securities and other investment assets of the
Funds, including the selection of brokers, dealers and other persons to
introduce or execute those transactions. To carry out such decisions, the
Adviser is authorized, as agent and attorney-in-fact for the Trust, for the
account of, at the risk of and in the name of the Trust, to place orders and
issue instructions with respect to those transactions of the Funds. In all
purchases, sales and other transactions in securities or other assets for the
Funds, the Adviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things
<PAGE>
necessary or incidental to the furtherance or conduct of such purchases, sales
or other transactions.
(b) In making decisions with respect to all purchases and sales and other
transactions of securities and other investment assets of the Funds, the Adviser
shall follow and comply with the policies set forth from time to time by the
Board (to the extent communicated to the Adviser in writing or at a Board
meeting attended by a representative of the Adviser) as well as the limitations
imposed by the Trust's Trust Instrument and By-laws, the Trust's Registration
Statement and the Funds' Prospectuses (in each case, to the extent copies
thereof are furnished to the Adviser) and, the limitations in the Act and in the
Internal Revenue Code of 1986, as amended, in respect of regulated investment
companies.
(c) The Adviser shall either monitor the performance of brokers, dealers
and other persons who introduce or execute purchases, sales and other
transactions of securities and other investment assets of the Funds or select an
introducing broker who shall, as part of its transaction charges, monitor such
performance. Such persons may be affiliated persons of the Adviser to the extent
permitted by the Act.
(d) The Adviser shall maintain such records relating to portfolio
transactions and the placing and allocation of brokerage orders as are required
to be maintained by the Trust under the Act and will provide copies of such
records to the Trust's fund accountant as the accountant reasonably may request.
The Adviser shall prepare and maintain, or cause to be prepared and maintained,
in such form, for such periods and in such locations as may be required by
applicable law, all documents and records relating to the services provided by
the Adviser pursuant to this Agreement required to be prepared and maintained by
the Trust pursuant to the rules and regulations of any national, state, or local
government entity with jurisdiction over the Trust, including the Securities and
Exchange Commission and the Internal Revenue Service. The books and records of
the Trust which are in the possession of the Adviser shall be the property of
the Trust. The Trust, or the Trust's authorized representatives, shall have
access to such books and records at all times during the Adviser's normal
business hours. Upon the reasonable request of the Trust, copies of any such
books and records shall be provided promptly by the Adviser to the Trust or the
Trust's authorized representatives.
(e) The Adviser shall determine in its sole discretion the propriety of (i)
honoring requests for orders to purchase Fund shares "in kind" for a
consideration consisting of securities determined to be suitable to purchase,
(ii) honoring requests by shareholders for proceeds upon redemption of Fund
shares to be paid "in kind" by delivery of portfolio securities, and (iii)
decisions to pay redemption proceeds "in kind" even though not requested by a
Fund shareholder, consistent with any elections or undertakings the Trust may
have made to certain redemption proceeds in cash.
(f) The Adviser shall provide to the Board at each regularly scheduled
meeting thereof (or such other meetings as may be requested by the Trust) a
report containing an appropriate summary of all changes in the Funds since the
prior report, will inform the Board of important developments affecting the
Funds, and on its own initiative will furnish the Board from time to time with
such information as it believes appropriate for this purpose, whether concerning
the individual companies whose securities are included in the Funds, the
industries in which they engage, or the economic, social or political conditions
prevailing in each country in which the Funds maintain investments. The Adviser
also shall provide the Board with such statistical and analytical information
with respect to securities in the Funds as the Adviser believes appropriate or
as the Trust reasonably may request. The Adviser shall provide the Trust's fund
accountant, in such forms and at such times as the fund accountant shall
request,
-2-
<PAGE>
complete information about all portfolio transactions and borrowings and the
requested information about prices or yield quotations of portfolio securities.
(g) The Adviser shall from time to time employ or associate with such
persons as it believes to be particularly fitted to assist it in the execution
of its duties under this Agreement, the cost of performance of such duties to be
borne and paid by the Adviser. No obligation may be incurred on behalf of the
Trust in any such respect.
SECTION 3. EXPENSES
The Adviser shall be responsible for the portion of the net expenses that
relate to each of the Funds (except interest, taxes, brokerage, fees and
expenses paid by the Trust in accordance with an effective plan pursuant to Rule
12b-1 under the Act and organization expenses, all to the extent such exclusions
are permitted by applicable state law) incurred by the Trust during each of its
fiscal years or portion thereof that this Agreement is in effect which, as to a
Fund, in any such year exceeds the limits applicable to the Fund under the laws
of any state in which its shares are qualified for sale (reduced pro rata for
any portion of less than a year). Subject to the foregoing and any other
agreement by the Adviser to reimburse the Trust, the Trust shall be responsible
and assumes the obligation for payment of all its other expenses.
SECTION 4. STANDARD OF CARE
The Adviser shall give the Trust the benefit of its best judgment and
efforts in rendering its services to the Trust and shall not be liable for error
of judgment or mistake of law, for any loss arising out of any investment, or in
any event whatsoever, provided that nothing herein shall be deemed to protect,
or purport to protect, the Adviser against any liability to the Trust or to the
security holders of the Trust to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of reckless disregard of its obligations and
duties under hereunder.
SECTION 5. COMPENSATION
(a) For the services provided by the Adviser pursuant to this Agreement,
the Trust shall pay the Adviser, with respect to each of the Funds, a fee at an
annual rate equal to the amount set forth in Schedule B hereto. Such fees shall
be accrued by the Trust daily and shall be payable monthly in arrears on the
first day of each calendar month for services performed under this Agreement
during the prior calendar month. Any reimbursement provided for in Section 3 of
this Agreement shall be estimated and paid to the Trust monthly in arrears, at
the same time as payment to the Adviser for such month. Payment of the fees
hereunder will be reduced or postponed, if necessary, with any adjustments made
after the end of the year.
(b) Notwithstanding anything in this Agreement to the contrary, the Adviser
and its affiliated persons may receive compensation or reimbursement from the
Trust with respect to (i) the provision of distribution services on behalf of
the Funds in accordance with any distribution plan adopted by the Trust pursuant
to Rule 12b-1 under the Act or (ii) the provision of shareholder support or
other services.
-3-
<PAGE>
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
latter of the date on which the Trust's Registration Statement relating to the
shares of the Fund becomes effective and date of its approval by a vote of a
majority of the outstanding voting securities of the Fund. Upon the
effectiveness of this Agreement, it shall supersede all previous agreements
between the Trust and the Adviser covering the subject matter hereof.
(b) This Agreement shall continue in effect with respect to a Fund for
twelve months and, thereafter, shall continue in effect for successive
twelve-month periods (computed from each anniversary date of the approval),
provided that such continuance is specifically approved at least annually (i) by
the Board or by a vote of a majority of the outstanding voting securities of the
Fund and (ii) by a vote of a majority of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party at a meeting
called for the purpose of voting on such approval. If the continuation of this
Agreement is not approved as to a Fund, the Adviser may continue to render to
the Fund the services described herein in the manner and to the extent permitted
by the Act.
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Fund on 60 days' written notice to
the Adviser or (ii) by the Adviser on 60 days' written notice to the Trust. This
Agreement shall terminate with respect to a Fund if it has not been approved in
the manner specified in clauses (i) and (ii) of Section 6(b) within two years
from its effective date. This Agreement also shall automatically terminate in
the event of its assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
(a) Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Adviser's
right, or the right of any of its officers, directors or employees (whether or
not they are a trustee, officer, employee or other affiliated person of the
Trust) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
(b) The Adviser represents that it is currently registered as an investment
adviser under the Investment Advisers Act of 1940 and will continue to be
registered as such so long as this agreement remains in effect.
SECTION 8. "AUSTIN" NAME
If the Adviser ceases to act as investment adviser to the Austin Global
Equity Fund or any other Fund whose name includes the word "Austin," or if the
Adviser requests in writing, the Trust shall take prompt action to change the
name of any such Fund to a name that does not include the word "Austin." The
Adviser may from time to time make available without charge to the Trust for the
Trust's use any marks or symbols owned by the Adviser, including marks or
symbols containing the word "Austin" or any variation thereof, as the Adviser
deems appropriate. Upon the Adviser's request in writing at any time, the Trust
shall cease to use any such mark or symbol. The Trust acknowledges that any
rights in or to the word "Austin" and any such marks or symbols which may exist
on the date of this Agreement or arise hereafter are, and under any and all
circumstances shall continue to be, the sole property of the Adviser. The
Adviser may permit other parties, including other investment companies, to use
the word "Austin"
-4-
<PAGE>
in their names without the consent of the Trust. The Trust shall not use the
word "Austin" in conducting any business other than that of an investment
company registered under the Act without the permission of the Adviser.
SECTION 9. MISCELLANEOUS
(a) Except for the Schedules, no provisions of this Agreement may be
amended or modified in any manner except by a written agreement properly
authorized and executed by both parties hereto and, if required by the Act, by a
vote of a majority of the outstanding voting securities of any Fund thereby
affected.
(b) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FORUM FUNDS
------------------------
John Y. Keffer
Chairman and President
AUSTIN INVESTMENT MANAGEMENT, INC.
------------------------
Peter A. Vlachos
President
-5-
<PAGE>
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
FUNDS OF THE TRUST
Austin Global Equity Fund
SCHEDULE B
ADVISORY FEES
Advisory Fee as a % of the Annual Average
Fund Daily Net Assets of the Fund
- - ------------------------------- ------------------------------------------------
Austin Global Equity Fund 1.50%
<PAGE>
FORM OF
FORUM FUNDS
OAK HALL EQUITY FUND
DISTRIBUTION PLAN
Distribution Plan (the "Plan") of Forum Funds (the "Trust") with
respect to the Oak Hall Equity Fund (the "Fund") in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act").
SECTION 1. DISTRIBUTOR; ADVISER
The Trust has entered into an Administration and Distribution Agreement
with Forum Financial Services, Inc. (the "Distributor") whereby the Distributor
acts as principal underwriter of the Fund's shares (the "Shares"), and has
entered into an investment advisory agreement with Austin Investment Management,
Inc. (the "Adviser") whereby the Adviser acts as investment adviser to the Fund,
each in a form satisfactory to the Trust's Board of Trustees (the "Board").
SECTION 2. DISTRIBUTION EXPENSES
The Trust may reimburse the Distributor for the distribution expenses
incurred by the Distributor on behalf of the Fund of up to 0.25% per annum of
the Fund's average daily net assets in accordance with the following:
(a) On behalf of the Fund, the Distributor may incur expenses for any
distribution-related purpose it deems necessary or appropriate, including: (i)
the incremental costs of printing (excluding typesetting) prospectuses,
statements of additional information, annual reports and other periodic reports
for use in connection with the offering or sale of Shares, to any prospective
investor, (ii) preparing, printing and distributing any other literature used by
the Distributor in connection with the offering of Shares for sale to the public
and the cost of administering the program, compensation to and expenses
(including overhead and telephone) of employees of the Distributor who engage in
sales support and distribution activities, (iii) compensating other persons for
providing assistance in distributing the Shares and (iv) reimbursement to the
Adviser of the Adviser's distribution-related expenses, including expenses of
employees of the Adviser who train or educate others with respect to the Fund
and the investment techniques employed to achieve the Fund's investment
objective.
(b) The schedule of such reimbursements and the basis upon which they
will be paid shall be determined from time to time by the Board. Unreimbursed
expenses of the Distributor incurred during a fiscal year of the Trust may not
be reimbursed by the Trust in subsequent fiscal years.
SECTION 3. REVIEW AND RECORDS
(a) The Trust and the Distributor shall prepare and furnish to the
Board, and the Board shall review at least quarterly, written reports setting
forth all amounts expended under the Plan by the Trust and the Distributor and
identifying the activities for which the expenditures were made.
<PAGE>
(b) The Trust shall preserve copies of the Plan, each agreement related
to the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1 under the Act.
SECTION 4. EFFECTIVENESS; DURATION; AND TERMINATION
(a) The Plan shall become effective upon approval by (i) a vote of at
least a majority of the outstanding voting securities of the Fund and (ii) the
Board, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan (the "Qualified Trustees"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on approval of the Plan.
(b) The Plan shall remain in effect for a period of one year from the
date of its effectiveness, unless earlier terminated in accordance with this
Section, and thereafter shall continue in effect for successive twelve-month
periods, provided that such continuance is specifically approved at least
annually by the Board and a majority of the Qualified Trustees pursuant to a
vote cast in person at a meeting called for the purpose of voting on continuance
of the Plan.
(c) The Plan may be terminated without penalty at any time by a vote of
(i) a majority of the Qualified Trustees or (ii) a vote of a majority of the
outstanding voting securities of the Fund.
SECTION 5. AMENDMENT
The Plan may be amended at any time by the Board, provided that (i) any
material amendments to the Plan shall be effective only upon approval of the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on the amendment to the Plan, and
(ii) any amendment which increases materially the amount which may be spent by
the Trust pursuant to the Plan shall be effective only upon the additional
approval a majority of the outstanding voting securities of the Fund.
SECTION 6. NOMINATION OF DISINTERESTED TRUSTEES
While the Plan is in effect, the selection and nomination of the
Trustees of the Trust who are not interested persons of the Trust shall be
committed to the discretion of the Trustees of the Trust who are not interested
persons of the Trust.
SECTION 7. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
2
<PAGE>
FORM OF
FORUM FUNDS
AUSTIN GLOBAL EQUITY FUND
DISTRIBUTION PLAN
Distribution Plan (the "Plan") of Forum Funds (the "Trust") with respect to
the Austin Global Equity Fund (the "Fund") in accordance with the provisions of
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act").
SECTION 1. DISTRIBUTOR; ADVISER
The Trust has entered into an Administration and Distribution Agreement
with Forum Financial Services, Inc. (the "Distributor") whereby the Distributor
acts as principal underwriter of the Fund's shares (the "Shares"), and has
entered into an investment advisory agreement with Austin Investment Management,
Inc. (the "Adviser") whereby the Adviser acts as investment adviser to the Fund,
each in a form satisfactory to the Trust's Board of Trustees (the "Board").
SECTION 2. DISTRIBUTION EXPENSES
The Trust may reimburse the Distributor for the distribution expenses
incurred by the Distributor on behalf of the Fund of up to 0.25% per annum of
the Fund's average daily net assets in accordance with the following:
(a) On behalf of the Fund, the Distributor may incur expenses for any
distribution-related purpose it deems necessary or appropriate, including: (i)
the incremental costs of printing (excluding typesetting) prospectuses,
statements of additional information, annual reports and other periodic reports
for use in connection with the offering or sale of Shares, to any prospective
investor, (ii) preparing, printing and distributing any other literature used by
the Distributor in connection with the offering of Shares for sale to the public
and the cost of administering the program, compensation to and expenses
(including overhead and telephone) of employees of the Distributor who engage in
sales support and distribution activities, (iii) compensating other persons for
providing assistance in distributing the Shares and (iv) reimbursement to the
Adviser of the Adviser's distribution-related expenses, including expenses of
employees of the Adviser who train or educate others with respect to the Fund
and the investment techniques employed to achieve the Fund's investment
objective.
(b) The schedule of such reimbursements and the basis upon which they will
be paid shall be determined from time to time by the Board. Unreimbursed
expenses of the Distributor incurred during a fiscal year of the Trust may not
be reimbursed by the Trust in subsequent fiscal years.
SECTION 3. REVIEW AND RECORDS
(a) The Trust and the Distributor shall prepare and furnish to the Board,
and the Board shall review at least quarterly, written reports setting forth all
amounts expended under the Plan by
<PAGE>
the Trust and the Distributor and identifying the activities for which the
expenditures were made.
(b) The Trust shall preserve copies of the Plan, each agreement related to
the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1 under the Act.
SECTION 4. EFFECTIVENESS; DURATION; AND TERMINATION
(a) The Plan shall become effective upon approval by (i) a vote of at least
a majority of the outstanding voting securities of the Fund and (ii) the Board,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement related to the Plan (the "Qualified Trustees"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on approval of the Plan.
(b) The Plan shall remain in effect for a period of one year from the date
of its effectiveness, unless earlier terminated in accordance with this Section,
and thereafter shall continue in effect for successive twelve-month periods,
provided that such continuance is specifically approved at least annually by the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on continuance of the Plan.
(c) The Plan may be terminated without penalty at any time by a vote of (i)
a majority of the Qualified Trustees or (ii) a vote of a majority of the
outstanding voting securities of the Fund.
SECTION 5. AMENDMENT
The Plan may be amended at any time by the Board, provided that (i) any
material amendments to the Plan shall be effective only upon approval of the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on the amendment to the Plan, and
(ii) any amendment which increases materially the amount which may be spent by
the Trust pursuant to the Plan shall be effective only upon the additional
approval a majority of the outstanding voting securities of the Fund.
SECTION 6. NOMINATION OF DISINTERESTED TRUSTEES
While the Plan is in effect, the selection and nomination of the Trustees
of the Trust who are not interested persons of the Trust shall be committed to
the discretion of the Trustees of the Trust who are not interested persons of
the Trust.
SECTION 7. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court decision,
statute, rule or otherwise, the remainder of the Plan shall not be affected
thereby.
2
<PAGE>
STONE BRIDGE FUNDS, INC.
AUSTIN GLOBAL FUND
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 15, 1996
Please refer to the Proxy Statement for a discussion of these matters. THE
UNDERSIGNED HOLDER(S) OF SHARES OF STOCK OF AUSTIN GLOBAL FUND SERIES OF STONE
BRIDGE FUNDS, INC. HEREBY CONSTITUTES AND APPOINTS MAX BERUETTY AND TRACI BLOCK,
OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER
OF SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES
ANY PRIOR PROXIES. To vote, mark an X in blue or black ink on the proxy card
below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STONE
BRIDGE FUNDS, INC.
1. To approve a Reorganization of the Austin Global Fund into a series of the
Forum Funds
FOR AGAINST ABSTAIN
|_| |_| |_|
2. To approve the following proposals relating to Austin Global Fund's
fundamental investment restrictions:
a. Senior securities
FOR AGAINST ABSTAIN
|_| |_| |_|
b. Borrowing
FOR AGAINST ABSTAIN
|_| |_| |_|
c. Commodities
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
-38-
<PAGE>
STONE BRIDGE FUNDS, INC. - AUSTIN GLOBAL FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF EACH PROPOSAL.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x___________________
____________________
___________________
x____________________
____________________
___________________
Dated:______________
___________________
___________, 1996
-1-
<PAGE>
STONE BRIDGE FUNDS, INC.
OAK HALL FUND
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 15, 1996
Please refer to the Proxy Statement for a discussion of these matters. THE
UNDERSIGNED HOLDER(S) OF SHARES OF STOCK OF OAK HALL FUND SERIES OF STONE BRIDGE
FUNDS, INC. HEREBY CONSTITUTES AND APPOINTS MAX BERUETTY AND TRACI BLOCK, OR
EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES
ANY PRIOR PROXIES. To vote, mark an X in blue or black ink on the proxy card
below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STONE
BRIDGE FUNDS, INC.
1. To approve a Reorganization of the Oak Hall Fund into a series of the Forum
Funds
FOR AGAINST ABSTAIN
|_| |_| |_|
2. To approve the following proposals relating to Oak Hall Fund's fundamental
investment restrictions:
a. Senior securities
FOR AGAINST ABSTAIN
|_| |_| |_|
b. Borrowing
FOR AGAINST ABSTAIN
|_| |_| |_|
c. Commodities
FOR AGAINST ABSTAIN
|_| |_| |_|
3. To approve the following proposals relating to Oak Hall Fund's fundamental
investment restrictions:
a. Investment for purposes of exercising control
FOR AGAINST ABSTAIN
|_| |_| |_|
b. Purchases of securities on margin and short sales
FOR AGAINST ABSTAIN
|_| |_| |_|
c. Investment in interests in oil or gas
FOR AGAINST ABSTAIN
|_| |_| |_|
d. Investment in other investment companies
-2-
<PAGE>
FOR AGAINST ABSTAIN
|_| |_| |_|
e. Securities in which affiliates have invested
FOR AGAINST ABSTAIN
|_| |_| |_|
f. Securities of unseasoned issuers
FOR AGAINST ABSTAIN
|_| |_| |_|
g. Pledging, mortgaging or hypothecation of assets
FOR AGAINST ABSTAIN
|_| |_| |_|
h. Investment in securities that are not readily marketable
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
-3-
<PAGE>
STONE BRIDGE FUNDS, INC. - OAK HALL FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF EACH PROPOSAL.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x___________________
____________________
___________________
x____________________
____________________
___________________
Dated:______________
___________________
___________, 1996
-1-
