[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Notices]
[Pages 77941-77942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31889]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 24751A; 812-12294]
Stratevest Funds, et al.; Notice of Application
December 11, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 17(a)
of the Act.
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SUMMARY: Applicants request an order to permit the proposed
reorganizations of two series (the ``Acquired funds'') of the Forum
Funds with and into two series of the Stratevest Funds (the ``Acquiring
Funds,'' and together with the Acquired Funds, the ``Funds''). Because
of certain affiliations, applicants may not rely on rule 17a-8 under
the Act.
Applicants: Stratevest Funds, Forum Funds, The Stratevest Group,
N.A. (``Stratevest Group''), and Forum Investment Advisors, LLC
(``Forum Advisors'').
Filing Dates: The application was filed on October 10, 2000.
Applicants have agreed to file an amendment to the application during
the notice period, the substance of which is reflected in this notice.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on December 28, 2000, and should be accompanied by proof of
service on applicants in the form of an affidavit or, for lawyers, a
certificate of service.\1\ Hearing requests should state the nature of
the writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
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\1\ A notice was originally issued on November 28, 2000
(Investment Company Act Release No. 24751) giving interested persons
until December 20, 2000, to request a hearing. However, the original
notice was not published in the Federal Register, therefore,
interested persons have until December 28, 2000, to request a
hearing on the application.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC
20549-0609. Applicants: Stratevest Funds and Stratevest Group, 111 Main
Street, Burlington, Vermont 05402-0409; Forum Funds and Forum Advisors,
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Two Portland Square, Portland, Maine 04101.
FOR FURTHER INFORMATION CONTACT: Mary Kay Frech, Branch Chief, at (202)
942-0564 (Division of Investment Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the Commission's Public Reference Branch, 450 Fifth Street, NW.,
Washington, DC 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. Stratevest Funds, a Delaware business trust, is registered under
the Act as an open-end management investment company and currently
offers four series. Stratevest Funds is organizing two new series, the
Stratevest Large Cap Core Fund (``Stratevest Core Fund'') and the
Stratevest Intermediate Bond Fund (``Stratevest Bond Fund''), which
will be Acquiring Funds. The Stratevest Group, a national banking
association, serves as investment adviser to the Acquiring Funds and is
exempt from registration under the Investment Advisers Act of 1940
(``Advisers Act''). On or before the Reorganizations (as defined
below), the Stratevest Group is expected to own, in a fiduciary
capacity, more than 25% of the outstanding voting shares of the
Stratevest Bond Fund as a result of the Stratevest Bond Fund's proposed
acquisition of assets of certain common and collective trust funds.
2. Forum Funds, a Delaware business Trust, is registered under the
Act as an open-end management investment company and currently offers
twenty-one series, two of which are Acquired Funds: the Investors
Equity Fund (``Forum Equity Fund'') and the Investors High Grade Bond
Fund (``Forum Bond Fund''). Stratevest Group is the investment adviser
for Forum Equity Fund, and owns, in a fiduciary capacity, more than 25%
of the outstanding voting shares of the Forum Bond Fund. Forum Advisors
is an investment adviser registered under the Advisers Act and serves
as investment adviser to the Forum Bond Fund. The Acquired Funds and
Acquiring Funds are collectively referred to as the Funds.
3. On August 15, 2000 and October 2, 2000, the boards of trustees
of the Acquiring Funds and the Acquired Funds (together, the
``Boards''), respectively, including all the trustees who are not
``interested persons,'' as defined in section 2(a)(19) of the Act
(``Independent Trustees''), unanimously approved the agreements and
plans of reorganization between the Funds (the ``Reorganization
Agreements''). Under the Reorganization Agreements, each Acquiring Fund
will acquire all the assets and liabilities of the corresponding
Acquired Fund in exchange for shares of the Acquiring Fund (the
``Reorganizations'').\2\ The shares of each Acquiring Fund exchanged
will have an aggregate net asset value equal to the aggregate net asset
value of the Acquired Fund's shares determined as of the close of
business on the business day immediately preceding the day of the
closing of each Reorganization (``Closing Date''), currently
anticipated to occur on or after December 20, 2000. The value of the
assets of the Funds will be determined according to the Funds' then-
current prospectuses and statements of additional information. As soon
as reasonably practical after the Closing Date, each Acquired Fund will
be liquidated by the distribution of the Acquiring Fund shares pro rata
to the shareholders of the Acquired Fund.
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\2\ The Acquired Funds and their corresponding Acquiring Funds
are: (1) Forum Equity Fund and Stratevest Core Fund and (2) Forum
Bond Fund and Stratevest Bond Fund.
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4. Applicants state that the investment objectives and strategies
of each Acquired Fund are similar to those of the corresponding
Acquiring Fund. The Funds offer one class of shares. The Acquired
Funds' shares are subject to either a front-end sales charge or a
contingent deferred sales charge, but are not subject to a distribution
fee adopted under rule 12b-1 of the Act or shareholder services fees.
The Acquiring Funds' shares are subject to a front-end sales charge, a
rule 12b-1 distribution fee, and shareholder services fee. Shareholders
of the Acquired Funds will not be subject to a contingent deferred
sales charge upon redemption of the Acquiring Fund shares that they
receive in connection with the Reorganizations. No sales charges or
exchange fee will be imposed in connection with the Reorganizations.
Stratevest Group, Federated Services Company, and, possibly, Forum
Financial Group will bear the costs associated with the
Reorganizations.
5. The Boards, including all of the Independent Trustee, determined
that the participation of each Acquiring and Acquired Fund in a
Reorganization was in the best interests of each Fund and its
shareholders, and that the interests of the shareholders of each Fund
would not be diluted as a result of the Reorganization. In approving
the Reorganizations, the Boards considered various factors, including:
(a) The
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investment objectives, strategies, techniques, investment risks and
limitations of each Acquired Fund and their compatibility with those of
the corresponding Acquiring Fund; (b) the investment advisory and other
fees paid by each Acquiring Fund and the projected expense ratio of
each Acquiring Fund as compared to those of the corresponding Acquired
Fund; (c) the terms and conditions of each Reorganization Agreement;
and (d) the anticipated tax consequences of the Reorganizations for the
Funds and their shareholders. In addition, the Forum Board considered:
(a) The small asset size of each Acquired Fund; (b) the likelihood that
each Acquired Fund's service providers may not be able to maintain
their current fee waivers; and (c) the fact that the Reorganizations
would permit shareholders to own shares in a new fund without realizing
tax consequences that would be present if the Acquired Funds were to
liquidate.
6. The Reorganizations are subject to certain conditions, including
that: (a) the shareholders of each Acquired Fund will have approved the
Reorganizations; (b) the Funds will have received opinions of counsel
concerning the tax-free nature of the Reorganizations; and (c)
applicants will have received exemptive relief from the Commission to
permit the Reorganizations. The Reorganization Agreements may be
terminated and the Reorganizations abandoned at any time prior to the
Closing Date by the Boards. Applicants agree not to make any material
changes to the Reorganization Agreements without prior Commission
approval.
7. Registration Statements on Form N-14 with respect to the
Reorganizations were filed with the Commission on September 8, 2000.
Proxy solicitation materials were mailed to shareholders of the
Acquired Funds on November 1, 2000. A shareholders meeting of the
Acquired Funds is scheduled for December 1, 2000.
Applicants' Legal Analysis
1. Section 17(a) of the Act, in relevant part, prohibits an
affiliated person of a registered investment company, or an affiliated
person of such a person, acting as principal, from selling any security
to, or purchasing any security from, the company. Section 2(a)(3) of
the Act defines an ``affiliated person'' of another person to include:
(a) Any person directly or indirectly owning, controlling, or holding
with power to vote 5% or more of the outstanding voting securities of
the other person; (b) any person 5% or more of whose securities are
directly or indirectly owned, controlled, or held with power to vote by
the other person; (c) any person directly or indirectly controlling,
controlled by, or under common control with the other person; and (d)
if the other person is an investment company, any investment adviser of
that company.
2. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) certain mergers, consolidations, and sales of
substantially all of the assets of registered investment companies that
are affiliated persons, or affiliated persons of an affiliated person,
solely by reason of having a common investment adviser, common
directors/trustees, and/or common officers, provided that certain
conditions are satisfied.
3. Applicants state that Stratevest Group is investment adviser to
the Stratevest Core Fund and Stratevest Group holds of record more than
25% of the outstanding voting securities of the Forum Equity Fund. In
addition, applicants state that, on or before the Reorganization,
Stratevest Group will hold of record more than 25% of the outstanding
voting securities of the both the Forum Bond Fund and the Stratevest
Bond Fund. Because of these relationships and ownership positions, the
Acquired Funds and their corresponding Acquiring Funds may be deemed
affiliated persons for reasons other than those set forth in rule 17a-8
and therefore unable to rely on the rule.
4. Section 17(b) of the Act provides that the Commission may exempt
a transaction from the provisions of section 17(a) if evidence
establishes that the terms of the proposed transaction, including the
consideration to be paid or received, are reasonable and fair and do
not involve overreaching on the part of any person concerned, and that
the proposed transaction is consistent with the policy of each
registered investment company concerned and with the general purposes
of the Act.
5. Applicants request an order under section 17(b) of the Act
exempting them from section 17(a) to the extent necessary to complete
the Reorganizations. Applicants submit that the terms of the
Reorganizations satisfy the standards set forth in section 17(b).
Applicants note that the Boards, including all of the Independent
Trustees, found that participation in the Reorganizations is in the
best interests of each Fund and its shareholders and that the interests
of the existing shareholders of each Fund will not be diluted as a
result of the Reorganizations. Applicants also note that the
Reorganizations will be based on the Funds' relative net asset value.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31889 Filed 12-11-00; 2:52 pm]
BILLING CODE 8010-01-M