[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