As filed with the Securities and Exchange Commission on November 5, 2003
Registration No. 333-109527
Securities and Exchange Commission
Washington, D.C. 20549
Form N-14
Registration Statement under the Securities Act of 1933 /X/
Pre-Effective Amendment No. /1/
Post-effective Amendment No. / /
Integrity Managed Portfolios
(Exact Name of Registrant as Specified in Charter)
1 North Main
Minot, North Dakota 58703
(Address of Principal Executive Offices)
(701) 852-5292
(Registrant's Telephone Number)
Robert E. Walstad Mark J. Kneedy Dana Lukens
Integrity Mutual Funds, Inc. Chapman and Cutler LLP Forum Funds
1 North Main 111 West Monroe Street Two Portland Square
Minot, North Dakota 58703 Chicago, Illinois 60603 Portland, Maine 04101
(Name and Address of Agent (with a copy to the above) (with a copy to the above)
for Service)
As soon as practicable after the Registration Statement becomes effective under
the Securities Act of 1933.
(Approximate Date of Proposed Public Offering)
The title of shares being registered is shares of beneficial interest of the
New Hampshire Municipal Fund and the Maine Municipal Fund, each series of the
Integrity Managed Portfolios (formerly known as the Ranson Managed
PortfolioS). No filing fee is due in reliance on Section 24(f) of the
Investment Company Act.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
IMPORTANT NOTICE: PLEASE COMPLETE THE
ENCLOSED PROXY BALLOT AND RETURN IT AS SOON AS POSSIBLE.
FORUM FUNDS
Two Portland Square
Portland, Maine 04101
November 6, 2003
Dear Valued Shareholder:
Enclosed is a Notice of Special Meeting of Shareholders of Maine TaxSaver
Bond Fund ("Forum ME Fund") and New Hampshire TaxSaver Bond Fund ("Forum NH
Fund") (each a "Forum Series"), each a series of Forum Funds ("Forum"), to be
held at 10:00 a.m. on December 15, 2003 at the offices of Forum Financial
Group, LLC, Two Portland Square, Fourth Floor Conference Room, Portland, Maine
04101.
At the meeting, you will be asked to approve an Agreement and Plan of
Reorganization between Forum, on behalf of each Forum Series, and Integrity
Managed Portfolios ("Integrity"), another registered investment company, on
behalf of its series, Maine Municipal Fund ("Integrity ME Fund") and New
Hampshire Municipal Fund ("Integrity NH Fund") (the "Plan"). Under the Plan,
each of Forum ME Fund and Forum NH Fund will transfer its assets to Integrity
ME Fund and Integrity NH Fund, respectively (each an "Integrity Series"), in
exchange solely for shares of that corresponding Integrity Series and the
corresponding Integrity Series' assumption of the applicable Forum Series'
liabilities. The Plan further provides that each Forum Series will then
distribute the shares received from the corresponding Integrity Series
proportionately to its shareholders and then terminate. Prior to each Forum
Series' transfer of its assets to the corresponding Integrity Series, the
Integrity Series will not have made a public offering of its shares and will
have only nominal assets.
The Board of Trustees of Forum (the "Forum Board") unanimously approved the
Plan. In evaluating the Plan with respect to the Forum Series in which you
invest, please note that:
1. Each Forum Series and the corresponding Integrity Series pursue the
same investment objective and have similar investment strategies and
policies.
2. Each Forum Series and the corresponding Integrity Series will have
similar portfolio holdings.
3. The Management fee for the Integrity Series is higher than the
Management fee for the Forum Series, however, the projected gross
annual operating expenses of each Integrity Series, expressed as a
percentage of fund assets, are expected to be less than those of
the corresponding Forum Series. Pursuant to contractual fee waivers
and expense reimbursements, the net expenses of each Integrity Series
and the corresponding Forum Series will be the same through July 31,
2004, 0.95% of that series' average daily net assets (excluding taxes,
interest, portfolio transaction expenses and extraordinary expenses).
On August 1, 2004, the contractual fee waiver agreement with respect
to each Forum Series will terminate while the contractual fee
waiver agreement with respect to each Integrity Series will continue
through December 20, 2004. Notwithstanding the foregoing, each
Integrity Series assesses a higher sales load than its corresponding
Forum Series.
4. The Plan includes provisions intended to avoid dilution of the
interests of the shareholders of each Forum Series. Under the Plan,
each Forum Series' shareholder will receive shares of the
corresponding Integrity Series equal in value to the shareholder's
share of the net assets of the Forum Series held.
5. The transactions contemplated under the Plan with respect to each
Forum Series and Integrity Series are tax-free in nature.
Shareholders are being asked to approve the Plan only with respect to the
Forum Series in which they own shares. The approval of the Plan by the
shareholders of one Forum Series is not contingent on the approval of the Plan
by the shareholders of the other Forum Series. If shareholders of a Forum
Series approve the Plan, that Forum Series will reorganize into the
corresponding Integrity Series regardless of whether shareholders of the other
Forum Series vote to approve the Plan.
The Forum Board believes that the Plan is important and recommends that you
read the enclosed materials carefully and then vote FOR the Plan with respect
to the Forum Series in which you invest.
Please refer to the enclosed proxy card for instructions on how to cast
your vote.
Forum Financial Group, LLC and/or its affiliates (collectively, "FFG") have
agreed to pay the expenses incurred by each Forum Series in connection with
the transactions contemplated by the Plan. FFG currently provides investment
advisory, distribution, administrative, transfer agency, fund accounting, and
custody services to each Forum Series. Integrity Mutual Funds, Inc. and/or its
affiliates (collectively, "Integrity Inc.") have agreed to pay the expenses
incurred by each Integrity Series in connection with the transactions
contemplated by the Plan. Integrity Inc. provides investment advisory,
distribution, administrative, transfer agency, and fund accounting services
to each Integrity Series.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
-2-
IF YOU HAVE ANY QUESTIONS CONCERNING THE ENCLOSED PROXY STATEMENT/PROSPECTUS
OR THE PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT
FORUM SHAREHOLDER SERVICES, LLC AT 1-800-943-6786.
Very truly yours,
David I. Goldstein
President
Forum Funds
-3-
FORUM FUNDS
MAINE TAXSAVER BOND FUND
NEW HAMPSHIRE TAXSAVER BOND FUND
Two Portland Square
Portland, Maine 04101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 15, 2003
To the Shareholders:
A Special Meeting of Shareholders of Maine TaxSaver Bond Fund ("Forum ME
Fund") and New Hampshire TaxSaver Bond Fund ("Forum NH Fund"), each a series of
Forum Funds ("Forum"), will be held at the offices of Forum Financial Group,
LLC, Two Portland Square, Fourth Floor Conference Room, Portland, Maine 04101,
on December 15, 2003 at 10:00 a.m., Eastern Time, to consider the following:
(1) A proposal to approve the Agreement and Plan of Reorganization between
Forum, on behalf of Forum ME Fund and Forum NH Fund (each a "Forum
Series") and Integrity Managed Portfolios ("Integrity"), another
registered investment company, on behalf of its series, Maine
Municipal Fund ("Integrity ME Fund") and New Hampshire Municipal
Fund ("Integrity NH Fund") (the "Plan"). Under the Plan, each of
Forum ME Fund and Forum NH Fund will transfer all of its assets to
Integrity ME Fund and Integrity NH Fund (each an "Integrity Series"),
respectively, in exchange solely for shares of that corresponding
Integrity Series and the corresponding Integrity Series' assumption
of the applicable Forum Series' liabilities. The Plan further
provides that each Forum Series will then distribute the shares
received from the corresponding Integrity Series proportionately to
its shareholders and terminate; and
(2) Any other business that properly comes before the meeting.
The approval of the Plan by shareholders of one Forum Series is not
contingent on the approval of the Plan by the shareholders of the other Forum
Series. If shareholders of a Forum Series approve the Plan, that Forum Series
will reorganize into the corresponding Integrity Series regardless of whether
shareholders of the other Forum Series vote to approve the Plan.
Enclosed with this notice is a Proxy Statement/Prospectus, which includes
information relevant to the proposed transactions. A form of the Plan is
attached as Exhibit A to the Proxy Statement/Prospectus.
Shareholders of record of each Forum Series as of the close of business on
October 27, 2003 are entitled to vote at the meeting and at any postponement
or adjournment thereof. This notice and related Proxy Statement/Prospectus
are first being mailed to shareholders of each Forum Series on or about
November 11, 2003. This Proxy is being solicited by Forum's Board of Trustees.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
IF YOU HAVE ANY QUESTIONS CONCERNING THE ENCLOSED PROXY STATEMENT/PROSPECTUS
OR THE PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE
CONTACT FORUM SHAREHOLDER SERVICES, LLC AT (800) 943-6786.
By Order of the Board of Trustees,
-----------------------------------
Leslie K. Klenk
Secretary
Forum Funds
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE
NUMBER OF SHARES THAT YOU OWNED ON THE RECORD DATE.
-2-
PROXY STATEMENT/PROSPECTUS
November 6, 2003
Acquisition of the Assets of
MAINE TAXSAVER BOND FUND ("FORUM ME FUND")
NEW HAMPSHIRE TAXSAVER BOND FUND ("FORUM NH FUND")
each a series of
Forum Funds
Two Portland Square
Portland, Maine 04101
(800) 943-6786
By and In Exchange for
Shares of Beneficial Interest of
MAINE MUNICIPAL FUND ("INTEGRITY ME FUND")
NEW HAMPSHIRE MUNICIPAL FUND ("INTEGRITY NH FUND")
each a series of
INTEGRITY MANAGED PORTFOLIOS
1 North Main
Minot, North Dakota 58703
(800) 276-1262
At a meeting on June 4, 2003, and continued on July 7, 2003, the Board of
Trustees of the Forum Funds (the "Forum Board"), an open-end investment
company registered under the Investment Company Act of 1940, as amended
("1940 Act"), unanimously approved the Agreement and Plan of Reorganization
between Forum Funds ("Forum"), on behalf of its municipal bond series, Forum
ME Fund and Forum NH Fund, and Integrity Managed Portfolios (formerly known as
Ranson Managed Portfolios)("Integrity"), another registered open-end investment
company, on behalf of its municipal bond series, Integrity ME Fund and
Integrity NH Fund (the "Plan").
Under the Plan, each of Forum ME Fund and Forum NH Fund (each a "Forum
Series") will transfer its assets to Integrity ME Fund and Integrity NH Fund,
respectively (each an "Integrity Series"), in exchange solely for shares of
that corresponding Integrity Series and the corresponding Integrity Series'
assumption of the applicable Forum Series' liabilities. The Plan further
provides that each Forum Series will then distribute the shares received from
the Integrity Series proportionately to its shareholders and then terminate.
Prior to each Forum Series' transfer of its assets to the corresponding
Integrity Series under the Plan, the Integrity Series will not have made a
public offering of its shares and will have only nominal assets.
Please read the Proxy Statement/Prospectus carefully and retain it for
future reference. This Proxy Statement/Prospectus sets forth concisely the
information that you should know before investing in an Integrity Series. A
Statement of Additional Information dated November 6, 2003, containing
additional information about the Plan and the transactions contemplated
thereunder, has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into, and is legally part of, this Proxy
Statement/Prospectus. The Statement of Additional Information to this Proxy
Statement/Prospectus is available upon request, without charge, by writing or
calling:
Integrity Managed Portfolios
1 North Main
Minot, North Dakota 58703
(800) 276-1262
A copy of the Prospectus dated October 31, 2003 for the corresponding
Integrity Series of the Forum Series in which you invest, accompanies this
Proxy Statement/Prospectus and is incorporated by reference into, and is
legally part of, this Proxy Statement/Prospectus. A copy of the Statement of
Additional Information dated October 31, 2003 for the corresponding Integrity
Series is incorporated by reference into, and is legally part of, this Proxy
Statement/Prospectus and is available upon request, without charge, by
writing or calling:
Integrity Managed Portfolios
1 North Main
Minot, North Dakota 58703
(800) 276-1262
A copy of the Prospectus dated August 1, 2003 for each Forum Series and the
related Statement of Additional Information also dated August 1, 2003 are
incorporated by reference into, and are legally part of, this Proxy Statement/
Prospectus. Copies of these documents as well as the Annual Report dated
March 31, 2003 for the Forum Series in which you invest are available upon
request, without charge, by writing or calling:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(800) 943-6786
Shareholders may also view or obtain copies of this Proxy Statement/
Prospectus, the materials incorporated by reference herein or additional
information regarding a Forum Series or Integrity Series from the SEC's
Website, WWW.SEC.GOV.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-2-
AN INVESTMENT IN A FORUM SERIES OR AN INTEGRITY SERIES IS NOT A DEPOSIT OR
OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND IS NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER U.S. GOVERNMENT AGENCY. AN INVESTMENT IN A FORUM SERIES OR AN INTEGRITY
SERIES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
-3-
Table of Contents
SUMMARY..................................................................6
The Proposed Agreement and Plan of Reorganization........................6
Comparison of Fees.......................................................7
Comparison of Business Structures........................................9
Comparison of Investment Objectives and Principal Investment Strategies..9
Comparison of Investment Advisory Services and Fees......................16
Comparison of Other Service Providers....................................18
Comparison of Sales Charges..............................................18
Comparison of Purchase, Redemption and Exchange Privileges...............20
Comparison of Minimum Initial/Subsequent Investment Requirements.........23
Comparison of Distribution Policies......................................23
Comparison of Distribution and Shareholder Servicing Fees................23
Comparison of Net Asset Value Calculation Procedures.....................24
Tax Matters Relating to the Reorganizations..............................25
INVESTMENT RISKS.........................................................25
General Risks............................................................25
Specific Risks...........................................................25
INFORMATION ABOUT THE PLAN...............................................28
General Description of the Plan..........................................28
Related Party Transactions...............................................29
Securities to Be Issued..................................................30
Reasons for the Reorganizations..........................................33
TAXATION.................................................................35
Tax Consequences of Distributions........................................35
Tax Consequences of the Reorganizations..................................36
PERFORMANCE..............................................................37
CAPITALIZATION...........................................................38
VOTING INFORMATION.......................................................38
Instructions for Signing Proxy Cards.....................................40
Information Regarding Shares of Each Forum Series Outstanding............40
Information Regarding Shares of Each Integrity Series Outstanding........41
ADDITIONAL INFORMATION...................................................41
Legal Matters............................................................41
Experts..................................................................41
Interested Persons.......................................................42
Information Filed with the Securities and Exchange Commission............42
EXHIBIT A: Form of Agreement and Plan of Reorganization................A-1
EXHIBIT B: Management's Discussion of Performance of Maine TaxSaver
Bond Fund and New Hampshire TaxSaver Bond Fund..............B-1
EXHIBIT C: Financial Highlights - Maine TaxSaver Bond Fund
and New Hampshire TaxSaver Bond Fund........................C-1
-5-
SUMMARY
This section summarizes the important terms of the Plan between Forum, on
behalf of each Forum Series, and Integrity, on behalf of each Integrity Series.
This section also summarizes certain information regarding each Forum Series
and each Integrity Series.
The information set forth in this section is only a summary and is qualified
in its entirety by the information contained elsewhere in this Proxy Statement/
Prospectus or in the documents incorporated by reference herein.
For a detailed discussion of the topics discussed in this Summary regarding
an Integrity Series, see the Integrity Series' Prospectus dated October 31,
2003 and the Statement of Additional Information to this Proxy Statement/
Prospectus dated November 6, 2003, each of which is incorporated by reference
into, and is legally part of, this Proxy Statement/Prospectus. For a detailed
discussion of the topics discussed in this Summary regarding a Forum Series,
see the Forum Series' Prospectus dated August 1, 2003 and the Statement of
Additional Information dated November 6, 2003 to this Proxy Statement/
Prospectus.
THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
At a meeting on June 4, 2003, and continued on July 7, 2003, the Forum
Board, including the Trustees who are not "interested persons" as defined in
Section 2(a)(19) of the 1940 Act ("Independent Trustees"), unanimously voted
to approve the Plan with respect to each Forum Series.
Under the Plan, each of Forum ME Fund and Forum NH Fund will: (1) transfer
its assets and liabilities to Integrity ME Fund and Integrity NH Fund,
respectively, in exchange solely for shares of that corresponding Integrity
Series and the corresponding Integrity Series' assumption of the applicable
Forum Series' liabilities and (2) each Forum Series will then distribute the
shares received from the Integrity Series proportionately to its shareholders
and terminate (each a "Reorganization," collectively, the "Reorganizations").
The Reorganization of a Forum Series will occur as of the Closing Date (as
defined in the Plan) or at a later date as agreed upon by the Forum Board and
the Integrity Board of Trustees ("Integrity Board") and only after the Plan
is approved by the shareholders of the Forum Series and all contingencies under
the Plan are satisfied. You will receive, on a tax-free basis, shares of the
corresponding Integrity Fund equal in value to your shares of the Forum Series
that you hold as of 4:00 P.M., Eastern time, on the Closing Date (as defined
in the Plan). No front-end sales loads or contingent deferred sales charges
("CDSC") will be imposed in connection with the Reorganizations.
For the reasons set forth in the section entitled "Information about the
Plan - Reasons for the Reorganizations," the Forum Board, including the
Independent Trustees, unanimously approved the Plan with respect to each Forum
Series, and recommends that you approve the Plan with respect to the Forum
Series in which you own shares. The Forum Board considered a variety of
different factors prior to approving the Plan with respect to each Forum Series
-6-
including: (1) each Forum Series shareholder will receive shares of the
corresponding Integrity Series equal in value to its share of the net assets
of the Forum Series held; (2) the similarities of the investment objectives and
policies of each Forum Series and the corresponding Integrity Series; (3) the
expenses of each Forum Series and the corresponding Integrity Series; (4) the
tax-free nature of the Reorganizations; (5) the fact that Forum Financial
Group, LLC and/or its affiliates (collectively, "FFG") have agreed to pay the
expenses incurred by each Forum Series in connection with the implementation
of the Plan; (6) the fact that Forum Investment Advisors, LLC (and indirectly
John Y. Keffer, Chairman of Forum and control person of Forum Investment
Advisors, LLC), will receive from Integrity Mutual Funds, Inc. and/or its
affiliates an amount equal to 1.00% of the Forum Series' aggregate net assets
as of the business day immediately preceding the Closing Date (as defined
therein) and 0.75% of the aggregate net assets of the Integrity Series as of
the business day immediately preceding the first anniversary of the Closing
Date; and (7) the fact that Integrity Mutual Funds, Inc. and/or its affiliates
(collectively, "Integrity Inc.") have agreed to pay the expenses incurred by
each Integrity Series in connection with the implementation of the Plan.
COMPARISON OF FEES
Like all mutual funds, each Forum Series and Integrity Series (each a
"Series") incurs certain expenses in its operations and, as a shareholder, you
pay these expenses indirectly. The following tables compare the various fees
and expenses that a shareholder incurred from an investment in each Forum
Series as of the fiscal year ended March 31, 2003 and the Pro Forma estimated
expenses of each corresponding Integrity Series, as of March 31, 2003,
assuming the Reorganizations are approved. Actual expense information for
each Integrity Series for the annual period ended March 31, 2003 is not
provided as neither Integrity Series have made a public offering of its shares
and each will have only nominal assets prior to the completion of the
Reorganizations.
FORUM ME FUND - INTEGRITY ME FUND
FORUM ME FUND INTEGRITY ME FUND
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of the offering price) 3.00%(1) 4.25%(1)
Maximum Deferred Sales Charge (Load) 1.00%(2) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED ACTUAL EXPENSES PRO FORMA
FROM FUND ASSETS) ESTIMATED EXPENSES
Management Fees 0.40% 0.50%
Distribution (12b-1) Fees None 0.25%
Other Expenses 0.82%(3) 0.44%(5)
Total Annual Fund Operating Expenses 1.22%(3) 1.19%(5)
Fee Waiver and Expense Reimbursement (0.27)%(4) (0.24)%(6)
Net Annual Fund Operating Expenses 0.95%(4) 0.95%(6)
- -------------------
-7-
<FN>
(1) Investors may qualify for a lower sales charge. See "Summary -
Comparison of Sales Charges." SHAREHOLDERS WILL NOT PAY ANY SALES LOAD
ON THE REDEMPTION OF SHARES OF THE FORUM SERIES OR THE PURCHASE OF SHARES
OF THE CORRESPONDING INTEGRITY SERIES MADE IN CONNECTION WITH THE
REORGANIZATION.
(2) No initial sales charge applies on purchases of $1 million or more. A
CDSC of up to 1.00% is charged on purchases of $1 million or more that
are redeemed in whole or in part within twenty-four months of purchase.
(3) Based on amounts incurred during the Forum Series' fiscal year ended
March 31, 2003 stated as a percentage of average daily net assets.
(4) Based on certain contractual fee waivers and expense reimbursements that
may change after July 31, 2004.
(5) Based on estimated amounts had the Reorganization occurred on March 31,
2003.
(6) Based on certain contractual fee waivers and expense reimbursements that
may change after December 20, 2004.
</FN>
FORUM NH FUND - INTEGRITY NH FUND
FORUM NH FUND INTEGRITY NH FUND
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of the offering price) 3.00%(1) 4.25%(1)
Maximum Deferred Sales Charge (Load) 1.00%(2) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED ACTUAL EXPENSES PRO FORMA
FROM FUND ASSETS) ESTIMATED EXPENSES
Management Fees 0.40% 0.50%
Distribution (12b-1) Fees None 0.25%
Other Expenses 1.63%(3) 0.75%(5)
Total Annual Fund Operating Expenses 2.03%(3) 1.50%(5)
Fee Waiver and Expense Reimbursement (1.08)%(4) (0.55)%(6)
Net Annual Fund Operating Expenses 0.95%(4) 0.95%(6)
- -------------------
<FN>
(1) Investors may qualify for a lower sales charge. See "Summary -
Comparison of Sales Charges." SHAREHOLDERS WILL NOT PAY ANY SALES LOAD
ON THE REDEMPTION OF SHARES OF THE FORUM SERIES OR THE PURCHASE OF SHARES
OF THE CORRESPONDING INTEGRITY SERIES MADE IN CONNECTION WITH THE
REORGANIZATION.
(2) No initial sales charge applies on purchases of $1 million or more. A
CDSC of up to 1.00% is charged on purchases of $1 million or more that
are redeemed in whole or in part within twenty-four months of purchase.
(3) Based on amounts incurred during the Forum Series' fiscal year ended
March 31, 2003 stated as a percentage of average daily net assets.
(4) Based on certain contractual fee waivers and expense reimbursements that
may change after July 31, 2004.
(5) Based on estimated amounts had the Reorganization occurred on March 31,
2003.
(6) Based on certain contractual fee waivers and expense reimbursements that
may change after December 20, 2004.
</FN>
HYPOTHETICAL EXAMPLE OF EFFECT ON FUND EXPENSES
The following is a hypothetical example intended to help you compare the
cost of investing in each Forum Series with the costs of investing in the
-8-
corresponding Integrity Series after its Reorganization. This example
assumes that you invest $10,000 in a specified fund for the time periods
indicated, you pay the maximum sales charge, and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% annual rate of return, that Total Annual Operating
Expenses and Net Annual Operating Expenses of the specified fund remain the
same as stated in the above tables and that all dividends and distributions
are reinvested. Although your actual costs may be higher or lower, under
these assumptions your costs would be:
FORUM PRO FORMA FORUM PRO FORMA
ME FUND INTEGRITY ME FUND NH FUND INTEGRITY NH FUND
- -------------------------------------------------------------------------------
1 YEAR $394 $541 $394 $571
- -------------------------------------------------------------------------------
3 YEARS $650 $787 $816 $879
- -------------------------------------------------------------------------------
5 YEARS $925 $1,052 $1,264 $1,209
- -------------------------------------------------------------------------------
10 YEARS $1,710 $1,807 $2,504 $2,139
- -------------------------------------------------------------------------------
COMPARISON OF BUSINESS STRUCTURES
Each Forum Series is a series of Forum, a Delaware statutory trust that is
registered under the 1940 Act as an open-end, management investment company.
Forum commenced operations on March 24, 1980 as a Maryland corporation and
reorganized into a Delaware statutory trust on January 5, 1996. The business
of Forum and each Forum Series is managed under the direction of the Forum
Board. Presently, there are twenty series of Forum, including each Forum
Series.
Each Integrity Series is a series of Integrity, another registered, open-
end management investment company. Integrity was organized as a Massachusetts
business trust on August 10, 1990. The business of Integrity and each
Integrity Series is managed under the direction of the Integrity Board.
Presently, there are six series of Integrity, including each Integrity Series.
Neither Integrity Series will commence operations prior to its Reorganization.
Accordingly, each Integrity Series will not have made a public offering of
its shares and will have only nominal assets prior to completion of the
Reorganizations.
The Forum Board and the Integrity Board formulate the general policies of
each Forum Series and each Integrity Series, respectively. The Forum Board and
the Integrity Board also meet periodically to review performance, investment
activities and practices, and to discuss other matters relating to each Forum
Series and each Integrity Series, respectively.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The investment objective of Forum ME Fund and Integrity ME Fund are the
same - to seek a high level of current income exempt from both federal and
Maine state income taxes (other than the alternative minimum tax ("AMT"))
without assuming undue risk. The investment objective of Forum NH Fund and
Integrity NH Fund are the same - to seek a high level of current income exempt
from both federal income tax (other than AMT) and New Hampshire state interest
and dividends tax without assuming undue risk.
-9-
It is anticipated that each Forum Series and its corresponding Integrity
Series will be similarly managed. Under normal circumstances, each Forum
Series and Integrity Series invests at least 80% of the value of its net
assets and borrowings in bonds, including municipal securities, the interest
income from which is exempt from federal income tax and applicable state tax.
Each Forum Series and Integrity Series may, however, invest up to 20% of its
net assets in securities the interest income from which is subject to federal
income tax or the applicable state tax. Each Forum Series may invest up to
25% of its respective total assets in municipal securities of issuers located
in any one U.S. territory or possession while each Integrity Series may invest
up to 30% of its respective total assets in the municipal securities of
issuers located in each U.S. territory or possession (such as Puerto Rico, U.S.
Virgin Islands or Guam). Generally, the weighted average maturity of
each Forum Series' and Integrity Series' portfolio securities is between 5 and
15 years. Each Forum Series and Integrity Series primarily invests in
investment grade municipal securities. Investment grade municipal securities
are those securities rated in the top four long-term rating categories of a
nationally recognized statistical rating organization ("NRSRO") (or unrated and
determined to be of comparable quality by the investment adviser). Each Forum
Series may also invest up to 20% of its total assets in municipal securities
rated in an NRSRO's fifth highest long-term rating category (or unrated and
determined by the investment adviser to be of comparable quality). As
described in further detail below, each Integrity Series may invest over 25%
of its total assets in municipal securities whose revenues derive from similar
sources (e.g. health care revenue bonds, mortgage loans, electric energy, and
university and college revenue bonds).
KEY DIFFERENCES. The following is a summary of the primary differences in
the principal investment policies of each Forum Series and its corresponding
Integrity Series:
POLICY FORUM SERIES INTEGRITY SERIES EFFECT OF DIFFERENCE
Investments in bonds. Each Forum Series' policy Each Integrity Series' policy Each Forum Series' policy
to invest under normal to invest under normal may be changed by the Forum
circumstances at least 80% circumstances at least 80% of Board after 60 days' notice to
of the value of its net the value of its net assets shareholders. Each Integrity
assets and borrowings in and borrowings in bonds, the Series' policy may only be
bonds, the interest income interest income from which changed after approval by
from which is exempt from is exempt from federal income its shareholders.
federal income tax and tax and applicable state tax,
applicable state tax, is is a fundamental policy.
a non-fundamental policy.
Investments in non- Each Forum Series may Neither Integrity Series Each Forum Series may invest in
investment grade debt invest up to 20% of its maintains a similar investment non-investment grade debt
securities. total assets in an NRSRO's policy and neither Integrity securities. Accordingly, each
fifth highest long-term Series currently plans to invest Forum Series may be subject
rating category (or unrated in municipal securities rated to more credit and default
and determined by the below investment grade. risk than its corresponding
investment adviser to be Integrity Series.
of comparable quality).
-10-
Investments in health Neither Forum Series invests Each Integrity Series may Each Integrity Series has
care revenue bonds. greater than 25% of its invest greater than 25% of greater investment flexibility,
total assets in health care its total assets in health but may have greater exposure
revenue bonds nor does it care revenue bonds. to the economic, political,
maintain an investment policy and regulatory risks associated
authorizing concentration in with the health care
such securities. industry than its corresponding
Forum Series.
Investments in municipal Neither Forum Series invests Each Integrity Series may Each Integrity Series has
securities whose income greater than 25% of its invest greater than 25% of greater investment flexibility,
is generated from total assets in municipal its total assets in municipal but may have greater exposure
mortgage loans. securities whose income is securities whose income is to the economic, political,
generated from mortgage generated from mortgage loans. and regulatory risks associated
loans nor does it maintain with mortgage loans than
an investment policy its corresponding Forum Series.
authorizing concentration
in such securities.
Investments in municipal Neither Forum Series invests Each Integrity Series may Each Integrity Series has
securities of issuers greater than 25% of its invest greater than 25% of greater investment flexibility,
whose revenues are total assets in municipal its total assets in municipal but may have greater exposure
primarily derived from securities of issuers whose securities of issuers whose to the economic, political, and
the sale of electric revenues are primarily revenue is primarily derived regulatory risks associated
energy. derived from the sale of from the sale of electric with the utilities industry
electric energy nor does energy. than its corresponding
it maintain an investment Forum Series.
policy authorizing
concentration in such
securities.
Investments in Neither Forum Series invests Each Integrity Series may Each Integrity Series has
university and college greater than 25% of its invest greater than 25% of greater investment flexibility,
revenue bonds. total assets in university its total assets in but may have greater exposure
and college revenue bonds university and college to the economic, political,
nor does it maintain an revenue bonds. and regulatory risks associated
investment policy authorizing with the education industry
concentration in such than its corresponding
securities. Forum Series.
Investments in futures Neither Forum Series Each Integrity Series may Each Integrity Series is
and options. invests in options purchase and sell financial exposed to the risks
or futures. futures and related associated with futures and
options thereon, and trade options trading whereas the
municipal bond index futures corresponding Forum Series
and options thereon to hedge is not.
against anticipated interest
rate changes.
Each Integrity Series will These risks include,
either segregate cash or but are not limited to:
high quality, readily
marketable securities in - the skills and techniques
its custodial account or needed to trade these
will maintain positions instruments are different
in portfolio securities, from those needed to select
futures contracts, or the securities in which each
options to cover each of Integrity Series invests and
its futures and options the ability of an Integrity
contracts as required by Series to benefit from options
applicable law. and futures is largely
dependent on its investment
adviser's ability to use such
strategies successfully;
-11-
POLICY FORUM SERIES INTEGRITY SERIES EFFECT OF DIFFERENCE
Investments in futures Neither Integrity Series - price movements of the
and options (continued). may enter into futures futures and options may
contracts or purchase not correlate with the price
related options if immediately movement of the portfolio
thereafter the amount committed securities being hedged
to initial margin plus the thus causing a gain or
amount paid for premiums for loss that will not be
unexpired options on futures completely offset by
exceed 5% of the Integrity movements in the price
Series' total assets. of the corresponding
securities;
- losses (or gains)
involving futures can sometimes
be substantial in part because
a relatively small price
movement in a futures contract
may result in an immediate and
substantial loss (or gain) for
an Integrity Series;
- use of options may also
result in losses to an
Integrity Series, force the
purchase or sale of portfolio
securities at inopportune times
or for prices higher than or
lower than current market
values, limit the amount of
appreciation the Integrity
Series can realize on its
investments, increase the cost
of holding a security, and
reduce the returns on
securities, or cause the
Integrity Series to hold a
security that it might
otherwise sell;
- the lack of assurance that a
liquid secondary market will
exist for any particular
instrument at any particular
time, which, among other
things, may hinder an Integrity
Series' ability to limit
exposures by closing its
positions;
-12-
POLICY FORUM SERIES INTEGRITY SERIES EFFECT OF DIFFERENCE
Investments in futures - there is no assurance that
and options (continued). a counterparty in an over-the-
counter option transaction will
be able to perform its
obligations; and
- activities in the futures and
options markets may result in
higher portfolio turnover rates
and additional brokerage costs,
which could reduce yield or
return.
TEMPORARY DEFENSIVE MEASURES. Each Forum Series may assume a temporary
defensive position in response to adverse market, economic, political or other
conditions ("Adverse Conditions") and may invest without limit in cash and
taxable prime quality cash equivalents including U.S. Government securities
(its agencies or instrumentalities), commercial paper, time deposits, bankers
acceptances, certificates of deposit, corporate notes, short-term bonds, and
money market mutual funds ("Money Market Instruments"). Prime quality
instruments are those rated in one of the two highest short-term rating
categories by an NRSRO (or unrated and determined by the investment adviser
to be of comparable quality). Each Integrity Series may also assume a
temporary defensive position in response to Adverse Conditions and invest in
similar securities. During these periods, a Series may be unable to achieve
its investment objective.
Each Forum Series may invest up to 20% of its total assets in cash and
Money Market Instruments pending investment in municipal securities and to
provide flexibility in satisfying shareholder redemptions and paying expenses.
Each Integrity Series may also invest up to 20% of its total assets in similar
securities for similar purposes.
KEY DIFFERENCES. In addition to the Money Market Instruments above, each
Integrity Series may also invest in certain taxable obligations of the relevant
state for temporary defensive or temporary liquidity purposes while neither
Forum Series may invest in similar securities.
OTHER INVESTMENT POLICIES. Each Forum Series' other investment policies
are summarized in its Statement of Additional Information dated August 1, 2003,
a copy of which is available upon request, without charge, by writing Forum
Shareholder Services, LLC at P.O. Box 446, Portland, Maine 04112 or calling
-13-
(800) 943-6786. Each Integrity Series' other investment policies are
summarized in its Statement of Additional Information dated October 31, 2003, a
copy of which is available upon request, without charge, by writing Integrity
Managed Portfolios at 1 North Main, Minot, North Dakota 58703 or calling
(800) 276-1262.
KEY DIFFERENCES. The following is a summary of the primary differences in
certain other investment policies of each Forum Series and its corresponding
Integrity Series:
POLICY FORUM SERIES INTEGRITY SERIES EFFECT OF DIFFERENCE
Delayed delivery Each Forum Series limits Neither Integrity Series Each Integrity Series may
securities. its investment in delayed limits the percentage of involve a greater degree
delivery securities to 15% its total assets that may of risk than its
of its total assets. be used to invest in corresponding Forum Series
securities on a delayed in that a larger portion
delivery basis. of its total assets may be used
to purchase securities on a
delayed delivery basis and
securities purchased on such a
basis may decline in value
prior to delivery. In addition,
each Integrity Series may be
required to set aside a greater
amount of cash or high quality
liquid debt securities to
satisfy its larger commitment
to purchase securities on a
delayed delivery basis and thus
such cash and securities will
not be available for additional
investments.
Borrowing. Forum NH Series may not Integrity NH Series may also Forum NH Series does not
borrow money except for not borrow money except for have a similar 10% limitation
temporary or emergency temporary or emergency on borrowings for purposes
purposes and except for purposes and except for other than meeting redemptions.
entering into reverse entering into reverse The Forum NH Series therefore
repurchase agreements, repurchase agreements, may have more flexibility
provided borrowings do provided borrowings do not with respect to borrowings,
not exceed 33 1/3% of exceed 33 1/3% of its but may have more exposure
its net assets. net assets. to leverage risk as a result
of such borrowings.
As a non-fundamental policy,
the Forum NH Series will not As a non-fundamental policy,
purchase securities for the Integrity NH Series
investment while any will not purchase securities
borrowing equaling 10% for investment while any
or more of the Fund's borrowing equaling 10%
total assets is or more of the Fund's
outstanding. total assets is outstanding
or borrow for purposes
other than meeting
redemptions in an amount
exceeding 10% of the value
of the respective Integrity
Series' total assets.
-14-
POLICY FORUM SERIES INTEGRITY SERIES EFFECT OF DIFFERENCE
Pledging. Forum NH Series does As a non-fundamental investment Forum NH Series may involve
not maintain a policy policy, Integrity NH Series a greater degree of risk
with respect to may not pledge, mortgage or than Integrity NH Series
pledging of assets. hypothecate its assets, except in that it may collateralize
to secure permitted loans with portfolio securities
indebtedness. The deposit in and may lose those securities
escrow of securities in if it defaults on such loans.
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.
THE INVESTMENT ADVISER'S PROCESS. Forum Investment Advisors, LLC ("FIA") is
the investment adviser of each Forum Series while Integrity Money Management,
Inc. (formerly known as ND Money Management, Inc.) ("Integrity Management")
will be the investment adviser of each Integrity Series. The investment
processes utilized by FIA and Integrity Management for the Forum Series and
Integrity Series, respectively, are similar and are summarized below.
FIA continuously monitors economic factors, such as interest rate outlooks,
and technical factors, such as the shape of the yield curve, in combination
with the stated objective of a Forum Series to determine an appropriate
maturity profile for the Forum Series' investment portfolio. FIA then
principally searches for municipal securities that satisfy the maturity profile
requirements of a Forum Series and provide the greatest potential return
relative to the risk of the security, including credit risk. FIA may sell a
municipal security if:
1. Revised economic forecasts or interest rate outlook require a
repositioning of the portfolio.
2. The security subsequently fails to meet its investment criteria.
3. A more attractive security is found or funds are needed for another
purpose.
4. It believes that the security has reached its appreciation potential.
Integrity Management will review municipal securities available for purchase
and analyze economic, political, and demographic trends affecting the
municipal markets. Integrity Management will then select municipal obligations
for each Integrity Series based upon its assessment of a municipal security's
relative value in terms of current yield, price, credit quality and future
prospects. Based on the analysis of this research, Integrity Management will
select those municipal obligations for each Integrity Series that it believes
represent the most attractive values. Integrity Management will monitor the
-15-
continued creditworthiness of each Integrity Series' municipal securities after
their purchase. In deciding to sell a portfolio security, Integrity Management
generally considers such factors as the bond's yield, the continued
creditworthiness of the issuer and prevailing market conditions. Integrity
Management may sell a portfolio security if revised economic forecasts or
interest rate outlook requires a repositioning of the portfolio; the security
subsequently fails to meet Integrity Management's investment criteria; a more
attractive security is found or funds are needed for another purpose; or
Integrity Management believes that the security has reached its appreciation
potential. In periods of rapidly fluctuating interest rates, an Integrity
Series' investment policy may lead to frequent changes in investments.
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES
FIA, the investment adviser for each Forum Series, is located at Two
Portland Square, Portland, Maine 04101. FIA is a privately owned company
controlled by John Y. Keffer, who is Chairman of the Forum Board. Under the
Investment Advisory Agreement with Forum, FIA makes the investment decisions
on behalf of each Forum Series. Les C. Berthy, Senior Portfolio Manager of
FIA, has been primarily responsible for the day-to-day management of each
Forum Series since its inception. Mr. Berthy has nearly 31 years of
experience in the investment industry. Prior to his association with FIA in
January 1991, Mr. Berthy was Managing Director and Co-Chief Executive Officer
of Irwin Union Capital Corp., an affiliate of Irwin Union Bank & Trust Co.
As compensation for its services, FIA is entitled to receive an advisory
fee at an annual rate of 0.40% of each Forum Series' average daily net assets.
For the fiscal year ended March 31, 2003, FIA waived a portion of its advisory
fee and only received a fee equal to 0.39% of the average daily net assets of
Forum ME Fund. For the same fiscal period, FIA waived its entire advisory fee
for Forum NH Fund. FIA has agreed to contractually waive its fee and reimburse
fund expenses in order to maintain each Forum Series' annual net expenses
(excluding taxes, interest, portfolio transaction expenses and extraordinary
expenses) to 0.95% or below of the average daily net assets of the Forum Series
until July 31, 2004.
Integrity Management, the investment adviser for each Integrity Series, is
located at 1 North Main, Minot, North Dakota 58703. Integrity Management has
been advising mutual funds since 1989 and currently has assets under management
of approximately $355 million. Integrity Management is responsible for
selecting and ongoing monitoring of securities in each Integrity Series'
portfolio, performing certain evaluations of the funds' portfolio securities,
managing the funds' business affairs and providing certain administrative
services, office space, equipment and clerical services necessary for managing
the Integrity Series' investments and effecting their portfolio transactions.
Integrity Management is a wholly owned subsidiary of Integrity Mutual Funds,
Inc., a mutual fund services company. Mr. Monte Avery, Chief Portfolio
Strategist of Integrity Management, will be primarily responsible for the
day-to-day management of each Integrity Series under the general supervision
of Robert E. Walstad upon the commencement of operations of each Integrity
Series.
Mr. Walstad started in the securities business with PaineWebber as a retail
broker in 1972. In 1977, he became branch manager with Dean Witter Reynolds
and spent ten years in that capacity. In 1987, Mr. Walstad founded Integrity
Mutual Funds, Inc. (formerly known as ND Holdings, Inc.), which wholly owns
-16-
Integrity Management and Ranson Capital Corporation ("Ranson"), the investment
adviser and distributor, respectively, of each Integrity Series. He has been
the President of Integrity Management since its inception. He has been
President of Integrity, directing the management of its various series, and of
Ranson since January 1996. Mr. Walstad is also President of five other mutual
funds comprised of ten portfolios, collectively. Mr. Walstad is President of
these other Integrity funds and supervises and directs the management of four
of these portfolios.
Mr. Avery started with PaineWebber in 1981 as a retail broker and
transferred to Dean Witter in 1982. In 1988, Mr. Avery joined Bremer Bank,
N.A. (Minot, N.D.) to help start its Invest Center. He transferred back to
Dean Witter in 1993 and then joined Integrity Mutual Funds Inc. in 1995.
Since 1995, Mr. Avery has been a co-manager of Montana Tax-Free Fund, Inc.,
ND Tax-Free Fund, Inc. and South Dakota Tax Free Fund, Inc. and, effective
February 2000, became the sole portfolio manager of these funds. From
January 1996 until September 2001 and September 2002 to present, he was also
the portfolio manager for the Integrity Fund of Funds, Inc. He was also the
co-portfolio manager of the other series of Integrity (the Kansas Municipal
Fund, the Kansas Insured Intermediate Fund, the Nebraska Municipal Fund, and
the Oklahoma Municipal Fund) since January 1996, and effective February 2000,
became the sole portfolio manager of these funds.
As compensation for its services, Integrity Management will be entitled
to receive an advisory fee at an annual rate of 0.50% of each Integrity Series'
average daily net assets. Integrity Management has contractually agreed to
waive its fee and reimburse certain expenses in order to limit each Integrity
Series' net operating expenses (excluding taxes, interest, portfolio
transaction expenses, and extraordinary expenses) to 0.95% or less of the
respective Integrity Series' average daily net assets for one year following
the Closing Date (as that term is defined in the Plan) ("Contractual Waiver").
In addition, under the terms of the advisory agreement for each Integrity
Series, Integrity Management has agreed to pay all expenses of the respective
Integrity Series, including the fund's management and investment advisory fee
and the fund's disbursing, administrative and accounting services fee (but
excluding taxes and brokerage fees and commissions, if any) that exceed 1.25%
of the fund's average daily net assets on an annual basis up to the amount of
Integrity Management's advisory and management fee.
KEY DIFFERENCE: The gross investment advisory fee to be paid by each
Integrity Series is 0.10% higher than the investment advisory fee currently
paid by each Forum Series. Pursuant to contractual fee waivers and expense
reimbursements, the net expenses of each Integrity Series and the corresponding
Forum Series will be no greater than 0.95% of that Series' average daily net
assets through July 31, 2004 (excluding taxes, interest, portfolio transaction
expenses and extraordinary expenses). On August 1, 2004, the contractual fee
waiver agreement regarding each Forum Series will terminate while the
Contractual Waiver will continue through December 20, 2004 with respect to
each Integrity Series. Upon expiration of the Contractual Waiver, each
Integrity Series will pay a higher investment advisory fee than the
corresponding Forum Series unless Integrity Management agrees to continue such
waiver either by contract or voluntarily.
-17-
COMPARISON OF OTHER SERVICE PROVIDERS
The following FFG affiliates serve as service providers to each Forum
Series: (1) Forum Administrative Services, LLC serves as administrator; (2)
Forum Fund Services, LLC ("FFS") serves as principal underwriter; (3) Forum
Shareholder Services, LLC ("FSS") serves as transfer agent; (4) Forum
Accounting Services, LLC serves as fund accountant; and (5) Forum Trust, LLC
serves as custodian (collectively, the "Forum Companies"). Each of the Forum
Companies is an indirect wholly - owned subsidiary of FFG and is controlled
by John Y. Keffer, the Chairman of Forum.
Wells Fargo Bank Minnesota, NA, Institutional Trust & Custody serves as
Custodian for each Integrity Series. The following Integrity, Inc. affiliates
serve as service providers to each Integrity Series: (1) Ranson Capital
Corporation serves as principal underwriter and (2) Integrity Fund Services,
Inc. serves as transfer agent, fund accountant and administrator.
COMPARISON OF SALES CHARGES
An initial sales charge is assessed on purchases of shares of each Forum
Series and its corresponding Integrity Series. The offering price of each
Forum Series and Integrity Series includes the relevant sales charge. The
differences in the sales charge schedule for each Forum Series and Integrity
Series are summarized in the following charts.
FORUM ME FUND - FORUM NH FUND
SALES CHARGE (LOAD) AS % OF:
AMOUNT OF PURCHASE PUBLIC NET ASSET
OFFERING PRICE VALUE (1)
- ----------------------------------------------------------------------
$0 to $99,999 3.00% 3.09%
- ----------------------------------------------------------------------
$100,000 to $249,999 2.50% 2.56%
- ----------------------------------------------------------------------
$250,000 to $499,999 2.00% 2.04%
- ----------------------------------------------------------------------
$500,000 to $999,999 1.50% 1.52%
- ----------------------------------------------------------------------
$1,000,000 and up 0.00%(2) 0.00%
- ----------------------------------------------------------------------
- --------------
<FN>
(1) Rounded to the nearest one-hundredth percent.
(2) No initial sales charge applies on purchases of $1 million or more. A
CDSC of up to 1.00% is charged on purchases of $1 million or more that
are redeemed in whole or in part within twenty-four months of purchase.
</FN>
-18-
INTEGRITY ME FUND - INTEGRITY NH FUND
SALES CHARGE (LOAD) AS % OF:
AMOUNT OF PURCHASE PUBLIC NET ASSET
OFFERING PRICE VALUE (1)
- ----------------------------------------------------------------------
Less than $50,000 4.25% 4.44%
$50,000 but less than $100,000 3.75% 3.90%
$100,000 but less than $250,000 3.25% 3.36%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 1.50% 1.52%
$1,000,000 and up 0.75% 0.76%
- --------------
<FN>
(1) Rounded to the nearest one-hundredth percent.
</FN>
You may qualify for a reduced initial sales charge on purchases of a Forum
Series or an Integrity Series under rights of accumulation or a letter of
intent. You may also qualify for a reduced sales under Integrity's group
purchase program. Certain persons may also be eligible to purchase shares of
a Forum Series or an Integrity Series without a sales charge. You do not pay
a sales charge on the reinvestment of distributions with respect to a Forum
Series or an Integrity Series. You will not pay any sales loads on the
redemption of shares a Forum Series or the purchase of shares of the
corresponding Integrity Series made in connection with the Reorganization.
KEY DIFFERENCES: The initial sales charges that you will pay to purchase
shares of an Integrity Series are higher than the initial sales charges that
you will pay to purchase shares of a Forum Series. Although neither Forum
Series assesses an initial sales charge on purchases of $1 million or more, a
CDSC is assessed on redemptions of Forum Series' shares that were part of such
a purchase as follows:
REDEEMED WITHIN SALES CHARGE
First year of purchase 1.00%
Second year of purchase 0.50%
The CDSC is paid on the lower of the NAV of shares redeemed or the cost of the
shares. Neither Integrity Series charges a CDSC.
With respect to each Integrity Series, you may also qualify for a reduced
sales charge if you are purchasing shares of the Integrity Series as a
participant in an investment group and the administrator of the investment
group has entered into an agreement with the distributor of the Integrity
Series to purchase shares, subject to certain requirements ("Group Program").
Neither Forum Series offers a Group Program.
-19-
COMPARISON OF PURCHASE, REDEMPTION AND EXCHANGE PRIVILEGES
PURCHASE PROCEDURES. Each Forum Series and Integrity Series continuously
offers its shares through its respective distributor.
You may purchase shares of a Forum Series by sending a check, ACH payment
or wire to the Series' transfer agent. All checks must be payable in U.S.
dollars and drawn on U.S. financial institutions. Neither Forum Series
accepts purchases made by cash or cash equivalents (for instance, you may not
pay by money order, cashier's check, bank draft or traveler's check) or by
credit card check. You may also purchase shares of a Forum Series by
systematic investment (described below) or through certain broker-dealers or
other financial institutions.
You also may purchase shares of an Integrity Series by sending a check, ACH
payment or wire to the Series' transfer agent. All checks must be payable in
U.S. dollars and drawn on U.S. financial institutions. Neither Integrity
Series accepts purchases made by traveler's check or credit card check but
may, unlike a Forum Series, accept purchases made by money order, cashiers
check, or bank draft. You may also buy shares of an Integrity Series by
systematic investment (described below) or through certain broker-dealers of
other financial institutions.
If you purchase shares directly from a Forum Series, you receive monthly
account statements and a confirmation of every transaction. If you purchase
shares directly from an Integrity Series, you will receive quarterly
statements and a confirmation of every transaction. If you purchase or redeem
shares of a Forum Series or an Integrity Series through a financial
institution, the policies and fees charged by that institution may be
different from those charged by the funds.
Neither Forum Series or Integrity Series issues share certificates.
Purchases of shares of a Forum Series and an Integrity Series may be made
on any day that the New York Stock Exchange is open ("Business Day"). Under
unusual circumstances, a Forum Series may also accept and process purchase
orders on a day other than a Business Day if deemed appropriate by the Trust's
officers.
You may purchase shares of a Forum Series or an Integrity Series at the net
asset value ("NAV") next calculated after the transfer agent of the applicable
Series receives your request in proper form plus any applicable sales charge.
If you place your order to purchase shares of a Forum Series or an Integrity
Series through your financial institution prior to the close of trading of the
New York Stock Exchange (normally 4:00 P.M., Eastern Time) on a Business Day
and the transfer agent receives your order in a timely manner as agreed between
it and the financial institution, your order will be priced at that Business
Day's NAV plus any applicable sales charge.
KEY DIFFERENCES. Under unusual circumstances, a Forum Series may also
accept and process orders when the New York Stock Exchange is closed if deemed
appropriate by Forum's officers, while neither Integrity Series maintains a
similar policy. Additionally, each Integrity Series may accept money orders,
-20-
cashier checks and bank drafts as payment for shares whereas neither Forum
Series may accept such cash equivalents as payment for its shares. Finally,
if you purchase shares directly from a Forum Series, you will receive monthly
account statements whereas if you purchase shares directly from an Integrity
Series, you will receive quarterly account statements.
EXCHANGE PROCEDURES. You may exchange shares of a Forum Series for shares
of any other series of the Trust or certain money market series of Monarch
Funds, another registered management investment company. If you exchange into
a fund that has a higher sales charge than a Forum Series, you will have to
pay the difference between that fund's sales charge and the Forum Series sales
charge at the time of the exchange. If you exchange into a fund that has no
sales charge or a lower sales charge than a Forum Series, you will not have to
pay a sales charge at the time of the exchange. Under unusual circumstances,
a Forum Series may also accept and process exchange orders on a day other than
a Business Day if deemed appropriate by the Trust's officers.
You may exchange shares of an Integrity Series for shares of any other fund
underwritten by Ranson Capital Corporation, the distributor of each Integrity
Series, at net asset value, subject to the following conditions:
1. When exchanging into shares of a fund that imposes a CDSC, no CDSC will
be imposed upon redemption of the newly acquired shares;
2. Shares must be held for at least six (6) months prior to exchange when
exchanging into a higher-load fund; and
3. When exchanging into another single-state municipal fund, the
shareholder must be a resident of that state or any other state in
which the fund's shares are registered for sale.
An exchange is a sale and purchase of shares and may have tax consequences.
Currently, there is no limit on the number of exchanges that may be made in or
out of a Forum Series or an Integrity Series, but each Series reserves the
right to revise, limit or suspend exchange privileges.
KEY DIFFERENCES. Under unusual circumstances, each Forum Series may also
accept and process exchange orders on a day other than a Business Day if deemed
appropriate by Forum's officers while neither Integrity Series maintains such a
policy. Additionally, under the Integrity Series' exchange program, you may
exchange shares into an identically registered account at any time for shares
of any fund underwritten by the distributor of the Integrity Series at net
asset value subject to certain conditions, including a six-month holding
period when exchanging into a higher load fund. Under the Forum Series'
exchange program, you may exchange into another fund of the Forum Funds or
other mutual funds participating in the Forum Funds' exchange program. If
you exchange into a fund that has a higher sales charge than a Forum Series,
you will have to pay the difference between that fund's sales charge and the
Forum Series sales charge at the time of the exchange.
-21-
REDEMPTION PROCEDURES. You may redeem shares of each Forum Series and
Integrity Series on any Business Day. Under unusual circumstances, each Forum
Series may also accept and process redemption orders on a day other than a
Business Day if deemed appropriate by Forum's officers. You will receive the
NAV next calculated for the shares (minus any applicable CDSC in the case of a
Forum Series), after a Forum Series' or Integrity Series' transfer agent, as
applicable, receives your request in proper form. If you place your order to
redeem shares of a Forum Series or an Integrity Series through your financial
institution prior to the close of trading of the New York Stock Exchange
(normally 4:00 P.M., Eastern Time) on a Business Day and the transfer agent
receives your order in a timely manner as agreed between it and the financial
institution, your order will be priced at that Business Day's NAV (minus any
applicable CDSC in the case of a Forum Series).
You may generally redeem each Forum Series' shares by mail, wire,
telephone, through a systematic withdrawal plan (discussed below), or through
your financial institution. You may redeem each Integrity Series' shares by
mail, through a systematic withdrawal plan (discussed below), or by placing a
redemption order through your financial institution. A financial institution
may place a telephone order with the Integrity Series' transfer agent for
redemptions of $100,000 or less. Each Forum Series and Integrity Series has
also reserved the right to make redemption payments in securities rather than
cash.
KEY DIFFERENCES. Each Forum Series may accept and process orders under
unusual circumstances when the New York Stock Exchange is closed if deemed
appropriate by Forum's officers while neither Integrity Series maintains a
similar policy. In addition, you may redeem shares of a Forum Series through
its transfer agent by mail, wire or telephone while you may redeem shares
of an Integrity Series through its transfer agent by mail or through your
financial adviser who may place a telephone order subject to the following.
Although you may redeem shares of each Forum Series and Integrity Series
through certain financial institutions, such financial institutions may
process redemptions of an Integrity Series in amounts up to $100,000 by phone
with the Integrity Series' transfer agent. Neither Forum Series maintains a
similar restriction.
SYSTEMATIC INVESTMENT/WITHDRAWAL PLANS. Each Forum Series and Integrity
Series offer systematic investment and withdrawal plans. Under a Forum Series'
systematic investment plan, you may make an investment once or twice a month
on specific dates whereas an Integrity Series' systematic investment plan
provides for monthly investments. Minimum investments under a Forum Series'
and the Integrity Series' systematic investment plan are $250 and $50,
respectively.
Under each Forum Series' systematic withdrawal plan, you may redeem a
specified amount of money from your account once a month on a specified date.
If the value of your account is at least $5,000, under an Integrity Series'
systematic withdrawal plan, you may elect to receive payments monthly,
quarterly or annually. The minimum withdrawal under each Forum Series'
systematic withdrawal plan is $250. There is no minimum withdrawal
requirement under each Integrity Series' plan.
-22-
KEY DIFFERENCES. Each Forum Series' systematic investment plan provides
for minimum systematic investments of at least $250 per month whereas each
Integrity Series' plan provides for a minimum systematic investment of $50
per month. Moreover, each Forum Series' systematic withdrawal plan provides
for minimum withdrawals of $250 once per month while each Integrity Series'
plan provides for monthly, quarterly or annual withdrawals, without a minimum
withdrawal limitation. Finally, neither Forum Series maintains a minimum
investment policy in connection with participation in its systematic
withdrawal plan while each Integrity Series requires the value of your account
to be at least $5,000 for the initial participation in its systematic
withdrawal plan.
COMPARISON OF MINIMUM INITIAL/SUBSEQUENT INVESTMENT REQUIREMENTS
The following tables summarize the minimum initial and subsequent investment
requirements of each Forum Series and Integrity Series.
MINIMUM INITIAL AND SUBSEQUENT INVESTMENT REQUIREMENTS
FORUM ME FUND INTEGRITY ME FUND
FORUM NH FUND INTEGRITY NH FUND
- ------------------------------------------------------------------------------
INITIAL INVESTMENT
Standard Accounts $2,000 $1,000(1)
Systematic Investment Plans $250 $50
SUBSEQUENT INVESTMENTS
Standard Accounts $250 $50
Systematic Investment Plans $250 $50
- ----------------
<FN>
(1) The value of your account in an Integrity Series must be at least $5,000
for the initial participation in its systematic withdrawal plan.
COMPARISON OF DISTRIBUTION POLICIES
Each Forum Series and Integrity Series distributes its net investment income
monthly and net capital gain at least annually.
Normally, each Forum Series and Integrity Series reinvests distributions in
additional Series shares unless a shareholder elects to receive distributions
in cash.
COMPARISON OF DISTRIBUTION AND SHAREHOLDER SERVICING FEES
Each Integrity Series has adopted a Rule 12b-1 distribution and shareholder
services plan under the 1940 Act (a "Rule 12b-1 Plan") under which the
Integrity Series pays up to 0.25% of its average daily net assets for the
distribution of Integrity Series shares and the servicing of shareholder
accounts invested in the Integrity Series.
-23-
Although neither Forum Series has adopted a Rule 12b-1 Plan, Forum has
adopted a Shareholder Service Plan on behalf of each Forum Series. Under each
Forum Series' Shareholder Service Plan, the Forum Series may pay up to 0.25% of
its average daily net assets for the servicing of shareholder accounts invested
in the Series.
Because each Forum Series pays shareholder service fees under its
Shareholder Service Plan and each Integrity Series pays distribution and
shareholder service fees under its Rule 12b-1 Plan on an ongoing basis, your
investment cost in a Forum Series or an Integrity Series over time may be
higher than paying other types of sales charges.
COMPARISON OF NET ASSET VALUE CALCULATION PROCEDURES
The NAV of each Forum Series and Integrity Series is determined by taking
the total value of each Series' total assets, subtracting the Series'
liabilities, and then dividing the result (net assets) by the number of
outstanding shares of the Series. Generally, each Forum Series and Integrity
Series values fixed income investments for which market quotations are readily
available at the mean of the last quoted bid and ask price. Each Forum Series
and Integrity Series values short-term securities with remaining maturities of
less than 60 days at amortized cost. If market quotations are not readily
available or the prices or value for a security do not represent fair value,
each Forum Series and Integrity Series values securities at fair value pursuant
to procedures adopted by the Forum Board or the Integrity Board, respectively.
Each Integrity Series may also invest in financial futures and related options
for hedging purposes. Options that are traded on an exchange are valued at the
last sales price or, in the absence of a sale, at the mean between the closing
bid and ask prices. Financial futures are valued at their settlement prices
established on the board of trade or exchange on which they are traded.
Neither Forum Series invests or intends to invest in financial futures and
related options.
Each Forum Series and Integrity Series calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 P.M., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which a
Forum Series and Integrity Series' NAV is calculated may change in case of an
emergency. Under unusual circumstances, a Forum Series may accept and process
orders and calculate an NAV per share on days other than a Business Day if
deemed appropriate by Forum's officers.
KEY DIFFERENCES. Under unusual circumstances, each Forum Series may accept
and process orders and calculate an NAV on days other than a Business Day if
deemed appropriate by Forum's officers while neither Integrity Series maintains
a similar policy. Each Integrity Series may also invest in financial futures
and related options for hedging purposes. Options that are traded on an
exchange are valued at the last sales price or, in the absence of a sale, at
the mean between the closing bid and ask prices. Financial futures are valued
at their settlement prices established on the board of trade or exchange on
which they are traded. Neither Forum Series invests or intends to invest in
financial futures and related options.
-24-
TAX MATTERS RELATING TO THE REORGANIZATIONS
Forum and Integrity will receive an opinion from Seward & Kissel LLP,
counsel to Forum, to the effect that each Reorganization will qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Consequently, no gain or loss
will be recognized for federal income tax purposes by a Forum Series, the
corresponding Integrity Series or their respective shareholders as a result of
a Reorganization. There is additional information about the federal income
tax consequences of the Reorganization under "Taxation."
INVESTMENT RISKS
GENERAL RISKS
The investment risks applicable to each Forum Series and its corresponding
Integrity Series are similar.
An investment in a Forum Series or an Integrity Series is not a deposit of
a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. The NAV, yield, and total return
of each Forum Series and Integrity Series will fluctuate based upon changes in
the value of its portfolio securities. The market value of securities in
which each Forum Series and Integrity Series invests is based upon the market's
perception of value and is not necessarily an objective measure of the
securities' value. There is no assurance that a Forum Series or an Integrity
Series will achieve its investment objective. An investment in a Forum Series
or an Integrity Series is not by itself a complete or balanced investment
program.
You could lose money on your investment in a Forum Series or an Integrity
Series or the Forum Series or Integrity Series could underperform other
investments due to, among other things, poor investment decisions by FIA or
Integrity Management, respectively.
SPECIFIC RISKS
INTEREST RATE RISK. The value of your investment in a Forum Series and an
Integrity Series may change in response to changes in interest rates. An
increase in interest rates typically causes a decline in the value of the
securities in which a Forum Series and an Integrity Series invests. The longer
a debt security's maturity and the lower its credit quality, the more its value
typically falls in response to an increase in interest rates. An additional
risk is that issuers of debt securities held in a Series' portfolio may pre-pay
fixed rate securities owned by the Series when interest rates fall, forcing the
Series to invest in securities with lower interest rates. Similarly, issuers
may decrease prepayments of principal when interest rates increase extending
the average life and duration of a fixed income security and causing the value
of the security to decline.
CREDIT RISK. The value of your investment in a Forum Series and an
Integrity Series may decline if the issuer of a security held in the Series'
portfolio is unable to make interest or principal payments. This risk
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generally increases as credit ratings for the security fall. Each Forum Series
may invest in lower rated debt securities than its corresponding Integrity
Series. Accordingly, each Forum Series may be subject to more credit and
default risk than its corresponding Integrity Series.
DIVERSIFICATION RISK. Each Forum Series and Integrity Series is non-
diversified and may focus its investments in the securities of a comparatively
small number of issuers. Concentration in securities of a limited number of
issuers exposes a fund to greater market risk and potential monetary losses
than if its assets were diversified among the securities of a greater number
of issuers.
CONCENTRATION RISK. Each Integrity Series may invest over 25% of its assets
in municipal securities whose revenues derive from similar types of projects,
including health care, housing, utilities and education. Neither Forum Series
maintains a similar policy. Accordingly, each Integrity Series may have
greater exposure to the economic, political, and regulatory risks associated
with the health care, housing, utilities and education industries than the
corresponding Forum Series.
RISKS INVOLVING MAINE MUNICIPAL SECURITIES. Economic or political factors
in Maine may adversely affect issuers of Maine municipal securities. Since
each of Forum ME Fund and Integrity ME Fund may invest a significant amount of
its respective assets in Maine municipal securities, any adverse economic or
political factors will affect each Series' NAV more than if the Series invested
in more geographically diverse investments. As a result, the value of the
assets of Forum ME Fund and Integrity ME Fund may fluctuate more widely than
the value of shares of a fund investing in securities relating to a number of
different states.
The following is a summary of the Nationally Recognized Statistical Rating
Organization (NRSRO) ratings for Maine municipal securities. In 1991, citing
declines in key financial indicators and continued softness in the Maine
economy, Standard & Poor's ("S&P") lowered its credit rating for Maine general
obligations from AAA to AA+, and at the same time lowered its credit rating on
bonds issued by the Maine Municipal Bond Bank, the Maine Court Facilities
Authority and State of Maine Certificates of Participation for highway
equipment, from AA to A+. In November 2002, S&P revised its outlook on Maine's
general obligation debt rating from stable to "negative." In August 1993,
citing the "effects of protracted economic slowdown and the expectation that
Maine's economy will not soon return to the pattern of robust growth evident in
the mid-1980s," Moody's Investor Services ("Moody's") lowered its credit
rating for Maine general obligations from Aa1 to Aa. At the same time,
Moody's lowered, from Aa1 to Aa, the ratings assigned to state-guaranteed
bonds of the Maine School Building Authority and the Finance Authority of
Maine, and confirmed the ratings assigned to the bonds of the Maine Court
Facilities Authority and State of Maine Certificates of Participation at A1.
On May 13, 1997, Moody's "confirmed and refined from Aa to Aa3" Maine's general
obligation bond rating in accordance with a new national rating system
published by Moody's in January 1997. On June 5, 1998, Moody's raised its
credit rating on Maine general obligations bonds from Aa3 to Aa2. On June 1,
2000, Fitch Ratings ("Fitch") upgraded its rating on Maine general obligation
bonds from AA to AA+, saying the "rating change takes into account the low
burden of debt on resources and the unusually rapid rate of amortization as
well as strengthening economic trends, very successful financial operations
and the institutionalization of financial reforms." Moody's, S&P, and Fitch
-26-
confirmed these ratings on June 6, 2003. There can be no assurance that Maine
general obligations or the securities of any Maine political subdivision,
authority, or corporation owned by a Series will be rated in any category or
will not be downgraded by an NRSRO.
RISKS INVOLVING NEW HAMPSHIRE MUNICIPAL SECURITIES. Economic or political
factors in New Hampshire may adversely affect issuers of New Hampshire
municipal securities. Since each of Forum NH Fund and Integrity NH Fund may
invest a significant amount of its respective assets in New Hampshire
municipal securities, any adverse economic or political factors will affect a
Series' NAV more than if the Series invested in more geographically diverse
investments. As a result, the value of the assets of Forum NH Fund and
Integrity NH Fund may fluctuate more widely than the value of shares of a
fund investing in securities relating to a number of different states.
The following is a summary of recent NRSRO ratings of New Hampshire
municipal securities. The major NRSROs have rated recent New Hampshire general
obligation or state-guaranteed bond issues as follows: Moody's - Aa2; S&P -
AA+; Fitch - AA+. A recent bond issued by the New Hampshire Municipal Bond
Bank without state guarantee has been separately rated Aa2 by Moody's, AAA by
Fitch and AA by S&P. Bond ratings of individual municipalities in New
Hampshire vary in accordance with rating agencies' estimates of the issuer's
relative financial strength and ability to support debt service. There can be
no assurance that New Hampshire general obligations or any New Hampshire
municipal securities owned by the Fund will be rated in any category or will
not be downgraded by an NRSRO.
RISKS INVOLVING SECURITIES ISSUED BY U.S. TERRITORIES AND POSSESSIONS.
Each Forum Series and Integrity Series may invest a significant amount of
their respective assets in the municipal securities of U.S. territories and
possessions. Each Forum Series may invest up to 25% and each Integrity Series
may invest up to 30% of their respective total assets in municipal securities
of issuers located in each territory or possession of the United States. The
funds are therefore more susceptible to economic, political or regulatory
developments that could adversely affect issuers in a U.S. territory or
possession and therefore the value of the funds' portfolios. Because the
Integrity Series may invest a greater percentage of their assets in the
municipal securities of these U.S. territories or possessions than the
corresponding Forum Series, the Integrity Series will be more sensitive to
risks specific to such U.S. territories and possessions.
Risks Involving Futures and Options. Each Integrity Series may engage in
various investment strategies designed to hedge against interest rate changes
using financial futures and related options. Accordingly, each Integrity
Series is exposed to the risks associated with futures and options trading
whereas the corresponding Forum Series is not. These risks include, but are
not limited to:
1. the skills and techniques needed to trade these instruments are
different from those needed to select the securities in which each
Integrity Series invests and the ability of an Integrity Series to
benefit from options and futures is largely dependent on its investment
adviser's ability to use such strategies successfully;
2. price movements of the futures and options may not correlate with the
price movement of the portfolio securities being hedged thus causing a
-27-
gain or loss that will not be completely offset by movements in the
price of the corresponding securities;
3. losses (or gains) involving futures can sometimes be substantial in
part because a relatively small price movement in a futures contract
may result in an immediate and substantial loss (or gain) for an
Integrity Series;
4. use of options may also result in losses to an Integrity Series, force
the purchase or sale of portfolio securities at inopportune times or
for prices higher than or lower than current market values, limit the
amount of appreciation the Integrity Series can realize on its
investments, increase the cost of holding a security, and reduce the
returns on securities, or cause the Integrity Series to hold a security
that it might otherwise sell;
5. the lack of assurance that a liquid secondary market will exist for any
particular instrument at any particular time, which, among other
things, may hinder an Integrity Series' ability to limit exposures by
closing its positions;
6. there is no assurance that a counterparty in an over-the-counter option
transaction will be able to perform its obligations; and
7. activities in the futures and options markets may result in higher
portfolio turnover rates and additional brokerage costs, which could
reduce yield or return.
INFORMATION ABOUT THE PLAN
This section summarizes the material terms of the Plan. This section is
qualified in its entirety by the terms and conditions contained in the Plan, a
form of which is attached as Exhibit A to this Proxy Statement/Prospectus.
GENERAL DESCRIPTION OF THE PLAN
Under the Plan, each Forum Series will transfer its assets to a
corresponding Integrity Series with the same investment objective and similar
policies in exchange solely for shares of the Integrity Series and the
Integrity Series' assumption of the applicable Forum Series' liabilities. The
Plan further provides that each Forum Series will then distribute the shares
received from the Integrity Series proportionately to its shareholders and
terminate. Each shareholder of a Forum Series will receive full and fractional
shares of the corresponding Integrity Series equal in value to that of his or
her shares of the applicable Forum Series held by the shareholder.
The Plan contains representations, warranties, and conditions designed to
help ensure that each Reorganization is fair to the participating Forum Series,
Integrity Series, and their respective shareholders. The Plan provides that
the consummation of a Reorganization is contingent upon, among other things,
approval of the Plan by the participating Forum Series' shareholders. The Plan
-28-
may be terminated with respect to a Reorganization if, on or before the
Effective Time (as defined in the Plan) of the Reorganization, certain
conditions precedent have not been satisfied or if the Forum Board or the
Integrity Board determines that consummation of the Reorganization is not in
the best interests of the shareholders of the participating Forum Series or
Integrity Series, respectively. Under the Plan, FFG is obligated to pay the
expenses incurred by a Forum Series and Integrity Mutual Funds Inc. is
obligated to pay the expenses incurred by the corresponding Integrity Series
in connection with the Reorganization.
The Closing Date (as defined in the Plan) of each Reorganization is
scheduled to occur on or about December 19, 2003 or such other date as the
parties may agree.
The approval of the Plan by shareholders of one Forum Series is not
contingent on the approval of the Plan by the shareholders of the other Forum
Series. If shareholders of a Forum Series approve the Plan, that Forum Series
will reorganize into the corresponding Integrity Series regardless of whether
shareholders of the other Forum Series approve the Plan. If the shareholders
of a Forum Series do not approve the Plan, the Reorganization involving that
Forum Series will not take place.
If a Forum Series' shareholders approve the Plan, shares of the Forum Series
will no longer be offered for sale, except through the reinvestment of dividend
and capital gain distributions or through established automatic investment
plans. From the date of shareholder approval until the close of business on
the Closing Date, shareholders may continue to add to their existing account
only through an established automatic investment plan or through the
reinvestment of dividend and capital gain distributions.
If shareholders of a Forum Series approve the Plan, the stock transfer books
of that Forum Series will be permanently closed as of 4:00 p.m., Eastern time,
on the Closing Date. Such Forum Series will only accept requests for
redemptions received in proper form before 4:00 p.m., Eastern time, on the
business day immediately preceding the Closing Date. Requests received after
that time will be considered requests to redeem shares of the corresponding
Integrity Series.
RELATED PARTY TRANSACTIONS
Integrity Mutual Funds, Inc. and FIA have entered into a Purchase and Sale
Agreement for certain assets of FIA (the "Purchase and Sale Agreement"),
pursuant to which FIA agrees to sell and deliver to Integrity Mutual Funds,
Inc. certain properties and assets of FIA which relate to the Forum Series
(including goodwill, various records, market lists, certain intellectual
property relating to the Forum Series as well as an agreement not to compete,
as described in further detail below) (the "Purchased Assets"). The purchase
price to be paid by Integrity Mutual Funds, Inc. to FIA for the Purchased
Assets will be equal to 1.00% of the aggregate net assets of the Forum
Series as of the business day immediately preceding the Closing Date (as
defined therein) and 0.75% of the aggregate net assets of the Integrity Series
as of the business day immediately preceding the first anniversary of the
Closing Date (the "Purchase Price").
As a condition to the closing of the Purchase and Sale Agreement, FIA will
enter into an Agreement Not To Compete pursuant to which FIA agrees, for a
-29-
period of five (5) years, not to directly or indirectly sponsor, provide
investment advisory services or provide certain distribution services to
registered investment companies with an investment objective substantially
similar to those of the Forum Series anywhere in the United States of America.
Consummation of the transaction described in the Purchase and Sale
Agreement is contingent upon, among other things, approval of the Plan by the
Forum Series shareholders.
SECURITIES TO BE ISSUED
Forum is organized as a Delaware statutory trust and Integrity is
organized as a Massachusetts business trust. Forum and Integrity Trust may
each issue an unlimited number of authorized shares of beneficial interest, no
par value. The Forum Board and the Integrity Board may, without shareholder
approval, divide the authorized shares into an unlimited number of separate
portfolios or series. Each share of a Forum or Integrity Series represents an
equal proportionate interest in the assets and liabilities belonging to the
series with each other share of such series and is entitled to receive a
distribution out of the net assets belonging to the respective series as are
declared by the applicable Board of Trustees.
Each share of a Forum Series and an Integrity Series has equal dividend,
liquidation and voting rights, and fractional shares have those rights
proportionately. Subject to certain contractual fee waivers and expense
reimbursements noted above, each Forum Series and each Integrity Series pays
all of its other expenses (including expenses for advisory services, custodial
services, transfer agent services, administrative services, shareholder
services, accounting and legal services fees, brokerage fees and commissions,
expenses of redemption of shares, insurance premiums, expenses of preparing
prospectuses and reports to shareholders, interest, bookkeeping, fees for
independent trustees, taxes, fees for registering fund shares and extraordinary
expenses).
Neither Massachusetts nor Delaware law requires Forum or Integrity,
respectively, to hold annual meetings of shareholders, and generally, Forum and
Integrity will hold shareholder meetings only when specifically required by
federal or state law.
There are no conversion or preemptive rights in connection with shares of
either Forum Series or Integrity Series. All shares of a Forum Series and an
Integrity Series are fully paid and non-assessable. A shareholder of Forum
Series or an Integrity Series will receive a pro rata share of all
distributions arising from that Series' assets and, upon redeeming shares,
will receive the portion of the Series' net assets represented by the redeemed
shares, minus any applicable CDSC.
The following chart provides information with respect to the material
differences in the rights of shareholders under Massachusetts law and Delaware
law and the respective governing documents of Forum and Integrity.
-30-
Shareholder Effect of
Rights Forum Integrity Difference
Division of series Forum Board may divide Integrity's governing documents If Integrity decides to
into separate classes. series into separate do not provide for the division authorize a division of
classes without a of series into classes. series into classes, the
shareholder vote. division may require a
shareholder vote.
Calling a shareholder Shareholders representing Shareholders representing 25% A larger percentage of
meeting. 10% of Forum's (or a of Integrity's (or a series') shareholders are needed to
series') outstanding shares outstanding shares (10% if call a meeting of Integrity
may call meetings of Forum the purpose of the meeting (or a series) other than
(or a series) for any is to determine whether or in the case of a meeting
purpose related to Forum not to remove a Trustee) may called to remove one or
(or a series), including call a meeting of Integrity more Trustees.
for the purpose of voting (or a series).
on removal of one or more
Trustees.
Liquidation of Trust Shareholder approval is Integrity Board may approve After the Reorganizations,
or Series. required prior to the the liquidation of the trustees could decide
liquidation of Forum or Integrity or a series to terminate Integrity
a series thereof. thereof without a or an Integrity Series
shareholder vote. without a shareholder vote.
Shareholders may terminate
Integrity by vote of more
than 50% of the outstanding
shares of each series
entitled to vote on the
matter and shareholders
of an Integrity Series may
terminate such series by
vote of more than 50% of
the outstanding shares
entitled to vote on the
matter.
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Shareholder Effect of
Rights Forum Integrity Difference
Shareholder liability. Delaware law provides Massachusetts law provides, Massachusetts law does not
that Forum shareholders if certain conditions prevail, provide the same limited
are entitled to the same that Integrity shareholders liability protection for
limitations of personal shall have the same shareholders. In addition,
liability extended to personal liability as after the Reorganizations,
stockholders of private a partner of a shareholders of each Forum
corporations for profit. partnership. Series will not have the
There is, however, a right to require Integrity
remote possibility that, Integrity's trust to assume the defense of
under certain circumstances, instrument states that any claim made against the
shareholders of a Delaware shareholders are not shareholder for any act or
statutory trust might be held partners and provides obligation of the Integrity
personally liable for the that neither Integrity, Series.
trust's obligations to the the trustees nor an officer,
extent the courts of another employee or agent of the
state that does not recognize trust have any power to bind
such limited liability were personally any shareholder
to apply the laws of such nor except as provided in
state to a controversy the trust instrument, call
involving such obligations. upon any shareholder to
pay any amount other than
Forum's trust instrument as specifically agreed to be
contains an express paid by the shareholder.
disclaimer of shareholder
liability for the debts, Integrity's trust instrument
liabilities, obligations further provides that
and expenses of Forum shareholders shall not be
(or a series). personally liable for any
Forum's trust instrument note, bond, contract,
provides for indemnification instrument, certificate share,
out of each Forum Series' undertaking or every other
property of any shareholder act executed or done by
or former shareholder held or on behalf of Integrity
personally liable solely by or the Trustees in
reason of his being or having connection with the Trust.
been a shareholder and not
because of his acts or
omissions or for some other
reason for the obligations of
the Forum Series.
Integrity's trust instrument
Forum's trust instrument provides shareholders or
also provides that each former shareholders with
Forum Series shall, upon indemnification out of the
request, assume the assets of the particular
defense of any claim made Integrity Series of which
against any shareholder he or she was a shareholder,
for any act or obligation if such shareholder is
of the Forum Series and held personally liable
satisfy any judgment for the obligations of
thereon from the assets the Integrity Series solely
of the series. by reason of his or her
being or having been a
shareholder and not
because of his or her
acts or omissions or for
some other reason.
-32-
Shareholder Effect of
Rights Forum Integrity Difference
Amendments to Trust The Board may amend The Integrity Board may amend The Board has more
Instrument. Forum's trust instrument Integrity trust's instrument flexibility in amending
without a shareholder without shareholder approval to Forum's trust instrument
vote if the amendment (1) change the name of without shareholder approval
(1) does not affect Integrity; (2) cure an ambiguity than the Integrity Board
shareholder voting rights; or to supply any omission; (3) has in amending Integrity's
(2) does not amend the cure, correct or supplement any trust instruments.
provision of the trust provision which is defective or
instrument addressing inconsistent with the 1940 Act
amendments thereto; (3) or with the requirements of the
is not an amendment Internal Revenue Code and the
required by law or by the regulations thereunder regarding
Trust's registration the most favorable treatment
statement filed with the available for regulated investment
SEC; and (4) is not an companies; or (4) create or
amendment submitted to liquidate a series in accordance
shareholders for vote by with certain provisions of
the Trustees. Integrity's trust instrument.
REASONS FOR THE REORGANIZATIONS
At a meeting held on June 4, 2003 and continued on July 7, 2003, the Forum
Board, including the Independent Trustees, unanimously approved the Plan.
In considering the Plan, the Forum Board, including its Independent Trustees
(with the advice and assistance of independent legal counsel), took into
consideration that each Reorganization would provide certain benefits to
shareholders of each Forum Series based on the following information provided
at the meeting:
Dilution: The Plan includes provisions intended to avoid dilution of the
interests of the shareholders of each Forum Series. Under the Plan, each Forum
Series' shareholder will receive shares of the corresponding Integrity Series
equal in value to its share of the net assets of the Forum Series held.
Similarity of Investment Objectives and Policies: The investment objective
of each Forum Series and its corresponding Integrity Series is the same. The
investment objective of Forum ME Fund and Integrity ME Fund is to seek a high
level of current income exempt from both federal and Maine state income taxes
(other than AMT) without assuming undue risk. The investment objective of
Forum NH Fund and Integrity NH Fund is to seek a high level of current income
exempt from both federal income tax (other than AMT) and New Hampshire state
interest and dividends tax. Each Forum Series and its corresponding Integrity
Series will be similarly managed.
Cost Savings: It is anticipated that each Reorganization will result in
lower gross expenses for the participating Forum Series and the same net
expenses through July 31, 2004. On August 1, 2004, the contractual fee waiver
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agreement regarding each Forum Series will terminate while the Contractual
Waiver regarding each Integrity Series will continue through December 20, 2004.
Thereafter, FIA may voluntarily waive its fee and reimburse fund expenses but
does not intend to continue such waivers and reimbursements indefinitely.
Tax-Free Nature of each Reorganization: It is anticipated that each
Reorganization will be accomplished without federal tax consequences for the
participating Forum Series, its corresponding Integrity Series, and their
respective shareholders.
Transaction Costs: FFG has agreed to pay the expenses incurred by each
Forum Series in connection with the implementation of the Plan and Integrity
Inc. has agreed to pay the expenses incurred by each Integrity Series in
connection with the implementation of the Plan.
Income to Forum Investment Advisors, LLC and Integrity Mutual Funds, Inc.:
As a result of the Reorganizations, Forum Investment Advisors, LLC will receive
from Integrity Mutual Funds, Inc., an affiliate of Integrity Series' investment
adviser, an amount equal to 1.00% of the Forum Series' aggregate net assets as
of the business day immediately preceding Closing Date and 0.75% of the
aggregate net assets of the Integrity Series as of the business day immediately
preceding the first anniversary of the Closing Date pursuant to the Purchase
and Sale Agreement. As a controlling person of FIA, John Y. Keffer will
indirectly benefit from the receipt by FIA of this Purchase Price. Integrity
Management and Ranson Capital Corporation, each Integrity Series' investment
advisor and distributor, respectively, will receive management fees and Rule
12b-1 distribution and service fees from each Integrity Series. An affiliate
of Integrity Management and Ranson Capital Corporation will receive a fee for
providing transfer agency, fund accounting and administrative services paid by
each Integrity Series.
In considering the Reorganizations, the Forum Board, whose members are not
and are not expected to become interested persons of Integrity Management,
considered the various policies and procedures of Integrity (including, in
particular, Integrity's valuation and pricing procedures), any regulatory
issues involving Integrity and its affiliates and responses thereto, and the
nature and quality of the investment and administrative services provided to
the Integrity Series. The Forum Board considered also the undertaking by
Integrity that, for the three-year period immediately following the
transactions, the Board of Trustees of Integrity will be comprised of 75% of
trustees who are not interested persons of Integrity Management or FIA.
Based on its review of the terms of the Reorganizations, the Forum Board
concluded also that no "unfair burden" would be imposed on the Forum Series
as a result of the transactions relating to the sale to Integrity or any
express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" includes any arrangement during the two-year period
following the transaction whereby a fund's investment adviser or any
interested person of such adviser receives or is entitled to receive any
compensation, directly or indirectly: (i) from any person in connection with
the purchase or sale of securities or other property to, from or on behalf of
such company, other than bona fide ordinary compensation as principal
underwriter for such company, or (ii) from such company or its securities
holder for other than bona fide investment advisory or other services.
-34-
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN
TAXATION
Each Forum Series and its corresponding Integrity Series has similar tax
treatment and each intends to qualify each taxable year to be treated as a
regulated investment company (a "RIC") under the Code. As a RIC, each Forum
Series and Integrity Series generally will not be liable for federal income tax
on the net investment income and capital gain it distributes to its
shareholders. Each Forum Series and Integrity Series intends to distribute
all of its respective net investment income and capital gain each year.
Accordingly, neither a Forum Series nor the corresponding Integrity Series
should be subject to federal income or excise taxes.
TAX CONSEQUENCES OF DISTRIBUTIONS
FORUM ME FUND/INTEGRITY ME FUND. Generally, shareholders of Forum ME Fund
and Integrity ME Fund are not subject to federal or Maine state income tax on
distributions of tax-exempt interest income (other than the federal and Maine
"alternative minimum taxes" (the "Federal AMT" and "Maine AMT," respectively).
However, if you are shareholder of Forum ME Fund or Integrity ME Fund and a
"substantial user" or a "related person" of a substantial user of facilities
financed by private activity bonds held by Forum ME Fund or Integrity ME Fund,
respectively, you may have to pay federal income tax on your pro rata share of
the net income generated from these securities. Distributions by Forum ME Fund
or Integrity ME Fund of taxable interest, other investment income and short-
term capital gains, are taxable to shareholders as ordinary income.
Distributions by Forum ME Fund and Integrity ME Fund of net long-term capital
gain are taxable to shareholders as long-term capital gain regardless of how
long a shareholder has held the fund's shares. It is anticipated that a
substantial portion of the net investment income of Forum ME Fund and Integrity
ME Fund will be exempt from federal and Maine state income tax other than the
AMT.
Distributions by Forum ME Fund and Integrity ME Fund of interest income on
certain private activity bonds are an item of tax preference for purposes of
the Federal AMT applicable to individuals and corporations. Distributions of
net income from tax-exempt obligations are included in "adjusted current
earnings" of corporations for Federal AMT purposes. The Maine AMT is based,
in part, on the Federal AMT.
FORUM NH FUND/INTEGRITY NH FUND. Generally, distributions by Forum NH Fund
and Integrity NH Fund of tax-exempt interest income are not subject to federal
income tax (other than the AMT) and New Hampshire state interest and dividends
tax. However, if you are shareholder of Forum NH Fund or Integrity NH Fund and
a "substantial user" or a "related person" of a substantial user of facilities
financed by private activity bonds held by Forum NH Fund or Integrity NH Fund,
you may have to pay federal income tax on your pro rata share of the net income
generated from these securities. Distributions by Forum NH Fund and Integrity
NH Fund of taxable interest, other net investment income and short-term capital
gain, are taxable to you as ordinary income. Distributions by Forum NH Fund or
-35-
Integrity NH Fund of net long-term capital gain are taxable to shareholders as
long-term capital gain regardless of how long a shareholder has held the fund's
shares. It is anticipated that a substantial portion of the net income of
Forum NH Fund and Integrity NH Fund will be exempt from federal income tax
(other than the AMT) and New Hampshire state interest and dividends tax.
Distributions by Forum NH Fund and Integrity NH Fund of interest income on
certain private activity bonds are an item of tax preference for purposes of
the Federal AMT applicable to individuals and corporations. Distributions of
net income from tax-exempt obligations are included in "adjusted current
earnings" of corporations for Federal AMT purposes.
If you are subject to the New Hampshire state interest and dividends tax,
you will generally not be taxable on the net income paid by Forum NH Fund or
Integrity NH Fund to the extent that the fund invests in New Hampshire tax-
exempt municipal securities or U.S. Government securities. Net income paid by
Forum NH Fund and Integrity NH Fund from other forms of investment will be
subject to the interest and dividends tax. Special interest and dividends tax
rules apply to net income received by trusts, estates, partnerships, limited
liability companies and "S" corporations and their beneficiaries or owners, if
all or some of its beneficiaries or owners are not New Hampshire residents.
If you are subject to the New Hampshire business profits tax, taxable
business profits do not include the New Hampshire apportioned amount of net
income paid by Forum NH Fund and Integrity NH Fund to the extent that the fund
invests in federal income tax-exempt municipal securities or U.S. Government
securities.
GENERAL. If you buy shares of a Forum Series or an Integrity Series just
before the fund makes a distribution, a portion of the distribution you receive
may be taxable to you even though it represents a portion of the purchase price
you paid for the shares. For federal income tax purposes, distributions are
treated the same whether they are received in cash or reinvested.
The sale or exchange of shares of a Forum Series or an Integrity Series is a
taxable transaction for federal income tax purposes. You will recognize a gain
or loss on such transaction equal to the difference, if any, between the amount
of your net sales proceeds and your tax basis in the fund's shares. Such gain
or loss will be capital gain or loss if you held your fund shares as capital
assets. Any capital gain or loss will be treated as long-term capital gain or
loss if you held the fund shares for more than one year at the time of the sale
or exchange.
TAX CONSEQUENCES OF THE REORGANIZATIONS
As a condition to the consummation of each Reorganization, Forum and
Integrity will receive an opinion from Seward & Kissel LLP to the effect that,
based on the facts and assumptions stated therein as well as certain
representations made by Forum and Integrity, including those in the Plan, for
federal income tax purposes:
1. The Reorganization will qualify as a "reorganization" (as defined in
Code Section 368(a)) and each Forum Series and Integrity Series each
will be a "party to a reorganization" (within the meaning of Code
Section 368(b));
-36-
2. The Forum Series' shareholders will recognize no gain or loss on their
receipt of the corresponding Integrity Series' shares in exchange for
their Forum Series shares pursuant to the Reorganization;
3. Each Forum Series will recognize no gain or loss on the transfer of all
of its assets to the corresponding Integrity Series solely in exchange
for the Integrity Series' shares and the assumption by the Integrity
Series of the liabilities pursuant to the Reorganization or on its
distribution of those shares to its shareholders pursuant to its
liquidation in exchange for their Forum Series' shares;
4. Each Integrity Series will recognize no gain or loss on its acquisition
of all of the assets of the corresponding Forum Series solely in
exchange for the Integrity Series' shares and its assumption of the
applicable Forum Series' liabilities;
5. The aggregate tax basis in each Integrity Series' shares received by
shareholders of the corresponding Forum Series pursuant to the
Reorganization will equal the aggregate tax basis of the Forum Series
shares surrendered in exchange therefor, and the shareholder's holding
period for those Integrity Series' shares will include the period that
the shareholder held the Forum Series shares exchanged therefor,
provided that the shareholder held such Forum Series shares as a
capital asset at the Effective Time;
6. Each Integrity Series' basis in the assets of the corresponding Forum
Series acquired will equal the Forum Series' basis in such assets
immediately before the Reorganization and the Integrity Series'
holding period for the assets will include the period during which the
Forum Series held the assets; and
7. Each Integrity Series will succeed to and take into account the items
of the corresponding Forum Series described in Code Section 381(c),
including the earnings and profits, or deficit in earnings and profits,
of the corresponding Forum Series as of the Effective Time. Each
Integrity Series will take these items into account subject to the
conditions and limitations specified in Code Sections 381, 382, 383
and 384 and applicable regulations thereunder.
Shareholders of each Forum Series should consult their tax advisers
regarding the effect on them, if any, of the Reorganization in which that
Forum Series is participating in light of their individual circumstances.
Because the foregoing discussion only relates to the federal income tax
consequences of the Reorganizations, those shareholders also should consult
their tax advisers about state and local tax consequences, if any, of that
Reorganization.
PERFORMANCE
FIA's discussion of the factors that materially affected the performance of
Forum ME Fund and Forum NH Fund during their most recently completed fiscal
year together with the underlying performance information contained in each
Forum Series' most recent annual report dated March 31, 2003 follows as
-37-
Exhibit B. No prior performance information is provided for either Integrity
Series, as neither Series will commence operations until after the
Reorganization in which it is participating.
CAPITALIZATION
The following table sets forth the capitalization of each Forum Series as
of March 31, 2003 and, on a pro forma basis, the capitalization of each
Integrity Fund as of March 31, 2003, assuming that the Plan is approved. Pro-
forma capitalization information is provided for each Integrity Series, as
neither fund will have commenced operations prior to the Reorganization in
which it is participating.
FORUM ME FUND - INTEGRITY ME FUND
FORUM ME FUND PRO FORMA
INTEGRITY ME FUND
- ----------------------------------------------------------------------------
Net Assets $37,847,214 $37,847,214
- ----------------------------------------------------------------------------
Net Asset Value Per Share $11.35 $11.35
- ----------------------------------------------------------------------------
Shares Outstanding 3,335,874 3,335,874
- ----------------------------------------------------------------------------
FORUM NH FUND - INTEGRITY NH FUND
FORUM NH FUND PRO FORMA
INTEGRITY NH FUND
- ----------------------------------------------------------------------------
Net Assets $10,197,613 $10,197,613
- ----------------------------------------------------------------------------
Net Asset Value Per Share $10.88 $10.88
- ----------------------------------------------------------------------------
Shares Outstanding 937,517 937,517
- ----------------------------------------------------------------------------
VOTING INFORMATION
This Proxy Statement/Prospectus is being furnished by the Forum Board in
connection with the solicitation of proxies for the Special Meeting of Forum
Series shareholders. Solicitation of proxies will be primarily by mail.
Officers of Forum may also solicit proxies by telephone, facsimile, or in
person. The costs of solicitation will be borne by the FFG and are estimated
to be under $1,000.
Each share of each Forum Series is entitled to one vote. Approval of the
Plan by each Forum Series requires the affirmative vote of the lesser of (a)
67% or more of the shares of the Forum Series present at the Special Meeting
or represented by proxy if the holders of more than 50% of the outstanding
shares are present or represented by proxy at the Special Meeting or (b) more
than 50% of the outstanding shares of the Forum Series. Shareholders holding
one third of the outstanding shares of each Forum Series as of the Record Date
(defined below) present in person or by proxy will constitute a quorum for the
transaction of business at the Special Meeting.
-38-
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 votes cast at the Special Meeting and
therefore will have the effect of voting "AGAINST" the proposal. Broker non-
votes are shares held in street name for which the broker indicates that
instructions have not been received from the beneficial owners and other
persons entitled to vote for which the broker lacks discretionary voting
authority.
Please refer to the enclosed proxy card for instructions on how to cast
your vote.
Any shareholder may revoke his or her proxy at any time before it is voted
by giving written notice of revocation or by executing and delivering a later
dated proxy to FSS at P.O. Box 446, Portland, Maine, 04112, or by personally
casting a vote at the Meeting. To change a vote by written notice of
revocation, you must provide FSS with a "Revocation Letter" that:
* Identifies yourself;
* States that as shareholder of a Forum Series, you revoke your prior
decisions as set forth in the previously returned Proxy Card; and
* Indicates your approval, disapproval or abstention from voting on the
Plan.
If you do not specify a choice on a proxy card that is properly executed and
returned in time to be voted at the Special Meeting, it will be voted "FOR" the
approval of the Plan.
If you do not plan to attend the Special Meeting of Shareholders of the
Forum Series in which you invest on December 15, 2003, your vote must be
received on or before December 14, 2003. If you return your proxy card by
that date but abstain from voting, you will be treated as having voted
"AGAINST" the Plan.
It is not anticipated that any matters other than the approval of the Plan
will be brought before the meeting. Should other business be brought before
the meeting, it is intended that all proxies will be voted in accordance with
the judgment of the persons named as proxies. If sufficient votes in favor of
approving the Plan are not received by the time scheduled for the meeting, the
persons named as proxies may propose one or more adjournments of the meeting
for a reasonable period of time to permit further solicitation of proxies. Any
adjournment will require the affirmative vote of a majority of the votes cast
on the question in person or by proxy at the session of the meeting to be
adjourned. Proxies executed "FOR" the proposal will be voted "FOR"
adjournment. Proxies executed "AGAINST" the proposal will be voted "AGAINST"
adjournment. The costs of any additional solicitation and of any adjourned
session will be paid by FFG.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Forum Series involved in validating
your vote if you fail to sign your proxy card properly.
-39-
Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the
proxy card.
All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION VALID SIGNATURE
------------ ---------------
Corporate Accounts
------------------
(1) ABC Corp............................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp............................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer...... John Doe
(4) ABC Corp. Profit Sharing Plan.......... John Doe, Director
Partnership Accounts
--------------------
(1) The XYZ Partnership.................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership... Jane B. Smith, General Partner
Trust Accounts
--------------
(1) ABC Trust Account...................... Jane B. Doe, Director
(2) Jane B. Doe, Director u/t/d 12/28/78... Jane B. Doe
Custodial or Estate Accounts
----------------------------
John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGM/UTMA............................... John B. Smith
(2)Estate of John B. Smith.................. John B. Smith, Executor
INFORMATION REGARDING SHARES OF EACH FORUM SERIES OUTSTANDING
Only shareholders of a Forum Series on October 27, 2003 ("Record Date")
are entitled to notice of and to vote at the Special Meeting. As of October
27, 2003, there were 3,070,940.171 shares outstanding of Forum ME Fund and
772,708.387 shares outstanding of Forum NH Fund.
From time to time, certain shareholders may own a large percentage of the
shares of a Forum Series. Accordingly, those shareholders may be able to
greatly affect (if not determine) the outcome of a shareholder vote. As of
October 27, 2003, and to the best of Forum's knowledge and belief, no
persons beneficially owned 25% or more of the shares of a Forum
Series.
As of October 27, 2003, and to the best of Forum's knowledge, the following
shareholders owned beneficially or of record 5% or more of a Forum Series:
-40-
NAME NUMBER OF PERCENTAGE OF
ADDRESS SHARES OWNED FUND SHARES OWNED
- ----------------------------------------------------------------------------
FORUM NH FUND
- ----------------------------------------------------------------------------
Primevest Financial
Services
Richard W. Aho
400 First Street
South, Suite 300
P.O. Box 283
St. Cloud, Minnesota
56302 94,568.179 12.24%
- ----------------------------------------------------------------------------
As of October 27, 2003, Forum's Trustees and officers, as a group, owned
less than 1% of each Forum Series.
INFORMATION REGARDING SHARES OF EACH INTEGRITY SERIES OUTSTANDING
As of October 27, 2003, neither Integrity Series had any shareholders.
Prior to the completion of the Reorganization, each Integrity Series will have
nominal assets. Each Integrity Series will not commence operations until after
the Reorganization in which it is participating.
ADDITIONAL INFORMATION
LEGAL MATTERS
Seward & Kissel LLP ("S&K") serves as counsel for each Forum Series and
Forum. S&K does not represent FIA or FFS regarding the Plan or any related
transaction. Kirkpatrick & Lockhart LLP ("K&L") serves as counsel to Forum's
Independent Trustees and does not represent FIA, FFS, or Forum regarding the
Plan or any related transaction.
Chapman and Cutler LLP serve as counsel for each Integrity Series and
Integrity with respect to the Reorganizations.
EXPERTS
Deloitte & Touche LLP ("Deloitte & Touche") are the independent accountants
for each Forum Series. Deloitee & Touche is considered to be an expert due
to its experience in auditing and accounting.
Please refer to Exhibit C to this Proxy Statement/Prospectus for financial
highlight information for the Forum Series.
Brady, Martz & Associates, P.C. ("Brady, Martz") are the independent
accountants for each Integrity Series. Brady, Martz is considered to be an
expert due to its experience in auditing and accounting. Financial highlight
information is not included for either Integrity Series, as neither fund will
commence operations until after the Reorganization in which it is
participating.
-41-
INTERESTED PERSONS
As a result of the Reorganizations, FIA will receive from Integrity Mutual
Funds, Inc., the parent company of each Integrity Series' investment adviser,
an amount equal to 1.00% of the Forum Series' aggregate net assets as of
business day immediately preceding the Closing Date and 0.75% of the aggregate
net assets of the Integrity Series' as of the business day immediately
preceding the first anniversary of the Closing Date pursuant to the Purchase
and Sale Agreement. As a controlling shareholder of FIA, John Y. Keffer will
indirectly benefit from the receipt by FIA of this Purchase Price.
Mr. Robert Walstad, President of Integrity, and Mr. Peter Quist, an officer
of Integrity, are shareholders of Integrity Mutual Funds, Inc., the parent of
the adviser, distributor and certain other service providers to the Integrity
Series. Accordingly, they may indirectly benefit from the receipt of service
fees as well as Rule 12b-1 distribution/service fees and other fees paid by
each Integrity Series to the adviser, distributor and its affiliates.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information does not contain all of the information set forth in the
registration statements and exhibits of each Forum Series or Integrity Series
filed with the SEC under the Securities Act of 1933, as amended, and the 1940
Act.
Forum, on behalf of each Forum Series, and Integrity, on behalf of each
Integrity Series, file proxy materials, reports and other information with the
SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act. These materials can be
inspected and copied at the SEC's Public Reference Room at 450 Fifth Street
NW, Washington, D.C. 20549, and at the SEC's regional and district offices
located at 73 Tremont Street, Suite 600, Boston, MA 02108-3912, 601 Walnut
Street, Suite 1120E, Philadelphia, PA 19106 3475 Lenox Road, N.E., Suite 1000,
Atlanta, GA 30326 and 175 Jackson Boulevard, Suite 900, Chicago, IL 60604.
Copies of such materials can also be obtained by mail from the Public Reference
Branch, Office of Consumer Affairs and Information Services, SEC, Washington,
D.C. 20549 at prescribed rates. The SEC maintains a website at http://www.sec.
gov that contains information regarding Forum, Integrity, and other
registrants that file information electronically with the SEC.
-42-
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
A-1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Plan") is made as of this
____ day of _____________, 2003, by and between Forum Funds (the "Trust"), a
Delaware statutory trust, for itself and on behalf of its series listed in the
Target Funds column below (each a "Target Fund"), and Integrity Managed
Portfolios, a Massachusetts business trust ("Integrity"), for itself and on
behalf of its series listed in the Acquiring Funds column below (each an
"Acquiring Fund").
ACQUIRING FUNDS TARGET FUNDS
- -------------------------------------------------------------------------------
Integrity Maine Municipal Fund Maine TaxSaver Bond Fund
- -------------------------------------------------------------------------------
Integrity New Hampshire Municipal Fund New Hampshire TaxSaver Bond Fund
- -------------------------------------------------------------------------------
WHEREAS, the Trust and Integrity are open-end management investment
companies registered with the Securities and Exchange Commission (the "SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Acquiring Fund acquire the assets and
assume the liabilities of the Target Fund listed opposite the Acquiring Fund in
the above table (each a "Corresponding Target Fund") in exchange for shares of
equal value of the Acquiring Fund and the distribution of the shares of the
Acquiring Fund to the shareholders of the Corresponding Target Fund in
connection with the dissolution and liquidation of the Corresponding Target
Fund (the "Reorganization");
WHEREAS, the parties intend that all agreements, representations, actions
and obligations described herein made or undertaken by the Acquiring Fund or
Corresponding Target Fund are made and shall be taken or undertaken by the
Trust on behalf of the Corresponding Target Fund or by Integrity on behalf of
each Acquiring Fund, as appropriate. Similarly, the parties intend, if
context requires, that all agreements, representations, actions and
obligations described herein made or undertaken by the Trust or Integrity are
made and shall be taken by the Trust on behalf of the Corresponding Target
Fund or Integrity on behalf of the appropriate Acquiring Fund, as appropriate;
WHEREAS, the parties intend that the Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the Acquiring Fund and the
Corresponding Target Fund each be a "party to a reorganization," within the
meaning of Section 368(b) of the Code, with respect to the Reorganization;
WHEREAS, the parties, for convenience, have structured this Plan so that it
generally refers to a single Reorganization between a single Acquiring
Portfolio and its Corresponding Target Fund, but intend for this Plan and its
terms and conditions to apply to each Reorganization, and that this Plan be,
adopted as, a "plan of reorganization" within the meaning of the regulations
under the Code ("Regulations"); and
A-2
WHEREAS, the parties intend that the consummation of any single
Reorganization shall not be contingent on consummation of any other
Reorganization.
NOW, THEREFORE, in accordance with the mutual promises described herein,
the parties agree as follows:
1. Definitions. The following terms shall have the following meanings:
------------
1933 Act The Securities Act of 1933, as amended.
--------
1934 Act The Securities Exchange Act of 1934, as amended.
--------
Assets All property and assets of any kind and all interests,
------ rights, privileges and powers of or attributable to the
Target Fund whether or not determinable at the Effective
Time and wherever located. Assets include all cash, cash
equivalents, securities, claims (whether absolute or
contingent, Known or unknown, accrued or unaccrued or
conditional or unmatured), contract rights and
receivables (including dividend and interest receivables)
owned by or attributed to the Target Fund and any
deferred or prepaid expense shown as an asset on the
Target Fund's books.
Business Day Each weekday that the New York Stock Exchange is open or,
------------ under unusual circumstances, as deemed by the Trust's
officers.
Assets List A list of securities and other Assets and Known
----------- Liabilities of or attributable to the Target Fund as of
the date provided to the Trust.
Closing Date December 19, 2003, or such other date as the parties may
------------ agree to in writing.
Effective Time 9:00 a.m. Eastern time on the Business Day following the
-------------- Closing Date, or such other time as the parties may agree
to in writing.
Fund The Acquiring Fund or the Target Fund as the context may
---- require.
Know, Known
-----------
or Knowledge Known after reasonable inquiry.
------------
Liabilities All liabilities of, allocated or attributable to the
----------- Target Fund, whether Known or unknown, accrued or
unaccrued, absolute or contingent or conditional or
unmatured.
A-3
N-14 Registration
-----------------
Statement Integrity's Registration Statement on Form N-14 under the
--------- 1940 Act that will register the shares of the Acquiring
Fund to be issued in the Reorganization and will include
the proxy materials necessary for shareholders of the
Target Fund to approve the Reorganization.
Material
---------
Agreements The agreements set forth in Schedule A.
----------
Net Value
---------
of Assets Value of Assets, determined in accordance with Section
--------- 3(d), net of Liabilities.
Reorganization
--------------
Documents Such bills of sale, assignments, assumptions, and other
--------- instruments as desirable for the Target Fund to transfer
to the Acquiring Fund all right and title to and interest
in the Assets and for the Acquiring Fund to assume the
Liabilities.
Schedule A Schedule A to this Plan.
----------
Schedule B Schedule B to this Plan.
----------
Target
------
Financial
---------
Statements The audited financial statements of the Target Fund for
---------- its most recently completed fiscal year and, if
applicable, the unaudited financial statements of the
Target Fund for its most recently completed semi-annual
period.
Valuation
---------
Time The time on the Closing Date, the Business Day immediately
---- preceding the Closing Date if the Closing Date is not a
Business Day, or such other date as the parties may agree
to in writing, that Integrity determines the Net Value of
Assets of the Acquiring Fund and the Trust determines the
Net Value of Assets of or attributable to the Target Fund.
Unless otherwise agreed to in writing, the Valuation Time
shall be at the time of day then set forth in the
Acquiring Fund's and Target Fund's Registration Statement
on Form N-1A as the time of day at which net asset value
is calculated.
A-4
2. Regulatory Filings and Shareholder Action.
------------------------------------------
(a) Integrity shall promptly file the N-14 Registration Statement with
the SEC. The Trust and the Target Fund shall promptly prepare and
file any other appropriate regulatory filings, including, without
limitation, filings with federal, state or foreign securities
regulatory authorities.
(b) The parties shall seek an order of the SEC, if appropriate,
providing them with any necessary relief from Section 17 of the
1940 Act to permit them to consummate the transactions contemplated
by this Plan.
(c) As soon as practicable after the effective date of the N-14
Registration Statement, the Trust shall hold a meeting of the
Target Fund's shareholders to consider and approve this Plan and
such other matters as the Trust's Board of Trustees may determine.
3. Transfer of Assets and Related Transactions. The Trust and
--------------------------------------------
Integrity shall take the following steps with respect to the
Reorganization:
(a) On or prior to the Closing Date, the Trust shall (1) endeavor to
pay or make reasonable provision to pay all of the Liabilities,
expenses, costs and charges of or attributable to the Target Fund
that are Known to the Trust and that are due and payable as of the
Closing Date, and (2) the Target Fund shall declare and pay to its
shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all
(and in any event not less than 90%) of its "investment company
taxable income" (as defined in section 852(b)(2) of the Code,
computed without regard to any deduction for dividends paid) and
substantially all of its "net capital gain," if any (as defined in
section 1222(11) for the current taxable year through the
Effective Time.
(b) At the Effective Time, the Trust shall assign, transfer, deliver
and convey all of the Assets to the Acquiring Fund, subject to all
of the Liabilities. Integrity shall then accept the Assets and
assume the Liabilities such that at and after the Effective Time
(i) all of the Assets shall become and be the assets of the
Acquiring Fund and (ii) all of the Liabilities shall attach to the
Acquiring Fund, enforceable against the Acquiring Fund to the same
extent as if initially incurred by the Acquiring Fund.
(c) Within a reasonable time prior to the Closing Date, the Trust shall
provide the Assets List to Integrity. The parties agree that the
Target Fund may sell any asset on the Assets List prior to the
Effective Time. After the Trust provides the Assets List, the
Target Fund will not acquire any additional securities or permit to
exist any encumbrances, rights, restrictions or claims not
reflected on the Assets List, without the prior consent of
Integrity. Within a reasonable time after receipt of the Assets
List and prior to the Closing Date, Integrity will advise the Trust
of any investments shown on the Assets List that Integrity has
A-5
determined to be inconsistent with the investment objective,
policies and restrictions of the Acquiring Fund. The Target Fund
will dispose of any such securities prior to the Closing Date to
the extent practicable and consistent with applicable legal
requirements, including the Target Fund's investment objective,
policies and restrictions. In addition, if Integrity determines
that, as a result of the Reorganization the Acquiring Fund would
own an aggregate amount of an investment that would exceed a
percentage limitation applicable to the Acquiring Fund, Integrity
will advise the Trust in writing of any such limitation and the
Target Fund shall dispose of a sufficient amount of such investment
as may be necessary to avoid violating the limitation as of the
Effective Time, to the extent practicable and consistent with
applicable legal requirements, including the Target Fund's
investment objective, policies and restrictions.
(d) The Target Fund shall assign, transfer, deliver and convey the
Assets to the Acquiring Fund at the Effective Time on the following
bases:
(1) In exchange for the transfer of the Assets, Integrity shall
simultaneously issue and deliver to the Target Fund full and
fractional shares of beneficial interest of the Acquiring
Fund. Integrity shall determine the number of shares of the
Acquiring Fund to be issued by dividing the Net Value of
Assets of the Target Fund by the net asset value of one
Acquiring Fund share, which shall be the net asset value of
the Target Fund calculated on the Closing Date. Based on this
calculation, Integrity shall issue shares of beneficial
interest of the Acquiring Fund with an aggregate net asset
value equal to the Net Value of Assets of the Target Fund.
(2) The parties shall determine, as of the Valuation Time, the Net
Asset Value of the Acquiring Fund shares to be delivered and
the Net Asset Value of the Assets to be conveyed,
substantially in accordance with the Trust's current valuation
procedures. The parties shall make all computations to the
fourth decimal place or such other decimal place as the
parties may agree to in writing.
(3) The Trust shall transfer the Assets with good and marketable
title to Integrity's custodian for the account of the
Acquiring Fund. The Trust shall transfer all of the Target
Fund's cash in the form of immediately available funds payable
to the order of Integrity's custodian for the account of the
Acquiring Fund. The Trust shall transfer any of the Assets
that were not transferred to Integrity's custodian at the
Effective Time to Integrity's custodian at the earliest
practicable date thereafter.
(e) The steps set forth in Section 3(d), together with all other
related acts necessary to consummate the Reorganization, shall
occur at the Trust's principal office on the Closing Date, or at
such other place as the parties may agree on. All steps and acts
shall be deemed to take place simultaneously at the Effective Time.
(f) Promptly after the Closing Date (usually within one week), the
Trust will deliver to Integrity the Statement of Assets and
Liabilities of the Target Fund as of the Closing.
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4. Dissolution and Liquidation of the Target Fund, Registration of
----------------------------------------------------------------
Shares and Access to Records. The Trust and Integrity also shall
-----------------------------
take the following steps in connection with the Reorganization:
(a) At or as soon as reasonably practical after the Effective Time, the
Target Fund shall dissolve and liquidate by transferring to
shareholders of record full and fractional shares of beneficial
interest of the Acquiring Fund equal in value to the shares of the
Target Fund held by the shareholder. Each Target Fund shareholder
also shall have the right to receive any unpaid dividends or other
distributions that the Target Fund declared with respect to the
shareholder's Target Fund shares at or before the Effective Time.
Integrity shall record on its books the ownership by the
shareholders of the Acquiring Fund shares; the Target Fund shall
simultaneously redeem and cancel on its books all of its issued and
outstanding shares. The Trust shall then wind up the affairs of
the Target Fund and take all steps as are necessary and proper to
terminate the Target Fund as soon as is reasonably possible (but in
no event more than six months) after the Effective Time and in
accordance with all applicable laws and regulations.
(b) If a Target Fund shareholder requests a change in the registration
of the shareholder's Acquiring Fund shares to a person other than
the shareholder, the Acquiring Fund shall require the shareholder
to (i) furnish the Acquiring Fund with an instrument of transfer
properly endorsed, accompanied by any required signature guarantees
and otherwise in proper form for transfer; (ii) if any of the
shares is outstanding in certificate form, deliver to the Acquiring
Fund the certificate representing such shares; and (iii) pay to the
Acquiring Fund any transfer or other taxes required by reason of
such registration or establish to the reasonable satisfaction of
the Acquiring Fund that such tax has been paid or does not apply.
(c) At and after the Closing Date, the Trust shall provide Integrity
and its transfer agent with immediate access to: (i) all records
containing the names, addresses and taxpayer identification numbers
of all of the Target Fund shareholders and the number and
percentage ownership of the outstanding shares of the Target Fund
owned by each shareholder as of the Effective Time and (ii) all
original documentation (including all applicable Internal Revenue
Service forms, certificates, certifications and correspondence)
relating to the Target Fund shareholders' taxpayer identification
numbers and their liability for or exemption from back-up
withholding. The Trust shall preserve and maintain, or shall
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direct its service providers to preserve and maintain, its records
as required by Section 31 of and Rules 31a-1 and 31a-2 under the
1940 Act.
5. Certain Representations, Warranties and Agreements of the Trust.
----------------------------------------------------------------
The Trust, on behalf of itself and, as appropriate, the Target
Fund, represents and warrants to, and agrees with, Integrity as
follows:
(a) The Trust is a statutory trust, validly existing and in good
standing under the laws of the State of Delaware. The Board of
Trustees of the Trust has duly established and designated the
Target Fund as a series of the Trust. The Trust is registered
with the SEC as an open-end management investment company under
the 1940 Act, and such registration is in full force and effect.
Before January 1, 1997, the Trust "claimed" classification for
federal tax purposes as an association taxable as a corporation
and has not elected otherwise since.
(b) The Trust has the power and all necessary federal, state and local
qualifications and authorizations to own all of its properties and
Assets, to carry on its business as now being conducted and
described in its currently effective Registration Statement on
Form N-1A, to enter into this Plan and to consummate the
transactions contemplated herein.
(c) The Board of Trustees of the Trust has duly authorized the
execution and delivery of this Plan and the transactions
contemplated herein. Duly authorized officers of the Trust have
executed and delivered this Plan. Assuming due execution and
delivery of this Plan by Integrity, this Plan represents a valid
and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery of this
Plan does not, and, subject to the approval of shareholders
referenced in Section 2(c), the consummation of the transactions
contemplated by this Plan will not, violate the Trust's Trust
Instrument, By-Laws or any Material Agreement. Except for the
approval of Target Fund shareholders, the Trust does not need to
take any other action to authorize its officers to effectuate this
Plan and the transactions contemplated herein.
(d) The Target Fund is a "fund" (as defined in Section 851(g)(2) of the
Code); it has qualified for treatment as a regulated investment
company ("RIC") under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Code, for each taxable year since the
commencement of its operations and qualifies and shall continue to
qualify for treatment as a RIC during its current taxable year,
which includes the Effective Time; it will invest its assets at all
times and through the Effective Time in a manner that ensures
compliance with the foregoing; and it has no earnings and profits
accumulated in any taxable year in which the provisions of such
Subchapter M did not apply to it.
A-8
(e) The materials included within the N-14 Registration Statement when
filed with the SEC, when Part A of the N-14 Registration Statement
is distributed to shareholders, at the time of the Target Fund
shareholder meeting and at the Effective Time, insofar as they
relate to the Trust and the Target Fund (i) shall comply in all
material respects with the applicable provisions of the 1933 Act
and the 1940 Act, the rules and regulations thereunder and state
securities laws, and (ii) shall 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 made
therein not misleading.
(f) The Trust has duly authorized and validly issued all of its issued
and outstanding shares of the Target Fund and all of the shares
are validly outstanding, fully paid and non-assessable, and are
offered for sale and sold in conformity with the registration
requirements of all applicable federal and state securities
laws. There are no outstanding options, warrants or other rights
to subscribe for or purchase Target Fund shares, nor are there any
securities convertible into Target Fund shares.
(g) The Trust shall operate the business of the Target Fund in the
ordinary course between the date hereof and the Effective Time,
it being agreed that such ordinary course of business will include
the declaration and payment of customary dividends and other
distributions and any other distributions deemed advisable in
anticipation of the Reorganization (including distributions
pursuant to Section 3(a)(2) hereof). From the date it commenced
operations through the Effective Time, the Target Fund shall
conduct its "historic business" (within the meaning of Section
1.368-1(d)(2) of the Regulations) in a substantially unchanged
manner; and before the Effective Time, the Target Fund will not
(a) dispose of and/or acquire any Assets (i) for the purpose of
satisfying the Acquiring Fund's investment objective or policies
or (ii) for any other reason except in the ordinary course of
its business as a RIC, or (b) otherwise change its historic
investment policies.
(h) At the Effective Time, the Target Fund will have good and
marketable title to the Assets and full right, power and authority
to assign, transfer, deliver and convey the Assets.
(i) The Target Financial Statements, copies of which have been
previously delivered to the Trust, fairly present the financial
position of the Target Fund as of its most recent fiscal year-end
and the results of its operations and changes in its net assets
for the periods indicated. The Target Financial Statements are
in accordance with generally accepted accounting principles
consistently applied.
(j) To the Knowledge of the Trust, the Target Fund has no liabilities,
whether or not determined or determinable, other than the
Liabilities disclosed or provided for in the Target Financial
Statements or Liabilities incurred in the ordinary course of
business subsequent to the date of the Target Financial
Statements, and Liabilities set forth in the Assets List.
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(k) Other than the claims, actions, suits, investigations or
proceedings set forth on Schedule B, the Trust does not Know of
any claims, actions, suits, investigations or proceedings of any
type pending or threatened against it or the Assets or its
businesses. The Trust does not Know of any facts that it currently
has reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation or
proceeding against the Target Fund. For purposes of this
provision, investment underperformance or negative investment
performance shall not be deemed to constitute such facts,
provided all required performance disclosures have been made.
Other than the orders, decrees or judgments set forth on
Schedule B, the Target Fund is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely
to adversely affect, its financial condition, results of
operations, business, properties or the Assets or its ability to
consummate the transactions contemplated by the Plan.
(l) Except for contracts, agreements, franchises, licenses or permits
entered into or granted in the ordinary course of its business or
listed in Schedule A, in each case under which no material default
exists, the Trust is not a party to or subject to any material
contract, debt instrument, employee benefit plan, lease, franchise,
license or permit of any kind or nature whatsoever on behalf of
the Target Fund.
(m) The Trust has filed the federal income tax returns of the Target
Fund, copies of which have been previously delivered to Integrity,
for all taxable years to and including the Target Fund's most
recently completed taxable year, and has paid all taxes payable
pursuant to such returns. No such return is currently under audit
and no assessment has been asserted with respect to such returns.
(n) Since the date of the Target Financial Statements, there has been
no material adverse change in the financial condition, results of
operations, business, properties or assets of the Target Fund.
For all purposes under this Plan, investment underperformance,
negative investment performance and/or investor redemptions shall
not be considered material adverse changes, provided all required
performance disclosures have been made. The Target Fund incurred
the Liabilities in the ordinary course of its business.
(p) During the five-year period ending at the Effective Time, (a)
neither the Target Fund nor any person "related" (within the
meaning of section 1.368-1(e)(3) of the Regulations) to it will
have acquired Target Fund shares, either directly or through any
transaction, agreement, or arrangement with any other person, with
consideration other than Acquiring Fund shares or Target Fund
shares, except for shares redeemed in the ordinary course of the
Target Fund's business as a series of an open-end investment
company as required by section 22(e) of the 1940 Act, and (b) no
distributions will have been made with respect to Target Fund
shares, other than normal, regular dividend distributions made
pursuant to the Target Fund's historic dividend-paying practice
A-10
and other distributions that qualify for the deduction for
dividends paid (within the meaning of section 561 of the Code)
referred to in sections 852(a)(1) and 4982(c)(1)(A) of the Code.
(q) Not more than 25% of the value of the Target Fund's total assets
(excluding cash, cash items and U.S. government securities) is
invested in the stock and securities of any one issuer, and not
more than 50% of the value of such assets is invested in the stock
and securities of five or fewer issuers.
6. Certain Representations, Warranties and Agreements of Integrity.
----------------------------------------------------------------
Integrity, on behalf of itself and, as appropriate, the Acquiring
Fund, represents and warrants to, and agrees with the Trust as
follows:
(a) Integrity is organized as a business trust duly created, validly
existing and in good standing under the laws of the Commonwealth
of Massachusetts. The Board of Trustees of Integrity has duly
established and designated the Acquiring Fund as a series of
Integrity. Integrity is registered with the SEC as an open-end
management investment company under the 1940 Act, and such
registration is in full force and effect. Integrity's
Registration Statement relating to the Acquiring Fund will be
effective with the SEC prior to the effectiveness of the N-14
Registration Statement. Before January 1, 1997, Integrity
"claimed" classification for federal income tax purposes as an
association taxable as a corporation and has not elected
otherwise since.
(b) Integrity has the power and all necessary federal, state and
local qualifications and authorizations to own all of its
properties and assets, to carry on its business as now being
conducted and described in its currently effective
Registration Statement on Form N-1A, to enter into this Plan
and to consummate the transactions contemplated herein.
(c) The Board of Trustees of Integrity has duly authorized the
execution and delivery of this Plan and the transactions
contemplated herein. Duly authorized officers of Integrity
have executed and delivered this Plan. Assuming due execution
and delivery of this Plan by the Trust, this Plan represents a
valid and binding contract, enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles. The execution and
delivery of this Plan does not, and the consummation of the
transactions contemplated by this Plan will not, violate
Integrity's Agreement and Declaration of Trust, By-Laws or
any Material Agreement. Integrity does not need to take any
other action to authorize its officers to effectuate the Plan
and the transactions contemplated herein.
(d) The Acquiring Fund is a "fund" (as defined in Section 851(g)(2)
of the Code); it shall qualify for treatment as a RIC under Part
I of Subchapter M of Subtitle A, Chapter 1, of the Code, for its
current taxable year, which includes the Effective Time; it will
A-11
invest its assets at all times and through the Effective Time in
a manner that ensures compliance with the foregoing; and it has
no earnings and profits accumulated in any taxable year in which
the provisions of such Subchapter M did not apply to it.
(e) The materials included within the N-14 Registration Statement when
filed with the SEC, when Part A of the N-14 Registration Statement
is distributed to shareholders, at the time of the Target Fund
shareholder meeting and at the Effective Time of the
Reorganization, insofar as they relate to Integrity and the
Acquiring Fund (i) shall comply in all material respects with the
applicable provisions of the 1933 Act and the 1940 Act, the rules
and regulations thereunder and state securities laws, and (ii)
shall 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 made therein not misleading.
(f) There shall be no issued and outstanding shares of the Acquiring
Fund prior to the Closing Date other than shares issued to
Integrity Mutual Funds, Inc. or its affiliates in order to approve
certain Acquiring Fund start-up matters. Integrity shall duly
authorize the Acquiring Fund shares to be issued and delivered to
the Target Fund as of the Effective Time. When issued and
delivered, the Acquiring Fund shares shall be duly and validly
issued, fully paid and non-assessable, and no shareholder of the
Acquiring Fund shall have any preemptive right of subscription or
purchase in respect of them. There are no outstanding options,
warrants or other rights to subscribe for or purchase Acquiring
Fund shares, nor are there any securities convertible into
Acquiring Fund shares.
(g) Integrity will not commence the operations of the Acquiring Fund
prior to the Effective Time.
(h) Integrity does not Know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened
against the Acquiring Fund or its assets or businesses. There are
no facts that Integrity currently has reason to believe are likely
to form the basis for the institution of any such claim, action,
suit, investigation or proceeding against the Acquiring Fund. The
Acquiring Fund is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
that adversely affects, or is reasonably likely to adversely
affect, its financial condition, results of operations, business,
properties or assets or its ability to consummate the transactions
contemplated herein.
(i) Except for contracts, agreements, franchises, licenses or permits
entered into or granted in the ordinary course of its business, in
each case under which no material default exists, Integrity is not
a party to or subject to any material contract, debt instrument,
employee benefit plan, lease, franchise, license or permit of any
kind or nature whatsoever on behalf of the Acquiring Fund.
(j) No consideration other than Acquiring Fund shares (and the
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization.
A-12
(k) The Acquiring Fund has no plan or intention to issue additional
Acquiring Fund shares following the Reorganization except for
shares issued in the ordinary course of its business as a series
of an open-end investment company; nor does the Acquiring Fund, or
any person "related" (within the meaning of section 1.368-1(e)(3)
of the Regulations) to it, have any plan or intention to acquire
-- during the five-year period beginning at the Effective Time,
either directly or through any transaction, agreement, or
arrangement with any other person, any Acquiring Fund shares
issued to the Target Fund's shareholders pursuant to the
Reorganization, except for redemptions in the ordinary course of
such business as required by section 22(e) of the 1940 Act.
(l) Following the Reorganization, the Acquiring Fund (a) will continue
the Target Fund's "historic business" (within the meaning of
section 1.368-1(d)(2) of the Regulations) or (b) will use a
significant portion of the Target Fund's "historic business assets"
(within the meaning of section 1.368-1(d)(3) of the Regulations)
in a business; in addition, the Acquiring Fund (c) has no plan or
intention to sell or otherwise dispose of any of the Assets, except
for dispositions made in the ordinary course of that business and
dispositions necessary to maintain its status as a RIC and (d)
expects to retain substantially all the Assets in the same form as
it receives them in the Reorganization, unless and until subsequent
investment circumstances suggest the desirability of change or it
becomes necessary to make dispositions thereof to maintain such
status.
(m) There is no plan or intention for the Acquiring Fund to be
dissolved or merged into another business trust or a corporation
or any "fund" thereof (as defined in section 851(g)(2) of the
Code) following the Reorganization.
(n) Immediately after the Reorganization, (a) not more than 25% of the
value of the Acquiring Fund's total assets (excluding cash, cash
items and U.S. government securities) will be invested in the stock
and securities of any one issuer and (b) not more than 50% of the
value of such assets will be invested in the stock and securities
of five or fewer issuers.
(o) The Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it
directly or indirectly owned at any time during the past five
years, any shares of the Target Fund.
(p) During the five-year period ending at the Effective Time, neither
the Acquiring Fund nor any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to it will have acquired
Target Fund shares with consideration other than Acquiring Fund
shares.
(q) Integrity has made all state filings to register the Acquiring Fund
in each jurisdiction that the Target Fund is currently registered
and all necessary steps have been taken under all relevant
jurisdictions' securities laws to consummate the Reorganization.
A-13
(r) The Acquiring Fund will invest its assets in accordance with the
disclosures contained in its current Prospectus and Statement of
Additional Information.
6A. Additional Representations, Warranties and Agreements of the Trust
-------------------------------------------------------------------
and Integrity. The Trust, on behalf of itself and, as appropriate,
-------------- the Target Fund, represents and warrants to, and
agrees with, Integrity, and Integrity, on behalf of itself and, as
appropriate, the Acquiring Fund, represents and warrants to, and
agrees with, the Trust, as follows:
(a) The fair market value of the Acquiring Fund shares each Target Fund
shareholder receives will be approximately equal to the fair market
value of the Target Fund shares it surrenders in exchange therefor.
(b) The respective management of the Trust and Integrity (a) is
unaware, without making independent inquiry, of any plan or
intention of the Target Fund's shareholders to redeem, sell or
otherwise dispose of (i) any portion of their Target Fund shares
before the Reorganization to any person "related" (within the
meaning of section 1.368-1(e)(3) of the Regulations) to either the
Acquiring Fund or the Target Fund or (ii) any portion of the
Acquiring Fund shares they receive in the Reorganization to any
person "related" (within such meaning) to the Acquiring Fund, (b)
does not anticipate dispositions of those Acquiring Fund shares at
the time of or soon after the Reorganization to exceed the usual
rate and frequency of dispositions of shares of the Target Fund as
a series of an open-end investment company, (c) expects that the
percentage of Target Fund shareholder interests, if any, that will
be disposed of as a result of or at the time of the Reorganization
will be de minimis, and (d) does not anticipate that there will be
extraordinary redemptions of Target Fund shares immediately
following the Reorganization.
(c) Each Target Fund shareholder will pay his or her own expenses
(including fees of personal investment or tax advisors for advice
regarding the Reorganization), if any, he or she incurs in
connection with the Reorganization.
(d) The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by the Acquiring Fund
and those to which the Assets are subject.
(e) There is no intercompany indebtedness between the Acquiring Fund
and the Target Fund that was issued or acquired, or will be
settled, at a discount.
(f) Pursuant to the Reorganization, the Target Fund will transfer to
the Acquiring Fund, and the Acquiring Fund will acquire, at least
90% of the fair market value of the net Assets, and at least 70%
of the fair market value of the gross Assets, the Target Fund
held immediately before the Reorganization. For the purposes of
the foregoing, any amounts the Target Fund uses to pay its
A-14
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in
the ordinary course of its business required by section 22(e) of
the 1940 Act and (b) regular, normal dividend distributions made
to conform to its policy of distributing all or substantially all
of its income and gains to avoid the obligation to pay federal
income tax and/or the excise tax under section 4982 of the Code)
will be included as Assets held thereby immediately before the
Reorganization.
(g) None of the compensation received by any Target Fund shareholder
who is an employee of or service provider to the Target Fund will
be separate consideration for, or allocable to, any of the Target
Fund shares that shareholder held; none of the Acquiring Fund
shares any such shareholder receives will be separate consideration
for, or allocable to, any employment agreement, investment
advisory agreement or other service agreement; and the
consideration paid to any such shareholder will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
(h) The aggregate value of the acquisitions, redemptions and
distributions limited by Sections 5(p), 6(k) and 6(p) will not
exceed 50% of the value (without giving effect to such
acquisitions, redemptions, and distributions) of the proprietary
interest in the Target Fund at the Effective Time.
(i) The shareholders of the Target Fund will receive no consideration
pursuant to the Reorganization other than Acquiring Fund shares.
(j) The sum of (a) the expenses incurred by Forum pursuant to the Plan
and (b) the liabilities of the Target Fund to be assumed by the
Acquiring Fund in the Reorganization will not exceed 20% of the
fair market value of the assets of the Target Fund transferred to
the Acquiring Fund pursuant to the Reorganization.
7. Conditions to the Trust's Obligations. The obligations of the
--------------------------------------
Trust set forth herein shall be subject to the following
conditions precedent:
(a) Integrity shall have duly executed and delivered its applicable
Reorganization Documents to the Trust.
(b) The Target Fund's shareholders shall have approved this Plan in
the manner required by the Trust's Trust Instrument, Bylaws,
and applicable law. If the Target Fund shareholders fail to
approve this Plan, that failure shall release the Trust of its
obligations under this Plan.
(c) Integrity shall have delivered to the Trust a certificate dated
as of the Closing Date and executed in its name by the Secretary
or Assistant Secretary of Integrity, in a form reasonably
satisfactory to the Trust, stating that the representations and
warranties of Integrity in this Plan are true and correct in all
material respects at and as of the Effective Time.
(d) The Trust shall have received an opinion of Chapman & Cutler LLP,
as counsel to Integrity, in form and substance reasonably
satisfactory to the Trust and dated as of the Closing Date,
substantially to the effect that:
(1) Integrity is a business trust duly created, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts and is an open-end, management investment
company registered under the 1940 Act;
A-15
(2) The Plan has been duly authorized, executed and delivered by
Integrity, and assuming due authorization, execution, and
delivery of this Plan by the Trust on behalf of the Target
Fund, represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions
with respect thereto, and further subject to the
application of equitable principles in any proceeding,
whether at law or in equity or with respect to the
enforcement of provisions of the Plan, and the effect of
judicial decisions which have held that certain provisions
are unenforceable when their enforcement would violate an
implied covenant of good faith and fair dealing or would
be commercially unreasonable or when default under the
Plan is not material;
(3) The shares of the Acquiring Fund to be delivered as provided
for by this Plan are duly authorized and upon delivery will
be validly issued, fully paid and non-assessable by Integrity;
(4) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate
Integrity's Agreement and Declaration of Trust or By-Laws or
any Material Agreement to which Integrity is a party or by
which it is bound; and
(5) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority
is required for the consummation by Integrity of the
Reorganization or for the execution and delivery of the
Acquiring Fund's Reorganization Documents, except those that
have been obtained under the 1933 Act, the 1940 Act and the
rules and regulations under those Acts or that may be required
under state securities laws or subsequent to the Effective
Time or when the failure to obtain the consent, approval,
authorization or order would not have a material adverse
effect on the operation of the Acquiring Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such
opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies thereof
without independent verification thereof, (iii) limit such
opinion to applicable federal and state law, (iv) define the
word "Knowledge" and related terms to mean the Knowledge of
attorneys then with such firm who have devoted substantive
attention to matters directly related to this Plan and (v)
rely on certificates of officers or trustees of Integrity.
A-16
(e) The Trust shall have received an opinion of Seward & Kissel LLP
with respect to the tax matters specified in Section 8(e) addressed
to the Trust and Integrity in form and substance reasonably
satisfactory to them, and dated as of the Closing Date (the "Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as
to factual matters, exclusively and without independent
verification, on the representations and warranties made in this
Plan, which such counsel may treat as representations and
warrantees made to it, and in separate letters addressed to such
counsel and certificates delivered pursuant to this Plan. The Tax
Opinion shall comprise substantively the information listed
under Section 8(e)(1)-(7) based on the facts and assumptions
stated therein and conditioned on consummation of the
Reorganization in accordance with this Plan, for federal income
tax purposes.
(f) The N-14 Registration Statement shall have become effective under
the 1933 Act as to the Acquiring Fund's shares, and the SEC shall
not have instituted or, to the Knowledge of the Trust,
contemplated instituting, any stop order suspending the
effectiveness of the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in
connection with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the Reorganization under Section 25(c)
of the 1940 Act.
(i) Integrity shall have performed and complied in all material
respects with each of its agreements and covenants required by
this Plan to be performed or complied with by it prior to or at
the Valuation Time and Effective Time.
(j) The Trust shall have received from Integrity a duly executed
instrument whereby the Acquiring Fund assumes all of the
Liabilities of or attributable to the Target Fund.
(k) Neither party shall have terminated this Plan pursuant to Section
10 of this Plan.
(l) The parties shall have received any necessary order of the SEC
exempting the parties from the prohibitions of Section 17 of the
1940 Act or any similar relief necessary to permit consummation of
the Reorganization.
(m) The Trust shall have received a certificate from:
(1) Forum Financial Group, LLC stating that it will pay all of
the expenses incurred by the Trust and the Target Fund in
connection with the Reorganization; and
A-17
(2) Integrity Mutual Funds, Inc. stating that it will pay all of
the expenses incurred by Integrity and the Acquiring Fund in
connection with the Reorganization.
(n) The parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
information of the Acquiring Fund and the Target Fund contained in
the N-14 Registration Statement.
8. Conditions to Integrity's Obligations. The obligations of
--------------------------------------
Integrity set forth herein shall be subject to the following
conditions precedent:
(a) The Trust shall have duly executed and delivered its applicable
Reorganization Documents to Integrity.
(b) The Target Fund's shareholders shall have approved this Plan in
the manner required by the Trust's Trust Instrument, Bylaws and
applicable law. If the Target Fund shareholders fail to approve
this Plan, that failure shall release Integrity's obligations with
respect to the Acquiring Fund under this Plan.
(c) The Trust shall have delivered to Integrity a certificate dated as
of the Closing Date and executed in its name by the Trust's
Secretary or Assistant Secretary, in a form reasonably satisfactory
to Integrity, stating that the representations and warranties of
the Trust in this Plan are true and correct in all material respects
at and as of the Effective Time.
(d) Integrity shall have received an opinion of Seward & Kissel LLP, as
counsel to the Trust, in form and substance reasonably satisfactory
to Integrity and dated as of the Closing Date, substantially to
the effect that:
(1) The Trust is a Delaware statutory trust duly organized,
validly existing and in good standing under the laws of
the State of Delaware and is an open-end, management
investment company registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and delivered by
the Trust and, assuming due authorization, execution and
delivery of this Plan by Integrity on behalf of the Acquiring
Fund, represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions
with respect thereto, and further subject to the application
of equitable principles in any proceeding, whether at law or
in equity or with respect to the enforcement of provisions of
the Plan, and the effect of judicial decisions which have
held that certain provisions are unenforceable when their
A-18
enforcement would violate an implied covenant of good faith
and fair dealing or would be commercially unreasonable or
when default under the Plan is not material;
(3) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate the
Trust Instrument or By-Laws of the Trust or any Material
Agreement to which the Trust is a party or by which it is
bound; and
(4) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by the Trust of
the Reorganization or the execution and delivery of the
Target Fund's Reorganization Documents, except those that
have been obtained under the 1933 Act, the 1940 Act and the
rules and regulations under those Acts or that may be
required under state securities laws or subsequent to the
Effective Time or when the failure to obtain the consent,
approval, authorization or order would not have a material
adverse effect on the operation of the Target Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such
opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies
thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, (iv)
define the word "Knowledge" and related terms to mean the
Knowledge of attorneys then with such firm who have devoted
substantive attention to matters directly related to this
Plan and (v) rely on certificates of officers or trustees
of the Trust.
(e) Integrity shall have received the Tax Opinion of Seward & Kissel
LLP addressed to the Trust and Integrity in form and substance
reasonably satisfactory to them dated as of the Closing Date, as
to the federal income tax consequences mentioned below. In
rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations and warranties made in this Plan, which such
counsel may treat as representations and warranties made to it,
and in separate letters addressed to such counsel and certificates
delivered pursuant to this Plan. The Tax Opinion shall be
substantially to the effect that, based on the facts and
assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Plan, for federal income
tax purposes:
(1) The Reorganization will qualify as a "reorganization" (as
defined in Code Section 368(a)) and the Acquiring Fund and
the Target Fund each will be a "party to a reorganization"
(within the meaning of Code Section 368(b)).
A-19
(2) The Target Fund shareholders will recognize no gain or loss
on their receipt of Acquiring Fund shares in exchange for
their Target Fund shares pursuant to the Reorganization.
(3) The Target Fund will recognize no gain or loss on the
transfer of all of the Assets to the Acquiring Fund solely
in exchange for Acquiring Fund shares and the assumption by
the Acquiring Fund of the Liabilities pursuant to the
Reorganization or on its distribution of those shares to its
shareholders pursuant to its liquidation in exchange for
their Target Fund shares.
(4) The Acquiring Fund will recognize no gain or loss on its
acquisition of all of the Assets solely in exchange for the
Acquiring Fund shares and its assumption of the Liabilities.
(5) The aggregate tax basis in the Acquiring Fund shares received
by each Target Fund shareholder pursuant to the
Reorganization will equal the aggregate tax basis of the
Target Fund shares surrendered in exchange therefor, and
the shareholder's holding period for those Acquiring Fund
shares will include the period that the shareholder held the
Target Fund shares exchanged therefor, provided that the
shareholder held such Target Fund shares as a capital asset
at the Effective Time.
(6) The Acquiring Fund's basis in the Assets will equal the
Target Fund's basis in the Assets immediately before the
Reorganization, and the Acquiring Fund's holding period for
the Assets will include the period during which the Target
Fund held the Assets.
(7) The Acquiring Fund will succeed to and take into account the
items of the Target Fund described in Code Section 381(c),
including the earnings and profits, or deficit in earnings
and profits, of the Target Fund as of the Effective Time.
The Acquiring Fund will take these items into account
subject to the conditions and limitations specified in Code
Sections 381, 382, 383 and 384 and applicable regulations
thereunder.
(f) The N-14 Registration Statement shall have become effective under
the 1933 Act as to the Acquiring Fund's shares, and the SEC shall
not have instituted or, to the Knowledge of Integrity,
contemplated instituting, any stop order suspending the
effectiveness of the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit or obtain damages or other relief in
connection with the Reorganization.
A-20
(h) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding
seeking to enjoin consummation of the Reorganization under Section
25(c) of the 1940 Act.
(i) The Trust shall have performed and complied in all material
respects with each of its agreements and covenants required by
this Plan to be performed or complied with by it prior to or at
the Valuation Time and Effective Time.
(j) Neither party shall have terminated this Plan pursuant to Section
10 of this Plan.
(k) The parties shall have received any necessary order of the SEC
exempting the parties from the prohibitions of Section 17 of the
1940 Act or any similar relief necessary to permit consummation
of the Reorganization.
(l) Integrity shall have received a certificate from:
(1) Forum Financial Group, LLC stating that it will pay all of
the expenses incurred by the Trust and the Target Fund in
connection with the Reorganization; and
(2) Integrity Mutual Funds, Inc. stating that it will pay all
of the expenses incurred by Integrity and the Acquiring
Fund in connection with the Reorganization.
(m) The parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
information of the Acquiring Fund and the Target Fund contained
in the N-14 Registration Statement.
9. Survival of Representations and Warranties. The representations
-------------------------------------------
and warranties of the parties hereto shall survive the completion
of the transactions contemplated herein.
10. Termination of Plan. A majority of a party's Board of Trustees
--------------------
may terminate this Plan, by giving, notice to the other party at
any time before the Effective Time if: (i) the party's
conditions precedent set forth in Sections 7 or 8, as appropriate,
are not satisfied or (ii) the Board of Trustees determines that
the consummation of the Reorganization is not in the best
interests of shareholders.
11. Governing Law. This Plan and the transactions contemplated hereby
---------------
shall be governed, construed and enforced in accordance with the
laws of the State of Delaware, except to the extent preempted by
federal law, without regard to conflicts of law principles.
12. Brokerage Fees. Each party represents and warrants that there are
---------------
no brokers or finders entitled to receive any payments from the
Trust, Integrity, a Target Fund or an Acquiring Fund in
connection with the transactions provided for in this Plan.
A-21
13. Amendments. The parties may, by agreement in writing authorized
-----------
by their respective Boards of Trustees, amend this Plan at any
time before or after the Target Fund's shareholders approve this
Plan. However, after the Target Fund shareholders approve this
Plan, the parties may not amend this Plan in a manner that
materially alters the obligations of either party with respect to
the Reorganization. The parties shall not deem this Section to
preclude them from changing the Closing Date or the Effective
Time by mutual agreement.
14. Waivers. At any time prior to the Closing Date, either party may
--------
by written instrument signed by it (i) waive the effect of any
inaccuracies in the representations and warranties made to it
contained herein and (ii) waive compliance with any of the
agreements, covenants or conditions made for its benefit contained
herein. The parties agree that any waiver shall apply only to the
particular inaccuracy or requirement for compliance waived, and
not any other or future inaccuracy or lack of compliance.
15. Cooperation and Further Assurances. Each party will cooperate with
-----------------------------------
the other in fulfilling its obligations under this Plan and will
provide such information and documentation as is reasonably
requested by the other in carrying out this Plan's terms. Each
party will provide such further assurances concerning the
performance of obligations under this Plan and the consummation of
the Reorganization as the other shall deem necessary, advisable
or appropriate.
16. Updating of N-14 Registration Statement. If at any time prior to
----------------------------------------
the Effective Date, a party becomes aware of any material
information that is not reflected in the N-14 Registration
Statement, the party discovering the information shall promptly
notify the other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC, and, if appropriate,
distributing to shareholders appropriate disclosure with respect
to the information.
17. Limitation on Liabilities. The obligations of the Trust, the
--------------------------
Target Fund, Integrity, and the Acquiring Fund shall not bind
any of the Trustees, shareholders, nominees, officers, agents, or
employees of the Trust or Integrity personally, but shall bind only
the assets and property of the Target Fund and the Acquiring Fund,
respectively. The execution and delivery of this Plan by the
parties' officers shall not be deemed to have been made by any of
them individually or to impose any liability on any of them
personally, but shall bind only the Assets and the property of the
Target Fund or Acquiring Fund, as appropriate.
18. Notices. Any notice, report, statement, certificate or demand
--------
required or permitted by any provision of this Plan shall be in
writing and shall be given by prepaid telegraph, telecopy,
certified mail or overnight express courier to:
A-22
For the Trust:
Leslie K. Klenk
Forum Administrative Services, LLC
Two Portland Square
Portland, ME 04101
With copies to:
Anthony C.J. Nuland, Esq.
Seward & Kissel LLP
1200 G Street, N.W., Suite 350
Washington, DC 20005
For Integrity:
Robert E. Walstad
Integrity Mutual Funds, Inc.
One Main Street North
Minot, ND 58703
With copies to:
Mark J. Kneedy
Chapman and Cutler LLP
111 West Monore Street
Chicago, IL 60603
19. General. This Plan supersedes all prior agreements between the
--------
parties (written or oral), is intended as a complete and exclusive
statement of the terms of the agreement between the parties and
may not be changed or terminated orally. The parties may execute
this Plan in counterparts, which shall be considered one and the
same agreement, and shall become effective when the counterparts
have been executed by and delivered to both parties. The headings
contained in this Plan are for reference only and shall not affect
in any way the meaning or interpretation of this Plan. Nothing in
this Plan, expressed or implied, confers upon any other person any
rights or remedies under or by reason of this Plan. Neither party
may assign or transfer any right or obligation under this Plan
without the written consent of the other party.
A-23
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers designated below to execute this Plan as of the date first written
above.
FORUM FUNDS, for itself and on behalf of
MAINE TAXSAVER BOND FUND and
NEW HAMPSHIRE TAXSAVER BOND FUND
(EACH A TARGET FUND)
ATTEST:
- ----------------------- By:-------------------------
Name: Name: David I. Goldstein
Title: Title: President
INTEGRITY MANAGED PORTFOLIOS for itself and on behalf of
MAINE MUNICIPAL FUND and
NEW HAMPSHIRE MUNICIPAL FUND
(EACH AN ACQUIRING FUND)
ATTEST:
- ----------------------- By:-------------------------
Name: Name:
Title: Title:
A-24
SCHEDULE A
MATERIAL AGREEMENTS
(1) The following agreements are the Material Agreements of the Trust related
to the Reorganization:
(a) Investment Advisory Agreement between Forum and Forum Investment
Advisors, LLC dated January 2, 1998.
(b) Distribution Agreement between Forum and Forum Fund Services, LLC
dated February 28, 1999.
(c) Custodian Agreement between Forum and Forum Trust, LLC dated May 12,
1999.
(d) Administration Agreement between Forum and Forum Administrative
Services, LLC dated June 19, 1997 as amended and restated May 13,
2002.
(e) Transfer Agency and Services Agreement between Forum and Forum
Shareholder Services, LLC dated May 19, 1998 as amended and restated
May 13, 2002.
(f) Fund Accounting Agreement between Forum and Forum Accounting Services,
LLC dated June 19, 1997 as amended and restated May 13, 2002.
(2) The following agreements are the Material Agreements of Integrity related
to the Reorganization:
(a) Management and Investment Advisory Agreement between Integrity and
Integrity Money Management, Inc. on behalf of the Maine Municipal
Fund dated September 24, 2003.
(b) Management and Investment Advisory Agreement between Integrity and
Integrity Money Management, Inc. on behalf of the New Hampshire
Municipal Fund dated September 24, 2003.
(c) Distribution and Services Agreement on behalf of the Maine Municipal
Fund dated September 24, 2003.
(d) Distribution and Services Agreement behalf of the New Hampshire
Municipal Fund dated September 24, 2003.
(e) Custodian Agreement between Integrity Mutual funds, Inc. and Wells
Fargo Bank Minnesota, NA, dated September 18, 2001.
(f) Shareholder Services Plan for the Maine Municipal Fund dated September
24, 2003.
(g) Shareholder Services Plan for the New Hampshire Municipal Fund dated
September 24, 2003.
(h) Transfer Agency Agreement between Integrity and Integrity Fund
Services, Inc. dated September 24, 2003.
(i) Accounting Services Agreement between Integrity and Integrity Fund
Services, Inc. dated September 24, 2003.
(j) Administration Services Agreement between Integrity and Integrity Fund
Services, Inc. dated September 24, 2003.
A-25
SCHEDULE B
Claims, actions, suits, investigations or proceedings pending or threatened
against the Trust, on behalf of the Target Fund, Target Fund, or the Assets or
its businesses:
None
Orders, decrees or judgments to which the Trust on behalf of the Target Fund or
the Target Fund is a party that adversely affect, or are reasonably likely to
adversely affect, the Target Fund's financial condition, results of operations,
business, properties or the Assets or ability to consummate the transactions
contemplated by the Plan.
None
A-26
EXHIBIT B
MANAGEMENT'S DISCUSSION OF PERFORMANCE
MAINE TAXSAVER BOND FUND
NEW HAMPSHIRE TAXSAVER BOND FUND
B-1
A MESSAGE TO OUR SHAREHOLDERS
FORUM INVESTMENT ADVISORS, LLC
March 31, 2003
Dear Shareholder:
We are pleased to present our annual report for Maine TaxSaver Bond Fund and
New Hampshire TaxSaver Bond Fund for the year ended March 31, 2003. The report
includes a review of financial highlights and our perspective on the financial
markets. As of the end of the period, net assets in the Funds total just over
$48 million.
At the risk of triggering deja-vu, we might begin this letter with the
introduction we used at the end of March 2002 - "The last 12 months have been
witness to both instability and weakness in the financial markets." What was
true then has also held true for the 12 months ended March 31, 2003. Volatile
equity markets and geopolitical uncertainties during the past year helped to
spur on the flight to quality that has benefited funds that invest in municipal
bonds and other fixed income securities.
Maine TaxSaver Bond Fund ended the year with a total return of 7.16% and New
Hampshire TaxSaver Bond Fund with 6.65%, both lagging the Morningstar Municipal
National Bond Funds Average of 7.64% and the Morningstar Municipal Single-State
Funds Average of 8.33%. On the brighter side, returns for both Funds exhibited
much stronger performance relative to their last fiscal year. And, continued
record low interest rates have provided a boost to the principal value of
municipal bonds and fixed income security returns in general.
We continue to monitor economic indicators and the fundamental data that
influence the economy. A reduction in short-term interest rates last November
represented the Federal Reserve's only interest rate change in 2002. After
deciding in mid-March to keep the Federal Funds rate target at 1.25%, the Fed
was reluctant to express publicly its opinion on the likelihood of sustainable
economic growth until critical uncertainties in world politics are resolved.
Our portfolio management team has maintained its investment discipline and has
kept focused on long-term investing. This long-term approach to portfolio
management is, we believe, the best approach to helping you meet your financial
goals. We appreciate your continued trust and confidence in us, and thank you
for investing in our Funds. Feel free to call us at 800-943-6786
(or 207-879-0001) or contact your local investment professional with any
questions.
Forum Investment Advisors, LLC
Investment Advisors
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FOR ADDITIONAL FUND
PERFORMANCE INFORMATION AND IMPORTANT DISCLOSURE, PLEASE REFER TO PAGES 3 AND
4. FOR UP-TO-DATE FUND PERFORMANCE, PLEASE CALL 800-943-6786. THE VIEWS IN
THIS REPORT ARE THOSE OF FORUM INVESTMENT ADVISORS, LLC AS OF MARCH 31, 2003
AND MAY NOT REFLECT THEIR VIEWS ON THE DATE THIS REPORT IS FIRST PUBLISHED OR
ANY TIME THEREAFTER. THESE VIEWS ARE INTENDED TO ASSIST SHAREHOLDERS OF THE
FUNDS IN UNDERSTANDING THEIR INVESTMENTS AND DO NOT CONSTITUTE INVESTMENT
ADVICE. (05/03)
B-2
FORUM FUNDS PERFORMANCE
SUMMARY PERFORMANCE INDICATORS
AVERAGE ANNUAL TOTAL RETURN WITHOUT SALES CHARGE
YEAR ENDED MARCH 31, 2003
Forum vs.
Morningstar Morningstar
Forum Average Average
-------------------------------------
Maine TaxSaver Bond Fund 7.16% 8.33%1 (1.17)%
New Hampshire TaxSaver Bond Fund 6.65% 8.33%1 (1.68)%
<FN>
1 MORNINGSTAR Municipal Single-State Bond Funds Average:
910 Funds in Category
</FN>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE FUNDS AND MORNINGSTAR
figures do not include the effect of maximum sales charges, see table below.
During the period reported, the Funds waived fees or reimbursed expenses. If
the maximum sales charge was reflected and if there had been no fee waivers or
expense reimbursements, EACH FUND'S QUOTED PERFORMANCE WOULD BE LOWER.
MAXIMUM SALES CHARGES
Maine TaxSaver Bond Fund 3.00%
New Hampshire TaxSaver Bond Fund 3.00%
B-3
FORUM FUNDS PERFORMANCE
The following charts reflect the change in value of a hypothetical $10,000
investment, including applicable sales charges, and reinvestment of dividends
and distributions to each Fund's related securities index, over the past 10
fiscal years. The Lehman Brothers 10-year Municipal Bond Index is a market
index of investment grade municipal fixed-rate debt securities with an average
maturity of 10 years. Each Fund is professionally managed while each Index is
unmanaged and is not available for investment. Returns include each Fund's
maximum sales charge which is 3.00%. During the period, certain fees were
waived or expenses reimbursed; otherwise, total return would have been lower.
PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF FUTURE RESULTS.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUNDS WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST. THE PERFORMANCE TABLE AND GRAPH DO NOT REFLECT
THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR
THE REDEMPTION OF FUND SHARES. For more up to date performance please call
(800) 943-6786.
Comparison of Change in Value of a $10,000 Investment Including Sales Charge
MAINE TAXSAVER BOND FUND VS. LEHMAN BROTHERS
10-YEAR MUNICIPAL BOND INDEX
Average Annual Total Return on 3/31/03
- --------------------------------------
One Year: 3.94%
Five Year: 4.23%
Ten Year: 5.13%
Investment Value on 3/31/03
- ---------------------------
[bar chart]
Maine TaxSaver Bond Fund: $16,485
Lehman Index: $18,850
3/31/1993 9,700 10,000
4/30/1993 9,798 10,095
5/31/1993 9,837 10,130
6/30/1993 9,980 10,330
7/31/1993 10,012 10,356
8/31/1993 10,220 10,571
9/30/1993 10,345 10,701
10/31/1993 10,377 10,719
11/30/1993 10,284 10,631
12/31/1993 10,490 10,858
1/31/1994 10,596 10,991
2/28/1994 10,355 10,690
3/31/1994 10,055 10,281
4/30/1994 10,073 10,394
5/31/1994 10,172 10,478
6/30/1994 10,125 10,432
7/31/1994 10,286 10,608
8/31/1994 10,319 10,649
9/30/1994 10,176 10,505
10/31/1994 9,989 10,352
11/30/1994 9,813 10,156
12/31/1994 10,050 10,339
1/31/1995 10,304 10,607
2/28/1995 10,579 10,907
3/31/1995 10,689 11,055
4/30/1995 10,719 11,068
5/31/1995 11,039 11,419
6/30/1995 10,982 11,348
7/31/1995 11,075 11,515
8/31/1995 11,183 11,671
9/30/1995 11,228 11,746
10/31/1995 11,324 11,881
11/30/1995 11,473 12,041
12/31/1995 11,584 12,114
1/31/1996 11,671 12,237
2/29/1996 11,640 12,187
3/31/1996 11,473 12,035
4/30/1996 11,465 11,993
5/31/1996 11,481 11,959
6/30/1996 11,546 12,073
7/31/1996 11,658 12,188
8/31/1996 11,665 12,189
9/30/1996 11,763 12,314
10/31/1996 11,865 12,470
11/30/1996 12,035 12,722
12/31/1996 12,006 12,665
1/31/1997 12,056 12,715
2/28/1997 12,144 12,834
3/31/1997 12,044 12,662
4/30/1997 12,091 12,756
5/31/1997 12,219 12,936
6/30/1997 12,335 13,079
7/31/1997 12,589 13,447
8/31/1997 12,490 13,316
9/30/1997 12,607 13,485
10/31/1997 12,668 13,557
11/30/1997 12,716 13,619
12/31/1997 12,877 13,834
1/31/1998 12,986 13,987
2/28/1998 12,984 13,986
3/31/1998 13,000 13,977
4/30/1998 12,955 13,900
5/31/1998 13,123 14,136
6/30/1998 13,160 14,189
7/31/1998 13,198 14,211
8/31/1998 13,391 14,458
9/30/1998 13,535 14,673
10/31/1998 13,538 14,680
11/30/1998 13,562 14,724
12/31/1998 13,602 14,769
1/31/1999 13,750 14,996
2/28/1999 13,686 14,861
3/31/1999 13,675 14,853
4/30/1999 13,724 14,893
5/31/1999 13,663 14,789
6/30/1999 13,488 14,514
7/31/1999 13,551 14,611
8/31/1999 13,476 14,557
9/30/1999 13,488 14,606
10/31/1999 13,387 14,503
11/30/1999 13,488 14,662
12/31/1999 13,449 14,585
1/31/2000 13,400 14,526
2/29/2000 13,513 14,640
3/31/2000 13,734 14,925
4/30/2000 13,683 14,850
5/31/2000 13,620 14,762
6/30/2000 13,921 15,163
7/31/2000 14,067 15,373
8/31/2000 14,239 15,611
9/30/2000 14,185 15,539
10/31/2000 14,304 15,698
11/30/2000 14,395 15,784
12/31/2000 14,689 16,155
1/31/2001 14,791 16,363
2/28/2001 14,830 16,391
3/31/2001 14,928 16,530
4/30/2001 14,774 16,326
5/31/2001 14,906 16,503
6/30/2001 15,010 16,602
7/31/2001 15,183 16,830
8/31/2001 15,370 17,117
9/30/2001 15,351 17,093
10/31/2001 15,483 17,304
11/30/2001 15,365 17,081
12/31/2001 15,289 16,901
1/31/2002 15,434 17,220
2/28/2002 15,602 17,465
3/31/2002 15,384 17,106
4/30/2002 15,600 17,503
5/31/2002 15,690 17,586
6/30/2002 15,807 17,804
7/31/2002 15,968 18,041
8/31/2002 16,100 18,276
9/30/2002 16,387 18,712
10/31/2002 16,105 18,372
11/30/2002 16,065 18,221
12/31/2002 16,346 18,620
1/31/2003 16,307 18,520
2/28/2003 16,494 18,840
3/31/2003 16,485 18,850
B-4
NEW HAMPSHIRE TAXSAVER BOND FUND VS.
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX
Average Annual Total Return on 3/31/03
- --------------------------------------
One Year: 3.45%
Five Year: 4.09%
Ten Year: 5.19%
Investment Value on 3/31/03
- ---------------------------
[bar chart]
New Hampshire TaxSaver Bond Fund: $16,590
Lehman Index: $18,850
3/31/1993 9,700 10,000
4/30/1993 9,825 10,095
5/31/1993 9,893 10,130
6/30/1993 10,090 10,330
7/31/1993 10,145 10,356
8/31/1993 10,413 10,571
9/30/1993 10,563 10,701
10/31/1993 10,557 10,719
11/30/1993 10,469 10,631
12/31/1993 10,684 10,858
1/31/1994 10,804 10,991
2/28/1994 10,508 10,690
3/31/1994 10,140 10,281
4/30/1994 10,168 10,394
5/31/1994 10,271 10,478
6/30/1994 10,220 10,432
7/31/1994 10,407 10,608
8/31/1994 10,438 10,649
9/30/1994 10,294 10,505
10/31/1994 10,136 10,352
11/30/1994 9,990 10,156
12/31/1994 10,194 10,339
1/31/1995 10,447 10,607
2/28/1995 10,712 10,907
3/31/1995 10,781 11,055
4/30/1995 10,801 11,068
5/31/1995 11,146 11,419
6/30/1995 11,085 11,348
7/31/1995 11,170 11,515
8/31/1995 11,291 11,671
9/30/1995 11,346 11,746
10/31/1995 11,455 11,881
11/30/1995 11,608 12,041
12/31/1995 11,699 12,114
1/31/1996 11,798 12,237
2/29/1996 11,740 12,187
3/31/1996 11,575 12,035
4/30/1996 11,552 11,993
5/31/1996 11,545 11,959
6/30/1996 11,633 12,073
7/31/1996 11,736 12,188
8/31/1996 11,741 12,189
9/30/1996 11,863 12,314
10/31/1996 11,979 12,470
11/30/1996 12,164 12,722
12/31/1996 12,119 12,665
1/31/1997 12,156 12,715
2/28/1997 12,245 12,834
3/31/1997 12,103 12,662
4/30/1997 12,161 12,756
5/31/1997 12,327 12,936
6/30/1997 12,445 13,079
7/31/1997 12,730 13,447
8/31/1997 12,623 13,316
9/30/1997 12,753 13,485
10/31/1997 12,814 13,557
11/30/1997 12,872 13,619
12/31/1997 13,044 13,834
1/31/1998 13,153 13,987
2/28/1998 13,185 13,986
3/31/1998 13,173 13,977
4/30/1998 13,147 13,900
5/31/1998 13,331 14,136
6/30/1998 13,367 14,189
7/31/1998 13,404 14,211
8/31/1998 13,603 14,458
9/30/1998 13,750 14,673
10/31/1998 13,774 14,680
11/30/1998 13,796 14,724
12/31/1998 13,843 14,769
1/31/1999 13,983 14,996
2/28/1999 13,926 14,861
3/31/1999 13,912 14,853
4/30/1999 13,948 14,893
5/31/1999 13,883 14,789
6/30/1999 13,698 14,514
7/31/1999 13,762 14,611
8/31/1999 13,696 14,557
9/30/1999 13,693 14,606
10/31/1999 13,613 14,503
11/30/1999 13,717 14,662
12/31/1999 13,665 14,585
1/31/2000 13,612 14,526
2/29/2000 13,729 14,640
3/31/2000 13,916 14,925
4/30/2000 13,873 14,850
5/31/2000 13,805 14,762
6/30/2000 14,101 15,163
7/31/2000 14,250 15,373
8/31/2000 14,413 15,611
9/30/2000 14,381 15,539
10/31/2000 14,490 15,698
11/30/2000 14,569 15,784
12/31/2000 14,831 16,155
1/31/2001 14,962 16,363
2/28/2001 15,001 16,391
3/31/2001 15,087 16,530
4/30/2001 14,981 16,326
5/31/2001 15,102 16,503
6/30/2001 15,178 16,602
7/31/2001 15,298 16,830
8/31/2001 15,461 17,117
9/30/2001 15,480 17,093
10/31/2001 15,580 17,304
11/30/2001 15,513 17,081
12/31/2001 15,452 16,901
1/31/2002 15,619 17,220
2/28/2002 15,766 17,465
3/31/2002 15,556 17,106
4/30/2002 15,766 17,503
5/31/2002 15,877 17,586
6/30/2002 15,986 17,804
7/31/2002 16,096 18,041
8/31/2002 16,206 18,276
9/30/2002 16,374 18,712
10/31/2002 16,276 18,372
11/30/2002 16,268 18,221
12/31/2002 16,478 18,620
1/31/2003 16,482 18,520
2/28/2003 16,602 18,840
3/31/2003 16,590 18,850
B-5
EXHIBIT C
FINANCIAL HIGHLIGHTS
MAINE TAXSAVER BOND FUND
NEW HAMPSHIRE TAXSAVER BOND FUND
The following table is intended to help you understand the Maine TaxSaver Bond
Fund's financial performance. Total return in the table represents the rate an
investor would have earned (or lost) on an investment in the Fund (assuming the
reinvestment of all distributions). This information has been audited by
Deloitte & Touche LLP. The Fund's financial statements and the auditor's
report are included in the Annual Report dated March 31, 2003, which is
available upon request, without charge.
YEARS ENDED MARCH 31,
2003 2002 2001 2000 1999
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share $10.97 $11.06 $10.62 $11.07 $11.05
Investment Operations:
Net investment income 0.39 0.42 0.46 0.48 0.49
Net realized and unrealized gain
(loss) on investments 0.38 (0.09) 0.44 (0.44) 0.07
Total from Investment Operations 0.77 0.33 0.90 0.04 0.56
Less Distributions:
From net investment income (0.39) (0.42) (0.46) (0.48) (0.49)
From net realized capital gain -(c) - - (0.01) (0.05)
Total Distributions (0.39) (0.42) (0.46) (0.49) (0.54)
Ending Net Asset Value Per Share $11.35 $10.97 $11.06 $10.62 $11.07
OTHER INFORMATION
Ratios to Average Net Assets:
Net expenses 0.95% 0.95% 0.84% 0.60% 0.60%
Gross expenses(a) 1.22% 1.32% 1.37% 1.31% 1.32%
Net investment income 3.49% 3.82% 4.28% 4.50% 4.42%
Total Return(b) 7.16% 3.06% 8.69% 0.43% 5.19%
Portfolio Turnover Rate 26% 13% 19% 23% 29%
Net Assets at End of Period (in thousands) $37,847 $38,033 $33,422 $31,938 $32,659
<FN>
(a) Reflects expense ratio in the absence of fee waivers and expense
reimbursements.
(b) Does not include sales charges.
(c) Less than $0.01 per share.
</FN>
C-1
The following table is intended to help you understand the New Hampshire
TaxSaver Bond Fund's financial performance. Total return in the table
represents the rate an investor would have earned (or lost) on an investment
in the Fund (assuming the reinvestment of all distributions). This information
has been audited by Deloitte & Touche LLP. The Fund's financial statements and
the auditor's report are included in the Annual Report dated March 31, 2003,
which is available upon request, without charge.
YEARS ENDED MARCH 31,
2003 2002 2001 2000 1999
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value Per Share $10.65 $10.74 $10.33 $10.80 $10.73
Investment Operations:
Net investment income 0.40 0.42 0.44 0.47 0.46
Net realized and unrealized gain
(loss) on investments 0.30 (0.09) 0.41 (0.47) 0.13
Total from Investment Operations 0.70 0.33 0.85 - 0.59
Less Distributions:
From net investment income (0.40) (0.42) (0.44) (0.47) (0.46)
From net realized gain (0.07) -(c) - -(c) (0.06)
Total Distributions (0.47) (0.42) (0.44) (0.47) (0.52)
Ending Net Asset Value Per Share $10.88 $10.65 $10.74 $10.33 $10.80
OTHER INFORMATION
Ratios to Average Net Assets:
Net expenses 0.95% 0.95% 0.84% 0.60% 0.60%
Gross expenses(a) 2.03% 1.86% 1.82% 1.59% 1.53%
Net investment income 3.71% 3.88% 4.18% 4.46% 4.28%
Total Return(b) 6.65% 3.11% 8.41% 0.03% 5.61%
Portfolio Turnover Rate 20% 21% 24% 19% 42%
Net Assets at End of Period (in thousands) $10,198 $11,843 $12,626 $11,644 $15,227
<FN>
(a) The ratio of Gross Expenses to Average Net Assets reflects the expense
ratio excluding any waivers and/or reimbursements.
(b) Total return calculations do not include sales charge.
(c) Less than $0.01 per share.
</FN>
C-2
STATEMENT OF ADDITIONAL INFORMATION
INTEGRITY MANAGED PORTFOLIOS
MAINE MUNICIPAL FUND
NEW HAMPSHIRE MUNICIPAL FUND
NOVEMBER 6, 2003
This Statement of Additional Information supplements the Proxy Statement/
Prospectus dated November 6, 2003 relating to:
1. A proposal to approve an Agreement and Plan of Reorganization
between Forum Funds, another registered investment company, on
behalf of Maine TaxSaver Bond Fund ("Forum ME Fund") and New
Hampshire TaxSaver Bond Fund ("Forum NH Fund") (each a "Forum
Series"), and Integrity Managed Portfolios ("Integrity"), on behalf
of its series, Maine Municipal Fund ("Integrity ME Fund") and New
Hampshire Municipal Fund ("Integrity Municipal Fund") (the "Plan").
Under the Plan, each of Forum ME Fund and Forum NH Fund will (a)
transfer its assets to Integrity ME Fund and Integrity NH Fund,
respectively (each an "Integrity Series"), in exchange for shares
of that corresponding Integrity Series and the corresponding
Integrity Series' assumption of the applicable Forum Series'
liabilities and (b) then distribute the shares received from the
Integrity Series proportionately to its shareholders and terminate
(each a "Reorganization," collectively, the "Reorganizations").
This Statement of Additional Information is not a Prospectus; a Proxy
Statement/Prospectus dated November 6, 2003, relating to the Reorganizations
may be obtained without charge by writing Integrity at 1 North Main, Minot,
North Dakota 58703 or calling (800) 276-1262. This Statement of Additional
Information relates to, and should be read in conjunction with, such
\Prospectus/Proxy Statement.
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE FORUM SERIES AND THE INTEGRITY SERIES......2
FINANCIAL STATEMENTS........................................................2
ADDITIONAL INFORMATION ABOUT
THE FORUM SERIES AND THE INTEGRITY SERIES
The following documents, each of which has been filed with the Securities
and Exchange Commission, are incorporated herein by reference and are legally
part of this Statement of Additional Information:
1. Statement of Additional Information dated August 1, 2003 for the
Forum Funds on behalf of each Forum Series.
2. Financial Statements included in the annual report dated March 31,
2003 for each Forum Series.
3. Statement of Additional Information dated October 31, 2003 for
Integrity on behalf of each Integrity Series.
FINANCIAL STATEMENTS
Audited financial statements for the Forum NH Fund and the Forum ME Fund
for its most recent fiscal year and the report thereon by Deloitte & Touche
LLP, independent auditors, are included in the Forum Annual Report, the
financial statements of which have been incorporated by reference. Financial
information is not presented for either Integrity Series as each Integrity
Series has no material assets and will not commence a public offering of its
shares until the Reorganization to which it is a party.
Pro forma financial statements are not presented as each Forum Series is being
combined with a corresponding newly created Integrity Series, which does not
have material assets or liabilities.
Form N-14
Part C
Other Information
Item 15. Indemnification
The following is a summary of the rights of indemnification set forth in the
Agreement and Declaration of Trust of Registrant (see Exhibit 1.1). Article
VIII of the Agreement and Declaration of Trust of Registrant provides generally
that any person who is or has been a trustee or officer of Registrant
(including persons who serve at the request of Registrant as directors,
trustees or officers of another organization and including persons who served
as officers and directors of the Registrant) shall be indemnified by Registrant
to the fullest extent permitted by law against liabilities and expenses
reasonably incurred by such person in connection with any claim, suit or
proceeding in which such person becomes involved as a party or otherwise by
virtue of being or having been such a trustee, director or officer and against
amounts incurred in settlement thereof. It is further provided in such
Agreement and Declaration of Trust that no indemnification shall be provided
in the event that it is determined that such person was engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or that such person did not act in good
faith in the reasonable belief that his action was in the best interests of
Registrant. In the event of a settlement or other disposition not involving a
final determination of the foregoing matters by a court or other body, no
indemnification shall be provided unless such determination is made by a vote
of a majority of the "disinterested" trustees acting on the matter or a written
opinion of independent legal counsel. The right to indemnification as so
provided may be insured against by policies maintained by the Registrant and
shall continue as to any person who has ceased to be a trustee or officer of
Registrant.
Expenses of preparation and presentation of a defense by a person claiming
indemnification may be advanced by Registrant provided generally that such
person undertakes to repay any such advances if it is ultimately determined
that he is not entitled to indemnification and provided that either such
undertaking is secured by appropriate security or a majority of the
"disinterested" trustees acting on the matter or independent legal counsel
in a written opinion determines that there is reason to believe that such
person ultimately will be found entitled to indemnification.
The Agreement and Declaration of Trust provides further that in the event
that any shareholder or former shareholder shall be found to be personally
liable solely by reason of his being a shareholder and not because of acts
or omissions of such person, such shareholder shall be entitled, out of
assets of the series of which he or she was a shareholder, to be indemnified
against all loss and expense arising from such liability (provided there is
no liability to reimburse any shareholder for taxes paid by reason of such
shareholder's ownership of shares or for losses suffered by reason of any
changes in value of any of Registrant's assets).
The Agreement and Declaration of Trust (Article IV, Section 2(o)) provides
specifically that the trustees have the power to purchase and pay for insurance
out of assets of Registrant as they deem necessary or appropriate for the
conduct of its business, including policies insuring shareholders, trustees,
officers, employees, agents, investment managers, principal underwriters or
independent contractors of Registrant against claims or liabilities arising by
reason of such persons holding or having held any such office or position with
Registrant or by reason of any action alleged to have been taken or omitted by
such person in such office or position including any action taken or omitted
that may be determined to constitute negligence whether or not the Registrant
would have the power to indemnify such person against such liability.
The provisions with respect to indemnification in the Agreement and
Declaration of Trust of Registrant do not affect any rights of indemnification
that persons other than those specifically covered may have whether under
contract or otherwise under law.
In addition to the foregoing, the distribution and services agreements
with the Funds' Distributor provide that the respective fund will
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within
the meaning of Section 15 of the Securities Act of 1933 against any loss,
liability, claim, damages or expense (including the reasonable cost
of investigating or defending any alleged loss, liability, claim, damages, or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares, based upon the ground that
the registration statement, prospectus, shareholder or other information filed
or made public by the respective fund (as from time to time amended), included
an untrue statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading under the 1933 Act, or any other statute or the common law.
However, the applicable fund does not agree to indemnify the Distributor
or hold it harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished to the fund by
or on behalf of the Distributor. In no case (i) is the indemnity of the fund
in favor of the Distributor or any person indemnified to be deemed to protect
the Distributor or any person against any liability to the Fund or its
security holders to which the Distributor or such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties under the applicable distribution and services
agreement, or (ii) is the fund to be liable under its indemnity agreement
contained in Section 8 of the distribution and services agreement with respect
to any claim made against the Distributor or any person (or after the
Distributor or the person shall have received notice or service on any
designated agent). However, failure to notify the respective fund of any claim
shall not relieve the fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than
on account of its indemnity agreement contained in Section 8 of the respective
distribution and services agreement. The applicable fund shall be entitled to
participate at its own expense in the defense, or if it so elects, to assume
the defense of any suit brought to enforce any claims, but if the fund elects
to assume the defense, the defense shall be conducted by counsel chosen by it
and satisfactory to the Distributor or persons or defendant or defendants in
the suit. In the event, the applicable fund elects to assume the defense of
any suit and retain counsel, the Distributor, officers or Trustees or
-2-
controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them. If the
respective fund does not elect to assume the defense of any suit, it will
reimburse the Distributor, officers or Trustees or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The applicable fund agrees to
notify the Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with
the issuance or sale of any of the shares of the respective fund.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the provisions of Registrant's Agreement and
Declaration of Trust, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liability (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) as asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
Item 16. Exhibits
1.1. Agreement and Declaration of Trust dated August 10, 1990.1
2.1. By-Laws of Registrant.1
3.1. Not applicable.
4.1. Agreement and Plan of Reorganization: See Exhibit A to Part A of this
Registration Statement.
5.1. Not applicable.
6.1. Management and Investment Advisory Agreement between Registrant and
Integrity Money Management, Inc. on behalf of the Maine Municipal Fund.2
6.2. Management and Investment Advisory Agreement between Registrant and
Integrity Money Management, Inc. on behalf of the New Hampshire
Municipal Fund.2
-3-
7.1. Distribution and Services Agreement on behalf of the Maine Municipal
Fund.2
7.2. Distribution and Services Agreement on behalf of the New Hampshire
Municipal Fund.2
7.3. Form of Dealer's Agreement.1
8.1. Not Applicable.
9.1. Custodian Agreement between Registrant and Wells Fargo Bank Minnesota,
NA, Institutional Trust and Custody, on behalf of all series.3
10.1. Shareholder Services Plan for the Maine Municipal Fund.2
10.2. Shareholder Services Plan for the New Hampshire Municipal Fund.2
11.1. Form of Opinion and Consent of Chapman and Cutler LLP.4
12.1. Form of Tax Opinion Relating to Reorganization and Consent of Seward
& Kissel LLP.5
13.1 Transfer Agency Agreement between Registrant and Integrity Funds
Services, Inc.2
13.2. Accounting Services Agreement between Registrant and Integrity Fund
Services, Inc. on behalf of all series.2
13.3. Administration Services Agreement between Registrant and Integrity
Fund Services, Inc. on behalf of all series.2
14.1. Consent of Deloitte & Touche LLP.4
15.1. Not applicable.
16.1. Not applicable.
17.1. Form of Proxy.4
<FN>
1. Incorporated by reference to post-effective Amendment no. 43 filed on
November 30, 1999 on Form N-1A for Registrant.
2. Incorporated by reference to post-effective Amendment No. 49 filed on
September 29, 2003 on Form N-1A for Registrant.
3. Incorporated by reference to post-effective Amendment no. 45 filed on
November 26, 2001 on Form N-1A for Registrant.
4. Filed herewith.
5. To be filed by post-effective amendment.
</FN>
-4-
Item 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of
the Securities Act of 1933, the reoffering prospectus will contain
the information called for by the applicable registration form for
the reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that in determining any liability under the
Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
-5-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Registration Statement to be signed on
its behalf by the undersigned duly authorized in the City of Minot, in the
State of North Dakota on the 4th day of November, 2003.
RANSON MANAGED PORTFOLIOS
By /s/ Robert E. Walstad
-----------------------
Robert E. Walstad, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 4th day of Nevember, 2003:
SIGNATURES TITLE
/s/ Robert E. Walstad
- ---------------------
Robert E. Walstad Trustee, Chairman of the Board,
President and Treasurer (Principal
Executive Officer and Principal
Accounting Officer)
/s/ Lynn W. Aas
- ---------------
Lynn W. Aas Trustee
/s/ Orlin W. Backes
- -------------------
Orlin W. Backes Trustee
/s/ R. James Maxson
- -------------------
R. James Maxson Trustee
-6-
Exhibit Index
11.1. Form of Opinion and Consent of Chapman and Cutler LLP.
14.1. Consent of Deloitte & Touche LLP.
17.1 Form of Proxy
-7-