By:
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/s/Stacey E.
Hong
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Stacey
E. Hong
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President
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Forum Funds (Target Fund)
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IMST (Acquiring Fund)
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Liberty Street Horizon Fund – A
Shares
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Liberty Street Horizon Fund – A
Shares
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Liberty Street Horizon Fund – C
Shares
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Liberty Street Horizon Fund – C
Shares
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Liberty Street Horizon Fund – Institutional
Shares
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Liberty Street Horizon Fund – Institutional
Shares
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·
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Prospectus and Statement of
Additional Information of the Target Fund, dated September 1,
2008;
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·
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Semi-Annual Report to
Shareholders of the Target Fund, dated October 31, 2008 and Annual Report
to Shareholders of the Target Fund, dated April 30,
2009.
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·
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Prospectus and Statement of
Additional Information of the Acquiring Fund, dated August 14,
2009.
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A.
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OVERVIEW
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4
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B.
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COMPARISON
FEE TABLE AND EXAMPLES
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5
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C.
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SUMMARY
OF FUND INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS
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7
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D.
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COMPARISON
OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES
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16
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E.
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KEY
INFORMATION ABOUT THE PROPOSAL
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16
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1. SUMMARY OF THE PROPOSED REORGANIZATION |
16
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2. DESCRIPTION OF THE ACQUIRING FUND’S SHARES |
17
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3. REASONS FOR THE REORGANIZATION |
17
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4. FEDERAL INCOME TAX CONSEQUENCES |
18
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5. COMPARISON OF FORMS OF ORGANIZATION AND SHAREHOLDER RIGHTS |
19
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6. CAPITALIZATION |
20
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F.
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ADDITIONAL
INFORMATION ABOUT THE FUNDS
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21
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1. PAST PERFORMANCE OF THE TARGET FUND |
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2. SERVICE PROVIDERS |
22
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II.
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VOTING
INFORMATION
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24
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A.
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GENERAL
INFORMATION
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24
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B.
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METHOD
AND COST OF SOLICITATION
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25
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C.
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RIGHT
OF REVOCATION
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26
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D.
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VOTING
SECURITIES AND PRINCIPAL HOLDERS
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26
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E.
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INTEREST
OF CERTAIN PERSONS IN THE TRANSACTION
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27
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III.
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MISCELLANEOUS
INFORMATION
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27
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A.
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OTHER
BUSINESS
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27
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B.
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NEXT
MEETING OF SHAREHOLDERS
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27
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C.
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LEGAL
MATTERS
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27
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D.
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EXPERTS
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28
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E.
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INFORMATION
FILED WITH THE SEC
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28
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APPENDIX A – Form of Agreement and Plan of Reorganization | A-1 |
I.
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PROPOSAL
– TO APPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION
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A.
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OVERVIEW
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Liberty Street Horizon
Fund
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||||||
Fees and
Expenses
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||||||
Target
Fund
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Acquiring
Fund
(Pro
forma)
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Target
Fund
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Acquiring
Fund
(Pro
forma)
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Target
Fund
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Acquiring
Fund
(Pro
forma)
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Share
Class
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Class
A
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Class
A
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Class
C
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Class
C
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Institutional
Class
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Institutional
Class
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Shareholder
Fees
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||||||
(fees paid directly from your
investment)
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||||||
Maximum Sales Charge
(Load)
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4.75%(1)
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4.75%(1)
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None
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None
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None
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None
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Imposed On
Purchases
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||||||
(as a percentage of the
offering price)
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||||||
Maximum Deferred Sales Charge
(Load) Imposed on Redemptions
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1.00%(2)
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1.00%(2)
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0.75%(3)
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0.75%(3)
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None
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None
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(as a percentage of the
purchase or sale price, whichever is less)
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||||||
Redemption
Fee
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1.00%(4)
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1.00%(4)
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1.00%(4)
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1.00%(4)
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1.00%(4)
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1.00%(4)
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(as a percentage of amount
redeemed)
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||||||
Annual Fund Operating
Expenses(5)
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||||||
(expenses that are deducted
from Fund assets)
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||||||
Management
Fee
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1.00%
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1.00%
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1.00%
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1.00%
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1.00%
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1.00%
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Distribution and/or Service
(Rule 12b-1) Fees
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0.25%
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0.25%
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0.75%
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0.75%
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None
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None
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Other Expenses(6)
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0.66%
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0.41%
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0.75%
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0.41%
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0.68%
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0.41%
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Total Annual Fund
Operating
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1.91%
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1.66%
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2.50%
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2.16%
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1.68%
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1.41%
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Expenses
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||||||
Fee Waiver and
Expense
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(0.41%)
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(0.16%)
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(0.50%)
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(0.16%)
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(0.43%)
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(0.16%)
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Reimbursement
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||||||
Net Expenses(7)(8)
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1.50%
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1.50%
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2.00%
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2.00%
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1.25%
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1.25%
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One
Year
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Three
Years
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Five
Years
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Ten
Years
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Liberty
Street Horizon Fund (A Shares)
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||||
Target
Fund
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$620
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$1,009
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$1,421
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$2,570
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Acquiring
Fund (Pro
forma)
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620
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959
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1,320
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2,334
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Liberty
Street Horizon Fund (C Shares)
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||||
Target
Fund
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$278
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$731
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$1,286
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$2,798
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Acquiring
Fund (Pro
forma)
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278
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661
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1,145
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2,480
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Liberty
Street Horizon Fund (Institutional Shares)
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||||
Target
Fund
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$127
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$488
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$872
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$1,951
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Acquiring
Fund (Pro
forma)
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127
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431
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756
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1,677
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One
Year
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Three
Years
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Five
Years
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Ten
Years
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Liberty
Street Horizon Fund (A Shares)
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||||
Target
Fund
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$620
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$1,009
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$1,421
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$2,570
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Acquiring
Fund (Pro
forma)
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620
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959
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1,320
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2,334
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Liberty
Street Horizon Fund (C Shares)
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||||
Target
Fund
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$278
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$731
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$1,286
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$2,798
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Acquiring
Fund (Pro
forma)
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278
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661
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1,145
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2,480
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Liberty
Street Horizon Fund (Institutional Shares)
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||||
Target
Fund
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$127
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$488
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$872
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$1,951
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Acquiring
Fund (Pro
forma)
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127
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431
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756
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1,677
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C.
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SUMMARY
OF FUND INVESTMENT OBJECTIVES, STRATEGIES, AND
RISKS
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Target
Fund and Acquiring Fund
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Investment
Strategy
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Liberty
Street Horizon Fund,
a
series of Forum Funds
and
Liberty
Street Horizon Fund,
a
series of IMST
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The
Fund pursues its investment objective by primarily investing in U.S. and
foreign equity stocks. The Fund’s equity investments may include common
stock, preferred stock, securities convertible into common stock,
warrants, rights and other equity securities having the characteristics of
common stock (such as depositary receipts). The Fund may invest in any
size company, including small- and medium-sized companies, and further may
invest in companies which are financially distressed. In addition, under
certain market conditions, the Fund may invest in companies at the time of
their initial public offering (“IPO”). The Fund’s investments in foreign
equity stocks will primarily be purchased in developed markets, although
it may also purchase foreign equity stocks in emerging markets pursuant to
its investment strategy.
The
Fund may also invest up to 20% of its assets in fixed income securities
with maturities typically between one year and ten years, which may
include debt securities that are rated below investment grade, or unrated
securities that Horizon, the Fund’s sub-advisor, deems to be of comparable
quality.
The
Fund may use certain derivative instruments, such as writing and selling
options, for risk management purposes or as part of the Fund’s investment
strategies. Generally, derivatives are financial contracts the
values of which depend upon, or are derived from, the value of an
underlying asset, reference rate, or index, and may relate to stocks,
bonds, interest rates, currencies or currency exchange rates, and related
indices. The Fund may also lend its portfolio securities to generate
additional income.
The
Sub-Advisor’s Process
Horizon’s
general investment philosophy begins with the acknowledgement that the
greatest determining factor of a portfolio’s long-term, successful
performance is the reduction of risk. Many investment professionals
measure risk in degrees of prior volatility; Horizon assesses risk in
terms of the probability of permanent capital loss. It is generally
understood that equity investing is an inherently risky exercise; yet it
is less understood that investment returns are asymmetrical, meaning that
negative returns require larger off-setting positive returns just to break
even. Horizon’s investment process uses in-house research as well as a
dynamic approach to portfolio construction to identify and select what
Horizon believes are securities with asymmetrically favorable return
properties – those for which reward potential exceeds downside risk.
Horizon invests in opportunities in the full spectrum of available
securities that it believes have the most favorable risk/reward
characteristics. Where appropriate, Horizon may employ periodic hedging
and other risk reduction techniques, including the use of fixed income
securities where the risk/reward attributes are
favorable.
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The
majority of the Fund’s assets are managed using Horizon’s core value
strategy, as described below. In addition, portions of the Fund’s assets
are managed by Horizon using its research strategy, and also may be
invested in specialty stocks that Horizon believes maintain the most
favorable risk/reward characteristics. Horizon may allocate assets of the
Fund across the above strategies in order to best implement its investment
philosophy.
Horizon’s Core Value
Strategy. Horizon’s core value strategy relies on its
in-house research to identify companies possessing very particular, often
distinctive and under-appreciated business models. The strategy focuses on
businesses that tend to be relatively protected from severe price
competition or technological obsolescence which, as a consequence, Horizon
believes can sustain high returns on equity.
Horizon
does not screen for quantitative value measures. Horizon often invests in
out-of-favor companies, applying its research capabilities to distinguish
between permanent and transitory problems, and exercises the patience to
await the resolution of the latter. Selections are not constrained by
arbitrary or non-investment considerations and therefore will include a
variety of market capitalizations as well as companies outside the U.S.,
though typically the majority of stocks held by the Fund will tend to be
larger U.S. companies. Core value holdings will not ordinarily include
shares that rely on a catalyst, thereby avoiding what is often referred to
as the “value trap.” Rather, holdings reflect a focus on a company’s
ability to continue to compound earnings as the result of its core
business.
Horizon’s
security selection is based upon a strategic and financial, or “bottom up”
analysis of each company. However, as unusually favorable
risk/reward opportunities are often the product of dislocation in a
particular sector, weightings can reflect businesses subject to similar
conditions. Thus, core value holdings frequently contain themes, with
allocations of 25% or more in one area. This presents an opportunity to
own shares below what Horizon considers to be intrinsic value and can
represent a second margin of safety in addition to the compounding
manifested by the superior business model.
Horizon’s Research
Strategy. In utilizing its research strategy, Horizon
selects a wide variety of investments in the areas of catalyst driven and
event driven opportunities, distressed securities, companies that it
believes have certain assets whose true values are not fully reflected on
the balance sheets, and securities with pricing anomalies and other areas
of inefficiency.
Unlike
Horizon’s core value strategy which typically requires a proven history of
high and sustainable returns on invested capital, Horizon’s research
strategy has a higher tolerance for companies that may not have as
extensive operating histories. Horizon considers not only a company’s
current ability to produce high sustainable returns on invested capital
but also the company’s future potential to increase that rate of return.
In many instances, the Fund’s research strategy portfolio will invest in
less mature companies in the process of developing a superior product or
market niche. These companies can be smaller in size and may employ
leverage to assist in rapid expansion opportunities or enhance returns on
invested capital. In many cases, the portfolio may invest in companies
that are the subject of significant questions by Wall Street surrounding
the companies’ going concern status. In rare instances, companies emerging
from bankruptcy may also be purchased in this strategy. Appropriately, the
holdings in the research strategy will tend to be more volatile while
offering higher return potential given their earlier stage in the business
cycle.
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Horizon’s Sell
Discipline. For each strategy, Horizon evaluates
securities for sale as fundamentally as it does for purchase. Its primary
reasons for selling a security are as follows:
•
expectations have been met or exceeded and it becomes appropriate to
realize gains;
•
the risk/reward characteristics have changed and no longer meet the Fund’s
investment guidelines;
• an
additional investment idea, with more favorable risk/reward
characteristics, has been identified creating a need for cash;
or
• Horizon
has misjudged or otherwise found an omission in its original
analysis.
Cash and Temporary Defensive
Positions. The Fund intends to hold some cash or high quality,
short-term debt obligations and money market instruments for reserves to
cover redemptions and unanticipated expenses. In addition, when the
risk/reward profile for common stocks or fixed income instruments appears
unfavorable, or when price valuations are not attractive, Horizon will
allow the Fund’s cash position to increase rather than purchase stocks
that fail to meet its investment criteria. In addition, there may be times
when Horizon may respond to adverse market, economic, political or other
considerations by investing up to 100% of the Fund’s assets in high
quality, short-term debt securities or other defensive investments for
temporary defensive purposes. During those times, the Fund may not achieve
its investment objective and, instead, will focus on preserving its
assets. To the extent the Fund uses a money market fund for investment of
cash, there will be some duplication of expenses because the Fund would
bear its pro rata portion of such money market fund’s advisory fees and
operational expenses.
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Target Fund and Acquiring
Fund
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Principal Investment
Risks
|
Liberty
Street Horizon Fund,
a
series of Forum Funds
and
Liberty
Street Horizon Fund,
a
series of IMST
|
Management Risk. The
Fund’s success depends largely on Horizon’s ability to select favorable
investments. Different types of investments shift in and out of favor
depending on market and economic conditions. For example, at various times
equity securities will be more or less favorable than debt securities and
small company stocks will be more or less favorable than large company
stocks. Because of this, the Fund will perform better or worse than other
types of Fund depending on what is in “favor.” In addition, there is the
risk that the strategies, research or analytical techniques used by the
Fund’s portfolio managers and/or their security selection may fail to
produce the intended result.
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General Market Risk. In
general, a company’s stock value is affected by activities specific to the
company as well as general market, economic and political conditions. The
net asset value per share (“NAV”) and investment return of the Fund will
fluctuate based upon changes in the value of its portfolio securities. The
market value of securities in which the Fund 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 the Fund will achieve
its investment objective, and an investment in the Fund is not by itself a
complete or balanced investment program. You could lose money on your
investment in the Fund or the Fund could underperform other investments.
Other general market risks include:
• The
market may not recognize what Horizon believes to be the true value
potential of the stocks held by the Fund;
• The
earnings of the companies in which the Fund invests may not continue to
grow at expected rates, thus causing the price of the underlying stocks to
decline;
• Horizon’s
judgment as to the growth potential or value of a stock may prove to be
wrong; and
• A
decline in investor demand for the stocks held by the Fund also may
adversely affect the value of the securities.
Small- and Medium-Sized
Companies Risk. The Fund may invest in any size company, including
small- and medium-sized companies. Investments in smaller capitalized
companies may involve greater risks than larger-capitalized companies,
such as limited product lines, markets and financial or managerial
resources. Investments in small- and medium-sized companies may
be more volatile than investments in larger companies because short-term
changes in the demand for the securities of smaller companies may have a
disproportionate effect on their market price, tending to make prices of
these securities fall more in response to selling pressure. The smaller
the company, the greater effect these risks may have on that company’s
performance. As a result, an investment in the Fund may exhibit a higher
degree of volatility than the general domestic securities
market.
Initial Public Offerings
Risk. The Fund may purchase securities of companies in initial
public offerings. Special risks associated with these securities may
include limited numbers of shares available for trading, unseasoned
trading, lack of investor knowledge of the companies and the companies’
limited operating histories. These factors may contribute to substantial
price volatility for the shares of these companies. The limited number of
shares available for trading in some initial public offerings may make it
more difficult for the Fund to buy or sell significant amounts of shares
without an unfavorable impact on prevailing market prices. Some companies
whose shares are sold through initial public offerings are involved in
relatively new industries or lines of business, which may not be widely
understood by investors. Some of these companies may be undercapitalized
or regarded as developmental stage companies without revenues or operating
income, or the near-term prospects of achieving
them.
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Distressed Securities
Risk. Financially distressed securities involve considerable risk
that can result in substantial or even total loss of the Fund’s
investment. It is often difficult to obtain information as to the true
condition of financially distressed securities. These securities are often
subject to litigation among the participants in bankruptcy or
reorganization proceedings. Such investments may also be adversely
affected by federal and state laws relating to, among other things,
fraudulent transfers and other voidable transfers or payments, lender
liability and a bankruptcy court’s power to disallow, reduce, subordinate
or disenfranchise particular claims. These and other factors contribute to
above-average price volatility and abrupt and erratic movements of the
market prices of these securities. In addition, the spread between the bid
and asked prices of such securities may be greater than normally expected
and it may take a number of years for the market prices of such securities
to reflect their intrinsic values.
Foreign Securities Risk.
The Fund’s investments in foreign securities will have the following
additional risks:
• Foreign
securities may be subject to greater fluctuations in price than securities
of U.S. companies because foreign markets may be smaller and less liquid
than U.S. markets;
• Changes
in foreign tax laws, exchange controls, investment regulations and
policies on nationalization and expropriation as well as political
instability may affect the operations of foreign companies and the value
of their securities;
• Fluctuations
in currency exchange rates and currency transfer restrictions may
adversely affect the value of the Fund’s investments in foreign
securities, which are denominated or quoted in currencies other than the
U.S. dollar;
• Foreign
securities and their issuers are not subject to the same degree of
regulation as U.S. issuers regarding information disclosure, insider
trading and market manipulation. There may be less publicly available
information on foreign companies and foreign companies may not be subject
to uniform accounting, auditing, and financial standards as are U.S.
companies;
• Foreign
securities registration, custody and settlements may be subject to delays
or other operational and administrative problems;
• Certain
foreign brokerage commissions and custody fees may be higher than those in
the U.S.; and
• Dividends
payable on the foreign securities contained in the Fund’s portfolio may be
subject to foreign withholding taxes, thus reducing the income available
for distribution to the Fund’s
shareholders.
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Foreign
securities may trade on U.S. or European exchanges in the form of
American, European or International depositary receipts. Although
depositary receipts have similar risks to the securities they represent,
they may also involve higher expenses and be less liquid than the
underlying securities listed on an exchange. In addition, depositary
receipts may not pass through voting and other shareholder
rights.
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Emerging Markets Risk.
To the extent that the Fund invests in emerging markets, an investment in
the Fund may have the following additional risks:
• Information
about the companies in these countries is not always readily
available;
• Stocks
of companies traded in these countries may be less liquid and the prices
of these stocks may be more volatile than the prices of the stocks in more
established markets;
• Greater
political and economic uncertainties exist in emerging markets than in
developed foreign markets;
• The
securities markets and legal systems in emerging markets may not be well
developed and may not provide the protections and advantages of the
markets and systems available in more developed countries;
and
• Very
high inflation rates may exist in emerging markets and could negatively
impact a country’s economy and securities markets.
For
these and other reasons, the prices of securities in emerging markets can
fluctuate more significantly than the prices of securities of companies in
developed countries. The less developed the country, the greater effect
these risks may have on your investment in the Fund. As a result, an
investment in the Fund may exhibit a higher degree of volatility than
either the general domestic securities market or the securities markets of
developed foreign countries.
Derivatives Risk.
Derivatives can be volatile and involve various types and degrees of
risks, including leverage, credit and liquidity risk. The Fund could
experience a significant loss if derivatives do not perform as
anticipated, or are not correlated with the performance of other
investments which they are used to hedge or if the Fund is unable to
liquidate a position because of an illiquid secondary market.
Interest Rate Risk. The
value of your investment in the Fund may change in response to changes in
interest rates. An increase in interest rates typically causes a fall in
the value of the debt securities that the Fund holds. The effect is
usually more pronounced for debt securities with longer dates to
maturity.
Credit Risk. The
financial condition of an issuer of a debt security may cause it to
default or become unable to pay interest or principal due on the security.
If an issuer defaults, the affected security could lose all of its value,
be renegotiated at a lower interest rate or principal amount, or become
illiquid. The Fund may invest in debt securities that are issued by U.S.
Government sponsored entities. Securities issued by agencies and
instrumentalities of the U.S. Government that are supported by the full
faith and credit of the United States, such as the Federal Housing
Administration and Government National Mortgage Association, present
little credit risk. Other securities issued by agencies and
instrumentalities sponsored by the U.S. Government that are supported only
by the issuer’s right to borrow from the U.S. Treasury, subject to certain
limitations, such as securities issued by Federal Home Loan Banks, and
securities issued by agencies and instrumentalities sponsored by the U.S.
Government that are supported only by the credit of the issuing agencies,
such as Federal Home Loan Mortgage Corporation and Federal National
Mortgage Association, are subject to a greater degree of credit risk as
they are not backed by the full faith and credit of the U.S.
Government.
|
As
of September 7, 2008, the Federal Housing Finance Agency (“FHFA”) was
appointed as the conservator of Federal Home Loan Mortgage Corporation
(“FHLMC”) and Federal National Mortgage Association (“FNMA”) for an
indefinite period. In accordance with the Federal Housing
Finance Regulatory Reform Act of 2008 and the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, as conservator, the FHFA will
control and oversee these entities until the FHFA deems them financially
sound and solvent. During the conservatorship, each entity's
obligations are expected to be paid in the normal course of
business. Although no express guarantee exists for the debt or
mortgage-backed securities issued by these entities, the U.S. Department
of Treasury, through a secured lending credit facility and a senior
preferred stock purchase agreement, has attempted to enhance the ability
of the entities to meet their obligations.
Prepayment or Call Risk.
Issuers may prepay fixed rate obligations when interest rates fall,
forcing the Fund to reinvest in obligations with lower interest rates than
the original obligations.
Lower-Rated Securities
Risk. Debt securities rated below investment grade (often called
“junk bonds”) generally have greater credit risk than higher-rated
securities. Companies issuing high yield, fixed-income securities are less
financially strong, are more likely to encounter financial difficulties
and are more vulnerable to changes in the economy than those companies
with higher credit ratings. These factors could affect such companies’
abilities to make interest and principal payments and ultimately could
cause the issuer to stop making interest and/or principal payments. In
such cases, payments on the securities may never resume, which would
result in the securities owned by the Fund becoming
worthless.
The
prices of high yield, fixed-income securities may fluctuate more than
higher-quality securities, which could subject the Fund to a greater risk
of loss. Such securities are more sensitive to developments affecting the
company’s business and are more closely linked with the company’s stock
prices than higher-quality securities. In addition, high yield securities
generally may also be less liquid than higher-quality securities. The Fund
may have difficulty selling these securities promptly at acceptable
prices.
Diversification Risk.
The Fund is classified as non-diversified and may focus its investments in
the securities of a comparatively small number of issuers. Investment in
securities of a limited number of issuers exposes the Fund to greater
market risk and potential losses than if its assets were diversified among
the securities of a greater number of issuers. However, the Fund will
comply with certain diversification requirements imposed by the Internal
Revenue Code.
|
Securities Lending Risk.
The Fund may lend its portfolio securities to broker-dealers by entering
directly into lending arrangements with such broker-dealers or indirectly
through a securities lending arrangement, in an amount no more than
33
1/3% of the total assets of the Fund (including any collateral
posted) or 50% of the total assets of the Fund (excluding any collateral
posted). Securities lending transactions will be fully collateralized at
all times with cash and/or short-term obligations. These transactions
involve some risk to the Fund if the other party should default on its
obligation and the Fund is delayed or prevented from recovering the
collateral. In the event the original seller defaults on its obligation to
repurchase, the Fund will seek to sell the collateral, which could involve
costs or delays. To the extent the proceeds from the sale of the
collateral are less than the repurchase price, the Fund would suffer a
loss if forced to sell such collateral in this manner.
|
|
|
·
|
the Reorganization was
recommended by the Advisor;
|
|
·
|
the investment objective,
policies and restrictions of the Target Fund are substantially identical
to the Acquiring Fund;
|
|
·
|
the Advisor and Horizon will
continue to manage the Acquiring
Fund;
|
|
·
|
the cost of the Reorganization
will not be borne by the Target Fund or its shareholders;
and
|
|
·
|
counsel to IMST will provide the
Trust with an opinion to the effect that the Reorganization will not have
any federal or state tax consequences for the Target Fund or its
shareholders.
|
|
·
|
The Target Fund will not
recognize any gain or loss as a result of the
Reorganization;
|
|
·
|
Each Target Fund shareholder will
not recognize any gain or loss as a result of the receipt of Acquiring
Fund shares in exchange for such shareholder’s Target Fund shares pursuant
to the Reorganization;
|
|
·
|
The tax basis and holding period
for the Target Fund’s assets will effectively be carried over when those
assets are transferred to the Acquiring
Fund;
|
|
·
|
Each Target Fund shareholder’s
aggregate tax basis in the Acquiring Fund shares received pursuant to the
Reorganization will equal such shareholder’s aggregate tax basis in the
Target Fund shares held immediately before the Reorganization, and its
holding period for those Acquiring Fund shares will include, in each
instance, its holding period for those Target Fund shares, provided the
shareholder holds them as capital assets as of the time of the
Closing;
|
|
·
|
The Acquiring Fund will recognize
no gain or loss on its receipt of the Target Fund’s assets in exchange
solely for Acquiring Fund shares and its assumption of the Target Fund’s
liabilities; and
|
|
·
|
For purposes of section 381 of
the Code, the Acquiring Fund will be treated just as the Target Fund would
have been treated if there had been no
Reorganization. Accordingly, the Reorganization will not result
in the termination of the Target Fund’s taxable year, the Target Fund’s
tax attributes enumerated in section 381(c) of the Code will be taken into
account by the Acquiring Fund as if there had been no Reorganization, and
the part of the Target Fund’s taxable year before the Reorganization will
be included in the Acquiring Fund’s taxable year after the
Reorganization.
|
(unaudited)
|
Target
Fund
|
Pro
forma
Acquiring
Fund
|
Net
Assets
|
||
Class
A
|
$19,383,588
|
$19,383,588
|
Class
C
|
10,063,814
|
10,063,814
|
Institutional
Class
|
60,434,028
|
60,434,028
|
Total
|
$89,881,430
|
$89,881,430
|
Shares
Outstanding
|
||
Class
A
|
4,038,556
|
4,038,556
|
Class
C
|
2,117,741
|
2,117,741
|
Institutional
Class
|
12,660,307
|
12,660,307
|
Total
|
18,816,604
|
18,816,604
|
Net
Asset Value per Share
|
||
Class
A
|
$4.80
|
$4.80
|
Class
C
|
$4.75
|
$4.75
|
Institutional
Class
|
$4.77
|
$4.77
|
|
F.
|
ADDITIONAL
INFORMATION ABOUT THE FUNDS
|
Institutional
Class
|
||
Highest
Calendar Qtr Return at NAV (non-annualized):
|
(1.38)%
|
Quarter
Ended 6/30/08
|
Lowest
Calendar Qtr Return at NAV (non-annualized):
|
(29.16)%
|
Quarter
Ended 12/31/08
|
1
Year
|
Since
Inception
|
|
Institutional
Shares — Return Before
Taxes
|
(58.40)%
|
(43.17)% (1)
|
Institutional
Shares — Return After Taxes on
Distributions
|
(58.44)%
|
(43.23)% (1)
|
Institutional
Shares — Return After Taxes on
Distributions and Sale of Fund
Shares
|
(37.92)%
|
(35.83)% (1)
|
A Shares
— Return Before
Taxes
|
(60.37)%
|
(38.41)%
(2)
|
C
Shares — Return Before
Taxes
|
(58.99)%
|
(38.15)%
(2)
|
S&P 500 Index (reflects no
deduction for fees, expenses or taxes)
|
(37.00)%
|
(28.12)%(3)
|
Fiscal
Year Ended April 30, 2009
|
|||
Advisory
Fee Earned
|
Waiver/Reimbursement
|
Amount
Received After
Waiver/Reimbursement
|
|
Liberty
Street Horizon Fund
|
$702,332
|
($305,285)
|
$397,047
|
II.
|
VOTING
INFORMATION
|
|
•
|
complete and sign the enclosed
proxy ballot and mail it to us in the prepaid return envelope (if mailed
in the United States);
|
|
•
|
vote on the Internet at the
website address listed on your proxy ballot;
or
|
|
•
|
call the toll-free number printed
on your proxy ballot.
|
Target Fund Class
|
Shares
Outstanding &
Entitled
to Vote
(unaudited)
|
Class
A
|
4,104,993.191
|
Class
C
|
2,158,334.681
|
Institutional
Class
|
13,214,461.718
|
Name and
Address
|
Class
|
No.
of Shares
Owned
|
%
of Shares
|
UBS
Financial Services, Inc.
FBO
Richard E. Workman Living Trust
5180
Vardon Drive
Windermere,
FL 34786-8960
|
A
|
586,643.165
|
14.29%
|
UBS
Financial Services, Inc.
FBO
William H. Stender Jr. Living Trust
1720
Buck Island Drive
Guntersville,
AL 35976-8548
|
A
|
248,249.884
|
6.05%
|
UBS
Financial Services, Inc.
FBO
Fredric H. Clark
Rinda
K. Clark JTWROS
11
Fred Clark Lane
Fayetteville,
TN 37334-6180
|
C
|
153,601.695
|
7.12%
|
UBS
Financial Services, Inc.
FBO
Diversified Holdings LLC
Horizon
Large Cap
303
Middle Collision Road
Mount
Lookout, WV 26678-9347
|
C
|
152,865.127
|
7.08%
|
Charles
Schwab & Co, Inc.
101
Montgomery Street
San
Francisco, CA 94104
|
I
|
8,428,134.374
|
63.78%
|
Name
|
Relationship
to Liberty Street Advisors, Inc.
|
|
Raymond
A. Hill III, Timothy Reick, Victor J. Fontana
and
Scott Daniels
|
Shareholders
|
III.
|
MISCELLANEOUS
INFORMATION
|
1.
|
The
Statement of Additional Information of the Target Fund dated September 1,
2008;
|
2.
|
The
Statement of Additional Information of the Acquiring Fund dated August 14,
2009;
|
3.
|
The
Semi-Annual Report to Shareholders of the Target Fund dated October 31,
2008; and
|
4.
|
The
Annual Report to Shareholders of the Target Fund dated April 30,
2009.
|
|
1.
|
Amended and Restated Agreement
and Declaration of Trust is herein incorporated by reference from
Registrant’s Post-Effective Amendment No. 29 to Registrant’s Registration
Statement on form N-1A (333-122901) filed with the Commission on December
5, 2007.
|
|
2.
|
Amended and Restated By-Laws are
herein incorporated by reference from Registrant’s Post-Effective
Amendment No. 30 to Registrant’s Registration Statement on form N-1A
(333-122901) filed with the Commission on January 16,
2008.
|
|
3.
|
Not
Applicable.
|
|
4.
|
Form of Agreement and Plan of
Reorganization – filed
herewith.
|
|
5.
|
Instruments Defining Rights of
Security Holders are herein incorporated by reference from the Trust’s
Declaration of Trust and
By-Laws.
|
6.
(a)
|
Form of Investment Advisory
Agreement between the Trust and Liberty Street Advisors, Inc. is herein
incorporated by reference from Registrant’s Post-Effective Amendment No.
67 to Registrant’s Registration Statement on Form N-1A (333-122901) filed
with the Commission on August 14,
2009.
|
|
(b)
|
Form of Investment Sub-Advisor
Agreement between Horizon Asset Management, Inc. and Liberty Street
Advisors, Inc. is herein incorporated by reference from Registrant’s
Post-Effective Amendment No. 67 to Registrant’s Registration Statement on
Form N-1A (333-122901) filed with the Commission on August 14,
2009.
|
|
7.
|
Form of Distribution Agreement
between Foreside Fund Services, LLC and IMST on behalf of the Liberty
Street Horizon Fund is herein incorporated by reference from Registrant’s
Post-Effective Amendment No. 67 to Registrant’s Registration Statement on
Form N-1A (333-122901) filed with the Commission on August 14,
2009.
|
|
8.
|
Not
Applicable.
|
|
9.
|
Custodian
Agreement dated January 14, 2008 between the Trust and UMB Bank, n.a. is
herein incorporated by reference from Registrant’s Post-Effective
Amendment No. 31 to Registrant’s Registration Statement on form N-1A
(333-122901) filed with the Commission on February 1,
2008.
|
10.
(a)
|
Distribution
and Service Plan for A Class and C Class shares is herein incorporated by
reference from Registrant’s Post-Effective Amendment No. 67 to
Registrant’s Registration Statement on form N-1A (333-122901) filed with
the Commission on August 14,
2009.
|
|
(b)
|
Multiple
Class Plan pursuant to Rule 18f-3 is herein incorporated by reference from
Registrant’s Post-Effective Amendment No. 67 to Registrant’s Registration
Statement on Form N-1A (333-122901) filed with the Commission on August
14, 2009.
|
|
11.
|
Opinion of Counsel regarding
legality of issuance of shares and other matters – filed
herewith.
|
|
12.
|
Opinion
of Counsel as to Tax Matters – filed
herewith.
|
|
13.
|
Other
Material Contracts
|
|
(a)
|
Co-Administration Agreement dated
March 25, 2009 between the Trust and UMB Fund Services, Inc. and Mutual
Fund Administration Corporation is herein incorporated by reference from
Registrant’s Post-Effective Amendment No. 56 to Registrant’s Registration
Statement on form N-1A (333-122901) filed with the Commission on April 1,
2009.
|
|
(b)
|
Fund Accounting Servicing
Agreement dated March 25, 2009 between the Trust and UMB Fund Services,
Inc. is herein incorporated by reference from Registrant’s Post-Effective
Amendment No. 56 to Registrant’s Registration Statement on form N-1A
(333-122901) filed with the Commission on April 1,
2009.
|
|
(c)
|
Transfer Agency Agreement dated
March 25, 2009 between the Trust and UMB Fund Services, Inc. is herein
incorporated by reference from Registrant’s Post-Effective Amendment No.
56 to Registrant’s Registration Statement on form N-1A (333-122901) filed
with the Commission on April 1, 2009.
|
|
(d)
|
Operating Expense Limitation
Agreement between Liberty Street Advisors, Inc. and the Trust on behalf of
the Liberty Street Horizon Fund is herein incorporated by reference from
Registrant’s Post-Effective Amendment No. 67 to Registrant’s Registration
Statement on form N-1A (333-122901) filed with the Commission on August
14, 2009.
|
|
14.
|
Consent of Independent Registered
Public Accounting Firm
|
|
(a)
|
From
Briggs, Bunting & Dougherty, LLP – filed
herewith.
|
|
(b)
|
From
Tait, Weller & Baker, LLP – filed
herewith.
|
|
15.
|
Not
Applicable.
|
|
16.
|
Powers
of Attorney
|
|
(a)
|
Power of Attorney for Charles H.
Miller dated June 24, 2009 (1)
|
|
(b)
|
Power of Attorney for Ashley T.
Rabun dated June 24, 2009 (1)
|
|
(c)
|
Power
of Attorney for William H. Young dated June 24, 2009 (1)
|
|
(d)
|
Power of Attorney for Eric M.
Banhazl dated June 24, 2009 (1)
|
|
17.
|
(a)
|
Proxy
Card -
filed herewith
|
|
(b)
|
Statement
of Additional Information of the Target Fund dated September 1, 2008 (1)
|
|
(c)
|
Semi-Annual
Report to Shareholders of the Target Fund dated October 31, 2008 (1)
|
|
(d)
|
Annual Report to Shareholders of
the Target Fund dated April 30, 2009 (1)
|
Signature
|
Title
|
|
*
|
||
Ashley
T. Rabun
|
Trustee
|
|
*
|
||
William
H. Young
|
Trustee
|
|
*
|
||
Charles
H. Miller
|
Trustee
|
|
/s/ John P. Zader
|
||
John
P. Zader
|
Trustee
and President
|
|
*
|
||
Eric
M. Banhazl
|
Trustee
and Vice President
|
|
/s/ Rita Dam
|
||
Rita
Dam
|
Treasurer
and Principal Financial and Accounting
Officer
|
Exhibit
|
Exhibit
No.
|
Form
of Agreement and Plan of Reorganization
|
EX.4
|
Opinion
and Consent of Counsel
|
EX.11
|
Opinion
of Counsel as to Tax Matters.
|
EX.12
|
Consent
of Independent Registered Public Accounting Firm from Briggs, Bunting
& Dougherty, LLP
|
EX.14.a
|
Consent
of Independent Registered Public Accounting Firm from Tait, Weller &
Baker, LLP
|
EX.14.b
|
Proxy
Card
|
EX.
17.a
|
M_P#\]V*_Z;O]*[_H_P#D%7LZ3@6U>E;6;&>X^][W&7?3=O<[?NTV;O\`1_H_
MH(V4!]EN';TW:?(I*5+?].?^A_Y%*6_Z<_\`0_\`(J?HT_N-^X)>C3^XW[@D
MIAI_IS_T/_(IX_X8_P#0_P#(JA]8JJAT+.]C?YEW8+SOTJOW&_<%-BP>X">*
MJ-;6Q9,O`0*O3N^IQ_PQ_P"A_P"12C_AC_T/_(KRSTJOW&_<$O2J_<;]P4OW
M3^O_`,W_`-"6?>?ZOXOJ>G^G/_0_\BFEO^G/_0_\BN.^I%57[2R?8W^8'8?O
MKM/1I_<;]P5?+#@EPW;+CGQQNJ82W_3G_H?^13AI=]&YQ^&W_P`@I>C3^XW[
M@DVJMCB]K0UQ$&--!K_%,7K>F_\`TKON;_Y!+TW_`.E=]S?_`""(DDI'Z;_]
M*[[F_P#D%79;<.J''+RZKT!9M(;]+>YNZ6M;^:KBHC_EQW_A4?\`GQR2G__0
M]%I_Y>S/_"F+_P"?,Y7;+:ZF&RU[:ZVZN>X@`?%SE2I_Y>S/_"F+_P"?,Y:"
M2G)SOK!7A5Y;W4/<,$V.N$M!-5--69?=7SN=LOKKJJ=LWV_Z*O\`2)9?UBQ,
M7(-):7@0V6S)M=59FU5;7-#=MF/CV_I/4_G%;MZ5T^[U/5H;8+W%]H?+@XEG
MV=^]KCM
M?3/^VI9?\GABJ>XJ_P#_UO06O_\`*;>5?^C_`/Y,+BK)\5=BJ6P^6?+<%M-:
MPZ59Q6UQQ]>!+>)4?TSR3FH4!N#;K7[.*J_Z'TGT5A^I6_HI"ULD?I)Q$$E"
M\0%*"-^*\D^RW'%5.;R_H,]K%:3:;:RVD%3!;O#&T: 8>R9J'9.Q5V*NQ5V*NQ5V*NQ
M5V*I%YN_WGTS_MJ67_)X8JGN*O\`_]#T%K__`"FWE7_H_P#^3"XJR?%5&XLK
M2XDADGB61[=N<#,*E&\5Q5CEEY%CLK:**UN_3>R6UBTQQ$H$45EZ@B6101ZW
M))Y(Y6Y1\D^QZ7AS7;M9#PYKY#OY#WU_P#%?HOY
MM)32IZZU]S\>VDU6U/%+BYT5FSVE_I7O:QME;6.W_P"F_1_I**O4Q_7T,K^B
MW?\`%N_(4/\`9N#Z1J-+2PS(,F9=ZSRYSO<[U+??;_I?\(B97]%N_J._(4E*
M^UXO^FK_`,X?WI?:\7_35_YP_O14DE.3]8,C'?T3-:RUCG&IT`.!*\_7HGUC
M_P"0LW_B7+SM7>4^0^;5YCYAY*2225A@>@^I=E=?4<@V.#!Z(U<0/S_-=C]K
MQ?\`35_YP_O7(?4C_E+(_P"('_5KM%0YG^S/_"F+_P"?,Y7;;!56ZPM
|
(a)
|
to
issue and deliver to the Acquired Fund the number of full and fractional
(1) Class A Acquiring Fund Shares equal to the number of full
and fractional Class A Acquired Fund Shares then outstanding,
(2) Class C Acquiring Fund Shares equal to the number of full
and fractional Class C Acquired Fund Shares then outstanding, and
(3) Institutional Class Acquiring Fund Shares equal to the number of
full and fractional Institutional Class Acquired Fund Shares then
outstanding (all references herein to “fractional” shares meaning
fractions rounded to the third decimal place),
and
|
|
(b)
|
assume
all the Acquired Fund’s liabilities described in paragraph 1.3 (the “Liabilities”).
|
Re:
|
Reorganization
of the Forum Funds’ Liberty Street Horizon Fund into the Investment
Managers Series Trust’s Liberty Street Horizon Fund
series
|
(a)
|
the
Plan;
|
(b)
|
the
Registration Statement;
|
(c)
|
such
other instruments and documents related to the formation, organization and
operation of the Acquired Fund and the Acquiring Fund and related to the
consummation of the Reorganization and the transactions contemplated
thereby as we have deemed necessary or appropriate;
and
|
(d)
|
the
certificate attached to this opinion as Exhibit
A.
|
1.
|
That
original documents (including signatures) are authentic; that documents
submitted to us as copies conform to the original documents; and that
there is (or will be prior to the Effective Time) due execution and
delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof;
and
|
2.
|
That
all representations, warranties and statements made or agreed to by the
Acquiring Fund or the Acquired Fund, and their management, employees,
officers, directors and shareholders thereof in connection with the
Reorganization, including but not limited to those set forth in the Plan
(including the exhibits) are true and accurate at all relevant times; and
that all covenants contained in such documents are performed without
waiver or breach of any material provision
thereof.
|
FARMINGDALE, NY
11735
|
To vote by
Internet
1) Read the Proxy Statement and
have the proxy card below at hand.
2) Go to website www.proxyvote.com
3) Follow the instructions
provided on the website.
To vote by
Telephone
1) Read the Proxy Statement and
have the proxy card below at hand.
2)
Call 1-800-690-6903
3) Follow the
instructions.
To vote by
Mail
1) Read the Proxy
Statement.
2) Check the appropriate boxes on
the proxy card below.
3) Sign and date the proxy
card.
4) Return the proxy card in the
envelope provided.
|
SPECIFY YOUR DESIRED ACTION BY A
CHECK MARK IN THE APPROPRIATE SPACE. THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE
PROXY WILL BE VOTED FOR
THE REORGANIZATION.
THE PERSONS NAMED AS PROXIES HAVE DISCRETIONARY AUTHORITY,
WHICH THEY INTEND TO EXERCISE IN FAVOR OF THE PROPOSAL REFERRED TO
AND ACCORDING TO THEIR BEST JUDGMENT
AS TO ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE
MEETING.
|
For
|
Against
|
Abstain
|
||
1.
|
To approve an
Agreement and Plan of Reorganization for the sale of all of the assets of
the Liberty Street Horizon Fund (the "Target Fund"),
currently a series of Forum Funds, to, and the assumption of all of the
liabilities of the Target Fund by, the Liberty Street
Horizon Fund (the "Acquiring Fund"), a newly-created series of Investment
Managers Series Trust, in exchange for the Acquiring
Fund's shares, which would be distributed pro rata by the Target Fund to
the holders of its shares in complete
liquidation of the Target Fund.
|
¨
|
¨
|
¨
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN
BOX]
|
Date
|
Signature (Joint
Owners)
|
Date
|
Re:
|
Investment
Managers Series Trust File No.
333-160451
|
|
1.
|
Include
the following Section 8(a) delaying amendment paragraph on the Form N-14
cover page:
|
|
2
|
Page
2 states that the Acquiring Fund’s Prospectus and SAI are incorporated by
reference into the Proxy statement and copies of the Acquiring Fund’s
documents are available upon request without charge by writing to
IMST. If the Acquiring Fund’s prospectus is incorporated by
reference into the Proxy statement, the fund must deliver a copy of the
Acquired Fund’s Prospectus with the
Proxy.
|
|
3.
|
Page
5, Comparison Fee Table and Examples. Rearrange the Comparison
Fee Table to compare the fees and expenses by shares Class (Target Fund
Class A vs. Acquiring Fund Class A
etc.).
|
|
5.
|
Page
24, Effect of Abstentions and Broker Non-Votes. 2nd
sentence, why the reference to “under the rules of the New York Stock
Exchange”?
|
|
6.
|
Item
17 (Undertakings): if the Registrant is filing a form of opinion on tax
matters, add undertaking to file the final opinion on tax matters in a
post-effective amendment.
|