Exhibit (5)(i)
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
WITH
▇.▇. ▇▇▇▇▇▇ & CO.
AGREEMENT made as of the 5th day of December, 1997, between Forum Funds
(the "Trust"), a business trust organized under the law of the State of Delaware
with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, and ▇.▇. ▇▇▇▇▇▇ & Co. (the "Adviser "), a corporation organized under the
law of the State of Maine with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end management investment company and
is authorized to issue its shares in separate series and classes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advice and is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended ("Adviser Act"); and
WHEREAS, the Trust desires that the Adviser perform investment advisory
and other services as specified in this Agreement for the investment portfolio
or portfolios of the Trust listed on Schedule A hereto (the "Fund" or "Funds"),
each a separate series of the Trust, and the Adviser is willing to provide those
services on the terms and conditions set forth in this Agreement.
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. APPOINTMENT AND DELIVERY OF DOCUMENTS
(a) The Trust hereby appoints the Adviser as investment adviser for the
Fund(s) for the period and on the terms set forth in this Agreement. The Adviser
accepts this appointment and agrees to render its services as investment adviser
for the compensation set forth herein.
(b) The Trust has delivered copies of each of the following documents
and will from time to time furnish the Adviser with any supplements or
amendments to such documents:
(1) the Trust Instrument of the Trust, as in effect on the
date hereof and as amended from time to time ("Trust Instrument");
(2) the Bylaws of the Trust as in effect on the date hereof
and as amended from time to time ("Bylaws");
(3) the Registration Statement under the Act and the
Securities Act of 1933 (the "Securities Act"), as filed with the Securities and
Exchange Commission (the "Commission"), relating to the Fund and its shares and
all amendments thereto ("Registration Statement");
(4) the prospectus(es) and statement(s) of additional
information relating to the Fund(s) ("Prospectus"); and,
(5) all proxy statements, reports to shareholders, advertising
or other materials prepared for distribution to Fund shareholders or the public,
that refer to the Adviser or its clients.
The Trust shall furnish the Adviser with any further documents,
materials or information that the Adviser may reasonably request to enable it to
perform its duties under this Agreement.
SECTION 2. DUTIES OF THE ADVISER
(a) Subject to the direction, control and supervision of the Board of
Trustees of the Trust ("Board"), the Adviser shall direct the investments of the
Fund and shall make decisions with respect to all purchases and sales of
securities and other investment assets in the Fund. To carry out such duties,
the Adviser is hereby authorized, as agent and attorney-in-fact for the Trust,
for the account of, and in the name of the Trust, to place orders and issue
instructions with respect to those transactions of the Fund. In all purchases,
sales and other transactions in securities for the Fund, the Adviser is
authorized to exercise full discretion and act for the Trust in the same manner
and with the same force and effect as the Trust might or could do with respect
to such purchases, sales or other transactions, as well as with respect to all
other things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(b) The Adviser will report to the Board at each meeting thereof all
changes in the Fund since the prior report and will also keep the Board informed
of important developments affecting the Trust, the Fund and the Adviser, and on
its own initiative, will furnish the Board from time to time with such
information as the Adviser may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in the Fund's
holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser will also furnish the Board with such statistical and
analytical information with respect to securities in the Fund as the Adviser may
believe appropriate or as the Board reasonably may request.
(c) In making purchases and sales of securities for the Fund, and
otherwise performing its duties hereunder, the Adviser will comply with the Act
and the rules and regulations thereunder, all other applicable federal and state
laws and regulations, the policies set from time to time by the Board as well as
the limitations imposed by the Trust's Trust Instrument, Bylaws, Registration
Statement under the Act and the Securities Act, the limitations in the Act and
in the Internal Revenue Code of 1986, as amended, in respect of regulated
investment companies and the investment objective, policies and restrictions of
the Fund. Without limiting the foregoing, the Adviser agrees that, in placing
orders with broker-dealers for the purchase or sales of portfolio securities, it
shall attempt to obtain quality execution at favorable security prices; provided
that, consistent with section 28(e) of the Securities and Exchange Act of 1934
(the "Exchange Act"), the exercise of the Adviser's fiduciary duties under this
Advisory Agreement, and any other applicable law, the Adviser may allocate
brokerage on behalf of the Trust to broker-dealers who provide research services
and may cause the Fund to pay these broker-dealers a higher amount of commission
than may be charged by other broker-dealers, subject to the Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits to the Fund over the long term.
In no instance will portfolio securities be purchased from or sold to the
Adviser, or any affiliated person thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder. The Adviser may
aggregate sales and purchase orders of the assets of the Fund with similar
orders being made simultaneously for other accounts advised by the Adviser or
its affiliates. Whenever the Adviser simultaneously places orders to purchase or
sell the same security on behalf of the Fund and one or more other accounts
advised by the Adviser, the orders will be allocated as to price and amount
among all such accounts in a manner believed to be equitable over time to each
account.
(d) The Adviser may from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(e) The Adviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the Act. The Adviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such periods
and in such locations as may be required by applicable law, all documents and
records relating to the services provided by the Adviser under this Agreement
required to be prepared and maintained by the Trust under the Act and the rules
and regulations thereunder, the rules and regulations of any national, state, or
local government entity with jurisdiction over the Trust, including the
Commission and the Internal Revenue Service, including but not limited to,
records relating to Fund transactions and the placing and allocation of
brokerage orders. The books and records pertaining to the Trust that are in
possession of the Adviser shall be the property of the Trust. The Trust, or the
Trust's authorized representatives, shall have access to such books and records
at all times during the Adviser's normal business hours. Upon the reasonable
request of the Trust, copies of any such books and records shall be provided
promptly by the Adviser to the Trust or the Trust's authorized representatives.
(f) The Adviser shall provide the Trust's custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Fund's assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, as amended from
time to time, the Adviser is responsible for assisting in the fair valuation of
all portfolio securities and will use its reasonable efforts to arrange for the
provision of a price(s) from a party(ies) independent of the Adviser for each
portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
(g) To the extent consistent with all applicable federal and/or state
laws and regulations, the Adviser shall authorize and permit any of its
directors, officers and employees who may be elected as Trustees or officers of
the Trust to serve in the capacities in which they are elected.
SECTION 3. EXPENSES
(a) The Adviser shall waive its fee to ensure that the Fund's expense
ratio does not exceed any expense limit described in the prospectus or
applicable to the Fund under the laws or regulations of any state in which Fund
shares are qualified for sale (reduced pro rata for any portion of less than a
year).
(b) If the Fund's expense ratio exceeds the expense limits described in
subsection (a) above after the Adviser has waived its fees, the Adviser shall be
responsible for that portion of the Fund's net expenses that exceed any expense
limit described in the prospectus and the Fund's net expenses (except interest,
taxes, brokerage, fees and other expenses paid by the Fund in accordance with an
effective plan under Rule 12b-1 under the Act and organization expenses, all to
the extent such exceptions are permitted by applicable state law and regulation)
incurred by the Fund during each of the Fund's fiscal years or portion thereof
that this Agreement is in effect that, as to the Fund, in any such year exceeds
any expense limits applicable to the Fund under the laws or regulations of any
state in which Fund shares are qualified for sale (reduced pro rata for any
portion of less than a year).
(c) The Trust hereby confirms that, subject to the foregoing, the Trust
shall be responsible and shall assume the obligation for payment of all the
Trust's other expenses, including: (1) interest charges, taxes, brokerage fees
and commissions; (2) certain insurance premiums; (3) fees, interest charges and
expenses of the Trust's custodian, transfer agent and dividend disbursing agent;
(4) telecommunications expenses; (5) the fees and expenses of the Trust's
independent auditors and of the outside legal counsel appointed by the Board;
(6) costs of the Trust's formation and maintaining its existence; (7) costs of
preparing and printing the Trust's prospectuses, statements of additional
information, account application forms and shareholder reports and delivering
them to existing and prospective shareholders; (8) costs of maintaining books of
original entry for portfolio and fund accounting and other required books and
accounts and of calculating the net asset value of shares of the Trust; (9)
costs of reproduction, stationery and supplies; (10) compensation of the Trust's
Trustees, officers, employees and other personnel performing services for the
Trust who are not officers of the Adviser, of Forum Financial Services, Inc. or
of affiliated persons of either; (11) costs of corporate meetings; (12)
registration fees and related expenses for registration with the Commission and
the securities regulatory authorities of other countries in which the Trust's
shares are sold; (13) state securities law registration fees and related
expenses; (14) the fee payable hereunder and fees and out-of-pocket expenses
payable to Forum Financial Services,
Inc. under any distribution, management or similar agreement; (15) and all other
fees and expenses paid by the Trust under any distribution or shareholder
service plan adopted under Rule 12b-1 under the Act or otherwise.
SECTION 4. STANDARD OF CARE
The Adviser shall use its best judgment and efforts in rendering the
services described in this Agreement. The Adviser shall not be liable to the
Trust for any action or inaction of the Adviser in the absence of bad faith,
willful misconduct or gross negligence or based upon information, instructions
or requests with respect to the Fund made to the Adviser by a duly authorized
officer of the Trust. The Adviser shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement caused
by circumstances beyond its reasonable control.
SECTION 5. COMPENSATION
In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to the Fund, a fee at an annual rate as listed in Appendix A
hereto. These fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first (1st) business day of each calendar month for
services performed hereunder during the prior calendar month. The Adviser's
reimbursement, if any, of the Fund's expenses as provided in Section 4 hereof,
shall be estimated and accrued daily and paid to the Trust monthly in arrears,
at the same time as the Trust's payment to the Adviser for such month.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) With respect to the Fund, this Agreement shall become effective
upon the date first written above; provided that it shall not take effect until
approved by: (1) a majority of the Trust's Trustees, including a majority of the
Trustees who are not interested persons of the Trust; and (2) to the extent
required under section 15(a) of the Act, a majority of the outstanding voting
securities of the Fund to which this Agreement pertains, voting separately by
Fund.
(b) This Agreement shall remain in effect for a period of twenty four
(24) months from the date of its effectiveness and shall continue in effect for
successive twelve-month periods (computed from each anniversary date of
approval) or for such shorter period as may be specified by the Board in giving
its approval as provided below; provided that such continuance is specifically
approved at least annually: (1) by the Board or by the vote of a majority of the
outstanding voting securities of the Fund; and in either case, (2) by a majority
of the Trust's Trustees who are not parties to this Agreement or interested
persons of any such party (other than as Trustees of the Trust); provided
further, however, that if the continuation of this Agreement is not approved,
the Adviser may continue to render the services described herein in the manner
and to the extent permitted by the Act and the rules and regulations thereunder.
The annual approvals provided for herein shall be effective to continue this
Agreement from year to year (or such shorter period referred to above) if given
within a period beginning not more than sixty (60) days prior to such
anniversary, notwithstanding the fact that more than three hundred sixty-five
(365) days may have elapsed since the date on which such approval was last
given. The Trust shall prompty notify Payson should the Agreement not be renewed
pursuant to the procedures set forth in this paragraph.
(c) This Agreement may be terminated at any time, without the payment
of any penalty: (1) by the Board, or by a vote of a majority of the outstanding
voting securities of the Fund on sixty (60) days' written notice to Adviser; or
(2) by the Adviser on sixty (60) days' written notice to the Trust, with copies
to each of the Trust's Trustees at their respective addresses set forth in the
Trust's Registration Statement or at such other address as such persons may
specify to the Adviser. This Agreement shall terminate automatically and
immediately upon assignment by either party.
SECTION 7. ACTIVITIES OF ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors, trustees or employees who may
also be a Trustee, officer or employee of the Trust, or persons otherwise
affiliated with the Trust, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, trust, firm, individual or association.
SECTION 8. REPRESENTATIONS OF ADVISER.
The Adviser represents, warrants and agrees as follows:
(a) The Adviser: (1) is (A) registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect or (B) exempt from registration as an investment
adviser under the Advisers Act; (2) is not prohibited by the Act or the Advisers
Act or otherwise from performing the services contemplated by this Agreement;
(3) has met, and will seek to continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services contemplated by this
Agreement; (4) has the authority to enter into and perform the services
contemplated by this Agreement; and (5) will promptly notify Trust of the
occurrence of any event that would disqualify the Adviser from serving as an
investment adviser of an investment company under Section 9(a) of the Act or
otherwise.
(b) The Adviser has adopted ,or will adopt within forty-five (45) days,
a written code of ethics complying with the requirements of Rule 17j-1 under the
Act and will provide the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen (15) days of the end of the last
calendar quarter of each year that this Agreement is in effect, the president or
a vice-president of the Adviser shall certify that the Adviser has complied with
the requirements of Rule 17j-1 during the previous year and that there has been
no violation of the Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in
response to such violation. Upon the written request of the Trust, the Adviser
shall permit the Trust, its employees or its agents or the appropriate
regulatory authority to examine the reports required to be made to the Adviser
by Rule 17j-1 (c) (1) and all other records relevant to the Adviser's code of
ethics.
(c) The Adviser has provided the Trust with a copy of its Form ADV as
most recently filed with the Securities and Exchange Commission ("SEC") and
promptly will furnish a copy of all amendments to the Trust at least annually.
(d) The Adviser will notify the Trust of any change of control of the
Adviser, including any change of its general partners or twenty-five percent
(25%) of its shareholders, as applicable, and any changes in the key personnel
who are either the portfolio manager(s) of the Fund or senior management of the
Adviser, in each case prior to or promptly after such change.
SECTION 9 . SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the Adviser's supervision, one or
more persons who are registered as investment advisers under the Advisers Act or
who are exempt from registration thereunder ("Subadvisers"). Each Subadviser's
employment will be evidenced by a separate written agreement approved by the
Board and, if required, by the shareholders of the applicable Fund.
SECTION 10. NOTICES
Any notice or other communication required to be given under this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:
Forum Funds
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Secretary
and if to the Adviser, at:
▇.▇. ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SECTION 11. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trust's Trustees, in their individual capacities, and Fund
shareholders shall not be liable for any obligations of the Trust or of the Fund
under this Agreement, and the Adviser agrees that, in asserting any rights or
claims under this Agreement, it shall look only to the assets and property of
the Trust or the Fund to which the Adviser's rights or claims relate in
settlement of such rights or claims, and not to the Trustees of the Trust, in
their individual capacities, or Fund shareholders.
SECTION 12. MISCELLANEOUS
(a) No provision of this Agreement with respect to the Fund may be
amended or modified in any manner except by a written agreement properly
authorized and executed by both parties hereto and, if required by the Act, by a
vote of a majority of the outstanding voting securities of the Fund.
(b) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware .
(d) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FORUM FUNDS
_/s/ ▇▇▇▇ Kaplan_______________________
▇▇▇▇ ▇▇▇▇▇▇
Vice President
▇.▇. ▇▇▇▇▇▇ & CO.
_/s/ ▇▇▇▇ ▇. Downing_______________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
WITH
▇.▇. ▇▇▇▇▇▇ & CO.
SCHEDULE A
AS OF DECEMBER 5, 1997
Fee as a % of the
Annual Average Daily Net Assets
Funds of the Fund
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Investors Equity Fund 0.65%