9
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 13th of August, 2004, by and between Forum
Funds, a Delaware business trust, with its principal office and place of
business at Two ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Trust"), and ▇▇▇▇▇
Investment Advisory Incorporated, a Maryland corporation, with its principal
office and place of business at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Advisor").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment company
and may issue its shares of beneficial interest, no par value (the "Shares"), in
separate series; and
WHEREAS, the Trust desires that the Advisor perform investment advisory
services for each series of the Trust listed in Appendix A hereto (each, a
"Fund" and collectively, the "Funds"), and the Advisor is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Advisor hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs the Advisor, subject to the direction and
control of the Board, to manage the investment and reinvestment of the assets in
each Fund and, without limiting the generality of the foregoing, to provide
other services as specified herein. The Advisor accepts this employment and
agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Trust has delivered to the Advisor
copies of: (i) the Trust's Trust Instrument and Bylaws (collectively, as amended
from time to time, "Organic Documents"); (ii) the Trust's Registration Statement
and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the 1940 Act (the "Registration Statement"); (iii) the
Trust's current Prospectuses and Statements of Additional Information of each
Fund (collectively, as currently in effect and as amended or supplemented, the
"Prospectus"); and (iv) all procedures adopted by the Trust with respect to the
Funds (i.e., repurchase agreement procedures), and shall promptly furnish the
Advisor with all amendments of or supplements to the foregoing. The Trust shall
deliver to the Advisor: (x) a certified copy of the resolution of the Board of
Trustees of the Trust (the "Board") appointing the Advisor and authorizing the
execution and delivery of this Agreement; (y) a copy of all proxy statements and
related materials relating to the Funds; and (z) any other documents, materials
or information that the Advisor shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Advisor has delivered, or will deliver within 45 days, to the
Trust a copy of its code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act (the "Code"). The Advisor shall promptly furnish the Trust
with all amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST
In order for the Advisor to perform the services required by this
Agreement, the Trust: (i) shall cause all service providers to the Trust to
furnish information to the Advisor and to assist the Advisor as may be required;
and (ii) shall ensure that the Advisor has reasonable access to all records and
documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISOR
Subject to the delegation of any of the following duties to one or more
persons as permitted by Section 9 of this Agreement, the Advisor, at its own
expense, shall render the following services to the Trust:
(a) The Advisor will make decisions with respect to all purchases and
sales of securities and other investment assets on behalf of each Fund
consistent with the Fund's investment objectives, policies and restrictions. To
carry out such decisions, the Advisor is hereby authorized, as agent and
attorney-in-fact for the Trust, for the account of, at the risk 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 and other investments for the Funds, the Advisor 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, including voting of proxies with respect to
securities owned by each Fund.
Consistent with Section 28(e) of the Securities and Exchange Act of
1934, as amended, the Advisor may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Advisor may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Advisor or its affiliates.
Whenever the Advisor simultaneously places orders to purchase or sell the same
asset on behalf of a Fund and one or more other accounts advised by the Advisor,
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.
(b) The Advisor will report to the Board at each meeting thereof as
requested by the Board all material changes in each Fund since the prior report,
and will also keep the Board informed of important developments affecting the
Trust, the Funds and the Advisor, and on its own initiative, will furnish the
Board from time to time with such information as the Advisor may believe
appropriate for this purpose, whether concerning the individual companies whose
securities are included in the Funds' holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which the Funds maintain investments,
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or otherwise. The Advisor will also furnish the Board with such statistical and
analytical information with respect to investments of the Funds as the Advisor
may believe appropriate or as the Board reasonably may request. In making
purchases and sales of securities and other investment assets for the Funds, the
Advisor will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Organic Documents and Registration
Statement, the limitations in the 1940 Act, the Securities Act, the Internal
Revenue Code of 1986, as amended, and other applicable laws and the investment
objectives, policies and restrictions of the Funds.
(c) The Advisor will from time to time employ or associate with such
persons as the Advisor believes to be particularly fitted to assist in the
execution of the Advisor's duties hereunder, the cost of performance of such
duties to be borne and paid by the Advisor. No obligation may be incurred on the
Trust's behalf in any such respect.
(d) On an annual basis, the Advisor shall report on its compliance with
its Code to the Board and upon the written request of the Trust, the Advisor
shall permit the Trust, or its representatives to examine the reports required
to be made to the Advisor under the Code. The Advisor will notify the Trust of
any change of control of the Advisor and any changes in the key personnel who
are either the portfolio manager(s) of the Fund or senior management of the
Advisor, in each case prior to or promptly after such change.
(e) The Advisor 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 1940 Act. The Advisor 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 Advisor pursuant to this
Agreement required to be prepared and maintained by the Advisor or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust, which are in possession of the Advisor, shall be the
property of the Trust. The Trust, or its representatives, shall have access to
such books and records at all times during the Advisor's normal business hours.
Upon the reasonable request of the Trust, copies of any such books and records
shall be provided promptly by the Advisor to the Trust or its representatives.
(f) The Advisor will cooperate with each Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to those accountants for the performance of the accountants' duties.
(g) The Advisor will provide the Funds' custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Funds' assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, the Advisor is
responsible for assisting in the fair valuation of all Fund assets and will use
its reasonable efforts to arrange for the provision of prices from parties who
are not affiliated persons of the Advisor for each asset for which the Funds'
fund accountant does not obtain prices in the ordinary course of business.
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(h) The Advisor shall authorize and permit any of its directors,
officers and employees who may be duly elected as Trustees or officers of the
Trust to serve in the capacities in which they are elected.
(i) The Advisor shall have no duties or obligations pursuant to this
Agreement (other than the continuation of its preexisting duties and
obligations) during any period in which the Fund invests all (or substantially
all) of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Trust shall pay the Advisor,
with respect to each Fund, a fee at an annual rate as listed in Appendix A
hereto. Such fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. Reimbursement shall be
payable monthly in arrears on the first day of each calendar month for services
performed under this Agreement during the prior calendar month. If fees begin to
accrue in the middle of a month or if this Agreement terminates before the end
of any month, all fees for the period from that date to the end of that month or
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement with respect to a Fund, the Trust shall pay to the Advisor such
compensation as shall be payable prior to the effective date of termination.
(b) The Advisor shall reimburse expenses of each Fund or waive its fees
to the extent necessary to maintain a Fund's expense ratio at an agreed-upon
amount for a period of time specified in a separate letter of agreement. The
Advisor's reimbursement of a Fund's expenses shall be estimated and paid to the
Trust monthly in arrears, at the same time as the Trust's payment to the Advisor
for such month.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
(d) The Trust shall be responsible for and assumes the obligation for
payment of all of its expenses, including: (i) the fee payable under this
Agreement; (ii) the fees payable to each administrator under an agreement
between the administrator and the Trust; (iii) expenses of issue, repurchase and
redemption of Shares; (iv) interest charges, taxes and brokerage fees and
commissions; (v) premiums of insurance for the Trust, its trustees and officers,
and fidelity bond premiums; (vi) fees and expenses of third parties, including
the Trust's independent public accountant, custodian, transfer agent, dividend
disbursing agent and fund accountant; (vii) fees of pricing, interest, dividend,
credit and other reporting services; (viii) costs of membership in trade
associations; (ix) telecommunications expenses; (x) funds' transmission
expenses; (xi) auditing, legal and compliance expenses; (xii) costs of forming
the Trust and maintaining its
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existence; (xiii) costs of preparing, filing and printing the Trust's
Prospectuses, subscription application forms and shareholder reports and other
communications and delivering them to existing shareholders, whether of record
or beneficial; (xiv) expenses of meetings of shareholders and proxy
solicitations therefor; (xv) costs of maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, of
calculating the net asset value of Shares and of preparing tax returns; (xvi)
costs of reproduction, stationery, supplies and postage; (xvii) fees and
expenses of the Trust's trustees and officers; (xviii) the costs of personnel
(who may be employees of the Advisor, an administrator or their respective
affiliated persons) performing services for the Trust; (xix) costs of Board,
Board committee, shareholder and other corporate meetings; (xx) SEC registration
fees and related expenses; (xxi) state, territory or foreign securities laws
registration fees and related expenses; and (xxii) all fees and expenses paid by
the Trust in accordance with any distribution or service plan or agreement
related to similar matters.
SECTION 5. STANDARD OF CARE
(a) The Trust shall expect of the Advisor, and the Advisor will give
the Trust the benefit of, the Advisor's best judgment and efforts in rendering
its services to the Trust. The Advisor shall not be liable hereunder for mistake
of judgment or mistake of law or in any event whatsoever, except for lack of
good faith, provided that nothing herein shall be deemed to protect, or purport
to protect, the Advisor against any liability to the Trust or to the Trust's
security holders to which the Advisor would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Advisor's duties hereunder, or by reason of the Advisor's reckless disregard of
its obligations and duties hereunder.
(b) The Advisor shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Advisor's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
date above after approval by (1) a majority of the outstanding voting securities
of that Fund and (2) a majority of the Board who are not interested parties of
the Trust.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of one year from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; provided that
such continuance is specifically approved at least annually: (i) by the Board or
by the vote of a majority of the outstanding voting securities of the Fund, and,
in either case; (ii) 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 as to a
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Fund, the Advisor may continue to render to that Fund the services described
herein in the manner and to the extent permitted by the 1940 Act and the rules
and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty: (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Advisor; or (ii) by the Advisor on 60 days' written notice to the
Trust. This Agreement shall terminate immediately upon its assignment.
SECTION 7. ACTIVITIES OF THE ADVISOR
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Advisor's right, or the
right of any of the Advisor's directors, officers or employees 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 ADVISOR
The Advisor represents and warrants that: (i) it is either registered
as an investment Advisor under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect); (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
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 self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; and (iv) will promptly
notify the Trust of the occurrence of any event that would disqualify the
Advisor from serving as an investment Advisor of an investment company pursuant
to Section 9(a) of the 1940 Act or otherwise.
SECTION 9. SUBADVISORS
(a) At its own expense, the Advisor may carry out any of its
obligations under this Agreement by employing, subject to the direction and
control of the Board, one or more persons who are registered as investment
advisors pursuant to the Advisers Act ("Subadvisors"). Despite the Advisor's
ability to employ Subadvisors to perform the duties set forth in Section 3 of
this Agreement, the Advisor shall retain overall supervisory responsibility for
the general management and investment of each Fund's assets.
(b) If authorized by exemptive order issued by the SEC to the Advisor
and the Trust or by applicable law, and subject to the review and approval of
the Board, the Advisor shall (i) evaluate, select, and recommend Subadvisors to
manage all or a portion of each Fund's assets, (ii) enter into and amend
Sub-Advisory Agreements with new or current Subadvisors; (iii) allocate and,
when appropriate, reallocate each Fund's assets among multiple Subadvisors; (iv)
terminate and replace any Subadvisor; (v) monitor and evaluate each Subadvisor's
performance;
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(vi) implement procedures reasonably designed to ensure that Subadvisors comply
with the each applicable Fund's investment objective, policies, and
restrictions.
(c) Each Subadvisor's employment will be evidenced by a separate
written agreement approved by the Board and, if required by the 1940 Act, by the
shareholders of each applicable Fund.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Advisor 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 Advisor's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Funds.
SECTION 11. RIGHTS TO NAME
If the Advisor ceases to act as investment Advisor to the Trust or any
Fund whose name includes the term "BrownIA" (the "▇▇▇▇") or if the Advisor
requests in writing, the Trust shall take prompt action to change the name of
the Trust or any such Fund to a name that does not include the ▇▇▇▇. The Advisor
may from time to time make available without charge to the Trust for the Trust's
use any marks or symbols owned by the Advisor, including marks or symbols
containing the ▇▇▇▇ or any variation thereof, as the Advisor deems appropriate.
Upon the Advisor's request in writing, the Trust shall cease to use any such
▇▇▇▇ or symbol at any time. The Trust acknowledges that any rights in or to the
▇▇▇▇ and any such marks or symbols that may exist on the date of this Agreement
or arise hereafter are, and under any and all circumstances shall continue to
be, the sole property of the Advisor. The Advisor may permit other parties,
including other investment companies, to use the ▇▇▇▇ in their names without the
consent of the Trust. The Trust shall not use the ▇▇▇▇ in conducting any
business other than that of an investment company registered under the 1940 Act
without the permission of the Advisor.
SECTION 12. MISCELLANEOUS
(a) No provisions of this Agreement 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 1940 Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall affect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
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(d) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of New York.
(e) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement between those parties with respect to
the subject matter hereof, whether oral or written.
(f) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(g) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(j) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund of the Trust are separate and
distinct from the assets and liabilities of each other Fund and that no Fund
shall be liable or shall be charged for any debt, obligation or liability of any
other Fund, whether arising under this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Advisor shall be liable at law or in equity for the Advisor's obligations
under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof and each
party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
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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
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
▇▇▇▇▇ INVESTMENT ADVISORY INCORPORATED
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chief Financial Officer
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FORM OF
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix A
(A) FEES
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
▇▇▇▇▇ Advisory International Fund 1.00%
(B) OUT-OF-POCKET EXPENSES
The Fund will reimburse the Advisor for the amounts paid to an independent
consultant to evaluate the performance of new and current Subadvisors up to an
annual maximum of 0.05% of the Fund's average daily net assets, No
reimbursements will be permitted unless the Board has authorized the retention
of the independent consultant.
A-1