FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of March 1, 2004, by and between Forum Funds, a
Delaware statutory trust, with its principal office and place of business at Two
Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000 (the "Trust"), and XX Xxxxxxx Capital
Growth, LLC., a Delaware limited liability company, with its principal office
and place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx (the "Adviser").
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 Adviser perform investment advisory
services for each series of the Trust listed in Appendix A hereto (each a
"Fund"), and the Adviser 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 Adviser hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs the Adviser, 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 Adviser 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 Adviser
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 with respect to each Fund 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 each Fund (e.g., repurchase agreement procedures), and shall
promptly furnish the Adviser with all amendments of or supplements to the
foregoing (collectively the "Procedures"). The Trust shall deliver to the
Adviser: (x) a certified copy of the resolution of the Board of Trustees of the
Trust (the "Board") appointing the Adviser and authorizing the execution and
delivery of this Agreement; (y) a copy of all proxy statements and related
materials relating to each Fund; and (z) any other documents, materials or
information that the Adviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
(c) The Adviser 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 Adviser 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 Adviser to perform the services required by this
Agreement, the Trust: (i) shall cause all service providers to the Trust to
furnish information to the Adviser and to assist the Adviser as may be required;
and (ii) shall ensure that the Adviser has reasonable access to all records and
documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser will make decisions with respect to all purchases and
sales of securities and other investment assets in each Fund. To carry out such
decisions, the Adviser 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 each
Fund. In all purchases, sales and other transactions in securities and other
investments for each 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, 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 "Exchange Act"), the Adviser may allocate brokerage on
behalf of each Fund to broker-dealers who provide research services. Subject to
compliance with Section 28(e), the Adviser may cause a Fund to pay to any
broker-dealer who provides research services a commission that exceeds the
commission the Fund might have paid to a different broker-dealer for the same
transaction. The Adviser may aggregate sales and purchase orders of the assets
of each 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 asset on behalf of a 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.
The Trust acknowledges that Xxxxx, Xxxxxxxx & Xxxx, Inc., a registered
broker-dealer ("AH&H"), is an affiliate of the Adviser. The Trust further
acknowledges that the Adviser may allocate brokerage on behalf of each Fund to
AH&H, and may cause a Fund to pay AH&H a commission that exceeds the commission
the Fund might have paid to a different broker-dealer for the same transaction;
provided that (1) the Adviser receives services from AH&H and such payments are
otherwise consistent with Section 28(e) of the Exchange Act; and (2) the
transaction is otherwise consistent with the Adviser's duty to obtain the best
execution for Fund portfolio transactions as well as the Trust's Rule 17e-1
Procedures. Any such brokerage allocated to AH&H
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shall be effected solely on an agency basis, and the amount of commissions shall
not exceed that which could be obtained by the Funds from AH&H in an arm's
length transaction.
(b) The Adviser 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, each 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 each Fund's holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which each Fund maintain investments, or otherwise. The Adviser will also
furnish the Board with such statistical and analytical information with respect
to investments of each Fund as the Adviser may believe appropriate or as the
Board reasonably may request. In making purchases and sales of securities and
other investment assets for each Fund, the Adviser shall comply with the
directions 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 each Fund. The Adviser shall also comply with the Procedures provided that
the Adviser has adequate notice of the Procedures.
(c) The Adviser will 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.
(d) The Adviser will report to the Board all material matters related
to the Adviser. On an annual basis, the Adviser shall report on its compliance
with its Code to the Board and upon the written request of the Trust, the
Adviser shall permit the Trust, or its representatives to examine the reports
required to be made to the Adviser under the Code. The Adviser will notify the
Trust of any change of control of the Adviser and any changes in the key
personnel who are either the portfolio manager(s) of a Fund or senior management
of the Adviser, in each case prior to or promptly after such change.
(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 1940 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 pursuant to this
Agreement required to be prepared and maintained by the Adviser 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 Adviser 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 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 its representatives.
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(f) The Adviser 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 Adviser will provide each Fund's custodian and fund accountant
on each business day with such information relating to all transactions
concerning each Fund's assets as the custodian and fund accountant may
reasonably require. In accordance with the Procedures, the Adviser is
responsible for assisting in the fair valuation of all Fund assets using its
reasonable efforts to arrange for the provision of prices from parties who are
not affiliated persons of the Adviser for each asset for which a Fund's fund
accountant does not obtain prices in the ordinary course of business.
(h) The Adviser 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 Adviser 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 a 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 Adviser,
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. 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 Adviser such
compensation as shall be payable prior to the effective date of termination.
(b) The Adviser 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
Adviser'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 Adviser
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,
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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 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 Adviser, 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 Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust. The Adviser 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 Adviser against any liability to the Trust or to the Trust's
security holders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties hereunder, or by reason of the Adviser's reckless disregard of
its obligations and duties hereunder.
(b) The Adviser 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 Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
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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 two years 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 Fund, the Adviser 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 Adviser; or (ii) by the Adviser on 60 days' written notice to the
Trust. This Agreement shall terminate immediately upon its assignment.
SECTION 7. ACTIVITIES OF THE 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 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 ADVISER.
The Adviser represents and warrants that: (i) it is either registered
as an investment adviser 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) or exempt from registration under the Advisers Act;
(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 Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
SECTION 9. SUBADVISERS
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At its own expense, the Adviser 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 advisers pursuant to
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. The Adviser shall not be liable hereunder for any act or omission of any
Subadviser, except to exercise good faith in the employment of the Subadviser
and except with respect to matters as to which the Adviser assumes
responsibility in writing.
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 any 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 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 or the shareholders of any Fund.
SECTION 11. RIGHTS TO NAME
If the Adviser ceases to act as investment adviser to the Trust or any
Fund whose name includes the term "Xxxxx Xxxxxxxx" (the "Xxxx") or if the
Adviser 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 Xxxx. The
Adviser may from time to time make available without charge to the Trust for the
Trust's use any marks or symbols owned by the Adviser, including marks or
symbols containing the Xxxx or any variation thereof, as the Adviser deems
appropriate. Upon the Adviser's request in writing, the Trust shall cease to use
any such xxxx or symbol at any time. The Trust acknowledges that any rights in
or to the Xxxx and any such marks or symbols which 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 Adviser. The Adviser may permit other
parties, including other investment companies, to use the Xxxx in their names
without the consent of the Trust. The Trust shall not use the Xxxx in conducting
any business other than that of an investment company registered under the 1940
Act without the permission of the Adviser.
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.
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(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(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 Adviser shall be liable at law or in equity for the Adviser'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,
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insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
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/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
President
XX XXXXXXX CAPITAL GROWTH, LLC
/S/ Xxxx Xxxxxxx
-----------------------------------------
By: Xxxx Xxxxxxx
Title: President
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FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix A
FEE AS A % OF THE ANNUAL
FUNDS OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
Xxxxx Xxxxxxxx Small Cap Growth Fund 1.00%
