SUB-ADVISORY AGREEMENT
BETWEEN
XXXXX INVESTMENT ADVISORY INCORPORATED
AND XXXXXX XXXXX & PARTNERS LIMITED
AGREEMENT made as of the 26th day of September, 2006, by and between Xxxxx
Investment Advisory Incorporated, a Maryland corporation, with its principal
office and place of business at 000 X. Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000, (the "Advisor") and Xxxxxx Xxxxx & Partners Limited, a
corporation with its principal office and place of business at Xxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx/XX XX0 0XX (the "Subadvisor").
WHEREAS, Advisor has entered into an Investment Advisory Agreement dated
the 27th day of January, 2003, ("Advisory Agreement") with Forum Funds, a
Delaware business trust, with its principal office and place of business at Xxx
Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000, (the "Trust");
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;
WHEREAS, pursuant to the Advisory Agreement, and subject to the direction
and control of the Board of Trustees of the Trust (the `Board"), the Advisor
acts as investment advisor for the series of the Trust listed on Schedule A
hereto (the "Fund");
WHEREAS, it is intended that the Trust be a third-party beneficiary under
this Agreement;
WHEREAS, the Advisor retained the Subadviser to perform investment
advisory services for the Fund pursuant to a Sub-Advisory Agreement dated as of
September 14, 2004 (the "Existing Sub-Advisory Agreement");
WHEREAS, on or about May 17, 2006 the Subadviser agreed to be acquired by
Mellon International Limited on or about October 2/nd/ , 2006 (the "Change of
Control Transaction");
WHEREAS, the Change of Control Transaction will effect an assignment and
therefore an automatic and immediate termination of the Existing Sub-Advisory
Agreement;
WHEREAS, Advisor desires to retain the Subadvisor, after giving effect to
the Change of Control Transaction, to perform investment advisory services for
the Fund and Subadvisor 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 Advisor and the Subadvisor hereby agree as
follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Advisor hereby employs Subadvisor, subject to the direction and
control of the Board, to manage the investment and reinvestment of the assets
in the Fund and, without limiting the generality of the foregoing, to provide
other services as specified herein. The Subadvisor accepts this employment and
agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Advisor has delivered, or has arranged
for the delivery, to the Subadvisor 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
for the Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), (iv) each plan of distribution or similar
document adopted by the Trust under Rule 12b-l under the 1940 Act ("Plan") and
each current shareholder service plan or similar document adopted by the Trust
("Service Plan"); and (v) all procedures adopted by the Trust with respect to
the Fund (i.e., repurchase agreement procedures), and shall promptly furnish
the Subadvisor with all amendments of or supplements to the foregoing. The
Advisor shall deliver to the Subadvisor (x) a certified copy of the resolution
of the Board appointing the Subadvisor and authorizing the execution and
delivery of this Agreement (y) a copy of all proxy statements and related
materials relating to the Fund; and (z) any other documents, materials or
information that the Subadvisor shall reasonably request to enable it to
perform its duties pursuant to this Agreement.
(c) The Subadvisor has delivered to the Advisor and the Trust (i) a copy
of its Form ADV as most recently filed with the SEC and (ii) a copy of its code
of ethics complying with the requirements of Rule 17j-l under the 1940 Act (the
"Code"). The Subadvisor shall promptly furnish the Advisor and Trust with all
amendments of or supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE ADVISOR
In order for the Subadvisor to perform the services required by this
Agreement, the Advisor (i) shall cause all service providers to the Trust to
furnish information to the Subadvisor and assist the Subadvisor as may be
required and (ii) shall ensure that the Subadvisor has reasonable access to all
records and documents maintained by the Trust, the Advisor or any service
provider to the Trust and (iii) shall deliver to the Subadvisor all material it
provides to the Board in accordance with the Advisory Agreement.
SECTION 3. DUTIES OF THE SUBADVISOR
(a) Subject to the control and supervision of the Board and the Advisor,
the Subadvisor, at its own expense, will make decisions with respect to
purchases and sales of securities and other investment assets by the Fund with
respect to all or a portion of the Fund's assets allocated to the Subadvisor by
the Advisor for investment management purposes. The Subadvisor shall effect
purchases and sales of securities and other investment assets in behalf of the
Fund consistent with the Fund's investment objective, policies and
restrictions. To carry out such decisions, the Subadvisor 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 Fund, the Subadvisor
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 the Fund. The Subadvisor is also responsible for
monitoring significant events that could affect the value of securities held in
that portion of the Fund's portfolio it manages and recommending fair value
pricing for affected securities in a manner consistent with the Trust's
Portfolio Securities Valuation Procedures.
Consistent with Section 28(e) of the Securities and Exchange Act of 1934,
as amended, the Subadvisor may allocate brokerage on behalf of the Funds to
broker-dealers who provide
2
research services. The Subadvisor may aggregate sales and purchase orders of
the assets of the Fund with similar orders being made simultaneously for other
accounts advised by the Subadvisor or its affiliates. Whenever the Subadvisor
simultaneously places orders to purchase or sell the same asset on behalf of
the Fund and one or more other accounts advised by the Subadvisor, the
Subadvisor will allocate the order as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(b) The Subadvisor will report to the Board at each meeting thereof as
requested by the Advisor or the Board all material 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 Subadvisor, and on its own
initiative, will furnish the Board from time to time with such information as
the Subadvisor 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, the economic, social or political conditions
prevailing in each country in which the Fund maintains investments, or
otherwise. The Subadvisor will also furnish the Board with such statistical and
analytical information with respect to investments of the Fund as the
Subadvisor may believe appropriate or as the Board reasonably may request. In
making purchases and sales of securities and other investment assets for the
Fund, the Subadvisor 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 Fund.
(c) The Subadvisor will from time to time employ or associate with such
persons as the Subadvisor believes to be particularly fitted to assist in the
execution of the Subadvisor's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadvisor. No obligation may be incurred on
the Trust's or Advisor's behalf in any such respect.
(d) The Subadvisor will report to the Board all material matters related
to the Subadvisor. On an annual basis, the Subadvisor shall report on its
compliance with its Code to the Advisor and to the Board and upon the written
request of the Advisor or the Trust, the Subadvisor shall permit the Advisor
and the Trust, or their respective representatives to examine the reports
required to be made to the Sub advisor under the Code. The Subadvisor will
notify the Advisor and the Trust of any change of control of the Subadvisor and
any changes in the key personnel who are either the portfolio manager(s) of the
Fund or senior management of the Subadvisor, in each case prior to or promptly
after such change.
(e) The Subadvisor 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 Subadvisor 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 Subadvisor
pursuant to this Agreement required to be prepared and maintained by the
Subadvisor 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 Subadivsor, shall be the property of the Trust. The Advisor and the Trust,
or their respective representatives, shall have access to such books and
records at all times during the Subadvisor's normal business hours. Upon the
reasonable request of the Advisor or the Trust, copies of any such books and
records shall be provided promptly by the Subadvisor to the Advisor and the
Trust, or their respective representatives.
(f) The Subadvisor will cooperate with the Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to the accountants for the performance of the accountants' duties.
3
(g) The Subadvisor will provide the Fund's custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Fund's assets under the Subadvisor's control as the custodian
and fund accountant may reasonably require. In accordance with procedures
adopted by the Board, the Subadvisor 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 [A] parties who are not affiliated persons of the
Subadvisor for each asset for which the Fund's fund accountant does not obtain
prices in the ordinary course of business.
(h) The Subadvisor 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.
(i) The Subadvisor 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 Advisor shall pay the
Subadvisor, with respect to the Fund, a fee at an annual rate as listed in
Appendix B hereto. Such fees shall be accrued by the Advisor 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 the Fund, the Advisor shall pay to the
Subadvisor such compensation as shall be payable prior to the effective date of
termination.
(b) No fee shall be payable hereunder with respect to the 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.
SECTION 5. STANDARD OF CARE
(a) The Advisor shall expect of the Subadvisor, and the Subadvisor will
give the Advisor and the Fund the benefit of, the Subadvisor's judgment and
best efforts in rendering its services hereunder. The Subadvisor shall not be
liable to the Advisor or the Trust hereunder for any mistake of judgment 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 Subadvisor
against any liability to the Advisor or the Trust to which the Subadvisor would
otherwise be subject to reason of willful misfeasance, bad faith or gross
negligence in the performance of the Subadvisor's duties hereunder, or by
reason of the Subadvisor's reckless disregard of its obligations and duties
hereunder.
(b) The Subadvisor shall not be liable to the Advisor or the Trust for any
action taken or failure to act in good faith reliance upon: (i) information,
instructions or requests, whether oral or written, with respect to the Fund
made to the Subadvisor by a duly authorized officer of the Advisor or the
Trust; (ii) the advice of counsel to the Trust; and (iii) any written
instruction or certified copy of any resolution of the Board.
4
(c) The Subadvisor 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 Subadvisor'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 the Fund
immediately upon the later of approval 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) and, if required by applicable law, by a
vote of a majority of the outstanding voting securities of the Fund.
(b) This Agreement shall remain in effect with respect to the 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 the Fund, the Subadvisor 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 the Fund at any time,
without the payment of any penalty, (i) by the Board, by a vote of a majority
of the outstanding voting securities of the Fund or by the Advisor on 60 days'
written notice to the Subadvisor or (ii) by the Subadvisor on 60 days' written
notice to the Trust. This Agreement shall terminate immediately (x) upon its
assignment or (y) upon termination of the Advisory Agreement.
SECTION 7. ACTIVITIES OF THE SUBADVISOR
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadvisor's right, or
the right of any of the Subadvisor'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 SUBADVISOR.
The Subadvisor represents and warrants to the Advisor that:
(a) It is 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);
(b) It is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement;
(c) It 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
5
(d) It will promptly notify the Advisor and the Trust of the occurrence of
any event that would disqualify the Subadvisor from serving as an investment
advisor of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of the Fund shall not be
liable for any obligations of the Trust or of the Fund under this Agreement,
and the Subadvisor 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 Subadvisor'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 Fund.
SECTION 10. 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 approved by the Trust in the manner set forth in
Section 6(b) hereof.
(b) Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
(c) 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 Delaware.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(e) 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.
(f) 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. This Agreement shall be construed as if drafted jointly by
both the Advisor and Subadvisor and no presumptions shall arise favoring any
party by virtue of authorship of any provision of this Agreement.
(g) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(h) 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.
(i) No affiliated person, employee, agent, director, officer or manager of
the Subadvisor shall be liable at law or in equity for the Subadvisor's
obligations under this Agreement.
(j) 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.
6
(k) 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.
(l) Subadvisor warrants and represents and Advisor acknowledges that
Subadvisor is authorized and regulated in the conduct of its investment
business in the United Kingdom by the Financial Services Authority ("FSA") and
that under the regulations of the FSA Subadvisor shall classify Advisor as an
"Intermediate Customer."
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
XXXXX INVESTMENT ADVISORY INCORPORATED
/s/ X.X.Xxxxxxxxx
--------------------------------------
Name: X.X.Xxxxxxxxx
Title: CFO
XXXXXX XXXXX & PARTNERS LIMITED
/s/ Xxxx XxXxxxxxx
--------------------------------------
Name: Xxxx XxXxxxxxx
Title: Managing Director
7
SUBADVISORY AGREEMENT
BETWEEN
XXXXX INVESTMENT ADVISORY INCORPORATED
AND XXXXXX XXXXX & PARTNERS LIMITED
APPENDIX A
SERIES OF THE TRUST:
Xxxxx Advisory International Fund
SUBADVISORY AGREEMENT
BETWEEN
XXXXX INVESTMENT ADVISORY INCORPORATED
AND XXXXXX XXXXX & PARTNERS LIMITED
APPENDIX B
FEE AS OF % OF THE ANNUAL
AVERAGE DAILY NET ASSETS OF FUND UNDER
FUNDS OF THE TRUST MANAGEMENT BY SUBADVISOR
------------------ --------------------------------------
Xxxxx Advisory International Fund 0.60% of first $100 million, 0.50% of
amount thereafter
-2-
