(File Nos. 2-67052; 811-3032)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
FORUM FUNDS
(Name of Registrant as Specified in its Charter)
BOARD OF TRUSTEES OF REGISTRANT
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and 0-11
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
FORUM FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
June 6, 2000
Dear Shareholder:
The Board of Trustees of Forum Funds (the "Trust") has called a special
meeting of shareholders of Investors Equity Fund (the "Fund"), a series of the
Trust, to approve a new investment advisory agreement (the "New Agreement")
between the Fund and Peoples Heritage Bank ("Peoples"). The meeting is scheduled
to be held on July 6, 2000.
H.M. Payson & Co. ("Payson") currently serves as the Fund's investment
adviser under an investment advisory agreement (the "Current Agreement") between
the Trust and Payson. Peoples currently serves as the Fund's sub-adviser under a
sub-advisory agreement (the "Sub-Advisory Agreement") between Payson and
Peoples. The Board of Trustees proposes to terminate the Current Agreement and
replace Payson as investment adviser to the Fund by adopting the New Agreement.
The Investment Company Act of 1940 requires a shareholder vote when a fund
changes its investment adviser and adopts a new investment advisory agreement.
As a result, the Board of Trustees seeks shareholder approval of the New
Agreement. If shareholders of the Fund approve the New Agreement, Peoples will
replace Payson as the Fund's investment adviser. The New Agreement will have
substantially the same terms as the Current Agreement between the Trust and
Payson.
After careful consideration, the Board of Trustees unanimously approved
this proposal and recommends that you vote "FOR" the proposal.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN
ORDER TO AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE
ADJOURNMENTS, PLEASE READ THE PROXY STATEMENT AND CAST YOUR VOTE. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN JULY 5, 2000. IF YOU HAVE ANY
QUESTIONS ABOUT THE PROXY STATEMENT, PLEASE DO NOT HESITATE TO CALL US AT (800)
943-6786.
We appreciate your participation and prompt response and thank you for
your continued support.
Sincerely,
/s/ John Y. Keffer
John Y. Keffer
President and Chairman of
the Board of the Trustees
<PAGE>
FORUM FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
-------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JULY 6, 2000
-------------------------
To the Shareholders of Investors Equity Fund:
Notice is hereby given that a special meeting of shareholders (the
"Meeting") of Investors Equity Fund (the "Fund"), a series of Forum Funds (the
"Trust"), will be held at the offices of Forum Administrative Services, LLC, Two
Portland Square, Portland, Maine 04101 on July 6, 2000 at 10:00 a.m. (Eastern
time). The purpose of the Meeting is:
1. To approve a new investment advisory agreement between the
Fund and Peoples Heritage Bank (the "Proposal");
2. To transact such other business as may properly come before
the Meeting.
The Trust's Board of Trustees has fixed the close of business on May
26, 2000 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Meeting or any postponement or adjournment
thereof. Please carefully read the accompanying Proxy Statement.
By Order of the Board of Trustees,
/s/ Leslie K. Klenk
Leslie K. Klenk
Secretary
Portland, Maine
June 6, 2000
YOUR VOTE IS VERY IMPORTANT NO MATTER HOW MANY SHARES YOUR OWN. IN ORDER TO
AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO INDICATE
YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE>
TABLE OF CONTENTS PAGE
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INTRODUCTION...............................................................1
THE PROPOSAL...............................................................2
Evaluation By the Board of Trustees...............................2
Discussion of the New Agreement and the Current Agreement.........3
Advisory Fees.....................................................3
Information About Payson..........................................4
Information About Peoples.........................................4
OTHER MATTERS..............................................................4
ADDITIONAL INFORMATION.....................................................5
Investment Adviser, Administrator and Principal Underwriter.......5
REPORTS TO SHAREHOLDERS....................................................5
ADVISORY AGREEMENT (EXHIBIT A)
PROXY
<PAGE>
PROXY STATEMENT
INVESTORS EQUITY FUND
FORUM FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
--------------------
SPECIAL MEETING OF SHAREHOLDERS
JULY 6, 2000
-------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of Forum Funds (the "Trust"), a
Delaware business trust, on behalf of Investors Equity Fund (the "Fund"), a
series of the Trust. The Trust is a registered open-end investment company whose
executive offices are located at Two Portland Square, Portland, Maine 04101.
Proxies will be voted at a special meeting of shareholders (the "Meeting") of
the Fund to be held at the offices of the Trust's administrator, Forum
Administrative Services, LLC ("Forum"), Two Portland Square, Portland, Maine
04101 on July 6, 2000, at 10:00 a.m. (Eastern time), or at any postponement or
adjournment thereof for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. The Notice of Meeting, this Proxy Statement and
the proxy card are first being mailed to shareholders on or about June 6, 2000.
The Board has fixed the close of business on May 26, 2000 as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of, and to vote at, the Meeting and any postponement or adjournment
thereof. As of the Record Date there were 2,508,353.115 shares outstanding of
the Fund. Each shareholder will be entitled to one vote for each whole share and
a fractional vote for each fractional share held. Shares may be voted in person
or by proxy. Shareholders holding one-third of the outstanding shares of the
Fund as of the Record Date present in person or by proxy will constitute a
quorum for the transaction of business regarding the Fund at the Meeting. All
properly executed proxies received in time to be voted at the Meeting will be
counted at the Meeting, and any adjournment thereof, in accordance with the
instructions marked thereon or otherwise provided therein.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, shares represented by abstentions and "broker non-votes"
will be counted as present, but not as votes cast at the Meeting. Broker
non-votes are shares held in street name for which the broker indicates that
instructions have not been received from the beneficial owners and other persons
entitled to vote and for which the broker lacks discretionary voting authority.
Under the Investment Company Act of 1940 (the "1940 Act"), the affirmative vote
necessary to approve a matter under consideration may be determined with
reference to a percentage of votes present at the Meeting. For this reason,
abstentions and broker non-votes have the effect of votes "AGAINST" the
Proposal. In completing proxies, therefore, shareholders should be aware that
checking the box labeled "ABSTAIN" would result in the shares covered by the
proxy being treated as if they were voted "AGAINST" the Proposal.
IF YOU DO NOT SPECIFY A CHOICE ON THE PROXY, PROPERLY EXECUTED PROXIES THAT
ARE RETURNED IN TIME TO BE VOTED AT THE MEETING WILL BE VOTED "FOR" THE APPROVAL
OF THE PROPOSAL DESCRIBED IN THIS PROXY STATEMENT.
If a quorum is not present at the Meeting, or if a quorum is present at the
Meeting, but sufficient votes to approve the Proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies with respect to the Proposal. Any
adjournment will require the affirmative vote of a majority of shares
<PAGE>
represented in person or by proxy at the Meeting. In that case, the persons
named as proxies will vote all proxies that they are entitled to vote for the
Proposal as "FOR" such an adjournment; provided, however, any proxies required
to be voted against the Proposal will be voted "AGAINST" such adjournment. A
shareholder vote may be taken on the Proposal prior to adjournment if sufficient
votes have been received and it is otherwise appropriate.
Approval of the Proposal requires the affirmative vote of the lesser of (a)
67% or more of the shares of the Fund present at the Meeting or represented by
proxy if the holders of more than 50% of the outstanding shares are present or
represented by proxy at the Meeting or (b) more than 50% of the outstanding
shares of the Fund.
Any shareholder may revoke his or her proxy at any time prior to exercise
thereof by giving written notice of revocation or by executing and delivering a
later dated proxy to Forum Shareholder Services, LLC, the Trust's transfer
agent, at Two Portland Square, Portland, Maine, 04101, or by personally casting
a vote at the Meeting. The solicitation of proxies will be primarily by mail but
may also include telephone or oral communications by the officers of the Trust
or by regular employees of Forum or their affiliates. Peoples Heritage Bank
("Peoples") will bear all of the costs of the Meeting and the preparation,
printing and mailing of this Proxy Statement and proxy cards.
THE PROPOSAL
The Meeting is being called to approve a new investment advisory agreement
(the "New Agreement") between the Trust and Peoples. Shareholders of the Fund
are being asked to approve the New Agreement so that Peoples may serve as the
Fund's investment adviser. H.M. Payson & Co. ("Payson"), located at One Portland
Square, Portland, Maine 04112, currently serves as the Fund's investment adviser
pursuant to an investment advisory agreement dated December 5, 1997, between the
Trust and Payson (the "Current Agreement"). The Current Agreement, with respect
to the Fund, was initially approved by the Board at a meeting held on December
5, 1997 and by shareholders of the Fund on December 16, 1997. The Board renewed
the Current Agreement for the Fund's 1999-2000 fiscal year on August 13, 1999.
If shareholders of the Fund approve the New Agreement, the Current Agreement
will terminate and Peoples will become the Fund's sole adviser as of the date of
shareholder approval.
Evaluation By the Board of Trustees
On May 15, 2000, the Board met and discussed the Proposal and its possible
effect on the Trust, the Fund and its shareholders and evaluated the New
Agreement. The form of the New Agreement is attached as Exhibit A. Because
Peoples has served as the Fund's sub-adviser since the Fund's inception, the
Board is aware of Peoples' ability to serve as the Fund's adviser. The Board
considered several factors in approving and recommending the New Agreement to
Fund shareholders including, Peoples' service as sub-adviser to the Fund and
Peoples' success in generating returns that exceeded its benchmark since the
Fund's inception. The Board considered the fact that Peoples is comprised of
experienced investment professionals who would continue to manage the Fund in
the same manner as it had been managed since its inception. The Board also
considered that the advisory fee under the New Agreement is the same as the
advisory fee under the Current Agreement and that, like Payson, Peoples is
expected to voluntarily waive a portion of its advisory fee in order to maintain
the Fund's expense ratio at 1.10% of the Fund's average daily net assets. Based
upon its review, the Board concluded that the New Agreement is reasonable, fair
and in the best interests of the Fund and its shareholders. Accordingly, after
consideration of the above factors, and such other factors and information it
deemed relevant, the Board unanimously approved the New Agreement and voted to
recommend its approval to the Fund's shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL.
If the Fund's shareholders approve the Proposal, the New Agreement will
become effective immediately on the date of the Meeting or any adjournment
thereof and Peoples will become the investment adviser to the Fund.
<PAGE>
Discussion of the New Agreement and the Current Agreement
The New Agreement is substantially the same in all material respects as
the Current Agreement. Under the terms of the New and Current Agreements
(collectively, the "Agreements"), the investment adviser manages the investment
and reinvestment of the assets of the Fund. Under the Agreements, the investment
adviser places orders for the purchase and sale of the Fund's investments
directly with brokers and dealers selected by the adviser in its discretion.
Commissions paid to brokers or dealers are determined by research and trading
services provided along with the best execution available for the client.
Commissions are also used to pay for third-party research services through "soft
dollar" arrangements. Such services may include research on proxy issues,
economic and business cycle research and industry/company specific reports. The
investment adviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Fund's investments and
effecting portfolio transactions for the Fund. The investment adviser also
furnishes to the Board, which has overall responsibility for the business and
affairs of the Trust, periodic reports concerning the performance and operation
of the Fund. At the investment adviser's own expense, it may carry out any of
its obligations under the Agreements by employing, subject to the direction and
control of the Board, one or more investment sub-advisers. A sub-adviser's
employment must be evidenced by a separate agreement approved by the Board and
if required, by the shareholders of the Fund. The New Agreement provides that
the investment adviser shall not be liable for any act or omission of a
sub-adviser, except to exercise good faith in the employment of the sub-adviser
and except with respect to matters as to which the investment adviser assumes
responsibility in writing.
In contrast to the Current Agreement, the New Agreement provides that
the investment adviser will not receive compensation under the New Agreement
during any period in which the Fund invests all (or substantially all) of its
investment assets in another registered, open-end management investment company,
or separate series thereof, a structure commonly referred to as a master-feeder
arrangement.
Each Agreement provides that the investment adviser shall not be liable
to the Trust for any action or inaction of the investment adviser in the absence
of bad faith, willful misfeasance, or gross negligence or based upon
information, instructions or requests with respect to the Fund made to the
investment adviser by a duly authorized officer of the Trust. In addition, each
Agreement is terminable without penalty by the Board, by a vote of a majority of
the voting securities of the Fund on 60 days' written notice to the investment
adviser, or by the investment adviser on 60 days' written notice to the Trust,
and will automatically terminate in the event of its assignment.
The terms of each Agreement obligate the investment adviser to manage
the Fund in accordance with all applicable laws and regulations. The provision
of investment advisory services by the investment adviser to the Fund is not
exclusive under the terms of the Agreements.
If the New Agreement is approved by the Fund's shareholders, it will
remain in effect, unless earlier terminated, for an initial term expiring
twenty-four months from the date of effectiveness and will continue in effect
thereafter for successive twelve month periods, provided that such continuance
is specifically approved at least annually (i) by the Board of Trustees 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 Trustees who are not parties to the New
Agreement or interested persons of any such party (other than as Trustees of the
Trust).
Advisory Fees
Under the Current Agreement, Payson receives an advisory fee at an
annual rate of 0.65% of the average daily net assets of the Fund. For fiscal
year ended May 31, 1999, the total advisory fee payable to Payson by the Fund
was $201,585. The Fund paid Payson $94,606 which represents the Fund's payment
after Payson agreed to waive a portion of its fee totaling $106,979. Under the
current sub-advisory agreement between Payson and Peoples, Peoples' receives
from Payson, a subadvisory fee of 0.25% of the daily net assets of the Fund.
Under the New Agreement, Peoples would receive from the Fund an advisory fee at
an annual rate of 0.65% of the average daily net assets of the Fund. The new
advisory fee is at or below the industry average as characterized by the Fund's
category peer group maintained by Lipper Inc. If the New Agreement and proposed
fee had been in effect for the fiscal year ended May 31, 1999, the Fund would
<PAGE>
have paid Peoples $201,585 in advisory fees (excluding waivers). Like Payson,
Peoples is expected to voluntarily waive a portion of its advisory fee in order
to maintain the Fund's expense ratio at 1.10% of the Fund's average daily net
assets. The waiver may be reduced or eliminated at any time.
Information About Payson
Payson was founded in Portland, Maine in 1854 and was incorporated in
Maine in 1987, making it one of the oldest investment firms in the United States
operating under its original name. Payson is a registered broker-dealer and
investment adviser and is a member of the National Association of Securities
Dealers, Inc. Payson provides investment management services through an
investment advisory division and a trust division. As of March 31, 2000, Payson
had approximately $1.5 billion in assets under management. Set forth below is
information about the principal executive officer and directors of Payson, each
of whom may be contacted at H.M. Payson & Co., One Portland Square, Portland,
Maine 04112:
<TABLE>
<S> <C>
------------------------------------------------------------ ---------------------------------------------------------
Name Principal Occupation
------------------------------------------------------------ ---------------------------------------------------------
John H. Walker President and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Adrian L. Asherman Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Michael R. Currie Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Harold J. Dixon Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
John C. Downing, CFA Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Teresa M. Esposito Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
William O. Hall III, CFA Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
John C. Knox, CFA Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Thomas M. Pierce Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
Peter E. Robbins, CFA Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
William N. Weickert, Jr., CFA Partner and Managing Director
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
Information About Peoples
Peoples, the Fund's sub-adviser, was until May 10, 2000, a subsidiary
of Peoples Heritage Financial Group, a multibank holding company. As a result of
the acquisition by Peoples Heritage Financial Group of Banknorth Group, Inc. on
May 10, 2000, Peoples Heritage Financial Group changed its name to Banknorth
Group, Inc. As of March 31, 2000, Peoples Heritage Financial Group, which owned
100% of the stock of Peoples, had assets of approximately $13.8 billion and its
affiliated banks managed assets in their trust departments of approximately $3.2
billion. Set forth below is information about the principal executive officer
and directors of Peoples, each of whom may be contacted at BankNorth, One
Portland Square, Portland, Maine 04112:
<TABLE>
<S> <C>
------------------------------------------------------------ ---------------------------------------------------------
Name Principal Occupation
------------------------------------------------------------ ---------------------------------------------------------
Angelo P. Pizzagalli Chairman and Director
------------------------------------------------------------ ---------------------------------------------------------
Thomas J. Amidon Director
------------------------------------------------------------ ---------------------------------------------------------
Susan C. Crampton, C.P.A. Director
------------------------------------------------------------ ---------------------------------------------------------
George W. Dougan Director
------------------------------------------------------------ ---------------------------------------------------------
Luther F. Hackett Director
------------------------------------------------------------ ---------------------------------------------------------
Patrick E. Welch Director
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
OTHER MATTERS
Management of the Fund does not know of any matters to be presented at
the Meeting other than the Proposal. If any other matter properly comes before
the Meeting, the shares represented by proxies will be voted with respect
thereto in the discretion of the person or persons voting the proxies.
<PAGE>
It is anticipated that, following the Meeting, the Fund will not hold
any meetings of shareholders except as required by Federal or Delaware state
law. Shareholders wishing to submit proposals for inclusion in a proxy statement
for a subsequent shareholder meeting should send proposals to the Secretary of
the Trust, Leslie K. Klenk, in care of Forum Administrative Services, LLC, Two
Portland Square, Portland, Maine 04101.
As of the Record Date, the Trustees and officers of the Trust, as a
group, owned beneficially less than 1% of the outstanding shares of the Fund. As
of the Record Date, the following shareholders beneficially owned more than 5%
of the outstanding shares of the Fund:
<TABLE>
<S> <C> <C>
----------------------------------------------- --------------------------- ------------------------------------------
Name/Address Shares Percentage of Shares of the Fund
----------------------------------------------- --------------------------- ------------------------------------------
BABB & Co. No. 02-6004105
c/o Bank of New Hampshire
P.O. Box 477
Concord, NH 03302-0477 2,176,284.762 86.76%
----------------------------------------------- --------------------------- ------------------------------------------
Allagash & Co. Special
c/o Bank of New Hampshire
P.O. Box 477
Concord, NH 03302-0477 171,177.635 6.82%
----------------------------------------------- --------------------------- ------------------------------------------
</TABLE>
ADDITIONAL INFORMATION
Administrator and Principal Underwriter
The Fund's administrator is Forum Administrative Services, LLC and the
Fund's principal underwriter is Forum Fund Services, LLC. The principal office
of the Fund's administrator and principal underwriter is Two Portland Square,
Portland, Maine 04101.
REPORTS TO SHAREHOLDERS
THE FUND WILL FURNISH, UPON REQUEST AND WITHOUT CHARGE, EACH PERSON TO
WHOM THIS PROXY STATEMENT IS DELIVERED WITH A COPY OF THE FUND'S LATEST ANNUAL
REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED MAY 31, 1999 AND SEMI-ANNUAL
REPORT FOR THE PERIOD ENDED NOVEMBER 30, 1999. TO REQUEST A COPY, PLEASE CALL
THE FUND'S DISTRIBUTOR, FORUM FUND SERVICES, LLC, TWO PORTLAND SQUARE, PORTLAND,
MAINE 04101, AT 888-263-5593.
By Order of the Board of Trustees,
/s/ Leslie K. Klenk
Leslie K. Klenk
Secretary
<PAGE>
EXHIBIT A
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
WITH
PEOPLES HERITAGE BANK
AGREEMENT made as of the ____ day of ____, 2000, between Forum Funds
(the "Trust"), a business trust organized under the law of the State of Delaware
with its principal place of business at Two Portland Square, Portland, Maine
04101, and Peoples Heritage Bank (the "Adviser "), a corporation organized under
the law of the State of Maine with its principal place of business at One
Portland Square, Portland, Maine.
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
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
(a) 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 Schedule 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.
(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 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 promptly notify Adviser 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.
<PAGE>
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 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 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
Two Portland Square
Portland, ME 04101
Attn: Secretary
<PAGE>
and if to the Adviser, at:
Peoples Heritage Bank
One Portland Square
P.O. Box 31
Portland, ME 04112
Attn: Gary Robinson
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
David I. Goldstein
Vice President
PEOPLES HERITAGE BANK
Gary Robinson
Executive Vice President
<PAGE>
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
WITH
PEOPLES HERITAGE BANK
SCHEDULE A
AS OF ____ __, 2000
Fee as a % of the
Annual Average Daily Net Assets
Funds of the Fund
Investors Equity Fund 0.65%
<PAGE>
FORUM FUNDS
INVESTMENT ADVISORY AGREEMENT
FORUM FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Revoking any such prior appointments, the undersigned appoints David I.
Goldstein, Don L. Evans and Leslie K. Klenk (or, if only one shall act, that
one) proxies with the power of substitution to vote all of the shares of
Investors Equity Fund (the "Fund"), a series of Forum Funds (the "Trust"),
registered in the name of the undersigned at the Special Meeting of Shareholders
of the Fund to be held at the offices of Forum Administrative Services, LLC, Two
Portland Square, Portland, Maine 04101, on July 6, 2000, at 10:00 a.m. (Eastern
time), and at any postponements or adjournments thereof.
The shares of beneficial interest represented by this Proxy will be voted in
accordance with the instructions given by the undersigned below. IF NO CHOICE IS
SPECIFIED ON THE PROXY, PROPERLY EXECUTED PROXIES THAT ARE RETURNED IN TIME TO
BE VOTED AT THE MEETING WILL BE VOTED "FOR" THE APPROVAL OF THE PROPOSAL SET
FORTH BELOW. The Trust has proposed the Proposal. The Board of Trustees
recommends voting "FOR" the Proposal.
PROPOSAL: To approve a new Investment Advisory Agreement
between the Fund and Peoples Heritage Bank.
FOR _____ AGAINST _____ ABSTAIN _____
(NOTE: Checking the box labeled "Abstain" will result in the shares covered by
the Proxy being treated as if they were voted "Against" the Proposal.) Receipt
is acknowledged of the Notice and Proxy Statement for the Special Meeting of
Shareholders to be held on July 6, 2000. PLEASE SIGN AND DATE THIS PROXY IN THE
SPACE PROVIDED. Execution by shareholders who are not individuals must be made
by an authorized signatory. Executors, administrators, trustees, guardians and
others signing in a representative capacity should give their full title as
such.
Authorized Signature Date
Printed Name (and Title if Applicable)
Authorized Signature (Joint Investor or Second Signatory) Date
Printed Name (and Title if Applicable)
<PAGE>
