FORUM FUNDS
MONARCH FUNDS
CODE OF ETHICS
MAY 15, 2000
AS AMENDED JUNE 8, 2004
SECTION 1. INTRODUCTION
This Code of Ethics ("Code") has been adopted by Forum Funds and
Monarch Funds (collectively, the "Trust") with respect to each of their
investment portfolios (each a "Fund") to establish standards and procedures for
the detection and prevention of activities by which persons having knowledge of
the investments and investment intentions of a Fund may abuse their fiduciary
duties to the Trust and to deal with other types of conflict of interest
situations.
Upon discovering a violation of the Code, the Board of Trustees (the
"Board") may impose such sanctions as it deems appropriate, including, among
other things, a letter of censure or suspension or termination of the employment
or other position of the violator.
SECTION 2. DEFINITIONS
(A) ACCESS PERSON means:
(1) any Trust officer;
(2) any trustees, including any independent trustee; and
(3) any individual in a control relationship with a Fund who
obtains information concerning recommendations made to a
Fund about the purchase or sale of a security.
(B) BENEFICIAL OWNER means "beneficial owner" as defined in Rule
16a-1(a)(2) under the securities and Exchange Act of 1934 Act except that the
determination of direct or indirect beneficial ownership shall apply to all
Covered Securities which an Access Person owns or acquires. A beneficial owner
of a security is any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a DIRECT OR
INDIRECT PECUNIARY INTEREST (the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the subject securities) in
a security.
INDIRECT PECUNIARY INTEREST in a security includes securities held by a
person's immediate family sharing the same household. IMMEDIATE FAMILY means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law (including adoptive relationships).
(C) CONTROL means the power to exercise a controlling influence over
the management or policies of a company, unless such power is solely the result
of an official position with such company.
(D) COVERED OFFICER means the principal executive, financial, and
accounting officers of the Trust.
(E) COVERED SECURITY means any security except:
(1) direct obligations of the Government of the United
States;
(2) bankers' acceptances and bank certificates of deposit;
(3) commercial paper and debt instruments with a maturity at
issuance of less than 366 days and that are rated in one of
the two highest rating categories by a nationally recognized
statistical rating organization;
(4) repurchase agreements covering any of the foregoing; and
(5) shares of registered open-end investment companies.
(F) INVESTMENT PERSONNEL means any individual who controls the Trust
and who obtains information concerning recommendations made to the Trust
regarding the purchase or sale of securities by the Trust.
(G) SECURITY HELD OR TO BE ACQUIRED by the Trust means
(1) any Covered Security which, within the most recent 15
days (x) is or has been held by the Trust or (y) is being or
has been considered by the Trust or an investment adviser to
the Trust for purchase by the applicable Trust; and
(2) any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security.
(H) PURCHASE OR SALE includes, among other things, the writing of an
option to purchase or sell.
SECTION 3. PROHIBITED TRANSACTIONS
(A) PROHIBITION AGAINST FRAUDULENT CONDUCT. No Access Person shall use
any information concerning the investments or investment intentions of a Fund,
or the Access Person's ability to influence such investment intentions, for
personal gain or in a manner detrimental to the interests of a Fund.
In addition, no affiliated person of a Fund shall, directly or
indirectly in connection with the purchase or sale of a security held or to be
acquired by a Fund:
(1) employ any device, scheme or artifice to defraud a Fund;
(2) make to a Fund or to a Fund's investment advisers or
distributor any untrue statement of a material fact or omit
to state to any of the foregoing a
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material fact necessary in order to make the statements
made, in light of the circumstances under which they are
made, not misleading;
(3)engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon a Fund;
or
(4) engage in any manipulative practice with respect to a
Fund.
(B) OTHER PROHIBITED TRANSACTIONS. Access Persons are prohibited from:
(1) inducing or causing a Fund to take action or to fail to
take action, for personal benefit rather than for the
benefit of the Fund;
(2) accepting anything other than of DE MINIMUS value or any
other preferential treatment from any entity with which a
Fund does business;
(3) establishing or maintaining an account at any entity
through which securities transactions may be effected
without written notice to the designated Review Officer
prior to establishing such an account;
(4) using knowledge of portfolio transactions of a Fund for
their personal benefit or the personal benefit of their
friends or relatives;
(5) violating the anti-fraud provisions of the federal or
state securities laws;
(6) serving on the boards of directors of publicly traded
companies, absent prior authorization based upon a
determination by the Review Officer that the board service
would be consistent with the interests of the Fund and its
shareholders.
(C) UNDUE INFLUENCE; DISCLOSURE OF PERSONAL INTEREST. No Access Person
shall cause or attempt to cause any Fund to purchase, sell or hold any security
in a manner calculated to create any personal benefit to the Access Person. No
Access Person shall recommend any securities transactions for a Fund without
having disclosed the Access Person's interest, if any, in such securities or the
issuer thereof, including, without limitation:
(1) the Access Person's direct or indirect beneficial
ownership of any securities of such issuer;
(2) any position with such issuer or its affiliates; and
(3) any present or proposed business relationship between
such issuer or its affiliates, on the one hand, and such
person or any party in which such person has a significant
interest, on the other hand.
(D) CORPORATE OPPORTUNITIES. All Access Persons are prohibited from
taking personal advantage of any opportunity properly belonging to a Fund.
(E) CONFIDENTIALITY. Except as required in the normal course of
carrying out an Access Person's business responsibilities, Access Persons are
prohibited from revealing information relating to the investment intentions or
activities of any Fund, or securities that are being considered for purchase or
sale on behalf of any Fund.
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SECTION 4. REPORTING REQUIREMENTS
(A) ACCESS PERSON REPORTING. All Access Persons (as identified in
Appendix A) must report the information described in this Section with respect
to transactions in any Covered Security in which the Access Person has, or by
reason of such transaction acquires, any direct or indirect beneficial
ownership. All Access Persons and Investment Personnel must report to the Review
Officer unless they are otherwise required to report to the distributor, an
investment adviser or administrator of the Trust or a Fund pursuant to a Code of
Ethics adopted by those entities and, with respect to the distributor and
investment adviser's Code of Ethics, approved by the Trustees. Covered Officers
must also comply with the provisions of Appendix B.
(B) TRUSTEE REPORTING. An independent trustee (a trustee who is not an
interested person of the Trust as defined in Section 2(a)(19) of the Investment
Company Act of 1940 Act) need only report a transaction if the trustee knew at
the time of the transaction or, in the ordinary course of fulfilling the
trustee's official duties as a trustee, should have known that, during the 15
day period immediately preceding or after the date of the transaction in a
Covered Security by the trustee, such Covered Security is or was purchased or
sold or was being considered for purchase or sale by a Fund or an investment
adviser to the Trust or a Fund.
(C) EXCLUSIONS FROM REPORTING. Purchases or sales of Covered Securities
in an account in which an Access Person has no direct or indirect influence or
control are not subject to the reporting requirements of this Section.
(D) INITIAL HOLDING REPORTS. No later than ten (10) days after the
person becomes an Access Person, an Access Person must report the following
information:
(1) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct
or indirect beneficial ownership when the person became an
Access Person;
(2) the name of any broker, dealer or bank with whom the
Access Person maintained an account in which any securities
were held for the direct or indirect benefit of the Access
Person as of the date the person became an Access Person;
and
(3) the date that the report is submitted by the Access
Person.
(E) QUARTERLY TRANSACTION REPORTS. No later than ten (10) days after
the end of a calendar quarter, an Access Person must report the following
information:
(1) with respect to any transaction during the quarter in a
Covered Security in which the Access Person had, or by
reason of such transaction acquired, any direct or indirect
beneficial ownership:
(a) the date of the transaction, the title, the
interest rate and maturity date (if applicable),
the number of shares and the principal amount of each
Covered Security involved;
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(b) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(c) the price of the Covered Security at which
the transaction was effected;
(d) the name of the broker, dealer or bank with or
through which the transaction was effected; and
(e) the date that the report is submitted by the
Access Person.
(2) with respect to any account established by the Access
Person in which any securities were held during the quarter
for the direct or indirect benefit of the Access Person:
(a) the name of the broker, dealer or bank with whom
the Access Person established the account;
(b) the date the account was established; and
(c) the date that the report is submitted by the
Access Person.
(F) ANNUAL HOLDINGS REPORTS. Annually, an Access Person must report the
following information (which information must be current as of a date no more
than thirty (30) days before the report is submitted):
(1) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct
or indirect beneficial ownership;
(2) the name of any broker, dealer or bank with whom the
Access Person maintains an account in which any securities
are held for the direct or indirect benefit of the Access
Person; and
(3) the date that the report is submitted by the Access
Person.
(G) CERTIFICATION OF COMPLIANCE. Each Access Person is required to
certify annually (in the form of Appendix C) that the Access Person has read and
understood the Code and recognizes that the Access Person is subject to the
Code. Further, each Access Person is required to certify annually that the
Access Person has complied with all the requirements of the Code and that the
Access Person has disclosed or reported all personal securities transactions
pursuant to the requirements of the Code.
(H) ALTERNATIVE REPORTING. The submission to the Review Officer of
duplicate broker trade confirmations and statements on all Covered Securities
transactions shall be deemed to satisfy these reporting requirements. The annual
holdings report may be satisfied by confirming annually, in writing, the
accuracy of the records maintained by the Review Officer and recording the date
of the confirmation.
(I) REPORT QUALIFICATION. Any report may contain a statement that the
report shall not be construed as an admission by the person making the report
that he or she has any direct or indirect beneficial ownership in the Covered
Securities to which the report relates.
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(J) ACCOUNT OPENING PROCEDURES. Access Persons shall provide written
notice to the Review Officer prior to opening any account with any entity
through which a Covered Securities transaction may be effected. In addition, all
Access Persons will promptly:
(1) provide full access to the Trust, its agents and
attorneys to any and all records and documents which the
Trust considers relevant to any securities transactions or
other matters subject to the Code;
(2) cooperate with the Trust, or its agents and attorneys,
in investigating any securities transactions or other matter
subject to the Code;
(3) provide the Trust, its agents and attorneys with an
xplanation (in writing if requested) of the facts and
circumstances surrounding any securities transaction or
other matter subject to the Code; and
(4) promptly notify the Review Officer or such other
individual as the Trust may direct, in writing, from time to
time, of any incident of noncompliance with the Code by any
Access Person.
SECTION 5. REVIEW OFFICER
(A) DUTIES OF REVIEW OFFICER. A Review Officer shall be appointed by
the Trust's President to:
(1) review all securities transaction and holdings reports
and shall maintain the names of persons responsible for
reviewing these reports;
(2) identify all Access Persons who are required to make
these reports and promptly inform each Access Person of the
requirements of this Code;
(3) compare, on a quarterly basis, all Access Person Covered
Securities transactions with each Fund's completed portfolio
transactions to determine whether a Code violation may have
occurred;
(4) maintain a signed acknowledgment by each person who is
then an Access Person, in the form of Appendix A;
(5) identify persons who are Investment Personnel of the
Trust and inform those persons of their requirements to
obtain prior written approval from the Review Officer prior
to directly or indirectly acquiring ownership of a security
in any private placement or initial public offering; and
(6) annually prepare a written report to the Trustees that
(a) describes any issues under the code of ethics or
procedures since the last report to the Trustees,
including, but not limited to, information about
material violations of the code or procedures and
sanctions imposed in response to the material
violations; and
(b) certifies that the Fund has adopted procedures
reasonably necessary to prevent Access Persons from
violating the code.
(B) POTENTIAL TRADE CONFLICT. When there appears to be a transaction
that conflicts with the Code, the designated Review Officer shall request a
written explanation of the Access
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Person's transaction. If after post-trade review, it is determined that there
has been a violation of the Code, a report will be made by the designated Review
Officer with a recommendation of appropriate action to the Board.
(C) REQUIRED RECORDS. The Review Officer shall maintain and cause to be
maintained:
(1) a copy of any code of ethics adopted by the Trust which has
been in effect during the previous five (5) years in an easily
accessible place;
(2) a record of any violation of any code of ethics, and of any
action taken as a result of such violation, in an easily
accessible place for at least five (5) years after the end of the
fiscal year in which the violation occurs;
(3) a copy of each report made by an Access Person as required by
Section 4 of this Code for at least five (5) years after the end
of the fiscal year in which the report is made, the first two (2)
years in an easily accessible place;
(4) a list of all persons who are, or within the past five years
have been, required to make reports or who were responsible for
reviewing these reports pursuant to any code of ethics adopted by
a Trust, in an easily accessible place;
(5) a copy of each written report and certification required
pursuant to Section 5(c) of this Code for at least five (5) years
after the end of the fiscal year in which it is made, the first
two (2) years in an easily accessible place; and
(6) a record of any decision, and the reasons supporting the
decision, approving the acquisition by Investment Personnel of
securities under Section 5(a)(v) of this Code, for at least five
(5) years after the end of the fiscal year in which the approval
is granted.
SECTION 6. BOARD REVIEW
(A) The Board of Trustees, including a majority of the
independent trustees, shall:
(1) approve the code of ethics of the Trust, the code of ethics
of each investment adviser and principal underwriter of the Trust
before initially retaining their services, and any material
changes to these codes within six months of such change;
(2) review any material changes to the code of ethics of the
administrator of the Trust within six months of such change;
(3) base its approval of a code of ethics, and any material
changes to a code of ethics, on a determination that the code
contains provisions reasonably necessary to prevent access
persons (as defined in the respective codes) from engaging in
prohibited conduct;
(4) receive, prior to approving a code or any amendment to a
code, a certification from the Trust, investment adviser or
principal underwriter that it has adopted procedures reasonably
necessary to prevent access persons from violating the code; and
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(5) receive and consider, no less frequently than annually
(a) a written report from the Trust, investment
adviser, administrator or principal underwriter
describing any issues, material violations or
sanctions arising under the Code; and
(b) a written certification from the Trust,
investment adviser, administrator or principal
underwriter, as applicable, that it has adopted
procedures reasonably necessary to prevent Access
Persons from violating its code.
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FORUM FUNDS
MONARCH FUNDS
CODE OF ETHICS
APPENDIX A
ACCESS PERSONS
Costas Azariadas
James C. Cheng
J. Michael Parish
FORUM FUNDS
MONARCH FUNDS
CODE OF ETHICS
APPENDIX B
ADDITIONAL PROVISIONS PURSUANT TO
SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002
SECTION 1: COVERED OFFICERS/PURPOSE
This Appendix C has been adopted pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 (the "Act") and applies solely to the principal
executive, financial, and accounting officers of the Trust (each a "COVERED
OFFICER").
This Appendix has been adopted for the specific purpose of promoting
honest and ethical conduct, compliance with applicable laws and governmental
rules and regulations and accountability for adherence to the Code. Each Covered
Officer should adhere to a high standard of business ethics and should be
sensitive to situations that may give rise to conflicts of interest.
The Covered Officers and the date of effectiveness of this Appendix to
them are:
David I. Goldstein, August 28, 2003
Stacey E. Hong, August 28, 2003
SECTION 2: CONFLICTS OF INTEREST
A "conflict of interest" occurs when a Covered Officer's private
interest interferes with the interests of, or the officer's service to, the
Trust. For example, a conflict of interest would arise if a Covered Officer
receives improper personal benefits as a result of the Covered Officer's
position with the Trust. Conflicts may arise from, or as a result of, the
contractual relationship between the Trust and its service providers, of which a
Covered Officer is also an officer or employee. A Covered Officer may also be an
officer or employee of one or more other investment companies covered by other
similar codes. Such service, by itself, does not give rise to a conflict of
interest.
As applicable to a Covered Officer, the following must be approved by
the Chairman of the Trust's audit committee ("COMMITTEE"):
(1) service on the board of directors or governing board of a
publicly traded entity;
(2) the receipt of any non-nominal gifts from persons or entities
who have or are seeking business relationships with a Trust;
(3) the receipt of any entertainment from any company with which
the Trust has current or prospective business dealings unless
such entertainment is business-related,
A-1
reasonable in cost, appropriate as to time and place, and not so
frequent as to raise any question of impropriety;
(4) any ownership interest (material to the officer) in, or any
consulting or employment relationship with, any entities doing
business with the Trust, other than its service providers or
their respective affiliates.
(5) any direct or indirect financial interest in commissions,
transaction charges or spreads paid by the Trust for effecting
portfolio transactions or for selling or redeeming shares other
than an interest arising from the Covered Officer's employment
with the Trust's service providers or their respective
affiliates.
SECTION 3. REQUIRED DUTIES
A Covered Officer shall:
(1) become familiar with the disclosure requirements generally
applicable to the Trust;
(2) not knowingly misrepresent, or cause others to misrepresent,
facts about the Trust to others;
(3) to the extent appropriate, consult with other officers and
employees of the Trust and its service providers;
(4) promote compliance with the standards and restrictions
imposed by applicable laws, rules and regulations; and
(5) upon becoming a Covered Officer, affirm in writing to the
Trust that the officer has received, read and understands the
Code and, annually thereafter, affirm to the Trust that the
officer has complied with the requirements of the Code.
SECTION 4. VIOLATIONS
A Covered Officer shall notify the Chairman of the Committee promptly
if the officer knows of any violation of this Code.
FORUM FUNDS
MONARCH FUNDS
CODE OF ETHICS
APPENDIX C
ACCESS PERSON ACKNOWLEDGEMENT
I understand that I am an Access person as defined in the Forum Funds and
Monarch Funds Code of Ethics. I have read and I understand the Code of Ethics
and will comply with it in all respects. In addition, I certify that I have
complied with the requirements of the Code of Ethics and I have disclosed or
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of the Code.
_________________________ _______________________
Signature Date
________________________
Printed Name
THIS FORM MUST BE COMPLETED AND RETURNED TO THE TRUST'S REVIEW OFFICER:
NANETTE K. CHERN
C/O FORUM FUNDS/MONARCH FUNDS
TWO PORTLAND SQUARE
PORTLAND , ME 04101