FORM OF INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is executed as of this __ day of __ ,
1998, between FOUNDERS FUNDS, INC., a Maryland corporation (the "Company") on
behalf of each of its series Funds listed on Appendix 1 to this Agreement, which
Appendix 1 is incorporated into this Agreement by this reference (as to each
series, the "Fund"), and FOUNDERS ASSET MANAGEMENT LLC, a Delaware limited
liability company (the "Adviser").
WHEREAS, the Company has been organized and operates as an investment
company registered under the Investment Company Act of 1940 for the purpose of
investing and reinvesting its assets in securities, as set forth in its Articles
of Incorporation, its By-Laws and its Registration Statements under the
Investment Company Act of 1940 and the Securities Act of 1933, all as heretofore
amended and from time to time further amended and supplemented; and the Company
on behalf of each Fund desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser and to have an
investment adviser perform for it various management, statistical, research,
investment advisory and other services; and,
WHEREAS, the Adviser is engaged in the business of rendering management,
investment advisory, counseling and supervisory services to investment companies
and desires to provide these services to the Company.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISER. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of each Fund and to
administer its affairs, consistent with the Fund's objectives, policies and
restrictions, and subject to the overall supervision of the Board of Directors
of the Company, for the period and on the terms hereinafter set forth. The
Adviser hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Company or any Fund in any way or otherwise be deemed an agent of the Company or
any Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADVISER. In return for
the compensation described in paragraph 4 hereof, the Adviser undertakes to
provide the following services and to assume the following obligations:
A. OFFICE SPACE, FURNISHINGS, FACILITIES, EQUIPMENT AND PERSONNEL. The
Adviser shall furnish to the Company adequate office space, which may be space
within the office of the Adviser or in such other place as may be agreed upon
from time to time. The Adviser also shall furnish to the Company office
furnishings, facilities and equipment, including computer equipment and
programs, as may be reasonably required for managing the corporate affairs and
conducting the business of the Company, including ordinary clerical, bookkeeping
and administrative services, and maintenance of each Fund's books and records.
The Adviser shall employ or provide and compensate the executive, secretarial
and clerical personnel necessary to provide such services. The Adviser shall
also compensate all officers and employees of the Company and, in addition to
the services described in subparagraph D of this paragraph, shall permit
officers and employees of the Adviser to serve as directors or officers of the
Company, without compensation from the Company, if elected to such positions.
B. INVESTMENT ADVISORY SERVICES AND BROKERAGE ALLOCATION.
(1) The Adviser shall recommend from time to time to the officers and
directors of the Company a course of investment for each Fund's assets and
portfolio, subject to and in accordance with the investment objectives and
policies of the Fund and any directions which the Company's Board of Directors
may issue from time to time. The Adviser's recommendations also shall include
the manner in which the voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised. Subject to such objectives, policies and directions and subject to
the overall supervision of the Board of Directors of the Company, the Adviser
shall manage the investment and reinvestment of the assets of each Fund. The
Adviser shall render such reports to the Company concerning the investment of
each Fund's assets and portfolio as may be required by the Board of Directors of
the Company.
(2) Decisions with respect to placement of each Fund's portfolio
transactions shall be made by the Adviser. The primary consideration in making
these decisions shall be to seek the best execution of orders at the most
favorable net prices for the Fund, taking into account such factors as the size
of the order, difficulty of execution, and the reliability, financial condition
and capabilities of the broker or dealer. Subject to these objectives, business
may be placed with brokers and dealers who furnish investment research services
to the Adviser or to affiliates of the Adviser. Such research services include
advice,
both directly and in writing, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities, or purchasers or sellers of securities, as well as the furnishing of
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and the performance of accounts. Such
services allow the Adviser and its affiliates to supplement their own investment
research activities and provide them with information from individuals and
research staffs of many securities firms. The Company acknowledges on behalf of
each Fund that to the extent portfolio transactions are effected with brokers or
dealers who furnish research services to the Adviser or its affiliates, they
receive a benefit, which generally is not capable of evaluation in dollar
amounts, which is not passed on to the Fund in the form of a direct monetary
benefit.
(3) The Adviser shall render such reports regarding allocation of brokerage
business as may be required by the Board of Directors of the Company.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF SECURITIES
REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The Adviser shall make
available and provide accounting and statistical information required by the
Company and its principal underwriter in the preparation of registration
statements, reports and other documents required by federal and state securities
laws and such information as the principal underwriter of the Company may
reasonably request, for use in the preparation of such documents or of other
materials necessary or helpful for the underwriting and distribution of each
Fund's shares.
D. OTHER OBLIGATIONS AND SERVICES. The Adviser shall keep its
qualifications, facilities and staff fully adequate for performance of its
duties hereunder, and will perform such duties in good faith and in the best
interests of the Fund. The Adviser shall comply in all respects with applicable
statutory and regulatory provisions, including the Investment Company Act of
1940 and the Investment Advisers Act of 1940. The Adviser shall make available
its officers and employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administrative management of each
Fund and its investment activities.
3. EXPENSES OF EACH FUND. It is understood that each Fund will pay all of
its expenses other than those expressly assumed by the Adviser herein, which
expenses payable by the Fund shall include:
A. Fees to the Adviser as provided herein;
B. Expenses of all audits by independent public accountants;
C. The allocated portion of fees and expenses of legal counsel in
connection with legal services rendered to the Company, including the
Board of Directors of the Company, committees of the Board of
Directors and those directors who are not "interested persons" of the
Company or the Adviser, as defined in the Investment Company Act of
1940, and litigation;
D. Brokerage fees and commissions and other transaction costs in
connection with the purchase and sale of portfolio securities for the
Fund;
E. Costs, including the interest expense, of borrowing money;
F. All federal, state and local taxes levied against the Fund;
G. The allocated portion of fees of directors of the Company not
affiliated with the Adviser;
H. The allocated portion of costs and expenses of meetings of the Board
of Directors, committees of the Board of Directors and shareholders of
the Company;
I. Fees and expenses of the Company's transfer agent, registrar,
custodian, dividend disbursing agent, shareholder accounting agent,
and other agents approved by the Board of Directors of the Company;
J. Cost of printing stock certificates representing shares of the Fund;
K. Fees and expenses of registering and qualifying and maintaining
registration and qualification of the Company, the Fund and its shares
under federal, state and foreign securities laws;
L. The allocated portion of fees and expenses incident to filing of
reports with regulatory bodies and maintenance of the Company's
existence;
M. The allocated portion of premiums for insurance carried by the Company
pursuant to the requirements of Section 17(g) of the Investment
Company Act of 1940;
N. The allocated portion of fees and expenses incurred in connection with
any investment company organization or trade association of which the
Company may be a member;
O. The allocated portion of expenses of preparation, printing (including
typesetting) and distribution of reports, notices and prospectuses to
existing shareholders of the Company;
P. Expenses of computing the Fund's daily per share net asset value; and
Q. The allocated portion of expenses incurred by the Company in
connection with litigation proceedings or claims, including any
obligation the Company may have to indemnify its officers and
directors with respect thereto.
4. COMPENSATION OF THE ADVISER. As compensation for its services to each
Fund, the Adviser will be paid a monthly management fee by the Fund at an annual
rate equal to the percentages of the average daily value of the Fund's net
assets described as to each Fund on Appendix 1 to this Agreement, with each
Fund's net assets determined in accordance with provisions of the then current
prospectus of the Fund. All fees and expenses are accrued daily and deducted
before payment of dividends to shareholders. The fee is payable monthly and
shall be prorated for any portion of a month beginning on the date of this
Agreement or ending on termination of this Agreement.
5. EXPENSE LIMITATION. In the event the total expenses of a Fund for any
fiscal year, including the advisory fee but excluding interest, taxes, brokerage
commissions and extraordinary expenses, should exceed the lowest applicable
annual expense limitation established pursuant to the statutes or regulations of
any jurisdiction in which shares of the Fund are then qualified for offer or
sale, the Adviser shall reimburse the Fund for the full amount of such excess.
Such reimbursement shall be made by the Adviser monthly, subject to annual
reconciliation.
6. ACTIVITIES OF THE ADVISER. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser who may
also be a director, officer or employee of the Company to engage in any other
business or to devote his time and attention in part to the management or other
aspects of any business, whether of a similar or a dissimilar nature, nor to
limit or restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association. Subject to and in accordance with the Articles of Incorporation and
By-Laws of the Company and to Section 10(a) of the Investment Company Act of
1940, it is understood that directors, officers, agents and shareholders of the
Company are or may be interested in the Adviser or its affiliates as directors,
officers, agents or shareholders of the Adviser or its affiliates and that
directors, officers, agents or shareholders of the Adviser or its affiliates are
or may be interested in the Company as directors, officers, shareholders or
otherwise, and that the effect of any such interests shall be governed by said
Articles of Incorporation, said By-Laws and the Act.
7. LIABILITIES. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Company or
to any Fund hereunder for any act or omission in the course of, or connected
with, rendering services hereunder. No liability to the Adviser hereunder shall
attach individually to the shareholders, directors or officers of the Company.
8. RENEWAL, TERMINATION AND AMENDMENT. This Agreement shall become
effective upon the date first above written and shall continue in effect for an
initial term ending May 31, 1999, unless earlier amended or terminated. This
Agreement is renewable thereafter as to each Fund for successive periods not to
exceed one year if such continuance is approved at least annually by votes of
the Company's Board of Directors, cast in person at a meeting called for the
purpose of voting on such approval, or by a majority of the outstanding voting
securities of the Fund and in either event by the vote of a majority of the
directors who are not parties to the Agreement or interested persons of any such
party other than as directors of the Company. In addition, (i) this Agreement
may at any time be terminated as to any Fund without the payment of any penalty
either by vote of the Board of Directors of the Company or by vote of a majority
of the outstanding voting securities of the Fund, on 60 days' written notice to
the Adviser; (ii) this Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Investment Company Act of 1940); and (iii)
this Agreement may be terminated by the Adviser on 60 days' written notice to
the Company. Any notice under this Agreement shall be given in writing addressed
and delivered, or mailed postpaid, to the other party at any office of such
party. This Agreement may be amended as to any Fund at any time by mutual
consent of the parties, provided that such consent on the part of the Company
shall have been approved by vote of a majority of the outstanding voting
securities of the Fund. As used in this paragraph, the term "vote of a majority
of the outstanding voting securities" shall have the meaning set forth for such
term in Section 2(a)(42) of the Investment Company Act of 1940.
9. NAME. The Company and each Fund may use the word "Founders" in their
names and businesses only so long as the Adviser acts as investment adviser to
the Fund.
10. SEVERABILITY. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
11. MISCELLANEOUS. This Agreement shall be subject to the laws of the State
of Colorado, and shall be interpreted and construed to further and promote the
operation of the Company as an open-end investment company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
FOUNDERS FUNDS, INC.
on behalf of each of the
series Funds listed on
Appendix 1 to this
Agreement
ATTEST: By:________________________
President
__________________________
Secretary
FOUNDERS ASSET
MANAGEMENT LLC
ATTEST: By:________________________
President
__________________________
Secretary
APPENDIX 1
TO
FOUNDERS FUNDS, INC. INVESTMENT ADVISORY AGREEMENT
This Appendix 1 to the Investment Advisory Agreement ("Agreement") executed
as of the _ day of ______________, 1998, between Founders Funds, Inc. and
Founders Asset Management LLC is effective as of the __th day of ______________,
1998.
The following series Funds of Founders Funds, Inc. are parties to the
Agreement and, pursuant to paragraph 4 of the Agreement, shall pay to Founders
Asset Management LLC, as compensation for its services to each series Fund, the
management fees disclosed in the following table:
ADVISORY FEE
FUND SCHEDULE
--------------------------------------------
Discovery Fund 1.00% to $250 million
0.80% next $250 million
0.70% thereafter
Passport Fund 1.00% to $250 million
0.80% next $250 million
0.70% thereafter
Frontier Fund 1.00% to $250 million
0.80% next $250 million
0.70% thereafter
Special Fund 1.00% to $30 million
0.75% next $270 million
0.70% next $200 million
0.65% thereafter
International Equity Fund 1.00% to $250 million
0.80% next $250 million
0.70% thereafter
Worldwide Growth Fund 1.00% to $250 million
0.80% next $250 million
0.70% thereafter
Growth Fund 1.00% to $30 million
0.75% next $270 million
0.70% next $200 million
0.65% thereafter
Blue Chip Fund 0.65% to $250 million
0.60% next $250 million
0.55% next $250 million
0.50% thereafter
Balanced Fund 0.65% to $250 million
0.60% next $250 million
0.55% next $250 million
0.50% thereafter
Government Securities Fund 0.65% to $250 million
0.50% thereafter
Money Market Fund 0.50% to $250 million
0.45% next $250 million
0.40% next $250 million
0.35% thereafter
FOUNDERS FUNDS, INC.
on behalf of each of the
series Funds listed on this
Appendix 1
ATTEST: By:__________________________
President
__________________________
Secretary
FOUNDERS ASSET
MANAGEMENT LLC
ATTEST: By:__________________________
President
__________________________
Assistant Secretary
