MASTERS SELECT EQUITY FUND
MASTERS SELECT INVESTMENT TRUST
INVESTMENT ADVISORY AGREEMENT
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THIS INVESTMENT ADVISORY AGREEMENT is made as of the ___ day
of ___________, 199__, by and between MASTERS SELECT INVESTMENT TRUST, a
Delaware business trust (hereinafter called the "Trust"), on behalf of the
following series of the Trust, THE MASTERS SELECT EQUITY FUND (the "Fund") and
XXXXXX/XXXXXXX FUND ADVISORS, LLC, a California limited liability company
(hereinafter called the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment
company, registered as such under the Investment Company Act of 1940 (the
"Investment Company Act"); and
WHEREAS, the Fund is a series of the Trust having separate
assets and liabilities; and
WHEREAS, the Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
supplying investment management services as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render
advice and services to the Fund pursuant to the terms and provisions of this
Agreement, and the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. Appointment of Advisor. The Trust hereby employs the
Advisor and the Advisor hereby accepts such employment, to render investment
advice and related services to the Fund for the period and on the terms set
forth in this Agreement, subject to the supervision and direction of the Trust's
Board of Trustees.
2. Duties of Advisor.
(a) General Duties. The Advisor shall act as
investment adviser to the Fund and shall supervise the investments of the Fund
and provide management services to the Fund in accordance with the investment
objectives, policies and restrictions of the Fund as set forth in the Fund's and
Trust's governing documents, including, without limitation, the Trust's
Agreement and Declaration of Trust and By-Laws; the Fund's prospectus, statement
of additional information and undertakings;
and such other limitations, policies and procedures as the Trustees may impose
from time to time in writing to the Advisor. In providing such services, the
Advisor shall at all times adhere to the provisions and restrictions contained
in the federal securities laws, applicable state securities laws, the Internal
Revenue Code, the Uniform Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor
shall: (i) furnish the Fund with advice and recommendations with respect to the
selection and continued employment of investment managers to manage the actual
investment of the Fund's assets; (ii) direct the allocation of the Fund's assets
among such investment managers; (iii) oversee the investments made by such
investment managers on behalf of the Fund, subject to the ultimate supervision
and direction of the Trust's Board of Trustees; (iv) oversee the actions of the
investment managers with respect to voting proxies for the Fund, filing Section
13 ownership reports for the Fund, and taking other actions on behalf of the
Fund; (v) maintain the books and records required to be maintained by the Fund
except to the extent arrangements have been made for such books and records to
be maintained by the administrator, another agent of the Fund or an investment
manager; (vi) furnish reports, statements and other data on securities, economic
conditions and other matters related to the investment of the Fund's assets
which the Fund's administrator or distributor or the officers of the Trust may
reasonably request; and (vii) render to the Trust's Board of Trustees such
periodic and special reports with respect to each Fund's investment activities
as the Board may reasonably request, including at least one in-person appearance
annually before the Board of Trustees.
(b) Brokerage. The Advisor shall not be responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of brokerage commission rates.
Subject to such policies as the Board of Trustees of the Trust
may determine, the Advisor shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of an investment manager having caused the Fund to pay a broker or dealer that
provides (directly or indirectly) brokerage or research services to the Advisor
an amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Trust.
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3. Representations of the Advisor.
(a) The Advisor shall use its best judgment and
efforts in rendering the advice and services to the Funds as contemplated by
this Agreement.
(b) The Advisor shall maintain all licenses and
registrations necessary to perform its duties hereunder in good order.
(c) The Advisor shall conduct its operations at all
times in conformance with the Investment Advisers Act of 1940, the Investment
Company Act of 1940, and any other applicable state and/or self-regulatory
organization regulations.
(d) The Advisor shall maintain errors and omissions
insurance in an amount at least equal to $_____________, with a deductible not
to exceed $___________, throughout the term of this Agreement.
4. Independent Contractor. The Advisor shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized to do so, have no authority to act
for or represent the Trust or the Fund in any way, or in any way be deemed an
agent for the Trust or for the Fund. It is expressly understood and agreed that
the services to be rendered by the Advisor to the Funds under the provisions of
this Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
5. Advisor's Personnel. The Advisor shall, at its own
expense, maintain such staff and employ or retain such personnel and consult
with such other persons as it shall from time to time determine to be necessary
to the performance of its obligations under this Agreement. Personnel of the
Advisor may serve as officers of the Trust provided they do so without
compensation from the Trust. Without limiting the generality of the foregoing,
the staff and personnel of the Advisor shall be deemed to include persons
employed or retained by the Advisor to furnish statistical information,
research, and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Advisor or the Trust's
Board of Trustees may desire and reasonably request.
6. Expenses.
(a) With respect to the operation of the Fund, the
Advisor shall be responsible for (i) providing the personnel, office space and
equipment reasonably necessary for the operation of the Trust and the Fund
including the provision of persons qualified to serve as officers of the Trust;
(ii) compensating
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the investment managers selected to invest the assets of the Funds; (iii) the
expenses of printing and distributing extra copies of the Fund's prospectus,
statement of additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders); and (iv) the costs of any special
Board of Trustees meetings or shareholder meetings convened for the primary
benefit of the Advisor or any investment manager. If the Advisor has agreed to
limit the operating expenses of the Fund, the Advisor shall also be responsible
on a monthly basis for any operating expenses that exceed the agreed upon
expense limit.
(b) The Trust and the Fund are responsible for and
has assumed the obligation for payment of all of its expenses, other than as
stated in Subparagraph 6(a) above, including but not limited to: fees and
expenses incurred in connection with the issuance, registration and transfer of
its shares; brokerage and commission expenses; all expenses of transfer,
receipt, safekeeping, servicing and accounting for the cash, securities and
other property of the Trust for the benefit of the Fund including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the Investment Company Act; taxes, if any; a pro rata portion of
expenditures in connection with meetings of the Fund's shareholders and the
Trust's Board of Trustees that are properly payable by the Fund; salaries and
expenses of officers and fees and expenses of members of the Trust's Board of
Trustees or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Advisor; insurance premiums on
property or personnel of each Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of the Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Funds, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as herein otherwise prescribed.
(c) The Advisor may voluntarily absorb certain Trust
and Fund expenses or waive the Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by
assuming expenses which are an obligation of the Fund as set forth herein, the
Fund shall promptly reimburse the Advisor for
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such costs and expenses, except to the extent the Advisor has otherwise agreed
to bear such expenses. To the extent the services for which the Trust or the
Fund is obligated to pay are performed by the Advisor, the Advisor shall be
entitled to recover from such Fund to the extent of the Advisor's actual costs
for providing such services. In determining the Advisor's actual costs, the
Advisor may take into account an allocated portion of the salaries and overhead
of personnel performing such services.
7. Investment Advisory Fee.
(a) The Fund shall pay to the Advisor, and the
Advisor agrees to accept, as full compensation for all investment advisory and
management services furnished or provided to such Fund pursuant to this
Agreement, an annual advisory fee equal to [1.10]% of the Fund's daily net
assets, computed on the value of the net assets of the Fund as of the close of
business each day.
(b) The advisory fee shall be accrued daily by the
Fund and paid to the Advisor on the [first] business day of the succeeding
month.
(c) The initial fee under this Agreement shall be
payable on the [first] business day of the first month following the effective
date of this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to the Advisor
shall be prorated for the portion of any month in which this Agreement is in
effect which is not a complete month according to the proportion which the
number of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable within
ten (10) days after the date of termination.
(d) The fee payable to the Advisor under this
Agreement will be reduced to the extent of any receivable owed by the Advisor to
the Fund and as required under any expense limitation applicable to a Fund.
(e) The Advisor voluntarily may reduce any portion of
the compensation or reimbursement of expenses due to it pursuant to this
Agreement and may agree to make payments to limit the expenses which are the
responsibility of a Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Advisor hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and any
Fund expense absorbed by the Advisor voluntarily or pursuant to an agreed upon
expense cap shall be reimbursed by the Fund to
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the Advisor, if so requested by the Advisor, in the first, second or third (or
any combination thereof) fiscal year next succeeding the fiscal year of the
withholding, reduction or absorption if the aggregate amount actually paid by
the Fund toward the operating expenses for such fiscal year (taking into account
the reimbursement) do not exceed the applicable limitation on Fund expenses.
Such reimbursement may be paid prior to the Fund's payment of current expenses
if so requested by the Advisor even if such practice may require the Advisor to
waive, reduce or absorb current Fund expenses.
(g) The Advisor may agree not to require payment of
any portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Advisor hereunder.
8. No Shorting; No Borrowing. The Advisor agrees that
neither it nor any of its officers or employees shall take any short position in
the shares of the Funds. This prohibition shall not prevent the purchase of such
shares by any of the officers or employees of the Advisor or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the Investment Company Act. The
Advisor agrees that neither it nor any of its officers or employees shall borrow
from the Fund or pledge or use the Fund's assets in connection with any
borrowing not directly for the Fund's benefit. For this purpose, failure to pay
any amount due and payable to the Fund for a period of more than thirty (30)
days shall constitute a borrowing.
9. Conflicts with Trust's Governing Documents and
Applicable Laws. Nothing herein contained shall be deemed to require the Trust
or the Fund to take any action contrary to the Trust's Agreement and Declaration
of Trust, By-Laws, or any applicable statute or regulation, or to relieve or
deprive the Board of Trustees of the Trust of its responsibility for and control
of the conduct of the affairs of the Trust and Funds. In this connection, the
Advisor acknowledges that the Trustees retain ultimate plenary authority over
the Fund and may take any and all actions necessary and reasonable to protect
the interests of shareholders.
10. Reports and Access. The Advisor agrees to supply
such information to the Fund's administrator and to permit such compliance
inspections by the Fund's administrator as shall be reasonably necessary to
permit the administrator to satisfy its obligations and respond to the
reasonable requests of the Trustees.
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11. Advisor's Liabilities and Indemnification.
(a) The Advisor shall have responsibility for the
accuracy and completeness (and liability for the lack thereof) of the statements
in the Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for information
supplied by the administrator or another third party for inclusion therein.
(b) The Advisor shall be liable to the Fund for any
loss (including brokerage charges) incurred by the Fund as a result of any
improper investment made by any investment manager if the impropriety of such
investment should have been known by the Advisor.
(c) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or duties hereunder
on the part of the Advisor, the Advisor shall not be subject to liability to the
Trust or the Fund or to any shareholder of the Fund for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Funds.
(d) Each party to this Agreement shall indemnify and
hold harmless the other party and the shareholders, directors, officers and
employees of the other party (any such person, an "Indemnified Party") against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(e) No provision of this Agreement shall be construed
to protect any Trustee or officer of the Trust, or officer of the Advisor, from
liability in violation of Sections 17(h) and (i) of the Investment Company Act.
12. Non-Exclusivity; Trading for Advisor's Own Account.
The Trust's employment of the Advisor is not an exclusive arrangement. The Trust
may from time to time employ other individuals or entities to furnish it with
the services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake no activities which
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will adversely affect the performance of its obligations to the Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act
of 1940 and has been approved by the Trust' Board of Trustees.
13. Term.
This Agreement shall become effective at the time the
Fund commences operations pursuant to an effective amendment to the Trust's
Registration Statement under the Securities Act of 1933 and shall remain in
effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (l) year so long as such continuation is approved for
the Fund at least annually by (i) the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of each Fund and (ii)
the vote of a majority of the Trustees of the Trust who are not parties to this
Agreement nor interested persons thereof, cast in person at a meeting called for
the purpose of voting on such approval. The terms "majority of the outstanding
voting securities" and "interested persons" shall have the meanings as set forth
in the Investment Company Act.
14. Termination; No Assignment.
(a) This Agreement may be terminated by the Trust on
behalf of the Fund at any time without payment of any penalty, by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of a Fund, upon sixty (60) days' written notice to the Advisor, and
by the Advisor upon sixty (60) days' written notice to a Fund. In the event of a
termination, the Advisor shall cooperate in the orderly transfer of the Fund's
affairs and, at the request of the Board of Trustees, transfer any and all books
and records of the Fund maintained by the Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in
the event of any transfer or assignment thereof, as defined in the Investment
Company Act.
15. Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute or rule, or shall be
otherwise rendered invalid, the remainder of this Agreement shall not be
affected thereby.
16. Notice of Declaration of Trust. The Advisor agrees
that the Trust's obligations under this Agreement shall be limited to the Funds
and to their assets, and that the Advisor shall not seek satisfaction of any
such obligation from the shareholders of the Funds nor from any trustee,
officer, employee or agent of the Trust or the Funds.
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17. Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect.
18. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California without
giving effect to the conflict of laws principles thereof; provided that nothing
herein shall be construed to preempt, or to be inconsistent with, any federal
law, regulation or rule, including the Investment Company Act and the Investment
Advisors Act of 1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
MASTERS SELECT INVESTMENT TRUST XXXXXX/XXXXXXX FUND
on behalf of ADVISORS, LLC
MASTERS SELECT
EQUITY FUND
By: _________________________ By: _________________________
_________________________ _________________________
_________________________ _________________________
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