MASTERS' SELECT SMALLER COMPANIES FUND
MASTERS' SELECT FUNDS TRUST
INVESTMENT ADVISORY AGREEMENT
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THIS INVESTMENT ADVISORY AGREEMENT is made as of the 12th day of may, 2003,
by and between MASTERS' SELECT FUNDS TRUST, a Delaware business trust
(hereinafter called the "Trust"), on behalf of the following series of the
Trust, THE MASTERS' SELECT SMALLER COMPANIES 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.
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 the
following amounts throughout the term of this Agreement.
Total Fund Assets E & O Policy Limit
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Up to $500 million $1,000,000
$500 million - $1 billion $2,000,000
$1 billion - $1.5 billion $3,000,000
$1.5 billion - $2 billion $4,000,000
Above $2 billion $5,000,000
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 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 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 1.14% 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 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.
The Advisor may not request and receive reimbursement for any subsidies
before payment of the Fund's ordinary operating expenses for the current
year and cannot cause the Fund to exceed any agreed upon expense limitation
for that year in making such reimbursement.
(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
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
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
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 FUNDS TRUST
on behalf of
MASTERS' SELECT Smaller Companies FUND
By:
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Xxxx Xxxxxxxx
Treasurer
XXXXXX/XXXXXXX FUND
ADVISORS, LLC
By:
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Xxxx Xxxxxxxx
Chief Operating Officer
