INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
THIS INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is made as of this 2nd
day of July, 2001, between FIRST FUNDS, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), on behalf of the
Portfolios listed on Schedule A attached hereto (the "Portfolios") and BlackRock
Institutional Management Corporation, a Delaware corporation organized under the
laws of the State of Delaware ("BlackRock").
WHEREAS, the Trust has been organized to operate as an investment company
registered under the Investment Company Act of 1940, as amended, (the "1940
Act") with multiple series of shares (hereinafter referred to as Classes) having
varying preferences, limitations and relative rights, and to invest and reinvest
the assets of the Portfolios in securities pursuant to investment objectives and
policies for the Portfolios;
WHEREAS, the Trust, under separate agreement has engaged the services of
First Tennessee Bank National Association ("Bank") as a co-investment adviser to
provide or perform various investment advisory, monitoring, statistical,
research, portfolio investment adviser selection, and other services with
respect to the Portfolios as set forth more fully in the Bank's Investment
Advisory and Management Agreement (Bank hereinafter being referred to as
"Co-Adviser" and BlackRock hereinafter being referred to as "Investment
Adviser"); and
WHEREAS, the Trust desires to obtain the day-to-day portfolio investment
management services, information, advice, assistance and facilities of the
Investment Adviser with respect to the Portfolios as set forth more fully
herein;
NOW, THEREFORE, Trust, on behalf of the Portfolios, and Investment
Adviser agree as follows:
1. EMPLOYMENT OF THE INVESTMENT ADVISER. The Trust hereby employs the
Investment Adviser to provide investment advice and to manage the investment and
reinvestment of the Portfolios' assets in the manner set forth in Section 2A. of
this Agreement, subject to the direction of the Trustees, for the period, in the
manner, and on the terms hereinafter set forth. The Investment Adviser hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth. The Investment 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 or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
2. OBLIGATION OF, AND SERVICES TO BE PROVIDED BY, THE INVESTMENT
ADVISER. The Investment Adviser undertakes to provide the services hereinafter
set forth and to assume the following obligations:
A. Investment Advisory Services.
(1) The Investment Adviser shall have overall responsibility for
the day-to-day management and investment of the Portfolios'
assets and securities portfolio subject to and in accordance
with the investment objectives and policies of the Portfolios,
and any directions which the Trustees and officers of the Trust
may issue to the Investment Adviser from time to time, and
shall perform the following services: (i) provide or cause to
be provided investment research and credit analysis concerning
the Portfolios' investments, (ii) conduct or cause to be
conducted a continual program of investment of the Portfolios'
assets, (iii) place or cause to be placed orders for all
purchases and sales of the investments made for the Portfolios,
and (iv) maintain or
cause to be maintained the books and records required in
connection with its duties hereunder.
(2) The Investment Adviser shall advise the Trustees of the Trust
regarding overall investment programs and strategies for the
Portfolios, revision of such programs as necessary, and shall
monitor and report periodically to the Trustees concerning the
implementation of such programs and strategies.
(3) The Investment Adviser, with the prior approval of the Trustees
(and the shareholders to the extent required by applicable law)
as to particular appointments, shall be permitted to (i) engage
one or more persons or companies ("Sub-Advisers"), which may
have full investment discretion to make all determinations with
respect to the investment and reinvestment of all or any
portion of the Portfolios' assets and the purchase and sale of
all or any portion of the Portfolio securities, subject to the
terms and conditions of this Agreement and the written
agreement to be executed with any Sub-Adviser; and (ii) take
such steps as may be necessary to implement such appointment.
(4) The Investment Adviser will coordinate its activities with
those of the Co-Adviser and will provide to the Co-Adviser such
information regarding the Investment Adviser's investment
management activities to the Portfolios as the Co-Adviser may
reasonably request in order to enable the Co-Adviser to perform
its services on behalf of the Portfolios under the Co-Adviser
Agreement.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Investment Adviser will make available and provide such
financial, accounting, statistical and other information related to
its duties and responsibilities hereunder as required by the
Trustees and necessary for the preparation of registration
statements, reports and other documents required by federal and
state securities laws and such other information as the Trustees
may reasonably request for use by the Trust and its distributor for
the underwriting and distribution of the Portfolios' shares.
C. Other Obligations and Services.
The Investment Adviser agrees to make available its officers and
employees to the Trustees and officers of the Trust and to the Co-
Adviser for consultation and discussions regarding the investment
advisory activities of the Investment Adviser for the Portfolios.
The Investment Adviser will also coordinate its activities, to the
extent necessary, with the activities of the custodian, transfer
agent, distributor, administrator and pricing agent insofar as
their respective activities relate to the duties of the Investment
Adviser hereunder, and will provide to such service providers of
the Portfolios such information as they may reasonably request in
order to perform their services on behalf of the Portfolios.
3. COVENANTS BY INVESTMENT ADVISER. The Investment Adviser covenants
with the Trust that with respect to the services provided to the Portfolios it:
(a) will comply with all applicable provisions of the 1940 Act and
applicable rules and regulations of the Securities and Exchange
Commission ("SEC") and will in addition conduct its activities
under this Agreement in accordance with the investment
objective, policies and limitations contained the current
registration statement of the Portfolios;
(b) will not make loans to any person for the purpose of purchasing
or carrying Portfolio shares, or make loans to the Portfolios
or the Trust;
(c) will not purchase shares of the Portfolios or the Trust for its
own investment account;
(d) will maintain all books and records with respect to the
securities transactions of the Portfolios and furnish the
Trustees such periodic and special reports as the Trustees may
request with respect to the Portfolios;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust
and the Portfolio and prior, present or potential shareholders
(other than any information which Investment Adviser may have
obtained about shareholders from other business relationships
with such shareholders), and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder (except after prior
notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be
withheld and will be deemed granted where the Investment
Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, when so
requested by the Trust or when otherwise required or permitted
by law);
(f) will immediately notify the Trust and the Co-Adviser of the
occurrence of any event which would disqualify Investment
Adviser or any Sub-Adviser from serving as investment adviser
of an investment company; and
(g) will determine that all information furnished to the Trust or
the Co-Adviser by it pursuant to this Agreement is accurate in
all material respects.
4. TRANSACTION PROCEDURES. All investment transactions on behalf of
the Portfolios will be compensated by payment to or delivery by the custodian
for the Portfolios duly appointed by the Trustees of the Trust (the
"Custodian"), or such approved depositories or agents duly appointed by the
Trustees and as may be designated by the Custodian in writing, as custodian for
the Portfolios, of all cash and/or securities due to or from the Portfolios, and
the Investment Adviser shall not have possession or custody thereof or any
responsibility or liability with respect thereto. The Investment Adviser
effecting transactions on behalf of the Portfolios shall advise the Custodian
and the Co-Adviser of all investment orders for the Portfolios placed by it with
brokers, dealers, banks and other parties ("Brokers"). The Trustees shall issue,
or cause to be issued, to the Custodian such instructions as may be appropriate
in connection with the settlement of any transaction initiated by the Investment
Adviser. The Portfolios shall be responsible for all custodial arrangements and
the payment of all custodial charges and fees, and, upon the giving of proper
instructions to the Custodian, the Investment Adviser shall have no
responsibility or liability with respect to custodian arrangements or the acts,
omissions or other conduct of the Custodian, except that it shall be the
responsibility of the Investment Adviser to take appropriate action if the
Custodian fails properly to confirm execution of the instructions to the
Investment Adviser and the Co-Adviser in a written form duly agreed upon by the
Custodian, the Investment Adviser and the Co-Adviser.
5. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE. The Investment
Adviser shall place, subject to the limitations contained in this paragraph 5,
on behalf of the Portfolios, orders for the execution of the Portfolios'
securities transactions. The Investment Adviser is authorized by the Trust to
take any action, including the purchase or sale of securities for the account of
the Portfolios, (a) that is not in contravention of (i) any investment
restrictions set forth in the 1940 Act and the rules thereunder; (ii) specific
instructions adopted by the Trustees and communicated to the Investment Adviser;
(iii) the investment objectives, policies and restrictions of the Portfolios as
set forth in the Trust's current
registration statement, as amended from time to time; or (iv) instructions from
the Trustees to the Investment Adviser, and (b) which would not have the effect
of causing the Trust to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
The Investment Adviser may place orders pursuant to its investment
determinations for the Portfolios either directly with the issuer or with any
Brokers. In placing orders with any Broker, the Investment Adviser will consider
the experience and skill of a Broker's securities traders as well as the
Broker's financial responsibility and administrative efficiency. The Investment
Adviser will attempt to obtain the best price and the most favorable execution
of its orders with any Brokers; however, in so doing, the Investment Adviser may
consider, subject to applicable law, the research, statistical, and related
brokerage services provided or to be provided by such Broker to the Portfolios
or the other accounts for which the Investment Adviser exercises investment
discretion. A commission paid to such Brokers may be higher than that which
another Broker would have charged for effecting the same transaction, provided
that the Investment Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such Broker when viewed in terms of either the particular
transaction or the overall responsibilities of the Investment Adviser with
respect to the accounts as to which it exercises investment discretion. It is
understood that the Investment Adviser has not adopted a formula for selection
of Brokers for the execution of the Portfolios' investment transactions. On
occasions when the Investment Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolios as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Investment Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Portfolios and to
such other clients.
The Investment Adviser will not execute any Portfolio transactions for
the account of the Portfolios with a Broker which is an "affiliated person" (as
defined in the 0000 Xxx) of the Trust, the Trust's distributor, the Investment
Adviser or the Co-Adviser except in accordance with applicable laws, rules,
regulations or interpretations thereof and effective exemption orders issued by
the SEC pursuant to the 1940 Act without the prior written approval of the
Trustees. The Trust agrees to provide the Investment Adviser with a list of
brokers and dealers that are "affiliated persons" of the Trust. The Investment
Adviser likewise agrees to furnish to the Trust and the Co-Adviser a list of
Brokers which are "affiliated persons" of the Investment Adviser. In no instance
will Portfolio securities be purchased from or sold to the Trust's principal
distributor, Investment Adviser, Co-Adviser or any affiliate thereof, except to
the extent permitted by an exemption order issued by the SEC or by applicable
law.
The Investment Adviser shall render regular reports to the Trustees and
the Co-Adviser of the total brokerage business placed by it with respect to the
Trust and the manner in which the allocation of such brokerage has been
accomplished.
6. EXPENSES OF THE PORTFOLIOS. The Portfolios or Trust will pay, or
will enter into arrangements that require third parties to pay, all expenses
other than those expressly assumed by the Investment Adviser herein, which
expenses payable by the Portfolios or Trust shall include:
(a) Expenses of all audits by independent public accountants;
(b) Expenses of the Co-Adviser, transfer agent, registrar, dividend
disbursing agent and shareholder recordkeeping services;
(c) Expenses of custodial services including recordkeeping services
provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
the Portfolios' net assets;
(e) Salaries and other compensation of any of its executive
officers or employees, if any, who are not officers, directors,
stockholders or employees of the Investment Adviser, the
administrator or the distributor;
(f) Taxes levied against the Portfolios;
(g) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Portfolios;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to Trustees and shareholder meetings
of the Trust and the Portfolios, the preparation and mailings
of prospectuses and reports of the Portfolios to its existing
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Portfolios' legal existence, and the
registration of shares with federal and state securities
authorities;
(j) Legal fees in connection with the representation of the Trust
and/or Portfolios, including the legal fees related to the
registration and continued qualification of the Portfolios'
shares for sale;
(k) Costs of printing any share certificates representing shares of
the Portfolios;
(l) Fees and expenses of Trustees who are not affiliated persons,
as defined in the 1940 Act, of the Investment Adviser, the
Co-Adviser, the distributor or any of their affiliates; and
(m) Its pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or of other insurance premiums.
7. ACTIVITIES AND AFFILIATES OF THE INVESTMENT ADVISER. The Trustees
acknowledge that Investment Adviser, or one or more of its affiliates, may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that
Investment Adviser, its affiliates or any of its or their directors, officers,
agents or employees may buy, sell or trade in any securities for its or their
respective accounts (such individuals, entities and accounts hereinafter
referred to as Affiliated Accounts). Subject to the provisions of paragraph 2
hereof, the Trustees agree that the Investment Adviser or its affiliates may
give advice or exercise investment responsibility and take such other action
with respect to other Affiliated Accounts which may differ from the advice given
or the timing or nature of action taken with respect to the Portfolios, provided
that Investment Adviser acts in good faith and in accordance with applicable law
or as permitted by an exemption order issued by the SEC, and provided further,
that it is Investment Adviser's policy to allocate within its reasonable
discretion, investment opportunities to the Portfolios over a period of time on
a fair and equitable basis relative to the Affiliated Accounts, taking into
account the investment objectives and policies of the Portfolios and any
specific investment restrictions applicable thereto. The Trust acknowledges that
one or more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Portfolios may have an interest from time to time, whether in transactions
which involve the Portfolios or otherwise. The Investment Adviser shall not have
any obligation to acquire for the Portfolios a position in any investment which
any Affiliated Account may acquire, and the Portfolios shall have no first
refusal, coinvestment or other rights in respect of any investment, either for
the Portfolios or otherwise.
8. COMPENSATION OF THE INVESTMENT ADVISER.
(a) For all services provided to the Portfolios pursuant to this
Agreement, the Trust shall pay the Investment Adviser, and the
Investment Adviser agrees to accept as full compensation
therefor, an investment advisory fee, payable as soon as
practicable after the last day of each month, calculated using
an annual rate of the average daily net assets of the
Portfolios (the "Annual Rate"), as set forth on Schedule A
attached hereto. The monthly investment advisory fee to be paid
by the Trust to the Investment Adviser shall be determined as
of the close of business on the last business day of each month
by multiplying one-twelfth of the Annual Rate by the Average
Portfolio Net Assets (hereinafter defined), calculated monthly
as of such day.
(b) For purposes of this paragraph 8, the "Average Portfolio Net
Assets" shall be calculated monthly as of the last business day
of each month and shall mean the sum of the net assets of the
Portfolios calculated each business day during the month
divided by the number of business days in the month (such net
assets to be determined as of the close of business each
business day and computed in the manner set forth in the
Declaration of Trust of the Trust).
9. PROXIES. The Trustees will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Portfolios may be
invested from time to time, unless the Trustees delegate such right to the
Investment Adviser, at which time the Trustees shall provide BlackRock with a
certified resolution authorizing BlackRock to vote such proxies.
10. LIABILITIES OF THE INVESTMENT ADVISER.
(a) The Investment Adviser will not be liable for any loss suffered
by the Portfolios or the Trust as the result of any error of
judgment or mistake of law in connection with its performance
of this Agreement; PROVIDED, HOWEVER, that the Investment
Adviser shall be liable to the Portfolios and the Trust for any
loss resulting from (i) a breach of fiduciary duty with respect
to the receipt of compensation for services; (ii) willful
misfeasance, bad faith or gross negligence in, or reckless
disregard by the Investment Adviser of, the performance of its
obligations or duties under this Agreement; or (iii) any
material breach of any of its covenants contained in this
Agreement.
(b) No provision of this Agreement shall be construed to protect
any Trustee or officer of the Trust, or the Investment Adviser,
from liability in violation of Sections 17(h) and (i) of the
1940 Act.
11. RENEWAL, AMENDMENT AND TERMINATION.
(a) This Agreement shall become effective on the date first written
above and shall remain in force for a period of two (2) years
from such date and from year to year thereafter but only so
long as such continuance is specifically approved at least
annually (i) by the vote of a majority of the Trustees who are
not interested persons of the Portfolios, the Co-Adviser or the
Investment Adviser, cast in person at a meeting called for the
purpose of voting on such approval and by a vote of the Board
of Trustees or (ii) by the vote of a majority of the
outstanding voting securities of the Portfolios. The aforesaid
provision that this Agreement may be continued "annually" shall
be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder.
(b) This Agreement may be amended at any time, but only by written
agreement between the Trust and the Investment Adviser, which
amendment is subject to the approval of the Trustees and, if
applicable, the shareholders of the Trust in the manner
required by the 1940 Act, subject to any applicable exemption
order of the SEC modifying the provisions of the 1940 Act with
respect to approval of amendments to this Agreement.
(c) This Agreement:
(i) may at any time be terminated without the payment
of any penalty either by vote of the Trustees or by
vote of a majority of the outstanding voting
securities of the Portfolios, on sixty (60) days'
written notice to the Investment Adviser;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Investment Adviser on
sixty (60) days' written notice to the Trust.
(d) As used in this Section 11, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act
and the rules and regulations thereunder, subject to any
applicable orders of exemption or other interpretations issued
by the SEC.
12. BOOKS AND RECORDS.
(a) The Trustees shall provide to the Investment Adviser copies of
the Trust's most recent prospectus, statement of additional
information, supplement, and post-effective amendment which
relate to any class of shares representing interests in the
Portfolios.
(b) In compliance with the requirements of Rule 31a-3 of the rules
promulgated under the 1940 Act ("Rules"), the Investment
Adviser hereby agrees that all records which it maintains for
the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the
Trust's request. The Investment Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2, the records
required to be maintained by the Investment Adviser hereunder
pursuant to Rule 31a-1 of the Rules.
13. NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed given, if delivered
personally, on the day delivered or if mailed, by certified or registered mail,
postage prepaid, return receipt requested, three (3) days after placement in the
United States mail, or national courier service (e.g. UPS, Fed Ex, Airborne
Express), upon actual receipt as documented by such courier, to the addresses
below:
If to Trust: First Funds
c/o Xxxxxxx X. Xxxx, Esq.
ALPS Mutual Fund Services, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxxx Xxxxxxxx, Esq.
Baker, Donelson, Bearman, Caldwell, P.C.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Investment Adviser: BlackRock Institutional Management Corporation
c/o Xxxxxx X. Xxxxx
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
14. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. LIMITATION ON LIABILITY. Investment Adviser is hereby expressly put
on notice of the limitation of shareholder liability as set forth in the
Declaration of Trust and agrees that obligations assumed by the Portfolios
pursuant to this Agreement shall be limited in all cases to the Portfolios and
its assets. Investment Adviser agrees that it shall not seek satisfaction of any
such obligation from the shareholders or any individual shareholder of the
Portfolios, nor from the Trustees or any individual Trustee of the Portfolios.
16. GOVERNING LAW. To the extent that state law has not been preempted
by the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Tennessee without giving effect to the choice of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
FIRST FUNDS
By:
-----------------------------------------
Secretary
BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION
By:
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SCHEDULE A
PORTFOLIO CO-ADVISER FEE
U.S. Treasury Money Market Portfolio .08% of aggregate average monthly
net assets of the Portfolio up to
$500 million, .06% of the next
$500 million, and .05% on amounts
greater than $1 billion
U.S. Government Money Market Portfolio .08% of aggregate average monthly
net assets of the Portfolio up to
$500 million, .06% of the next
$500 million, and .05% on amounts
greater than $1 billion
Municipal Money Market Portfolio .08% of
aggregate average monthly net
assets of the Portfolio up to $500
million, .06% of the next $500
million, and .05% on amounts
greater than $1 billion
Cash Reserve Portfolio .08% of
aggregate average monthly net
assets of the Portfolio up to
$500 million, .06% of the next
$500 million, and .05% on amounts
greater than $1 billion
