MANAGEMENT AGREEMENT
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THIS MANAGEMENT AGREEMENT is made this ____ day of _______, 1996, between
Profit Funds Investment Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts, and Investor Resources Group (the
"Manager"), a corporation organized under the laws of the State of Delaware.
WHEREAS, the Trust has been organized to operate as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust currently consists of two series, the Profit Xxxxx Value
Fund and the Profit Xxxxx Institutional Equity (the "Funds"), and the Trustees
have the power to create additional series; and
WHEREAS, each Fund has been created for the purpose of investing and
reinvesting its assets in securities pursuant to the investment objective and
policies as set forth in the Trust's registration statements under the Act and
the Securities Act of 1933 ("Registration Statements"), as heretofore amended
and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical, portfolio
adviser selection and other services for the Funds; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, the Trust and Manager agree as follows:
1. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of the assets of each Fund in the manner
set forth in subparagraph 2B of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter set forth. The Manager hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth. The Manager 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 Funds in any way or otherwise be deemed an agent of the Funds.
2. Obligation of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Investment Management Services.
(a) The Manager shall have overall supervisory responsibility for the
general management and investment of the assets and portfolio
securities of each Fund subject to and in accordance with the
investment objective and policies of each Fund, and any
directions which the Trust's Board of Trustees may issue to the
Manager from time to time.
(b) The Manager shall provide overall investment programs and
strategies for each Fund, shall
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revise such programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Manager, with the approval of the Board of Trustees of the
Trust as to particular appointments, intends to (i) appoint one
or more persons or companies (the "Adviser") and, subject to the
terms and conditions of this Agreement, the Adviser shall have
full investment discretion and shall make all determinations with
respect to the investment of each Fund's assets and the purchase
and sale of portfolio securities with those assets, and (ii) take
such steps as may be necessary to implement such appointments.
The Manager shall be solely responsible for paying the fees and
expenses of the Adviser for its services to the Funds. The
Manager shall not be responsible or liable for the investment
merits of any decision by the Adviser to purchase, hold or sell a
portfolio security for the Funds. (d) The Manager shall evaluate
advisers and shall recommend to the Board of Trustees the adviser
which the Manager believes is best suited to invest the assets of
each Fund; shall monitor and evaluate the investment performance
of the Adviser; shall recommend changes in the Adviser
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when appropriate; shall coordinate the investment activities of
the Adviser to ensure compliance with applicable restrictions and
limitations applicable to the Fund; and shall compensate the
Adviser.
(e) The Manager shall render regular reports to the Trust, at regular
meetings of the Board of Trustees, of, among other things, the
portfolio investments of the Funds and measurement and analysis
of the results achieved by the Funds.
(f) The Manager shall employ or provide and compensate the executive,
administrative, secretarial and clerical personnel necessary to
provide the services set forth in this subparagraph 2B, and shall
bear the expense thereof, except as may otherwise be provided in
Section 4 of this Agreement. The Manager shall also compensate
all officers and employees of the Trust who are officers or
employees of the Manager.
(g) The Manager shall pay all expenses incurred in connection with
the sale or distribution of a Fund's shares; however, with
respect to the Profit Xxxxx Value Fund, the Manager shall pay
such expenses only to the extent such expenses are not assumed by
the Profit Xxxxx Value Fund under the Trust's Plan of
Distribution.
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B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Manager will make available and provide financial, accounting and
statistical information required by the Trust in the preparation of
registration statements, reports and other documents required by
federal and state securities laws, and such information as the Trust
may reasonably request for use in the preparation of registration
statements, reports and other documents required by federal and state
securities laws.
C. Other Obligations and Services. The Manager shall make available its
officers and employees to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the administration
and management of the Funds and their investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Adviser, subject to the limitations contained in this paragraph 3, shall place,
on behalf of each Fund, orders for the execution of portfolio transactions. The
Adviser is not authorized by the Funds to take any action, including the
purchase or sale of securities for either Fund's account, (a) in contravention
of (i) any investment restrictions set forth in the Act and the rules
thereunder, (ii) specific instructions adopted by the Board of Trustees and
communicated to the Adviser, (iii) the investment objective, policies and
restrictions of a Fund as
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set forth in the Trust's Registration Statement, or (iv) instructions from the
Manager communicated to the Adviser, or (b) which would have the effect of
causing a Fund 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.
Subject to the foregoing, the Adviser shall determine the securities to be
purchased or sold by a Fund and will place orders pursuant to its determination
with or through such persons, brokers or dealers in conformity with the policy
with respect to brokerage as set forth in the Trust's Registration Statement or
as the Board of Trustees may direct from time to time. It is recognized that, in
providing the Funds with investment supervision of the placing of orders for
portfolio transactions, the Adviser will give primary consideration to securing
the best qualitative execution, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the brokerage and research services provided by the broker or dealer.
Consistent with this policy, the Adviser may select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to other funds and/or the other
accounts over which it exercises investment discretion. It is understood that
neither the Trust, the Manager nor the Adviser have adopted
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a formula for allocation of the Trust's investment transaction business. It is
also understood that it is desirable for the Trust that the Adviser have access
to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher commission to the Trust than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission. Therefore, the
Adviser is authorized to place orders for the purchase and sale of securities
for the Funds with such certain brokers, subject to review by the Trust's Board
of Trustees from time to time with respect to the extent and continuation of
this practice, provided that the Adviser determines in good faith that the
amount of the commission is reasonable in relation to the value of the brokerage
and research services provided by the executing broker or dealer. The
determination may be viewed in terms of either a particular transaction or the
Adviser's overall responsibilities with respect to the Funds and to other
accounts over which it exercises investment discretion. It is understood that
although the information may be useful to the Trust and the Adviser, it is not
possible to place a dollar value on such information. Consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc., and
subject to seeking best qualitative execution, the Adviser may give
consideration to sales of shares of the Funds as a factor in the selection of
brokers and dealers to execute portfolio transactions of the Funds.
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On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the 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 Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other clients.
The Adviser will not execute any portfolio transactions for a Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Manager or the Adviser without the prior written
approval of the Manager. The Manager agrees that it will provide the Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Adviser.
The Adviser shall render regular reports to the Trust of the total
brokerage business placed by the Funds and the manner in which the allocation
has been accomplished.
4. Expenses of the Funds. It is understood that each Fund will pay, or that
the Trust will enter into arrangements that require third parties to pay, all
expenses of the Funds other than those expressly assumed by the Manager herein,
which expenses payable by the Funds shall include:
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A. Expenses of all audits by independent public accountants;
B. Expenses of transfer agent, dividend disbursing agent, accounting and
pricing agent and shareholder recordkeeping services;
C. Expenses of custodial services, including recordkeeping services
provided by the custodian;
D. Expenses of obtaining security valuation quotations for calculating
the value of each Fund's net assets;
E. Salaries and other compensation of any of its executive officers and
employees, if any, who are not officers, directors, stockholders or
employees of the Manager or the Adviser;
F. Taxes or governmental fees levied against the Funds; G. Brokerage fees
and commissions in connection with the purchase and sale of the Funds'
portfolio securities;
H. Costs, including the interest expense, of borrowing money;
I. Costs and/or fees incident to Board of Trustee and shareholder
meetings, the preparation and mailings of prospectuses, reports and
notices to the existing shareholders of the Funds, the filing of
reports with regulatory bodies, the maintenance of the Trust's
existence as a business trust, membership in investment company
organizations, and the registration of shares with federal and state
securities authorities;
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J. Legal fees, including the legal fees related to the registration and
continued qualification of each Fund's shares for sale and legal fees
arising from litigation to which the Trust may be a party and
indemnification of the Trust's officers and trustees with respect
thereto;
K. Costs of printing share certificates (in the event such certificates
are issued) representing shares of the Funds;
L. Trustees' fees and expenses of Trustees who are not directors,
officers, employees or stockholders of the Manager, the Adviser or any
of their affiliates; and
M. Each Fund's pro rata portion of the fidelity bond required by Section
17(g) of the Act and other insurance premiums.
5. Activities and Affiliates of the Manager.
A. The services of the Manager hereunder are not to be deemed exclusive,
and the Manager and any of its affiliates shall be free to render
similar services to others. The Manager shall use the same skill and
care in the management of the Funds' assets as it uses in the
administration of other accounts to which it provides asset
management, consulting and portfolio manager selection services, but
shall not be obligated to give the Funds more favorable or
preferential treatment vis-a-vis its other clients.
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B. Subject to and in accordance with the Agreement and Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of the Act, it is
understood that Trustees, officers and agents of the Trust and
shareholders of the Funds are or may be interested in the Manager or
its affiliates as directors, officers, agents or stockholders of the
Manager or its affiliates; that directors, officers, agents and
stockholders of the Manager or its affiliates are or may be interested
in the Trust as Trustees, officers, agents, shareholders or otherwise;
that the Manager or its affiliates may be interested in the Trust as
shareholders or otherwise; and that the effect of any such interests
shall be governed by said Declaration of Trust, Bylaws and the Act.
6. Compensation of the Manager. For all of the services to be rendered and
payments made as provided in this Agreement, the Profit Xxxxx Value Fund will
pay the Manager a fee, computed and accrued daily and paid monthly, at the
annual rate of 1.25% of such Fund's average daily net assets and the Profit
Xxxxx Institutional Equity Fund will pay the Manager a fee, computed and accrued
daily and paid monthly, at the annual rate of .60% of such Fund's average daily
net assets.
The value of the daily net assets of each Fund shall be determined pursuant
to the applicable provisions of the Declaration of Trust and to resolutions of
the Board of Trustees
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of the Trust. If, pursuant to such provisions, the determination of net asset
value is suspended for any particular business day, then for the purposes of
this paragraph 6, the value of the net assets of a Fund as last determined shall
be deemed to be the value of its net assets as of the close of business on that
day, or as of such other time as the value of such Fund's net assets may
lawfully be determined on that day. If the determination of the net asset value
of a Fund's shares has been suspended for a period including such month, the
Manager's compensation payable for such month shall be computed on the basis of
the value of the net assets of such Fund as last determined (whether during or
prior to such month). The Manager agrees that its compensation with respect to a
Fund for any fiscal year shall be reduced by the amount, if any, by which the
expenses of such Fund for such fiscal year exceed the lowest applicable expense
limitation established pursuant to the statutes or regulations of any
jurisdiction in which the shares of such Fund are qualified for offer or sale.
The Manager shall refund to a Fund the amount of any reduction of the Manager's
compensation pursuant to this paragraph 6 as promptly as practicable after the
end of such fiscal year, provided that the Manager will not be required to pay
an amount greater than the fee paid to the Manager with respect to such Fund for
such year pursuant to this Agreement. As used in this paragraph 6, "expenses"
shall mean those expenses included in the applicable expense limitation having
the broadest specification thereof, and "expense limitation" means a limit on
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the maximum annual expenses which may be incurred by an investment company or
series of an investment company determined by multiplying a fixed percentage by
the average, or by multiplying more than one such percentage by different
specified amounts of the average, of the values of the investment company or
series' net assets for a fiscal year. The words "lowest applicable expense
limitation" shall be construed to result in the largest reduction of the
Manager's compensation for any fiscal year of the Funds.
7. Liabilities of the Manager.
A. Except as provided below in this paragraph 7, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Manager ("disabling conduct"), the Manager shall not be subject to
liability to the Trust or to any shareholder of the Funds 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.
B. The Manager shall not be indemnified for any liability unless (i) a
final decision is made on the merits by a court or other body before
whom the proceeding was brought that the Manager was not liable by
reason of disabling conduct, or (ii) in the absence of such a
decision, a reasonable determination is made, based
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upon a review of the facts, that the Manager was not liable by reason
of disabling conduct, by (a) the vote of a majority of a quorum of the
Trustees who are not interested persons of the Trust or the Manager or
(b) an independent legal counsel in a written opinion. The Trust will
advance attorneys' fees or other expenses incurred by the Manager in
defending a proceeding, upon the undertaking by or on behalf of the
Manager to repay the advance unless it is ultimately determined that
the Manager is entitled to indemnification, so long as the Manager
meets at least one of the following as a condition to the advance: (i)
the Manager shall provide a security for its undertaking, (ii) the
Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the Trustees who are not
interested persons of the Trust or the Manager, or an independent
legal counsel in a written opinion, shall determine, based on a review
of the readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Manger ultimately
will be found entitled to indemnification. Any person employed by the
Manager who may also be or become an employee of the Trust shall be
deemed, when acting within the scope of his employment by the Trust,
to be acting in such employment solely for the Trust and not as the
Manager's employee or agent.
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C. No provision of this Agreement shall be construed to protect any
Trustee, director, officer or agent of the Trust or the Manager from
liability in violation of Sections 17(h) and (i) of the Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date first written above
and shall remain in full force and effect for two (2) years from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of
a majority of the Trustees who are not interested persons of the
Trust, the Manager or the 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 of a majority of the outstanding voting securities. The
aforesaid provision that this Agreement may be continued "annually"
shall be construed in a manner consistent with the Act and the rules
and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated with respect to a Fund, without the
payment of any penalty, either by vote of the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting
securities of such Fund, on sixty (60) days' written notice to
the Manager;
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(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by the Manager on sixty (60) days' written
notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth in the Act and the rules and regulations
thereunder.
D. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed postpaid, to the other party to this Agreement
at its principal place of business.
9. 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.
10. Limitation of Liability. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees and shareholders of the Trust and signed by the officers of the Trust,
acting as such, and neither such authorization by such Trustees and shareholders
nor such
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execution and delivery by such officers shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Declaration
of Trust.
11. Use of Name. The Manager may use the name "Profit Funds" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Manager is, or may become
associated, so long as such use is permitted under the Act and other applicable
law.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund(s) to which the amendment
relates and by the Board of Trustees, including a majority of the Trustees who
are not interested persons of the Manager or of the Trust, cast in person at a
meeting called for the purpose of voting on such approval.
13. 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
Delaware.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
PROFIT FUNDS INVESTMENT TRUST
ATTEST: By:
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-------------------------- Title: President
INVESTOR RESOURCES GROUP
ATTEST: By:
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-------------------------- Title: President
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