INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of April 2003, by and between ARK Funds,
a Massachusetts business trust (the "Fund'), and Allied Investment Advisors,
Inc., a Maryland corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end, management series
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, the Fund currently offers thirty series of units of beneficial
interest ("Shares"), each series representing interests in a separate investment
portfolio, and may offer other series of Shares from time to time (all such
series of Shares hereinafter collectively referred to as the "Portfolios"); and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund and to the Portfolios, subject to and in
accordance with the requirements of the Investment Company Act; and
WHEREAS, the Adviser is willing to render such services under the terms of
this Agreement:
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund and its Portfolios for the period and on such
terms as are set forth in this Agreement. The Adviser hereby accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER. Subject to the supervision of the Fund's
Board of Trustees ("Board"), the Adviser will be responsible for providing a
continuous investment program for the Fund's Portfolios, including the provision
of investment research and management with respect to all securities and
investments and cash equivalents purchased, sold or held in the Portfolios and
the selection of brokers and dealers through which securities transactions for
the respective Portfolios will be executed. In carrying out its responsibilities
under this Agreement, the Adviser will at all times act in accordance with the
investment objectives, policies and restrictions of each Portfolio as stated in
the Fund's registration statement as it may be amended from time to time
("Registration Statement") as well as all applicable rules and regulations of
the Securities and Exchange Commission.
The Adviser further agrees that it will:
(a) promptly advise the Fund's custodian and accounting services agent of
each purchase and sale, as the case may be, made on behalf of each of the
Portfolios of any security or other investment specifying in each case: the name
and quantity of the investment purchased or sold, the unit and aggregate
purchase or sale price, commission paid, the market on which the transaction was
effected, the trade date, the settlement date, the identity of the effecting
broker or dealer and/or such other information as may be reasonably requested by
the custodian and accounting services agent, all in such manner as may from time
to time be reasonably requested by them;
(b) provide, in a timely manner, such information as may be reasonably
requested by the Fund or its authorized agent in connection with the computation
of the net asset value and the net income of each Portfolio in accordance with
the procedures prescribed in the Registration Statement or as more frequently
requested by the Board; provided, however, that the Adviser shall not be
responsible for any such computation or for the calculation of the net asset
value per share of any of the Fund's Portfolios; and
(c) render regular reports to the Board concerning the Adviser's
performance of its responsibilities under this Agreement and such other periodic
and special reports as the Board may request; in particular, the Adviser agrees
that it will attend meetings of the Board or validly constituted committees
thereof.
3. BROKERAGE TRANSACTIONS. In placing orders with brokers and dealers, the
Adviser shall obtain the most favorable execution of such orders. However, the
Adviser may, in its discretion, purchase and sell portfolio securities to and
from brokers and dealers who provide the Adviser with research, analysis, advice
and similar
services, and the Adviser may cause the Fund to pay to those brokers or dealers,
in return for research and analysis, a higher commission or spread than may be
charged by other brokers or dealers, provided that the Adviser determines in
good faith that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of the Adviser to the
Fund and any other accounts with respect to which the Adviser exercises
investment discretion. In no instance will securities be purchased from or sold
to the Adviser or any affiliated person of the Adviser except in accordance with
the Investment Company Act.
4. DELEGATION. The Adviser may delegate any of its duties as described in,
or derived from, the duties set forth in paragraph 2 of this Agreement, provided
that any such delegation may be made only pursuant to written agreements which
satisfy the requirements of the Investment Company Act and shall have been
approved by the Fund's Board, and by the shareholders of each Portfolio to which
such agreement applies, in accordance with the provisions of the Investment
Company Act.
5. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser hereunder
are not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the Investment Company Act, the Adviser hereby agrees that all records
which it maintains for the Fund and/or the Portfolios are the property of the
Fund and further agrees to surrender promptly to the Fund any of such records
upon request by the Fund. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act the records required
to be maintained by Rule 31a-1 under the Investment Company Act.
7. EXPENSES OF THE FUND. All expenses shall be allocated among the
Portfolios in accordance with the Fund's Declaration of Trust and the provisions
of the Investment Company Act. During the term of this Agreement, the Fund will
bear all expenses, not specifically assumed by the Adviser, incurred in the
conduct of its operations, including, without limitation, responsibility for the
following: (a) the cost (including brokerage commissions) of securities
purchased or sold by the Portfolios and any losses incurred in connection
therewith; (b) fees payable to, and expenses incurred on behalf of the Fund by,
the Adviser; (c) expenses of organizing the Fund; (d) filing fees and expenses
relating to the registration and qualification of the Fund's shares and the Fund
under federal and/or state securities laws and maintaining such registrations
and qualifications; (e) fees and salaries payable to the Fund's trustees and
officers; (f) taxes (including any income or franchise taxes) and governmental
fees; (g) costs of any liability, uncollectible items of deposit and other
insurance or fidelity bonds; (h) any costs, expenses or losses arising out of a
liability of or claim for damages or other relief asserted against the Fund for
violation of any law; (i) legal, accounting and auditing expenses, including
legal fees of special counsel at any time retained for those members of the
Board who are not interested persons of the Fund and expenses relating to the
use of consulting services by the Fund provided that the use of such services is
approved by the Fund's trustees; (j) charges of custodians, transfer agents and
other agents; (k) costs of preparing share certificates; (l) expenses of setting
in type and printing prospectuses and supplements thereto for existing
shareholders, reports, shareholder reports, and proxy materials; (m) costs of
mailing prospectuses, statements of additional information and supplements
thereto to existing shareholders as well as shareholder reports and proxy
materials; (n) any extraordinary expenses (including fees and disbursements of
counsel) incurred by the Fund; (o) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (p) costs of mailing and tabulating proxies and costs of
shareholders and trustees meetings; and (q) the cost of investment company
literature and other publications provided by the Fund to its trustees and
officers.
The Fund may pay directly any expense incurred by it in its normal
operations and, if any such payment is consented to by the Adviser and
acknowledged as otherwise payable by the Adviser pursuant to this Agreement, the
Fund may reduce the fee payable to the Adviser pursuant to this Agreement by
such amount. To the extent that such deductions exceed the fee payable to the
Adviser for any monthly payment period, such excess shall be carried forward and
deducted in the same manner from the fee payable on succeeding monthly payment
dates.
8. EXPENSES OF ADVISER. The Adviser will bear all expenses incurred by it
in performing its duties as investment adviser under this Agreement. The Adviser
may, but is not required to, voluntarily assume any portion or all of the
expenses that the Fund is required to pay under paragraph 7 hereof. In addition,
if the expenses borne by the Fund in any fiscal year exceed the applicable
expense limitations imposed by the securities regulations of any
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state in which shares are registered or qualified for sale to the public, the
Adviser will reimburse the Fund for any excess up to the amount of the fee
payable to it during that fiscal year pursuant to this Agreement.
9. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Fund will pay to the Adviser a fee in accordance
with the compensation schedule appended to this Agreement.
10. LIMITATION OF LIABILITY OF ADVISER. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund or
any of its Portfolios in connection with the matters to which this Agreement
relates including, without limitation, losses that may be sustained in
connection with the purchase, holding, redemption, or sale of any security on
behalf of any Portfolio of the Fund, except a loss resulting from the willful
misfeasance, bad faith or gross negligence of the Adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement.
11. DURATION AND TERMINATION. This Agreement shall become effective upon
the date first above written and, unless sooner terminated as provided herein,
shall continue in effect automatically for successive periods of twelve months
each, so long as such continuance is specifically approved with respect to each
Portfolio at least annually by (a) the vote of a majority of those members of
the Board who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval; and (b) all of the members of the Board or by vote of the holders of a
majority of the outstanding voting securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated with
respect to any Portfolio or the Fund at any time, without the payment of any
penalty by the Fund, upon the vote of the Board or the vote of a majority of the
outstanding voting securities of the Fund and on 60 days' written notice to the
Adviser or by the Adviser at any time, without the payment of any penalty, on 60
days' written notice to the Fund. This Agreement will automatically and
immediately terminate in the event of its assignment. As used in this Agreement,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meanings as such terms have in the
Investment Company Act.
In the event that this Agreement shall not be approved in the manner
provided herein or shall have been terminated with respect to any Portfolio, the
Adviser and the Fund shall continue to be bound by the terms of this Agreement
with respect to any other Portfolio provided that this Agreement shall have been
approved in the manner contemplated herein with respect to such Portfolio.
12. AMENDMENT OF THIS AGREEMENT. No material provision of this Agreement
may be changed, waived, discharged or terminated except by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of any material term of
this Agreement shall be effective until approved by the Board and by the holders
of a majority of the Fund's outstanding voting securities.
13. NAME OF THE FUND. The Fund may use the name "ARK Funds" or any name
derived from or using the word "ARK" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect. At such time as such
agreement shall no longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name similar thereto.
14. MISCELLANEOUS. The Adviser acknowledges that the Fund is a
Massachusetts business trust, and that the Fund is required by its Declaration
of Trust to limit its liability in all agreements to the assets of the Fund.
Consequently, the Adviser agrees that any claims by it against the Fund may be
satisfied only from the assets of the Fund, and no shareholders, trustees or
officers of the Fund may be held personally liable or responsible for any
obligations arising out of this Agreement.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this
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Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Maryland law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: ARK FUNDS
XXXXXX X. RUS By: /S/ XXXXXXX XXXXXX
------------- ----------------------------------
Name: XXXXXXX XXXXXX
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Title: VICE PRESIDENT
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Attest: ALLIED INVESTMENT ADVISORS, INC.
XXXXXX X. RUS By: /S/ J. XXXX XXX
------------- ----------------------------------
Name: J. XXXX XXX
-----------------------------------
Title: CHIEF INVESTMENT OFFICER
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FEE SCHEDULE
For the services provided, and the expenses assumed, by the Adviser to
the Fund under the terms of the Agreement, the Fund shall pay to the Adviser a
monthly fee at the following annual rates:
Percentage of
Average Daily Net
ARK FUNDS PORTFOLIO ASSETS
U.S. Treasury Money Market Portfolio 0.25%
U.S. Government Money Market Portfolio 0.25%
Money Market Portfolio 0.25%
Pennsylvania Tax-Free Money Market Portfolio 0.25%
Tax-Free Money Market Portfolio 0.25%
Short-Term Treasury Portfolio 0.35%
Short-Term Bond Portfolio 0.75%
Maryland Tax-Free Portfolio 0.65%
Pennsylvania Tax-Free Portfolio 0.65%
Intermediate Fixed Income Portfolio 0.60%
U.S. Government Bond Portfolio 0.75%
Income Portfolio 0.60%
Balanced Portfolio (formerly Growth and Income Portfolio) 0.65%
Equity Income Portfolio 0.70%
Value Equity Portfolio 1.00%
Equity Index Portfolio 0.20%
Blue Chip Equity Portfolio 0.70%
Capital Growth Portfolio 0.70%
Mid-Cap Equity Portfolio 0.80%
Small-Cap Equity Portfolio (formerly Special Equity Portfolio) 0.80%
International Equity Portfolio 1.00%
Emerging Markets Equity Portfolio 1.00%
Prime Cash Management Portfolio 0.15%
U.S. Government Cash Management Portfolio 0.15%
U.S. Treasury Cash Management Portfolio 0.15%
Tax-Free Cash Management Portfolio 0.15%
Social Issues Intermediate Fixed Income Portfolio 0.60%
Social Issues Blue Chip Portfolio 0.70%
Social Issues Capital Growth Portfolio 0.70%
Social Issues Small-Cap Equity Portfolio 0.80%
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