XXXXXXXXX XXXXXXXX INVESTMENT TRUST
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT ("Agreement") is made as of the 1st day
of October, 1997, by and between XXXXXXXXX XXXXXXXX INVESTMENT TRUST, a business
trust organized and existing under the laws of the Commonwealth of Massachusetts
(the "Trust"), with respect to its initial, series of shares also known as
XXXXXXXXX XXXXXXXX EMERGING GROWTH FUND (the "Fund"), and RS INVESTMENT
MANAGEMENT, INC., a corporation organized and existing under the laws of the
State of Delaware (the Adviser").
W I T N E S S E T H :
WHEREAS, the Trust is an open-end diversified, management investment
company, registered as such under the Investment Company Act of 1940, as amended
(the "Act"); and
WHEREAS, the Adviser seeks to be and has filed such documents as are
necessary to be registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and is engaged in the
business of supplying investment advice, investment management and
administrative services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Adviser to render advice and
services to the Trust and Fund pursuant to the terms and provisions of this
Agreement, and the Adviser is interested in furnishing said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, mutually agree as follows:
1. EMPLOYMENT OF ADVISER. (a) The Trust hereby employs the Adviser, and
the Adviser hereby accepts such employment, to render investment advice and
investment management services with respect to the assets of the Fund,
consistent with the investment objectives and policies of the Fund and subject
to the supervision and direction of the Trust's Board of Trustees. The Adviser
shall, except as otherwise provided for herein, render or make available all
administrative services needed for the management and operation of the Fund, and
shall, as part of its duties hereunder, (i) furnish the Trust with investment
advice, research and recommendations with respect to the investment of the
Fund's assets and the purchase and sale of its portfolio securities, including
the taking of such other steps as may be necessary to implement such advice and
recommendations, (ii) furnish the Trust and Fund with
1
reports, statements and other data on securities, economic conditions and other
pertinent subjects which the Trust's Board of Trustees may request, (iii)
furnish such office space and personnel as are needed by the Fund, and (iv) in
general superintend and manage the investments of the Fund, subject to the
ultimate supervision and direction of the Trust's Board of Trustees.
(b) The Adviser shall determine the securities to be purchased or sold by
the Fund and will place orders pursuant to its determination with or through
such persons, brokers or dealers (including Xxxxxxxxx, Xxxxxxxx & Company LLC)
in conformity with the policy with respect to brokerage as set forth in the
Trust's Registration Statement and the Fund's Private Placement Memorandum,
Prospectus and Statement of Additional Information or as the Trustees may direct
from time to time. The Adviser shall not execute portfolio transactions for the
account of the Fund with a broker or dealer which is an "affiliated person" (as
defined in the Act) of the Adviser or the Trust, except pursuant to procedures
adopted by the Trustees in accordance with Rule 17e-l under the Act. The
Adviser shall render regular reports to the Trustees of the total brokerage
business placed and the manner in which the allocation has been accomplished.
2. SUB-ADVISERS AND CONSULTANTS. The Adviser may from time to time, in
its discretion, delegate certain of its responsibilities under this Agreement to
one or more qualified companies, each of which is registered under the Advisers
Act, provided that the separate costs of employing such companies and of the
companies themselves are borne by the Adviser And not by the Fund.
3. ADVISER IS INDEPENDENT CONTRACTOR. The Adviser shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized, have no authority to act for or
represent the Trust or Fund in any way, or in any way be deemed an agent for the
Trust or Fund. It is expressly understood and agreed that the services to be
rendered by the Adviser to the Trust and Fund under the provisions of this
Agreement are not to be deemed exclusive, and the Adviser 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.
4. RESPONSIBILITIES AND PERSONNEL OF ADVISER. The Adviser agrees to use
its best efforts in the furnishing of investment advice, research and
recommendations to the Fund, in the preparation of reports and information, and
in the management of the Fund's assets, all pursuant to this Agreement, and for
this purpose the Adviser 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. Without limiting the generality of the
foregoing, the staff and personnel of the Adviser shall be deemed to include
persons employed or retained by the Adviser to furnish statistical, research,
and other factual information, advice regarding economic factors and
2
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Adviser may desire and
request.
5. FURNISHING OF STATEMENTS AND REPORTS. The Trust shall from time to
time furnish to the Adviser detailed statements of the portfolio investments and
assets of the Fund and information as to its investment objectives and needs,
and shall make available to the Adviser such financial reports, business
descriptions and plans, proxy statements, legal and other information relating
to its investments as may be in the possession of the Trust or available to it
and such other information as the Adviser may reasonably request.
6. EXPENSES OF EACH PARTY. (a) The Adviser shall bear all expenses in
connection with the performance of its services under this Agreement. The
Adviser shall also pay (i) all compensation, if any, to the executive officers
of the Fund and their related expenses and (ii) all compensation, if any, and
out-of-pocket expenses of the Trust's trustees, who are "interested persons" of
the Trust (as defined in the Act).
(b) The Trust shall bear all expenses of the Fund's
organization, operations, and business not specifically assumed or agreed to be
paid by the Adviser as provided in this Agreement. In particular, but without
limiting the generality of the foregoing, the Trust on behalf of the Fund and
out of its assets shall pay:
(A) CUSTODY AND ACCOUNTING SERVICES. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for the
cash, securities, and other property of the Fund, including all
charges, of depositories, custodians, and other agents, if any;
(B) SHAREHOLDER SERVICING. 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 Fund;
(C) BOOKS AND RECORDS. All costs and expenses associated
with the maintenance of the Fund's books of account and records
as required by the Act;
(D) SHAREHOLDER COMMUNICATIONS. All expenses of preparing,
printing, and distributing reports and other communications to
shareholders;
(E) SHAREHOLDER MEETINGS. All fees and expenses incidental
to holding meetings of shareholders, including the printing of
notices and proxy material, and proxy solicitation therefor,
provided that the Adviser shall be responsible for and assume all
expenses and fees with
3
respect to meetings of the Fund's shareholders held solely for the
benefit of the Adviser;
(F) PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION.
All expenses of preparing and printing of annual or more frequent
revisions of the Private Placement Memorandum, Prospectus and
Statement of Additional Information relating to the offering of
Fund's shares and of mailing them to shareholders;
(G) PRICING. All expenses of computing the Fund's net asset
value per share, including the cost of any equipment or services used
for obtaining price quotations;
(H) COMMUNICATION EQUIPMENT. All charges for equipment or
services used for communication between the Adviser or the Trust
and the custodian, transfer agent or any other agent selected by
the Trust;
(I) LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges
for services and expenses of the Trust's legal counsel and
independent auditors for the benefit of the Trust;
(J) TRUSTEES' FEES AND EXPENSES. All compensation of
trustees, other than those who are interested persons of or
affiliated with the Adviser, and all expenses incurred in
connection with their service and meetings;
(K) FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust under
the Act and the registration of Fund shares under the Securities
Act of 1933, as amended (the "1933 Act"), including all fees and
expenses incurred in connection with the preparation, printing,
and filing of any registration statement, Prospectus and
Statement of Additional Information under the 1933 Act or the
Act, and any amendments or supplements thereto that may be made
from time to time;
(L) STATE REGISTRATION FEES. All fees and expenses
(including the compensation of personnel who may be employed by
the Adviser or an affiliate) of qualifying and maintaining
qualification of the Trust and of the Fund shares for sale under
securities laws of various states or jurisdictions, and of
registration and qualification of the Trust under all other laws
applicable to the Trust or its business activities (including
registering the Trust as a broker-dealer, or any officer of the
Trust or any person as agent or salesman of the Trust in any
state);
4
(M) ISSUE AND REDEMPTION OF TRUST SHARES. All expenses
incurred in connection with the issue, redemption, and transfer
of Fund shares, including the expense of confirming all Fund
share transactions, and of preparing and transmitting the Fund's
share certificates;
(N) BONDING AND INSURANCE. All expenses of bond,
liability, and other insurance coverage required by law or deemed
advisable by the Board of Trustees;
(0) BROKERAGE COMMISSIONS. All brokerage commissions and
other charges incident to the purchase, sale, or lending of the
Fund's portfolio securities;
(P) TAXES. All taxes or governmental fees payable by or
with respect of the Trust or Fund to federal, state, or other
governmental agencies, domestic or foreign, including stamp or
other transfer taxes;
(Q) TRADE ASSOCIATION FEES. All fees, dues, and other
expenses incurred in connection with the Trust's membership in
any trade association or other investment organization;
(R) DISTRIBUTION FEES. Fees and expenses incurred with
respect to the distribution of the Fund's shares pursuant to the
Distribution Plan pursuant to Rule 12b-1 between the Trust with
respect to the Fund and Xxxxxxxxx, Xxxxxxxx & Company LLC;
(S) INTEREST. All interest which may accrue and be payable
as a result of the Fund's activities;
(T) STATIONERY AND POSTAGE. The cost of all stationery and
postage required by the Fund, unless otherwise payable by another
party with respect to an activity or expense referred to above;
and
(U) NONRECURRING AND EXTRAORDINARY EXPENSES. Such
nonrecurring expenses as may arise, including the costs of
actions, suits, or proceedings to which the Trust on behalf of
the Fund is a party and the expenses the Trust on behalf of the
Fund may incur as a result of its legal obligation to provide
indemnification to its officers, trustees, and agents.
(c) In the event that the Trust offers other series of its
shares in the future, then the Fund shall only be responsible for expenses
directly attributable to it and its
5
operations and for such other costs and expenses of the Trust as the Board of
Trustees may by resolution or otherwise direct.
7. REIMBURSEMENT FOR ADVANCED COSTS AND EXPENSES. To the extent the
Adviser incurs any costs or performs any services which are an obligation of the
Trust or Fund, as set forth herein, the Trust on behalf of the Fund and out of
the Fund's assets shall promptly reimburse the Adviser for such costs and
expenses. To the extent the services for which the Fund is obligated to pay are
performed by the Adviser, the Adviser shall be entitled to recover from the Fund
only to the extent of its actual costs for such services.
8. FEES. (a) The Trust on behalf of the Fund and out of the Fund's
assets agrees to pay to the Adviser, and the Adviser agrees to accept, as full
compensation for all services furnished or provided to the Trust and Fund
hereunder, and as full reimbursement for all expenses assumed by the Adviser, a
management fee computed at the rate of 1.00% per annum, of the average daily net
assets of the Fund.
(b) The management fee shall be accrued daily during each month
by the Trust on behalf of the Fund and paid to the Adviser on the first business
day of the succeeding month. The initial monthly fee under this Agreement shall
be payable on the first business day of the first month following the effective
date of the Adviser's registration as an investment adviser under the Advisers
Act. The fee to the Adviser 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. If
this Agreement is terminated prior to the end of any month, the fee to the
Adviser shall be payable within ten (10) days after the date of termination.
(c) To the extent that the gross operating costs and expenses of
the Fund (excluding any interest, taxes, brokerage commissions, distribution
fees paid pursuant to the Distribution Plan pursuant to Rule 12b-1, and, with
the prior written approval of any state securities commission requiring same,
any extraordinary expenses, such as litigation), exceed the most stringent
expense limitation requirement of' the states in which shares of the Fund are
qualified for sale, the Adviser shall reimburse the Fund for the amount of such
excess.
(d) The Adviser may waive any portion of the compensation due to
it hereunder, or for reimbursement of expenses by the Trust pursuant to
Paragraph 7 of this Agreement, and any such waiver shall be applicable only with
respect to the specific items waived and shall not constitute a waiver of any
future compensation or reimbursement due to the Adviser hereunder.
9. SHORT POSITIONS IN FUND'S SHARES. The Adviser agrees that
neither it nor any of its officers or employees shall take any short position in
the shares of the Fund. This prohibition shall not prevent the purchase of such
shares by any of the officers and Trustees or
6
employees of the Adviser 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 Act.
10. RELATIONSHIP TO PROVISIONS OF AGREEMENT AND DECLARATION OF TRUST.
Nothing herein contained shall be deemed to require the Trust to take any action
contrary to its Agreement and Declaration of Trust 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
Fund.
11. DUTIES AND STANDARDS OF CARE. (a) In the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to 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 Fund.
(b) No provision of this Agreement shall be construed to protect
any Trustee or officer of the Trust or director or officer of the Adviser from
liability in violation of Sections 17(h) and (i) of the Act.
(c) A copy of the Agreement and Declaration of Trust of the
Trust is on-file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this Agreement is executed on
behalf of the Trustees of the Trust as Trustees, and not individually, and that
the obligations arising out of this Agreement are not binding upon the Trustees
or holders of the Trust's shares individually but are binding only upon the
assets and property of the. Fund. The Adviser acknowledges that it has
received notice of and accepts the limitations of liability as set forth in the
Agreement and Declaration of Trust of the Trust. The Adviser agrees that the
Trust's obligations hereunder shall be limited to the Fund and to its assets,
and that the Adviser or any affiliated or related party shall not seek
satisfaction of. any such obligation from any shareholder of the Fund nor from
any trustee, officer, employee or agent of the Trust.
12. TERM AND RENEWAL. This Agreement shall remain in effect for a
period of two years, unless sooner terminated in accordance with Paragraph 13
hereof, and shall continue in effect from year to year thereafter so long as
such continuation is approved 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
the Fund, and (ii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting for the purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Trustees of the Trust or by a
vote of a majority of its
7
outstanding voting securities, upon sixty (60) days' written notice to the
Adviser, and by the Adviser upon sixty (60) days' written notice to the Trust.
This Agreement shall also terminate in the event of any transfer or assignment
thereof, as defined in the Act.
14. CERTAIN DEFINITIONS. The terms "majority of the outstanding
voting securities" of the Trust or Fund and "interested persons' shall have the
meanings as set forth in the Act. The term "net assets" shall have the meaning
and shall be calculated as set forth in the Trust's Registration Statement from
time to time.
15. 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.
16. HEADINGS. The headings used herein are for convenience and ease
of reference only. No legal effect is intended, nor is to be derived from such
headings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers, all as of the
day and year first above written.
XXXXXXXXX XXXXXXXX
INVESTMENT TRUST
/s/ Xxxxx X. Xxxxx
--------------------------------------
Treasurer
RS INVESTMENT MANAGEMENT, INC.
/s/ Xxxxxx X. Xxxxx
--------------------------------------
President
8
