INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
THIS INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is made as of this___th
day of _____________, 1997, between FIRST FUNDS, a business trust organized
under the laws of the Commonwealth of Massachusetts (the "Trust"), on behalf of
its CAPITAL APPRECIATION PORTFOLIO (the "Portfolio") and Investment Advisers,
Inc., a corporation organized under the laws of the State of Minnesota (the
"Investment Adviser").
WHEREAS, the Trust has been organized to operate as an investment company
registered under the Investment Company Act of 1940 (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 Portfolio in securities pursuant to investment objectives and
policies for the Portfolio;
WHEREAS, the Trust desires to obtain the services (including day-to-day
portfolio management), information, advice, assistance and facilities of the
Investment Adviser and to have a co-investment adviser (Co-Adviser) provide or
perform various investment advisory, statistical, research, portfolio investment
adviser selection, and other services with respect to the Portfolio as set forth
more fully herein;
NOW, THEREFORE, Trust, on behalf of the Portfolio, 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 Portfolio's 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.
(a) The Investment Adviser shall have overall responsibility for the
day-to-day management and investment of the Portfolio's assets
and securities portfolio subject to and in accordance with the
investment objectives and policies of the Portfolio, 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
Portfolio's investments, (ii) conduct or cause to be conducted a
continual program of investment of the Portfolio's assets, (iii)
place or cause to be placed orders for all purchases and sales of
the investments made for the Portfolio, and (iv) maintain or
cause to be maintained the books and records required in
connection with its duties hereunder.
(b) The Investment Adviser shall advise the Trustees of the Trust
regarding overall investment programs and strategies for the
Portfolio, revision of such programs as
necessary, and shall monitor and report periodically to the
Trustees concerning the implementation of such programs and
strategies.
(c) 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 Portfolio's 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.
(d) The Investment Adviser will coordinate its activities with the
Co-Adviser and, 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 and obligations of the Investment Adviser hereunder.
The Investment will provide to the Co-Adviser and to the other
service providers to the Portfolio such information as the
Co-Adviser and/or other service providers may reasonable request
in order to perform services on behalf of the Portfolio.
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 and statistical information related to its duties and
responsibilities hereunder as required by the Trustees and necessary
for the preparation of registration statement, 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
Portfolio's 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 for consultation
and discussions regarding the investment advisory activities of the
Portfolio.
3. COVENANTS BY INVESTMENT ADVISER. The Investment Adviser agrees with
respect to the services provided to the Portfolio that it:
(a) will comply with all 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 Portfolio;
(b) will not make loans to any person for the purpose of purchasing
or carrying Portfolio shares, or make loans to the Portfolio or
the Trust;
(c) will not purchase shares of the Portfolio or the Trust for its
own investment account;
(d) will maintain all books and records with respect to the
securities transactions of the Portfolio and furnish the Trustees
such periodic and special reports as the Trustees may request
with respect to the Portfolio;
(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); and
(f) will immediately notify the Trust of the occurrence of any event
which would disqualify Investment Adviser or any Sub-Adviser from
serving as investment adviser of an investment company.
4. TRANSACTION PROCEDURES. All investment transactions on behalf of the
Portfolio will be compensated by payment to or delivery by the custodian for
the Portfolio 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 Portfolio, of
all cash and/or securities due to or from the Portfolio, 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 Portfolio shall advise the Custodian of all investment orders
for the Portfolio 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 Portfolio 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 in a written form duly agreed upon by
the Custodian and the Investment 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 Portfolio, orders for the execution of the Portfolio's
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 Portfolio, (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 Portfolio 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 Portfolio 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
Portfolio 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 Portfolio's investment transactions. On
occasions when the Investment Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio 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
Portfolio and to such other clients.
The Investment Adviser will not execute any Portfolio transactions for the
account of the Portfolio 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 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 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 of the
total brokerage business placed by it and the manner in which the allocation of
such brokerage has been accomplished.
6. EXPENSES OF THE PORTFOLIO. The Portfolio 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 Portfolio 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
Portfolio's 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 Portfolio;
(g) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Portfolio;
(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 Portfolio, the preparation and mailings of
prospectuses and reports of the Portfolio to its existing
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Portfolio's 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 Portfolio, including the legal fees related to the
registration and continued qualification of the Portfolio's
shares for sale;
(k) Costs of printing any share certificates representing shares of
the Portfolio;
(l) Fees and expenses of Trustees who are not affiliated persons, as
defined in the 1940 Act, of the Investment 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 Investment Adviser or its 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 Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio may
have an interest from time to time, whether in transactions which involve the
Portfolio or otherwise. The Investment Adviser shall not have any obligation
to acquire for the Portfolio a position in any investment which any Affiliated
Account may acquire, and the Portfolio shall have no first refusal, coinvestment
or other rights in respect of any investment, either for the Portfolio or
otherwise.
8. COMPENSATION OF THE INVESTMENT ADVISER. (a) For all services provided
to the Portfolio 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 0.70% of the average
daily net assets of the Portfolio for the first $50 million of such assets, and
0.65% on average daily net assets of the Portfolio in excess of $50 million (the
"Annual Rate"). 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 Portfolio 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 Portfolio may be
invested from time to time, unless the Trustees delegate such right to the
Investment Adviser.
10. LIABILITIES OF THE INVESTMENT ADVISER.
(a) The Investment Adviser will not be liable for any error or
judgment or mistake of law or for any loss suffered by the
Portfolio or the Trust in connection with the matters to which
this Agreement relates, except that the Investment Adviser shall
be liable to the Portfolio and the Trust for a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of duties or reckless
disregard by it of its obligations or duties under 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 Portfolio 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 Portfolio. 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 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
Portfolio, 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 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 and statement of additional
information (as each may be amended or supplemented from time to time) which
relate to any class of shares representing interests in the Portfolio.
(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, to the addresses below:
If to Trust: First Funds
c/o Xxxxx X. Xxxxx
ALPS Mutual Fund Services, Inc.
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxxxxxxxxxx, Esq.
Baker, Donelson, Bearman, Caldwell, P.C.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Investment Adviser: Investment Advisers, Inc.
c/o: ____________________
000 Xxxxxx Xxx. X., Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
With a copy to: _________________________, Esq.
_________________________
_________________________
_________________________
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 Portfolio
pursuant to this Agreement shall be limited in all cases to the Portfolio 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
Portfolio, nor from the Trustees or any individual Trustee of the Portfolio.
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:
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Xxxxxxx X. Xxxxxxx, President
INVESTMENT ADVISERS, INC.
By:
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