NEW RIVER FUNDS
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT (the "Agreement") made as of the
___ day of September, 2003, by and between New River Funds, a Delaware statutory
trust (the "Trust"), on behalf of each series of the Trust listed in APPENDIX A
hereto (hereinafter referred to individually as a "Fund" and collectively as the
"Funds") and New River Advisers LLC, a limited liability company organized and
existing under the laws of the Commonwealth of Virginia (the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is an investment adviser, registered as such
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
NOW, THEREFORE, in consideration of the covenants and the mutual
premises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF MANAGER. The Trust hereby appoints the Manager and
the Manager hereby accepts such appointment, to render investment advice and
management services with respect to the assets of the Funds for the period and
on the terms set forth in this Agreement, subject to the supervision and
direction of the Trust's Board of Trustees (the "Board").
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2. DUTIES OF MANAGER.
(a) GENERAL DUTIES. The Manager shall perform the management and
administrative services necessary for the operation of the Funds that are not
otherwise provided by third party service providers. The Manager shall, subject
to the supervision of the Board, perform various services for the Funds,
including but not limited to: (1) providing the Funds with office space,
equipment and facilities (which may be its own) for maintaining their
organization; and (2) on behalf of each Fund, supervising relations with, and
monitoring the performance of, custodians, depositories, fund administrators,
transfer, dividend disbursing, accounting and pricing agents, independent
auditors, attorneys, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable.
(b) INVESTMENT ADVISORY SERVICES. The Manager shall act as
investment manager to the Funds and shall manage the investments of the Funds on
behalf of the Funds in accordance with the investment objectives, programs and
restrictions of the Funds as provided in the Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of Trust
and By-Laws, or otherwise and such other limitations as the Trustees may impose
from time to time in writing to the Manager. In this regard, the Manager shall
regularly make decisions as to what securities and other investments to purchase
and sell on behalf of the Funds, and shall effect the purchase and sale of such
investments. The Manager shall also have discretion to vote any proxy solicited
by a Fund's portfolio company, again subject to the ultimate supervision of the
Board. In performing these services, the Manager may hire one or more
sub-advisers (the "Sub-Advisers") for each Fund to carry out the investment
program of the Funds (subject to the approval of the Board and shareholders of
the Fund, except as otherwise permitted under the terms of any exemptive relief
obtained by the Manager from the Securities and Exchange Commission ("SEC"), or
by rule or regulation). To the extent that the Manager does hire any
Sub-Adviser, it will thereafter continuously review, supervise and (where
appropriate) administer the investment program of the Funds. Without limiting
the generality of the foregoing, the Manager shall, or direct any Sub-Adviser
to: (i) furnish the Funds with advice and recommendations with respect to the
investment of each Fund's assets and the purchase and sale of portfolio
securities for the Funds, including selecting brokers and effecting transactions
or taking of such other steps as may be necessary to implement such advice and
recommendations; (ii) furnish the Funds with reports, statements and other data
on securities, economic conditions and other pertinent subjects which the Board
may reasonably request; (iii) manage the investments of the Funds, subject to
the ultimate supervision and direction of the Board; (iv) vote proxies solicited
by portfolio companies; (v) provide persons satisfactory to the Board to act as
officers and employees of the Trust and the Funds (such officers and employees,
as well as certain trustees, may be trustees, directors, officers, partners, or
employees of the Manager or its affiliates) but not including personnel to
provide administrative services or distribution services to the Fund; and (vi)
render to the Board such periodic and special reports with respect to each
Fund's investment activities as the Board may reasonably request. The investment
policies and all other actions of each Fund are and shall at all times be
subject to the control and direction of the Fund's Board.
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(c) BROKERAGE. The Manager or a Sub-Adviser shall place orders
for the purchase and sale of securities either directly with the issuer or with
a broker or dealer selected by the Manager or the Sub-Adviser. In placing each
Fund's securities trades, it is recognized that the Manager or Sub-Adviser will
give primary consideration to securing the most favorable price and efficient
execution, so that each Fund's total cost or proceeds in each transaction will
be the most favorable under all the circumstances. Within the framework of this
policy, the Manager may consider the financial responsibility, research and
investment information, and other services provided by brokers or dealers who
may effect or be a party to any such transaction or other transactions to which
other clients of the Manager or Sub-Adviser may be a party.
It is also understood that it is desirable for the Funds that the
Manager and each Sub-Adviser have access to investment and market research and
securities and economic analyses provided by brokers and others. It is also
understood that brokers providing such services may execute brokerage
transactions at a higher cost to the Funds than might result from the allocation
of brokerage to other brokers on the basis of seeking the most favorable price
and efficient execution. Therefore, the purchase and sale of securities for the
Funds may be made with brokers who provide such research and analysis, subject
to review by the Board from time to time with respect to the extent and
continuation of this practice to determine whether each Fund benefits, directly
or indirectly, from such practice. It is understood by both parties that the
Manager may select broker-dealers for the execution of the Funds' portfolio
transactions who provide research and analysis as the Manager may lawfully and
appropriately use in its investment management and advisory capacities, whether
or not such research and analysis may also be useful to the Manager or
Sub-Adviser in connection with its services to other clients.
On occasions when the Manager or a Sub-Adviser deems the purchase or
sale of a security to be in the best interest of one or more of the Funds as
well as of other clients, the Manager or the Sub-Adviser, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and the most efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Manager or Sub-Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Funds and to such other clients.
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The Manager is authorized to direct, or to permit any sub-adviser to
direct, portfolio transactions to a broker-dealer which is an affiliated person
of the Manager or the Trust in accordance with such standards and procedures as
may be approved by the Board in accordance with 1940 Act Rule 17e-1, or other
rules promulgated by the SEC. Any transaction placed with an affiliated
broker-dealer must (i) be placed at the best available execution, and (ii) may
not be a principal transaction.
(d) ADMINISTRATIVE SERVICES. The Manager shall oversee the
administration of the Funds' business and affairs although the provision of
administrative services, to the extent not covered by subparagraphs (a) or (b)
above, is not the obligation of the Manager under this Agreement.
Notwithstanding any other provisions of this Agreement, the Manager shall be
entitled to reimbursement from the Funds for all or a portion of the reasonable
costs and expenses, including salary, associated with the provision by Manager
of personnel to render administrative services to the Funds.
3. BEST EFFORTS AND JUDGMENT. The Manager shall use its best efforts
and judgment in rendering the advice and services to the Funds as contemplated
by this Agreement.
4. INDEPENDENT CONTRACTOR. The Manager shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or the Funds in any way, or in any way be deemed an agent
for the Trust or for the Funds. It is expressly understood and agreed that the
services to be rendered by the Manager to the Funds under the provisions of this
Agreement are not to be deemed exclusive, and the Manager 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.
5. MANAGER'S PERSONNEL. The Manager or its affiliates 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 Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Manager or the Board may desire and reasonably request.
6. REPORTS BY FUNDS TO MANAGER. Each Fund will from time to time
furnish to the Manager detailed statements of its investments and assets, and
information as to its investment objective and needs, and will make available to
the Manager such financial reports, proxy statements, legal and other
information relating to each Fund's investments as may be in its possession or
available to it, together with such other information as the Manager may
reasonably request.
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7. EXPENSES.
(a) With respect to the operation of each Fund, the Manager is
responsible for (i) the compensation of any of the Trust's trustees, officers,
and employees who are affiliates of the Manager (but not the compensation of
employees performing services in connection with expenses which are the Fund's
responsibility under Subparagraph 7(b) below), and (ii) providing personnel,
office space and equipment reasonably necessary to fulfill the Manager's duties
under this Agreement.
(b) Each Fund is responsible for and has assumed the obligation
for payment of all of its expenses, other than as stated in Subparagraph 7(a)
above, including but not limited to: fees and expenses incurred in connection
with the issuance, registration and transfer of its shares; brokerage and
commission expenses; all expenses of transfer, receipt, safekeeping, servicing
and accounting for the cash, securities and other property of the Trust for the
benefit of the Funds including all fees and expenses of its custodian, fund
administrator, shareholder services agent and accounting services agent;
interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the 1940 Act; taxes, if any; expenditures in connection with
meetings of each Fund's shareholders and Board that are properly payable by the
Fund; salaries and expenses of officers and fees and expenses of members of the
Board or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Manager; insurance premiums on
property or personnel of each Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of the Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of obtaining and maintaining any required registration or
notification for its shares for sale under federal and applicable state and
foreign securities laws; 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 Funds,
if any; and all other charges and costs of its operation plus any extraordinary
and non-recurring expenses, except as herein otherwise prescribed.
(c) To the extent the Manager incurs any costs by assuming
expenses which are an obligation of a Fund as set forth herein, such Fund shall
promptly reimburse the Manager for such costs and expenses, except to the extent
the Manager has otherwise agreed to bear such expenses. To the extent the
services for which a Fund is obligated to pay are performed by the Manager, the
Manager shall be entitled to recover from such Fund to the extent of the
Manager's actual costs for providing such services.
8. MANAGEMENT FEE.
(a) Each Fund shall pay to the Manager, and the Manager agrees to
accept, as full compensation for all administrative and investment management
and advisory services furnished or provided to such Fund pursuant to this
Agreement, a management fee as set forth in the Fund and Fee Schedule attached
hereto as APPENDIX A, as may be amended in writing from time to time by the
Trust and the Manager.
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(b) The initial fee under this Agreement shall be payable on the
first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated before the end of any month, the fee to the Manager 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, and shall be payable within ten (10) days after the
date of termination.
(c) FEE REDUCTION. The Manager may, but is not required to,
voluntarily or contractually reduce all or a portion of its fees and/or make
payments for other expenses in order to decrease the operating expenses of a
Fund. Any such reduction or payment (a "subsidy" or collectively "subsidies")
shall be applicable only to such specific subsidy and shall not constitute an
agreement to continue such subsidy in the future. Any such subsidy will be
agreed to prior to accrual of the related expense or fee and will be estimated
daily and reconciled and paid on a monthly basis. The Manager may seek
reimbursement of any subsidies made by the Manager either voluntarily or
pursuant to contract. The reimbursement of any subsidy must be approved by the
Board and must be sought no later than the end of the third fiscal year
following the year to which the subsidy relates if the aggregate expenses for
that period do not exceed any more restrictive limitation to which the Manager
has agreed (subsidies available for reimbursement to the Manager are
collectively referred to as the "Recoupment Balance") and the Board approves the
reimbursement. For example, subsidized operating expenses relating to the period
July 1, 2003 through June 30, 2004 would no longer be eligible for reimbursement
after July 1, 2007. The Manager agrees not to request or seek reimbursement of
subsidized operating expenses that are no longer eligible for reimbursement. The
Manager may not request or receive reimbursement of the Recoupment Balance
before payment of the Fund's operating expenses for the current year and cannot
cause the Fund to exceed any agreed upon expense limitation for that year in
making such reimbursement.
(d) The Manager may agree not to require payment of any portion
of the compensation or reimbursement of expenses otherwise due to it pursuant to
this Agreement prior to the time such compensation or reimbursement has accrued
as a liability of the Fund. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Manager hereunder.
9. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of the Trust of its responsibility for and control of the conduct of the
affairs of the Trust and Funds.
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10. MANAGER'S LIABILITIES.
(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the Trust
or the Funds 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 by the
Funds.
(b) The Funds shall indemnify and hold harmless the Manager, its
managing member and the shareholders, directors, officers and employees of each
of them (any such person, an "Indemnified Party") against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating and
defending any alleged loss, liability, claim, damage or expenses and reasonable
counsel fees incurred in connection therewith) arising out of the Indemnified
Party's performance or non-performance of any duties under this Agreement;
provided, however, that nothing herein shall be deemed to protect any
Indemnified Party against any liability to which such Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement; and provided, further,
that this provision shall not be construed as a waiver or limitation of any
rights which the Trust or the Funds may have under applicable federal securities
laws.
(c) No provision of this Agreement shall be construed to protect
any trustee or officer of the Trust, or managing member, director or officer of
the Manager, from liability in violation of Sections 17(h) and (i) of the 1940
Act.
11. NON-EXCLUSIVITY. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. If
this Agreement is terminated with respect to any Fund, this Agreement shall
remain in full force and effect with respect to all other Funds listed on
APPENDIX A hereto, as the same may be amended.
12. TERM. This Agreement shall become effective as to any Fund on the
date that is the latest of (1) the execution of this Agreement, (2) the approval
of this Agreement for the Fund by the Board of the Trust (as required under
Section 15 of the 0000 Xxx) or (3) the approval of this Agreement by the
shareholders of the affected Fund. This Agreement shall remain in effect as to
any Fund for an initial period of two (2) years or such shorter initial period
as may be approved by the Board and shareholders of the Fund in the manner
required under Section 15 of the 1940 Act (including SEC interpretations
thereof), unless sooner terminated as hereinafter provided. This Agreement shall
continue in effect thereafter for additional periods not exceeding one (1) year
so long as such continuation is approved for the Fund at least annually by (i)
the Board 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 nor interested persons thereof, cast
in person at a meeting called for the purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds at any time without payment of any
penalty, by the Board of the Trust or by the vote of a majority of the
outstanding voting securities of the affected Fund, upon thirty (30) days'
written notice to the Manager, and by the Manager upon sixty (60) days' written
notice to the Trust.
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14. AMENDMENT. This Agreement may be modified by mutual consent
subject to the provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the SEC or any rules or
regulations adopted by, or interpretative releases of, the SEC. In addition to
the requirements of paragraph 12 and this paragraph 14, the terms of any
continuance or modification of this Agreement must have been approved by the
vote of a majority of those trustees of the Trust who are not parties to the
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
15. TERMINATION BY ASSIGNMENT. This Agreement shall terminate
automatically in the event of any assignment thereof, as defined in the 1940
Act.
16. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
17. DEFINITIONS. The terms "majority of the outstanding voting
securities," "assignment," and "interested persons," when used herein, shall
have the respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the SEC.
18. NOTICE OF DECLARATION OF TRUST. The Manager agrees that the
Trust's obligations under this Agreement shall be limited to the Funds and to
their assets, and that the Manager shall not seek satisfaction of any such
obligation from the shareholders of the Funds nor from any trustee, officer,
employee or agent of the Trust or the Funds.
19. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
20. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Virginia without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the 1940 Act and the Advisers Act and any rules
and regulations promulgated thereunder.
21. NONPUBLIC PERSONAL INFORMATION. Notwithstanding any provision
herein to the contrary, the Manager agrees on behalf of itself and its
directors, officers, and employees (1) to treat confidentially and as
proprietary information of the Trust (a) all records and other information
relative to the series of the Trust and their prior, present, or potential
shareholders (and clients of said shareholders) and (b) any Nonpublic Personal
Information, as defined under Section 248.3(t) of Regulation S-P ("Regulation
S-P"), promulgated under the Xxxxx-Xxxxx-Xxxxxx Act (the "Privacy Act"), and (2)
not to use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder, or as otherwise
permitted by the privacy policies adopted by the Trust, Regulation S-P or the
Privacy Act, except after prior notification to and approval in writing by the
Trust. Such written approval shall not be unreasonably withheld by the Trust and
may not be withheld where the Manager may be exposed to civil or criminal
contempt proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.
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22. ANTI-MONEY LAUNDERING COMPLIANCE. The Manager acknowledges that,
in compliance with the Bank Secrecy Act, as amended, and implementing
regulations ("BSA"), the Funds have adopted an Anti-Money Laundering Policy. The
Manager agrees to comply with the Funds' Anti-Money Laundering Policy and the
BSA, as the same may apply to the Manager, now and in the future. The Manager
further agrees to provide to the Funds and/or the Trust such reports,
certifications and contractual assurances as may be requested by the Funds or
the Trust. The Trust and the Funds may disclose information respecting the
Manager to governmental and/or regulatory or self-regulatory authorities to the
extent required by applicable law or regulation and may file reports with such
authorities as may be required by applicable law or regulation.
22. CERTIFICATIONS; DISCLOSURE CONTROLS AND PROCEDURES. The Manager
acknowledges that, in compliance with the Xxxxxxxx-Xxxxx Act of 2002, and the
implementing regulations promulgated thereunder, the Funds are required to make
certain certifications and have adopted disclosure controls and procedures. To
the extent reasonably requested by the Trust or the Funds, the Manager agrees to
use its best efforts to assist the Trust and the Funds in complying with the
Xxxxxxxx-Xxxxx Act and implementing the Funds' disclosure controls and
procedures. The Manager agrees to inform the Trust and the Funds of any material
development related to the Trust or the Funds that the Manager reasonably
believes is relevant to the certification obligations of the Funds under the
Xxxxxxxx-Xxxxx Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers, all on the day
and year first above written.
NEW RIVER FUNDS NEW RIVER ADVISERS LLC
By: By:
------------------------- ------------------------
Name: Name:
Title: Title:
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APPENDIX A-1
FUND AND FEE SCHEDULE - NEW RIVER FUNDS
New River Core Equity Fund 0.80% of the net assets
NEW RIVER FUNDS NEW RIVER ADVISERS LLC
By: By:
--------------------- ------------------------
Name: Name:
Title: Title:
Date: Date:
APPENDIX X-0
XXXX XXX XXX XXXXXXXX - XXX XXXXX FUNDS
New River Small Cap Fund 1.00% of the net assets
NEW RIVER FUNDS NEW RIVER ADVISERS LLC
By: By:
------------------- ------------------------
Name: Name:
Title: Title:
Date: Date:
APPENDIX X-0
XXXX XXX XXX XXXXXXXX - XXX XXXXX FUNDS
New River Core Fixed Income Fund 0.60% of the net assets
NEW RIVER FUNDS NEW RIVER ADVISERS LLC
By: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
Date: Date:
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