EXHIBIT 23 (d)(2)
FIRST PACIFIC MUTUAL FUND, INC.
FIRST PACIFIC LOW VOLATILITY FUND
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 16th day of May, 2011, by and
between First Pacific Mutual Fund, Inc., a Maryland corporation, (the
"Corporation") for the First Pacific Low Volatility Fund series (the "Fund")
and Xxx Financial Group Inc., a Hawaii corporation (the "Manager"). All
references to any series of the Corporation will be called the "Fund" unless
expressly noted otherwise.
BACKGROUND
The Fund, a series of the Corporation, is organized and operated as an
open-end, non-diversified management investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Corporation
desires to retain the Manager to render investment management and advisory
services to the Fund, and the Manager is willing to render such services on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Corporation hereby appoints the Manager to act as investment
manager and advisor to the Fund, subject to the supervision and direction of
the Board of Directors of the Fund, for the period and on the terms set forth
in this Agreement. The Manager accepts such appointment and agrees to render
the services herein described, for the compensation herein provided.
2. The Manager shall furnish the Fund investment management and
administrative services. Investment management shall include analysis,
research and portfolio recommendations consistent with the Fund's objective and
policies. Administrative services shall include the services and compensation
of such members of the Manager's organization as shall be duly elected officers
and/or directors of the Fund and such other personnel as shall be necessary to
carry out its normal operations.
3. The Manager shall manage the investment operations of the Fund
and the composition of the Fund's portfolio, including the purchase, retention
and disposition thereof, in accordance with the Fund's investment objective,
policies and restrictions as stated in and limited by the statements contained
in the various documents filed with the U.S. Securities and Exchange Commission
(the "Commission") as such documents may from time to time be amended and
subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's
investments and determine from time to time what investments or securities,
including futures contracts, will be purchased, retained, sold or loaned by the
Fund, and what portion of the assets will be invested, hedged, or held
uninvested as cash.
(b) The Manager shall use its best judgment in the
performance of its duties under this Agreement.
(c) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Corporation's Articles of Incorporation and By-Laws, and the Prospectus of
the Fund and the instructions and directions of the Board of Directors of the
Corporation, and will conform to and comply with the requirements of the 1940
Act and all other applicable federal and state laws and regulations.
(d) The Manager 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 in conformity with the policy with
respect to brokerage as set forth in the Corporation's Registration Statement
and Prospectus of the Fund or as the Board of Directors may direct from time to
time. In providing the Fund with investment supervision, it is recognized that
the Manager will give primary consideration to securing the most favorable
price and efficient execution. Consistent with 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 may be a party. It is understood that neither the Fund nor the Manager
has adopted a formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable, for the Fund, that the
Managers have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers by seeking the most favorable price and efficient
execution. Therefore, the Manager is authorized to place orders for the
purchase and sale of securities for the Fund with such brokers, subject to
review by the Corporation's Board of Directors, from time to time with respect
to the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to the Manager in connection
with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be so 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 the expenses incurred in the transaction, will be made by
the Manager in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
(e) The Manager shall maintain all books and records with
respect to the Fund's securities transactions required by subparagraphs (b)(5),
(6) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall render
to the Corporation's Board of Directors such periodic and special reports as the
Board may reasonably request.
(f) The Manager shall provide the Fund's custodian and the Fund
on each business day with information relating to all transactions concerning
the Fund's assets.
(g) The investment management services provided by the Manager
hereunder are not to be deemed exclusive, and the Manager shall be free to
render similar services to others. While information and recommendations
supplied to the Fund shall, in the Manager's judgment, be appropriate under the
circumstances and in light of investment objective and policies of the Fund,
they may be different from the information and recommendations supplied to
other investment companies and customers. The Fund shall be entitled to
equitable treatment under the circumstances in receiving information,
recommendation and any other services, but the Fund shall not be entitled to
receive preferential treatment as compared with the treatment given to any
other investment company or customer.
(h) The Manager shall perform such other services as are
reasonably incidental to the foregoing duties.
4. The Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Articles of Incorporation of the Corporation, filed with
the Secretary of the State of Maryland (such Articles of Incorporation, as in
effect on the date hereof and as amended from time to time, are herein called
the "Articles of Incorporation");
(b) By-Laws of the Fund (such By-Laws, as in effect on the
date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the
Corporation authorizing the appointment of the Manager and approving the form
of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (the Registration Statement), as filed
with the Commission relating to the Fund and shares of the Fund's common stock
and all amendments thereto;
(e) Notification of Registration of the Corporation under the
1940 Act on Form N-8A as filed with the Commission and all amendments thereto;
(f) Prospectus of the Fund (such Prospectus, as currently in
effect and as amended or supplemented from time to time, being herein called
the "Prospectus"); and
(g) Any other documents filed with the Commission. The
Manager shall have no responsibility or liability for the accuracy or
completeness of the Corporation's Registration Statement under the 1940 Act or
the Securities Act of 1933 except for information supplied by the Manager for
inclusion therein. On behalf of the Fund, the Corporation agrees to indemnify
the Manager to the full extent permitted by the Corporation's governing
instruments.
5. The Manager shall authorize and permit any of its directors,
officers and employees who may be elected as directors or officers of the
Corporation to serve in the capacities in which they are elected. Services to
be furnished by the Manager under this Agreement may be furnished through the
medium of any of such directors, officers or employees.
6. The Manager agrees that no officer or director of the Manager, or
of any affiliate of the Manager, will deal for or on behalf of the Fund with
himself as principal or agent, or with any corporation, partnership or other
person in which he may have a financial interest, except that this shall not
prohibit:
(a) Officers and directors of the Manager or of any affiliate
of the Manager, from having a financial interest in the Fund, in the Manager or
any affiliate of the Manager.
(b) Officers and directors of the Manager, or of any affiliate
of the Manager, from providing services to the Fund of a type usually and
customarily provided to an investment company, pursuant to a written agreement
approved by the Board of Directors of the Fund, including a majority of the
disinterested directors of the Fund (as defined in the 1940 Act).
(c) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer, one or more
of whose partners, officers or directors is an officer or a director of the
Manager, provided such transactions are handled in the capacity of broker only
and provided commissions charged do not exceed customary brokerage charges for
such services.
7. If any occasion should arise in which the Manager or any of its
officers or directors advises persons concerning the shares of the Fund, the
Manager or such officer or director will act solely on its, her or his own
behalf and not in any way on behalf of the Fund.
8. The Manager agrees that, except as herein otherwise expressly
provided, neither it nor any of its officers or directors shall at any time
during the period of this Agreement make, accept or receive, directly or
indirectly, any fees, profits or emoluments of any character in connection with
the purchase or sale of securities (except securities issued by the Fund) or
other assets by or for the Fund.
9. The Manager shall keep the Fund's books and records required
to be maintained by it pursuant to paragraph 3 hereof. The Manager agrees that
all records which it maintains for the Fund are the property of the Fund and it
will surrender promptly to the Fund any of such records upon the Fund's
request. The Manager further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are
required to be maintained by the Manager pursuant to paragraph 2 hereof.
10. During the term of this Agreement, the Manager will pay (i) the
salaries and expenses of all its personnel, and (ii) all expenses incurred by
it in the ordinary course of performing its duties hereunder. All costs and
expenses not expressly assumed by the Manager under this Agreement shall be
paid by the Fund, including, but not limited to: (i) interest and taxes,
including but not limited to all issue or transfer taxes chargeable to the Fund
in connection with its securities transactions; (ii) brokerage commissions;
(iii) insurance premiums; (iv) compensation and expenses of the Board of
Directors of the Fund; (v) legal and audit expenses; (vi) fees and expenses
of the Fund's distributor, transfer agent and accounting services agents;
(vii) expenses incident to the issuance of shares, including issuance on the
payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Fund or its
shares; (ix) expenses of preparing, printing and mailing reports and notices
and proxy material to shareholders of the Fund; (x) all other expenses
incidental to holding meetings of the Corporation's directors and the Fund's
shareholders and all allocable communications expenses with respect to investor
services and to preparing, printing and mailing prospectuses and reports to
shareholders in the amount necessary for distribution to the shareholders;
(xi) dues or assessments of or contributions to any trade association of which
the Fund is a member; (xii) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations which the
Corporation may have to indemnify its officers and directors with respect
thereto; (xiii) all expenses which the Corporation agrees to bear in any
distribution agreement or in any plan adopted by the Corporation on behalf of
the Fund pursuant to Rule 12b-1 under the 1940 Act; and (xiv) all corporate
fees payable by the Fund to federal, state or other governmental agencies.
11. For the services provided and the expenses assumed pursuant to
this Agreement, the Fund will pay to the Manager as full compensation therefore
a fee at an annualized rate of 1.00% of the Fund's average daily net assets.
This fee will be compounded daily as of the close of business and will be paid
to the Manager monthly within ten (10) business days after the last day of each
month and such management fee shall be adjusted, if necessary, at the time of
the payment due in the last month in the fiscal year of the Fund. The
Management fee shall be prorated for any fraction of a month at the
commencement or termination of this Agreement.
12. In the event the expenses of the Fund for any fiscal year
(including the fees payable to the Manager but excluding interest, taxes,
brokerage commissions, distribution fees, amortization of organization expenses
and litigation and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the Fund's business) exceed the limit
set by applicable regulation of state securities commissions, if any, the
compensation due to the Manager hereunder will be reduced by the amount of such
excess of postponed so that at no time will there be any accrued but unpaid
liability under this expense limitation. Any such reductions or payments are
subject to readjustment during the year, and the Manager's obligation hereunder
will be limited to the amount of its fee paid or accrued with respect to such
fiscal year.
13. The Manager shall give the Fund the benefit of its best judgment
and effort in rendering service hereunder, but the Manager shall not be liable
for any loss sustained by reason of the purchase, sale or retention of any
securities or hedging instrument, whether or not such purchase, sale or
retention shall have been based upon its own investigation or upon
investigation and research made by any other individual firm or corporation.
The Manager shall not be liable for any error of judgment or mistake of law for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 0000 Xxx) of a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
Any person employed by the Manager, who may be or become an employee of and
paid by any other entity affiliated with the Fund, such as the administrator,
distributor, or custodian to the Fund, shall be deemed, when acting within the
scope of his employment by such other affiliated entity, to be acting in such
employment solely for such other affiliated entity and not as the Manager's
employee or agent.
14. This Agreement shall continue in effect for a period of more
than two (2) years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Fund at any time, without the payment of any penalty, by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of the Fund, or by the Manager at any time, without
the payment of any penalty, on not more than sixty (60) days nor less than
thirty (30) days written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the 1940
Act).
15. Nothing in this Agreement shall limit or restrict the right of
any of the Manager's directors, officers, or employees who may also be a
director, officer or employee of the Fund to engage in any other business or
to devote his time and attention in part to the management or other aspects of
any business, whether of a similar or dissimilar nature, nor limit nor restrict
the Manager's right to engage in any other business or to render services of
any kind to any other corporation, firm, individual or association. Nothing in
this Agreement shall prevent the Manager or any affiliated person (as defined
in the 0000 Xxx) of the Manager from acting as investment advisor and/or
principal underwriter for any other person, firm or corporation and shall not
in any way limit or restrict the Manager or any such affiliated person from
buying, selling, or trading any securities or hedging instruments for its or
their own accounts or for the account of others for whom it or they may be
acting, provided, however, that the Manager expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under the Agreement.
16. Neither this Agreement nor any transaction made pursuant hereto
shall be invalidated or in any way affected by the fact that directors,
officers, agents and/or shareholders of the Fund are or may be interested in
the Manager, or any successor or assignee thereof, as directors, officers,
shareholders or otherwise; that directors, officers, shareholders or agents of
the Manager are or may be interested in the Fund as directors, officers,
shareholders or otherwise; or that the Manager or any successor or assignee,
is or may be interested in the Fund as shareholders or otherwise; provided,
however, that neither the Manager nor any officer or director of the Manager or
of the Corporation shall sell to or buy from the Fund any property or security
other than a security issued by the Fund, except in accordance with an
applicable order or exemptive rule of the Commission.
17. Except as otherwise provided herein or authorized by the Board of
Directors of the Corporation from time to time, the Manager shall for all
purposes herein deemed to be an independent contractor, and, except as
expressly provided or authorized in this Agreement, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund. The Fund and the Manager are not partners or joint venturers with the
other and nothing herein shall be construed so as to make them such partners or
joint venturers or impose any liability as such on either of them.
18. During the term of this Agreement, the Corporation agrees to
furnish the Manager at its principal office with all prospectuses, proxy
statements, report to stockholders, sales literature, or other material
prepared for distribution to stockholders of the Fund or the public, which
refer to the Manager in any way, prior to use thereof and not to use such
material if the Manager reasonably objects in writing within five (5) business
days (or such other time as may be mutually agreed) after receipt thereof. In
the event of termination of this Agreement, the Corporation will continue to
furnish to the Manager copies of any of the above mentioned materials which
refer in any way to the Manager. The Corporation shall furnish or otherwise
make available to the Manager such other information relating to the business
affairs of the Corporation or of the Fund as the Manager at any time, or from
time to time, reasonably requests in order to discharge its obligations
hereunder. The Corporation agrees that, in the event that the Manager ceases
to be the Fund's investment manager for any reason, the Fund will (unless the
Manager otherwise agrees in writing) promptly take all necessary steps to
propose to the shareholders at the next regular meeting that the Fund change to
a name not including the words "First Pacific". The Corporation agrees that
the words "First Pacific" in its name is derived from the name of the Manager
and is the property of the Manager for copyright and all other purposes and
that therefore such word may be freely used by the Manager as to other
investment activities or other investment products.
19. This Agreement may be amended by mutual consent, but the consent
of the Fund must be obtained in conformity with the requirement of the 1940 Act.
20. This Agreement shall be subject to all applicable provisions of
law, including, without limitation, the applicable provisions of the 1940 Act.
21. This Agreement shall be governed by and construed in accordance
with the laws of the State of Hawaii.
22. Compensation to be paid to the Manager hereunder shall be separate
and distinct from organizational expenses, if any, to be reimbursed to the
Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
FIRST PACIFIC MUTUAL FUND, INC.
By: /s/ Xxxxxxxx X.X. Xxx
=========================
Xxxxxxxx X.X. Xxx, President
[Corporate Seal]
Attest: /s/ Xxxxxx Xxxx Xxx
=========================
Xxxxxx Xxxx Xxx, Secretary
XXX FINANCIAL GROUP INC.
By: /s/ Xxxxxxxx X.X. Xxx
=========================
Xxxxxxxx X.X. Xxx, President
[Corporate Seal]
Attest: /s/ Xxxxxx Xxxx Xxx
=========================
Xxxxxx Xxxx Xxx, Secretary
