INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is executed as of this 1st day of
April, 1998, between FOUNDERS FUNDS, INC., a Maryland corporation (the
"Company") on behalf of each of its series Funds listed on Appendix 1 to this
Agreement, which Appendix 1 is incorporated into this Agreement by this
reference (as to each series, the "Fund"), and FOUNDERS ASSET MANAGEMENT LLC, a
Delaware limited liability company (the "Adviser").
WHEREAS, the Company has been organized and operates as an investment
company registered under the Investment Company Act of 1940 for the purpose of
investing and reinvesting its assets in securities, as set forth in its Articles
of Incorporation, its By-Laws and its Registration Statements under the
Investment Company Act of 1940 and the Securities Act of 1933, all as heretofore
amended and from time to time further amended and supplemented; and the Company
on behalf of each Fund desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser and to have an
investment adviser perform for it various management, statistical, research,
investment advisory and other services; and,
WHEREAS, the Adviser is engaged in the business of rendering management,
investment advisory, counseling and supervisory services to investment companies
and desires to provide these services to the Company.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISER. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of each Fund and to
administer its affairs, consistent with the Fund's objectives, policies and
restrictions, and subject to the overall supervision of the Board of Directors
of the Company, for the period and on the terms hereinafter set forth. The
Adviser hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth for the compensation
herein provided. The 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 for or represent the
Company or any Fund in any way or otherwise be deemed an agent of the Company or
any Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADVISER. In return
for the compensation described in paragraph 4 hereof, the Adviser undertakes to
provide the following services and to assume the following obligations:
A. OFFICE SPACE, FURNISHINGS, FACILITIES, EQUIPMENT AND
PERSONNEL. The Adviser shall furnish to the Company adequate office space, which
may be space within the office of the Adviser or in such other place as may be
agreed upon from time to time. The Adviser also shall furnish to the Company
office furnishings, facilities and equipment, including computer equipment and
programs, as may be reasonably required for managing the corporate affairs and
conducting the business of the Company, including ordinary clerical, bookkeeping
and administrative services, and maintenance of each Fund's books and records.
The Adviser shall employ or provide and compensate the executive, secretarial
and clerical personnel necessary to provide such services. The Adviser shall
also compensate all officers and employees of the Company and, in addition to
the services described in subparagraph D of this paragraph, shall permit
officers and employees of the Adviser to serve as directors or officers of the
Company, without compensation from the Company, if elected to such positions.
B. INVESTMENT ADVISORY SERVICES AND BROKERAGE ALLOCATION.
(1) The Adviser shall recommend from time to time to the
officers and directors of the Company a course of investment for each Fund's
assets and portfolio, subject to and in accordance with the investment
objectives and policies of the Fund and any directions which the Company's Board
of Directors may issue from time to time. The Adviser's recommendations also
shall include the manner in which the voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised. Subject to such objectives, policies and
directions and subject to the overall supervision of the Board of Directors of
the Company, the Adviser shall manage the investment and reinvestment of the
assets of each Fund. The Adviser shall render such reports to the Company
concerning the investment of each Fund's assets and portfolio as may be required
by the Board of Directors of the Company.
(2) Decisions with respect to placement of each Fund's
portfolio transactions shall be made by the Adviser. The primary consideration
in making these decisions shall be to seek the best execution of orders at the
most favorable net prices for the Fund, taking into account such factors as the
size of the order, difficulty of execution, and the reliability, financial
condition and capabilities of the broker or dealer. Subject to these objectives,
business may be placed with brokers and dealers who furnish investment research
services to the Adviser or to affiliates of the Adviser. Such research services
include advice, both directly and in writing, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities, or purchasers or sellers of securities, as well as
the furnishing of analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts. Such services allow the Adviser and its affiliates to supplement
their own investment research activities and provide them with information from
individuals and research staffs of many securities firms. The Company
acknowledges on behalf of each Fund that to the extent portfolio transactions
are effected with brokers or dealers who furnish research services to the
Adviser or its affiliates, they receive a benefit, which generally is not
capable of evaluation in dollar amounts, which is not passed on to the Fund in
the form of a direct monetary benefit.
(3) The Adviser shall render such reports regarding
allocation of brokerage business as may be required by the Board of Directors of
the Company.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
SECURITIES REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The Adviser
shall make available and provide accounting and statistical information required
by the Company and its principal underwriter in the preparation of registration
statements, reports and other documents required by federal and state securities
laws and such information as the principal underwriter of the Company may
reasonably request, for use in the preparation of such documents or of other
materials necessary or helpful for the underwriting and distribution of each
Fund's shares.
D. OTHER OBLIGATIONS AND SERVICES. The Adviser shall keep its
qualifications, facilities and staff fully adequate for performance of its
duties hereunder, and will perform such duties in good faith and in the best
interests of the Fund. The Adviser shall comply in all respects with applicable
statutory and regulatory provisions, including the Investment Company Act of
1940 and the Investment Advisers Act of 1940. The Adviser shall make available
its officers and employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administrative management of each
Fund and its investment activities.
3. EXPENSES OF EACH FUND. It is understood that each Fund will pay all
of its expenses other than those expressly assumed by the Adviser herein, which
expenses payable by the Fund shall include:
A. Fees to the Adviser as provided herein;
B. Expenses of all audits by independent public accountants;
C. The allocated portion of fees and expenses of legal counsel
in connection with legal services rendered to the Company, including the Board
of Directors of the Company, committees of the Board of Directors and those
directors who are not "interested persons" of the Company or the Adviser, as
defined in the Investment Company Act of 1940, and litigation;
D. Brokerage fees and commissions and other transaction costs
in connection with the purchase and sale of portfolio securities for the Fund;
E. Costs, including the interest expense, of borrowing money;
F. All federal, state and local taxes levied against the Fund;
G. The allocated portion of fees of directors of the Company
not affiliated with the Adviser;
H. The allocated portion of costs and expenses of meetings of
the Board of Directors, committees of the Board of Directors and shareholders of
the Company;
I. Fees and expenses of the Company's transfer agent,
registrar, custodian, dividend disbursing agent, shareholder accounting agent,
and other agents approved by the Board of Directors of the Company;
J. Cost of printing stock certificates representing shares of
the Fund;
K. Fees and expenses of registering and qualifying and
maintaining registration and qualification of the Company, the Fund and its
shares under federal, state and foreign securities laws;
L. The allocated portion of fees and expenses incident to
filing of reports with regulatory bodies and maintenance of the Company's
existence;
M. The allocated portion of premiums for insurance carried by
the Company pursuant to the requirements of Section 17(g) of the Investment
Company Act of 1940;
N. The allocated portion of fees and expenses incurred in
connection with any investment company organization or trade association of
which the Company may be a member;
O. The allocated portion of expenses of preparation, printing
(including typesetting) and distribution of reports, notices and prospectuses to
existing shareholders of the Company;
P. Expenses of computing the Fund's daily per share net asset
value; and
Q. The allocated portion of expenses incurred by the Company
in connection with litigation proceedings or claims, including any obligation
the Company may have to indemnify its officers and directors with respect
thereto.
4. COMPENSATION OF THE ADVISER. As compensation for its services to each
Fund, the Adviser will be paid a monthly management fee by the Fund at an annual
rate equal to the percentages of the average daily value of the Fund's net
assets described as to each Fund on Appendix 1 to this Agreement, with each
Fund's net assets determined in accordance with provisions of the then current
prospectus of the Fund. All fees and expenses are accrued daily and deducted
before payment of dividends to shareholders. The fee is payable monthly and
shall be prorated for any portion of a month beginning on the date of this
Agreement or ending on termination of this Agreement.
5. EXPENSE LIMITATION. In the event the total expenses of a Fund for any
fiscal year, including the advisory fee but excluding interest, taxes, brokerage
commissions and extraordinary expenses, should exceed the lowest applicable
annual expense limitation established pursuant to the statutes or regulations of
any jurisdiction in which shares of the Fund are then qualified for offer or
sale, the Adviser shall reimburse the Fund for the full amount of such excess.
Such reimbursement shall be made by the Adviser monthly, subject to annual
reconciliation.
6. ACTIVITIES OF THE ADVISER. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser who may
also be a director, officer or employee of the Company 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 a dissimilar nature, nor to
limit or restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association. Subject to and in accordance with the Articles of Incorporation and
By-Laws of the Company and to Section 10(a) of the Investment Company Act of
1940, it is understood that directors, officers, agents and shareholders of the
Company are or may be interested in the Adviser or its affiliates as directors,
officers, agents or shareholders of the Adviser or its affiliates and that
directors, officers, agents or shareholders of the Adviser or its affiliates are
or may be interested in the Company as directors, officers, shareholders or
otherwise, and that the effect of any such interests shall be governed by said
Articles of Incorporation, said ByLaws and the Act.
7. LIABILITIES. 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 Company or
to any Fund hereunder for any act or omission in the course of, or connected
with, rendering services hereunder. No liability to the Adviser hereunder shall
attach individually to the shareholders, directors or officers of the Company.
8. RENEWAL, TERMINATION AND AMENDMENT. This Agreement shall become
effective upon the date first above written and shall continue in effect for an
initial term ending May 31, 1999, unless earlier amended or terminated. This
Agreement is renewable thereafter as to each Fund for successive periods not to
exceed one year if such continuance is approved at least annually by votes of
the Company's Board of Directors, cast in person at a meeting called for the
purpose of voting on such approval, or by a majority of the outstanding voting
securities of the Fund and in either event by the vote of a majority of the
directors who are not parties to the Agreement or interested persons of any such
party other than as directors of the Company. In addition, (i) this Agreement
may at any time be terminated as to any Fund without the payment of any penalty
either by vote of the Board of Directors of the Company or by vote of a majority
of the outstanding voting securities of the Fund, on sixty days' written notice
to the Adviser; (ii) this Agreement shall immediately terminate in the event of
its assignment (within the meaning of the Investment Company Act of 1940); and
(iii) this Agreement may be terminated by the Adviser on sixty days' written
notice to the Company. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed postpaid, to the other party at any office of
such party. This Agreement may be amended as to any Fund at any time by mutual
consent of the parties, provided that such consent on the part of the Company
shall have been approved by vote of a majority of the outstanding voting
securities of the Fund. As used in this paragraph, the term "vote of a majority
of the outstanding voting securities" shall have the meaning set forth for such
term in Section 2(a)(42) of the Investment Company Act of 1940.
9. NAME. The Company and each Fund may use the word "Founders" in
their names and businesses only so long as the Adviser acts as investment
adviser to the Fund.
10. SEVERABILITY. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
11. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of Colorado, and shall be interpreted and construed to further and promote
the operation of the Company as an open-end investment company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
FOUNDERS FUNDS, INC.
on behalf of each of the series Funds listed
on Appendix 1 to this Agreement
ATTEST: By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
/s/ Xxxxxxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxxx, President
-------------------------------
Xxxxxxxxxxx X. Xxxxxx,
Assistant Secretary
FOUNDERS ASSET MANAGEMENT LLC
ATTEST: By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------
/s/ Xxxxxxx X. Xxxxxxxxxxxxxx Xxxxxxxx X. Xxxxxxx, President
-------------------------------
Xxxxxxx X. Xxxxxxxxxxxxxx,
Secretary
APPENDIX 1
TO
FOUNDERS FUNDS, INC. INVESTMENT ADVISORY AGREEMENT
This Appendix l to the Investment Advisory Agreement ("Agreement") executed as
of the 1st day of April, 1998, between Founders Funds, Inc. and Founders Asset
Management LLC is effective as of the 1st day of April, 1998.
The following series Funds of Founders Funds, Inc. are parties to the Agreement
and, pursuant to paragraph 4 of the Agreement, shall pay to Founders Asset
Management LLC, as compensation for its services to each series Fund, the
management fees disclosed in the following table:
Fund Advisory Fee Schedule
---- ---------------------
Discovery Fund 1.000% to $250 million
0.800% next $250 million
0.700% thereafter
Passport Fund 1.000% to $250 million
0.800% next $250 million
0.700% thereafter
Frontier Fund 1.000% to $250 million
0.800% next $250 million
0.700% thereafter
Special Fund 1.000% to $30 million
0.750% next $270 million
0.700% next $200 million
0.650% thereafter
International Equity Fund 1.000% to $250 million
0.800% next $250 million
0.700% thereafter
Worldwide Growth Fund 1.000% to $250 million
0.800% next $250 million
0.700% thereafter
Growth Fund 1.000% to $30 million
0.750% next $270 million
0.700% next $200 million
0.650% thereafter
Blue Chip Fund 0.650% to $250 million
0.600% next $250 million
0.550% next $250 million
0.500% thereafter
Balanced Fund 0.650% to $250 million
0.600% next $250 million
0.550% next $250 million
0.500% thereafter
Government Securities Fund 0.650% to $250 million
0.500% thereafter
Money Market Fund 0.500% to $250 million
0.450% next $250 million
0.400% next $250 million
0.350% thereafter
FOUNDERS FUNDS, INC.
on behalf of each of the series Funds listed
on this Appendix 1
ATTEST: By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
/s/ Xxxxxxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxxx, President
-------------------------------
Xxxxxxxxxxx X. Xxxxxx,
Assistant Secretary
FOUNDERS ASSET MANAGEMENT LLC
ATTEST: By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------
/s/ Xxxxxxx X. Xxxxxxxxxxxxxx Xxxxxxxx X. Xxxxxxx, President
-------------------------------
Xxxxxxx X. Xxxxxxxxxxxxxx,
Secretary
