QUESTAR FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 16th day
of December, 1998, by and between QUESTAR FUNDS, INC., a Maryland corporation
(hereinafter called the "Corporation"), on behalf of its series, Imperial
BankFund (the "Fund") and Retirement Planning Company of New England, Inc., a
Rhode Island corporation (hereinafter called the "Adviser").
WITNESSETH:
WHEREAS, the Corporation is an open-end management investment
company, registered as such under the Investment Company Act of 1940 (the
"Investment Company Act"); and
WHEREAS, the Fund is a series of the Corporation having
separate assets and liabilities; and
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
providing investment advice to individual clients and investment companies; and
WHEREAS, the Corporation desires to retain the Adviser to
render advice and services to the Fund pursuant to the terms and provisions of
this Agreement, and the Adviser desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISER. The Corporation hereby employs the
----------------------
Adviser and the Adviser hereby accepts such employment, to render investment
advice and related services with respect to the assets of the Fund for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Board of Directors.
1. DUTIES OF ADVISER.
-----------------
(1) GENERAL DUTIES. The Adviser shall act as investment
--------------
adviser to the Fund and shall supervise investments of the Fund on behalf of the
Fund in accordance with the investment objective, policies and restrictions of
the Fund as set forth in the Fund's and Corporation's governing documents,
including, without limitation, the Corporation's Articles of Incorporation and
By-Laws; the Fund's prospectus, statement of additional information and
undertakings; and such other limitations, policies and procedures as the
Directors may impose from time to time in writing to the Adviser. In providing
such services, the Adviser shall at all times adhere to the provisions and
restrictions contained in the federal securities laws, applicable state
securities laws, the Internal Revenue Code, the Uniform Commercial Code and
other applicable law.
Without limiting the generality of the foregoing, the Adviser
shall: (i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (I.E., placing the orders); (ii)
manage and oversee the investments of the Fund, subject to the ultimate
supervision and direction of the Board of Directors; (iii) vote proxies for the
Fund, file ownership reports under Section 13 of the Securities Exchange Act of
1934 for the Fund, and take other actions on behalf of the Fund; (iv) maintain
the books and records required to be maintained by the Fund except to the extent
arrangements have been made for such books and records to be maintained by the
Administrator or another agent of the Fund; (v) furnish reports, statements and
other data on securities, economic conditions and other matters related to the
investment of the Fund's assets which the Fund's Administrator or distributor or
the officers of the Corporation may reasonably request; and (vi) render to the
Board of Directors such periodic and special reports with respect to the Fund's
investment activities as the Board may reasonably request, including at least
one in-person appearance annually before the Board of Directors.
(2) BROKERAGE. The Adviser shall be responsible for decisions
---------
to buy and sell securities for the Fund, for broker-dealer selection, and for
negotiation of brokerage commission rates, provided that the Adviser shall not
direct orders to an affiliated person of the Adviser without general prior
-2-
authorization to use such affiliated broker or dealer from the Board of
Directors. The Adviser's primary consideration in effecting a securities
transaction will be execution at the most favorable price. In selecting a
broker-dealer to execute each particular transaction, the Adviser may take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Directors may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Adviser an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Corporation. The Adviser is further authorized to allocate the orders placed
by it on behalf of the Fund to such brokers or dealers who also provide research
or statistical material, or other services, to the Corporation, the Adviser, or
any affiliate of either. Such allocation shall be in such amounts and
proportions as the Adviser shall determine, and the Adviser shall report on such
allocations regularly to the Corporation, indicating the broker-dealers to whom
such allocations have been made and the basis therefor. The Adviser is also
authorized to consider sales of shares as a factor in the selection of brokers
or dealers to execute portfolio transactions, subject to the requirements of
best execution, I.E., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price.
-3-
On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as of other clients, the
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 Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
2. REPRESENTATIONS OF THE ADVISER.
------------------------------
(3) The Adviser shall use its best judgment and efforts in
rendering the advice and services to the Fund as contemplated by this Agreement.
(4) The Adviser shall maintain all licenses and
registrations necessary to perform its duties hereunder in good order.
(5) The Adviser shall conduct its operations at all times
in conformance with the Investment Advisers Act of 1940, the Investment Company
Act of 1940, and any other applicable state and/or self-regulatory organization
regulations.
(6) The Adviser shall maintain errors and omissions
insurance in an amount at least equal to that disclosed to the Board of
Directors in connection with their approval of this Agreement.
3. INDEPENDENT CONTRACTOR. The Adviser 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 Corporation or the Fund in any way, or in any way be deemed an
agent for the Corporation or for the Fund. It is expressly understood and agreed
that the services to be rendered by the Adviser to the Fund under the provisions
of this Agreement are not to be deemed exclusive, and the Adviser shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
-4-
4. ADVISER'S PERSONNEL. The Adviser shall, at its own expense,
-------------------
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall be
deemed to include persons employed or retained by the Adviser to furnish
statistical 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 Adviser or the Board of Directors may desire and reasonably request.
5. EXPENSES.
--------
(7) With respect to the operation of the Fund, the Adviser
shall be responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the investment management of the Fund, (ii) the
expenses of printing and distributing extra copies of the Fund's prospectus,
statement of additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) the costs of any special
Board of Directors meetings or shareholder meetings convened for the primary
benefit of the Adviser. If the Adviser has agreed to limit the operating
expenses of the Fund, the Adviser shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense limitation.
(8) The Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 6(a) above, including but not limited to: investment advisory and
administrative fees payable to the Adviser or the Administrator under the
appropriate agreements entered into with the Adviser or the Administrator, as
the case may be; 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 Corporation for the benefit of the
Fund including all fees and expenses of its custodian, shareholder services
agent and accounting services agent; interest charges on any borrowings; costs
-5-
and expenses of pricing and calculating its daily net asset value and of
maintaining its books of account required under the Investment Company Act;
taxes, if any; a pro rata portion of expenditures in connection with meetings of
the Fund's shareholders and the Corporation's Board of Directors that are
properly payable by the Fund; salaries and expenses of officers and fees and
expenses of members of the Board of Directors or members of any advisory board
or committee who are not members of, affiliated with or interested persons of
the Adviser or the Administrator; insurance premiums on property or personnel of
the 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 registering and maintaining registration of 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 Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(9) The Adviser may voluntarily absorb certain Fund
expenses or waive the Adviser's own Advisory fee. (1)
(10) To the extent the Adviser incurs any costs by
assuming expenses which are an obligation of the Fund as set forth herein, the
Fund shall promptly reimburse the Adviser for such costs and expenses, except to
the extent the Adviser has otherwise agreed to bear such expenses. To the extent
the services for which the Fund is obligated to pay are performed by the
Adviser, the Adviser shall be entitled to recover from the Fund to the extent of
the Adviser's actual costs for providing such services. In determining the
Adviser's actual costs, the Adviser may take into account an allocated portion
of the salaries and overhead of personnel performing such services.
6. INVESTMENT ADVISORY FEE.
-----------------------
(11) The Fund shall pay to the Adviser, and the Adviser
agrees to accept, as full compensation for all investment and advisory services
furnished or provided to the Fund pursuant to this Agreement, an annual
investment advisory fee at the rate set forth in Schedule A to this Agreement.
-6-
(12) The investment advisory fee shall be accrued daily by
the Fund and paid to the Adviser on the first business day of the succeeding
month.
(13) 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 prior to the end of any month, the fee to the Adviser shall be
prorated for the portion of any month in which this Agreement is in effect which
is not a complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(14) The fee payable to the Adviser under this Agreement
will be reduced to the extent of any receivable owed by the Adviser to the Fund
and as required under any expense limitation applicable to the Fund.
(15) The Adviser voluntarily may reduce any portion of the
compensation or reimbursement of expenses due to it pursuant to this Agreement
and may agree to make payments to limit the expenses which are the
responsibility of the Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Adviser hereunder or to continue future payments. Any such reduction 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.
(16) Any fee withheld or voluntarily reduced and any Fund
expense absorbed by the Adviser voluntarily or pursuant to an agreed upon
expense cap shall be reimbursed by the Fund to the Adviser, if so requested by
the Adviser, no later than the fifth fiscal year succeeding the fiscal year of
the withholding, reduction or absorption if the aggregate amount actually paid
by the Fund toward the operating expenses for such fiscal year (taking into
-7-
account the reimbursement) do not exceed the applicable limitation on Fund
expenses. Such reimbursement may be paid prior to the Fund's payment of current
expenses if so requested by the Adviser even if such practice may require the
Adviser to waive, reduce or absorb current Fund expenses.
(17) The Adviser may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement. 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 Adviser hereunder.
7. NO SHORTING; NO BORROWING. The Adviser agrees that neither
-------------------------
it nor any of its officers or employees shall take any short position in the
shares of the Fund. This prohibition shall not prevent the purchase of such
shares by any of the officers or employees of the Adviser or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the Investment Company Act. The
Adviser agrees that neither it nor any of its officers or employees shall borrow
from the Fund or pledge or use the Fund's assets in connection with any
borrowing not directly for the Fund's benefit. For this purpose, failure to pay
any amount due and payable to the Fund for a period of more than thirty (30)
days shall constitute a borrowing.
8. CONFLICTS WITH CORPORATION'S GOVERNING DOCUMENTS AND
----------------------------------------------------
APPLICABLE LAWS. Nothing herein contained shall be deemed to require the
---------------
Corporation or the Fund to take any action contrary to the Corporation's
Articles of Incorporation, By-Laws, or any applicable statute or regulation, or
to relieve or deprive the Board of Directors of the Corporation of its
responsibility for and control of the conduct of the affairs of the Corporation
and the Fund. In this connection, the Adviser acknowledges that the Directors
retain ultimate plenary authority over the Fund and may take any and all actions
necessary and reasonable to protect the interests of shareholders.
9. REPORTS AND ACCESS. The Adviser agrees to supply such
------------------
information to the Fund's Administrator and to permit such compliance
inspections by the Administrator as shall be reasonably necessary to permit the
Administrator to satisfy its obligations and respond to the reasonable requests
of the Directors.
-8-
10. ADVISER'S LIABILITIES AND INDEMNIFICATION.
-----------------------------------------
(18) The Adviser shall have responsibility for the
accuracy and completeness (and liability for the lack thereof) of the statements
in the Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for information
supplied by the Administrator or the Corporation or another third party for
inclusion therein.
(19) The Adviser shall be liable to the Fund for any loss
(including brokerage charges) incurred by the Fund as a result of any improper
investment made by the Adviser.
(20) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or duties hereunder
on the part of the Adviser, the Adviser shall not be subject to liability to the
Corporation or the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(21) Each party to this Agreement shall indemnify and hold
harmless the other party and the shareholders, directors, officers and employees
of the other party (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 nonperformance 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.
-9-
(22) No provision of this Agreement shall be construed to
protect any Director or officer of the Corporation, or officer of the Adviser,
from liability in violation of Sections 17(h) and (i) of the Investment Company
Act.
11. NON-EXCLUSIVITY; TRADING FOR ADVISER'S OWN ACCOUNT. The
--------------------------------------------------
Corporation's employment of the Adviser is not an exclusive arrangement. The
Corporation may from time to time employ other individuals or entities to
furnish it with the services provided for herein. Likewise, the Adviser may act
as investment adviser for any other person, and shall not in any way be limited
or restricted from having, selling or trading any securities for its or their
own accounts or the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it will undertake
no activities which will adversely affect the performance of its obligations to
the Fund under this Agreement; and provided further that the Adviser will adhere
to a code of ethics governing employee trading and trading for proprietary
accounts that conforms to the requirements of the Investment Company Act and the
Investment Advisers Act of 1940 and has been approved by the Corporation's Board
of Directors.
12. TERM. This Agreement shall become effective at the time
----
the Fund commences operations pursuant to an effective amendment to the
Corporation's Registration Statement under the Securities Act of 1933 and shall
remain in effect for a period of two (2) years, 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 Directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) the vote of a majority of the Directors of the Corporation 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. The terms
"majority of the outstanding voting securities" and "interested persons" shall
have the meanings as set forth in the Investment Company Act.
-10-
13. TERMINATION; NO ASSIGNMENT.
--------------------------
(23) This Agreement may be terminated by the Corporation
on behalf of the Fund at any time without payment of any penalty, by the Board
of Directors or by vote of a majority of the outstanding voting securities of a
Fund, upon sixty (60) days' written notice to the Adviser, and by the Adviser
upon sixty (60) days' written notice to a Fund. In the event of a termination,
the Adviser shall cooperate in the orderly transfer of the Fund's affairs and,
at the request of the Board of Directors, transfer any and all books and records
of the Fund maintained by the Adviser on behalf of the Fund.
(24) This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the Investment
Company Act.
14. 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.
15. 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.
16. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York 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 Investment Company Act and the Investment
Advisers Act of 1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
-11-
QUESTAR FUNDS, INC. RETIREMENT PLANNING COMPANY OF
on behalf of its series, the NEW ENGLAND, INC.
Imperial BankFund
By: /S/ XXXXXXX XXXXX By: /S/ XXXXX XXXXXXX
------------------- -----------------
Name: Xxxxxxx Xxxxx Name: Xxxxx Xxxxxxx
Title: President Title: President
Schedule A
SERIES OR FUND OF QUESTAR FUNDS, INC. ANNUAL FEE RATE
------------------------------------- ---------------
Imperial BankFund 1.00% of average net assets
