Exhibit (d)(2)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 26th day of February, 1998, by and
between WATERHOUSE INVESTORS FAMILY OF FUNDS, INC., a Maryland corporation,
whose address is 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Fund") and
WATERHOUSE ASSET MANAGEMENT, INC., a Delaware corporation, whose address is
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund is an open-end, management investment
company, registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), with distinct series of shares each having its own investment
objectives, policies and restrictions, including Waterhouse Investors Dow
Xxxxx Industrial Average(SM) Index Fund (the "Portfolio"), as more fully
described in the Fund's Registration Statement on Form N-1A under the 1940 Act
and the Securities Act of 1933, as amended (the "Registration Statement"), as
filed with the Securities and Exchange Commission (the "Commission") relating
to the Fund and shares of the Fund's capital stock, and all amendments
thereto;
WHEREAS, the Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund and the Investment Manager desire to enter
into an agreement to provide for comprehensive management and investment
advisory services to the Portfolio upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the parties
hereto as follows:
1. Duties of Investment Manager. (a) The Fund hereby employs
the Investment Manager to act as the investment adviser for the Portfolio and
to manage the investment and reinvestment of the assets of the Portfolio in
accordance with the investment objectives, policies and restrictions of the
Portfolio as the same are set forth in the Registration Statement, and in
accordance with the requirements of the 1940 Act and all other applicable
state and federal laws, rules and regulations, subject to the supervision of
the Board of Directors of the Fund for the period and upon the terms herein
set forth. The investment of funds shall also be subject to all applicable
restrictions of the Articles of Incorporation and By-laws of the Fund as may
from time to time be in force. Without limiting the generality of the
foregoing, the Investment Manager shall:
(i) formulate and implement a continuing program for the
purchases and sales of securities for the Portfolio and regularly report
thereon to the Fund's Board of Directors; and
(ii) make decisions with respect to and take, on behalf of
the Portfolio, all actions which appear necessary to carry into effect such
purchase and sale program and supervisory
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functions aforesaid, including the placing of orders for the purchase and sale
of securities for the Portfolio.
(b) Subject to the supervision and direction of the Board of
Directors of the Fund, the Investment Manager also shall perform or arrange
for the performance of the following administrative and clerical services with
respect to the Portfolio: (i) maintain and preserve the books and records,
including financial and corporate records, of the Fund as required by law or
otherwise for the proper operation of the Fund; (ii) prepare and, subject to
approval by the Fund, file registration statements, notices, reports and other
documents required by U.S. Federal, state and other applicable laws and
regulations (other than state "blue sky" laws), including proxy materials and
periodic reports to Fund shareholders, oversee the preparation and filing of
registration statements, notices, reports and other documents required by
state "blue sky" laws, and oversee the monitoring of sales of shares of the
Fund for compliance with state securities laws; (iii) calculate and publish,
or arrange for the calculation and publication of, the net asset value of the
Portfolio's shares; (iv) calculate, or arrange for the calculation of,
dividends and distributions and performance data, and prepare other financial
information regarding the Portfolio; (v) oversee and assist in the
coordination of, and, as the Board may reasonably request or deem appropriate,
make reports and recommendations to the Board on, the performance of
administrative and professional services rendered to the Fund by others,
including the custodian, registrar, transfer agent and dividend disbursing
agent, shareholder servicing agents, accountants, attorneys, underwriters,
brokers and dealers, corporate fiduciaries, insurers, banks and such other
persons in any such other capacity deemed to be necessary or desirable; (vi)
furnish secretarial services to the Fund, including, without limitation,
preparation of materials necessary in connection with meetings of the Fund's
Board of Directors, including minutes, notices of meetings, agendas and other
Board materials; (vii) provide the Fund with the services of an adequate
number of persons competent to perform the administrative and clerical
functions described herein; (viii) provide the Fund with administrative office
and data processing facilities; (ix) arrange for payment of the Fund's
expenses; (x) provide routine accounting services to the Fund, and consult
with the Fund's officers, independent accountants, legal counsel, custodian,
accounting agent and transfer and dividend disbursing agent in establishing
the accounting policies of the Fund; (xi) prepare such financial information
and reports as may be required by any banks from which the Fund borrows funds;
(xii) develop and implement procedures to monitor the Fund's compliance with
regulatory requirements and with the Portfolio's investment policies and
restrictions as set forth in the Portfolio's currently effective Prospectus
and Statement of Additional Information filed under the Securities Act of
1933, as amended; and (xiii) provide such assistance to the custodian, other
Fund service providers and the Fund's counsel and auditors as generally may be
required to carry on properly the business and operations of the Fund.
Notwithstanding anything to the contrary herein contained, the Fund, and not
the Investment Manager, shall be responsible for and bear the cost of any
third party pricing services or any third party blue sky services.
(c) The Investment Manager accepts such employment and
agrees during such period to render such services and to assume the
obligations herein set forth for the compensation herein provided. The
Investment Manager shall give the Portfolio the benefit of its best judgment,
efforts and facilities in rendering its services as an investment manager. The
Investment Manager shall for all purposes herein provided be deemed to be an
independent contractor and, unless
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otherwise expressly provided or authorized, shall have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund.
It is understood and agreed that the Investment Manager, by separate
agreements with the Fund, may also serve the Fund in other capacities. It is
further agreed that the Investment Manager and its officers and directors are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies, so long as its or their services hereunder are not impaired
thereby. It is further agreed that personnel of the Investment Manager may
invest in securities for their own account pursuant to a code of ethics that
sets forth all employees' fiduciary responsibilities regarding the Fund,
establishes procedures for personal investing and restricts certain
transactions.
(d) The Investment Manager shall keep any books and records
relevant to the provision of its investment advisory services to the Portfolio
and shall specifically maintain all books and records with respect to the
Portfolio's securities and portfolio transactions and shall render to the
Fund's Board of Directors such periodic and special reports as the Board may
reasonably request. The Investment 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 such records upon the Fund's request, provided
however that the Investment Manager may retain a copy of such records. The
Investment Manager further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records kept by the Investment Manager
in connection with investment advisory services provided pursuant hereto.
(e) The Fund has delivered to the Investment Manager copies
of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(i) The Registration Statement; and
(ii) The Prospectus of the Portfolio (such Prospectus
and the related Statement of Additional Information
of the Portfolio, as currently in effect and as
amended or supplemented from time to time, being
herein collectively called the "Prospectus").
(f) The Fund shall at all times keep the Investment Manager
fully informed with regard to the securities owned by the Portfolio, its funds
available or to become available for investment, and generally as to the
condition of its affairs. The Fund shall furnish the Investment Manager with a
copy of all financial statements and each report prepared by certified public
accountants with respect to it, and with such other information with regard to
its affairs as the Investment Manager may from time to time reasonably
request.
(g) The Investment Manager may enter into agreements with
one or more other persons, including affiliates of the Investment Manager, to
perform any or all the Investment Manager's duties hereunder, provided that
(i) any such agreement shall have been approved by the Board of Directors of
the Fund; (ii) the Investment Manager shall be as fully responsible to the
Fund for the acts and omissions of any such service providers as it would be
for its own acts or omissions hereunder; and (iii) the cost of performance of
such duties by others are to be borne and paid by the Investment Manager.
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(h) Any investment program undertaken by the Investment
Manager pursuant to this Agreement, as well as any other activities undertaken
by the Investment Manager on behalf of the Portfolio pursuant thereto, shall
at all times be subject to any directives of the Board of Directors.
2. Expenses. The Investment Manager shall pay all of its
expenses arising from the performance of its obligations under Section 1 of
this Agreement, including the payment of any persons engaged pursuant to
Section l(g), and shall pay any salaries, fees and expenses of Fund directors
or officers who are employees, officers or directors of the Investment
Manager.
The Investment Manager shall not be required to pay any
other expenses of the Fund or the Portfolio, including (a) the fees and
expenses of directors who are not "interested persons" of the Fund, as defined
by the 1940 Act, and travel and related expenses of the directors for
attendance at meetings; (b) the fees and expenses of the custodian and
transfer agent of the Fund or any pricing service, including but not limited
to fees and expenses relating to Fund accounting, pricing of portfolio shares,
and computation of net asset value; (c) the fees and expenses of calculating
yield and/or performance of the Portfolio; (d) the charges and expenses of
legal counsel and independent accountants; (e) taxes and corporate fees
payable to governmental agencies; (f) the costs of share certificates and of
membership dues of any trade association of which the Fund is a member; (g)
reimbursement of the organization expenses of the Portfolio; (h) the fees and
expenses involved in registering and maintaining registration of the Fund and
the Portfolio's shares with the Commission, blue sky service providers,
registering the Fund as a broker or dealer and qualifying the shares of the
Portfolio (or applying for applicable exemptions, as the case may be) under
state securities laws, including the preparation and printing of the
registration statements and prospectuses for such purposes; (i) allocable
communications expenses with respect to investor services, expenses of
shareholders' and Board of Directors' meetings and preparing, printing and
mailing proxies, prospectuses and reports to shareholders; (j) costs of
acquiring and disposing of portfolio securities, including but not limited to
brokers' commissions, dealers' xxxx-ups and any issue or transfer taxes
chargeable in connection with the Portfolio's transactions; (k) the cost of
stock certificates representing shares of the Portfolio, if any; (l) insurance
expenses, including, but not limited to, the cost of a fidelity bond,
directors and officers insurance and errors and omissions insurance; and (m)
litigation and indemnification expenses, expenses incurred in connection with
mergers, and other extraordinary expenses not incurred in the ordinary course
of the Portfolio's business.
3. Compensation. (a) For the services described in Section 1
hereof, the Fund, on behalf of the Portfolio, will pay to the Investment
Manager promptly after the end of each calendar month, an investment
management fee computed at the annual rate applicable to the Portfolio set
forth on Schedule A hereto. The fee as computed in accordance with Schedule A
shall be based upon the net assets of the Portfolio as to which this Agreement
is then effective. The value of the net assets for the Portfolio shall be
calculated in accordance with the provisions of the Portfolio's Prospectus.
For purposes of this Agreement, on each day when net asset value is not
calculated, the net assets of the Portfolio shall be deemed to be the net
assets of the Portfolio as of the close of business on the last day on which
net asset value was determined. Except as hereinafter set forth, compensation
under this Agreement shall be calculated and accrued daily and the amounts of
the daily accruals shall be paid monthly in arrears (i.e., the applicable
annual fee rate divided by
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365 as applied to each prior day's net assets in order to calculate the daily
accrual). If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above.
(b) In the event the operating expenses of the Portfolio
including all management fees, for any fiscal year ending on a date on which
this Agreement is in effect exceed the expense limitation applicable to the
Portfolio imposed by the securities laws or regulations thereunder of any
state or jurisdiction in which the Portfolio's shares are qualified for sale,
as such limitations may be raised or lowered from time to time, the Investment
Manager shall reduce its management fee to the extent of such excess and, if
required, pursuant to any such laws or regulations, will reimburse the
Portfolio for any annual operating expenses (after reductions of all
management fees) in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amount of
any interest, taxes, brokerage commission and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the Fund and
attributable to the Portfolio. Such reduction, if any, shall be computed and
accrued daily, shall be settled on a monthly basis and shall be based upon the
expense limitation applicable to the Portfolio as at the end of the last
business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Investment Manager's
fee shall be applicable.
4. Brokerage. In managing the assets of the Portfolio, the
Investment Manager shall purchase securities from or through and sell
securities to or through such persons, brokers or dealers as the Investment
Manager shall deem appropriate in conformity with applicable law and with the
terms of the Registration Statement, and as the Fund's Board of Directors may
direct from time to time. Without limiting the generality of the foregoing,
the Investment Manager will implement the Fund's policy of seeking the best
execution of orders, which includes best net prices, in effecting purchases
and sales of portfolio securities for the account of the Portfolio (consistent
with this obligation, when the execution and price offered by two or more
persons, brokers or dealers are comparable, the Investment Manager, in its
discretion, purchase and sell portfolio securities to and from persons,
brokers and dealers who provide the Investment Manager with research advice
and other services).
On occasions when the Investment Manager deems the purchase
or sale of securities to be in the best interest of the Portfolio and one or
more of the other investment portfolios of the Fund, as well as other clients
of the Investment Manager, the Investment 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 Investment
Manager in accordance with its policy for aggregation of orders, as in effect
from time to time.
5. Interested Persons. No director, officer or employee of
the Fund shall receive from the Fund any salary or other compensation as such
director, officer or employee while he or she is at the same time a director,
officer or employee of the Investment Manager or any
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affiliated person (as defined in the 1940 Act) thereof. The Investment Manager
shall authorize and permit any of its directors, officers and employees who
may be elected as directors or officers of the Fund to serve in the capacities
in which they are elected, subject to their individual consent and to any
limitations imposed by law. All services to be furnished by the Investment
Manager under this Agreement may be furnished through the medium of any such
directors, officers or employees of the Investment Manager.
6. Limitation of Liability. Subject to Section 36 of the
1940 Act, the Investment Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the
Investment Manager in the performance of its obligations and duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
7. Non-Exclusive Use of the Name "Waterhouse". The Fund
acknowledges that it adopted its name and the name of the Portfolio through
the permission of the Investment Manager, and that the Fund is subject to the
provisions of that certain Sublicense Agreement between the Investment Manager
and the Fund dated December 12, 1995. The Investment Manager hereby consents
to the non-exclusive use by the Fund of the marks "Waterhouse", "Waterhouse
Investors Family of Funds" and the Waterhouse logo only so long as the
Investment Manager (or its affiliate or successor) serves as the investment
manager to one or more portfolios of the Fund. The Fund covenants and agrees
to protect, exonerate, defend, indemnify and hold harmless the Investment
Manager, its officers, agents and employees from and against any and all
costs, losses, claims, damages or liabilities, joint or several, including all
legal expenses which may arise or have arisen out of the Fund's use or misuse
of the name "Waterhouse", "Waterhouse Investors Family of Funds" or the
Waterhouse logo or out of any breach of or failure to comply with this
paragraph.
Neither the Fund nor the Portfolio shall distribute or
circulate any prospectus, proxy statement, sales literature, promotional
material or other printed matter required to be filed with the Securities and
Exchange Commission under Section 24(b) of the 1940 Act which contains any
reference to the Investment Manager or using the name "Waterhouse",
"Waterhouse Investors Family of Funds" or the Waterhouse logo without the
approval of the Investment Manager and shall submit all such materials
requiring approval of the Investment Manager in draft form, allowing
sufficient time for review by the Investment Manager and its counsel prior to
any deadline for printing. If the Investment Manager or any successor to its
business shall cease to furnish services to the Fund under this Agreement or
similar contractual arrangement, the Fund:
(a) as promptly as practicable, will take all necessary
action to cause its Articles of Incorporation to be amended to accomplish a
change of name; and
(b) within 90 days after the termination of this Agreement
or such similar contractual arrangement, shall cease to use in any other
manner, including but not limited to use in any prospectus, sales literature
or promotional material, the name "Waterhouse", "Waterhouse Investors Family
of Funds" and the Waterhouse logo or any name, xxxx or logotype derived from
or similar to such marks or indicating that the Fund or the Portfolio is
managed by or otherwise associated with the Investment Manager.
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8. Term of Agreement. This Agreement shall become effective
upon its execution by an authorized officer of the respective parties hereto.
This Agreement shall continue in effect for an initial two-year term, and
thereafter from year to year so long as such continuation is specifically
approved at least annually in conformity with the requirements of the 1940 Act
with regard to investment advisory contracts; provided, however, that this
Agreement may be terminated at any time without the payment of any penalty by
the Fund, by the Board or by "vote of a majority of the outstanding voting
securities" (as defined in the 0000 Xxx) of the Portfolio, or by the
Investment Manager on not less than 60 days' written notice to the other
party. This Agreement shall terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
Termination of this Agreement shall not affect the right of
the Investment Manager to receive payments on any unpaid balance of the
compensation described in Section 3 hereof earned prior to such termination.
9. Amendments; Partial Invalidity. This Agreement may be
amended by mutual consent, but the consent of the Fund must be obtained in
conformity with the requirements of the 1940 Act. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder shall not be thereby affected.
10. Notices. All notices or other communications hereunder
to either party shall be in writing and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after postmark if
such notice is mailed first class postage prepaid. Notice shall be addressed:
(a) if to the Fund, to: President, Waterhouse Investors Investors Family of
Funds, Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; or (b) if to the
Investment Manager, to: President, Waterhouse Asset Management, Inc., 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other address as either party may
designate by written notice to the other. Notice shall also be deemed
sufficient if given by telex, telecopier, telegram or similar means of same
day delivery (with a confirming copy by mail as provided herein).
11. Entire Agreement; Governing Law. This Agreement contains
the entire agreement between the parties hereto and supersedes all prior
agreements, understandings and arrangements with respect to the subject matter
hereof. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon, either of the parties to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Investment Manager have
caused this Agreement to be executed as of the day and year first above
written.
WATERHOUSE INVESTORS FAMILY
OF FUNDS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
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WITNESS:
/s/ Xxxxx Xxxxxxx-Xxxx
----------------------------
WATERHOUSE ASSET MANAGEMENT, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------
WITNESS:
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------
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SCHEDULE A
Fees
For the services provided by the Investment Manager under the foregoing
agreement to the Portfolio, the Investment Manager will receive the following
fee:
An annual fee, payable monthly, of .20 of 1% of average daily net assets of
the Portfolio.
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