EXHIBIT 5(F)
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
--------------------------------------------
THIS INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is made as of this 29th
day of August, 1997, between FIRST FUNDS, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), on behalf of its
CAPITAL APPRECIATION PORTFOLIO (the "Portfolio") and First Tennessee Bank
National Association ("Bank").
WHEREAS, the Trust has been organized to operate as an investment company
registered under the Investment Company Act of 1940, as amended, (the "1940
Act") with multiple series of shares (hereinafter referred to as Classes) having
varying preferences, limitations and relative rights, and to invest and reinvest
the assets of the Portfolio in securities pursuant to investment objectives and
policies for the Portfolio; and
WHEREAS, the Trust, under separate agreement (the "Investment Advisory and
Management Agreement"), has engaged the services of Investment Advisers, Inc. as
co-investment adviser to the Portfolio to provide day-to-day investment
management of the Portfolio's assets and securities, to conduct a continuous
program of investment of the Portfolio's assets, and to provide other advisory
services as outlined in the Investment Advisory and Management Agreement, a form
of which is attached hereto as Exhibit A, (IAI hereinafter being referred to as
"Investment Adviser" and Bank hereinafter being referred to as "Co-Adviser");
and
WHEREAS, the Trust desires to obtain the services, information, advice,
assistance and facilities of an investment adviser and to have an investment
adviser provide or perform for it various investment advisory, monitoring,
statistical, research, investment adviser selection and counseling and other
services with respect to the Portfolio as set forth more fully herein, but
exclusive of day-to-day investment management services;
NOW, THEREFORE, the Trust, on behalf of the Portfolio, and Co-Adviser
agree as follows:
1. Employment of the Co-Adviser. The Trust hereby employs the Co-Adviser
----------------------------
to provide investment advisory services in the manner set forth in Section 2A of
this Agreement, subject to the direction of the Trustees, for the period, in the
manner, and on the terms hereinafter set forth. The Co-Adviser hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth. The Co-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
or represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. Obligations of, and Services to be Provided by, the Co-Adviser. The Co-
----------------------------------------------- --------------
Adviser undertakes to provide the services hereinafter set forth and to assume
the following obligations:
A. Investment Advisory Services.
(a) The Co-Adviser will provide the Trust with research, analyses and
recommendations with respect to the investment objective,
guidelines for and risk characteristics of the Portfolio.
1
(b) The Co-Adviser will monitor the investment and management
activities of the Investment Adviser relative to the Portfolio,
including, but not limited to, purchase and sale transactions
following settlement thereof, and report to the Trustees on
compliance by the Investment Adviser with the investment
objective and policies of the Portfolio, any directions which the
Trustees and officers of the Trust may issue to the Investment
Adviser from time to time and the requirements of the 1940 Act
and all applicable rules and regulations of the Securities and
Exchange Commission ("SEC") with respect to the Portfolio. In
performing its monitoring services under this sub-section,the Co-
Adviser may rely, among other things, upon reports, data and
information furnished to it by the Investment Adviser, custodian
or other service providers to the Portfolio.
(c) The Co-Adviser will make recommendations with respect to the
engagement and termination of investment advisers and sub-
advisers for the Portfolio and provide research, analyses and
recommendations on qualified candidates to perform the investment
advisory and, if applicable, sub-advisory duties and
responsibilities for the day-to-day management of a continuous
investment program for the Portfolio and the related functions to
sustain that role.
(d) The Co-Adviser will perform or obtain research and analysis on
the investment performance of the Investment Adviser, or other
investment advisers or sub-advisers (collectively, the
"Advisers") with respect to the Portfolio and comparisons of its
absolute and relative performance to relevant indices and
investment universes.
(e) The Co-Adviser will determine and recommend allocation of assets
between multiple active Advisers at such time that the assets of
the Portfolio reach such size that multiple active Advisers are
warranted.
(f) The Co-Adviser may make presentations or reports on behalf of the
Investment Adviser, or other Advisers, at the request of the
Investment Adviser or such other Advisers in meetings and other
settings where the presence of a representative of any such
investment adviser is needed or requested but is unable to
attend. Such meetings and settings may include, but are not
limited to, (i) Board of Trustee meetings, (ii) meetings with
broker-dealers, and (iii) meetings with other channels of
distribution. Such meetings shall not include regulatory
meetings.
(g) The Co-Adviser will coordinate its activities with the Investment
Adviser and the activities of the Investment Adviser or other
Advisers, with the Portfolio's transfer agent, administrator,
custodian and independent accountants.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Co-Adviser will make available and provide such financial,
accounting, statistical and other information related to its duties
and responsibilities hereunder as required by the Trustees and
necessary for the preparation of registration statements, reports and
other documents required by federal and state securities laws and such
other information
2
as the Trustees may reasonably request for use by the Trust and its
distributor for the underwriting and distribution of the Portfolio's
shares.
C. Other Obligations and Services.
The Co-Adviser agrees to make available its officers and employees to
the Trustees and officers of the Trust for consultation and
discussions regarding the activities of the Investment Adviser and the
Co-Adviser's duties hereunder and their activities with respect to the
Portfolio.
3. Covenants by Co-Adviser. The Co-Adviser covenants with the Trust
-----------------------
that, with respect to the services provided to the Portfolio, it:
(a) will comply with all applicable provisions of the 1940 Act and
applicable rules and regulations of the Securities and Exchange
Commission ("SEC") and will in addition conduct its activities
under this Agreement in accordance with the Portfolio's current
registration statement and applicable regulations of the Office of
the Comptroller of the Currency pertaining to the investment
advisory activities of national banks which are applicable to the
Co-Adviser;
(b) will not make loans to any person for the purpose of purchasing or
carrying Trust or Portfolio shares, or make loans to the Trust or
the Portfolio;
(c) will not purchase shares of the Trust or the Portfolio for its own
investment account;
(d) will maintain all books and records with respect to its duties set
forth herein, and furnish the Trustees such periodic and special
reports as the Trustees may request with respect to the Portfolio;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and
the Portfolio and prior, present or potential shareholders (other
than any information which Co-Adviser may have obtained about
shareholders from other business relationships with such
shareholders), and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder (except after prior notification to and approval
in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld and will be deemed granted where
the Co-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when so requested by
the Trust or when otherwise required or permitted by law);
(f) will, to the best of its knowledge and ability, immediately notify
the Trust of the occurrence of any event which would disqualify
Co-Adviser or the Investment Adviser from serving as investment
adviser of an investment company; and
(g) will determine that all information furnished to the Trust by the
Co-Adviser pursuant to this Agreement is accurate in all material
respects.
3
4. Expenses of the Portfolio. The Portfolio or Trust will pay, or will
-------------------------
enter into arrangements that require third parties to pay, all expenses other
than those expressly assumed by the Co-Adviser herein, which expenses payable by
the Portfolio or Trust shall include:
(a) Expenses of all audits by independent public accountants;
(b) Expenses of Investment Adviser, transfer agent, registrar,
dividend disbursing agent and shareholder recordkeeping services;
(c) Expenses of custodial services including recordkeeping services
provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(e) Salaries and other compensation of any of its executive officers
or employees, if any, who are not officers, directors,
stockholders or employees of the Investment Adviser, the Co-
Adviser, the Administrator or the Distributor;
(f) Taxes levied against the Portfolio;
(g) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Portfolio;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to Trustees and shareholder meetings of
the Trust and the Portfolio, the preparation and mailings of
prospectuses and reports of the Portfolio to its existing
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Portfolio's legal existence, and the
registration of shares with federal and state securities
authorities;
(j) Legal fees, including the legal fees related to the registration
and continued qualification of the Portfolio's shares for sale;
(k) Costs of printing any share certificates representing shares of
the Portfolio;
(l) Fees and expenses of Trustees who are not affiliated persons, as
defined in the 1940 Act, of the Co-Adviser, the Investment
Adviser, the Distributor or any of their affiliates; and
(m) Its pro rata portion of the fidelity bond required by section
17(g) of the 1940 Act, or of other insurance premiums.
5. Activities and Affiliates of the Co-Adviser. The Trustees acknowledge that
-------------------------------------------
the Co-Adviser , or one or more of its affiliates, may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Co-Adviser ,
its affiliates or any of its or their directors, officers, agents or employees
may buy, sell or trade in any securities for its or their respective accounts
(such individuals, entities and accounts hereinafter referred to as "Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Trustees agree
that the
4
Co-Adviser or its affiliates may give advice or exercise investment
responsibility and take such other action with respect to other Affiliated
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Portfolio, provided that the Co-Adviser acts in
good faith and in accordance with applicable law or as permitted by an exemption
order issued by the SEC, and provided further, that, as applicable to the
Portfolio, it is the Co-Adviser's policy to allocate within its reasonable
discretion, investment opportunities to the Portfolio over a period of time on a
fair and equitable basis relative to the Affiliated Accounts, taking into
account the investment objectives and policies of the Portfolio and any specific
investment restrictions applicable thereto. The Trust acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Portfolio may have an interest from time to time, whether in transactions
which involve the Portfolio or otherwise. The Co-Adviser shall not have any
obligation to acquire for the Portfolio a position in any investment which any
Affiliated Account may acquire, and the Portfolio shall have no first refusal,
coinvestment or other rights in respect of any investment, either for the
Portfolio or otherwise.
6. Compensation of the Co-Adviser. (a) For all services provided to the
------------------------------
Portfolio pursuant to this Agreement, the Trust shall pay the Co-Adviser, and
the Co-Adviser agrees to accept as full compensation therefor, an investment
advisory fee, payable as soon as practicable after the last day of each month,
calculated using an annual rate of 0.15% of the average daily net assets of the
Portfolio (the "Annual Rate"). The monthly investment advisory fee to be paid
by the Trust to the Co-Adviser shall be determined as of the close of business
on the last business day of each month by multiplying one-twelfth of the Annual
Rate by the Average Portfolio Net Assets (hereinafter defined), calculated
monthly as of such day.
(b) For purposes of this paragraph 6, the "Average Portfolio Net Assets"
shall be calculated monthly as of the last business day of each month and shall
mean the sum of the net assets of the Portfolio calculated each business day
during the month divided by the number of business days in the month (such net
assets to be determined as of the close of business each business day and
computed in the manner set forth in the Declaration of Trust of the Trust) .
7. Proxies. The Trustees will vote all proxies solicited by or with
-------
respect to the issuers of securities in which assets of the Portfolio may be
invested from time to time, unless the Trustees delegate such right to the
Investment Adviser.
8. Liabilities of the Co-Adviser.
-----------------------------
(a) The Co-Adviser will not be liable for any loss suffered by the
Portfolio or the Trust as the result of any error of judgment or
mistake of law in connection with its performance of this
Agreement; provided, however, that the Co-Adviser shall be liable
-------- -------
to the Portfolio and the Trust for any loss resulting from (i) a
breach of fiduciary duty with respect to the receipt of
compensation for services; (ii) willful misfeasance, bad faith or
gross negligence in, or reckless disregard by the Co-Adviser of,
the performance of its duties and obligations under this
Agreement; or (iii) any material breach of any of its covenants
contained in this Agreement.
(b) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or the Co-Adviser, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
5
9. Renewal, Amendment and Termination.
----------------------------------
(a) This Agreement shall become effective on the date first
written above and shall remain in force for a period of two
(2) years from such date and from year to year thereafter but
only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees
who are not interested persons of the Portfolio, the
Investment Adviser or the Co-Adviser, cast in person at a
meeting called for the purpose of voting on such approval and
by a vote of the Board of Trustees or (ii) by the vote of a
majority of the outstanding voting securities of the
Portfolio. The aforesaid provision that this Agreement may be
continued "annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations
thereunder.
(b) This Agreement may be amended at any time, but only by
written agreement between the Trust and the Co-Adviser, which
amendment is subject to the approval of the Trustees and the
shareholders of the Trust in the manner required by the 1940
Act, subject to any applicable exemption order of the SEC
modifying the provisions of the 1940 Act with respect to
approval of amendments to this Agreement.
(c) This Agreement:
(i) may at any time be terminated without the payment of
any penalty either by vote of the Trustees or by vote
of a majority of the outstanding voting securities of
the Portfolio, on sixty (60) days' written notice to
the Co-Adviser;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Co-Adviser on sixty (60)
days' written notice to the Trust.
(d) As used in this Section 9, the terms "assignment",
"interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set
forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption
issued by the SEC.
10. Books and Records.
-----------------
(a) The Trustees shall provide to the Co-Adviser copies of the
Trust's most recent prospectus and statements of additional
information (as each may be amdended or supplemented from
time to time) which relate to any class of shares
representing inrterests in the Portfolio.
(b) In compliance with the requirements of Rule 3la-3 of the
rules promulgated under the 1940 Act ("Rules"), the Co-
Adviser hereby agrees that all records which it maintains for
the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the
Trust's request. The Co-Adviser further agrees to preserve
for the periods prescribed by Rule 3la-2, the records
required to be maintained by the Co-Adviser hereunder
pursuant to Rule 3la-1 of the Rules.
6
11. Notices. All notices, requests, demands or other communications hereunder
-------
shall be in writing and shall be deemed given, if delivered personally, on the
day delivered or if mailed, by certified or registered mail, postage prepaid,
return receipt requested, three (3) days after placement in the United States
mail, to the addresses below:
If to Trust: First Funds
c/o Xxxxx X. Xxxxx, Esq.
ALPS Mutual Fund Services, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxxx X. Xxxxxx, Xx., Esq.
Baker, Donelson, Bearman, Caldwell, P.C.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Co-Adviser: C. Xxxxxxx Xxxxx, III
c/o: First Tennessee Bank National Association
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
With a copy to: Xxxxxx Xxxxx, Esq.
First Tennessee Bank National Corporation
000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
12. Severability. If any provision of this Agreement shall be held or made
------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Limitation on Liability. Co-Adviser is hereby expressly put on notice of
-----------------------
the limitation of shareholder liability as set forth in the Declaration of Trust
and agrees that obligations assumed by the Portfolio pursuant to this Agreement
shall be limited in all cases to the Portfolio and its assets. Co-Adviser
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Portfolio, nor from the
Trustees or any individual Trustee of the Portfolio.
7
14. Governing Law. To the extent that state law has not been preempted by the
-------------
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Tennessee without
giving effect to the choice of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
FIRST FUNDS
By: ______________________________
Name: Xxxxx X. Xxxxx
Title: Secretary
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: ______________________________
Name: C. Xxxxxxx Xxxxx, III
Title: Senior Vice President
8
EXHIBIT A
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
--------------------------------------------
THIS INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is made as of this 28th
day of August, 1997, between FIRST FUNDS, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), on behalf of its
CAPITAL APPRECIATION PORTFOLIO (the "Portfolio") and Investment Advisers, Inc.,
a corporation organized under the laws of the State of Delaware ("IAI ").
WHEREAS, the Trust has been organized to operate as an investment company
registered under the Investment Company Act of 1940, as amended, (the "1940
Act") with multiple series of shares (hereinafter referred to as Classes) having
varying preferences, limitations and relative rights, and to invest and reinvest
the assets of the Portfolio in securities pursuant to investment objectives and
policies for the Portfolio;
WHEREAS, the Trust, under separate agreement has engaged the services of
First Tennessee Bank National Association ("Bank") as a co-investment adviser to
provide or perform various investment advisory, monitoring, statistical,
research, portfolio investment adviser selection, and other services with
respect to the Portfolio as set forth more fully in the Bank's Investment
Advisory and Management Agreement, a form of which is attached hereto as Exhibit
A, (Bank hereinafter being referred to as "Co-Adviser" and IAI hereinafter being
referred to as "Investment Adviser"); and
WHEREAS, the Trust desires to obtain the day-to-day portfolio investment
management services, information, advice, assistance and facilities of the
Investment Adviser with respect to the Portfolio as set forth more fully herein;
NOW, THEREFORE, Trust, on behalf of the Portfolio, and Investment Adviser
agree as follows:
1. Employment of the Investment Adviser. The Trust hereby employs the
------------------------------------
Investment Adviser to provide investment advice and to manage the investment and
reinvestment of the Portfolio's assets in the manner set forth in Section 2A. of
this Agreement, subject to the direction of the Trustees, for the period, in the
manner, and on the terms hereinafter set forth. The Investment Adviser hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth. The Investment 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 or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
2. Obligation of, and Services to be Provided by, the Investment Adviser.
---------------------------------------------------------------------
The Investment Adviser undertakes to provide the services hereinafter set forth
and to assume the following obligations:
A. Investment Advisory Services.
(a) The Investment Adviser shall have overall responsibility for the
day-to-day management and investment of the Portfolio's assets and
securities portfolio subject to and in accordance with the
investment objectives and policies of the Portfolio, and
9
any directions which the Trustees and officers of the Trust may
issue to the Investment Adviser from time to time, and shall
perform the following services: (i) provide or cause to be
provided investment research and credit analysis concerning the
Portfolio's investments, (ii) conduct or cause to be conducted a
continual program of investment of the Portfolio's assets, (iii)
place or cause to be placed orders for all purchases and sales of
the investments made for the Portfolio, and (iv) maintain or cause
to be maintained the books and records required in connection with
its duties hereunder.
(b) The Investment Adviser shall advise the Trustees of the Trust
regarding overall investment programs and strategies for the
Portfolio, revision of such programs as necessary, and shall
monitor and report periodically to the Trustees concerning the
implementation of such programs and strategies.
(c) The Investment Adviser, with the prior approval of the Trustees
(and the shareholders to the extent required by applicable law) as
to particular appointments, shall be permitted to (i) engage one
or more persons or companies ("Sub-Advisers"), which may have full
investment discretion to make all determinations with respect to
the investment and reinvestment of all or any portion of the
Portfolio's assets and the purchase and sale of all or any portion
of the Portfolio securities, subject to the terms and conditions
of this Agreement and the written agreement to be executed with
any Sub-Adviser; and (ii) take such steps as may be necessary to
implement such appointment.
(d) The Investment Adviser will coordinate its activities with those
of the Co-Adviser and will provide to the Co-Adviser such
information regarding the Investment Adviser's investment
management activities to the Portfolio as the Co-Adviser may
reasonably request in order to enable the Co-Adviser to perform
its services on behalf of the Portfolio under the Co-Adviser
Agreement.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Investment Adviser will make available and provide such financial,
accounting, statistical and other information related to its duties
and responsibilities hereunder as required by the Trustees and
necessary for the preparation of registration statement, reports and
other documents required by federal and state securities laws and such
other information as the Trustees may reasonably request for use by
the Trust and its distributor for the underwriting and distribution of
the Portfolio's shares.
C. Other Obligations and Services.
The Investment Adviser agrees to make available its officers and
employees to the Trustees and officers of the Trust and to the Co-
Adviser for consultation and discussions regarding the investment
advisory activities of the Investment Adviser for the Portfolio. The
Investment Adviser will also coordinate its activities, to the extent
necessary, with the activities of the custodian, transfer agent,
distributor, administrator and pricing agent insofar as their
respective activities relate to the duties of the Investment Adviser
hereunder, and will provide to such service providers of the Portfolio
such information as they may reasonably request in order to perform
their services on behalf of the Portfolio.
10
3 . Covenants by Investment Adviser. The Investment Adviser covenants
-------------------------------
with the Trust that with respect to the services provided to the Portfolio it:
(a) will comply with all applicable provisions of the 1940 Act and
applicable rules and regulations of the Securities and Exchange
Commission ("SEC") and will in addition conduct its activities
under this Agreement in accordance with the investment objective,
policies and limitations contained the current registration
statement of the Portfolio;
(b) will not make loans to any person for the purpose of purchasing or
carrying Portfolio shares, or make loans to the Portfolio or the
Trust;
(c) will not purchase shares of the Portfolio or the Trust for its own
investment account;
(d) will maintain all books and records with respect to the securities
transactions of the Portfolio and furnish the Trustees such
periodic and special reports as the Trustees may request with
respect to the Portfolio;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and
the Portfolio and prior, present or potential shareholders (other
than any information which Investment Adviser may have obtained
about shareholders from other business relationships with such
shareholders), and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder (except after prior notification to and approval
in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld and will be deemed granted where
the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, when so
requested by the Trust or when otherwise required or permitted by
law);
(f) will immediately notify the Trust and the Co-Adviser of the
occurrence of any event which would disqualify Investment Adviser
or any Sub-Adviser from serving as investment adviser of an
investment company; and
(g) will determine that all information furnished to the Trust or the
Co-Adviser by it pursuant to this Agreement is accurate in all
material respects.
4. Transaction Procedures. All investment transactions on behalf of the
----------------------
Portfolio will be compensated by payment to or delivery by the custodian for
the Portfolio duly appointed by the Trustees of the Trust (the "Custodian"), or
such approved depositories or agents duly appointed by the Trustees and as may
be designated by the Custodian in writing, as custodian for the Portfolio, of
all cash and/or securities due to or from the Portfolio, and the Investment
Adviser shall not have possession or custody thereof or any responsibility or
liability with respect thereto. The Investment Adviser effecting transactions
on behalf of the Portfolio shall advise the Custodian and the Co-Adviser of all
investment orders for the Portfolio placed by it with brokers, dealers, banks
and other parties ("Brokers"). The Trustees shall issue, or cause to be issued,
to the Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Investment Adviser. The Portfolio
shall be responsible for all custodial arrangements and the payment of all
custodial charges and fees, and, upon
11
the giving of proper instructions to the Custodian, the Investment Adviser shall
have no responsibility or liability with respect to custodian arrangements or
the acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Investment Adviser to take appropriate action if the
Custodian fails properly to confirm execution of the instructions to the
Investment Adviser and the Co-Adviser in a written form duly agreed upon by the
Custodian, the Investment Adviser and the Co-Adviser.
5. Execution and Allocation of Portfolio Brokerage. The Investment
-----------------------------------------------
Adviser shall place, subject to the limitations contained in this paragraph 5,
on behalf of the Portfolio, orders for the execution of the Portfolio's
securities transactions. The Investment Adviser is authorized by the Trust to
take any action, including the purchase or sale of securities for the account
of the Portfolio, (a) that is not in contravention of (i) any investment
restrictions set forth in the 1940 Act and the rules thereunder; (ii) specific
instructions adopted by the Trustees and communicated to the Investment Adviser;
(iii) the investment objectives, policies and restrictions of the Portfolio as
set forth in the Trust's current registration statement, as amended from time to
time; or (iv) instructions from the Trustees to the Investment Adviser, and (b)
which would not have the effect of causing the Trust to fail to qualify or to
cease to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended, or any succeeding statute.
The Investment Adviser may place orders pursuant to its investment
determinations for the Portfolio either directly with the issuer or with any
Brokers. In placing orders with any Broker, the Investment Adviser will
consider the experience and skill of a Broker's securities traders as well as
the Broker's financial responsibility and administrative efficiency. The
Investment Adviser will attempt to obtain the best price and the most favorable
execution of its orders with any Brokers; however, in so doing, the Investment
Adviser may consider, subject to applicable law, the research, statistical, and
related brokerage services provided or to be provided by such Broker to the
Portfolio or the other accounts for which the Investment Adviser exercises
investment discretion. A commission paid to such Brokers may be higher than
that which another Broker would have charged for effecting the same transaction,
provided that the Investment Adviser determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such Broker when viewed in terms of either the particular
transaction or the overall responsibilities of the Investment Adviser with
respect to the accounts as to which it exercises investment discretion. It is
understood that the Investment Adviser has not adopted a formula for selection
of Brokers for the execution of the Portfolio's investment transactions. On
occasions when the Investment Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be 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 expenses incurred in the
transaction, will be made by the Investment Adviser in the manner it considers
to be the most equitable and consistent with its fiduciary obligations to the
Portfolio and to such other clients.
The Investment Adviser will not execute any Portfolio transactions for the
account of the Portfolio with a Broker which is an "affiliated person" (as
defined in the 0000 Xxx) of the Trust, the Trust's distributor, the Investment
Adviser or the Co-Adviser except in accordance with applicable laws, rules,
regulations or effective exemption orders issued by the SEC pursuant to the 1940
Act without the prior written approval of the Trustees. The Trust agrees to
provide the Investment Adviser with a list of brokers and dealers that are
"affiliated persons" of the Trust. The Investment Adviser likewise agrees to
furnish to the Trust and the Co-Adviser a list of Brokers which are "affiliated
persons" of the Investment Adviser. In no instance will Portfolio securities be
purchased from or sold to the Trust's principal
12
distributor, Investment Adviser, Co-Adviser or any affiliate thereof, except to
the extent permitted by an exemption order issued by the SEC or by applicable
law.
The Investment Adviser shall render regular reports to the Trustees and the
Co-Adviser of the total brokerage business placed by it and the manner in which
the allocation of such brokerage has been accomplished.
6. Expenses of the Portfolio. The Portfolio or Trust will pay, or will
-------------------------
enter into arrangements that require third parties to pay, all expenses other
than those expressly assumed by the Investment Adviser herein, which expenses
payable by the Portfolio or Trust shall include:
(a) Expenses of all audits by independent public accountants;
(b) Expenses of the Co-Adviser, transfer agent, registrar, dividend
disbursing agent and shareholder recordkeeping services;
(c) Expenses of custodial services including recordkeeping services
provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(e) Salaries and other compensation of any of its executive officers
or employees, if any, who are not officers, directors,
stockholders or employees of the Investment Adviser, the
administrator or the distributor;
(f) Taxes levied against the Portfolio;
(g) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Portfolio;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to Trustees and shareholder meetings of
the Trust and the Portfolio, the preparation and mailings of
prospectuses and reports of the Portfolio to its existing
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Portfolio's legal existence, and the
registration of shares with federal and state securities
authorities;
(j) Legal fees in connection with the representation of the Trust
and/or Portfolio, including the legal fees related to the
registration and continued qualification of the Portfolio's shares
for sale;
(k) Costs of printing any share certificates representing shares of
the Portfolio;
(l) Fees and expenses of Trustees who are not affiliated persons, as
defined in the 1940 Act, of the Investment Adviser, the Co-
Adviser, the distributor or any of their affiliates; and
13
(m) Its pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or of other insurance premiums.
7. Activities and Affiliates of the Investment Adviser. The Trustees
---------------------------------------------------
acknowledge that Investment Adviser, or one or more of its affiliates, may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that
Investment Adviser, its affiliates or any of its or their directors, officers,
agents or employees may buy, sell or trade in any securities for its or their
respective accounts (such individuals, entities and accounts hereinafter
referred to as Affiliated Accounts). Subject to the provisions of paragraph 2
hereof, the Trustees agree that the Investment Adviser or its affiliates may
give advice or exercise investment responsibility and take such other action
with respect to other Affiliated Accounts which may differ from the advice given
or the timing or nature of action taken with respect to the Portfolio, provided
that Investment Adviser acts in good faith and in accordance with applicable law
or as permitted by an exemption order issued by the SEC, and provided further,
that it is Investment Adviser's policy to allocate within its reasonable
discretion, investment opportunities to the Portfolio over a period of time on a
fair and equitable basis relative to the Affiliated Accounts, taking into
account the investment objectives and policies of the Portfolio and any specific
investment restrictions applicable thereto. The Trust acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Portfolio may have an interest from time to time, whether in transactions
which involve the Portfolio or otherwise. The Investment Adviser shall not
have any obligation to acquire for the Portfolio a position in any investment
which any Affiliated Account may acquire, and the Portfolio shall have no first
refusal, coinvestment or other rights in respect of any investment, either for
the Portfolio or otherwise.
8. Compensation of the Investment Adviser. (a) For all services provided
--------------------------------------
to the Portfolio pursuant to this Agreement, the Trust shall pay the Investment
Adviser, and the Investment Adviser agrees to accept as full compensation
therefor, an investment advisory fee, payable as soon as practicable after the
last day of each month, calculated using an annual rate of 0.70% of the average
daily net assets of the Portfolio for the first $50 million of such assets, and
0.65% on average daily net assets of the Portfolio in excess of $50 million (the
"Annual Rate"). The monthly investment advisory fee to be paid by the Trust to
the Investment Adviser shall be determined as of the close of business on the
last business day of each month by multiplying one-twelfth of the Annual Rate by
the Average Portfolio Net Assets (hereinafter defined), calculated monthly as of
such day.
(b) For purposes of this paragraph 8, the "Average Portfolio Net Assets"
shall be calculated monthly as of the last business day of each month and shall
mean the sum of the net assets of the Portfolio calculated each business day
during the month divided by the number of business days in the month (such net
assets to be determined as of the close of business each business day and
computed in the manner set forth in the Declaration of Trust of the Trust).
9. Proxies. The Trustees will vote all proxies solicited by or with
-------
respect to the issuers of securities in which assets of the Portfolio may be
invested from time to time, unless the Trustees delegate such right to the
Investment Adviser.
10. Liabilities of the Investment Adviser.
-------------------------------------
(a) The Investment Adviser will not be liable for any loss suffered by
the Portfolio or the Trust as the result of any error of judgment
or mistake of law in connection with its performance of this
Agreement; provided, however, that the Investment Adviser shall be
--------- -------
liable to the Portfolio and the Trust for any loss resulting from
(i) a breach of
14
fiduciary duty with respect to the receipt of compensation for
services; (ii) willful misfeasance, bad faith or gross negligence
in, or reckless disregard by the Investment Adviser of, the
performance of its obligations or duties under this Agreement; or
(iii) any material breach of any of its covenants contained in
this Agreement.
` (b) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or the Investment Adviser, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
11. Renewal, Amendment and Termination.
----------------------------------
(a) This Agreement shall become effective on the date first written
above and shall remain in force for a period of two (2) years from
such date and from year to year thereafter but only so long as
such continuance is specifically approved at least annually (i) by
the vote of a majority of the Trustees who are not interested
persons of the Portfolio, the Co-Adviser or the Investment
Adviser, cast in person at a meeting called for the purpose of
voting on such approval and by a vote of the Board of Trustees or
(ii) by the vote of a majority of the outstanding voting
securities of the Portfolio. The aforesaid provision that this
Agreement may be continued "annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations
thereunder.
(b) This Agreement may be amended at any time, but only by written
agreement between the Trust and the Investment Adviser, which
amendment is subject to the approval of the Trustees and the
shareholders of the Trust in the manner required by the 1940 Act,
subject to any applicable exemption order of the SEC modifying the
provisions of the 1940 Act with respect to approval of amendments
to this Agreement.
(c) This Agreement:
(i) may at any time be terminated without the payment of any
penalty either by vote of the Trustees or by vote of a
majority of the outstanding voting securities of the
Portfolio, on sixty (60) days' written notice to the
Investment Adviser;
(ii) shall immediately terminate in the event of its assignment;
and
(iii) may be terminated by the Investment Adviser on sixty (60)
days' written notice to the Trust.
(d) As used in this Section 11, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and
the rules and regulations thereunder, subject to any applicable
orders of exemption issued by the SEC.
12. Books and Records. (a) The Trustees shall provide to the Investment
-----------------
Adviser copies of the Trust's most recent prospectus and statement of additional
information (as each may be amended or supplemented from time to time) which
relate to any class of shares representing interests in the Portfolio.
(b) In compliance with the requirements of Rule 31a-3 of the rules
promulgated under the 1940 Act ("Rules"), the Investment Adviser hereby agrees
that all records which it maintains for the Trust
15
are the property of the Trust and further agrees to surrender promptly to the
Trust any such records upon the Trust's request. The Investment Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2, the records
required to be maintained by the Investment Adviser hereunder pursuant to Rule
31a-1 of the Rules.
13. Notices. All notices, requests, demands or other communications
-------
hereunder shall be in writing and shall be deemed given, if delivered
personally, on the day delivered or if mailed, by certified or registered mail,
postage prepaid, return receipt requested, three (3) days after placement in the
United States mail, to the addresses below:
If to Trust: First Funds
c/o Xxxxx X. Xxxxx, Esq.
ALPS Mutual Fund Services, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxxxxxxxxxx, Esq.
Baker, Donelson, Bearman, Caldwell, P.C.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Investment Adviser: Investment Advisers, Inc.
c/o: Xxxxx Xxxxxxxx
000 Xxxxxx Xxx. X., Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
14. Severability. If any provision of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. Limitation on Liability. Investment Adviser is hereby expressly put
-----------------------
on notice of the limitation of shareholder liability as set forth in the
Declaration of Trust and agrees that obligations assumed by the Portfolio
pursuant to this Agreement shall be limited in all cases to the Portfolio and
its assets. Investment Adviser agrees that it shall not seek satisfaction of
any such obligation from the shareholders or any individual shareholder of the
Portfolio, nor from the Trustees or any individual Trustee of the Portfolio.
16. Governing Law. To the extent that state law has not been preempted by
-------------
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Tennessee without giving effect to the choice of laws provisions thereof.
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
FIRST FUNDS
By:____________________________________
Secretary
INVESTMENT ADVISERS, INC.
By:____________________________________
By:____________________________________
17
