THE CLEARWATER INVESTMENT FUND
INVESTMENT ADVISORY AGREEMENT
This AGREEMENT made this ___ day of _________, 2003, between THE
CLEARWATER INVESTMENT FUND, a Delaware statutory trust (referred to
herein as the "Trust") and Clearwater Asset Management, L.L.C, a
Delaware limited liability company, (referred to herein as "Investment
Adviser."), to provide certain advisory services to certain series of
shares of beneficial interest in the Trust as listed on the attached
Schedule A to this Agreement (each a "Fund," collectively the
"Funds"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
The Trust is registered as an open-end investment company registered
under the Investment Company Act of 1940 ("1940 Act"), and consists of
more than one series of shares, including the Funds. In managing the
Funds, as well as in the conduct of certain of its affairs, the Trust
wishes to have the benefit of the investment advisory services of
Clearwater Asset Management, LLC, and its assistance in performing
certain management, administrative and promotional functions.
Clearwater Asset Management, LLC desires to furnish services for the
Trust and to perform the functions assigned to it under this Agreement
for the considerations provided. Accordingly, the parties have agreed
as follows:
1. APPOINTMENT OF INVESTMENT ADVISER
The Investment Adviser undertakes to act as Investment Adviser to,
and, subject to the supervision of the Trustees of the Trust and the
terms of this Agreement, to manage the investment and reinvestment of the
assets of the Trust. In all matters relating to the performance of this
Agreement, Clearwater Asset Management, LLC will act in conformity
with the Trust's Declaration of Trust, Bylaws and current registration
statement applicable to the Funds as it may be supplemented from time
to time, and with the instructions and direction of the Board of
Trustees of the Trust, and will conform to and comply with the 1940
Act and all other applicable federal or state laws and regulations.
The Investment Adviser will be an independent contractor and will have no
authority to act for or represent the Trust in any way except as
expressly authorized in this Agreement or writing by the Trust.
2. SERVICES TO BE RENDERED BY THE INVESTMENT ADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the
Trust, the Investment Adviser will manage the investments and
determine the composition of the assets of the Funds in accordance
with the Registration Statement (as defined below). In fulfilling
its obligations to manage the investments and reinvestments of the
assets of the Funds, the Investment Adviser will:
i. obtain and evaluate pertinent economic, statistical,
financial and other information affecting the economy
generally and individual companies or industries the
securities of which are included in the Funds or are under
consideration for inclusion in the Funds;
ii. formulate and implement a continuous investment program for
each Fund consistent with the investment objectives and
related investment policies for each such Fund as described
in the Registration Statement;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
including the placing of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to
the implementation of these investment programs; and
b. The Investment Adviser, at its expense, will furnish (i) all neces-
sary investment and management facilities, including salaries of
personnel required for it to execute its duties faithfully, and
(ii) administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of the
investment affairs of the Trust.
c. The Investment Adviser will, consistent with its duty of best
execution, select brokers and dealers to effect all transactions
subject to the following conditions: The Investment Adviser will
place all necessary orders with brokers, dealers, or issuers, and
will negotiate brokerage commissions if applicable. The Investment
Adviser is directed at all times to seek to execute brokerage
transactions for the Funds in accordance with such policies or
practices as may be established by the Trustees and described in
the Registration Statement. The Investment Adviser may pay a
broker-dealer which provides research and brokerage services a
higher spread or commission for a particular transaction than
otherwise might have been charged by another broker-dealer, if the
Investment Adviser determines that the higher spread or commission
is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms
of either the particular transaction or the Investment Adviser's
overall responsibilities with respect to accounts managed by the
Investment Adviser. The Investment Adviser may use for the benefit
of the Investment Adviser's other clients, or make available to
companies affiliated with the Investment Adviser or to its
directors for the benefit of its clients, any such brokerage and
research services that the Investment Adviser obtains from brokers
or dealers.
d. On occasions when the Investment Adviser deems the purchase or sale
of a security to be in the best interest of the Funds as well as
other clients of the Investment Adviser, 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
purchased or sold to attempt to obtain a more 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 Adviser in the manner the Investment Adviser considers
to be the most equitable and consistent with its fiduciary
obligations to the Funds and to its other clients.
e. The Investment Adviser will maintain all accounts, books and
records with respect to the Trust as are required of an investment
adviser of a registered investment company pursuant to the
Investment Company Act of 1940 (the "Investment Company Act") and
Investment Advisers Act of 1940 (the "Investment Advisers Act") and
the rules thereunder.
3. COMPENSATION OF INVESTMENT ADVISER
The Trust will pay the Investment Adviser, with respect to each
Fund, the compensation specified in Schedule A to this Agreement.
4. LIABILITY OF INVESTMENT ADVISER
Neither the Investment Adviser nor any of its directors, officers
or employees shall be liable to the Trust for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with
the matters to which this Agreement relates except for losses resulting
from willful misfeasance, bad faith or gross negligence in the
performance of, or from the reckless disregard of, the duties of the
Investment Adviser or any of its directors.
5. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders
of the Trust are or may be interested in the Investment Adviser as
trustees, officers, partners or otherwise; that employees, agents and
partners of the Investment Adviser are or may be interested in the Trust
as trustees, officers, shareholders or otherwise; that the Investment
Adviser may be interested in the Trust; and that the existence of any
such dual interest shall not affect the validity hereof or of any
transactions hereunder except as otherwise provided in the Agreement and
Declaration of Trust of the Trust and the Articles of Incorporation of
the Investment Adviser, respectively, or by specific provision of
applicable law.
6. REGULATION
The Investment Adviser shall submit to all regulatory and ad-
ministrative bodies having jurisdiction over the services provided
pursuant to this Agreement any information, reports or other material
which any such body by reason of this Agreement may request or require
pursuant to applicable laws and regulations.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective, with respect to each Fund,
on the later of (i) its execution or (ii) the date of the meeting of the
Board of Trustees of the Trust, at which meeting this Agreement is
approved as described below. The Agreement will continue in effect for a
period more than two years from the date of its execution only so long as
such continuance is specifically approved at least annually either by the
Trustees of the Trust or by a majority of the outstanding voting
securities of each of the Funds, provided that in either event such
continuance shall also be approved by the vote of a majority of the
Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. Any
required shareholder approval of the Agreement or of any continuance of
the Agreement shall be effective with respect to any Fund if a majority
of the outstanding voting securities of the series (as defined in Rule
18f-2(h) under the Investment Company Act) of shares of that Fund votes
to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of
the outstanding voting securities of (a) any other Fund affected by the
Agreement or (b) all the Funds of the Trust.
If any required shareholder approval of this Agreement or any
continuance of the Agreement is not obtained, the Investment Adviser will
continue to act as Investment Adviser with respect to such Fund pending
the required approval of the Agreement or its continuance or of a new
contract with the Investment Adviser or a different adviser or other
definitive action; provided, that the compensation received by the
Investment Adviser in respect of such Fund during such period is in
compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at any time, without the payment
of any penalty, by the Trustees of the Trust, by the vote of a majority
of the outstanding voting securities of the Trust, or with respect to any
Fund by the vote of a majority of the outstanding voting securities of
such Fund, on sixty days' written notice to the Investment Adviser, or by
the Investment Adviser on sixty days' written notice to the Trust. This
Agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment
Company Act).
8. PROVISION OF CERTAIN INFORMATION BY INVESTMENT ADVISER
The Investment Adviser will promptly notify the Trust in writing of the
occurrence of any of the following events:
a. the Investment Adviser fails to be registered as an investment ad-
viser under the Investment Advisers Act or under the laws of any
jurisdiction in which the Investment Adviser is required to be
registered as an investment adviser in order to perform its
obligations under this Agreement;
b. the Investment Adviser is served or otherwise receives notice of
any action, suit, proceeding, inquiry or investigation, at law or
in equity, before or by any court, public board or body, involving
the affairs of the Investment Adviser; and
c. any change in actual control or management of the Investment
Adviser or the portfolio manager of any Fund.
9. PROVISION OF CERTAIN INFORMATION BY TRUST
The Trust has furnished the Investment Adviser with copies of each
of the following documents and will furnish to the Investment
Adviser all future amendments and supplements to such documents, if
any, as soon as such documents become available:
(1) The Declaration of Trust of the Trust, as filed
with the State of Delaware, as in effect on the date
hereof and as amended from time to time
("Articles");
(2) The by-laws of the Trust as in effect on the date
hereof and as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of Trustees
approving the form of the Advisory Agreement and
this Agreement;
(4) The Trust's Registration Statement under the 1940
Act and the Securities Act of 1933, as amended (the
"1933 Act") on Form N-1A, as filed with the
Securities and Exchange Commission ("SEC") relating
to the Trust and its shares and all amendments
thereto ("Registration Statement");
(5) The Notification of Registration of the Trust under
the 1940 Act on Form N-8A as filed with the SEC and
any amendments thereto;
(6) The Trust's (or Fund's, as applicable) most recent
Prospectus;
(7) Copies of annual and semi-annual reports filed
pursuant to Rule 30d-1; and
(8) The Trust shall furnish the Investment Adviser with
any further documents, materials or information that
Investment Adviser may reasonably request to enable
it to perform its duties pursuant to this Agreement.
10. SERVICES TO OTHER CLIENTS
Nothing contained in this Agreement shall limit or restrict (i)
the freedom of the Investment Adviser, or any affiliated person
thereof, to render investment management and corporate administrative
services to other investment companies, to act as investment manager
or investment counselor to other persons, firms, or corporations, or
to engage in any other business activities, or (ii) the right of any
director, officer, or employee of the Investment Adviser to engage in
any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature. Nothing in this Agreement
shall impose upon the Investment Adviser any obligation to purchase or
sell or to recommend for purchase or sale, with respect to the Fund,
any securities which the Investment Adviser, or its officers,
directors, employees or affiliates may purchase or sell for its or
their own account(s) or for the account of any other client.
Investment Adviser may give advice and take action with respect to any
of its other accounts or for its own account, which may differ, from
the timing or nature of action taken by the Investment Adviser with
respect to the Fund.
11. CUSTODY
Investment Adviser shall have no responsibility with respect to
maintaining custody of the Trust's assets. Investment Adviser shall
affirm security transactions with central depositories and advise the
custodian of the Trust ("Custodian") or such depositories or agents
as may be designated by Custodian and Investment Adviser promptly for
each Fund of each purchase and sale of a portfolio security,
specifying the name of the issuer, the description and amount or
number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date
and the identity of the effecting broker or dealer. Investment
Adviser shall from time to time provide Custodian and Trust with
evidence of authority of its personnel who are authorized to give
instructions to Custodian. The Trust shall instruct the Custodian to
provide the Investment Adviser with such information as the Investment
Adviser may reasonably request relating to daily cash levels held by
each Fund.
12. REPRESENTATIONS OF INVESTMENT ADVISER
The Investment Adviser represents, warrants, and agrees as
follows:
A. The Investment Adviser: (i) is registered as an
investment adviser under the Investment Advisers Act and will continue
to be so registered for so long as this Agreement remains in effect;
(ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met,
and will continue to meet for so long as this Agreement remains in
effect, any applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into
and perform the services contemplated by this Agreement; and (v) will
immediately notify the Trust of the occurrence of any event that would
disqualify the Investment Adviser from serving as an investment
adviser of an investment company pursuant to Section 9 (a) of the 1940
Act or otherwise.
B. The Investment Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940
Act and, if it has not already done so, will provide the Trust with a
copy of such code of ethics, together with evidence of its adoption.
C. The Investment Adviser has provided the Trust with a
copy of its Form ADV, as most recently filed with the SEC, and will,
promptly after filing any material amendment to its Form ADV with the
SEC, furnish a copy of such amendment to the Trust.
D. If not included in the Investment Adviser's Form ADV,
the Investment Adviser has provided or will provide, in accordance
with Rule 206(4)-6 under the Investment Advisers Act, the Trust with a
description of its proxy voting policies and procedures.
13. VOTING OF PROXIES.
Unless the Trust advises Investment Adviser in writing that the
right to vote proxies has been expressly reserved to Investment
Adviser or the Trust or otherwise delegated to another party,
Investment Adviser shall, consistent with its fiduciary duties under
applicable law, exercise voting rights incident to any securities held
in the Fund without consultation with the Trust, provided that
Investment Adviser will follow any written instructions received from
the Trust with respect to voting as to particular issues. Investment
Adviser shall further respond to all corporate action matters incident
to the securities held in each Fund including, without limitation,
proofs of claim in bankruptcy and class action cases and shelf
registrations. Should Investment Adviser undertake litigation against
an issuer on behalf of accounts which it manages that are shareholders
of such issuer, the Trust agrees, that in the event a Fund is also a
shareholder of such issuer, to pay its proportionate share of any
applicable legal fees associated with the action or to forfeit any
claim to any assets Investment Adviser may recover and, in such case,
agrees to hold Investment Adviser harmless for excluding the Fund from
such action. In the case of class action suits involving issuers held
by a Fund, Investment Adviser may include information about the Fund
for purposes of participating in any settlements.
In connection with voting such proxies, the Investment Adviser
may use the services of an affiliated or nonaffiliated proxy voting
service.
14. EXPENSES.
During the term of this Agreement, Investment Adviser will bear
all expenses incurred by it in the performance of its duties
hereunder, other than those expenses specifically borne by a Fund or
assumed by the Trust pursuant to the Advisory Agreement. The Fund and
the Investment Adviser shall bear their own expenses, including but
not limited to those expenses allocated to the Fund or the Investment
Adviser in the Advisory Agreement, all proxy voting expenses and
brokers' and underwriting commissions chargeable to the Fund in
connection with the securities transactions to which the Fund is a
party. (See Schedule A for list of expenses).
15. NOTICES.
Any notice shall be sufficiently given in person, facsimile, or
by registered mail or a private mail or delivery service providing the
sender with notice of receipt to the parties at the address below:
If to Trust:
THE CLEARWATER INVESTMENT FUND
00000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Trustee
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to the Investment Adviser:
Clearwater Asset Management, LLC
00000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, CEO & President
Telephone: (000) 000-0000
Fax: (000) 000-0000
16. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment
is specifically approved by the vote of a majority of the Trustees of the
Trust and by the vote of a majority of the Trustees of the Trust who are
not interested persons of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. Any required
shareholder approval shall be effective with respect to any Fund if a
majority of the outstanding voting securities of that Fund vote to
approve the amendment, notwithstanding that the amendment may not have
been approved by a majority of the outstanding voting securities of (a)
any other Fund affected by the amendment or (b) all the Funds of the
Trust.
17. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of
the parties.
18. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
19. SEVERABILITY
Should any portion of this Agreement for any reason be held to be
void in law or in equity, the Agreement shall be construed, insofar as is
possible, as if such portion had never been contained herein.
20. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the State of Florida, or any of the
applicable provisions of the Investment Company Act. To the extent that
the laws of the State of Florida, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company
Act, the latter shall control.
21. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust dated September 26, 2003,
together with all amendments thereto (the "Declaration"), provides that
the name "THE CLEARWATER INVESTMENT FUND" refers to the Trustees under
the Declaration collectively as Trustees, but not as individuals or
personally; and no Trustee, shareholder, officer, employee or agent of
the Trust shall be held to any personal liability, nor shall resort be
had to their private property, for the satisfaction of any obligation or
claim, in connection with the affairs of the Trust or any Fund thereof,
but only the assets belonging to the Trust, or to the particular Fund
with respect to which such obligation or claim arose, shall be liable.
Liability of Investment Adviser. Investment Adviser may rely on
information reasonably believed by it to be accurate and reliable.
Except as may otherwise be provided by the 1940 Act, neither
Investment Adviser nor its officers, directors, employees or agents
shall be subject to any liability to the Trust, the Fund or any
shareholder of the Fund for any error of judgment, mistake of law or
any loss arising out of any investment or other act or omission in the
course of, connected with or arising out of any service to be rendered
hereunder, except by reason of willful misfeasance, bad faith or gross
negligence in its performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed under seal by their duly authorized officers as of the
date first mentioned above.
ATTEST: THE CLEARWATER INVESTMENT
FUND
By: By:
Name: Name:
Title: Title: Trustee
ATTEST CLEARWATER ASSET
MANAGEMENT, LLC.
By
Name: Rosylee Xxx Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Corporate Secretary Title:
President & CEO
SCHEDULE A
The Investment Adviser shall serve as Investment Adviser for the
following Fund(s) of the Trust. The Fund or Trust will pay the
Investment Adviser, as full compensation for all services provided under
this Agreement, the fee computed separately for each such Fund at an
annual rate as follows (the "Investment Adviser Percentage Fee"):
First Excess over
Fund $500 Million $500 Million
1. Clearwater Quantum Trust 0.75% 0.65%
2. Clearwater Aggressive Opportunities Trust 0.75% 0.65%
3. Clearwater Quantum Fixed Income Trust 0.60% 0.50%
4. Clearwater Small Cap Trust 0.75% 0.65%
The Investment Adviser Percentage Fee for each Fund shall be
accrued for each calendar day and the sum of the daily fee accruals shall
be paid monthly to the Investment Adviser. The daily fee accruals will
be computed by multiplying the fraction of one over the number of
calendar days in the year by the applicable annual rate described in the
preceding paragraph, and multiplying this product by the net assets of
the Fund as determined in accordance with the Trust's prospectus and
statement of additional information as of the close of business on the
previous business day on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of
any month, the fee (if any) for the period from the effective date to the
end of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.
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