INVESTMENT ADVISORY AGREEMENT
Exhibit (5)(a)
(Treasury Fund and Prime Fund)
AGREEMENT made as of January 9, 1998, between EMERALD FUNDS, a
Massachusetts business trust (herein called the "Trust"), and XXXXXXX CAPITAL
ADVISORS, INC., a wholly-owned indirect subsidiary of Xxxxxxx Xxxxx, Inc.
(herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory and other services to the Trust for its Treasury Fund and
Prime Fund portfolios (the "Funds"), and the Investment Adviser is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Trust's Treasury Fund and Prime Fund for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
(b) In the event that the Trust establishes one or more
portfolios other than the Treasury Fund and Prime Fund with respect to which it
desires to retain the Investment Adviser to act as investment adviser hereunder,
it shall notify the Investment Adviser in writing. If the Investment Adviser is
willing to render such services under this Agreement it shall notify the Trust
in writing whereupon such portfolio shall become a Fund hereunder and shall be
subject to the provisions of this Agreement to the same extent as the two Funds
named above in subparagraph (a) except to the extent that said provisions
(including those relating to the compensation payable by the Fund to the
Investment Adviser) are modified with respect to such Fund in writing by the
Trust and the Investment Adviser at the time.
2. DELIVERY OF DOCUMENTS.
The Trust has furnished the Investment Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed
with the State Secretary of the Commonwealth of Massachusetts on March 16, 1988,
and any amendments thereto (such Agreement and Declaration of Trust, as
presently in effect and as it shall from time to time be amended, is herein
called the "Declaration of Trust");
(b) The Trust's Code of Regulations and any amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) The Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission on March 21,
1988 and any amendments thereto;
(e) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended ("1933 Act") (File No. 33-20658) and under the
1940 Act as filed with the Securities and Exchange Commission on March 21, 1988
and any amendments thereto; and
(f) The most recent prospectuses of the Funds (such prospectuses
together with the related statement of additional information, as presently in
effect and all amendments and supplements thereto, are herein called
"Prospectuses").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing, if any.
3. SERVICES.
Subject to the supervision of the Trust's Board of Trustees, the
Investment Adviser will be responsible for the management of, and will provide a
continuous investment program for, the investment portfolio of each Fund,
including investment research and management with respect to all securities,
investments, cash and cash equivalents in the Funds. The Investment Adviser
will determine from time to time what securities and other investments will be
purchased, retained or sold by each of the Funds. The Investment Adviser will
provide the services rendered by it under this Agreement in accordance with each
Fund's investment objective, policies and restrictions
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as stated in the Prospectus for each Fund and resolutions of the Trust's
Board of Trustees. Without limiting the generality of the foregoing, the
Investment Adviser is hereby specifically authorized to invest and reinvest
the assets of a Fund, in its discretion as investment adviser, in (i)
variable amount demand notes of corporate borrowers held by the Investment
Adviser for the investment of monies held by the Investment Adviser in its
capacity as fiduciary, agent and custodian and (ii) securities of other
investment companies whether or not the same are advised or managed by the
Investment Adviser or another affiliated person of the Trust. The Investment
Adviser further agrees that it will:
(a) Establish and monitor investment criteria and policies
for each Fund;
(b) Update each Fund's cash availability throughout the day
as required;
(c) Maintain historical tax lots for each portfolio
security held by the Funds;
(d) Transmit trades to the Trust's custodian for proper
settlement;
(e) Maintain all books and records with respect to each
Fund's securities transactions;
(f) Supply the Trust and its Board of Trustees with
reports, statistical data and economic information as requested;
and
(g) Prepare a quarterly broker security transaction summary
and monthly security transaction listing for each Fund.
4. OTHER COVENANTS.
The Investment Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations
of the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(c) will place orders pursuant to its investment
determinations for each Fund either directly with the issuer or with any broker
or dealer. In executing portfolio transactions and selecting brokers or
dealers, the Investment Adviser will use
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its best efforts to seek on behalf of the Funds the best overall terms
available. In assessing the best overall terms available for any
transaction, the Investment Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best
overall terms available, and in selecting the broker-dealer to execute a
particular transaction, the Investment Adviser may also consider the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided to the Funds and other
accounts over which the Investment Adviser or an affiliate of the Investment
Adviser exercises investment discretion. The Investment Adviser is
authorized, subject to the prior approval of the Trust's Board of Trustees,
to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for any of the
Funds which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Investment Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the Investment
Adviser to the Funds. In addition, the Investment Adviser is authorized to
take into account the sale of shares of the Trust in allocating purchase and
sale orders for portfolio securities to brokers or dealers (including brokers
and dealers that are affiliated with the Investment Adviser or the Trust's
principal underwriter), provided that the Investment Adviser believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified firms. In no instance, however, will portfolio
securities be purchased from or sold to the Investment Adviser, the Trust's
principal underwriter, or any affiliated person of either the Trust, the
Investment Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission; and
(d) will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Investment Adviser makes investment
recommendations for a Fund, its investment advisory personnel will not inquire
or take into consideration whether the issuer of securities proposed for
purchase or sale for the Fund's account are customers of the commercial
department of any of the Investment Adviser's affiliates. In dealing with
commercial customers, the Investment Adviser's affiliates will not inquire
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or take into consideration whether securities of those customers are held by
the Funds.
5. SERVICES NOT EXCLUSIVE.
The services furnished by the Investment Adviser hereunder are
deemed not to be exclusive, and the Investment Adviser shall be free to furnish
similar services to others so long as its services under this Agreement are not
impaired thereby. To the extent that the purchase or sale of securities or
other investments of the same issuer may be deemed by the Investment Adviser to
be suitable for two or more accounts managed by the Investment Adviser, the
available securities or investments may be allocated in a manner believed by the
Investment Adviser to be equitable to each account. It is recognized that in
some cases this procedure may adversely affect the price paid or received by a
Fund or the size of the position obtainable for or disposed of by a Fund.
6. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Investment Adviser hereby agrees that all records which it maintains for
each Fund are the property of the Trust and further agrees to surrender promptly
to the Trust any of such records upon the Trust's request. The Investment
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
7. EXPENSES.
During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased or sold for the Funds. In addition, if in any fiscal year the
aggregate expenses of any Fund (as defined under the securities regulations of
any state having jurisdiction over such Fund) exceed the expense limitations of
any such state, the Trust may deduct from the fees to be paid hereunder, or the
Investment Adviser will bear, to the extent required by state law, that portion
of the excess which bears the same relation to the total of such excess as the
Investment Adviser's fee hereunder bears to the total fee otherwise payable for
the fiscal year by the Trust pursuant to this Agreement and the administration
agreement between the Trust and its administrator with respect to such Fund.
The Investment Adviser's obligation is not limited to the amount of its fees
hereunder. Such deduction or payment, if any, will be estimated and accrued
daily and paid on a monthly basis.
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8. COMPENSATION.
For the services provided and the expenses assumed pursuant to
this Agreement, the Trust will pay the Investment Adviser, and the Investment
Adviser will accept as full compensation therefor from the Trust, a fee,
computed daily and payable monthly, at the annual rate of .25% of the average
daily net assets of each of the Funds. Such fee as is attributable to each Fund
shall be a separate charge to such Fund and shall be the several (and not joint
or joint and several) obligation of each such Fund. The fees payable under this
Section 8 by a Fund for the period beginning on the date of this Agreement and
ending on the date the shareholders of the Fund approve this Agreement shall be
maintained in an interest-bearing escrow account until such Fund's shareholder's
approve the payment of such fees to the Investment Adviser. If a Fund's
shareholders do not approve the payment to the Investment Adviser of such fees
for such period, the balance in the escrow account shall be paid to such Fund.
9. LIMITATION OF LIABILITY.
The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or negligence on the part of
the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
10. DURATION AND TERMINATION.
This Agreement shall become effective as of the date hereof with
respect to the Funds listed in Section 1(a) hereof, and with respect to any
additional Fund, on the date of receipt by the Trust of notice from the
Investment Adviser in accordance with Section 1(b) hereof that the Investment
Adviser is willing to serve as investment adviser with respect to such Fund,
provided that this Agreement (as supplemented by the terms specified in any
notice and agreement pursuant to Section 1(b) hereof) shall have been approved
by the shareholders of such additional Fund in accordance with the requirements
of the 1940 Act. Unless sooner terminated as provided herein, this Agreement
shall continue in effect until May 9, 1998 and, if approved by the shareholders
of a Fund on or before such date, shall continue in effect as to that Fund for
an additional period ending on November 30, 1998. Thereafter, if not
terminated, this Agreement shall automatically continue in effect as to a
particular Fund for successive annual periods ending on November 30, PROVIDED
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board
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of Trustees who are not interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting such approval,
and (b) by the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund. Notwithstanding the foregoing,
this Agreement may be terminated as to any Fund at any time, without the
payment of any penalty, by the Trust (by vote of the Trust's Board of
Trustees or by vote of a majority of the outstanding voting securities of
such Fund), or by the Investment Adviser, on sixty days' written notice.
This Agreement will immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meaning as such terms have in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT.
No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective as to a particular
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
12. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. 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. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law.
13. NAMES.
The names "Emerald Funds" and "Trustees of Emerald Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the
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Trust must look solely to the Trust Property belonging to such class for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EMERALD FUNDS
Attest: (a Massachusetts business trust)
/s/ Xxxxxxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
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[Seal]
XXXXXXX CAPITAL ADVISORS, INC.
Attest:
by /s/ Xxxx X. Xxxxx
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[Seal]
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