INVESTMENT ADVISORY AGREEMENT
Whatifi Funds
AGREEMENT, effective as of May 23, 2000 between Whatifi Asset
Management, Inc. (the "Adviser") and Whatifi Funds (the "Trust") with respect to
the series listed in Exhibit A ("Funds").
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated December 15, 1999 (the "Declaration of Trust"), and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Funds, and the Adviser is willing to provide such
services to the Funds; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
adviser to the Funds for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties.
(a) Subject to the supervision of the Trustees of the Trust, the
Adviser will provide a program of continuous investment
management for the Fund in accordance with each Fund's investment
objective, policies and limitations as stated in the Fund's
Prospectus and Statement of Additional Information included as
part of the Trust's Registration Statement filed with the
Securities and Exchange Commission ("SEC") and as the Prospectus
and Statement of Additional Information may be amended from time
to time, copies of which shall be provided to the Adviser by the
Trust. Subject to approval by the Trustees of the Trust, the
Adviser for each Fund may select a master fund having
substantially the same investment objective and policies as the
Fund into which all or substantially all of the Fund's assets may
be invested, or select and manage investment subadvisers who may
be granted discretionary investment authority with respect to the
assets of the Fund.
(b) In performing its investment management services to the Funds
hereunder, the Adviser will provide the Funds with ongoing
investment guidance, policy direction, including oral and
written research, monitoring of any master funds, analysis,
advice, statistical and economic data and judgments regarding
individual investments, general economic conditions and trends
and long-range investment policy.
(c) Subject to the approval of the Trustees of the Trust, the
Adviser shall have the authority to manage cash and money
market instruments for cash flow purposes.
(d) The Adviser may advise as to the securities, instruments,
agreements, options and other investments and techniques that
each Fund will purchase, sell, enter into or use, and will
provide an ongoing evaluation of the Fund's portfolio. The
Adviser will advise as to what portion of the Fund's portfolio
shall be invested in securities and other assets, and what
portion if any, should be held uninvested.
(e) The Adviser shall provide or arrange for administration,
transfer agency, custody and all other services necessary for
the Funds to operate, and shall be responsible for the payment
of all expenses associated with such services, subject to
Section 5 of this Investment Advisory Agreement.
(f) The Adviser may engage and remove one or more subadvisers,
subject to any necessary approvals of the Trust and its
shareholders, and the Adviser shall monitor the performance of
any subadviser and report to the Trust thereon.
(g) The Adviser further agrees that, in performing its duties
hereunder, it will:
(i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the
"Code") and all other applicable federal and state laws and
regulations, and with any applicable procedures adopted by the
Trustees;
(ii) use reasonable efforts to manage each Fund so that it
will qualify, and continue to qualify, as a regulated
investment company under Subchapter M of the Code and
regulations issued thereunder;
(iii) place orders pursuant to each Fund's investment
determinations as approved by the Trustees for the Fund
directly with the issuer, or with any broker or dealer, in
accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in
accordance with applicable legal requirements;
(iv) furnish to the Trust whatever statistical information the
Trust may reasonably request with respect to each Fund's
assets or contemplated investments. In addition, the Adviser
will keep the Trust and the Trustees informed of developments
materially affecting each Fund's portfolio and shall, on the
Adviser's own initiative, furnish to the Trust from time to
time whatever information the Adviser believes appropriate for
this purpose;
(v) make available to the Trust's administrator (the
"Administrator") and the Trust, promptly upon their request,
such copies of its investment records and ledgers with respect
to each Fund as may be required to assist the Administrator
and the Trust in their compliance with applicable laws and
regulations. The Adviser will furnish the Trustees with such
periodic and special reports regarding the Fund and any
subadviser as they may reasonably request;
(vi) immediately notify the Trust in the event that the
Adviser or any of its affiliates: (1) becomes aware that it is
subject to a statutory disqualification that prevents the
Adviser from serving as investment adviser pursuant to this
Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the SEC or
other regulatory authority. The Adviser further agrees to
notify the Trust immediately of any material fact known to the
Adviser respecting or relating to the Adviser that is not
contained in the Trust's Registration Statement regarding the
Funds, or any amendment or supplement thereto, but that is
required to be disclosed thereon, and of any statement
contained therein that becomes untrue in any material respect;
and
(vii) in providing investment advice to the Funds, use no
inside information that may be in its possession or in the
possession of any of its affiliates, nor will the Adviser seek
to obtain any such information.
3. Futures and Options. The Adviser's investment authority shall include advice
with regard to purchasing, selling, covering open positions, and generally
dealing in financial futures contracts and options thereon, or master funds
which do so in accordance with Rule 4.5 of the Commodity Futures Trading
Commission.
The Adviser's authority shall include authority to: (i) open and
maintain brokerage accounts for financial futures and options (such accounts
hereinafter referred to as "Brokerage Accounts") on behalf of and in the name of
the Fund; and (ii) execute for and on behalf of the Brokerage Accounts, standard
customer agreements with a broker or brokers. The Adviser may, using such of the
securities and other property in the Brokerage Accounts as the Adviser deems
necessary or desirable, direct the custodian to deposit on behalf of a Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Adviser deems desirable or appropriate.
4. Use of Securities Brokers and Dealers. The Adviser will monitor the use by
master funds of broker-dealers. To the extent permitted by the Adviser's Form
ADV as filed with the SEC, purchase and sale orders will usually be placed with
brokers who are selected by the Adviser as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt and reliable execution at the
most favorable securities price, taking into account the other provisions
hereinafter set forth. Whenever the Adviser places orders, or directs the
placement of orders, for the purchase or sale of portfolio securities on behalf
of a Fund, in selecting brokers or dealers to execute such orders, the Adviser
is expressly authorized to consider the fact that a broker or dealer has
furnished statistical, research or other information or services which enhance
the Adviser's research and portfolio management capability generally. It is
further understood in accordance with Section 28(e) of the Securities Exchange
Act of 1934, as amended, that the Adviser may negotiate with and assign to a
broker a commission which may exceed the commission which another broker would
have charged for effecting the transaction if the Adviser determines in good
faith that the amount of commission charged was reasonable in relation to the
value of brokerage and/or research services (as defined in Section 28(e))
provided by such broker, viewed in terms either of the Fund or the Adviser's
overall responsibilities to the Adviser's discretionary accounts.
Neither the Adviser nor any parent, subsidiary or related firm shall
act as a securities broker with respect to any purchases or sales of securities
which may be made on behalf of a Fund, provided that this limitation shall not
prevent the Adviser from utilizing the services of a securities broker which is
a parent, subsidiary or related firm, provided such broker effects transactions
on a "cost only" or "nonprofit" basis to itself and provides competitive
execution. Unless otherwise directed by the Trust in writing, the Adviser may
utilize the service of whatever independent securities brokerage firm or firms
it deems appropriate to the extent that such firms are competitive with respect
to price of services and execution.
5. Allocation of Charges and Expenses.
The Adviser will pay all of the expenses of each class of each series
of the Trust's shares that it shall manage, including also the fees and expenses
of the corresponding Master Portfolios as identified in Exhibit B, other than
interest, taxes, brokerage commissions, extraordinary expenses and expenses
incurred in connection with the provision of shareholder services and
distribution services.
6. Compensation.
As compensation for the services provided and expenses assumed by the
Adviser under this Agreement, the Trust will arrange for each Fund to pay the
Adviser at the end of each calendar month an advisory fee computed daily at an
annual rate equal to the amount of average daily net assets listed opposite each
Fund's name in Exhibit A, attached hereto. The "average daily net assets" of a
Fund shall mean the average of the values placed on the Fund's net assets as of
the close of regular trading on the New York Stock Exchange on each day on which
the net asset value of the Fund is determined consistent with the provisions of
Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines the value of
its net assets as of some other time on each business day, as of such other
time. The value of net assets of each Fund shall always be determined pursuant
to the applicable provisions of the Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
section 6, the value of the net assets of a Fund as last determined shall be
deemed to be the value of its net assets as of the close of the New York Stock
Exchange, or as of such other time as the value of the net assets of the Fund's
portfolio may lawfully be determined, on that day. If the determination of the
net asset value of the shares of a Fund has been so suspended for a period
including any month end when the Adviser's compensation is payable pursuant to
this section 6, then the Adviser's compensation payable at the end of such month
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If a Fund determines
the value of the net assets of its portfolio more than once on any day, then the
last such determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this section 6.
7. Low Account Balance Maintenance Fee. It is hereby recognized and understood
that the Funds may apply a quarterly low account balance maintenance fee upon
shareholders who fail to maintain a total (sum of investments in all of the
Funds) account balance of $10,000. This fee applies to the shareholder's total
account with the Funds and is not a fee charged to the Funds. The fee is payable
to the Adviser. As from time to time disclosed in the Registration Statement,
shareholders will have certain time periods in which they may meet the
prescribed minimum account balance.
8. Books and Records. The Adviser agrees to maintain such books and records with
respect to its services to the Funds as are required by Section 31 under the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and Rule
31a-2 under the 1940 Act and otherwise in connection with its services hereunder
are the property of the Trust and will be surrendered promptly to the Trust upon
its request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Funds are being conducted in accordance
with applicable laws and regulations.
9. Aggregation of Orders. Provided that the investment objective, policies and
restrictions of the Funds are adhered to, the Trust agrees that the Adviser may
aggregate sales and purchase orders of securities held in the Funds with similar
orders being made simultaneously for other accounts managed by the Adviser or
with accounts of the affiliates of the Adviser, if in the Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
respective Fund taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses. The Trust acknowledges that the
determination of such economic benefit to a Fund by the Adviser represents the
Adviser's evaluation that the Fund is benefited by relatively better purchase or
sales prices, lower commission expenses and beneficial timing of transactions or
a combination of these and other factors.
10. Standard of Care and Limitation of Liability. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by a Fund or the holders of the Fund's shares in connection
with the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Trust, the Fund or to holders of the Fund's shares to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement. As used in this Section 10, the term "Adviser" shall include any
officers, directors, employees or other affiliates of the Adviser performing
services with respect to the Fund.
11. Services Not Exclusive. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the Adviser
from providing similar services to other investment companies or to other series
of investment companies, including the Trust (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Funds hereunder. When the Adviser
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Adviser recommends the purchase or sale
of the same security for a Fund, it is understood that in light of its fiduciary
duty to the Fund, such transactions will be executed on a basis that is fair and
equitable to the Fund. In connection with purchases or sales of portfolio
securities for the account of a Fund, neither the Adviser nor any of its
directors, officers or employees shall act as a principal or agent or receive
any commission. If the Adviser provides any advice to its clients concerning the
shares of a Fund, the Adviser shall act solely as investment counsel for such
clients and not in any way on behalf of the Trust or the Fund.
12. Duration and Termination.
(a) This Agreement shall continue for a period of two years from the
date of commencement, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Trustees or (ii) a vote of a "majority" (as defined in the
▇▇▇▇ ▇▇▇) of the Funds' outstanding voting securities (as defined in the 1940
Act), provided that in either event the continuance is also approved by a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the ▇▇▇▇ ▇▇▇) of any party to this Agreement, by vote
cast in person (to the extent required by the ▇▇▇▇ ▇▇▇) at a meeting called for
the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated:
(a) at any time without penalty by the Funds upon the vote of a majority of the
Trustees or by vote of the majority of the Funds' outstanding voting securities,
upon sixty (60) days' written notice to the Adviser or (b) by the Adviser at any
time without penalty, upon sixty (60) days' written notice to the Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
13. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties to this Agreement and in accordance with
any applicable legal or regulatory requirements.
14. Proxies. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of a Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
15. Failure to Perform; Force Majeure.
No failure or omission by either party hereto in the performance of any
obligation of this Agreement (other than payment obligations) shall be deemed a
breach of this Agreement or create any liability if the same shall arise from
any cause or causes beyond the control of the party, including but not limited
to, the following: acts of God, acts or omissions of any governmental agency;
any rules, regulations, or orders issued by any governmental authority or by any
officer, department, agency or instrumentality thereof; fire; storm; flood;
earthquake, war; rebellion; insurrection; riot; and invasion and provided that
such failure or omission resulting from one of the above causes is cured as soon
as is practicable after the occurrence of one or more of the above-mentioned
causes.
16. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in
a manner inconsistent with the 1940 Act, the Advisers Act, or
rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
(c) 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 hereby and,
to this extent, the provisions of this Agreement shall be
deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser as
an agent of the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets
of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of May 23, 2000.
Whatifi Funds
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board and
President
Whatifi Asset Management, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board and
President
EXHIBIT A
Name of Whatifi Fund Advisory Fee
------------------------
Whatifi S&P 500 Index Fund 0.80%
Whatifi Extended Market Index Fund 0.80%
Whatifi International Index Fund 0.80%
Whatifi Total Bond Index Fund 0.80%
Whatifi Money Market Fund 0.80%
EXHIBIT B
Name of Barclays Annual Advisory Fee Annual Administration Fee
Global Fund Advisors (as percentage of (as percentage of
Master Portfolio daily net assets) daily net assets)
---------------- ----------------- -----------------
S&P 500 Index Portfolio 0.05% N/A
Extended Index Portfolio 0.08% 0.02%
International Index Portfolio 0.15%* 0.10%
Bond Index Portfolio 0.08% N/A
Money Market Portfolio 0.10% N/A
*Such fee declines to 0.07% after such Portfolio's assets reach $1 billion.